Use of Adjusting and Instructing Information in Product Harm Crisis Communication

Author

Seema Bihari Doctoral Student Institute of Management Nirma University Ahmedabad-382481, Gujrat E-mail:- seemabihari@nirmauni.ac.in

Ashwini Awasthi Professor Institute of Management Nirma University Ahmedabad-382481, Gujrat E-mail:- awasthi.ashwini@gmail.com

Abstract

Communication with the stakeholders during a crisis situation is important for companies since it reflects the company’s response strategy. The stakeholders need to be informed about the reason of the crisis situation, and what can be done to remain safe during the crisis situation. This research paper studies the product recall messages issued by companies of the Indian Automobile industry and the type of information imparted by the companies through these messages. Content analysis of the messages issued by the automobile company has been done to identify the use of instructing and adjusting information. It is found that the e-paper/ e-magazine is the most used media vehicle in crisis situation. Companies are not following the guidelines provided by Society for Indian Automobile Manufacture (SIAM) which is not a regulatory body. The results indicate the need of robust regulatory guidelines for communication in crisis situations.

Keywords: Crisis Situation, Adjusting Information, Instructing Information, Automobile Industry, Content Analysis

1. Introduction

Organizations frequently find themselves in situations, which can be termed as crisis situations. A few recent examples of such situations are, detection of high level of lead content in Maggi Noodles in 2015 (Times of India, 2015; Zilman, 2016), presence of mercury in L’Oreal cream in 2016 (The Indian Express, 2016)or protests against Coca Cola plant for overuse of groundwater in Kerela in 2014 (Financial Times, 2014). It is difficult for organizations to protect themselves from crisis situations (Coombs, 2012).Therefore, it becomes imperative for them to spread rapid and accurate information about the crisis (Coombs &Holladay, 2009). Researchers have suggested the use of multiple media vehicles so that a large number of stakeholders can be contacted at the earliest.

This study focuses on the crisis communication strategies used by companies on the internet. It will be beneficial for the public relations managers to know how the companies are communicating during a crisis situation, if they want to help the organization in improving the crisis communication. This would also help the policy makers to identify, if there is a need for policy frameworks for communication guidelines to the companies issuing product recalls. The study has used content analysis, where the news items pertaining to product recalls done by automobile companies were identified. The company websites and e-newspapers/e-magazines were studied to identify the type of information given through the messages. The findings indicate that the automobile companies do not use adjusting and instructing information and there is a need to have a recall communication policy.

Section 2 below discusses the review of literature in which we have discussed the theoretical background and the rationale of the study. Research objectives, and research questions are outlined in section 3. Research methodology is briefly discussed thereafter in section 4, which includes information about data sources, sample, and analysis method employed. This is followed by results and analysis of the data in section 5, and conclusions and implication of the study in section 6.Finally, section 7 sums up the limitations of the study, and the scope for further research.

2. Review of Literature

A crisis is a major catastrophe that may occur either naturally or as a result of human error, intervention, or even a malicious intent. It can include tangible devastation, such as the destruction of lives or assets, or intangible devastation, such as the loss of an organization’s credibility or other reputational damage. The latter outcomes may be a result of management’s response to tangible devastation, or the result of human errors (Argenti 2007).

It is difficult to define a crisis situation specifically, since each crisis situation would be unique in itself. Though each crisis situation is unique, still they share some common characteristics which were identified by Hermann (1963): Crisis situations are a threat to the company, they are not anticipated by the company, and they do not provide enough time to the company for responding to the situation.

In addition to these three characteristics, Ray O’Rourke, former Managing Director for Global Corporate Affairs at Morgan Stanley, identified three more characteristics for crisis situations. First, in dearth of instant information, it is difficult for the company to explain the situation to the stakeholders. Second, the events subsequent to the crisis situation occur rapidly, for example reporting done by the media about the event is fast and it spreads widely. Third, the companies in a crisis situation are under strict scrutiny of the regulatory bodies, and the stakeholders (Argenti, 2015).

