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For a scandal to spill over, consumers must activate a spillover target (e.g., a product category or a competitor) as they process scandal information. Activation of a category is especially likely to occur when a scandalized company is typical of that category and when the scandal attribute is closely associated with the category. Activation of a competitor is facilitated when the other brand is strongly linked to the scandalized company, perhaps through a history of direct competition.

In addition, consumers must view the scandal as diagnostic for the category and/or the competitor. Factors that may promote diagnosticity include the typicality of a scandalized company and contextual cues, such as advertisements, that focus attention on relationships among brands. A noteworthy finding is that overall similarity does not support adequate diagnosticity to create spillover. Rather, similarity on a scandal attribute appears to be required. On a related note, when attention is focused on differentiation among brands, a scandal is likely to be perceived as unique to the scandalized firm—nondiagnostic for others—and its effect is likely to be isolated.

This research also provides insight into when and how issuing a denial may benefit a competitor in relation to a scandalized company. When spillover occurs, providing a denial results in more favorable judgments of the competitor than no denial. This occurs because the denial prompts consumers to correct their inference that the competitor of the scandalized firm also engages in the scandal behavior. However, when scandal spillover does not occur, the findings reveal that a denial may boomerang. When the denial is not literally informative, consumers may make the pragmatic inference that their initial belief was incorrect and that the brand may indeed be guilty of the denied behavior.

Biography
Michelle L. Roehm is an Associate Professor of Marketing in the Babcock Graduate School of Management at Wake Forest University. She received her doctoral degree from Northwestern University and her MS and BS from the University of Illinois. Her research interests include branding and consumer information processing.

Alice M. Tybout is the Harold T. Martin Professor of Marketing and Chair of the Marketing Department in the Kellogg School of Management at Northwestern University. Her research focuses on how people process, organize, and use information in making judgments and decisions. She has published more than 35 book chapters and articles in scholarly journals and serves on the editorial boards of Journal of Consumer Research and Journal of Consumer Psychology.

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