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The Product Recall Management Cycle
Abstract
This chapter provides a detailed discussion of the product management cycle, delineating its phases: pre-recall, recall, and post-recall. Within the pre-recall phase, emphasis is placed on planning and recall readiness. This is facilitated by establishing a cross-functional product recall task force, formulating general product recall guidelines, implementing training and education initiatives, conducting mock recall exercises, and enhancing product tracing, safety, and quality control measures. The recall phase is dissected into seven distinct sub-processes: problem identification, risk assessment, decision on recall, recall plan creation, communication with relevant stakeholders, execution of the recall and monitoring, and documentation and reporting. Each sub-process is examined to provide a comprehensive understanding of effective recall management. Transitioning into the post-recall phase, the focus shifts towards performance recovery and learning from the crisis. This phase emphasizes the importance of analyzing the recall event to improve future recall readiness and management practices. Overall, this chapter offers an in-depth exploration of the entire product management cycle, highlighting critical actions and strategies for each phase to ensure effective and efficient recall management.
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Consumers perceive brands on their intended goals that can benefit or harm consumers. These warmth perceptions become consequential when a consumer experiences a product-harm incident. Conventional wisdom suggests that brand warmth may inhibit consumers from reporting such incidents to the brand and/or regulators. However, the authors’ analyses of field data show that brand warmth increases the number of reports of harm incidents. Yet consumers’ underlying motive is to provide feedback rather than complain. Indeed, using machine learning and regressions, and laboratory experiments, the authors demonstrate that brand warmth boosts the proportion of feedback (vs. complaint) reports. Next, they theorize and show that brand warmth induces consumer benevolence, which drives the consumer toward feedback (vs. complaint). Lastly, the authors demonstrate that if managers of a warm brand acknowledge the consumer’s feedback motive in their recovery messages, such acknowledgement enhances consumer satisfaction. The research extends the discipline’s knowledge on how a brand’s warmth perceptions impact consumers’ responses in the aftermath of a product-harm incident and what intervention managers can use in such a context.
This paper examines the implications of chief marketing officers (CMOs) when firms experience crisis situations. In the context of product recalls, we analyze CMO impacts from the perspectives of two critical stakeholders—consumers and investors. For consumers, we find that firms with a CMO manage recalls for better consumer protection by issuing recalls earlier and having fewer consumer harm incidents than firms without a CMO. For investors, we find that firm financial value drops significantly more for firms with a CMO than those without a CMO when recall happens. These findings generate a more holistic picture of CMOs in the growing literature on the roles and impacts of marketing leadership. They boost the message that CMOs matter and show the nuanced impacts when firms face crisis.
This study’s purposes are threefold. First, to identify the sustainability practices and the motivation behind their implementation across different stages in the chain. Second, to understand the relationship between the sustainability practices in a particular supply chain stage with its operational performances, in the same stage and in other stages. Third, to identify the link between sustainability practices implemented in a particular supply chain stage and reputation in the same stage and in other stages. The study is grounded on the institutional theory and involves multiple cases in four different food supply chain (FSC) stages, in Italy. Findings indicate a varied practice implementation in different stages in the chain, motivated by different institutional pressures, which is in turn related to the company’s performance and reputation aims. This multi-stage study provides a more holistic interpretation of sustainability in the FSC, recognizing the importance of setting appropriate sustainability strategies and goals in each stage.
P roduct-harm crises are among a firm's worst nightmares. A firm may experience (i) a loss in baseline sales, (ii) a reduced own effectiveness for its marketing instruments, (iii) an increased cross sensitivity to rival firms' marketing-mix activities, and (iv) a decreased cross impact of its marketing-mix instruments on the sales of competing, unaffected brands. We find that this quadruple jeopardy materialized in a case study of an Australian product-harm crisis faced by Kraft peanut butter. We arrive at this conclusion by using a time-varying error-correction model that quantifies the consequences of this crisis on base sales, and on own-and cross-brand short-and long-term effectiveness. The proposed modeling approach allows managers to make more informed decisions on how to regain the brands' pre-crisis performance levels. History: This paper was received July 29, 2005, and was with the authors 3 months for 3 revisions; processed by Bart Bronnenberg.
