Can we quantify the impact of scandal on ad effectiveness?

Image source: The Canadian Press/Justin Tang

Image source: The Canadian Press/Justin Tang

When corporate scandals break, the impact can ripple through marketing departments.

One common response is the partial or complete halting of advertising. This can be a response to scandals that originate at the brand, like when Volkswagen paused most of its advertising following their emissions scandal in 2015. Or in response to a scandal originating at a media partner: Novo Nordisk, Babbel and IHOP all pulled their advertising from Fox News following racist comments made by their pundits; advertisers pulled their YouTube spend following first a string of scandals involving creators on its platforms and, then, revelations that a group of users were operating a soft-core pedophilia ring.

Boiling it down, responding to scandal by withdrawing advertising is about brand safety and the importance of context in creating associations in the minds of consumers.

In the case of Volkswagen, its brand was considered an ally of the environmental movement, wrapped up as it was in the hippie generation with iconic models like the VW Van and Beetle. As such, VW appealed to environmentally conscious US consumers, according to David Zaring, a professor of legal studies and business ethics at Wharton.

When it cheated on its environmental promises, the media narrative was one of betrayal. This created a negative and unsafe context of the brand’s own doing. To then place ads in that context would have been tone deaf and irresponsible — which the brand discovered early on in the scandal when it advertised its smartphone integration technology on TV and social media sites, only to face fierce consumer backlash. Advertising under these conditions activates and exacerbates a negative response.


What the unconscious mind says about scandal and advertising

Scandals like VW’s and those of Fox and YouTube are emotional lightning rods. Negative associations quickly become constructed in the minds of consumers and can become difficult to extract and break once wedged into the unconscious.

So, what happens in the unconscious minds of people when scandal strikes and what can we learn from a data-based approach?

Case Study: SNC Lavalin and the Liberal Party of Canada

To get at this, Brainsights ran a series of experiments investigating the neurological response of citizens to news about the SNC Lavalin scandal and its impact on the governing Liberal party.

The gist of the SNC Lavalin story is this: It’s alleged that Prime Minister Justin Trudeau pressured the Justice Minister to intervene in a federal corruption case against Quebec-based SNC Lavalin, which was accused of bribing Libyan officials to gain construction contracts. The fear was that a public trial would damage the Liberal party’s prospects in Quebec in an election year. 

In April 2019, we recruited more than 220 Canadians, who were split equally into nine groups, with each group comprised of the same representative, demographic makeup.

We selected three different political party ads — one from the Liberals (Strong Plan) to use as our reference point for peoples’ unconscious views of the party, and two from the Conservative Party (Scandals and Affordability) as comparisons.

Each group watched 60 minutes of video containing the same content, with the only difference being the order in which the video content played. Each person had their brain activity recorded using Brainsights’ neuro-measurement platform, based on EEG technology. Each group watched one of the three ads preceded by this CTV News clip (see table). The clip features a political commentator shedding light on the impact of the SNC-Lavalin scandal on Justin Trudeau’s approval ratings and the Liberal government. The other two ads were viewed at least 20 mins outside of this sequence (before or after).


The video content sequences by group

The video content sequences by group

Four key findings from our research

  1. Advertisers are right to withdraw their advertising, particularly if the scandal is their own doing.

    Liberal advertising performed 7% worse overall when it was viewed following the news segment than when viewed outside of this context. This 7% value is based on comparing the neural engagement score of the groups who watched the ad in the various contexts. Neural engagement is a measure of the persuasiveness and engagement of content, and is based on the unconscious attention, emotional connection and memory encoding levels picked up by the EEG devices. The news segment triggered a significant negative neural response to the communication from the Liberal Party.

  2. Advertisers may be right to withdraw — or at a minimum, reduce — their advertising even if the scandal isn’t their doing.

    The performance of Conservative party advertising performance dropped for Scandals and Affordability (by -4% and -3%, respectively) when viewed following the news segment. This could indicate “guilt by association”. This can manifest in two ways — Contextually and Structurally.

