Case Study: The Tylenol Crisis

We’re always being told we should find the opportunities in crisis.  Sometimes, as Johnson & Johnson’s murderous Tylenol case study shows, you won’t find the ‘opportunity’ until you’ve created it.

If you’ve ever taken a class in Crisis Management, you probably already know the classic tale of the Tylenol disaster that was soably handled by Johnson & Johnson that, instead of destroying the product their market share increased exponentially.The moral of this story – if you want to cut to the chase – is that those that do ‘the right thing’ are more likely to benefit in the end.  (How very ‘Disney’ of us!)Here’s what happened.Tylenol is an over-the-counter painkiller that’s mostly available in the US.  It’s made by Johnson & Johnson (J&J).  But back in 1982 they had a problem: somehow Tylenol seemed to be killing people.

At that time, J&J had 35% of the over-the-counter pain relief market and Tylenol represented a whopping 15% of their profits.

As the saying goes, it was an ordinary day when the police linked a number of deaths to the Tylenol brand.  By the time Tylenol had been suggested as the link, seven people died.

J&J acted immediately.  It simply ordered all the stock to come off the shelves and be recalled.  The financial cost of this decision was unprecedented.  At the time, it wasn’t clear whether the product had been contaminated at source.  It took time to rule out contamination at the J&J plants and then to determine that just one killer was visiting stores and lacing Tylenol bottles with cyanide while it was still on the supermarket and pharmacy shelves.  On J&J’s instructions, Americans threw their Tylenol bottles in the bin, and the companies value fell by $1bn.
When asked why they responded so quickly when others would have taken days or even weeks to make such an expensive decision, J&J cited the Creed that was instituted when J&J was created.  The Creed says the customer always comes first, even at the expense of profits and even the company itself.  J&J said there was no question: they just “did the right thing” and hoped for the best.   And the public rewarded them.  Praising J&J’s responsible actions and the way they put customers before profit, when Tylenol went back on the shelves it’s market share rose exponentially, along with J&J’s market value.When the same thing happened again in 1986, J&J repeated the action.  But this time they knew it wasn’t going to be enough to simply put the bottles back when the individual was caught.  This time, before they were ready to put Tylenol back on the shelves, they invested, researched, developed and produced the world’s first tamper proof container, so that they could be sure the same thing couldn’t happen again.   Again the public backed them, and Tylenol’s market share rose again.
When J&J made their decisions, they didn’t know that they wouldn’t result in the end of their organisation.  But they didn’t gamble on that, they did the right thing.

When one compares this with companies such as Perrier, who didn’t remove their product from the shelves during a scare (which was actually unfounded, and Perrier knew this), we see that J&J were wise to put the customer first…

If Perrier had ‘bitten the bullet’ and responded anyway, they might just have retained their position as the world’s leading water brand.


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