Johnson & Johnson: Case

Study Analysis

Introduction to the Case

Johnson & Johnson which was founded in 1886, is an American multinational involved in
manufacturing medical devices, consumer packaged goods and pharmaceutical products.
Headquartered in New Jersey, the company has about 250 subsidiary companies and operates
in over 57 countries while its products are sold in 175 countries. Some of its well-known brands
include Band-Aid, Clean & Clear, Acuvue, Benadryl, Listerine and Neutrogena.

The company had been performing very well since its foundation. But suddenly, in the fall of
1982, somehow (most likely because of tampering), cyanide- laced Tylenol capsules were put
on the shelves of pharmacies in the Chicago area. Seven unsuspecting consumers died after
consuming the cyanide- laced capsules. In fact, Johnson & Johnson itself came to know about
the cyanide-laced capsules only when a news reporter from the Chicago area called the
company requesting its comments.

Background

In 1982, Tylenol, an over- the- counter painkiller marketed by McNeil Consumer Products, a
division of Johnson & Johnson, was exhibiting excellent performance. The following points
explain the importance of the product for the company.
 1. It accounted for 19 percent of Johnson & Johnson’s corporate profits during the first
three quarters of 1982, 13 percent of Johnson & Johnson’s year- to- year sales growth,
and 33 percent of the company’s year- to- year profit growth.
2. With a 37 percent market share, Tylenol was, by far, the leader among painkillers. In fact,
its share was greater than the combined market shares of the next four leading painkillers
combined.
3. Had Tylenol been an independent corporate entity, its profits would have placed it in the
top half of the Fortune 500.

Statement of the problem

Problems Faced

The events made for sensational headlines, especially given the high level of trust enjoyed by
Tylenol from the American public. The US newspapers ran as many as 100,000 separate news
stories over the duration of the crisis. A post- crisis study by Johnson & Johnson found that
within the first week of the crisis, over 90 percent of the American population was aware of the
deaths in Chicago. One of the news clipping services claimed that the Tylenol crisis story had
been given the widest US news coverage since the assassination of President John F. Kennedy.
The story was carried by all three television networks, and CBS’ coverage, which focused on the
death of a 12-year-old girl from consuming the contaminated Tylenol, evoked strong emotions.

Alternative solutions
Recovery Strategy
Faced with this unprecedented crisis, Johnson & Johnson’s CEO, Jim Burke, acted decisively. He
formed a seven-member strategy team and tasked them with addressing two key questions

1. How do we protect the people?

2. How do we save this product?
To address the first question, the company undertook a variety of steps:

 It immediately alerted consumers across the nation, via the media, not to consume
Tylenol. The company also instructed the consumers not to resume using the product
until the extent of the tampering could be determined.
 It stopped all production and advertising of Tylenol.
 It withdrew all Tylenol capsules from the store shelves in Chicago and surrounding areas.
 Though it found only two more contaminated bottles, in the interest of protecting the
customers, the company ordered a national withdrawal of every capsule. By undertaking
this withdrawal, the company was effectively signaling to the customers that their safety
was paramount even if it cost the company hundreds of millions of dollars.
  Johnson & Johnson successfully used the media, both PR and paid advertising, to
communicate information about its response as well as its evolving strategy through the
duration of the crisis. Generally, before the crisis, Johnson & Johnson did not actively
seek press coverage, but despite this inexperience, it recognized the importance of open
communication during a crisis, especially if Tylenol was to be “saved.”
 First, as noted above, it issued a national alert to tell the public not to use the Tylenol
product. It also established a toll-free hotline to respond to inquiries from customers
concerning the safety of Tylenol. Second, it also established a toll-free line for news
organizations to call and receive prerecorded daily messages with updated statements
about the crisis. Next, several major press conferences were held at corporate
headquarters. Within hours of the first reports, an internal video staff team set up a live
television feed via satellite to the New York metro area. This allowed all press
conferences to go national.

Fourth, rather than shying away from media, Jim Burke confronted the issue by going on 60
Minutes (a popular, longstanding news show) and the Donahue Show (a popular talk show) and
informing the public of his company’s initiatives. And fifth, the company cooperated fully with
the government. Tyrone Fahner, the Illinois Attorney General in charge of the investigation, was
impressed that not only did he get whatever he requested from Johnson & Johnson, but the
company was also proactive in proposing a large reward of US$100,000 for catching the
perpetrator.
With regard to Johnson & Johnson’s PR strategy, Dieudonnee Ten Berge had the following
comment: “The Tylenol crisis is without a doubt the most exemplary case ever known in the
history of crisis communications. Any business executive, who has ever stumbled into a public
relations ambush, ought to appreciate the way Johnson & Johnson responded to the Tylenol
poisonings. They have effectively demonstrated how major business has to handle a disaster.”
Johnson & Johnson also provided the victims’ families with counseling and financial assistance
even though it was not responsible for the product tampering. It further developed a tamper-
proof triple seal packaging (a glued box, a plastic seal over the neck of the bottle, and a foil seal
over the mouth of the bottle)—a first for the industry—within six months of the crisis to
prevent any similar future incidents. It also developed new random inspection procedures
before shipments of Tylenol to retailers. To encourage purchases in the short term, customers
were given US$2.50 off for purchasing the re- launched Tylenol (or, in fact, any Johnson &
Johnson product).