    First, Contextually. The negative news coverage can create a cloud in peoples’ minds that blankets all it touches. So, for example, if a public scandal befalls a media company or spokesperson, advertisers that invest in that media company or spokesperson could be perceived as supporting/associated with these brands, thus putting their brand safety at risk. Hence the common response of withdrawing media dollars when scandals hit media companies.

    The second way this manifests is Structurally within industries/categories, which effectively creates a Category Halo, a point we explore in depth in the next point.

  3. Beware of the Category Halo in consumers’ minds

    Advertisers should be careful, too, about pressing any perceived advantage resulting from a scandal suffered by a competitor. Certain stories implicate entire categories, producing a ‘Category Halo’ effect. In this instance, unethical political behaviour results in poorer performance of political advertising — not only for the Liberals, but for the Conservative party, too. This insight has implications for the tactics advertisers may use to press any perceived advantage resulting from the negative news coverage of a competitor. Seeing the Liberals ensnared by an ethics scandal may lead Conservatives to believe they should highlight their own ethical credentials, when this research shows that this strategy is faulty.

    Brands beware. Consider Apple’s billboard placement in Toronto near the Alphabet-owned Sidewalk Labs headquarters. Sidewalk Labs has come under heavy scrutiny for its proposed data governance model in Toronto’s Quayside neighbourhood, which Sidewalk Labs won a competitive bid to develop. Apple has been highlighting its privacy practices in a recent campaign and chose their billboard placement aptly. But Apple itself came under intense scrutiny recently with its privacy practices relating to Siri and how its contractors listened in to private conversations, thus calling into question their purported moral high ground.

    The lesson here is to press whatever perceived advantage you may have carefully. Brainsights conducted its research months before the recent revelations of corruption by the cabinet of Doug Ford, the Ontario Provincial counterpart of the Federal Conservatives, which effectively nullified any moral advantage offered to them by the SNC Lavalin scandal. But this suggests the ‘Category Halo’ isn’t contingent on top-of-mind news, and advertisers would be wise both to exercise restraint so as not to inadvertently tarnish their own brand, and understand the exposure their brand may have to public sensitivities.

  4. The advertising can be completely unrelated to the scandal in question and still suffer considerably from the negative news.

    Further analysis into the moment-by-moment unconscious response of people to the Liberals ad reveals two key moments of significant difference in neural engagement based on whether the ad was viewed standalone (unprimed), or primed with the CTV news segment. These happen between s11-16, and s22-34 (See chart).

The neural engagement trace shows the unconscious response of viewers when they watched the Liberal ad following the negative news clip referencing the SNC Lavalin scandal and those who watched the ad independent of the negative news coverage.

The neural engagement trace shows the unconscious response of viewers when they watched the Liberal ad following the negative news clip referencing the SNC Lavalin scandal and those who watched the ad independent of the negative news coverage.

Referring to the ad for what happens during these moments gives us clues:

  • Seconds 11-16 spell out the core pillars of the Liberals’ Carbon Tax plan. This moment was 13% worse off on average following the news segment

  • Seconds 22-34 open with “We need to do better than that” on screen, followed by “Our kids are counting on us” with a still image of Trudeau high-fiving a child before the ad concludes with the Liberal logo. This moment was 16% worse off on average when viewed following the news segment.

Negative response to the Liberal party leader and the Liberal brand make logical sense given that these result from negative news coverage of Trudeau and the Liberal party. But negative response to the Carbon Tax policy? Less so.

In a similar way that consumers had strong words for Volkswagen following the emissions scandal when they advertised their smartphone integration technology — a topic completely unrelated to emissions — viewers experience a negative response to Liberal advertising related to the Carbon Tax policy when primed with the unrelated SNC Lavalin scandal news.

But scandals are not logical affairs in the minds of the public. People are not distinguishing between the Liberals and the Liberal Party leader; they’re not differentiating between the Liberals’ climate plan and their ethical compass. They’re not even necessarily distinguishing wholly between political parties.  

Such is the havoc that a scandal can wreak, and the power of the unconscious mind in shaping the public’s response. Proceed with caution.


Kevin Keane is the CEO of Brainsights. You can reach him at