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What Apple should learn from Tylenol?and fast

In the face of mounting criticism of the iPhone 4?s signal problems, Apple must act fast to do good by its consumers and nip this public relations disaster in the bud before it gets worse.

Apple has two relevant past examples to learn from: Johnson & Johnson, which acted fast to recall bad Tylenol products, taking responsibility and paying damages, versus Toyota, which waited ages this year to recall faulty vehicles, denying there was a serious problem until it was far too late to prevent consumer deaths and serious damage to its brand image.

?Apple has handled reports that the iPhone 4 has a manufacturing glitch that causes dropped calls very, very poorly,? said Al Ries, chairman of focusing consultancy Ries & Ries, Atlanta. ?They tried to minimize the problem when they should have done just the opposite?get ahead of the situation by ?maximizing? the problem.

?Steve Jobs should have held a press conference and said, ?I'm appalled at what has happened and I'm going to recall all iPhone 4s and keep them off the market until we have a permanent fix,? he said.

IPhone floored
Apple continues to remain at the forefront of the smartphone market with the recently launched iPhone 4, according to British online mobile phone store Mobiles.co.uk.

With HD video capture, an enhanced 5 megapixel camera and a host of other new features including the highest resolution display screen ever seen on a mobile phone, iPhone 4 has proven to be the biggest product launch in Apple's history, and coupled with the latest iOS 4, boasts over a hundred new features, according to the site.

Apple?s iOS 4 offers better multitasking of third party applications and an improved digital zoom when taking photos, plus a tap to focus video feature, still offering one the most powerful operating systems to rival that of Google's Android, Research In Motion?s BlackBerry and Nokia's Symbian operating system.

However, despite its popularity, iPhone 4 has not launched without its problems, with stock too limited to meet the demand of a booming market, and the notorious fault with the positioning of the phone's antenna that causes a noticeable signal drop depending on the way users grip the handset.

This issue has sparked heated debate over the recent weeks since the phone's launch and forced Apple to comment on the situation, which suggested that it was users? fault for covering the phone antenna by holding it the wrong way.

In the iPhone 4's case the signal problem occurs when users cover the black strip in the lower left corner of the metal band, which sees the signal bars drop as a result.

Duct tape solutions aside, as suggested by Consumer Reports magazine, this is a major blow to Apple?s image.

However, Apple continues to claim that the issue is due to an incorrect formula in the way the signal bars are displayed on screen, sometimes mistakenly displaying more signal than the area actually permits.

Whether this fully explains what many believe to be a design flaw is open to debate, but an upcoming software update is set to rectify the problem or simply buying an iPhone bumper?a protective case for the phone?can help eradicate the issue too, according to Mobiles.co.uk.

None of this seems to have hindered the early success of iPhone 4, which the site claims is fast becoming the must-have device of 2010.

As retailers continue to sell out of the iPhone 4 as soon as it hits their stores, and low stock levels set to continue for the next couple of months at least, Apple will hope to benefit from keeping supply low and demand high.

Strong sales in the present, though, do not guarantee sustained success, and devices such as the Droid X by Motorola?launching today on Verizon Wireless?could give the iPhone 4 a run for its money.

The larger issue is Apple?s testy response to criticism. Perhaps Apple's top brass can jog their memories back 28 years when another Fortune 500 brand confronted its worst nightmare.

Solution is painfully clear
The Tylenol painkiller brand made headlines in 1982 when beginning Sept. 29 of that year seven people died after consuming cyanide-laced capsules of Extra-Strength Tylenol, J&J?s best-selling drug. Those deaths occurred a few days apart in the Chicago area.

While the case was one of sabotage, J&J went ahead and recalled 31 million bottles of Tylenol capsules from the market, offering tablet replacements for free.

More importantly, J&J chairman James Burke took charge of the situation, addressing a press conference one and a half months after the problem arose.

In addition, the company allocated more than $100 million to the 1982 recall and the relaunch of the Tylenol brand.

Tylenol accounted for 17 percent of J&J?s net income in 1981, per a New York Times report filed during the recall crisis. After the deaths, Tylenol?s share of the market dropped to 7 percent from 37 percent previously.

Indeed, many market observers were sceptical of the brand?s future. Yet, Tylenol was back on shelves two months later in tamper-proof packaging and supported by a huge marketing push.

 Also, per the New York Times report, Tylenol clawed back share only one year later to 30 percent of the $1.2 billion analgesic market segment.

?Before 1982, nobody ever recalled anything,? Albert Tortorella, a managing director at Burson-Marsteller, the New York public relations agency advising J&J on the recall, told the New York Times in 2002. ?Companies often fiddle while Rome burns.?

Unfortunately, J&J has suffered more recalls of Tylenol since 1982 ? one in 1986 that also cost much in sales and marketing costs, another in late 2009 and more recently this year.

On July 8, J&J expanded a recall of 21 lots of over-the-counter brands such as Tylenol, Motrin and Benadryl (see recall announcement). This followed a Jan. 15 recall after complaints of a ?musty or moldy odor.?

Regardless of the merits of each recall, the takeaway for Apple and other brands in similar sticky situations is acknowledging the problem, taking charge of the situation, addressing consumer and regulatory concerns and quickly making good to all who suffered one way or the other.

