Market-Stigmatized Groups and the Effectiveness of Stigma Management Strategies: Evidence from Washington’s Marijuana Market

Abstract

Some organizations in stigmatized markets are more successful than others at managing audience perceptions and attracting consumers. Despite extensive research on organizational stigma management, less is known about the conditions under which different strategies drive consumer patronage. This study examines two broad approaches—(1) distancing from the stigmatized market, and (2) displaying associations with the stigmatized market—that operate through opposing mechanisms and offer competing prescriptions for organizations. We consider how group stigma affects dynamics between organizations and consumers to influence the effectiveness of stigma management strategies. We introduce the concept of market-stigmatized groups and predict that the local concentration of these groups moderates the effectiveness of distancing and displaying in generating sales. Examining dispensaries in Washington state’s marijuana market, we find that displaying strategies are associated with lower sales in areas with higher concentrations of Black residents, a market-stigmatized group in this industry, whereas distancing strategies have diverging effects. Our study contributes to stigma research by demonstrating that the effectiveness of stigma management strategies is contingent on the local concentration of market-stigmatized groups, showing how stigmas interact across levels to affect organizational outcomes, and identifying a source of performance heterogeneity in stigmatized markets.