The right recall strategy
Source: HBS Working Knowledge
Mattel has been criticized heavily for having to recall not once but twice in as many weeks 20 million toys manufactured in China with lead paint and/or loose, potentially dangerous magnets.
Clearly Mattel did not have sufficiently tight quality control procedures in its supply chain to compensate for the extra risks of outsourcing to relatively new Chinese subcontractors. Clearly there were design flaws in the toys with the magnets that could come loose.
But Mattel deserves praise for now stepping up to its responsibilities as the leading brand in the toy industry.
Mattell CEO Bob Eckert has taken personal charge of the situation. He has apologized publicly and taken immediate steps to tighten quality assurance requirements on Mattel's suppliers. There has been no effort to duck behind blaming suppliers and distributors or, even worse, consumers - as Audi attempted to do in the famous unintended acceleration recall of the late 1980s.
Mattel is effectively getting the word out about the recall. Among other methods, the company is using bold red ads on high-traffic Internet sites such as Yahoo.com to find owners of the affected products and drive them to the Mattel website for more recall information. With this approach, consumers are being empowered to handle the problem themselves rather than clog customer service desks at Mattel's retail outlets, which would strain Mattel's dealer relations and cost the company extra dollars in processing fees.
Mattel's recall website is a model of excellence. All the affected products are depicted and clear instructions are provided on how to return recalled products (including downloadable application forms and shipping mailers), which suggests strong contingency planning.
Where Mattel has fallen short so far is in compensation. Mattel is offering equivalent value coupons good for other Mattel products in exchange for recalled products. Given the inconvenience caused to consumers and the need to motivate them to return the affected products, this offer may not be sufficient.
Ultimately, the success of the recall will be determined by the percentage of affected products that are returned. Anything less than 90 percent within 3 months for a child safety hazard will represent failure.
As long as the two recalls to date are the whole of the problem and not the tip of an iceberg, Mattel's brand reputation should survive. The CEO knows that Mattel's brand trust - built up over 62 years - is at stake, just ahead of the holiday selling season. And with 80 percent of US toys sourced from China, other US toy marketers are under equal scrutiny; if similar problems surface at other companies, Mattel may earn some credit for getting out ahead of the problem
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