The adage that no one is perfect extends to large, successful companies that produce some of the world’s most popular brands. All companies that sell consumer goods face the possibility of product recalls, whether they sell food, cars, electronics, clothing or any number of other items.
The successful — or unsuccessful — handling of recalls can dramatically affect customer loyalty and influence a company’s sales for years to come. A company that seeks to maintain high levels of purchase intention from customers must develop effective marketing plans not only in best-case scenarios when all is well but also in the worst-case situation of a product recall.
Negative Effects of a Product Recall
Handling the recall of a product (especially a very successful one with sales in the thousands or millions) can be a nightmare. The financial impact of a recall includes a wide range of expenses, such as issuing refunds, processing and handling returns, delivering new products or repairing damaged ones, and retaining counsel to deal with legal ramifications. If a company is financially unprepared for a recall or lacks a diversified inventory to make up for the losses, the entire process can lead to bankruptcy.
Perhaps the most devastating effect, however, is the loss of customer loyalty that can result from a recall. Companies fear that customers will lose trust over a product that proved unsafe, defective or otherwise unable to deliver on the promises the company made when the customer made the original purchase. Customer loyalty is hard to win in the first place, and most brands value it above all else.
Desired Outcomes of a Product Recall
Although the prospect of a recall can be debilitating, proper handling can ensure that a company emerges from the crisis stronger than before. Some companies take a growth mindset when it comes to any type of setback, including a recall, and view every situation as an opportunity to build trust with their customers and establish the value and reliability of their brand. They approach a recall as a time to prove their mettle and increase customer loyalty, not lose it.
While some companies may focus on minimizing expenses in the handling of a recall, those with a customer-centric approach look beyond their bottom line. Companies that value their customers’ purchase intention and seek to protect it more than their own balance sheet can walk away from a recall with loyal customers and an improved reputation.
How Marketing Can Create a Positive Outcome
It takes a superb marketing campaign to successfully handle a recall. Tylenol in the 1980s and Fitbit more recently are examples of successfully handled recalls. Companies can release a letter to their customers or begin press campaigns as soon as they know the issues surrounding the recall — so that they are the first to notify loyal customers and future prospects.
Social media marketing during a recall is also a huge factor in today’s connected world. Companies can leverage social media posts, reviews and comments to make sure customers feel that they’re being heard.
A product recall does not have to be the end of a company. A lack of direction from the marketing team can mean disaster if it does not maintain control of the situation in the press and online during a recall. However, effective marketing before, during and after the crisis of a recall can alleviate the negative effects on purchase intention and actually increase customer loyalty.
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Sources:
An Investigation of the Effects of Product Recalls on Brand Commitment and Purchase Intention
How Fitbit, Like Tylenol Before It, Handled a Recall the Right Way