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What Manufacturers Can Learn From The Recent Tesla Recall

This week’s Tesla “recall” has raised some questions about what really constitutes a recall – and why transparency on the issue is so important. In a letter to the National Highway Traffic Safety Administration, Tesla said it was issuing a “voluntary recall” of its NEMA 14-50 power adaptors. The reason for this is a possible default that could cause excessive heating, and in some cases electrical fires.

However, Tesla founder, Elon Musk, later issued a tweet stating “Some confusion in media reports today. No Tesla vehicles are being physically recalled by Tesla”. The confusion lies in the fact that the vehicle can receive software updates via a Wi-Fi connection, without the need physically for the vehicle to be returned. The recall is voluntary, and doesn’t involve nearly as many vehicles as other automotive recalls. This recall involves 29,000 vehicles, whereas the recent General motors truck recall affected 370,000 vehicles.

In 2012, new car sales for the US were 14.5 million units, while the number of recalled car units was very similar – 14.3 million current and past models. So, Tesla certainly isn’t alone.

As the US National Highway Traffic Safety Administration is classifying the issue as a recall, the company needs to show customers that safety is tantamount and that it is doing everything possible to ensure that vehicles are safe for road use. Not only this, but Tesla could also be fined heavily by the NHTSA for not reporting what it considers to be safety defects.

Firms needn’t be afraid of issuing a voluntary recall. Brands’ relationships with customers are one of the most valuable assets. Customer loyalty is continually decreasing as consumers have more choice than ever before. Therefore there is great importance levied on a crisis handled well. By issuing a voluntary recall, brands are both being transparent and communicating openly with customers.

Car manufacturers are increasingly finding that their attitude to and execution of product recalls can actually have a positive impact on perception. In a surprisingly large number of cases, consumers actually view voluntary recalls by automotive manufacturers positively. It highlights that the manufacturer is being proactive and ensuring that their vehicles are as safe as possible.

What most companies don’t realise is that a recall situation can also provide a positive customer touchpoint. It is important for a manufacturer to guide the customer throughout the process, especially in the case of high value items like cars. This can involve anything from ensuring they are well informed at every step, using the opportunity to offer the customer access to new models and even where appropriate, providing the customer with an appropriate gift. Above everything, it is about minimising the disruption caused to the customer.

Companies focus far too much about the direct impact the word recall can have on brand image of the negative aspects of poorly handled recalls, rather than the benefits of well executed ones. Recalls don’t automatically cause shareholder revolt – a well-managed one can actually increase share value.

There are instances (e.g. the recent Ford Edge SUV recall) where companies that handle recalls with a robust approach gain customer loyalty. The situation is an opportunity for the management team and company to show their ability to deal with crisis situations and prove commitment to quality and customer care.     

Would a poorly handled recall cause you to lose confidence in a brand?