Liability and reputation

The ongoing situation of the Simplicity baby bassinet recall illustrates an important point in managing an intangible asset: the difference bewteen liability and reputation. Liability is a legal responsibility to the customer; reputation is how the customer views your product. You would think that it is easy enough to distinguish between the two. But they routinely get tangled. The Simplicity case is highlighted in a story in today's Washington Post: Recall Highlights Liability Questions.

Simplicity for Children has had problems recently with its bassinets, with numerous recalls over the past few years. The company was bought in April by SFCA, an affiliate of Blackstreet Capital Management. The deal was supposed to shelter SFCA from the liability issues. As the Post story relates:

At the time, SFCA was aware of Simplicity's recall of 1 million cribs and voluntarily set aside resources to continue carrying it out. A May news release from Blackstreet said: "The Simplicity brand is well known for its exceptional value, innovative design and unparalleled focus on safety."

Clearly, this was a strategy to deal with the issue and move on.

However, a few weeks ago, the Consumer Product Safety Commission issued an order removing the bassinets from the stores. Here is the kicker as the Post story tells it:

SFCA had refused to issue a recall, saying it gained the right to sell products under the Simplicity brand but that it did not assume the liability of products already on the market, said Rick Locker, an attorney for SFCA.

Now, technically Mr. Locker may be right. SFCA bought the assets at auction and the liability may not confer with the sale. But the reputation does. It looked like those bassinets were coming off the market one way or another. By not being part of the recall, SFCA attempted to draw a distinction between those products and themselves. This may be a good tactic as part of asserting no liability. But from a reputation point of view, it doesn't appear to be a successful. Those products say "Simplicity" on them. Not dealing with the reputational threat to the brand weakens the brand, maybe fatally. Blackstreet back in May all but said they were buying the brand. Rather than attempt to bolster the brand by moving quickly to correct what was seems as a major problem, Blackstreet now appears to want to be moving away from the brand as quickly as possible. And if the owners don't stand behind the brand, what is it worth in the eyes of the consumer?

Bottom line, Blackstreet's strategy for deal with the liability issue may have dealt a death blow to the brand's reputation.