Impact of Brand Coolness and Virtual Presence Following a Product Failure: An Abstract

Despite firms’ desires to manufacture and sell products that meet or exceed customer expectations, product failures happen. In 2021 the home fitness giant Peloton, recalled its two highest selling treadmills (Tread+ and Tread) in response to an urgent warning by the U.S Consumer Product Safety Commission for people to stop using the machines. In multiple countries, dozens of injuries were reported (and one child fatality) that were linked to the Tread+ treadmills. Consumers took to social media criticising the firm’s products and showing pictures of various injuries. Peloton apologized, recalled 125,000 machines, and promised to refund all affected customers. The aftermath of the product recalls saw the firm’s stock price lose over 40% of its value. Product failures do not always directly injure consumers. For example, in 2015, the U.S. Environmental Protection Agency issued a notice to Volkswagen for violating the Clean Air Act by deliberately manipulating their vehicles’ CO2 emissions results, for which they were fined $2.8 billion. Regardless of direct harm (Peleton) or no direct harm (VW) to consumers, these product failures have negative impacts on customer-firm relationships. This research uses 2 studies to investigate the role of Brand Coolness and Virtual Presence in product failure-recovery efforts. Study 1 investigates the impact of Brand Coolness (cool vs. uncool) on consumer response to product failures (causing harm vs. no harm). Study 2 builds on the first study by adding a 3rd factor, that of virtual presence (VP vs. no VP) in the firm’s response and investigates the 2x2x2 interaction on consumer response to product failures. We find that Brand Coolness helps reduce negative responses to product failures and that virtual presence reduces the benefits of being a Cool brand.