Tylenol is a North American subsidiary brand of drugs under the parent company Johnson & Johnson. Tylenol is advertised to help relieve pain, reduce fever, and relieve symptoms of cold, flu, sinus, arthritis, and allergies. It has become a trusted brand that parents turn to, to help relieve common ailments their children may suffer from. As a result, Johnson & Johnson has gained immense respect from consumers everywhere due to the reliability and safety of their products.
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However, due to a series of ongoing recalls in the past couple of years, Tylenol has been suffering tremendously. Within the past year over five Tylenol product lines have been recalled: the cold liquid products, 8-hour caplets, extra strength Tylenol, Tylenol PM products, Children’s Tylenol, Children’s Meltaway Tylenol, and Infant’s Tylenol. There have been many more recalls by Johnson & Johnson for their other brands-such as Benadryl and Mylanta-but so far, Tylenol has had to recall these aforementioned products, and they have stated there are more recalls yet to come.
The loss of sales and more importantly, the loss of customer confidence in Tylenol is a serious cause of concern. Due to the enormity of the recalls, regaining goodwill seems difficult without creative marketing. Also, this is not like the 1982 recalls, where numerous deaths were caused by an unknown assailant who injected cyanide in the Tylenol bottles. Johnson & Johnson was fortunately able to recover 92% of lost sales through the revolutionary creation of tamper proof bottles. And this helped them expand with 250 operating companies in 60 countries with annual revenues near $62.5 billion.
By May 2010, however, Tylenol was forced to issue numerous recalls for their Arthritis Relief caplets and Children’s Tylenol products. The FDA confirmed the moldy odor coming from the bottles was due to a bacteria that was known to be resistant to common antibiotics. The high-quality, reliable family product has now been tainted due to a lack of quality control in various manufacturing plants. And the FDA investigations have only brought more attention to the internal quality errors.
Since Johnson & Johnson is losing millions of dollars each month due to lost sales and factory updates, it is imperative for Johnson & Johnson to improve its brand image and regain consumer confidence. Through intense ad campaigning Tylenol can educate consumers about the quality improvements and portray Tylenol’s actions as highly responsible.
Also, all internal quality control measures can be indicated on the bottles of all Tylenol products. Consumers have an increasing need to know where their medicines come from and Tylenol can provide that information and sense of security to their consumers. By providing a serial number on all products, Tylenol can allow consumers to go online and see where their products are made. Consumers can take part in the quality control aspect by providing pivotal information regarding the performance in each of their factories. This system will allow Tylenol to understand how well each factory performs and what, if any, changes need to be made.
Although internal quality control changes need to be made within the company, Tylenol must simultaneously work on improving its brand image among consumers. By building strong consumer confidence, Tylenol can recover the sales it lost as a result of these recalls.
2.0 Situation Analysis
McNeil Consumer Healthcare-the consumer drug division of Johnson & Johnson and makers of Tylenol-has been caught up in a series of product recalls since late 2009. For a company that has been known for above average quality, this is a major setback to the company’s image as their quality control and internal practices have been called into question by federal regulators as well as consumers and industry analysts. In an effort to counteract this issue, William C. Weldon, CEO, has made several public statements and appearances to quell consumers’ fears and describe the steps being taken to correct this issue.
2.1 Market Summary
The McNeil line of consumer healthcare products are utilized by people of all ages from infants to senior citizens and includes various well known, over the counter names including Tylenol, Rolaids, Benadryl, and Motrin. Each is a top brand in its field and has had a nearly flawless quality record. The company allows its divisions a large degree of autonomy, which protects the others from being affected by any adverse situations within their sister companies.
The current issue of quality concerns and recalls started with a 2009 incident concerning Motrin ibuprofen. McNeil held a “phantom recall” when they noticed the product had slightly defective dissolving properties and was bought back from stores by hired private companies. In this situation, no formal recall notice was distributed and the buy backs were handled quietly without bringing attention to the issue. It was stated by Johnson & Johnson that there was no safety risk, which is why they handled the situation in this matter.
In 2010 however, Johnson & Johnson began to receive complaints that a musty, moldy smell was emanating from bottles of its over the counter medications which was making consumers sick with symptoms that included nausea, vomiting, diarrhea, and stomach pain. Furthermore, the company found that several of their pediatric medicines contained too much of an active ingredient or foreign material. This led to a voluntary recall of 136 million bottles. Due to this decrease in product quality, Colleen Goggins, the senior executive in charge of the McNeil line, tendered her resignation from Johnson & Johnson in an effort to provide consumers with a visible solution to their woes about Johnson & Johnson’s quality control.
In addition, a production facility in Fort Washington, Pennsylvania and another in Puerto Rico have been closed down due to poor quality standards and are currently being updated to meet FDA standards.
2.2 SWOT Analysis
Strengths
For decades, Johnson & Johnson was the leader in quality control. Their products and customer service had always been top notch and consumers have always trusted them. In light of the McNeil recalls, Johnson & Johnson can recognize the following as positives in their business:
Customer Service – To handle the influx of customer questions and concerns regarding recent recalls, Johnson & Johnson has set up a comprehensive section on their website dedicated to explaining the details behind each recall as well providing a FAQ list, dedicated phone lines, and email addresses.
Review of Manufacturing Operations – Johnson & Johnson is publicly admitting to performing an internal shake-up of their manufacturing operations to ensure that all production facilities maintain the quality standards they have been known for in years past. In addition, quality control has been moved from individual centers to a centralized office. This will help build conformity among all of their products by upholding a specific product standard.
CEO William C. Weldon – His public admission of internal error and promise to restructure the company to fix their quality issues indicates that he understands the public concern and loss of good will that will result from this. He admitted to letting his customers down and resolved to make sure Johnson & Johnson does not face poor quality issues again in the future.
Company History - Johnson & Johnson’s handling of the 1982 cyanide crisis is still considered the ideal way to deal with a disaster. The media, industry analysts and consumers alike all lauded the company for its speed, efficiency and honesty for the recall and their high involvement in the criminal investigation. Johnson & Johnson’s comeback was made possible due to regaining consumer trust during the crisis. This history can serve as a support for Tylenol’s current crises and provide a platform for them to make another comeback.
Weaknesses
Several actions as well as the sudden decline in quality are a huge blow to the image of Johnson & Johnson. These areas include:
Slow Reaction time to Consumer Complaints – FDA documents have shown that when the initial reports of moldy odors came to Johnson & Johnson, no action was taken to rectify the problem. This indicates a lack of acknowledgement of a potentially serious issue and not grasping the gravity of the situation.
Violation of Manufacturing Standards – FDA inspectors have found that since 2001, several manufacturing issues have come into play including drug mix-ups, lack of training, incomplete investigations of complaints, and failure to determine the cause and solution to problems.
Unsavory Recall Practices – In their attempt to confront the quality issue with Motrin in 2009, Johnson & Johnson simply sent a hired group to buy back available products in all retail establishments rather than conduct a formal recall. This has come under contention from the FDA as an unsound practice since it did not properly notify individuals of a potential issue. This completely counteracts Johnson & Johnson’s highly responsible and reliable brand image and makes consumers feel they will continue to hide important information from its consumers. Johnson & Johnson has since admitted to making a poor decision in this situation.
Resignation of Colleen Goggins – With the tendering of Goggins’ resignation from the company, Johnson & Johnson will be losing the long term institutional knowledge she possesses. Having been with the company since the 1980’s, Goggins has overseen and controlled several strong product groups that will now be subject to new leadership and potentially a new method of management. This can cause problems down the road if the new division head isn’t as strong as Goggins and could lead to excessive turnover in that position if they cannot do the job as well as Goggins had to this point.
Opportunities
Although currently under fire from the FDA, business analysts and consumers, Johnson & Johnson can identify several areas in which they can regain their image of quality:
Analysis of Facilities and Stability Testing – As Johnson & Johnson overhauls its quality process and revamps its manufacturing practices, they can once again position themselves as an industry leader in quality who cares for consumer well-being. If they publicize their actions to right these wrongs, their consumer base will see that their dedication to quality remains resolute.
Customer Service Portals – By creating a comprehensive website dedicated to recall information and quality concerns, Johnson & Johnson shows that even after a misstep, they still recognize the importance of customer needs. By quickly reestablishing their presence on retail shelves with new batches of recalled medicines, Johnson & Johnson shows their dedication to providing customers with the medicine they need to maintain their health.
Creation of New Bottles – Johnson & Johnson’s creation of the tamper- resistant bottles became an industry standard after the 1982 crisis. Sales were able to bounce back as more consumers started to trust Tylenol again, and Tylenol gained a competitive advantage through this innovation. By creating new bottles with the ‘Q.C. Passed’ label and the plant serial number on them, Tylenol can do gain that product differentiation it needs from its competitors and generic brands alike.
Threats
Recalls and FDA investigation will seriously impact Johnson & Johnson’s image. In addition, their structure and quality control have become an area that has suddenly turned sour.
Loss of Goodwill – Since Johnson & Johnson had been a quality leader for so long; recalls of their medication will lead to a loss of consumer trust in their products. As a result, they will lose profits on these products as customers may turn to generic brands, which cost less and provide the same benefits as the name brand. Also, customers will be hesitant to go back to a product that they feel they can no longer trust.
Representative Darrell Issa – As a member of the House Committee on Oversight and Government Reform, he is an outspoken critic of the FDA and Johnson & Johnson’s recent actions and promises to watch this issue closely to ensure both groups correct and maintain higher standards in their practices. This can result in harsher terms against Johnson & Johnson if their quality does not improve as Issa may push for the FDA to enforce stricter penalties.
Competitors and Bad Publicity – Competitor brands such as Advil are now exploiting Tylenol’s current quality issues through their ad campaigns and many loyal Tylenol users are turning to other brands. Advil’s recent ad campaigns urge customers to trash the recalled products and try Advil free of charge. The ads are directly aimed at converting Tylenol users to Advil. Triaminic-which competes with Children’s Tylenol-is also offering their Fever Reducer Pain Relief medicine for free as part of its launch of their new line extension. This negative campaigning will surely deter Tylenol’s ability to maintain consumer loyalty, and will hinder further progress if consumers start preferring competitor brands over Tylenol.
2.3 Competition
With many of their products no longer being protected by government patents, Johnson & Johnson faces increased competition from generic producers. Charging lower prices and providing the same benefits as name brand medicines, if customers of Johnson & Johnson brands no longer trust them, they’re likely to go to an option that they can trust. In addition, other established brands like Pfizer or Bayer could take this as an opportunity to create, release, or push their competitive products which would be seen in a more favorable light if their quality is regarded to be higher than Johnson & Johnson’s current standards.
2.4 Product Offering & Distribution
As mentioned in the Market Summary, Johnson & Johnson’s over the counter medicines include Tylenol, Motrin, Benadryl, and Rolaids. Their other branches include consumer products in the Baby Care, Skin and Hair Care, Wound Care, Oral Health, Women’s Health, Nutritionals and Vision Care. Since they own nearly 250 companies with so many other various products including medical devices, and prescription products, any impact from the McNeil group of products will have a small impact on their overall revenue. Due to this, Johnson & Johnson as a whole enjoys wide spread distribution across the United States and the world.
However, since the recalls affect so many of their products, Tylenol needs to introduce a new innovation that can help with their product differentiation. Since the current problems lie in the quality control of their products, Tylenol can offer bottles with the ‘Q.C. Passed’ stamp on it with a serial number indicating which manufacturing plant the bottle came from. This will provide consumers with the information they desire and it will separate Tylenol from all other brands, because they will do something highly innovative. This will also help Tylenol’s brand image as a responsible and honest company, and can potentially win back lost sales and consumer loyalty.
3.0 Marketing Strategy
3.1 Objectives
The first and most crucial step needs to be a complete overhaul of the quality control process within the entire company. Fortunately, Johnson & Johnson is already working on updating each of its factories and these internal changes will continue until every factory meets FDA standards. However, as that continues Johnson & Johnson needs to take this opportunity to build confidence in the market. By creating a new system that will help consumers track their medicines, Johnson & Johnson can aim to recover 70% of lost sales within the next fiscal year.
And in order for Johnson & Johnson to stimulate these sales, they need to do an intense ad campaign showing that they are taking full responsibility for their actions. By targeting these ads to mothers and reconnecting to their family-oriented consumers, Tylenol can see an upswing in sales. However, it is imperative that the changes in the packaging be done in conjunction with the marketing campaign to ensure a quick recovery.
3.2 Target Market
Tylenol is a product that is used by everyone and is available everywhere, so its marketing campaign has to address each of these market segments. This marketing plan focuses on three segments that were affected the most by the recalls:
Families with Children: Tylenol has an entire line of products geared towards treating colds and flu symptoms specifically for children. Even though the children are the users of this product, the consumer purchasing decision lies solely in the hands of the parents or guardians in that household. Parents are generally willing to spend extra for their child’s well-being, so they are not swayed by small increases in price if they find the brand reliable. However, parents will also stop purchasing a product immediately if they see it as being unreliable, unsafe or in any way hazardous to their child.
Working Class: The working class is the biggest consumer of Tylenol’s Rapid Release pills because these consumers need fast pain relief caused by daily stresses at their jobs. Since this market segment consists of hard working, middle-class members, their purchase decisions are based more on pricing.
The Elderly: Tylenol’s arthritis medicines are aimed to help relieve pain symptoms felt by the elderly. They are generally late adopters and once they find a dependable product are highly likely to stay loyal to it. Although these recalls may not affect sales for the arthritis medications too much, it is important to portray Johnson & Johnson’s sense of responsibility so any new products can be easily adopted by them.
3.3 Positioning
Tylenol can position itself as a responsible company that has to perform these recalls in order to protect its consumers. This positioning can be achieved by enforcing its history as a reliable company and its constant passion to help its customers. Tylenol can use its past experience with the 1982 cyanide case to remind consumers that they replied effectively to the disaster then, and are simply doing the same thing now. Even though Tylenol’s quality control issues are in question, it can still position itself as a company that is honest and willing to take the actions necessary to fix any internal issues it may face.
3.4 Marketing Strategies
The main marketing objective is to remind consumers of Tylenol’s responsibility and honesty. So, the marketing strategy will focus on raising consumer awareness of the recalls and use it as an opportunity to re-penetrate the shrinking consumer market.
The message Tylenol will convey is that its recalls were necessary to protect and safeguard the public from any potential hazards. By stressing the fact that the recalls are just a precaution-and no deaths or illnesses were linked to the use of these products-Tylenol can garner more consumer support.
Primarily this message will be conveyed through intense ad campaigns, in magazines, newspapers, billboards, and on the Internet. It will also be the means through which the public will be alerted of when the recalled products will be back on the shelves, and it will also provide Tylenol with a way to inform the public about the new ‘Q.C. Passed’ stamp on it. However, Tylenol needs to first stabilize the recall issues so they can regain consumer confidence. Once there is more stability within the company, Tylenol can start telling the public about the new bottles in order to recover lost sales.
Since the Tylenol brand is ubiquitous, it is important for the ad campaigns to be seen by consumers everywhere. The use of the Internet will be especially helpful because the costs associated with it will be relatively cheap. Print media, although costly, will allow the advertisements to be read everywhere, from homes to doctor offices to grocery stores.
Along with these ads, Tylenol will employ its website to inform the public of its recalls-which it already does-and it will also create a forum for customer feedback. This is another cost-effective method for Tylenol to talk honestly about the recalls and prove their responsibility. Plus, this can generate future ideas the company can use to satisfy its loyal customers.
3.5 Marketing Mix
The marketing mix for Johnson & Johnson will mainly consist of the relaunch of recalled products, pricing and intense advertising. The distribution portion of the marketing mix will remain the same because Johnson & Johnson has a strong network of distributors and stores to reach the target markets.
Products: The main change that needs to be made for the Tylenol products is the quality of them. Johnson & Johnson is focusing on the quality control systems at each of its plants already, and as the products are reintroduced to the public, their quality needs to be tested thoroughly to confirm there will not be any issues again. The ‘Q.C. Passed’ stamps also need to be added to the new bottles to show the public that each bottle stands up to the high quality standards set by Johnson & Johnson.
