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Product recalls: What should Samsung do next?

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11th Oct 2016
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When your product starts to spontaneously combust in your customers’ hands, it’s probably time for a recall.

But what do you do when it happens for a second time? That’s the scenario tech giant Samsung is currently in the midst of dealing with.

Following reports of the Galaxy Note 7 phone catching fire back in early September, the South Korean tech giant recalled 2.5m phones initially released in the US and Asia.

However, having resumed sales of the phone in Korea and the US on 1st October, reports of further incidents involving the Note 7 have been widespread, and on 6th October a plane was evacuated when a phone started emitting smoke in a passenger’s pocket.

Samsung has now publically urged Galaxy Note 7 owners to turn off their new smartphone while it investigates the “reports of the device catching fire”. The catalogue of events has led to some news outlets suggesting the company is “in crisis”. Bloomberg states Samsung has had $17bn wiped from its value.  

Recall trend

Given the speed at which brands can get a message out to customers and the subsequent perils of failing to react quickly to negative incidents, it’s no surprise that product recalls rose by a quarter to “an all-time high” in 2015. In the UK alone, recalls increased by 26% to 310 in 2014/15 from 245 the previous year. The number of car recalls rose to 39 during this time, a 30% increase from the 30 recalled in 2013/14.     

However, what does a company do when it faces an existential crisis of the magnitude Samsung is currently facing?

“Customer service becomes paramount to ensuring the public understands how they are affected,” says expert Christine Stubbs, a workforce optimisation consultant for Maintel. “As soon as customers read the news, they are going to have a multitude of questions, which, for the most part, will need to be answered through your channels of customer service.

“It’s times like these where your customer service strategy will be truly tested. As soon as you release the news into the public domain by way of an official company statement, you need to ensure you’re operating true omnichannel customer service, so the public can contact you on any device they’re using - in the channel that best suits their needs at that time.

“Your customers may be receiving a lot of mixed messages from the internet and social media about the recall. It will be your contact centre agents’ role to simplify these messages and communicate your company statement consistently to customers. You should also proactively use your customer database, alongside tools such as SMS and your app(s), to push out the latest information to your customers. It needs to be timely, up-to-date and very specific to them. If it's vague information, people aren’t going to read it, but if you make it specific to their model of [product], then you can instil confidence in them and ensure that they don’t have to come to you to get this information.”

Product retrieval

As well as ensuring your customer service department is prepared for a recall, the logistics of actually getting the product returned can be daunting. Especially if it’s a second recall.  

Farzad Henareh, European vice president of Stericycle, believes that, regardless of how the announcement of the recall is perceived by customers, a brand can then go onto make or break its reputation during the process of conducting the recall. He describes five factors every company must adhere to:

  1. Speed “In the event of a customer complaint, product recall, or a competitive situation, retrieving products as quickly as possible is imperative. Delayed responses have the potential to expose manufacturers and retailers to possible litigation, brand damage and regulatory scrutiny.  If the recall is in the serious risk category, as 91% of consumer product recalls in Q1 2016 were, according to the Stericycle Recall Index, there is even more urgency. Without a professional field team in place, many companies have to disrupt day-to-day operations and lose time and money trying to manage and coordinate retrieval logistics.”
  2. Accuracy “With a company’s image and reputation on the line, accurately retrieving all affected products is vital for the integrity of the brand. If products remain on shelves, in the warehouse or in homes, a company’s liability increases along with the risk of regulatory or legal action and brand damage. To prevent lost sales on non-affected products, companies should ensure only the affected goods are removed and not all products in the same range. While navigating potentially complex regulations it is important to account for all products and maintain the integrity of a product for additional testing and analysis.  This requires a strict chain of custody and a plan to properly document, execute and complete a retrieval event.”
  3. Efficiency and effectiveness “Due to the nature of product retrievals, it’s difficult for companies to fully prepare in advance. Typically, when a product needs to be removed from the market, manufacturers have little warning and must act immediately. With a complex supply and distribution chain, it may not be financially feasible to hire full-time staff to manage retrieval possibilities, and many companies attempt to pull internal resources to manage the process. However, taking staff away from their normal work interrupts day-to-day business and can actually delay the retrieval process, resulting in higher costs. Third-party solution providers who focus on retrievals are an alternative and often more efficient method of implementing a product retrieval.”
  4. Scalability “During a retrieval event, the number of units that need to be retrieved from anywhere in the world and along the supply chain can vary from one extreme to the next. Companies can experience events that require them to pick up just one product at a customer’s home or alternatively millions from retailers and distributors globally. Because retrievals are not always a part of an organisations’ day-to-day activity, it can be costly and prohibitive to hire and maintain a global field force or to require existing staff to assist. When a situation does occur, companies need the flexibility to handle any type of event anywhere in the world at a moment’s notice.”
  5. Quality “In any product retrieval situation a brand’s reputation is already at risk. To protect the integrity of the brand, manufacturers and retailers must ensure that representatives picking up product act as an extension of their team. It’s important that companies, particularly third parties, meet the highest quality standards and document every step of the process, from transporting and storing products with a secure chain of command, to handling subsequent product testing or product recalls in a regulatory compliant manner.”

Public relations

Of course, any product recall requires a brand to move quickly with its PR, to ease doubt in customers and to limit media hyperbole.

Neil Saunders, retail analyst at Conlumino, suggests that in this instance, brands might do worse than to take PR lessons from the way the 2013 horsemeat scandal was dealt with in the UK:

“Although financially disadvantageous, the industry knew it needed to take action and didn’t delay.

“It took products off the shelf. It quickly launched an investigation into supply chains and kept consumers updated. Tesco took out full-page newspaper adverts explaining to consumers what it was doing and underlined what they had done in terms of putting in safeguards to ensure standards were being upheld.”

With such an immediate risk to its customers' health, Samsung has already taken a number of necessary steps to minimise the chance of further incidents occurring. However, given the Note 7 is about to face its second recall in less than a month, how well the company communicates what happens next will likely determine whether it can save its reputation. 

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Chris Ward
By Chris Ward
11th Oct 2016 18:21

Update: Samsung has decided to cease production of the Galaxy Note 7 in order to "limit long-term risk to the brand".

Owners have been urged to return and exchange their handsets or claim a refund. Samsung share prices were down 6.9% in South Korea as a result of the announcement.

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Chris Ward
By Chris Ward
27th Oct 2016 16:57

UPDATE: Further issues for Samsung revealed today as a result of this recall - the company reported a 30% profit dive as a result of the Galaxy Note 7 debacle:
https://www.theguardian.com/technology/2016/oct/27/samsung-profits-dive-...

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