Reputation Matters, Especially During a Recall

Reputation. Whether you realize it or not, your reputation is built with every product manufactured, sales presentation given, telephone call answered, advertisement placed and article posted on social media. Everything you do―and, conversely, everything you don’t do―shapes your reputation and ultimately your brand equity. And there’s rarely a more important time to have a stellar brand reputation than in the event of a product recall.

As I mentioned in my previous post, recalls are expensive on many fronts―product return and/or replacement, consumer compensation, and legal fees, to name a few. But the loss of consumer trust can impact sales for years to come. Many companies survive a recall, but many others do not. Why? The difference often comes down to how consumers feel about a company and how much they blame internal firm-related factors, according to a recent study published in the American Marketing Association's Journal of Marketing Research.

The study finds that consumers’ positive brand beliefs contribute to brand resilience in the case of an adverse event such as a recall. Consumers will refrain from immediate blame for brands they like, and these consumers are much more likely to seek out other possible causes for the defective or dangerous product. Companies without strong reputations that are less well-liked do not enjoy the same consideration.

The frequency of recalls also plays an important role in shaping consumer perceptions. In industries where recalls are common―such as toys, children’s products, automobiles and healthcare products―the study found that consumers are less likely to lay blame on a specific company if similar incidents have plagued other companies. But once again, companies that are not well-liked don’t benefit from this consideration.

In industries where recalls are less common, a product-harm crisis stands out and requires explanation. Even here, however, consumers will treat a recall from a well-liked company as an exception, a rarity or an accident, but they will blame a less well-liked company for a similar incident.