Roles of Corporate Reputation and Service Recovery in Food Safety Crises: A Case Study of Food Hygiene Incidents in Hot Pot Restaurants

Fang CHEN,Haiming CHEN,Shuying HUANG,Yunyao LIANG,Yingyin LIU

1.Department of Finance,Zhaoqing University,Zhaoqing 526000,China; 2.College of Tourism and Historical Culture,Zhaoqing University,Zhaoqing 526000,China

Abstract Food hygiene incidents in hot pot restaurants were studied,and a relationship model between corporate reputation and consumers’ behavioral intention was established.Hot pot consumers of hot pot restaurants were surveyed through questionnaires.The results show that corporate reputation positively affects service recovery and repurchase intention,and service recovery positively influences repurchase intention,while corporate reputation affects repurchase intention through service recovery.In other words,under the situation of enterprise crises,the service recovery of an enterprise can restore its image and reputation.Therefore,when an enterprise has a crisis,it should positively respond to the crisis incident,and take timely crisis recovery to maintain its positive image.

Key words Corporate reputation,Service recovery,Repurchase intention

1 Introduction

Hot pot catering has become an important form of consumers’ catering consumption,but the health problems of kitchens of hot pot catering have been reported in recent years,and have caused social concern and strong condemnation.Meanwhile,the reputation of hot pot enterprises has also been greatly impacted.Consumers believe that a catering enterprise that flaunts a positive image not only fails to fulfill its due social responsibility,but also the situation of kitchen hygiene is really shocking,which seriously damages the interests and feelings of consumers[1],violates the social responsibility commitment of the enterprises,and hurts its corporate reputation[2].

Corporate reputation is the public’s judgment on the attribute value of an enterprise[3],the long-term performance of an enterprise in all aspects,and the formed stakeholders’ overall evaluation of the enterprise to a certain extent[4].It takes a long time to establish good corporate reputation,and it must rely on long-term stable investment.Like many valuable resources,corporate reputation is hard to create and copy,which is the reason why it has strategic significance for companies[5].In today’s very competitive market,as customers attach great importance to corporate reputation,corporate reputation is regarded as a key intangible resource for enterprises to maintain competitive advantage[6].Therefore,once the corporate reputation is formed,it will make an important contribution to the asset return of the company[7-8].In order to attract,retain and increase customer growth and cope with strong market competition,a business must have a very positive corporate reputation.Ebert (2009) found that good corporate reputation will make consumers trust the company more,and can also be translated into a positive consumers’ purchase intention (Dutta and Bhat 2016).

In hot pot catering as a famous type of catering in China,a large number of famous enterprises such as Haidilao have been given birth to.These hot pot enterprises have won a very positive corporate image in the hearts of consumers with their continuous excellent service quality over the years,and their positive corporate reputation has brought them high customer flow and popularity[9].However,these hot pot restaurants are strong and responsible enterprises that have always taken care of consumers’ feelings in the eyes of consumers,but their food hygiene and safety problems in their kitchens have been repeatedly reported,which has subverted their long-term good corporate reputation in the eyes of consumers,triggered public opinion[1],plunged these hot pot enterprises into a public relations crisis,and threatens positive corporate reputation that has long been built.

Hot pot companies realize that food safety incidents have made them lose their good reputation and friendly corporate image in the minds of consumers in the past,damaging the dining experience of consumers.After the occurrence of food safety incidents,the relevant hot pot enterprises urgently issued an apology statement,declared that the management assumed all responsibilities,and promised that they are willing to solve the food hygiene problem immediately.The food hygiene crisis of hot pot enterprises and the strategies to repair the reputation of enterprises,as well as the psychology and behavior of consumers after the response to the crisis strategy,have profound theoretical and practical research significance.

A crisis is seen as a threat to the reputation of an organization.Crises can damage reputation,and such changes can affect the way of interaction between stakeholders and the organization[10].Crises can harm stakeholders physically,emotionally,or financially.A crisis can threaten a company’s reputation because it gives people a reason to have a bad impression of the organization[11].At this point,the benefits of good reputation mentioned earlier may be lost.Consumers may also move to other merchants to spend money or spread negative word of mouth about the organization.There is no doubt that if these hot pot restaurants want to continue to maintain their advantages in the market competition,they must face up to their behavior of damaging their own corporate reputation,eliminate the negative reputation caused,and try to restore their original positive corporate reputation.In this study,the food hygiene incidents of hot pot restaurant were taken as an example,and the role of corporate reputation and service recovery in food safety crises was studied to provide theoretical reference for the management of relevant enterprises.

