Consumer Learning and Product-Harm Crisis Define a product-harm crisis

A product-harm crisis refers to a situation that can trigger serious damages to a company. A crisis can threaten an organization's system and cause drastic changes in a manner that that the firm's system operates. A crisis often has a disruptive impact on organizational, social, and environmental systems. In most cases, can lead to extensive damage accompanied by significant costs imposed upon the organization, individuals, and society. A succinct definition of a product harm crisis is best understood when the causative factors are identified as seen in this study. Besides comparing various studies on the phenomenon, the study offers recommendations on how the problem can be mitigated as it can severe the operations of even successful organizations.

For organizations, crises are higher consequences and lower probability events that can jeopardize the most important organizational objectives. However, the ability for an organization to manage a crisis determines how well it can withstand a crisis. A crisis management unit is tasked with the initial responsibility of assessing the impacts of the crisis. An effective crisis management team must protect the organization's reputation and control negative publicity.

A product-harm crisis is all about a specific brand. The positioning of J&J Tylenol in 1982 and 1977 Ford's car accidents are among the most popular cases of crises caused by product-harm. In the 90s, Coca-Cola Company had to withdraw 30 million bottles and cans in Europe due to a tainting scare in the region. Similarly, in 2000, Firestone recalled at least 7 million tires following stories that a hundred individuals had died in accidents that involved defective tires produced by the firm. Recently, San Lu's melamine crisis has dominated news headlines as it left four kids dead and others seriously injured and admitted to hospitals.

Product-harm crises can be caused by numerous factors like sabotage, product misuse, and manufacturer's negligence. Besides, the heightened product sophistication, the vigilant media and more demanding customers have rendered product-harm crises more visible. Despite the causative factor, product-harm crises lead to greater damages to the health of consumers and considerable financial losses for the troubled firm. For instance, in America, business firms are facing premium rises of between 20% to 100% for liability and property insurance. More so, in the 90s, product liability claims accounted for $6 billion in losses annually for U.S. firms (Chen, Ganesan and Liu, 2009).

Factors contributing to a product-harm crisis

Product trade interlinks most national economies. This has rendered more entities vulnerable to the risk of product challenges that can disrupt trade at any juncture within the supply chain. The nature of a product-harm crisis could extend from fire to flood to computer viruses or quality assurance. Such conditions could affect an item that might be crucial to carrying out businesses both locally, regionally and globally (Vassilikopoulou, Lepetsos, Siomkos, & Chatzipanagiotou, 2009).

Various factors are contributing to a product-harm crisis. These factors are divided into two generic groups: natural and unnatural events. Arguably, natural conditions wildfires, hurricanes, earthquakes, among other nature originated incidents. In contrast, unnatural events include inappropriate product usage, insufficient quality assurance processes, and other human originated activities.

Some studies have classified unnatural events as intentional or unintentional. Particularly, positive or negative consumer perceptions of social responsibility and shortage in supply can trigger a product-harm crisis. For example, a rival organization can circulate unsubstantiated negative attributions about a business or brand, which could create a product-harm crisis.

In the case of high-extent product-harm crisis, it is believed that organizational response is the most vital determinant of consumer's opinions and attitudes towards a firm involved in the crisis. For medium extent product-harm crisis, it has been identified that the time from the crisis is the second most vital element. Often, external effects and corporate social responsibility would greatly influence consumers' buying behavior only in severe crises (Chen, Ganesan and Liu, 2009).

Compare and contrast the findings of the various studies on product-harm crisis

Scholars focusing on product-harm crises are approaching the subject from differing angles. For instance, Chen, Ganesan and Liu (2009) consider the elements that affect the results of a product-harm crisis. This study deploys a conjoint analysis of selected factors to investigate the importance of each variable in influencing the buying behavior of consumers. They also evaluate variations in consumer intentions by considering three different levels of crisis degree. Chen, Ganesan and Liu (2009) conducted a longitudinal research on buyer decisions behavior based on a product crisis that left consumer product quality uncertain. Lei, Dawar, and Gurhan-Canli, (2012) looked at how foundational data influences brand beliefs. Vassilikopoulou,...

In contrast, Chen, Ganesan & Liu, (2009) researched the effect of product recalls on the stock market value in case of a product-harm crisis by adopting an event study approach.
Yannopoulu, Koronis, & Elliot (2011) explored the role of the media during a product crisis and the eventual effect on its trust. They adopted a case study methodology that reveals two key questions producing buyer responses to a product-harm crisis publicized via mass media. The study involved basic questions such as how public and private communication channels influence brand trust and the impact of media on uncertainty perceptions in the face of a crisis. According to the scholars, there is a sharp difference among consumers as far as brand trust and risk perception is concerned when analyzed via the public and private fields.

Zhao, Zhao, and Helsen (2011) delved into consumer learning in a turbulent market and their choices in a crisis situations. In their study, they discovered uncertainty features that affect buyer product decisions following a product-harm scenario. Among the primary attributions are consumer brand market, consumer set, research factors, consumer utility during, before and after the crisis, and brand choice. Further sub-classification by this study generate utility attribute resulting from quality product experience, advertising stock, risk coefficient and advertising sensitivity. The studies analyzed are based on a structural paradigm that is extensively robust compared to a standard buyer-learning model and a similar model that is crafted to omit data omission over time. Moreover, the scholars state that after processing data through the newly crafted model, whereby orientation to cost and risk delineate from uncertainty aspects and price evaluation, firms could properly handle quality perceptions after a product-harm crisis event.

In comparison, while Zhao et al. (2011), Lei et al. (2012), Vassilikopoulou et al. (2009) and Yannopoulu et al. (2011) obtain their positions from a consumer dimension, the assertions of Chen et al. (2009) accrue from an investor's angle. In the study of consumer behavior, Zhao et al. (2011) and Vassilikopoulou et al. (2009) posit that time is a crucial factor in consumer behavior. Comparatively, discounting has a strong effect.

Recommendations for handling a product-harm crisis

In the business field, it is the responsibility of the management to integrate a firm's resources into an efficient and effective system. As cited in the studies under analysis, this task is conducted in a rational manner, blending a proper set of resources to accomplish a set goal. Nevertheless, in most cases, managers across organizations report that the available resources tend to be fixed forcing them to incorporate other resource additives. As a result, companies handling a product-harm crisis must design mechanisms aimed at making amendments to product-harm responses.

During the adoption of a continuity management, organizations handling a product-harm crisis can have the ability to function amidst a crisis. Here, a firm deploys business continuity management throughout its formations to furnish an avenue for the efficient and effective management of a product-harm crisis. Scholars define business continuity management as the system whereby an entity prepares for potential events expected to jeopardize their long-term viability and core mission. Controls presented by product continuity ensure that when confronted by unexpected events, important functions will continue without disruptions. As a result, this promotes the security of sensitive and important organizational information. Throughout an organization, it is recommended that all functional divisions implement business continuity to guarantee effective handling and adequate preparedness of product-harm crises.

While analyzing various scholarly works on a product-harm crisis, it is conclusive that entities could successfully manage a product-harm crisis, restore brand trust and minimize potential consequences by properly adopting the recommended approaches. To this end, firms with cutting-edge image must adopt a voluntary brand recall and entities facing adverse impacts in the face of a crisis are advised to implement an organizational response to demonstrate that they are dedicated to social responsibility and commercial honesty. Meanwhile, business entities are encouraged to restore their image by proving that they have the ability to handle a crisis effectively and efficiently.

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., & Gurhan-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…