Pricing: The prices of each product will remain the same but as Johnson & Johnson is doing already, it has to continue providing coupons for its customers. However, the main issue with these coupons is that they are available online, which is not the most practical way to distribute coupons because most people do not remember to print these coupons when they are using the Internet. Also, this is extremely problematic for the older consumers who use Tylenol Arthritis Pain Relief because they are not active Internet users. So, it is important to provide coupons in stores so consumers can use them right away.
Advertising: The advertising campaigns will focus on the target markets and will remind the consumers of Johnson & Johnson’s responsibility. They will work to provide consumers with the peace of mind that Johnson & Johnson is doing everything in its power to fix these problems. The ads are directed towards, mothers, the elderly and the working class. It is imperative to advertise anywhere and everywhere possible so Tylenol can have more control over how the recalls are portrayed in the eyes of the consumer.
3.6 Marketing Research
The website will provide a way for Tylenol to have a dialogue with its consumers, so new ideas can be suggested by the users of the products. This will also provide a way for Tylenol to better communicate with its consumers and alert them of any changes in their products.
Also, by providing the serial number on the bottles, Tylenol will be better able to track any issues in the quality processes based on which plant any complaints are linked to. This will shorten the time it takes Tylenol to make changes because they will be able to pinpoint issues much sooner.
Lastly, it is very important to understand the full effect of these recalls in the minds of the consumers. With each of the bottles of medicine Tylenol sells, it can provide a questionnaire for the customer to fill out and send back to Johnson & Johnson for a 50% coupon. Even though the coupon provides a huge discount, the information the questionnaires will provide, will estimate how much damage control Tylenol really needs to do for its brand equity.
4.0 Financials
Johnson & Johnson’s recall of several McNeil Healthcare products will have several negative financial impacts on the company’s bottom line. The most direct impact is loss of income from lost sales of recalled products. With these products being off store shelves for various periods of time, consumers will not be able to buy these products and the company will lose money. Furthermore, future sales will be lost when customers turn to competitor products and decide not to go back to Johnson & Johnson products because of loss of goodwill resulting from the recalls. The estimated loss is expected to be close to $200 million.
Additionally, the company will lose sales from decreased production as a result of plant closings to reevaluate quality controls in an effort to deter this situation from happening again in the future. This loss is expected to amount to almost $600 million over the course of a year. Other yet unrealized losses will come from the reconfiguring and reconstruction of the plants, retraining employees to new systems and controls, and advertising dollars that will be needed to assure the public that Johnson & Johnson products are safe again and still maintain quality standard they have.
5.0 Controls
In order for Johnson & Johnson to regain their status in the market, they will need to ensure that they do not have a quality mishap like this again. Several steps have already been taken to rectify the situation including closing two plants found to have severe issues, creating a dedicated website to inform customers of their rights and to provide general information under the recall, and exiting Collen Goggins from her position of overseeing McNeil health products. These actions show customers and the general public that Johnson & Johnson is taking responsibility for their actions and doing what they can in the short run to make an immediate fix. CEO William Weldon’s numerous public statements about the company’s dedication to quality and admission of making a mistake, should assist with gaining back some customer good will.
5.1 Implementation
With all that is being done, Johnson & Johnson needs to put other controls in place to guarantee increased quality among their line of products. First of all they need to innovate a new method for quality control. This can be something like indicating which plant products are produced to clarify where mistakes are being made if something were to go wrong again. This would also show customers that Johnson & Johnson has a company-wide quality standard that each plant must follow. This will also make each plant function better because the tracking system will hold specific plants solely responsible for any problems in the future.
Another factor in retaining or winning back customers will be strong marketing. The company needs to push their new quality regiment with a full press marketing plan. This should include print, TV, radio, internet, and billboard advertising. This campaign should show how Johnson & Johnson values the health and well being of their customers and should also include an apology letting the public know how sorry they are for the inconvenience caused by not maintaining the quality they have been known for.
By implementing these controls, Johnson & Johnson should be able to regain potential lost customers and perhaps some new ones by showing their recommitment to quality after this mishap. After being a quality leader for years, the company needs to do whatever it takes to repeat history and make yet another comeback, or risk being defeated by its own negligence.
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