Weathering the Storm: The Impact of Recalls on Brand Equity
Recalls, even those with only minor impact on the consumer, can seriously affect consumer sentiment and damage a company’s reputation and the brands in its portfolio. Based on Nielsen’s 2016 Annual Reputation Quotient report, which surveyed more than 23,000 U.S. adults, product recall was among the top five situations that damage corporate reputation, after dishonesty, illegal activity or a security breach.
The strength of the brand experiencing the recall, along with consumer perceptions and beliefs about that brand, show us that some brands might be better equipped to rebound from a product recall than others. In a joint effort, Nielsen and Monitor 360 have worked together to analyze just that. While this study focused mainly on food-based recalls, the themes uncovered about brand equity strength and resilience are applicable across multiple industries. Strong brands are more likely to be able to “absorb” a negative event like a recall, assuming they handle the situation in a proactive way. Understanding the “why” behind consumer perceptions, and how the recall could affect brands over the long-term can offer the best guidance to course-correct and rebound sales quickly.