2 Research hypothesis development

2.1 Corporate reputation and service recoveryCorporate reputation is a perceptual representation of a company’s past behavior and future prospects,describing the company’s overall attractiveness to all of its key elements compared to other major competitors[12].Fombrun[13]believes that corporate reputation is the long-term performance of all aspects of an enterprise,and a certain degree of overall evaluation of the enterprise by stakeholders[14].Good corporate reputation must depend on the long-term and stable investment of the enterprise,and the actions of the enterprise must be in line with the code of ethics[8].The most direct economic benefit of corporate reputation is that it can be transformed into the trust of consumers to attract more consumers and bring financial excellence[7,15].

Most customers expect an enterprise to compensate them when it makes mistakes[16].In Situational Crisis Communication Theory,Coombs advocated the use of "remodeling" coping strategies to deal with "wrong" reputation crisis,namely repairing damaged corporate reputation with compensatory strategies.It is emphasized that all victims are properly accommodated and compensated accordingly[11,17-18].Effective remedies can turn consumers into loyal experiences[5].Service recovery adopted in the service industry is an effective measure to try to eliminate the negative influence of customers on enterprises and win back consumers[19].Service recovery refers to the use of services to make up for service failures or damaged corporate reputation and corporate image[20].The main methods are to adopt communication,fully authorize front-line employees,respond quickly,compensate,explain,and calmly and orderly solve customers’ complaints and demands[21].A good remedy strategy can restore dissatisfied consumers to a satisfied state and improve the repurchase rate of customers (McCollough,Berry &Yadav,2000).To sum up,corporate reputation has a direct impact on the relationship of service recovery,that is,the higher the corporate reputation,the higher the customers’ satisfaction with service recovery after crisis events.Therefore,the hypothesis is proposed as follows:

H1: Corporate reputation has a significant positive impact on service recovery.

2.2 Corporate reputation and behavioral intentStudies have shown that post-crisis corporate reputation is related to behavioral intentions such as purchase intention and support for the organization[22].Good corporate reputation can bring more benefits to an enterprise,such as driving consumers to buy its products (Griffin,2002).When corporate reputation makes consumers think that the enterprise is trustworthy,the positive evaluation of corporate reputation in consumers’ minds will drive their purchase behavior[23].

In a word,corporate reputation has a direct impact on the relationship of behavioral intention.That is,after crisis events,companies with high corporate reputation have a positive relationship with customers’ repurchase intention but a negative relationship with conversion.Therefore,two hypotheses are proposed as follows:

H2a: Corporate reputation has a significantly positive impact on repurchase intention.

H2b: Corporate reputation has a significantly negative impact on conversion.

2.3 Service recovery and behavioral intentionWhen the interests of customers are damaged,customers will have higher expectations for the company to remedy the situation[24].Successful service recovery results in positive outcomes,including customer satisfaction,repurchase and good reputation[25-26].Customers who experience service recovery are sometimes more loyal than customers who receive no service compensation at all[33].In other words,good remedial measures can improve customers’ satisfaction with the enterprise,reverse customers’ dissatisfaction,enhance customers’ retention rate and re-purchase intention,which is an important factor for the enterprise to maintain market share and competitive advantage[27].Hence,two hypotheses are proposed as follows:

H3a: Service recovery has a significantly positive impact on repurchase intention.

H3b: Service recovery has a significantly negative impact on conversion.

2.4 Corporate reputation,service recovery,avoidance and behavioral intentionCorporate reputation is the ability of an enterprise to meet customer expectations with or without trust under specific problems.It is the most important,critical and sustainable intangible asset of an enterprise[6].Studies have found that good corporate reputation can increase a company’s sales and market share[5].Corporate reputation is a kind of customers’ perception to an enterprise formed under the long-term operation of the enterprise,and in the long-term formation process of enterprise asset,customers will form the concept of the so-called psychological contract.If the service quality of an enterprise fails to satisfy customers and the service remedy is not provided in time,it is considered that the enterprise violates the standards of its reputation and image,which will affect customers’ loyalty and conversion behavior.

To sum up,service recovery has an intermediary effect on the relationship between corporate reputation and behavioral intention,so the following hypotheses are proposed:

H4a: Service recovery has an intermediary effect on the relationship between corporate reputation and repurchase intention.

H4b: Service recovery has an intermediary effect on the relationship between corporate reputation and conversion.

3 Research method

Hot pot consumers in the main cities of the Pearl River Delta were surveyed through questionnaires.Non-random sampling method was adopted to conduct the sampling survey,and a total of 450 questionnaires were distributed.The data were analyzed by AMOS.

4 Results and analysis

4.1 Descriptive statisticsIn this study,a total of 450 questionnaires were issued,among which there were 396 valid questionnaires,and the recovery rate was 88.0%.Basic data included gender,age,education,income level,marital status,place of residence and occupation.Gender: there were more women (69.4%) than men (30.6%).Age: most consumers were 21-30 years old (57.6%),followed by 20 years old and below (27.8%) and 31-40 years old (11.1%).Education: most consumers had bachelor’s degree (53.5%),followed by college degree (27.0%).Monthly income: the monthly income of most consumers was below 3 000 yuan (39.1%),followed by 5 000-8 000 (25.0%) and 3 000-5 000 (19.7%).Marital status: there were more unmarried consumers (82.3%) than married consumers (17.7%).Place of residence: most consumers resided in the Pearl River Delta region (75.0%),followed by the west of Guangdong (10.1%).Occupation: a large number of consumers were engaged in business (28.3%),followed by services (16.7%).