Research examining the antecedents instead of consequences of recalls is relatively sparse and has not considered whether firms’ likelihood to recall products is influenced by legal changes that could induce managerial opportunism, such as those reducing shareholder litigation risk. To examine this question, the authors exploit the staggered adoption of universal demand (UD) laws across different states in the U.S. as a quasi-natural experiment. UD laws aim to prevent frivolous litigation from disrupting a firm’s normal business operations by making it more difficult for shareholders to sue managers for neglecting their fiduciary duties and hold them personally liable. Although UD laws are well-intended, the reduced threat of shareholder litigation disciplining a firm’s managers could have unintended negative consequences. Indeed, using a difference-in-differences (DiD) analysis, the authors find that following the adoption of UD laws, affected firms become less likely to recall products. This effect is weaker in the presence of organizational mechanisms constraining managers’ self-interest-seeking behavior, such as a corporate culture focused on customer needs and interests or the exercise of normative control through monitoring by institutional investors. The authors do not find support for a potential alternative explanation of operational improvement and therefore higher product quality driving their findings.
Existing research provides contrasting perspectives on the implications of product recalls for firms. While some studies find that recalls represent failures that can motivate firms to innovate, others suggest that the resource‐intensive nature of recalls may inhibit firms from innovating. This study presents a theoretical framework that reconciles these two perspectives by proposing an inverted U‐shaped relationship between a firm's product recall frequency and innovation output. The paper also evaluates the effect of the firm's growth potential on the recall frequency–innovation relationship. Analysis of data on vehicle recalls and recall‐related patents in the automotive sector from 1980 to 2019 confirms the inverted U‐shaped relationship and shows that the relationship is steepened by the growth potential of the firm. Overall, the study presents a more nuanced understanding of learning from product recalls and bridges the supply chain disruption and innovation literature in the context of product recall.
Apologies represent a common strategy to respond to crises or product/service failures. In five experiments, involving different failures, we show that projecting lower competence in a specific, non-core domain of activity provides a significant boost to apology effectiveness. A projection of lower competence, operationalized as a lack of skills or expertise required to effectively execute a specific task, increases the perceived costliness of the apology because the organization accepts a symbolic cost. Perceived costliness, in turn, increases the perceived sincerity of the apology and leads to more favorable responses. This strategy, however, is effective only under certain circumstances and can backfire if misapplied. First, organizations might project lower competence only when stakeholders have no other reason to question their competence. Second, projecting lower competence is effective only when the failure is not relevant to the core business. Finally, the strategy is not effective for consumers with low communal relationship orientation.
This study centers on the roles of marketing and operations capabilities in preventing future recalls. Whereas prior literature identifies operations capability as critical for recall prevention, the current research highlights the equivalent importance of marketing capability. Furthermore, rather than limiting marketing’s role to damage control efforts after a recall, this study identifies its potential for preventing future recall incidents. With research conducted in the consumer packaged goods industry, the authors determine that firms that improve their marketing and operations capabilities after a recall lower their likelihood of future recalls. A proposed motivation‐based model for post‐recall marketing and operations capability improvement predicts that recalling public firms, by default, do not invest in capability improvements. The test of the propositions, with a sample of 276 product recalls using joint estimation, reveals that stock market penalties for recalls, combined with analyst following and independent boards, push recalling firms to make capability improvements. However, well‐reputed firms and those whose competitors recently engaged in recalls push back against investors’ demands.
Little is known about the underlying product recall process that food companies go through to identify and remove tainted products from the supply chain or why this process varies. To help fill this void in the literature and close the gap between what we know and what we need to know about product recalls, we use a grounded theory approach to develop mid‐range theorizing about food recalls. In doing so, our findings reveal that two manifestations of complexity—upstream and downstream—introduce recall uncertainty, which is the driving force behind why the recall process varies. Our study is also the first to propose that managers use recall options when trying to manage recall uncertainty. Furthermore, our study reveals that product recalls may not cleanly fall into recall categories as previously thought, but rather take the form of recall layering—that is, nested recalls or a recall within a larger recall. Overall, our mid‐range theorizing (a) offers key insights about why the recall process varies within a massive industry that affects every person; (b) provides a detailed agenda to guide subsequent research; and (c) suggests practical steps managers can take to better manage future recalls.
An increasing emphasis on social responsibility from consumers, media, and government agencies has expanded the discourse around product recalls from what can be done to prevent a product recall to also include what can be done to make a product recall more effective to reduce harm to consumers. Surprisingly, little research has addressed the latter, leaving a gap in our understanding, while a substantive body of research has investigated the former. As a result of this gap, managers face a dilemma regarding what recall strategy to adopt in order to conduct an effective recall and reduce harm to consumers. To address this dilemma, we empirically examine how recall strategy affects two measures of recall effectiveness, recall completion time and recalled product recovered, using secondary data from recalls regulated by the United States Department of Agriculture from 2005 to 2015. We further investigate how the difficulty or complexity associated with the recall task may moderate the relationship between recall strategies and recall effectiveness. Our results provide managers with actionable guidance regarding the influence of different recall strategies, and indicate that the effect of recall strategy on performance may depend on the complexity of the recall recovery task.
