£22 billion has already been wiped off Toyota’s share price; roughly ten times the estimated direct cost of recalling and fixing the 8 million affected cars worldwide. Toyota will of course survive, but for a weaker company an incident like this could easily push them over the edge. Given that the number of product recalls seem to increase each year; how do we plan and prepare?
For years, every discussion on product recalls referred back to Johnson & Johnson’s successful handling of the Tylenol poisoning in the US in 1982; even 30 years on it has cropped up in much of the commentary about Toyota. The suggestion seems to be that if you simply apply the experience of this one large company, operating in the pharmaceutical industry (and in an age before 24-hour news channels and the internet), in every product recall situation all will be well. It’s actually a bit more complex than that.
The critical decision in any situation is when to order a recall. Analyses of the Tylenol incident have usually highlighted the speed with which J&J moved to a recall (speed 30 years ago being measured in days) and emphasised this as the key to minimising long-term damage to the company. However, the slowness of Cadbury to react to salmonella contamination in 2007 doesn’t seem to have had too damaging a long-term effect on the company. Indeed, recent research by Chen et al (published in the Journal of Marketing) into recalls of consumer products found that firms adopting pro-active recall strategies suffered heavier losses than those who were more passive. It seems reasonable to suspect, at the very least, that the details of when to recall may vary from sector to sector.
I’m afraid that I cannot therefore offer a silver bullet that can be applied in all product recall situations. Rather I would reemphasise some basics of crisis communications planning, namely:
- Knowing and understanding your stakeholders;
- Selecting the most appropriate channels to communicate with each stakeholder group; and
- Identifying and training appropriate spokespersons;