In Halloween week, for many of us the general fear factor rises with thoughts of haunted houses, creepy costumes, and scary movies. But for business leaders, none of those is anywhere near as terrifying as a product recall. And it’s no wonder. If a recall is mismanaged, it can lead to brand damage, lost market share, and legal liability. Rather than turn away, and hide behind the sofa it is best to take a look at some of the top recall horror stories – and how to escape them. Partner at Kennedys, Samantha Silver, provides valuable commentary below.
NOTIFICATION AND RESPONSE MANAGEMENT PITFALLS
Ever notice how communication is among the top problems in virtually every aspect of business? That’s true of product recalls as well. Some common recall communication issues companies run into include:
– Failure to clearly communicate recalls to consumers
– A website that becomes overloaded and crashes
– Incorrectly listed recall hotline numbers
– Inadequate call centre staffing / long wait times
– Unclear instructions for returning affected products and obtaining a remedy
– Failure to communicate with retailers and distributors
– Lack of multilingual call centre agents during a global recall
One consumer product company ran into several of these issues when it issued a recall for a popular kitchen appliance. Customers who called the designated hotline often received busy signals, forcing them to call back and wait for hours to reach an agent, in some cases only to be disconnected and forced to start the process all over again. Most company leaders have been in similar situations themselves, perhaps after a cancelled flight or delayed delivery, so they know first-hand how frustrating it is – and how difficult it is to recover a reputation after the experience.
In most cases, overloaded websites and call centres will occur only when the issue presents a major hazard that receives a lot of media attention. But there are cases where poor communication has had a devastating impact on brand loyalty, even when the defect was relatively minor. A beverage company experienced a major decrease in market share because information being given to the media and public was confusing and even conflicting, giving the appearance that the company was indifferent to the situation.
Samantha Silver comments that : “Manufacturers must ensure that they communicate product recalls clearly to consumers in order to fully discharge their legal obligations. Of course, it can be difficult to trace each individual consumer but even where information is getting through to consumers, the number of different websites all professing to provide complete lists of consumer recalls often confuse rather than enlighten the public. Providing clear information is paramount.”
FAILURE TO REMOVE THE PRODUCT FROM MARKET
It can be challenging to retrieve products from consumers once they’ve been sold, but companies should have processes in place for removing them from the supply chain and keeping them from being sold in the first place. A leading beauty company faced backlash for failing this step. It received multiple reports that one of its products was causing hair loss, but even after issuing a recall, the product was widely available for purchase on several websites. The company was widely criticized on social media and even faced a class action lawsuit.
Samantha Silver adds that: “In Europe, there are a number of sanctions, including fines and even imprisonment, for failing to recall a product from the market. In addition, should a consumer be injured by a product which the producer or distributor knows is unsafe but has not removed from the market, they may successfully claim for damages.”
PROVIDING AN INADEQUATE REMEDY
Consumer loyalty is a double-edged sword when a recall is issued. Yet another small kitchen appliance company faced this issue when it issued a recall right before Christmas, when the product is most often used. Rather than offer consumers a choice, the company only provided replacements – even though it didn’t have enough in stock. Consumers had to wait months to receive a new product. Once again, the backlash on both traditional and social media was swift, and a class action lawsuit was filed.
GOING OUT OF BUSINESS
On occasion, a product recall is so serious that the company in question simply can’t recover. This most often happens when companies lack the traceability required to isolate affected product and narrow the scope of the recall. A good example is Topps Meat Company. In other cases, companies fail to cooperate with regulators, causing negative press that can be nearly impossible to overcome.
“Even for those companies that manage to survive, product recall scandals can have a lasting impact on their industries. For example, in the UK there has been an increased focus on the authenticity and origin of produce following the horsemeat scandal. Requests for certificates of origin or analysis from accredited laboratories or suppliers have become increasingly important and they are not without their costs. The burden for manufacturers in carrying out due diligence on suppliers will only increase with each new scandal that arises.” Samantha Silver – Kennedys
ESCAPING THE NIGHTMARE
Any one of these is certainly a frightening scenario for businesses. And unlike the common plotlines of cheesy horror movies, they actually happen. However, they can also be prevented. Leaders shouldn’t be afraid to take a close look at their recall plans and ask themselves if they are really comprehensive enough to guide them through a recall. And they should follow up with mock recalls to identify and correct any gaps.
Final thoughts from Samantha Silver – Kennedys “In many cases, particularly in Europe (under the RAPEX system- Rapid Alert System for non-Food Consumer Products) the key to a successful recall, or to even avoid a recall completely, is to liaise early with the relevant authorities who have the power to withdraw, recall or issue warnings about a product on the market. If you are able to notify them of a potential problem, co-operate and work with them at an early stage to assess and resolve any potential issues with a product, the recall procedure is likely to go more smoothly and may even be a company’s best chance at avoiding a recall altogether, particularly in cases where there is no possibility of physical danger to a person”.
In summary, considering the possibility of a recall may sound spooky, but it is always better to face those fears and act with foresight rather than hindsight.
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