Building on emerging theories of consumer heterogeneity in stigmatized markets, we propose that consumers’ membership in and proximity to stigmatized groups, such as those defined by race or class, makes them more vulnerable to market stigma and its penalties. We introduce the concept of “market-stigmatized groups”—those whose stigmatized attributes align with market stigma, resulting in disproportionate penalties for participation in the market—to better understand the interplay of group stigma and market stigma. We hypothesize that consumers in areas with higher concentrations of these groups penalize organizations that openly expose their association with the market’s stigma and reward those distancing from it. Using data from Washington State’s marijuana market, we investigate the relationship between group stigma, market stigma, and organizational performance. We find that the concentration of Black residents, a market-stigmatized group, affects the relationship between dispensary stigma management strategies and performance. We contribute by demonstrating the cross-level effect of stigma and its economic consequences, reorienting scholarly focus to the people that comprise audiences, and enriching our understanding of the conditions under which stigma management strategies affect organizational outcomes.