In other words, J&J understands Crisis Management 101.

Not everyone's gushing
In many respects, Apple?s situation is similar to petrogiant BP's problem over its broken underwater oil well spewing millions of gallons of crude oil into the Gulf of Mexico, ruining the livelihoods of many living along the coast.

?BP downplayed the seriousness of the Gulf spill until it was too late,? Mr. Ries said. ?As a result, the media has tarnished the brand to such an extent that it may be too late to save the company.

?Apple hasn't reached the depth of the BP brand, but everyday Apple's reputation is sinking lower and lower," he said.

Given consumer backlash to the iPhone 4?s signal problems and the highly negative reviews from Consumer Reports and the Engadget blog, Apple needed to respond quickly. It did not do so.

?Apple should think Tylenol and do the same?recall the product,? Mr. Ries said. ?But now it's probably too late to consider a recall.

?When you have a problem, you need to take immediate action, not wait until the problem gets worse,? he said.

The hardware glitch causing the iPhone 4?s signal problems is not what got Apple in trouble in the first place, Mr. Ries pointed out.

?Apple's fundamental problem is that the company is in too many businesses competing with too many other powerful companies,? Mr. Ries said.

Apple is in the computer business competing with Hewlett-Packard, Dell and others.

The company is in the software business, butting heads with Microsoft, Google and others.

Apple is in the music business, fighting off a host of companies.

The company is in the smartphone business competing with Nokia and BlackBerry.

?When you spread yourself thin, you lose focus and in the normal course of events something bad always happens,? Mr. Ries said.

The same thing happened to Toyota, he said. The automaker spread itself too thin and took its safety precautions for granted.

?The company has four brands: Toyota, Prius, Scion and Lexus,? Mr. Ries said. ?Furthermore, the Toyota brand alone has 18 different models.

?Too many models, too many brands, is an accident waiting to happen,? he said.

Luck of the Irish
Irish betting, gaming and bookmaking company Paddy Power has slashed the odds on Apple recalling its iPhone 4 from 2/1 to 4/6, making it odd on that the best-selling device will now be recalled.

Complaints about poor reception and a scathing report by Consumer Reports sparked a betting frenzy over the past 24 hours, with hundreds of shrewd punters backing a potential recall with Paddy Power before the bookie had a chance to react.

It looks like Apple may have been a little too fast out of the traps with the iPhone 4 launch, according to Paddy Power.

The company claims that if current betting trends are to be believed, it now seems certain that a recall is in the cards.

So how can Apple shine again?
Other industry insiders are not convinced that Apple will recall the device. Opinions vary as to what course of action Apple should take at this juncture.

The company must repair its image to counteract the impression that its response to criticism is brusque and dismissive.

?I think Apple, for all its glamour and aspirational appeal, doesn?t handle ?negative? very well,? said Thom Kennon, vice president of strategy at Wunderman, New York. ?They have boxed themselves into a fairly unique spot, with Steve Jobs being almost the singular face of the brand.

?That?s dangerous, and his perceived arrogance doesn?t help burnish their otherwise shiny brand,? he said. ?His first response?the company's first response?was reflexively dismissive.

?Had Apple been more humble and gracious??This is a problem, sorry, and we?re working to fix it??it may not be in the potential PR jam it is in today.?

The question remains: Should Apple consider a recall?

?No, I don?t think a recall is the smartest or even the most appropriate response,? Mr. Kennon said. ?We?re not talking about a safety hazard or even a significant failure of the product's core feature set which, let?s face it, is as much about the using the device as a tiny and sexy portable computer than it is about making phone calls.

?But they should be overnighting the bumpers free of charge to anyone who requests them,? he said. 

Mr. Kennon noted an ironic aspect of the scathing Consumer Reports article.

?Consumer Reports? failure to ?recommend? the iPhone 4 brings that publication back from the outer margins of relevancy, so well-done to them for capturing the moment and hanging in there,? Mr. Kennon said.

?Its death-grip labeling of the iPhone is certainly attention-grabbing, but where were they when Toyota was flogging all those actual death-trap minivans?? he said.

That aside, what is the best course of action for Apple to preserve or restore its brand credibility in the face of the current situation?

?On the surface, their brand is about style and grace, but peel it back to its essence and it?s about form?s perfect marriage to function,? Mr. Kennon said. ?That?s pretty heady territory for a personal technology brand and this is a design flaw that can fundamentally essentially diminish this perception for their customers.  

?So my advice?they need to seize the opportunity to make their response as on-brand as their product?s promise,? he said. ?I?d take out a full-page ad in all major dailies and digital pubs on one day next week.?

For the record, Mobile Marketer offers Mr. Jobs the chance to address these issues in this publication. Send an email to .

?It should have a simple, confidant note of concern and apology and a single call-to-action to remedy the problem,? Mr. Kennon said.

?Maybe something like: ?If you deserve an iPhone 4, we deserve to keep you happy. If you?d like a free bumper to help with your network connection, text BUMPER ME to 999999.??

Mickey Alam Khan contributed to this report.

Final Take
Dan Butcher, associate editor, Mobile Marketer and Mobile Commerce Daily: