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 Climate change and air pollution damaging health and causing millions of premature deaths
30.11.2018 | International Institute for Applied Systems Analysis (IIASA)

nachricht Reading rats’ minds
29.11.2018 | Institute of Science and Technology Austria

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: Researchers develop method to transfer entire 2D circuits to any smooth surface

What if a sensor sensing a thing could be part of the thing itself? Rice University engineers believe they have a two-dimensional solution to do just that.

Rice engineers led by materials scientists Pulickel Ajayan and Jun Lou have developed a method to make atom-flat sensors that seamlessly integrate with devices...

Im Focus: Three components on one chip

Scientists at the University of Stuttgart and the Karlsruhe Institute of Technology (KIT) succeed in important further development on the way to quantum Computers.

Quantum computers one day should be able to solve certain computing problems much faster than a classical computer. One of the most promising approaches is...

Im Focus: Substitute for rare earth metal oxides

New Project SNAPSTER: Novel luminescent materials by encapsulating phosphorescent metal clusters with organic liquid crystals

Nowadays energy conversion in lighting and optoelectronic devices requires the use of rare earth oxides.

Im Focus: A bit of a stretch... material that thickens as it's pulled

Scientists have discovered the first synthetic material that becomes thicker - at the molecular level - as it is stretched.

Researchers led by Dr Devesh Mistry from the University of Leeds discovered a new non-porous material that has unique and inherent "auxetic" stretching...

Im Focus: The force of the vacuum

Scientists from the Theory Department of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science (CFEL) in Hamburg have shown through theoretical calculations and computer simulations that the force between electrons and lattice distortions in an atomically thin two-dimensional superconductor can be controlled with virtual photons. This could aid the development of new superconductors for energy-saving devices and many other technical applications.

The vacuum is not empty. It may sound like magic to laypeople but it has occupied physicists since the birth of quantum mechanics.

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

New Plastics Economy Investor Forum - Meeting Point for Innovations

10.12.2018 | Event News

EGU 2019 meeting: Media registration now open

06.12.2018 | Event News

Expert Panel on the Future of HPC in Engineering

03.12.2018 | Event News

 
Latest News

Small but ver­sat­ile; key play­ers in the mar­ine ni­tro­gen cycle can util­ize cy­anate and urea

10.12.2018 | Life Sciences

New method gives microscope a boost in resolution

10.12.2018 | Physics and Astronomy

Carnegie Mellon researchers probe hydrogen bonds using new technique

10.12.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>