4.2 Analysis of structural equation modelIn this study,based on the statistical technique of structural equation model (SEM),AMOS analysis software was used to analyze relevant variables.

4.2.1Measurement model.Table 1 shows the item factor load of each measurement dimension or SMC and AVE values of the item,all of which meet the test standards of reliability.

Table 1 Measurement model

4.2.2Structural model.The compatibility of the model is as follows:χ2/df=1.320,GFI=0.934,AGFI=0.915,NFI=0.944,RFI=0.934,IFI=0.986,TLI=0.983,CFI=0.986,RMSEA=0.028.

The test results in Table 2 confirm that three hypotheses H1,H2a and H3a are supported,while two hypotheses H2b and H3b are not supported.According to the results of the hypotheses,service recovery does not have the path condition of intermediary effect in the relationship between corporate reputation and conversion,that is,hypothesis H4b is not true.

Table 2 Test results of the hypotheses

4.2.3Intermediary effect.The test results of structural model paths show that only service recovery has the path condition of intermediary effect in the relationship between corporate reputation and repurchase intention.The test results of intermediary effect (Table 3) show that after the adjustment of intermediary variable "service recovery",the regression model coefficients between corporate reputation and repurchase intention become weaker,and the coefficients a,b,c and c’are all significant,indicating that the intermediary effect is significant.Hypothesis H4a is true,while hypothesis H4b is not true.

Table 3 Test results of intermediary effect

5 Conclusions and suggestions

First,based on the mediation mechanism of service recovery,the correlation between corporate reputation and behavioral intention was discussed,which highlights the significance of corporate reputation and service recovery in predicting consumers’ repurchase intention.The consumers of a company with high corporate reputation will feel its better service remedy measures,thereby enhancing consumers’ repurchase intention.When encountering a crisis,enterprises with better reputation will make consumers more satisfied with their service recovery,and can further enhance their intention to re-purchase.If a crisis is caused by an enterprise’s own problems and fails to provide service remedy in time,the enterprise violates the standard of its corporate reputation and image,which will affect customers’ loyalty.In fact,when relevant hotpot restaurants suffered a kitchen food hygiene crisis and was condemned by the public,they quickly apologized to the public through the media and promised to rectify the situation in place.This remedy is quickly recognized by the public,and was reflected in consumers’ visit again.The business of the hotpot restaurants was soon restored.Therefore,it reveals that in the daily education and training,enterprises should develop and establish a clear and understandable response mechanism for service recovery,namely building service blueprint.As a result,in the process of service recovery,customers more clearly see the entire process of service recovery,and feel that enterprises’ behavior is consistent with the long-term declaration of the responsible corporate reputation,which reawakens the original good corporate reputation in the minds of consumers to repair corporate reputation and prompt customers to patronize again.In fact,Haidilao’s long-term adherence to excellent service standards and service remediation measures has more than once helped it to overcome public relations crises and restore its good reputation.

Secondly,corporate reputation has a significantly positive impact on service recovery,indicating that corporate reputation can effectively predict consumers’ perception of service recovery.At the same time,it indicates that as a corporate crisis occurs,consumers will be more satisfied with the service recovery made by a company with good corporate reputation,which also confirms the strategic value of corporate reputation.When a crisis occurs,the service recovery made by a company with good reputation is more satisfying to consumers.

Thirdly,corporate reputation has a direct impact on repurchase intention,that is,the level of corporate reputation has a positive relationship with customers’ repurchase intention.It reveals that consumers will have a greater willingness to buy the products of an enterprise with good reputation.Because of the direct prediction effect of corporate reputation on consumer behavior intention,corporate reputation has strategic significance for enterprises.Haidilao Hotpot Restaurant provides customers with a variety of free services while customers wait in line,such as manicuring for women,and providing free snacks and fruits,free gifts and free birthday celebrations,etc.These long-term value-added services have built its good corporate reputation.This has also been a move for other catering companies to learn.However,data analysis shows that the negative impact of corporate reputation on conversion is not significant.When an enterprise’s image crisis occurs,consumers are not satisfied with the current catering enterprise,but they are still likely to stay before there is no better alternative.This is not due to the loyalty to the catering enterprise,but because of the uncertainty and feeling lock of customers after switching consumption.

Fourthly,service recovery has a positive impact on repurchase intention.That is,after a crisis event,the better the enterprise’s service recovery measures are,the higher the customers’ repurchase intention will be.It shows that customers who have experienced service recovery sometimes have higher loyalty than customers who have not received service compensation at all.