Last Updated on September 19, 2018
A product recall is when a company replaces and/or retrieves defective merchandise. When this happens, the company must pay for the cost of replacing the item. This can range from a small amount of money to millions depending on the product and the manufacturer.
A product recall can affect any company or business. It’s often seen that smaller companies face a more long-term impact than larger ones. There are ways for a company to handle these situations that will hopefully limit the effect on the company as a whole.
How Can A Recall Affect Your Branding
The first thing that comes to mind when a company thinks of recalls is the cost. It will cost the company money to replace or fix the recalled products. Businesses have insurance to handle these types of situations. There are many times when recalls occur and this insurance is not enough to cover the entire process.
Many times the situations result in a lawsuit handled in court. Losing money is not the only effect that a recall can have on a company. An often-overlooked element of any recall is that the company’s reputation is at risk. This loss of confidence first affects the shareholders in the company. When shareholders lose confidence in a company the result is an immediate decrease in the stock’s value.
Another important consideration is the loss of confidence of the customer. When the customer loses faith in the company it has a major effect. They won’t buy products from the company anymore. This effect can also spread. This will not only affect the product in question but other products from the company as well. It can start a chain reaction that can be difficult to deal with and leave a long-lasting mark on the company’s bottom line.
How to Handle a Recall and Protect Your Brand
Recalls are one of the things that companies dread the most. A product recall is like a bad omen. Once it begins it can cause havoc for the company as a whole. There are many reasons why a product is recalled.
These include marketing inaccuracy, operational defect, and unintended health effects. Although it can seem like a bad omen, some companies use these circumstances to their advantage. These occurrences can be flipped and turned into an opportunity. When a recall occurs, the company can use this problem to help grow its customer base.
They can show the public how they handle the situation in a way that is responsible to their customers and the community. It gives them a way to put the customer and their satisfaction first. How a company responds to something like this can show the consumers they are genuine. After a recall companies can build better relationships with the public. This will also help in building loyalty with the consumer as well.
Consumers like to stay with a brand that they are comfortable with. Consumers will stay with a brand if they see recalls handled honorably and effectively. This will help the company in the end. In the event of a recall, a company should handle the situation in the best way possible. There are certain strategies to apply to these situations.
The first is to offer refunds to those who have purchased the defective item. When a company offers full refunds, they will be issuing a substantial amount of money to the public. However, this shows good faith in their customer base. Taking a hit in revenue is something that some companies will endure. This is necessary to preserve the same degree of loyalty after the recall.
The second thing that companies should do is to educate the public. It is necessary and honorable to notify the public of certain hazards that could occur with a recall. It is important to notify customers and the public about risks involved with the product. This will show the consumer base that the company cares about its customers and markets their goods or services responsibly. This preserves public trust.
The third strategy is to remain in constant communication with the public. Make sure that your company is easily reached in the case that someone has questions about the recall. This can go a long way in the eyes of the public. You can hire a few more customer service employees or add a chat feature to your website. This will help to ease the customer’s frustration and humanize your organization.
The last strategy is to make sure you are cooperating with third-party regulators. It is important to ensure that the product is completely recalled. Remove them from the stores and replace them with a better product. Cooperating with authorities will make the process smoother and easier. It will also show the public that you care about the recall. It will show them that the company is more worried about its customers than the revenue it makes from the product.
How To Help Prevent Recalls From Happening
There are also steps that a company can take to help prevent recalls from happening in the first place. Some recalls are unavoidable, but there are a few preventative measures that can be taken. These will help to decrease the damage a recall will cause to the company.
The first thing that companies should make sure they are doing is monitoring. All companies should have a standard that employees and manufacturers must abide by. Although there are standards that are put forth through the law, there should be higher standards in place by the company as well. This is to ensure that products are safe for consumers.
The standards are given by the law change constantly. They can be found online at any time. One of the most well-known agencies for safety is OSHA. Another is the U.S. Consumer Product Safety Commission. Both of these can be found online at any time. It is mandatory that all companies and businesses abide by these laws and regulations or suffer severe penalties.
Another procedure that companies should follow through with is testing. It is important that companies test and certify all their products. There are a number of companies that hire outside help for this step. Having another company that is unbiased test equipment can give the manufacturers better and more adequate insight into the product. This process involves thorough testing and documentation as well as recommending any changes that may improve the safety or quality of the product.
The last step to help prevent recalls is to have a compliance team ready. Having a compliance team takes the pressure off of managers and executives. This also ensures that the steps that are needed to help prevent and handle these situations are followed completely and correctly. These teams are devised by professionals who know the laws and regulations in the business as well as how to handle them.
Recalls are something that occurs every day. It is something that no company ever wants to have to deal with. If you’re unfortunate enough to be the focus of a recall, stay calm and stay focused on the safety and well-being of your customers. This will be the easiest way to navigate the mine-field of accepting responsibility for your product. To make yourself look even more official, order a company stamp in order to show your products and documents are certified.