The outrage over L.A. Clippers owner Donald Sterling’s racist remarks, caught on tape and published by TMZ over the weekend, has basically consumed the Internet over the last few days. People are angry and offended, and they’re saying so. They’re also calling for action. It looks like they just got it: This afternoon, the National Basketball Association (NBA) hit Sterling with a multimillion-dollar fine as well as a lifetime ban.
This comes just hours before Clippers are set to play a tie-breaking fifth playoff game tonight against the Golden State Warriors at the Staples Center in Los Angeles.
It wasn’t the only action that people have talked about. Yesterday, before news broke of the suspension, Warriors coach Mark Jackson had strongly suggesting that basketball fans should stay away. “If it was me, I wouldn’t come to the game. I believe as fans, the loudest statement they could make as far as fans is to not show up to the game,” he said, according to the New York Daily News.
He’s not the only who has talked about a fan boycott. Former Lakers player, and co-owner of baseball’s L.A. Dodgers, Magic Johnson has called for a boycott, and the idea has come up on ESPN radio shows. There’s a twitter hashtag making the rounds: #BoycottClippers.
How loud a statement can fans really make with a boycott? To put it another way: Do consumer-led boycotts actually work? To some extent, it depends on how you define success. Judged by their economic effects, they typically don’t have much of an impact. But as Donald Sterling’s harsh punishment shows, a corporation’s concern for its reputation, apart from negative financial effects, means that even the threat of a boycott can still have a big impact.
Researchers have studied the effects of boycotts on the marketplace for decades, and what most have concluded is that consumer boycotts just don’t have much negative effect on the target company’s bottom line. Indeed, there’s some evidence of a positive impact: A 1997 study by three researchers at Florida Atlantic University (FAU) found that, in fact, the value of target firms increased by an average of 0.76 percent on the day that news of a boycott became public, and a smaller increase of 0.55 percent the day a boycott was threatened.
Consumer boycotts have obviously changed a lot since 1997. But so far, there’s no research indicating that the Internet is making boycotts more economically powerful. A 2012 follow-up study from one of the FAU researchers, which examined boycotts started online between 2004 and 2008, found that the stock market doesn’t tend to react negatively to the presence of web-based boycotts.
In other words, boycotts generally don’t do much to hurt corporate pocketbooks. But that doesn’t mean they can’t make an impact in other ways. Boycotts can be an effective tool for exerting social pressure, even when the financial impact is small.
As Brayden King of the Kellogg School of Management at Northwestern University noted back in 2009, “A lot of research in the past has shown that they don’t necessarily affect their targets’ bottom lines that much. And it’s not clear that boycotts affect consumer behavior very much. But those boycotts that get some level of media attention are relatively successful in terms of getting some sort of concession out of their targets.”
The impact comes from the negative public relations hit, not a sagging bottom line. “Boycotters’ influence stems from their ability to make negative claims about the corporation that generate negative public perceptions of the corporation,” King’s research finds. “Hence, corporations that are already struggling to maintain their previously positive reputations will be more likely to concede to boycotts and quell any further damage the boycott may do to their reputation.”
The issue isn’t money. It’s perception and reputation. Which is probably why firms with strong reputations seem to generate a lot more media attention in response to boycotts. In a 2011 study,King looked at national media coverage of 133 boycotts organized between 1990 and 2005. Boycotts that went after well-liked firms with strong reputations generated a lot more media coverage—about 4.4 times as much as firms with no reputation and three times as much as those with poor reputations.
How does the growth of social media change all this? That’s harder to say, but a reasonable assumption is that many of the factors that have shaped offline consumer protests in the past will continue to do so in the future. A #BoycottLakers hashtag likely won’t have a big impact on the Clippers’ bottom line, but if it keeps going, then over time the reputational drag will build—especially in combination with all the negative coverage in other media. There’s a reason that so many companies have invested in social media representation in recent years; they care a lot about what people are saying online, and how those conversations affect corporate reputation.
Corporations aren’t the only ones responding to social pressure where boycotts are concerned, however. The consumers involved in a protest are also being pushed and pulled by larger social influences.
A 2003 paper published in the journal of Management Science looked at the individual end of the puzzle, and asked what motivated consumers to make personal sacrifices in order to participate in boycotts, despite the minimal likely impact from any one consumer’s boycott. The authors actually make a comparison to voting, where the activity of any one individual is unlikely to make a significant difference. One possibility raised by the study: Boycotts are an expressive act that occur at least partially in response to larger group actions, with boycotts gathering energy the more people that participate. It’s about social positioning. Consumers often participate in boycotts because they care what other people think about them. And when companies respond, it’s often for the same reason.
Indeed, it’s possible that actual boycotts themselves don’t matter so much as talking about them. The 1997 FAU study found that “the effects of actual boycotts are not significantly different from those of threats of boycott.” And despite the lack of negative financial effects, boycotts might still be useful protest tools. “The negative public relations that they generate can exact their toll on the good citizenship of the target firms as well as result in negative publicity for them.”
Which offers a pretty good explanation of how we got to where we are now. And it suggests that when Warriors coach Mark Jackson said that fans could make a statement by staying away from tonight’s game, he was actually hinting at more action than was necessary: Just by talking about a boycott, on Twitter and in the press, the statement had already been made… Read more from Reason.