Crisis Situations can occur due to different events such as technical faults, hostile take over’s, growing environmental concerns or sudden change in demand of products. The category of crises which are specifically related to products, are called product harm crises. These are incidents when products are found to be harmful or defective and cannot be used by the customer(Dawar, & Pillutla, 2000). Product harm crisis can be caused by three main reasons, namely defect in the product, product sabotage, and misuse of product (Siomkos, & Shrivastava, 1993).

An incident of product harm crisis can affect the company’s reputation, erode its brand equity, and change the quality perceptions of the product (Van, et al., 2007). Other than affecting the brand equity of the company, product harm crisis can also affect the finances of the company. It can have negative effect on the market share, sale of other products of the company, and losses on account of recalls of the products (Pruitt and Peterson, 1986). The reaction of consumers to product harm crisis is different than the reaction of shareholders. Consumers find a company’s decision to recall the defective product as a positive signal, whereas the investors find it as a signal for serious financial loss. Such incidents lead to reduction of firm value due to investors’ reaction, and its effects on the stock market (Chen, Ganesan and Liu, 2009).

Organizations realize the seriousness of issues arising from mismanagement of crises, and they try to develop strategies to prevent and deal with such crisis. Siomkos, & Shrivastava, (1993) identified four types of responses to a crisis, and placed them on the “Organizational Response Continuum”, with respect to the speed with which the company responds to the crises. At the lowest level the company can simply deny of any responsibility associated with the defective product (Denial), At the second level, the company recalls the defective products, after a regulatory agency orders it to do so (Involuntary recall).At a higher level, the company exhibits a positive response by recalling the defective products, even before a regulatory body issues an order to recall the products (Voluntary Recall).

At the highest level of response, the company displays a Superior Effort (Super Effort). The company is more concerned about its customers rather than merely being concerned of the finances of the company. It makes an effort to spread awareness of the recall activity by using different types of media. The recall is widely advertised in order to reach the larger target audience. The company also goes out of its way to repay for the inconvenience caused to the customers. It issues free product samples, coupons, or discounts for the other products of the company. The company tries to have a socially responsible image (Siomkos, & Shrivastava, 1993).

Communication in a Crisis Situation

Communication about the crisis is a critical part of management of the crisis situation. Crisis communication involves collection, processing and distribution of the information to the affected stakeholders, about how to handle the situation(Coombs and Holladay, 2011).The first priority of any company facing product crisis is to communicate about the crisis to the consumers.

During a crisis situation, usage of multiple media is found to be effective when the message is consistent across different media vehicles, and the media mix is rich (Coombs, 2007). Companies can get favourable feelings from the stakeholders if they use wide media mix. The usage of different media vehicles like print, television, internet, etc. for informing the customers during the crisis situation have been found to be impactful, and helpful in creating a positive image in the minds of the customers (Jolly, & Mowen, 1985).

Struges (1994) has suggested three types of information that needs to be given to the stakeholders, namely Instructing Information, Adjusting Information, and Internalizing Information. The company can help the stakeholders to overcome the physical threats by providing them “Instructing Information”. This information provides guidelines to the stakeholders about the measures that they can take to protect themselves from probable harm. The second type of information is Adjusting Information. It helps to cope with the psychological threats and also reduces the stress created by the crises (Coombs, 2012).

Companies provide internalizing Information in order to build their reputation. They mainly do this in the pre-crisis stage, for example, association of a company in corporate social responsibility activity (Struges, 1994).This information is helpful in positive image building of the firms, in the minds of the customers, and other shareholders. During a crisis, companies should first provide instructing information, followed by adjusting information. Company’s attention should be on safeguarding the interests of the stakeholders by telling the Do’s and Don’ts during crisis, rather than indulging in image building activity (Frandsen, & Johansen, 2016).

