Consumer boycotts can have permanent effects

A four-month boycott of Danish dairy products in Saudi Arabia in 2005 was massively successful, according to research by Alexis Antoniades and Sofronis Clerides, presented at the annual congress of the European Economic Association in Geneva in August 2016. The market share of Danish firms plunged from roughly 18% before the boycott to under 1% for three months.

More importantly, the study finds that the boycott’s impact extended far beyond its four-month duration. Although Danish sales recovered somewhat after the boycott was called off, they never returned to their original levels. This is strong evidence that national and religious sentiment play an important role in consumer choice and that even temporary events can have a lingering effect on consumer behaviour.

One of the long-term effects of the boycott was the entry of new firms: the number of brands in the segment increased from 16 to 25 between 2005 and 2007, and by 2009 the new entrants accounted for more than 5% of the market.

The overall market share of the Danish firms settled down at about 8%, reflecting a loss of 55% of the original 18% share.

The authors conclude: ‘Boycotts can be massively successful, especially if public pressure forces big retailers to join in. These findings show that political events can lead to permanent changes in consumer preferences, which produce a lasting impact on market structure.’