The call for a boycott of BP in the wake of its ongoing disastrous oil spill in the Gulf of Mexico is hardly surprising. The boycott, which in BP’s case was proposed by consumer group Public Citizen, is a tactic that has been used for centuries by consumers as a way to express outrage. While research shows many boycotts come up short in forcing their targets to give in to the demands of protest organizers, they can have real impact in terms of lost sales and a damaged reputation. In the case of BP, however, experts say a boycott is likely to be only a nuisance when compared to the outsized legal liability the company is facing from the Gulf spill.
The Popularity and Impact of Boycotts in Modern Consumer Culture
The use of the boycott as a form of consumer protest is more popular than ever, however. “Boycotts are shockingly common,” says Maurice Schweitzer, a Wharton professor of operations and information management. “One group or another has boycotted almost every major company at some point, whether it’s Walmart for its development procedures or union policies, Procter & Gamble for the treatment of animals, Nike for employment practices or Kentucky Fried Chicken for the treatment of chickens.”
Case Study: BP Boycott and Public Sentiment
Anger over the seemingly endless oil leak in the Gulf has given a boycott of BP some early momentum. Robert Weissman, president of Public Citizen, called on consumers back in mid-May to boycott BP gas for at least three months. Weissman says so far 20,000 people have signed Public Citizen’s petition vowing to boycott, and over 400,000 people have joined a separate “Boycott BP” Facebook page. “The passion of the people who are signing is unmatched in anything we’ve ever done,” Weissman notes.
Corporate Responses to Boycotts: Balancing Public Relations and Reputation
Scott Dean, a BP spokesman, recently told ABC News that the company understands the public frustration driving the protests. “All we can ask is that people withhold judgment until they have seen our full effort to contain and clean the Gulf and stop the leak because it is all still ongoing and we are sparing no expense.”
Criteria for Boycotting Success: Visibility and Severity
‘The Equivalent of a Bloody Nose’
Calls for a boycott are one thing — convincing consumers or businesses to change their behavior is another. Americus Reed II, a professor of marketing at Wharton who has studied how social identity drives consumer behavior, says for a boycott to succeed, the situation that incited it must be both visible and severe. Reed notes that while the Internet and a 24-hour news cycle increase the speed with which bad news travels and the number of people who see it, those forces can also dampen the effect of a boycott because people become desensitized to bad news. “What is defined as outrageous becomes a harder threshold to cross,” Reed notes. “The frequency with which we are exposed to these [horrible] events decreases the chance any one event will be seen as severe.”
At the same time, Reed says for a boycott to gain traction, there must be a low financial and psychological cost for consumers to get on board. If there are easily substitutable products available — as is the case with a commodity like gas — the barrier to participating in a boycott is lower.
Economic Research on Boycotts: Impact on Sales and Market Trends
Research bears this out. Larry Chavis, a professor of entrepreneurship at the University of North Carolina’s Kenan-Flagler Business School, and Phillip Leslie, a professor of economics at Stanford University’s Graduate School of Business, found that a 2003 boycott of French wine in the wake of that country’s lack of support for the U.S. invasion of Iraq led to a 13% volume decline in sales of French wine in the United States. The research showed that very cheap and very expensive wines were most affected — a fact the authors attributed to the lower barrier to substituting in both categories. When it comes to less expensive wine, the authors surmised, consumers have less loyalty to brands. In the higher priced categories, the wine is often purchased as a gift, making buyers more flexible as well because they are not consuming it.
Evaluating Boycott Success: Changing Corporate Behavior and Market Impact
How successful are boycotts in general? It depends on how you define success. If the goal is to get the target company to give in to boycotters’ demands, the success rate is not high. Monroe Friedman, emeritus professor of psychology at Eastern Michigan University, published a paper in 1985 in the Journal of Consumer Affairs examining 90 boycotts in the United States between 1970 and 1980. Friedman found that only 24 of the 90 boycotts were completely or partially successful in getting the target to change its behavior. Not surprisingly, the research found that the more organized and planned campaigns, including those that used picketing and other attention-grabbing techniques, had a greater degree of success.
