Remedy management for product recalls in the automotive industry: How car dealers should time the repair and communicate its outcome

Abstract

This paper examines how car dealers should manage the remedy for recalled vehicles, specifically the timing of the repair and the message on its outcome. Drawing on the Health Belief Model, we hypothesize that customers prefer an immediate repair if they perceive a high risk and the wait time until next inspection is long. Regarding the outcome message, we hypothesize that communicating a risk reduction message positively affects customers' satisfaction with the car dealer, mediated by perceived credibility. Two preliminary studies (archival data analyses and interviews with managers) unveil that current remedy processes are not well aligned with these propositions, with car dealers often delaying the repair service for a recalled vehicle until next inspection for convenience reasons and veiling its outcome as a value increase. Two experimental studies support our hypotheses, confirming the central role of customers' risk concerns for remedy management.