Sleeplessness is a common malady of business leaders whose companies have had to undergo a product recall. When a recall hits home, how well a company prepares for and manages the recall requirements can mean the difference between preserving customer loyalty and severely damaging the brand reputation, or even worse…sink a business entirely. Anxiety levels spike throughout the company as leaders brace for bad publicity, lower earnings, lost market share, legal liability, or a host of other unwanted outcomes.
History offers a long list of recall horror stories with a wide variety of missteps that created them. But after charting recall trends over the past several years, we’ve identified the four most common causes of recall-induced anxiety. The following describes some examples, the causes, and how to mitigate the negative fallout.
Ineffective recall execution
Most poorly executed recalls involve a few missteps that can damage a brand’s reputation for years to come. It usually comes down to ineffective communications, inadequate resources thrown at the process, mishandling of the affected product, or a combination of them all.
Companies should do everything they can to effectively communicate with retailers, distributors, and customers every step of the way. For instance, we’ve seen some companies update their hotline numbers, but then neglect to communicate that change. Some customers will bypass hotlines and seek information directly from the company’s website, causing a huge and sudden spike in web traffic. Failure to plan for this influx can leave customers frustrated and angry.
Effectively communicating a recall event goes beyond adequate phone and web capabilities. One popular beverage company experienced a recall for a relatively minor issue, but suffered significant blowback because it had no plan for effectively communicating the situation to the public. Representatives across the company offered conflicting and sometimes incorrect information, causing unnecessary confusion. As a result, its market share fell drastically – by as much as half in some areas – and took several years to recover while its competitors took advantage of the gap.
Heightened media attention
There’s no getting around the fact that recalls create news. And in many cases, media outlets play an important role in raising awareness and response rates for recalls. But a number of factors can jettison a recall into an unwanted negative news story that can cause severe brand damage.
Of course, cases of reported injuries, property damage, and deaths inevitably heighten media visibility. We’ll talk more about that in the next section.
The “eww!” factor is another prominent driver of unwanted media attention. Foreign objects in food and pharmaceuticals aren’t uncommon. When those materials are plastic or metal, for example, they will probably receive some coverage. But objects such as rodents, insects, and hair – while not necessarily more hazardous than many recall causes – tend to make people take notice, and media outlets are no exception.
Companies that fail to provide adequate remedies or compensation risk seeing brand damage spread quickly and extensively across social media platforms. A small kitchen appliance company experienced such wrath when it issued a recall just before the holidays – a time when its product is most often used – and only offered customers the option of a replacement appliance, even though it didn’t have enough in stock. The backlash on both traditional and social media was swift, and a class-action lawsuit was filed.
Other drivers include an overwhelming number of products affected, the consumer popularity of the brand or product, previous unrelated news of the company, the regional location of affected products, or maybe it’s just a slow day in the newsroom.
Regardless of how much coverage a recall receives, there are ways to minimize the negativity associated with the situation. Well-managed recalls may fade from the headlines as consumers are made whole. In some cases, the media may even report on the effectiveness of a recall, turning the news into a relatively positive story. Since coverage can be difficult to predict, companies should be ready for anything.
Prolonged cases of injuries
When the hazard of recall impacts a real person or a beloved pet, it is much more likely to receive major media attention and reputational damage. The severity of the damage increases dramatically the longer adverse events are reported. This is especially true if the people involved are willing to be interviewed or if there is a video of the incident, or both.
It’s essential that companies do everything they can to ensure that harmful products are thoroughly removed from the market as fast as possible. A well-known beauty product caused widespread and severe hair damage, and, in some cases, hair loss. Though a recall was issued, the product wasn’t properly removed and could still be purchased on some retailer websites. Claims continued to mount week after week, ultimately resulting in a class-action lawsuit and sustained scrutiny across traditional and social media. Entire Facebook pages were created to express anger about the product and the company’s inadequate response.
Big penalties
Fines and legal troubles also trigger negative public attention. In the U.S., product recalls are overseen by regulatory agencies like the Food and Drug Administration (FDA) or the Consumer Product Safety Commission (CSPC) who don’t take non-compliance lightly. In April 2018, for example, the CPSC issued a fine of $27,250,000 for failing to report defective off-road recreational vehicles. It was the highest fine ever levied by the agency.
When deaths or injuries occur due to a defective product, civil penalties can escalate into severe legal liabilities that would horrify any business leader. Case in point: The Peanut Corporation of America, which resulted in prison time for executives who recklessly enabled the most massive and lethal salmonella contamination event in U.S. history. When these legal dramas occur, media coverage often drags on for years as appeals play out and lawsuits ensue.
Business leaders have every reason to lose sleep over a recall event, especially if they haven’t planned for one. The good news is these nightmare scenarios can often be avoided. Effective preparation and execution may require the guidance of an experienced third-party, but the cost of that expertise pales in comparison to the lack of planning and potential brand damage.