A product recall could ‘make or break’ a brand in crisis according to London Business School’s professor of marketing, following Toyota’s recall of 3.4m cars over a fault in its passenger-side airbag, an issue being spread through social media channels.
Nirmalya Kumar responded to news of the recall by stating that the online response, especially through social, was pivotal to the action.
“The challenge is not to allow a product recall to threaten the entire brand or company. Research indicates that negative news is devastating; on average, the media impact of negative news has quadruple weight when compared with positive news.”
Kumar highlighted recalls by Intel, Coca-Cola and Firestone which had a massive impact on each company and their share prices.
However, “product recalls need not turn into a brand crisis. They can even be an opportunity to build the brand, provided they are handled appropriately,” he added.
“A mishandled public response can cause more damage than the problem it addresses in the first place. Remember, Bill Clinton or Three Mile Island? On the other hand, a well-managed corporate response, such as Tylenol’s handling of the terrorist capsule poisoning incident in the early 1980s, can leave the brand even stronger. Similarly, Lexus’s handling of a recall immediately after the launch of the brand in the USA generated tremendous customer goodwill and positive press for the new brand. Our research has identified ‘four Cs’ of product recall management that should guide companies in troubled times: be candid, contrite, compassionate and committed.”
He added that by being candid, a company is then addressing the problem head on, however it was rare that a company did take that route, more often attempting to hide the issue under the radar through ignoring the public or denying the issue outright.
He also advised that brands show both contrition and compassion when reacting to a crisis.
“After the Japan Airlines crash that claimed 520 lives in 1985, JAL’s chief executive publicly apologised and tendered his resignation. While, ultimately, it is important to ascertain where responsibility for the failure lies, the burning need of the moment is that the company is seen to take responsibility.”
He concluded by describing product failure as “a moment of truth” where a poorly managed response has the ability to ‘unmask a brand promise’ while a well-managed recall could offer a company the opportunity to show regard for their customers.