Focus at Four: What's with all the recalls lately?

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BRYAN, Tex. (KBTX) - Nearly everyday you see one in the news. Recalls. They are a dime a dozen. Now a Texas A&M study is looking into the long term effects they have on companies and consumers.

On Monday, Harley Davidson recalled 57,000 motorcycles worldwide because of an engine oil cooler clamp that wasn't installed correctly.

Last week...Readfield Meats recalled close to 50,000 pounds of beef trimmings that they say don't meet federal standards.

And just a couple years ago, Blue Bell had its big recall because of listeria concerns. Those issues, of course, have since been resolved, and the company has put new food safety protocols in place.

Two Texas A&M University marketing professors have been looking into the effects of crisis management strategies and long term effects of product recalls.

Venkatesh Shankar, who is one of the researchers from the Mays Business School, joined us on First News at Four Monday.

"We looked at the shareholder value," Shankar said. "So what we found short term was the conventional wisdom was that if you have a recall please be careful about announcing it because the fear is that you'll make people panicky."

Toyota had a number of recalls in 2009 and 2010.
in Shankar's opinion they did the right thing by making an announcement and trying to fix the problem.

"In the long term it's better to voluntarily recall," he said. "In the short term you'll get a hit in shareholder market capitalization. But in the long term it's better to do that because you get public trust."

Paul Atkinson with Atkinson-Toyota agrees with the strategy that the study proposes.

"It enhances the brand loyalty." Atkinson said. "The more transparent a company like us can be with the public about a recall or an incident with an automobile, the more loyalty there is from the customer...not to just the brand, but to the dealership."

And that is something that is echoed in the Texas A&M study.

“Our results suggest that managers should use different advertising types during and after a recall, strategically initiate recalls, and diligently prepare post-recall remedy to mitigate the negative effects of recall volume on long-run shareholder return,” Shankar explained.

We've attached the study to this web story for your convenience.

View the video above for more information.