Product recalls have become more frequent in today's markets, resulting in severe implications for consumers and companies.
Opportunistic tactics used by automotive dealerships could be doing damage to individual automotive brands globally, new research from Edith Cowan University (ECU) has found.
Product recalls have become more frequent in today's markets, resulting in severe implications for consumers and companies, which extend beyond monetary losses to include legal accountabilities, regulatory scrutiny, damaged reputation and diminished consumer trust.
In the automotive industry, product recalls have the potential to lead to reduced stock prices and long-term reputational damage, particularly when the cause of the defect is attributed and traced back to the manufacturer.
These negative impacts could be further exacerbated when recalls are perceived to be opportunistic, ECU lecturer Dr Shahid Hussain said.
"A regular recall can be made either voluntarily or involuntarily. A company can identify a problem and announce a recall or a regulatory authority can intervene and ask an automaker to announce a recall to ensure consumer safety.
"However, an 'opportunistic recall' sees dealerships try to upsell customers other goods or services during the recall process to increase their firms' revenue, leading customers to pay out-of-pocket. Often, this does not sit well with customers in terms of their perception of the brand," Dr Hussain said.
He noted that the opportunistic recall directive would, in most, if not all cases, not originate with the automotive manufacturer but would be a decision taken by individual dealerships.
"Unfortunately, these dealerships represent a particular automotive brand, and the customers will attribute this opportunistic behaviour to the automotive brand rather than the dealership."
Total recall
Previous research has found that involuntary recalls were a better strategy for companies compared with voluntary recalls when it comes to the implications that affect the firm value, but voluntary recalls are proposed as a better strategy to protect the company's image involved in a recall.
Dr Hussain's research, which has recently been published in the Journal of Retailing and Consumer Services, has shown that opportunistic recalls influence customer behaviour by violating their expectations, resulting in negative brand personality and protest behaviour from customers in the form of negative online reviews, negative social media posts or even taking part in public demonstrations.
"Interestingly, our research found that launching a protest against a brand can actually be a positive action, which seems counterintuitive.
"A protest does not always mean an outright rejection of the brand, but rather an opportunity for the brand to rethink its customer engagement strategy and capitalise on effective management of the recall issue to strengthen its customers' loyalty to the brand," Dr Hussain added.
"When customers engage in protests, they might feel more involved, empowered, and heard in their relationship with the brand. This relationship, even though arising from a negative event of a product recall, could paradoxically strengthen customer loyalty. It also implies that protesting customers care enough about the brand that they want to see a change in the brand, rather than simply abandoning it."
Dr Hussain's research found that while there was no 'one size fits all' solution to successfully manage a recall, there is a range of strategies available to companies, all aimed at making the process as painless as possible for the customer.
