Social media amplifies damage of product recalls to firms — rivals, too - UW Today
A product recall is never good news for a firm. So states new research on the social media multiplier of product recalls by Abhishek Borah , an assistant professor of marketing at the University of Washington’s Foster School of Business. His paper with co-author Gerard Tellis of the University of Southern California is titled “Halo (Spillover) Effects in Social Media: Do Product Recalls of One Brand Hurt or Help Rival Brands. Borah’s study of the automotive industry reveals that product recalls provoke a sharp increase in negative chatter on social media sites. This online trash talk amplifies the damage, slashing sales and the market cap — or total market value of unpurchased shares — of the recalling company. Innocent firms often face a similar fate when they get caught in a “perverse halo” of negativity created by a domestic competitor’s recall. “Bad news travels fast on social media,” Borah said. “Our study demonstrates that a recall event increases negative chatter that can have damaging effects on the sales and stock market performance of rivals. com — makes cars the perfect context for studying the relationship between social media and recall events. For the study, Borah and Tellis considered four automobile manufacturers: Japanese firms Toyota, Honda and Nissan, and American firm Chrysler. Source: www.washington.edu
