Protecting and rebuilding a brand’s reputation

No matter what the cause, a product recall event can have extensive financial ramifications to a company’s bottom line. This can certainly come from the direct results of replacing and removing the defective or contaminated products. However, financial damage also can result from indirect causes, such as crippling brand reputation.

Companies who are involved with any part of producing, supplying, selling or handling of consumer goods should be prepared for both types of product recall effects. The product recall plan, including sufficient insurance coverage, should not only protect the direct costs, but also the indirect influences that can easily destroy a brand’s reputation and even cause its demise.

How to regain customer trust after a product recall

Salvaging brand reputation during a recall takes planning and expertise. Ultimately, the biggest challenge is regaining customer trust. While the media will move on, customer mistrust can linger for years. Often, a turnaround can be achieved by creative and timely PR as well as addressing the problem—possibly an enhancement to the company’s manufacturing process that demonstrates the problem has been solved.1

Owning the situation with remorse and following through on your promise

The best way brands can recover is to own the situation with remorse, address the desire to do everything necessary to fix the problem and to follow through on that promise. The 2015 Volkswagen product recall emissions scandal is a prime example of what not to do. Their strategy of slowly releasing information incurred greater financial and reputational damage than if they had come out with complete honesty from the start. In essence, the company modified the software on their 3-liter diesel engines to help them pass emission tests in the U.S. In reality, the engines emitted nitrogen oxide pollutants up to 40 times above what is allowed in the U.S. VW executives and managers willfully misled officials for years and many top executives were ultimately convicted.2

The need for a strong plan of action

When a consumer product recall or food contamination event occurs, a company not only is required to recall or remove all affected or potentially affected products, but must communicate the recall to consumers, regulatory bodies and other stakeholders. If a company does not have a strong plan of action to successfully handle all that’s involved, not only can they expect financial damage, but brand reputation can be tarnished and possibly irreversible.

Don’t let your clients take that chance!

Resources:

  1. Kim Benjamin, “Brand Reputation: Good and Bad Ways to Manage Product Recall”, PR Week, Nov. 30, 2015
  2. Russell Hotten, “Volkswagen: The Scandal Explained”, BBC News, Dec. 10, 2015
  3. Jeff S. Bartlett, Michelle Naranjo, and Jeff Plungis, “Guide to the Volkswagen Emissions Recall”, Consumer Reports, Oct. 17, 2017

Disclaimer: Berkley Global Product Recall is pleased to share this material with its customers. Please note, however, that nothing in this document should be construed as legal advice or the provision of professional consulting services. This material is for general informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.