I have left this post in tact offering a flowing perspective on how I watched this anticipated brand crisis unfold. As of today (3/05/10) I will re-arrange the post so that the major news story links are up top and older updates are below if you are interested to see the flow yourself. For the past three days I have noticed the seeming urgency in the headlines subside. The new car sales figures for the month were not horrendous this week when released, though they did reflect a big bump in the road.
Based on everything up till now (since 1-28-2010) and looking forward here is what I think will happen and why:
The lynch pin to this entire brand crisis, and the larger threat to American car buyer perceptions, is that the problem remains undiagnosed. There are three fixes and potentially three different problems that somehow are being combined in a very negative way. The electronics issue has been denied more than once and clearly does not offer an avenue of remedy at this point. In fact, Toyota is now running ads on web sites that tell how their electronics are fail-safe...and how to learn more why. Risk to the brand remains high and at critical levels. Here's why: The entire premise of this idea offered here is how social mood, in a corrective state(now), affects our collective expectations of the always uncertain future. This uncertainty is skewed pessimistically during a social correction. When the macro force of this public perception is focused upon a particular brand and a persistent problem that is opposed to the existing perception of the utility of that brand, then the outcome is likely to be lost brand equity in a proportion much greater than how it was gained and long lasting too.
The possibility exists that Toyota will not find the problem and that further unexplained incidents will occur. (wow, yesterday's runaway Prius in Los Angeles (3/09/10)made the all the evening news hours and prompted a recall notice by the WSJ that was retracted within hours....how's that for crazy media attention?) Should social mood deepen into this corrective state further, the risks to the brand will increase and the risk to the company along with it. It is very possible that the negative effects are only just beginning now. Personally, I still regard Toyota as offering a high quality product that I have considerable admiration towards. My opinion about the brand is not what matters. If these two factors should occur going forward, the lessons of Audi in the late 1980's and early 90's are well worth revisiting. A definitive conclusion to these malfunctions are mandatory IMHO.
Daily flow of headlines on the thread (newest last):
Toyoda Shrinks World’s
Biggest Carmaker for Quality Control
Toyota Owners Frustrated With Massive Recall (Bloomberg) (sales hit and perception damage coming no matter)
Toyota U.S. Dealers May
Lose $2.47 Billion a Month (Bloomberg) (distribution Channels will suffer)
Toyota Owners Frustrated With Massive Recall (CBS) (uncetainty)
Toyota safety recall spreads to Europe (clearly an accelerator issue) FT 1 29 10
With Recall Expanding, Toyota Gives an Apology NYT 1 30 10
Toyota to Issue a Fix for Recalled Cars NYT 1 31 10 A Solution is ready says the NYT
U.S. Doesn’t Object to
Toyota Plan for Pedal Repairs BB 1 31 10
Toyota Plans Media Blitz After Stockholders Lose $21 Billion BB 1 31 10
Toyota’s Slow Awakening to a Deadly Problem NYT 2 01 10
With Eye on Its Reputation, Toyota Issues Repair for Pedal NYT 2 02 10
Toyota’s President Eludes
Media Amid Ballooning Vehicle Recall BB 2 02 10
Toyota’s Electronics Said
to Be a Focus of U.S. Recall Probe BB 2 03 10
Toyota Recall Crisis Mounts
as U.S. Steps Up Pressure BB 2 03 10 (Amer. politics gets involved)
Toyota May Recall Prius
After Japan Orders Probe BB 2 04 10
LaHood’s ‘On the Fly’
Toyota Statements Accelerate Confusion BB 2 04 10
In a Prius Preserve, Shaken Fans NYT 2 04 10
In California, a Rebuke to Toyota NYT 2 05 10
Toyota's payback for stealing from the Gods Op-Ed WP 2 05 10
Toyota Has Pattern of Slow Response on Safety Issues NYT 2 07 10
Toyota Is Expected to Add 2010 Prius to Recalls NYT 2 08 10 (add 300,000 more cars to the 8 million total now under recall for multiple reasons)
Toyota recalls 437,000 Priuses, hybrids globally Wash Post (headline) 2 09 10