Country-Specific Boycotts: Economic and Moral Outcomes
When it comes to boycotts of an entire country, the direct financial impact may be just as muted. In fact, one of the highest-profile boycotts in recent years — the protests around apartheid in South Africa — did not produce the hit many might think. In the late 1980s, economic sanctions, as well as large investors’ divestment of stakes in corporations that did business in South Africa, resulted in the withdrawal of many U.S. firms from the South African market. Ivo Welch, a professor of finance and economics at Brown University, says the goal was to damage the South African economy and force a change in policy. He and his co-authors looked at the South African financial markets to determine whether that pressure had any major financial impact. Because stock markets are forward looking, they theorized, any damage the withdrawals would do to the South African economy would be at least partially reflected in the market.
But the paper found no real financial impact from the divestment moves, whether they were U.S. government sanctions or decisions by U.S. firms to voluntarily withdraw from the market. “If the goal was to bring South Africa to its knees, the economic boycott had little effect,” Welch says. “If the goal was to put moral pressure on the [the South African government], that may have succeeded. But there was no measurable economic impact.”
Effects of Boycotts on Company Share Prices
Still, this is not to say that boycotts have no effect at all. Stephen Pruitt, economics and finance professor at the Henry W. Bloch School of Business and Public Administration at the University of Missouri, co-authored a paper in 1986 that studied the share prices of firms at the center of 21 boycotts. Among them was the consumer boycott of Nestle for its controversial promotion of baby formula in the developing world. In that case, critics contend, the company promoted baby formula over breast-feeding, even though many mothers would only have access to contaminated water to make the formula, among other issues.
Pruitt’s study found that there was a statistically significant dip in the share prices of the target companies in the two months after the boycotts were launched. Each of the 21 firms involved in the boycotts lost an average of more than $120 million in market capitalization in that period. While Pruitt notes that there was no additional decline beyond that two month window, there was no evidence the shares enjoyed a major bounce back, either. Although Pruitt says looking at whether a company gives in to boycotters’ demands may be a simple way of measuring success, he notes the impact on share price is important as well. “I think a boycott is successful if the share price goes down,” he says. “Boycotters gave the company [the equivalent of] a bloody nose.”
In fact, boycotts may inflict less visible, but still long lasting, damage to a company’s brand. “Most companies expend significant resources in the bid to establish relationships with their customers,” says Andrew John, professor of economics at Melbourne Business School in Australia. “A boycott severs that relationship in a dramatic way and encourages customers to seek out and try competing products instead.”
The Role of Strong Brands in Responding to Boycotts
Certainly, companies with strong brands are likely to take a boycott seriously. Wharton’s Schweitzer points to Nike’s change in sourcing policies after a boycott based on its use of overseas labor. “Nike is an image conscious company,” notes Schweitzer. “They work very hard with advertising to create a particular type of brand. People buy Nike shoes for two reasons. First, they are good functional shoes. But the other is about image and the way you feel wearing that ‘swoosh.’ You will pay more for a Nike-logoed item, so they need to protect the brand.”
Consumer Memory and the Lasting Effects of Boycotts
Paula Courtney, a lecturer at Wharton and chief executive officer of Toronto-based customer satisfaction consulting firm Verde Group, says bad memories are longer lasting than good ones. Case in point: When a telecommunications company her firm worked with saw poor consumer loyalty scores, consumer interviews revealed some of that stemmed from a controversial billing practice the company had eliminated 10 years earlier. “BP and the entire industry will suffer for many years, even if they can stop the spill and contain it within the next week,” she says.
Media Influence and Consumer Outrage: Driving Factors in Boycott Success
The high visibility of the disaster in the Gulf, with images of oil-covered birds and other wildlife popping up all over the Internet and on television, is also a huge factor. “The press is important in creating widespread awareness of the problem,” points out Jonah Berger, a Wharton marketing professor. “Personalizing the information can have a big effect. One story about a person who lost their livelihood or a photograph of water fowl covered in oil can have more impact than 10 news stories.” According to Berger, that sort of information is what could drive a BP boycott beyond the environmental crowd because “it touches our emotions.”
