Product-harm crisis situations have increased in frequency no matter which business is targeted and has a negative effect on its operation. In many instances products can be released as defective or pose a health or safety risk to its users. It could affect the whole lot of production or a small segment of the company’s products at large. The manifestation of such an issue can cause a reduction in sales along with the increase in costs involved in recalling the products affected. This could also prove harmful to the company’s brand and reputation.
Challenges pop up and one crisis is to regain the customer’s trust and the reinstatement of the company’s brand as one to be sought after and be proud of. Product-harm crisis situations can be either addressed proactively or passively to their existence. How a company chooses to address this situation determines the effect on their bottom line. This paper addresses what constitutes a product-harm crisis and the potential effect and suggested response from the organization at hand. INTRODUCTION
A product-harm crisis is defined as “A highly publicized event caused by a product being found to be defective, contaminated or even harmful to consumers” (1).
“A crisis is an event developed through complicated processes that causes extended damages and potentially affects an entire organization” (2).
“Crises are often dif? cult to anticipate and, realistically, to prevent; this is why many researchers emphasize on pre-crisis management practices such as risk analysis, efficient training of crisis management units and so on” (2).
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The magnitude of importance intensifies when the actions of a company responding to a product-harm crisis fails.
The negative effect on the competitive nature of the company causes serious impact. This all contributes to the increasing focus on product-harm crisis situations and their effect on the companies at hand. NEGATIVE INFLUENCE FROM A PRODUCT-HARM CRISIS The negative media coverage encompassing a product-harm crisis situation has dyer effects on the company. It seems that the media frequents negative coverage to a much larger degree than that of a favorable response. As a marketing representative of a company I would like to know who the customers will blame for the situation.
What effect will this have on future business and what will the customer’s attitude in regard to such an action be? EFFECT OF BRAND LOYALTY STATUS PERTAINING TO A PRODUCT-HARM CRISIS I feel that brand loyalty starts way before a crisis situation exists. If prior to the situation a customer has brand trust and confidence then I feel that this condition will continue throughout the crisis if handled properly. Let’s say for instance that IBM had a problem with its computer processers overheating due to a lack of dielectric grease between the motherboard and the processer.
IBM is a well-known company that has been around for a long time and has a good reputation. Customers know this and trust that they will be taken care of. To err is human and consumers are more forgiving when the company has a good track record behind them. Let’s say that the same problem was evident in a company called “xxx Computers”. This company isn’t known and the same situation may result in opening the door to a more well-known alternative, like IBM. ASSIGNMENT OF FAULT Companies are frequently blamed for product-harm crisis situations.
Occasionally customers blame themselves. When the company is blamed, customers seek out alternative brands for their consideration. When the customers blame themselves then repercussions seldom exist. A product-harm crisis is defined as “A highly publicized event caused by a product being found to be defective, contaminated or even harmful to consumers” (1).
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To this extent the importance of how it’s handled can have negative consequences on the business. SUGGESTED RESPONSE There is a lot of talk between a pro-active response and a passive response.
Before reading on these topics I would have been sure that a pro-active response would be the best as it’s usually best to be prepared then to endure a “surprise”. A key finding in this research is that the use of a proactive product-recall strategy, which firms can use to elicit positive responses from consumers, actually hurts a firm’s financial value more than a passive recall strategy (3), After reading the various points of view I’ve been swayed towards a passive response as viable solution of retaliation to a product-harm crisis event.
