Protecting market identity: When and how do organizations respond to consumers' devaluations?

Abstract

This article examines the conditions under which organizations publicly respond to unfavorable consumer evaluations that challenge their market identity. Because organizations' market identities are certified by expert evaluations, consumers' devaluations that challenge these expert evaluations represent an identity threat. However, organizations do not always react to consumers' devaluations because of the risks associated with public responses. Hence, we first predict that organizations are more likely to respond to severe devaluations than to weaker ones; second, we propose that organizations, when faced with severe devaluations, are more likely to craft responses that justify their actions and behaviors. We further contend that, for any market identity under consideration, an organization's reputation amplifies these relationships. Analyses of a dataset of London hoteliers' responses to online reviews posted on TripAdvisor during the period 2002-2012 lend substantial support to our hypotheses.