May I offer you a gift card? An analysis of Volkswagen's crisis response strategy in the wake of its Dieselgate scandal

Abstract

Volkswagen’s Dieselgate scandal represents one of the largest automotive crises in history. In the United States, approximately 500,000 cars were found to emit as much as 40 times the legal limits in pollutants after the company installed software to defeat emissions testing. This mixed methods case study examines owner and consumer opinions to determine the impact and effectiveness of VW’s choice of compensation strategy for its crisis response. The study’s conclusions are that consumer brand sentiment didn’t recover in the weeks following two separate compensation offers. In fact, factors including the company’s prior heavy advertising of the cars as “clean diesel” before the discovery, intensified the feelings of shock and betrayal. Strong prior reputation, long seen as a buffer against negative crisis reputational impact, is also examined. The study observes a corollary to reputation as a buffer – finding instead that Volkswagen’s strong prior reputation and heavy brand loyalty, coupled with its aggressive promotion of a false buying proposition, actually created a fall from grace that resulted in a stronger sense of betrayal and contributed to more negative brand sentiment.