Product Harm Crisis
Product-Harm Crisis
Giselle Rieschick
Walden University
Product-Harm Crisis
Businesses spend top dollar in order to get the publicity needed to be successful, and success is generally measured in dollars. If a company is lucky, then the brand will flourish by “word-of-mouth” or traditional advertising. If the company is unlucky, the brand can be tarnished by a product-harm crisis. Product-harm crisis can be defined as a well-publicized event that finds a particular product to be defective (Van Heerde et al., 2007). These events may not always be accurate and could be malicious rumors started by competitors. Regardless of truth, a product-harm crisis tarnishes a company’s reputation, generates significant financial loses, and can lead to expensive product recalls. Due to the increase in product complexity, manufacturer scrutiny, and high consumer demand, product-harm crises are expected to occur more frequently (Dawar and Pillutla, 2000). Additionally, consumers are being made aware of defects more often thanks to the media (Ahluwalia et al., 2000). Minimal research has been conducted on product-harm crisis and what the affected company must do to successfully recover.
One research study was conducted by Van Heerde et al. using a time-varying error-correction model. The model quantifies the impact of a crisis on a company using base sales and own-brand and cross-brand effectiveness. Both long term and short term impacts are evaluated (2007). This approach allows companies that may be facing an upward battle with product-harm crisis recovery to make informed decisions on how to get back to pre-crisis performance. The study took all emotion and bias out of decision making by strictly plotting out the data from the Australian Kraft peanut butter incident involving Salmonella in 1996. The company spared no expense on the recall that was very wide in scope and quick in response to the possibility that there was a Salmonella
Giselle Rieschick
Walden University
Product-Harm Crisis
Businesses spend top dollar in order to get the publicity needed to be successful, and success is generally measured in dollars. If a company is lucky, then the brand will flourish by “word-of-mouth” or traditional advertising. If the company is unlucky, the brand can be tarnished by a product-harm crisis. Product-harm crisis can be defined as a well-publicized event that finds a particular product to be defective (Van Heerde et al., 2007). These events may not always be accurate and could be malicious rumors started by competitors. Regardless of truth, a product-harm crisis tarnishes a company’s reputation, generates significant financial loses, and can lead to expensive product recalls. Due to the increase in product complexity, manufacturer scrutiny, and high consumer demand, product-harm crises are expected to occur more frequently (Dawar and Pillutla, 2000). Additionally, consumers are being made aware of defects more often thanks to the media (Ahluwalia et al., 2000). Minimal research has been conducted on product-harm crisis and what the affected company must do to successfully recover.
One research study was conducted by Van Heerde et al. using a time-varying error-correction model. The model quantifies the impact of a crisis on a company using base sales and own-brand and cross-brand effectiveness. Both long term and short term impacts are evaluated (2007). This approach allows companies that may be facing an upward battle with product-harm crisis recovery to make informed decisions on how to get back to pre-crisis performance. The study took all emotion and bias out of decision making by strictly plotting out the data from the Australian Kraft peanut butter incident involving Salmonella in 1996. The company spared no expense on the recall that was very wide in scope and quick in response to the possibility that there was a Salmonella
References: Ahluwalia, R., R. E. Burnkrant, H. R. Unnava. 2000. Consumer response to negative publicity: The moderating role of commitment Dawar, N., M. M. Pillutla. 2000. Impact of product-harm crises on brand equity: the moderating role of consumer expectations Van Heerde, H., K. Helsen, M. G. Dekimpe. 2007. Rising from the ashes: How brands and categories can overcome product-harm crisis Vassilikopoulou A. , A. Lepetsos, G. Siomkos, K. Chatzipanagiotou. 2009. The importance of factors influencing product-harm crisis management across different crisis extent levels: Vannopoulou, N., Koronis, E., & Elliott, R. (2011). Media amplification of a brand crisis and its affect on brand trust