Problem definition : The influence of female directors on firm decision-making and performance is a frequently studied research topic but has received limited attention in operations management. We investigate if adding female directors to a firm’s board of directors changes whether and how quickly the firm recalls defective products. Academic/practical relevance : By demonstrating a relationship between an increase in female directors and more rule-conscious, customer-focused recall decisions, we highlight that adding female directors may enable more societally beneficial operational decisions. Methodology : We analyze 4,271 medical product recalls from 2002 to 2013 across 92 publicly traded firms regulated by the Food and Drug Administration using negative binomial and ordinary least squares fixed effect regression models. In robustness checks, we include an instrumental variable analysis, propensity score matching models, and reverse causality regression models. Results : As boards add female directors, recall decisions change. Firms initiate more medical product recalls that are low in severity and hence easier for firms to avoid initiating, highlighting the increased rule-following brought to bear by adding female directors. Firms also make faster recall decisions for the most serious defects that are high in severity and dangerous for customers, highlighting the increased stakeholder responsiveness resulting from adding female directors. Managerial implications : Firms may more closely align recall decisions with regulatory rules and become more sensitized to customer health and safety by adding female directors. Further, at least two female directors may be required to speed up recall decisions for the most serious, life-threatening defects.
During a crisis the corporate message is not the only issue facing the company. The role of the spokesperson is an under-researched area which is examined in this paper. In studies conducted in South Korea and China we examine the reaction of consumers to the CEO as a spokesperson during a product harm crisis. We find in both countries that consumer responses to the CEO was contingent on the consumers' level of power distance. When consumers had high levels of power distance they had higher future purchase intentions when compared with consumers who had low levels of power distance when the CEO was the spokesperson during the crisis. In addition, in a study conducted in South Korea we find that higher levels of power distance generate increased levels of brand trust when the CEO is the spokesperson, which in turn increases future purchase intentions. Our studies have important theoretical and managerial implications which are discussed in the paper.
The authors tested whether image-based information is more effective
than text in changing implicit attitudes from positive to negative, even when both forms similarly change explicit attitudes. They studied corrective information (i.e., warnings about misleading advertising and product recall notices) because it is a common, important effort to change consumer attitudes. Corrective information in the form of pictures or imagery-evoking text, as well as direct instructions to imagine the scene, changed implicit attitudes more than plain, descriptive text, which is currently the most common warning method. Image-based stimuli can change implicit attitudes because they evoke vivid visual mental imagery of counterattitudinal valence (Experiments 1–2). Conditions that hindered the formation of visual mental imagery blocked implicit attitude change, whereas cognitive busyness did not (Experiment 3). In short, imagerybased information changed both explicit and implicit attitudes, whereas materials not based on imagery changed only explicit attitudes. Managers and regulators who aim to protect consumers from claims and products that could do harm should use image-based campaigns to best convey the message effectively.
Companies increasingly face product harm crises resulting in product recalls, which often have a negative impact on firm value. Whereas prior research has studied the short-term effects of product recalls on firm value, the authors of this article focus on the long-term effects. They develop a conceptual framework and hypotheses about the main effect of recall volume and the moderating effects of crisis management strategies on the relationship between recall volume and long-term firm value. They empirically test the hypotheses in the auto industry context using both short-term abnormal returns analysis and long-term calendar-time portfolio analysis of 280 product recalls during 2005-2015. The findings reveal that the negative impact of product recall volume lingers over time. Brand (promotion) advertising has a significant positive (negative) effect on the relationship between recall volume and long-term abnormal returns. Furthermore, both voluntary recall initiation and postrecall remedial efforts positively moderate the impact of recall volume on long-term returns. These moderating effects are contrary to those in the short term. The results suggest that managers should use different advertising types during and after a recall, strategically initiate recalls, and diligently prepare postrecall remedies to mitigate the negative effects of recall volume on long-term return.
This study investigates judgment bias (under-reaction or over-reaction) in product recall decisions by firms when they respond to adverse event reports generated by users of their products. We develop an integrative theoretical framework for identifying the sources of judgment bias in product recall decisions. We analyze user-generated reports (big and unstructured data) on adverse events related to medical devices using a combination of econometric and predictive analytic methods. We find that (i) noisy signals in user feedback, i.e., high noise-to-signal ratio, are associated with under-reaction likelihood; and (ii) user feedback related to adverse events characterized by high severity is associated with high over-reaction likelihood. We also identify conditions related to the situated context of managers that are associated with under-reaction or over-reaction likelihood. The findings of this study are consequential for firms and government regulatory agencies in that they shed light on the sources of judgment bias in recall decisions, thereby ensuring that such decisions are made correctly and in a timely manner. Our findings also contribute towards improving the post-launch market surveillance of products (e.g., medical devices) by making it more evidence-based and predictive. This article is protected by copyright. All rights reserved.
