Managing Product-Harm Crisis - Essay Example

Managing Product-Harm Crisis Sada Hye Jaman Walden Product-Harm Crisis Definition It is common knowledge that most organizations existfor purposes of getting profit. It is also well-known losses also occur. But why do organizations experience loss? Losses occur for numerous reasons. One of the reasons is because of the substandard products. It is a contributing reason for the withdrawal or rejection of certain products in the market. What are substandard or defective products? These are products that are harmful and dangerous to consumers, therefore organizations recall such products. Recalled products are the contributors of product-harm crisis. According to Vassilikopoulou et al. (2009), product-harm crisis occurs as a result of having defective products that are harmful to consumers in the market. Though organizations seek for better and improved products, departments in charge of inspections in an organization may still miss to identify the defects of such products because of negligence. While the expectation is that running an organization comes with several ups and downs, having a product-harm crisis tops the list because of its detrimental effects of an organization. Contributing Factors Organizations need to maintain their products’ based on the required safety levels. Consumers lose faith in a company if they find the product it offers is harmful. A harmful product is not only dangerous to consumers but also hurtful to the ecosystem. For example, milk spiked with melamine is not only harmful to human beings, but to animals such as cats and dogs. Therefore, organizations need to examine the factors that contribute to product-harm crisis because it affects it directly affects a company’s success. Yannopoulu et al. (2011) claimed that product-harm crises are crises because they directly control the media and the consumers. For example, the media spreads the news to the consumers in way that may influence them negatively. In addition, after watching the advertisements or news, consumers pay more attention to the name of the organization selling defective products or the defective product. Hence, organizations recall their products for several reasons which Yannopoulu et al. (2011) categorize as “…design errors, manufacturing faults, product recalls and marketing mistakes”. Most importantly consumers get influenced by the brand trust. For example, if a consumer finds out about a product’s defectiveness via the media, they do not trust the firm and it results to product-harm crisis (Yannopoulu, Koronis & Elliot, 2011). Therefore, it is very important for an organization to pay attention to the contributing factors of this issue. Moreover, organizations should take necessary measurement to abide by the required safety standards. Compare and Contrast Findings Research studies from various researchers shows that product-harm crisis has different interpretations and its impact has different explanations. For example, Chen et al. (2009) describes the term “product-harm crisis” as the products which are defective and those that fail to satisfy the rules of safety standards. Product- harm crisis leads to product recalling since the product will cause harm to the consumers. Organizations with such products experience losses because the stakeholders usually lose faith and have no interest in investing which eventually contributes to losses (Chen et al., 2009. Ultimately, consumers tend to find out that the products are defective when stakeholders give negative references for such products. Zhao et al. (2011) defines product-harm crisis as publicized events which result to products being dangerous. In addition, the authors say that literally evidence of the impact of product-harm crises in the market mostly comes from lab experiment. Lei et al. (2012) argues that consumers have certain attributions for the negative effects that comes with product-harm crisis. Hence, brands that have positive beliefs such as those with high and low rate base of product-harm crises get blamed if the crisis is similar to that of other products in the industry. However, when there is lack of similarity information for the brand, there is less blame from the consumers towards the product. Other researchers focus on responses obtained from consumers is helpful in dealing with product-harm crisis. According to Vassilikopoulou et al. (2009) there are four factors involved in the product-harm crisis which are helpful in evaluating consumers’ reactions. The first aspect of evaluating consumer reaction is reputation and corporate social responsibility. Reputation of a firm is crucial because it acts like a “protective role” and CSR plays role as an investment on the CSR. Reputation and CSR have a positive impact on the consumers’ response because they are likely to trust the organization when they see the organization’s positive action socially and responsibly. These would certainly diminish the negative effects that may have caused by the product recall. Besides, a poor reputable organization is more likely to get poor references if any of their products found defective. The other aspect used in evaluating customer response is response obtained to the issue. Responses are not avoidable. Consumers seek for responses when they are victims of the product-harm crisis. When companies reach out to consumers who get affected by the product-harm crisis, may have less negative impact on the crisis. For example, Vassilikopoulou et al. (2009) say that there are four types of responses. The first response is denial, where the consumer does not take the product because it is defective. The second response from the consumers is involuntary recall, where a firm acts as a way of dealing with complaints from third parties such as agencies. The third response is called voluntary recall, where a firm recalls its products after it disclosing the crisis and before getting orders from agencies. Lastly, the other response is the super effort where organization has to immediately recall the product and ensure that it communicates that it is socially responsible to the society. One of the ways of being socially responsible is by giving discounts for products. The other aspect for evaluating consumer response is the damage or injury incurred. The time it takes for an organization to react is vital as it affects the impact of the injury obtained. The sooner the organizations take action, less likely the consumers may have severe injuries because the number of injuries has negative impacts. Other aspects such as the organizational external effects during product-harm crisis and after should also go into management’s consideration. For example when the press reaches out to consumers and stakeholders to encourage feedback on the crises, the audience gains the trust for an organization which has a damaged reputation as it demonstrates the organization has an effective crises management plan. Recommendation for Managing Product-Harm Crisis To some extent, product-harm crisis always harms the organization. Thus, organizations need to get prepared on how to manage and cope during the crisis period so that future purchases are not affected negatively (Vassilikopoulou et al., 2009). The organizations should reach out to the consumers and the stakeholders before they find out the news from media. Yannopoulu et al. (2011) added that it is important for the organization to have their employees go through proper training to handle crisis. Consumers appreciate the organization’s concern and therefore, the organization will likely to have less negative effect. Ultimately, the goal of the organization should be clear in managing the crisis so that it does not have a negative impact on the consumer responses. Conclusion The media has a profound influence on most people. In most cases, consumers are usually misled by the adverts or the information they receive from different sources of media. Therefore, product-harm crises can seriously hamper the organization resulting to financial loss. Hence, recalling such products is one of the best techniques to avoid such crisis and gain confidence from consumers. References Chen, Y, Ganesan, S., & Liu, Y. (2009). Does a firm’s product-recall strategy affect its financial value? An examination of strategic alternatives during product-harm crises. Journal of Marketing, 73(6), 214–226. Lei, J., Dawar, N., & Gürhan-Canli, Z. (2012). Base rate information in consumer attributions of product-harm crisis. Journal of Marketing Research, 49(3), 336–348. Vassilikopoulou, A., Lepetsos, A., Siomkos, G., &.Chatzipanagiotou, K. (2009). The importance of factors influencing product-harm crisis management across different crisis extent levels: A conjoint analysis. Journal of Targeting, Measurement, and Analysis for Marketing, 17(1), 65–74. Yannopoulu, N., Koronis, E., & Elliot, R. (2011). Media amplification of a brand crisis and its effects on brand trust. Journal of Marketing Management, 27(5/6), 539–546. Zhao. Y., Zhao, Y., & Helsen, K. (2011). Consumer learning in a turbulent market environment: Modeling consumer choice dynamics after a product-harm crisis. Journal of Marketing Research, 48(2), 255–267. Read More