Featured Research

from universities, journals, and other organizations

What Companies Should Do To Recover From A Product Recall

Date:
May 11, 2009
Source:
Georgia Institute of Technology
Summary:
A study examining more than 500 toy recalls between 1988 and 2007 suggests ways that firms can minimize the business impact of a recall.

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.

Related Articles


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."


Story Source:

The above story is based on materials provided by Georgia Institute of Technology. Note: Materials may be edited for content and length.


Cite This Page:

Georgia Institute of Technology. "What Companies Should Do To Recover From A Product Recall." ScienceDaily. ScienceDaily, 11 May 2009. <www.sciencedaily.com/releases/2009/05/090511101727.htm>.
Georgia Institute of Technology. (2009, May 11). What Companies Should Do To Recover From A Product Recall. ScienceDaily. Retrieved April 25, 2015 from www.sciencedaily.com/releases/2009/05/090511101727.htm
Georgia Institute of Technology. "What Companies Should Do To Recover From A Product Recall." ScienceDaily. www.sciencedaily.com/releases/2009/05/090511101727.htm (accessed April 25, 2015).

Share This


More From ScienceDaily



More Science & Society News

Saturday, April 25, 2015

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Dispute Flares Over Controversial Thai Temple Tigers

Dispute Flares Over Controversial Thai Temple Tigers

AFP (Apr. 24, 2015) — Thai wildlife officials begin a headcount of nearly 150 tigers kept by monks at a temple which has become the centre of a dispute over the welfare of the animals. Video provided by AFP
Powered by NewsLook.com
Comcast Drops $45 Billion Time Warner Bid

Comcast Drops $45 Billion Time Warner Bid

AP (Apr. 24, 2015) — Comcast is dropping its $45 billion bid for Time Warner Cable after heavy regulatory pushback. Critics had pointed to higher prices and less choice. (April 24) Video provided by AP
Powered by NewsLook.com
Judge OKs 65-Year Deal Over NFL Concussions

Judge OKs 65-Year Deal Over NFL Concussions

AP (Apr. 23, 2015) — A judge has approved a potential $1 billion plan to resolve thousands of NFL concussion lawsuits filed by retired players. The NFL expects 6,000 of nearly 20,000 retired players to suffer from Alzheimer&apos;s disease or moderate dementia someday.(April 23) Video provided by AP
Powered by NewsLook.com
New DoD Strategy Warns of Cyberwar Capabilities

New DoD Strategy Warns of Cyberwar Capabilities

AP (Apr. 23, 2015) — A new Pentagon cybersecurity strategy lays out for the first time publicly that the U.S. military plans to use cyberwarfare as an option in conflicts with enemies. (April 23) Video provided by AP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:

Strange & Offbeat Stories

 

Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins