Product reality as an opportunity for corporate reputation?

In light of the rising numbers of product recalls, this research analyses how consumers in Germany perceive the impact of a product recall on corporate reputation. In contrast to the traditional perception of product recalls as a threat to corporate reputation, this thesis takes a modern perspective to recalls, considering them as an opportunity for corporate reputation. As such, the study examines how and under which conditions a product recall can enhance consumers’ perception of corporate reputation. Results of four focus group discussions and an inductive thematic analysis suggest that emotions and associations greatly impact consumer perceptions of a corporation during a recall. Therefore, corporations can shape consumer judgment during a recall by leveraging on priming and framing effects of consumers’ past experiences with the corporation. More specifically, the research found that a recall can – under certain conditions – pose an opportunity for a corporation and improve perceived corporate reputation among a subset of participants. These conditions include that (1) the corporation recalls the product voluntarily and out of caution. Also, the corporation should enjoy (2) positive prior reputation among consumers and (3) not be perceived as responsible for product harm, (4) while the product harm should be low. Finally, the corporation should employ ethical behaviour, by (5) apologizing for the inconveniences, (6) using honest communication and (7) displaying transparency. Hereby, a product recall can serve as an opportunity for perceived corporate reputation among a subset of German consumers. Moreover, the results propose that corporations can enhance perceived corporate reputation by employing ethical communication and adhering to CSR during a recall. Thus, corporations’ may generate reputational benefits by considering a product recall as part of an overall CSR strategy. In this sense, a corporation could use a product harm incident to display its social responsibility, which can improve a corporation’s credibility and reliability. Yet, as an open and transparent behaviour might imply reputational risks and costs, corporations need to evaluate the benefits of such an approach for the corporation in each recall situation.