Four lessons from the Samsung Note 7 recall

The PR disaster resulting from the self-combusting phones offers a sobering warning for every company.

Samung’s Note 7 was hailed as being the firm’s “iPhone killer”, but ended up having a more dangerous effect on its own users. Whether the debacle could spell the electronics firm’s own terminal decline is unclear, but there are several lessons every company could learn from Samsung’s woes.

“This is a perfect example of poor crisis management. Any product recall is a crisis for a company but a global recall is a huge crisis, and, from the outside looking in, they handled it poorly,” says David Burke, Product Recall Line Underwriter at Hiscox London Market.

The product’s double recall has been heavily criticised. “To do one recall is bad, but to then be forced into a second is disastrous,” says Burke. The company might face an uphill struggle to regain customer confidence in a highly competitive market. “Most clients are quite loyal to brands they like, so a company can recover from a problem providing it deals with that problem in a way that retains clients’ trust. But, neither regulators nor consumers had faith in Samsung’s reassurance that the initial recall was effective.” Some retailers report sales of other Samsung products have also slowed in the wake of the recall.

To do one recall is bad, but to then be forced into a second is disastrous.

Samsung’s reputation as a premium brand making top-end products is now on the line. “Could this be Samsung’s ‘Perrier moment’? Only time will tell,” says Burke. In 1990, the sparkling water firm’s disastrous handling of a recall resulted in a sales slump and damage to the brand from which it has never recovered.

Lesson 1. Don’t ignore social media

The Note 7 was also a lesson in how social media can drive a crisis. It took the company 42 days from when pictures of the blazing phones were posted online before it acted.  “Companies should have a social media strategy as part of their crisis management plans,” explains Burke. “Samsung was slow to pick up on reports of problems with the phones that quickly spread on social media. Several of our clients have teams who continually monitor what’s being said about their company on social media, so they can quickly pick up any problems and pass them on to senior managers to deal with.”

Lesson 2. Keep your crisis plan up to date

Another lesson is that it is important that firms ensure their crisis management plans reflect changing circumstances. “Although many companies have plans, whether they are robust enough to handle an emergency, or whether they have even been properly tested, is another matter,” says Burke. “It’s no use having a plan that is gathering dust in a filing cabinet – it needs to be regularly reviewed, updated and tested.”

Lesson 3. Call in the experts

Calling in product recall experts should be at the top of every company’s crisis response plan, argues Burke. “They’re experts who will have dealt with far more recalls than anyone, including the biggest global companies. They have teams who know how to work with regulators, how to go about issuing recall notices, and how, if necessary, to save your company’s brand from irreparable damage. They will know what is best practice in a product recall, and will have experience of how other companies that suffered similar problems dealt with them.”

Hiscox product recall insurance comes with round-the-clock access to crisis management experts to help clients to deal with the fallout from a crisis.

Lesson 4. Nothing is more important than your reputation

Perhaps the biggest lesson from a recall is the lasting damage a recall could have on a company’s image. “Sales targets are obviously important for every company, but they shouldn’t be allowed to compromise product safety,” says Burke. “Even small problems, if not handled well, could ruin a brand that has taken years to build – Perrier is a good example. That’s why companies like Coca-Cola have a culture where everyone is encouraged to speak up if they spot a quality issue that could cause a problem which tarnishes its reputation.”