Extant Literature suggests that the organizations must be able to communicate to the stakeholders by responding quickly and accurately. Organizations should talk to the stakeholders as soon as possible, and the communication strategies should take into consideration the needs of the stakeholders. Mere communication about the product recall does not suffice the needs, companies should use adjusting and instructing information in their communication messages. Existing literature, to the best of our knowledge, has not explored online communication messages of the companies facing product harm crises, and the type of information that the companies are providing through these messages.

3. Research Objective and Research Questions

More watchful eyes of regulatory bodies in the recent past, and growing concern of the marketer to be customer oriented, should prod companies to be appropriative, accurate and quick in their communication about the crisis situations. The purpose of this study is to examine the communication messages used by companies during a product harm crisis, in the absence of any regulatory directions. It also attempts to identify the type of information (whether adjusting or instructing) that the companies’ provide in the communication messages on the internet. Product harm crisis is the focus of the study, as they are common and can cause damage to both company and its customers.

The study attempts to answer questions like, do companies respond to the crisis situation faced by them. How do companies use the internet to communicate about the crisis situation? Do all the companies facing a crisis situation use adjusting information in their communication message to the stake holders. And do all the companies facing a crisis situation use instructing information in their communication message to the stakeholders.

4. Research Methodology

4.1 Sample: This study has taken up automobile sector of India for investigation, because there has been an increase in the number of product recalls happening in this sector. Society of Indian Automobile Manufacturer (SIAM) has classified the Indian Automobile Industry into passenger vehicles, commercial vehicles, three-wheelers, and two-wheelers. The two-wheeler segment accounts for 80 percent of the market share, while the passenger vehicles have 14 per cent of the market share (SIAM, 2016).There are 43 automobile companies that are operative in India, and are listed with SIAM. Out of these 43 companies, three companies are three-wheeler manufacturer, 12 two-wheelers companies, 10 commercial vehicles companies, and 18 passenger vehicles manufacturers.

There has been an observable increase in the number of product recalls, particularly in the automobile industry. In India alone, 2.24 million cars were recalled between 2012 to 2016. In the year 2012, SIAM announced a voluntary auto recall policy for two-wheelers, cars and commercial vehicles (Business Standard, 2016). SIAM’s voluntary code on vehicle recall covers the potential issues arising due to manufacturing defects in the vehicles. Communication guidelines direct the companies to display recall information on company websites (The Economic Times, 2012).

4.2 Data Source: News related to automobile crisis situations in India, from 1 ^st July 2012 to 15^th October 2016 was collected, and content analysis was carried out to analyze the messages. All 43 companies listed as members of SIAM were used for this study. Different online media vehicles that were used to communicate with the stakeholders such as e-papers/ e-magazines, press releases on company websites, and the specific pages on websites dedicated to crisis situations were analyzed. Content Analysis has been used to find out the type of information provided by the companies through the communication messages on the internet.

5. Analysis and Results

The situation in which a company had issued a product recall, either voluntarily or involuntarily was considered as a cue for identifying a product harm crisis situation. As defined by Siomkos & Shrivastava (1993), product harm crisis is caused by defect in the product; hence all the recall situations due to any type of defect in the product were identified as product harm crisis situations.

Online Media: The online crisis response strategies were identified by manually reviewing press releases, company websites, and e-newspapers/e-magazines. Company statements or messages regarding a crisis were matched with the available list of product harm crisis response strategies like Denial, Involuntary Product Recall, Voluntary Recall and Super Effort. The crisis response undertaken in the product recall messages were then identified through content analysis.

Types of Information : During product harm crisis, customers become concerned about their safety, and it may lead to negative feelings for the company. Adjusting Information is used to express concern for the victims. The use of sentences to explain about what has happened and providing information about corrective action has been used as an indicator for the use of adjusting information. The keywords used as indicator for adjusting information are divided into two categories, namely the keywords that explain the problem, and the keywords that indicate the corrective action taken by the company. The keywords that were used as indicator of the problem were defect, faulty, interference, stoppage, and preventive. The keywords that indicate the corrective action taken by the company were inspection, installation, replace, repair, rectify, update and fix.

Instructing Information consists of the measures that the customers should take to protect themselves from physical threats. A recall alert issued by a company is a way companies can deliver instructing information to the stakeholders.The keywords that indicate the use of instructing information in the communication message were, dealers will contact the customers, customers can contact the nearest dealer, customers can call the customer assistance centre, provide your chassis number, provide your vehicle identification number, company will contact the customer, and customer should visit the company website.

It is found that out of the 43 automobile companies, 15 companies had faced a crisis situation one time or the other. The crisis situations faced by these companies were post June 2012, after SIAM issued guidelines of recalling the products from the market in case of defects. 12 passenger vehicles manufacturers and three two-wheeler manufacturers had faced crisis situations. None of the commercial vehicle manufacturer, or the three-wheeler manufacturers had faced any type of crisis.

The crisis faced by all the 15 automobile companies fall in the category of Product Harm Crisis. All the crisis situations were caused by technical defects or technical problems, and all the companies which faced crisis situations, had issued product recalls (Appendix 1).It is found that 13 companies accepted the crisis situation, and voluntarily recalled the defective vehicles before intervention from any government authority. There are only two instances when two companies had denied the crisis situation. Table No.1 shows usage frequencies of different online media vehicles like websites, press releases and independent sources such as e-papers/ e-magazines.

See Table No.1

Out of the 15 companies that had issued product recalls, independent sources such as e-papers and e-magazines had reported about the situation in case of 14 companies. The company initiated source of information for communicating about the crisis situation were comparatively less than the independent sources.

There was a non-compliance of SIAM code of website use for disseminating crisis situation information, by many automobile companies facing product recalls. Nine companies had used either websites or released press releases on their own websites to communicate about the incidents. However, six companies had not used their websites to communicate about the situations. Many companies had used different media to a varying degree at different crisis events. Only One company (Maruti), used its website, press releases, and independent sources of communication for communicating with the stakeholders in all the five instances of crises.

Even before the company decides about the response strategy for the crisis situation, it needs to assure the stakeholders about the situation and the steps it is taking to control the situation, and it needs to provide adjusting as well as instructing information. All companies were not using adjusting and instructing information in their communication (See Table no. 2).Again there is only one company (Maruti) that provided instructing and adjusting information through company website, and through the independent sources of information on internet.

See Table No.2

Third party sources of information such as e-newspapers, and e-magazines provided adjusting and instructing information for14 companies (See Table No. 3). However the company controlled media vehicles namely websites, and press releases had been used only by eight companies for providing both types of information. The sources of adjusting and instructing information were different for different media vehicles. Press releases which are official sources of information, were used by four companies for providing adjusting and instructing information individually, and at three crisis instances companies provided both types of information through press releases.

See Table No.3

6. Conclusions and Implications

The extant literature available on crisis communication suggests that organizations facing crisis situations should provide timely, and accurate information to the stakeholders. It is expected that the message will reach the stakeholders either through the company, or through third parties (Coombs &Holladay, 2011).

This study which investigated online media, found that third parties (e-newspapers and e-magazines) were more active in communicating about the product recall situations faced by the companies. This may not be good for the companies and their customers. Companies need to be vigilant and be the first to communicate about the crisis situation. As mentioned in the guidelines given by SIAM, companies that are facing a recall situation should use their websites to publicize about the event, however it has been observed that all the companies in crisis situation are not using their websites to display information about such incidents.

The voluntary recall code by SIAM has directed the companies to display information on the websites, still seven companies in the study did not use their websites for communicating about the recalls. One suggestion is that the government can issue guidelines for recall communication.

