Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Study describes what companies should do to recover from a product recall

13.05.2009
A product recall can significantly affect a company's bottom line and its reputation, but a swift recall and restitution to purchasers can minimize harm to the company – and even improve customer satisfaction. A study examining more than 500 toy recalls between 1988 and 2007 suggests ways that firms can minimize the business impact of a recall.

The results of the study, conducted by researchers at the Georgia Institute of Technology and the University of Manitoba, were described on May 2 at the Annual Conference of the Production and Operations Management Society. This research was funded by the Social Sciences and Humanities Research Council of Canada.

"Recalls undermine trust in a specific brand and it can take the company a long time to recover from the damage to its reputation, but it doesn't have to take a long time if the company uses good crisis management tactics," said Manpreet Hora, an assistant professor in Georgia Tech's College of Management. "Reducing the time it takes to recall a product will have a positive effect on consumers' willingness to purchase other products from the same company and if the recall is handled well, the stock price may recover to the same level as before the incident."

The best example of how to deal with a product recall is the Tylenol tampering case in the 1980s. Johnson & Johnson demonstrated that the safety of consumers was paramount by swiftly recalling the product, cooperating fully with regulators, and communicating openly about the issue, the researchers noted. Subsequently, the firm undertook a series of operational and design measures to ensure that such tampering would not occur again.

According to Hora and Hari Bapuji, an assistant professor at the University of Manitoba, effective recovery from a product recall begins with the way in which the company announces the recall. The firm should engage the public and immediately disclose all relevant recall and replacement information as soon as possible. Even if the recall was the result of a purchasing, out-sourcing or off-shoring decision, the company should take shared responsibility for the error, the researchers say.

"Consumers are forgiving, so if a firm apologizes, acknowledges the problem, and doesn't make the mistake again and again, consumers will continue to be loyal to that brand," said Hora.

After apologizing, the firm needs to get the product off store shelves and out of consumer' hands as quickly as possible. To do this, the firm must choose the best way to compensate the product purchasers and who will interface with the customer to price the restitution. There are many choices – the manufacturer, distributor or retailer can collect the recalled product and restitution can be provided by repairing or replacing the product or refunding the purchase price.

"Firms must keep in mind that the best choices are those that decrease the time it takes to recall the product and our analysis shows that it takes much longer to recall the product if the company that announces the recall is further away or upstream from the consumer," explained Hora.

Therefore firms need to collaborate and communicate well with their downstream distributors and retailers so that the distributors and retailers are willing to handle the recall for the manufacturer, leading to much faster recalls. However, if there are millions of units being recalled, it can be a logistical nightmare for the retailers to handle the issue.

When it comes to the type of restitution, shorter recall time is associated with exchanging rather than refunding the recalled product. The firm will fare better if the consumer doesn't have to jump through a lot of hoops for restitution, which may mean allowing consumers to visit a local retailer to return the item for a refund. In other words, companies fare better if they recall the product and provide a refund through a retailer.

The researchers also studied how different types of recalls and defects affected the time it took to recall a product. Their results showed that manufacturing defects, such as lead content in toys, took much less time to recall than design defects such as detachable magnets. They also found that reactive recalls – recalls due to an incident, injury or death – were more likely than preventive recalls to result in exchanges, which dramatically reduced the recall time.

Hora and Bapuji are currently expanding their study to investigate how other industries recover from product recalls and whether firms learn from product recalls outside of their own industry. Since product recalls occur in many industries, the researchers are studying whether recalls by other firms lead companies to investigate their own production and supply chain processes to avoid the same issues.

"Having effective recovery strategies for dealing with product recalls efficiently and in a timely manner is imperative," noted Hora. "If a firm handles a product recall crisis well, it can be turned into a positive advantage for that company by actually increasing consumer satisfaction beyond where it was before the recall."

Abby Vogel | EurekAlert!
Further information:
http://www.gatech.edu

More articles from Studies and Analyses:

nachricht Drone vs. truck deliveries: Which create less carbon pollution?
31.05.2017 | University of Washington

nachricht New study: How does Europe become a leading player for software and IT services?
03.04.2017 | Fraunhofer-Institut für System- und Innovationsforschung (ISI)

All articles from Studies and Analyses >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Can we see monkeys from space? Emerging technologies to map biodiversity

An international team of scientists has proposed a new multi-disciplinary approach in which an array of new technologies will allow us to map biodiversity and the risks that wildlife is facing at the scale of whole landscapes. The findings are published in Nature Ecology and Evolution. This international research is led by the Kunming Institute of Zoology from China, University of East Anglia, University of Leicester and the Leibniz Institute for Zoo and Wildlife Research.

Using a combination of satellite and ground data, the team proposes that it is now possible to map biodiversity with an accuracy that has not been previously...

Im Focus: Climate satellite: Tracking methane with robust laser technology

Heatwaves in the Arctic, longer periods of vegetation in Europe, severe floods in West Africa – starting in 2021, scientists want to explore the emissions of the greenhouse gas methane with the German-French satellite MERLIN. This is made possible by a new robust laser system of the Fraunhofer Institute for Laser Technology ILT in Aachen, which achieves unprecedented measurement accuracy.

Methane is primarily the result of the decomposition of organic matter. The gas has a 25 times greater warming potential than carbon dioxide, but is not as...

Im Focus: How protons move through a fuel cell

Hydrogen is regarded as the energy source of the future: It is produced with solar power and can be used to generate heat and electricity in fuel cells. Empa researchers have now succeeded in decoding the movement of hydrogen ions in crystals – a key step towards more efficient energy conversion in the hydrogen industry of tomorrow.

As charge carriers, electrons and ions play the leading role in electrochemical energy storage devices and converters such as batteries and fuel cells. Proton...

Im Focus: A unique data centre for cosmological simulations

Scientists from the Excellence Cluster Universe at the Ludwig-Maximilians-Universität Munich have establised "Cosmowebportal", a unique data centre for cosmological simulations located at the Leibniz Supercomputing Centre (LRZ) of the Bavarian Academy of Sciences. The complete results of a series of large hydrodynamical cosmological simulations are available, with data volumes typically exceeding several hundred terabytes. Scientists worldwide can interactively explore these complex simulations via a web interface and directly access the results.

With current telescopes, scientists can observe our Universe’s galaxies and galaxy clusters and their distribution along an invisible cosmic web. From the...

Im Focus: Scientists develop molecular thermometer for contactless measurement using infrared light

Temperature measurements possible even on the smallest scale / Molecular ruby for use in material sciences, biology, and medicine

Chemists at Johannes Gutenberg University Mainz (JGU) in cooperation with researchers of the German Federal Institute for Materials Research and Testing (BAM)...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Plants are networkers

19.06.2017 | Event News

Digital Survival Training for Executives

13.06.2017 | Event News

Global Learning Council Summit 2017

13.06.2017 | Event News

 
Latest News

Quantum thermometer or optical refrigerator?

23.06.2017 | Physics and Astronomy

A 100-year-old physics problem has been solved at EPFL

23.06.2017 | Physics and Astronomy

Equipping form with function

23.06.2017 | Information Technology

VideoLinks
B2B-VideoLinks
More VideoLinks >>>