June 1, 2017
In a perfect world, every product would function, well, perfectly. But in the world we live in, there are bound to be defects, some more severe than others. Darla Moore School of Business marketing professor Satish Jayachandaran and his colleagues found that, unlike what they expected, the more severe the problem with the products they studied —automobiles — the longer it took for companies to issue recalls. This research is published in the May 2017 edition of Journal of Marketing.
Jayachandran, along with Meike Ellert from University of Kentucky, Kartik Kalaignanam from the Moore School, and Moore School marketing doctoral candidate Tracey Swartz, spent roughly four years studying the effects of things such as problem severity, brand reputation and the stock market. Overall, they found what they expected: More reputable brands recall faulty products faster and do more to compensate consumers. They also found that companies take a bigger hit on the stock market the longer it takes for them to issue recalls.
Jayachandran speculates that recall delays increase with problem severity for two reasons.
“Nobody wants to really own up to the problem, which essentially also means internal communication isn’t as good, therefore the problem takes longer to be addressed and solved appropriately,” he says.
In addition to this accountability issue, more severe product problems also require more investigation to pinpoint what went wrong and ensure the problem is completely eradicated. Regardless of a company’s reasoning, however, the longer a recall is delayed, the more potential there is for customers to get hurt.
“I think it’s in the firm’s interest to expedite a recall as soon as they know there’s a real problem,” Jayachandran says.
As one of Jayachandran’s primary research interests is corporate social responsibility (CSR), he is interested in conducting further research into the long-term effects of a recall on a brand’s reputation and how recalls relate to a firm’s CSR.
“This is sort of the flip side of corporate social responsibility: corporate irresponsibility,” he said. “What happens if you don’t recall the product in time?”
By Madeleine Vath