When guidelines of Food Safety and Standards Authority of India (FSSAI), and Central Drugs Standard Control Organization (CDSCO) are studied, it is found that they have stringent and specific guidelines for recall communications that has to be followed by companies. FSSAI states that the company should reach out to the maximum stakeholders, in case a recall is to be done. The recall communication should include adjusting as well as instructing information and the company can use press releases, letters, or paid advertisements in the media (FSSAI, 2009).

The government can also take cue from the general guidelines issued by the developed countries. For example, the Consumer Product Safety Commission (CPSC) in the United States not only asks the companies’ to recall the defective products but also provides guidelines for communication. CPSC has included social media such as Facebook, Blurp, Twitter as a medium to communicate with the stakeholders (CPSC, 2013).

Automobiles, and electronics products (particularly mobile phones) have witnessed increasing recall instances in India. For the safety of the consumers as well as benefit of the concerned firms, they need to inform the stakeholders as soon as possible, with adjusting and instructing information. There is a need for regulatory policy frameworks, and clear guidelines for recalls in areas other than food, drug, and cosmetics.

7. Limitations and Scope for Further Research

The type of crisis situation in this study was restricted to the product harm crises, hence it cannot be generalized to all types of crisis situations. The variation in the crisis response strategies and communication would change according to the crisis type. Future studies can explore the different types of crisis situations, and different company responses to them.

This study takes into consideration the company’s communication strategy in case of crisis situation, further research can to be done to know about the criteria on the basis of which companies select the media vehicles for communication. Further research can also be undertaken to know about reasons which inhibit the companies from using company’s’ websites for communicating with the stakeholders during a crisis situation. The study is restricted to the automobile industry, which does not have any recall communication policy. A mix of industries, those that have recall policies and those that do not have recall policies, can be studied, and a comparison of findings can be made.

This paper has studied the usage of adjusting and instructing information. Further studies can be undertaken to study the impact of adjusting and instructing information on the stakeholders and their relationship with the brand. Studies can also be conducted to find the impact of recall communication on customer loyalty, and re-patronage. Finally, the effectiveness of adjusting and instructing information for customers, and if customers find these type of information useful, can be studied as well.