Many of Johnson & Johnson’s actions received extensive coverage in the media, which ensured
that people were well informed about the concrete steps the company was taking; the constant
media coverage also earned sympathy for the company as a victim of a criminal tampering.
Within a year, Tylenol’s share had climbed back to 29 percent.

Many analysts attributed Johnson & Johnson’s quick response to the fact that it had a credo
that was well communicated and shared among company employees. David R. Clare, president
of Johnson & Johnson at the time, acknowledged this when he said, “It was the credo that
prompted the decisions that enabled us to make the right early decisions that eventually led to
the comeback phase.” In the credo, Robert Wood Johnson had stated that the company’s
responsibilities were to the consumers and medical professionals using its products, to its
employees, to the communities where its people work and live, and to its stockholders. Thanks
to the credo, in the time of crisis there was little doubt among either the management or the
employees that public/customer safety should be paramount regardless of short- term costs to
the company. This commitment was reflected in its actions and proved to be an effective public
relations tool as well the key factor behind the resurgence of the Tylenol brand which had been
written off by many analysts and observers.

The company embarked on a two pronged strategy built around two key questions. How to
return a safer product to the marketplace and how to earn back the trust of fearful customers?

The solution was not limited to developing safer packing for Tylenol, but it looked at how to
address the more important issue of consumer confidence in product safety. As a result, the
Johnson & Johnson team challenged itself to revolutionise packaging. The product safety
solution was also the catalyst for reversing consumer fear and winning back trust.

Larry Foster, Corporate Vice President of Public Relations at Johnson & Johnson said, in
reflecting on the astute management of the crises, “What began as Johnsons & Johnson’s
darkest hour turned out to be its brightest in terms of corporate reputation.” When probed
further, did you respond to a plan? His response was visionary.

“No, not really. We responded from our values,” he said. The company’s values, written in the
mid-1940’s by Robert Wood Johnson, stated that the company‘s responsibilities were to the
consumers and medical professionals using its products, employees, the communities where its
people work and live, and its stockholders. Therefore, it was essential to maintain the safety of
its publics to ensure business continuity. Johnson & Johnson’s responsibility to its publics
became the compass which guided the company’s decisions.

Chairman James Burke appeared on commercials, did more than 50 interviews and was the
chief trust-builder. A press event was held concurrently by satellite in 100 cities in the US to
introduce the new packaging, a new technology innovation in itself for its time.

Tylenol was re-launched with a revolutionary tamper proof packaging seal and introduced
caplets. The solution, however, was less about innovative packaging or a great crises plan. It
was more about a crises solution that focused on public safety and consumer peace of
mind. Innovative packaging was a rational driven solution. Public safety and peace of mind was
the emotional driven solution which, from more than 200 crises I’ve managed, always
resonates with customers or victims.

What is also significant is that while a crises plan protects you brand and reputation, crises are
more about the victims. It’s what I refer to as an “outside- in” instead of “inside-out” viewpoint.
I’ve seen this cardinal mistake being made time and time again, most recently in the BP oil
disaster in the Gulf of Mexico when CEO Tony Howard famously proclaimed, “There’s no one
who wants this over more than I do. I would like my life back.”

Tylenol’s market share spiked from 33% before the crisis to 48% 90 days after the re-launch.
Consumer trust in Tylenol increased three fold compared to the period prior to the crisis,
restoring confidence in the brand.

So what are the five key learning from Tylenol’s experience?

1. Values based brands outperform non-values based brands on trust, credibility and
listenability. In other words, great companies and great brands stand on a platform of great
values. In a crises I’d rather defend the values than the facts.

2. Crisis management is not about public relations driven ‘damage control’. It’s about business
continuity. About affirmative strategic, business-centric action with a strong focus on the
victims in a crises.

3. Assume responsibility for the solution, even if you don’t have to, because it’s about the
publics’ trust in your brand and the test of your character.

4. Act quickly, honestly and decisively.

5. Good behavior delivers great returns. Remember the high cost of low trust.

Nothing good happens without trust. One of the most overlooked concepts in crisis
management and mitigation is forgetting about the ‘speed of trust.’ It’s a concept that reflects
the speed of gaining or losing the trust that communities have in your brand. In crisis
management, trust changes everything. Why? Because it’s the only thing that means
everything.

Cost and benefit

The cost was a high one. In addition to the impact on the company's share price when the crisis
first hit, the lost production and destroyed goods as a result of the recall were considerable.

However, the company won praise for its quick and appropriate action. Having sidestepped the
position others have found themselves in - of having been slow to act in the face of consumer
concern - they achieved the status of consumer champion.

Within five months of the disaster, the company had recovered 70% of its market share for the
drug - and the fact this went on to improve over time showed that the company had succeeded
in preserving the long term value of the brand. Companies such as Perrier, who had been
criticised for less adept handling of a crisis, found their reputation damaged for as long as five
years after an incident.

In fact, there is some evidence that it was rewarded by consumers who were so reassured by
the steps taken that they switched from other painkillers to Tylenol.

Conclusion

The features that made Johnson & Johnson's handling of the crisis a success included the
following:

 They acted quickly, with complete openness about what had happened, and immediately
sought to remove any source of danger based on the worst case scenario - not waiting for
evidence to see whether the contamination might be more widespread
 Having acted quickly, they then sought to ensure that measures were taken which would
prevent as far as possible a recurrence of the problem
 They showed themselves to be prepared to bear the short term cost in the name of
consumer safety. That more than anything else established a basis for trust with their
customers