Product-Harm Crisis: Theoretical Identification of the Related Factors and Recommendations
The aim of the current paper is to identify the factors that contribute to a product harm, analyses the related researches, and accordingly develop and support a set of guidance for organizations managing a product-harm crisis. After defining the product-harm crisis, this paper identifies, based on studied literature, a three-dimensional model of forces that affect the organizations during and after a product-harm crisis. Based on the literature findings, the analysis compares and contrasts the different views and consequently, the paper develops recommendation for companies to assist in handling and overcoming product-harm crisis.
Definition of Product-Harm Crisis
Scholars defined product-harm crisis using different perspectives. Vassilikopoulou, Lepetsos, Siomkos, and Kalliopi (2009) considered the crisis caused by an operational deficiency in a products life cycle. In addition, Vassilikopoulou et al. (2009) characterized crises as low probability events that lead to negative financial implications and pose the most threat to companies. Lei, Dawar, and Gürhan-Canli (2012) recognized events as the crisis only if they resulted in consumer’s reaction or damage. Therefore, the crisis leads to lack of consumer’s trust and damages the evaluation of a brand. Zaho, Zaho, and Helsen (2011) see that each brand manager must confront a product-harm. However, they noted that the crisis could be associated, sometimes, with opportunities rather than threats. From a financial perspective, Chen, Ganesan, and Liu (2009) recognized that the crisis could destroy the investors’ confidence and their willingness to continue funding the firms. By combining different views, this paper defines product-harm crisis as “a low probability event that may occur at least once in a firms’ life. The event is a result of a product operational deficiency that may cause damages to consumers. If associated with a reaction from customers, the event becomes a crisis with a high impact affecting the firm consumers’ and investors’ trust and leads to financial losses.”
Factors Contributing to a Product-Harm Crisis
In the approach to study crisis, this paper posit a three-dimensional force based on examined literature. First dimension relates to the horizontal factors that influence the consumer’s attitude and responses during product-harm crises. Noticeably, the type of a recalled product (e.g., pharmaceutical, toy, car, food, etc.), does not affect, according to previous theoretical researches, the consumer’s purchasing behavior and intentions (Vassilikopoulou et al., 2009). Factors such as brand loyalty, pre-crisis category usage and advertising, and attribution and blame in are deemed important. However, Vassilikopoulou et al. (2009) considered that, (a) the company social responsibility CSR, (b) the external effects, (c) the company response, and (d) the time span between initial evidence of a crisis and the recall, are the four main factors affecting the consumers’ responses to organizational crises. External effects and organizational responses are also important to Siomkos and Kurzbard (1994) who appreciated the company’s reputation as an important factor shaping the consumer’s reactions in harsh situations.
The vertical dimension is the severity of harm or the extent of the crisis. Vassilikopoulou et al. (2009) highlighted that the majority of previous researchers agreed about the significance of this aspect in affecting the consumers’ reactions and attitudes while other studies pointed its importance in the placement of blame and responsibility.
In additional to the two dimensions affecting the consumer attitudes, this paper underpins a third dimension that affect the financial situation of the organization and its endurance in the wake of product-harm crisis.