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Damage control for product crises

Design and quality flaws can spell disaster for a brand. An EU-funded project has proposed a series of actions to help companies prevent and respond to a product-harm crisis.
Damage control for product crises
From a toy manufacturing company forced to recall millions of its dolls because they do not comply with safety standards to a tyre manufacturer responding to complaints that their tyres may be linked to fatal crashes, bad publicity can have a long-lasting negative impact on a brand.

The EU-funded project 'When bad things happen to good brands. On how to deal with product-harm crisis' (PRODUCT-HARM CRISES) investigated the effects of bad publicity on a brand. The findings suggest that apart from decreased brand share and a drop in purchases, the loss of customers' trust is much worse than any other expense associated with replacing a faulty product.

To gain a better understanding of consumer reactions, PRODUCT-HARM CRISES created a unique database containing purchase data of large household panel surveys surrounding dozens of product-harm crises in the Netherlands and the United Kingdom. Pulling together data collected between the years 2000 and 2007, PRODUCT-HARM CRISES was able to compare consumers' attitudes and purchasing behaviour before and after a product-harm crisis.

An analysis of the data suggests that the more loyal a consumer is to a given brand the more negatively he or she will react if and when a problem arises. Price sensitivity, however, is usually high enough for companies to win back consumers with coupons and discounts.

By gathering information about past crisis events, PRODUCT-HARM CRISES can provide insight and recommendations on strategies as well as advise companies on how to effectively deal with a future crisis.

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