The purpose of this paper is to examine the influence product-harm crisis situations have on, a firm's spokesperson strategies in China's emerging market economy. Through the content analysis of, 127 product-harm crises, crisis type is found to be a predictor of spokesperson strategies. Compared, with Chinese brands, foreign brands are less likely to employ top-executive spokesperson strategies, during product-harm crises. Crisis severity was found to have no impact on the adoption of, spokesperson strategies.
Goods recalls occur with unfortunate regularity, primarily due to sellers’ mistakes, but occasionally because of product tamperings. In either situation the legal environment affects what the marketer can and should do. In this paper, the current legal environment influencing recalls is reviewed, and resultant implications for marketers are explored.
Using data on accidents and incidents experienced by U.S. commercial airlines from 1983 to 1997, we investigated variation in firm learning by examining whether firms learn more from errors with heterogeneous or homogeneous causes. We measured learning by a reduction in airline accident and incident rates, while controlling for other factors related to accidents and incidents. Our results show that heterogeneity is generally better for learning, as prior heterogeneity in the causes of errors decreases subsequent accident rates, producing a deeper, broader search for causality than simple explanations like "blame the pilot." The benefits of heterogeneity, however, apply mainly to specialist airlines. Generalist airlines learn, instead, from outside factors such as the experience of others and general improvements in technology. These results suggest a theory of learning across organizational forms: complex forms benefit from simple information, and simple forms benefit from complex information. The implications of our study for learning theories and work on organizational errors are discussed.
Historically, the study of an organization’s publics has been primarily a research tool to profile the different stakeholders with whom organizations regularly come into contact. Using the case of the flawed Intel Pentium chip, this study applied Grunig’s theory of publics to the phenomenon of Internet newsgroups arguing that technology facilitates the rapid movement of publics from the theoretical construct stage to the active stage. This creates an environment in which these publics become communities of individuals who behave in ways that have a tangible effect on companies. Consequently, organizations are urged to maintain a presence on the Internet to monitor potentially damaging rumors as well as to provide a vehicle for feedback during crisis management.Keith Michael Hearit is an assistant professor in the Department of Communication at Western Michigan University.
Medical devices play an increasingly significant role in the delivery of health care today. However, persistent quality problems with medical devices and the associated recalls present potential health risks to patients and personnel using these devices. This study addresses three key issues in this regard. First, it empirically assesses the financial implications of medical device recalls to understand if these consequences are severe enough to deter firms from introducing potentially hazardous medical devices into the market, as can be inferred from the literature. Second, the study considers a cross section of medical device manufacturers to examine the effect of firm characteristics on the costs of poor quality. Third, in an attempt to explore the sources of recalls, this study investigates firm characteristics that are likely to be associated with device recalls. The econometric analyses in the study are based on data from manufacturers in the medical device industry over a four-year period (2002–2005). Contrary to our expectations, the findings of the study indicate that at an aggregate level, the market penalties for medical device recalls are not significant, i.e., at the aggregate level, the costs of poor quality are not severe. Furthermore, we find that the magnitude of financial consequences of device recalls is affected by the product scope, sales, growth prospects, and the capital structure of a firm. In our analyses exploring the sources of device recalls, we find that firms with a research and development focus, developing broader product portfolios, have a higher likelihood of device recalls. Also, we find that the likelihood of recalls decreases with prior recall experience, indicating the presence of learning. Implications of the study findings, limitations, and directions for future research are identified.
This paper was accepted by Sampath Rajagopalan, operations and supply chain management.
Umbrella branding, the practice of labeling more than one product with a single brand name, is commonly used by multiproduct companies. Spillovers occur when information about one product affects the demand for other products with the same brand name. This article provides a methodology to analyze spillovers and uses it to measure two instances of spillover effects. The study shows that negative spillovers resulted from the Audi 5000's problems with sudden acceleration and that positive spillovers resulted from Jaguar's first major model change in seventeen years. Copyright 1990 by the University of Chicago.
The food industry faces many significant risks from public criticism of corporate social responsibility (CSR) issues in the supply chain. This paper draws upon previous research and emerging industry trends to develop a comprehensive framework of supply chain CSR in the industry. The framework details unique CSR applications in the food supply chain including animal welfare, biotechnology, environment, fair trade, health and safety, and labor and human rights. General supply chain CSR issues such as community and procurement are also considered. Ultimately, the framework serves as a comprehensive tool to support food industry practitioners and researchers in the assessment of strategic and operational supply chain CSR practices. Copyright Springer 2006
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