Case Study / Public Relation

CASE 6-3 A CLASSIC: TYLENOL RIDES IT OUT AND GAINS A LEGACY

The Tylenol tragedy, Johnson & Johnson's responsive reaction, the
product's reissue and comeback, and the nation's applause, add up to a
classic case study of how a corporate crisis can be dealt with using
effective public relations strategy.

This story has been told in a variety of special and public media. It
has been interpreted for its merits in the practice of management,
marketing, and public relations, and for the blend of what is admirable
in all three.1

In 1982, some Tylenol capsules, laced with cyanide, were discovered to
be the cause of seven persons' deaths in the Chicago area. It was
discovered that the packages had been tampered with, and the cyanide
added by a person, or persons, unknown. In 2001, the crime remains
unsolved. All supplies of the product in stores nationwide were pulled
off the shelves by the parent company, Johnson & Johnson at a cost
exceeding $50 million. After due time and investigation, the product was
reissued in tamper-resistant containers, and a sealed package of
capsules was offered free to consumers who had discarded the suspect
supplies in their possession. The company became a champion of
tamper-resistant consumer product packaging.

In the echoing events, Tylenol recovered more than the share of market
it had held before the tragedy. The company gained credibility, public
trust, and esteem. The Food and Drug Administration of the Department of
Health and Human Services (HHS) tightened its regulations regarding
packaging (See Figure 6-5).

FIGURE 6-5 Tylenol case leads to federal regulation on tamper-resistant
packaging.



(Courtesy of The Food and Drug Administration.)

PRACTICAL REALITIES

It is relevant here to set “what-if” questions aside in favor of a
realistic situation analysis. Why was it that Johnson & Johnson,
specifically, was able to weather this storm— indeed, to turn
adversity into gain? Among the factors that appear instrumental:

The company benefited from a long history of success and service in a
field of “beneficial” and “worthwhile” healthcare products

The company took pride in its public visibility and its reputation for
integrity.

The company benefited by having had a strong founder who believed that
“the corporation should be socially responsible, with responsibilities
to society that went far beyond the usual sales and profit motives.”2
High ethical standards were set in place early on to be continued as a
tradition or as a legacy.

There was a credo, a “For this we stand” on paper, on which
succeeding generations of executives have built and interpreted in terms
of changing times and challenges. The credo was brought out during this
episode for the world to see (See Figure 6-6).



(Courtesy of Johnson & Johnson.)

5. In its relations with employees, neighbors, investors, customers, and
government agencies, there was a candor consistent with competitive and
financial security. Company spokespeople—including the CEO—showed
leadership and authority.

6. There was a recognition of the public interest and its legitimate
representation by news media. Information, whether good or bad, was
forthcoming as rapidly as it developed (See Figure 6-7).

FIGURE 6-7 Employees got the word fast in company publications. This is
the cover of a booklet that Tylenol published to keep employees informed
about the situation.



(Courtesy of Johnson & Johnson public relations.)

The corporate public relations function was part of management,
participating in the decision process and in the implementation when
communication was involved.

There were mechanisms for feedback from constituent publics, and a high
value was placed on public input.

These virtues, some of which derived from the company's history, graced
the behavior of Johnson & Johnson in its emergency. This is not to say
that their behavior was without agonizing, great risk, or debates within
the management task force set up to make decisions (See Figure 6-8).

FIGURE 6-8 The corporation used news, such as this news conference, as
well as ads to communicate with the public.



(Courtesy of Johnson & Johnson.)

JOHNSON & JOHNSON WAS NOT ALONE

In the crisis, public attention was focused heavily on Johnson &
Johnson, the parent company, which took over for its McNeil Consumer
Products subsidiary, which makes and sells Tylenol. However, many other
entities were involved, some in a major capacity. It is instructive to
look at the public information actions of one of them, the Food and Drug
Administration (FDA).

Over a period of several days the FDA's press office was busy keeping
the public informed about this incident. Constant communication about
this crisis characterized its behavior It issued several updates about
the initial recall of 93,000 bottles of Tylenol on September 30, 1982.
In addition, it reported on the total national recall of the drug that
Johnson & Johnson installed five days after the first local recall.
Finally, on November 4, the FDA released its new uniform standards for
nonprescription drug manufacturers in providing tamper-resistant
packages. This constant flow of information from an objective third
party helped to quell any consumer panic.

DEALING WITH A SEQUEL

Four years after the first poisoning episode, there was a recurrence. In
February 1986, a stenographer in Westchester County, New York, died of
cyanide poisoning from Tylenol capsules that had been purchased at an
A&P store in Bronxville. Johnson & Johnson, well-prepared for the
crisis, halted capsule manufacturing and offered to refund or exchange
all capsules on the market for tablets or caplets. A few days after the
stenographer's death, five poisoned capsules were found in a Woolworth
store. Johnson & Johnson took action to withdraw Tylenol capsules
entirely from the market at a cost of $180 million, which covered
“inventory handling and disposal, and communication expenses to
reassure consumers of the safety of noncapsule Tylenol.” The action
fitted the public image of Johnson & Johnson, and the news media
coverage was positive.

By the late 1980s, competition in the pain-easing medicine business
returned to normal. Entries such as Advil (American Home Products),
Ecotrin (Smith Kline), Bufferin (Bristol Myers), Anacin (Whitehall),
Panadol (Sterling), and some others matched and counter matched each
other's claims in consumer media advertising and publicity to get a
bigger piece of the very large and profitable market. If the tragic
incident befalling Tylenol was a negative for the product, that didn't
show in a 1986 poll of consumers about the same time as the second
incident. Some 76 percent of those queried said they thought the company
had done enough to ensure that its products were not tampered with.
Apparently, much of the public had come to realize that isolated acts of
violence and terrorism cannot be totally avoided.

THE PUBLIC MATTERED

The importance of corporate responsibility to the public is illustrated
vividly by the Tylenol crisis. Although the company did not specifically
have a plan before to deal with crises such as this one, its commitment
to the credo “the first responsibility is to the customer” helped
Johnson & Johnson to bounce back and contain the tragedy without
sacrificing credibility. “Johnson & Johnson developed and geared
activities to protect and communicate with its customers, to react to
their fears, and provide what consumers needed.”3 A study conducted by
Johnson & Johnson emphasized the importance of recognizing a
responsibility to the public and maintaining positive public
relationships. Companies that gave special attention to the public and
their needs enhanced their profitability.4

James Burke, then chairman stated, “I think the lesson in the Tylenol
experience…is that we as business men and women have extraordinary
leverage with our most important asset— goodwill—the goodwill of the
public. If we make sure our enterprises are managed in terms of their
obligations to society, that is also the best way to defend this
democratic capitalistic system that means so much to all of us .”5

ALMOST ABOVE IT ALL

Regaining its competitive lead was not the only positive result for
Johnson & Johns on. In 1986, the Council on Economic Priorities gave the
company its “American Corporate Conscience Award.” In that same
year, a public relations exclamation point was added by then-public
relations vice president Lawrence Foster who authored a book entitled A
Company That Cares honoring the company on its hundredth anniversary.
Throughout the 1990s, Johnson & Johnson received numerous industry
honors including two more awards from the Council on Economic Priorities
for its achievements in corporate social responsibility in 1998 and
2000, the “Best corporation reputation” award from The Reputation
Institution in both 2000 and 2001, and was voted one of the World's 100
Best-Managed Companies by IndustryWeek magazine in 2000. It is evident
that the Tylenol brand name regained its reputation as a safe product
because Johnson & Johnson successfully launched numerous Tylenol-based
remedies since the late 1980s. The company reported $29.1 billion in
sales in 2000.

However, it has not been all smooth sailing for Johnson & Johnson. Since
the beginning of 2000, it has had to insert additional warning language
on two of its pharmaceutical products (Propulsid and Sporanox).
Propulsid was eventually taken off the market due to serious side
effects.

By the end of 2000, Johnson & Johnson faced a severe blow to its
reputation. One of its units, LifeScan Inc., pled guilty to federal
criminal charges related to its marketing for several years, of a
knowingly defective diagnostic test for diabetes patients. It agreed to
pay $60 million in fines. This decision also sets the stage for lawsuits
already filed on behalf of the thousands of customers who used the
device and who will likely seek hundreds of millions of dollars in
damages.

Johnson & Johnson's response to this problem is in sharp contrast to its
immediate recall of Tylenol in the 1980s and its much heralded crisis
management at that time. Ralph S. Larsen, chairman and CEO, issued a
statement concerning the LifeScan situation saying that no one at the
company “engaged in intentional wrong doing or intentionally sought to
mislead customers or the governments [FDA]… but] mistakes and
misjudgments were made…We fully acknowledge those errors and sincerely
apologize for them.”6 Times will tell if this statement of acceptance
of corporate responsibility will help to maintain a feeling of goodwill
with the public, current customers, and potential future customers in
the twenty-first century.