{"id":163092,"date":"2020-08-04T07:40:04","date_gmt":"2020-08-04T11:40:04","guid":{"rendered":"https:\/\/today.uconn.edu\/?p=163092"},"modified":"2020-07-30T16:23:04","modified_gmt":"2020-07-30T20:23:04","slug":"marketing-professors-consumers-suspicious-companies-exceed-expectations-product-recalls","status":"publish","type":"post","link":"https:\/\/today.uconn.edu\/2020\/08\/marketing-professors-consumers-suspicious-companies-exceed-expectations-product-recalls\/","title":{"rendered":"Marketing Professors: Consumers Are Suspicious When Companies Exceed Expectations on Product Recalls"},"content":{"rendered":"

\u00a0<\/span><\/span><\/b>Companies that are extremely generous in compensating customers during a product-recall crisis may be creating unintended negative consequences and damaging their corporate reputation, according to surprising findings by UConn marketing professor Stefan Hock.<\/span><\/span><\/p>\n

His research, titled \u201cThe Crisis-Response Match: An Empirical Investigation,\u2019\u2019 has been accepted by the Strategic Management Journal<\/i>. He co-authored it with professor Sascha Raithel of Freie University in Berlin, Germany. <\/span><\/span><\/p>\n

\u201cRecalls are relatively commonplace, and companies want to respond appropriately to these crises when they occur,\u2019\u2019 Hock says. \u201cProduct recalls run the gamut from life-threatening, such as electrocution or furniture that can fall on a child, to a minor inconvenience when a product doesn\u2019t work as intended.\u2019\u2019<\/span><\/span><\/p>\n

\"Professor
Stefan Hock (UConn Photo)<\/figcaption><\/figure>\n

\u201cMost companies want to \u2018do right\u2019 by their customers,\u2019\u2019 he says. \u201cOur paper offers guidance on the importance of selecting a crisis response that aligns with the degree of severity and responsibility that the company accepts. While attempting to exceed expectations may seem like a favorable decision, it can be counterproductive, both in the eyes of customers and shareholders.\u2019\u2019<\/span><\/span><\/p>\n

Research Involved Claims of a Dangerous Smartphone<\/span><\/b><\/p>\n

Previous studies by other researchers suggested that exceeding expectations should have either a neutral or positive impact on both firm reputation and financial performance, Hock says.<\/span><\/p>\n

To test that theory, Hock and his colleague created a fictitious scenario involving a smartphone that was recalled due to a fire hazard. They presented nearly 600 people with articles highlighting the flaws of the smartphone and then asked them to rate two dimensions of a company\u2019s reputation, competence, and likeability. <\/span><\/span><\/p>\n

The professors found that ratings took a significant dip when the manufacturer offered overly-generous or stingy compensation. Of particular note was that, if the malfunction was the result of a supplier error, not the fault of the product manufacturer, the company issuing the recall was able to get away with taking less responsibility for the shortcoming.<\/span><\/span><\/p>\n

Why would consumers take this stance? Hock compares it to someone who is walking down the sidewalk and gets bumped by a stranger. The expected response would be for the inattentive walker to apologize to the person he or she brushed against. <\/span><\/span><\/p>\n

\u201cBut what if that person said, \u2018I\u2019m so sorry. Here\u2019s $100!\u2019 You\u2019d probably be very suspicious of that action. Why would that individual do that?,\u2019\u2019 Hock says. \u201cWell, consumers act the same way when offered overly generous compensation. They wonder if the company is hiding something or if the problem is much more severe than expected.\u2019\u2019<\/span><\/span><\/p>\n

\u201cWe discovered that the best response is well-matched to the situation and involves accepting the appropriate amount of responsibility,\u2019\u2019 Hock says. The more accommodative, such as offering money back or free replacement, the greater the perception that the organization takes responsibility for the crisis. Partial remedies, such as rebates or do-it-yourself repair kits, signal a more defensive response, he says.<\/span><\/span><\/p>\n

Investors\u2019 Needs Align with Customers <\/span><\/b><\/p>\n

In the second phase of their investigation, Hock and Raithel tracked the stock prices of 443 U.S. companies that had consumer-safety recalls between 1996 and 2014 to understand the financial impact of customer-recall strategies.<\/span><\/span><\/p>\n

For example, in 2014 Emerson Electric Co. recalled 3.7 million travel charger kits with a loose wire that posed an electrocution hazard. After receiving 300 reports of injuries, the company offered free replacements. That would be an appropriate response, given the seriousness of the defect, Hock said. <\/span><\/span><\/p>\n

In the same year, Graco recalled 4.7 million strollers with a folding hinge that can pinch a child’s finger, posing a laceration or amputation hazard. After 11 reports of finger injuries, some serious, Graco decided to offer free repair kits to affected customers. This was an inappropriate response, given the seriousness of the defect, the researchers concluded. <\/span><\/span><\/p>\n

\u201cPrevious researchers did not differentiate between consumers and investors. We were able to make this distinction and analyze the financial consequences of the crisis-response match,\u2019\u2019 Hock says. <\/span><\/span><\/p>\n

\u201cThe stock market punishes over- and under- conforming strategies with a .5 to 1 percent reduction in market capitalization, which represents $75 million to $150 million for an S&P 500 stock with median market capitalization,\u2019\u2019 he says. \u201cInvestors are not only concerned about the financial costs of highly accommodative behavior, but also about the unclear motivation behind it.\u2019\u2019<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Companies that are overly generous in handling product recalls surprisingly face harsher judgement from consumers, according to a UConn researcher’s findings. <\/p>\n","protected":false},"author":121,"featured_media":163094,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_crdt_document":"","wds_primary_category":0,"wds_primary_series":0,"wds_primary_attribution":0,"footnotes":""},"categories":[1862,2225],"tags":[],"magazine-issues":[],"coauthors":[2105],"class_list":["post-163092","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-busn","category-uconn-storrs"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"publishpress_future_action":{"enabled":false,"date":"2026-05-09 14:55:45","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/posts\/163092","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/users\/121"}],"replies":[{"embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/comments?post=163092"}],"version-history":[{"count":2,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/posts\/163092\/revisions"}],"predecessor-version":[{"id":163099,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/posts\/163092\/revisions\/163099"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/media\/163094"}],"wp:attachment":[{"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/media?parent=163092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/categories?post=163092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/tags?post=163092"},{"taxonomy":"magazine-issue","embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/magazine-issues?post=163092"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/today.uconn.edu\/wp-rest\/wp\/v2\/coauthors?post=163092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}