Consumers Becoming Less Tolerant of Recalls, Demanding More Control Over Information

More than half of consumers change buying habits for nine months or more

The buying habits of consumers change dramatically and cost companies millions when product safety and quality issues arise, according to a new study released today by Deloitte.

More than half of consumers responding (58 percent) who heard about product safety and/or quality problems changed their buying habits, according to the survey. These consumers turned away from such products for more than nine months, on average, increasing the likelihood that they would discontinue the use of the product or brand entirely.

“Our research shows that consumers are becoming less tolerant of recalls, with more than 50 percent changing their product choices,” said Pat Conroy, Deloitte LLP’s vice chairman and consumer products practice leader. “As these consumers continue to buy different products, product manufacturers can expect lower sales and run the risk of damage to their brands.”

The survey, “Food and Product Safety and Its Effect on Consumer Buying Habits,” addresses consumer behavior around product safety and product quality issues in general. Specifically, it focuses on key issues in four product categories:

• Toys
• Consumer electronics
• Fresh food
• Packaged food/beverages

Of these categories, changes in buying habits were most common for fresh food and packaged food/beverage. Roughly half (49 percent) of respondents said they were extremely concerned about product safety, with the greatest concerns coming from women (53 percent) and consumers 55 years of age and older (56 percent). All in all, there is a wide awareness about product safety and quality problems, and more than half of respondents (54 percent) said they were more concerned about the safety of fresh food products than they were a year ago.

Global Concerns
The global lines that were once drawn have now begun to blur, and corporate globalization has created “businesses without borders.” However, although globalization is an increasingly valuable part of doing business, roughly two-thirds of consumers surveyed (65 percent) were extremely concerned about the safety of products produced outside the United States, with the greatest apprehension coming from older consumers.

Approximately three-quarters of the overall respondents (73 percent) were extremely concerned about the safety of products produced in China, with half having the same doubts about products produced in Southeast Asia and Mexico.

As products fall under greater scrutiny, consumers surveyed indicated they would like more information about the safety of food products provided on packaging (86 percent), company Web sites (81 percent) and by the government (81 percent). Some 67 percent said that food product labels with country of origin labeling, certification of product testing and certification of quality testing would be extremely important in their buying decisions.

“Consumers’ increased sensitivity of product safety and quality is having a long-term effect on business,” said Conroy. “Product recalls impact companies’ revenues and share price, as well as market share and brand perception. We’ve seen that, while some companies can maneuver through recalls relatively unscathed, others suffer catastrophic damage.”

The research shows that some of the key factors that drive the extent of a product recall's impact range from the extent of the company’s product diversification, if the recall is specifically for a branded product, strength of the company’s brand when the incident occurred and how the company responds.

“Companies are meeting consumers’ concerns by upgrading or expanding safety procedures including stricter safety standards, testing and third-party audits, and government intervention is driving change,” said Conroy. “The recent granting of the Consumer Product Safety Commission to initiate product recalls and monitor ingredient levels such as lead allowed in toys and other children’s products, is a very timely and relevant example of changes being made all with consumer safety and peace-of-mind at the top of the agenda.”

About the Survey
The survey was commissioned by Deloitte and conducted online by an independent research company on September 3, 2008. The survey polled a nationally representative sample of 1,004 adult consumers. The survey has a margin of error of +/- 3.1 percentage points at the 95 percent confidence level.