Media’s Role in Amplifying Boycotts: Case Studies and Analysis
There’s no disputing the media’s role in a boycott’s success or failure, experts say. Brayden King, a professor at Northwestern University’s Kellogg School of Management, studied 188 boycotts that took place between 1990 and 2005. He found that companies were more likely to give in to boycotters’ demands when the controversy generated a lot of press. And the research also found that fear of damage to a company’s reputation was a greater determinant of caving to boycotters than the fear of lost sales. “Boycotts don’t tend to work in the way people think, meaning by hurting the bottom line,” says King. Instead, King says the big driver tends to be “the threat to a company’s reputation.”
Geopolitical Boycotts: Challenges and Implications
Even more frightening to many companies is the threat of a country-specific boycott where an individual corporation’s behavior — good or bad — means little. Melbourne Business School’s John points to the boycott of Danish companies in 2005 after controversial cartoons of the prophet Muhammad ran in a newspaper in that country. John says these geopolitical boycotts have the power to inflict even longer lasting damage because the protest is often based on deeply held positions, and there is typically little any one company can do to address the problem. “Geopolitical boycotts have become more common, and this trend seems likely to continue as the world becomes increasingly globalized.”
Moral Outrage from the BP and the Gulf Spill
For BP, the threat of a boycott is hardly surprising given the magnitude of the environmental disaster in the Gulf. Wharton professor of marketing and psychology Deborah Small says the damage from the spill is clearly creating a sense of moral outrage. The reaction to the spill “is much more on a collective level and driven by strong moral feeling. There is a strong impact from that — outrage is motivational and has a strong effect on behavior.”
The Real Impact of Boycotts
Still, there are reasons to believe a boycott won’t have an oversized impact. For one thing, according to Wharton management professor Lawrence G. Hrebiniak, boycotts tend to be more successful when there is a clear connection between the act of boycotting and some desired outcome. “It’s not clear that if we boycott [BP] it solves the leak in the Gulf.” After all, Hrebiniak notes, BP is clearly aiming massive resources at stopping the spill, and a boycott doesn’t make success in that arena any more likely.
At the same time, Jack Plunkett, CEO of Plunkett Research, says any boycott will hurt independent gas station owners who sell under the BP brand at hundreds of stations around the United States much more than it will hurt the oil giant itself. “You and I may fill up at Exxon Mobil tomorrow and get a refined product that came from BP,” Plunkett states. “We don’t know what we are really buying.” Eric Clemons, a Wharton professor of operations and information management agrees: “With a BP boycott, you are punishing some guy who is unlucky enough to have a BP logo on his gas station as opposed to hurting BP…. Gas companies aren’t effective targets for boycotts.”
Comparing Boycotts and Legal Liabilities: A Case Study of BP
Perhaps most importantly, the threat of any boycott is dwarfed by the potential legal liability BP is facing. With some estimates of the cost of the spill nearing $40 billion, the lost sales from a boycott are likely to seem modest in comparison. “The long-term costs in terms of fines, legal liability and a criminal investigation will probably have greater impact,” says Hrebiniak. Adds Peter Beutel, president of research and consulting firm Cameron Hanover: “The boycott is like throwing a tomato at the guy who is on his way to the guillotine.”
Long-Term Brand Damage: Analyzing BP’s Future
For his part, Public Citizen’s Weissman agrees BP’s liability from the spill may be far greater than the impact of a boycott. But he points out that, as the leak continues, the boycott “may become more consequential than it appears at first blush.” He predicts that the consumer protest will only further damage the BP brand, something the company spent years and many millions of dollars cultivating. “They had the most valuable brand among oil companies,” says Weissman. “And that brand is massively hurt.”