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Appendix 1

Crisis Situation faced by the Automobile companies

Serial No.	Name of the Automobile Company	Category	Date	For Product	Reason for the Product Recall
1	Toyota Kirloskar Motor	Passenger	29.06.2016	Toyota Prius models	Inspection and installation of retention brackets on the curtain shield airbag inflators
			28.12.2015	Corolla Altis & Camry vehicles	Inspect and rectify the vehicles.
			15.11.2015	Corolla Sedan	Passenger side air bag
			25.11.2014	Corolla Altis	Engine oil entry into air intake system.
			12.11.2014	Toyota Camry	Defect in the front suspension.
			2013	Toyota Corolla	Defective airbags
			10.10.2012	Corolla Altis and Camry	Inspect the Power Window Master Switch (PWMS).
2	Nissan Motor	Passenger	2016	Nissan Sunny	Install additional sub harness in the front turn signal lamp circuit
			29.06.2015	Nissan Sunny and Micra	Rework the Engine Push button start
			26.10.2014	Nissan Sunny	Defective airbag
			25.05.2013	NissanSunny and Micra	Replace a faulty braking system.
3	Honda	Passenger	16.07.2016	City, Jazz and Civic	Preventive replacement of Passenger Side Air Bag inflator
			19.02.2016	City, Jazz and Civic	Preventive replacement of Passenger Side Air Bag inflator
			10.12.2015.	Honda City and Honda Mobilo	Replace the Fuel Return Pipe of these vehicles.
			23.10. 2015.	Honda Car	Update the software that manages the continuously variable transmission (CVT)
			18.09.2015	Honda CR-V, Civic, City and Jazz	Replacement of driver side/ Passenger side Airbag inflator
			15.05.2016	Honda Civic	Preventive replacement of Passenger Side Air Bag inflator
			16.07. 2014	Honda Accord and Honda CR-V	Preventive replacement of Passenger Side Air Bag inflator
4	Volkswagen	Passenger	04.06.2016	Volkswagen	Updating the cars with EA 189 engines
			01.12.2015	Volkswagen	Updating the cars with EA 189 engines
			00.00.2014	Volkswagen Vento	Violation of Emission Norm
5	Ford	Passenger	12.04.2016	FIGO and FIGO Aspire	Fix a software glitch that could lead to malfunctioning of airbags during a collision.
			13.11.2015	Ford Ecosport	Faulty rear twist beam bolt, a part in the vehicle's suspension.
			00.09.2013	Ford Figo and Fiesta	Faulty rear twist beam and power steering hose.
6	Maruti	Passenger	27.05.2016	Maruti Baleno cars	Upgrade the airbag controller software
			27.05.2016	Maruti Dzire	Faulty fuel filter.
			10.03.2015	Maruti Alto	Replace the `right hand door latch assembly’
			30.09.2014	Maruti (Ertiga, Swift and DZire)	Replace ‘fuel filler neck’
			11.04.2014	Maruti (Ritz, Swift and DZire)	Faulty wiring harness issue.
7	General Motors	Passenger	02.09.2016	Chevrolet Cruze	Inspect and repair the ignition system.
			15.12.2015	Chevrolet Beat Diesel	Replace the clutch pedal lever
			14.07.2015	Chevrolet Beat & Spark	Modification of the RKE installation system,
			24.07.2013	Chevrolet Tavera	Emission issue
8	Mahindra	Passenger Vehicle	21.09.2016	Scorpio and NuvoSport SUVs	Rectify faulty fluid hose in engine compartment.
			11.04.2015	SUV Rexton	Replace the alloy Wheels
			17.02.2015	MahindraXUV500	Upgrade the side curtain airbag software.
			09.07.2014	Mahindra Scorpio	Rectify faulty pressure regulating valves
			19.11.2014	Mahindra Scorpio, XUV500, and Xylo	Rectify a defective vacuum pump in engines manufactured
9	Renault	Passenger	20.01.2015	Pulse and Scala	Faulty airbag.
			29.05. 2013	Pulse hatchback and Scala	Faulty master brake cylinder in these vehicles.
10	Audi	Passenger	31.05.2016	Audi	Engine problems
			01.11.2014	Audi A4	Update software in airbag control unit.
11	Hyundai	Passenger	05.10.2016	Hyundai Eon	Inspect the “Clutch Cable Fouling with Battery Cable”
			24.5.2014	Hyundai Santa Fe SUVs	Replace the ‘stop lamp switch
12	Skoda	Passenger	8.03.2016	Octavia	Manual child lock of the two rear doors’
			30.11.2015	Skoda	Updating all cars with EA 189 engines in the Indian market
13	Yamaha	Two Wheeler	1.07.2016	YZF-R3 bikes	Clutch pressure plate sassy and oil pump sassy malfunction
			15.12.2015	YZF R1	Faulty gearbox
			19.03.2014	YZF R1	Problem with the vehicle’s headlight.
			20.07.2013	Scooter 'Ray	Insufficient strength in the handlebar of some vehicles due to inadequate welding.
14	Honda Motorcycles	Two Wheeler	21.03. 2016	CBR 150R, CBR 250R	Rectify defective starter relay switch assembly.
			15.08.2015	CBR 150R, CBR 250R	Rectify defective starter relay switch assembly.
				GL-1800 Goldwing	Replace “M/C Assy Kit, Second/Rear”
				VFR1200FDA	Replace “Shaft Assy, Kit Propeller”
15	Harley-Davidson	Two Wheeler	21.03.2016	XG750	Rectify a faulty fuel pump inlet.
			29.08.2015	XG750	Rectify a faulty fuel pump inlet.
			07.01.2015	Dyna and Softail	Detect any fault in the front brake master cylinder.