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Product recalls to require more stringent strategies

An ACCC review has found that manufacturers must try harder to encourage consumers to return faulty goods during product recalls.

The Australian Competition and Consumer Commission (ACCC) recently released its review of product recalls in Australia, containing a number of recommendations for manufacturers of consumer goods.

The review found that product recalls are more effective if a regulator, such as the ACCC, is actively overseeing the process. Companies can expect greater involvement from regulators to ensure that their product recall strategies are adequate. Companies will also need to provide regulators with details of their strategy before launching a recall to ensure that it is well executed.

More rigorous reporting of recalls is necessary, with the review finding that putting notices in newspapers is not sufficient communication on its own. The ACCC recommend using new channels, such as blogs and social media, to target consumers.

The recall strategy must also explicitly state what actions consumers should take and what is to be done with the affected product. The strategy needs to reflect the level of risk associated with the product. When there is a high risk to the health and safety of consumers, the methods and intensity of communications must correspond with it and will differ from those in low risk situations.

The key to a successful recall is making consumers aware of the risk in a clear and easily understood manner and providing clear instructions on what should be done with the affected product. Return rates of goods are generally low as consumers deal with defective products themselves, so improving rates should be an objective of an effective recall process.

Overall, the ACCC stresses that companies need to be prepared and that the effectiveness of recalls is dependent on the strength of the systems in place.

Tracie Thompson, Global Crisis Management leader for Chartis International, agrees with the findings of the review. “Many companies are impacted severely in a crisis because they are unprepared; a well prepared first response to a crisis is crucial and an integral part of a company’s strategy,” she said.

Research carried out by Melbourne University in 2004 estimated the typical cost of a recall at $10 million, with 25 per cent costing over $100 million.  Up to 25 per cent of companies don’t survive the crisis.