Toyota recalls Prius over brake problem FT (headline) 2 09 10
Federal Officials Review Toyota Corolla Complaints WP 2 09 10
Toyota's Plan to repair its public image Op-Ed WP by Akio Toyoda 2 09 10
Regulators Hired by Toyota
Helped Halt Probes, Documents Show BB 2 12 10
Toyota Is Said to Discuss
Rebates, Warranties to Lure Customers BB 2 13 10
Toyota Acceleration
Complaints Cite 34 Deaths, U.S. Data ShowBB 2 15 10
Crisis-hit Toyota to idle two US factories Breitbart 2 16 10
Toyota faces class-action problem FT 2 16 10
Toyota Chief to Meet Press
for Third Time After Recall Crisis BB 2 17 10
Toyota chief to skip US safety hearings FT 2 17 10
Toyota’s President Softens on Speaking to Congress NYT 2 18 10
Toyota Chief Agrees to Testify Before House Panel NYT 2 19 10
Toyota Saved $100 Million
in ‘Favorable’ Recall, Document Shows BB 2 22 10
We Didn't Listen by Akio Toyoda WSJ 2 22 10
Toyota Probe Fueled by Politics as Well as Safety, Critics Say BB 2 23 10
Congress says Toyota misled public about runaway cars, engine electronics WP 2 23 10
Toyota Official Says Recall May Not Fully Solve Safety Problem NYT 2 24 10
2/24 & 2/25 had substantial TV coverage of Congressional hearing where Toyota execs testified
Toyota accused of withholding records in lawsuits FT 2 26 10
Will Toyota's problems hurt Honda? CNN Money 3 01 10
Toyota Sudden Acceleration
Tied to 43 Fatal Crashes, U.S. Says BB 3 02 10 this seems like a statistical conversation waiting to happen.
Data Shows Camrys Outside Recall Also Had Problems NYT 3 02 10
Millions of Toyotas Recalled, None in Japan NYT 3 05 10
Toyota runs clickable ads saying its electronics are fail safe and offers details why. 3 06 10
AP IMPACT: Toyota secretive on 'black box' data 3 04 10
Toyota to Recall Prius Models including one in runaway incident WSJ 3 09 10 (Toyota rebuts story)
Here's a point worth noting....this runaway Prius incident (last link above) looks a lot like a complete fraud. How do you take away a night of lead off news reports and interviews when it looks a lot like complete BS only a week later? And what does it say about the quality of the reporting a week ago that no one asked why the car was not put into neutral or the engine turned off? My point is that this story has its own social momentum now. It's not about being out to get Toyota. It's about social mood and social momentum. The only option for Toyota now is to find the problem and eliminate it.
Original post from 1-28 10:
My
last installment on this subject was somewhat indirect in that it
offered a familiar personal (sports)brand. The Tiger Wood's brand may
be characterized as inconsequential to anyone but his sponsors now that
he has temporarily retreated from public life for a re-boot, (as is so
common) in the world of celebrity.
Now, Toyota's well crafted brand has its turn in the glare of crisis
during a social correction.
Last week I recall seeing word (2x in a few months) of their
unfolding floor mat recall problem and I dismissed it because every car
company has had recalls. Even a quick Google search shows the other
Japanese car model I own has been recalled three times in eight years
for minor things; so recalls by themselves do not have to be a true
brand crisis.
Toyota's
problem(s) was all over the headlines yesterday afternoon and this
AM in the US (Europe too probably). I must admit that, at first, it felt
like the biased opinions out there were piling on to a problem that is
eminently fixable. Sliding floor mats can be secured, right? I am pretty
sure many Toyotas have metal snaps on floor mats. In any case, the
discussion in the Bloomberg
article I noticed yesterday was about the accelerator cable/pedal
assembly. It remains undetermined in large mainstream media accounts if
it is a cable issue, which would be more severe, or/and if it is simply
floor mats.
Then this morning, we get an example of why a brand in crisis during a
social correction is such a critical time....and every hour and move
counts.
My New York Times email this AM with their top headlines included a
story about Toyota's brand problem. It was the third story listed
under "Top Stories". My point here is that I am sure it is a high
percentage read. After 20-something short paragraphs and an impressive
graphic showing the growth of their sales figures, and a picture of a
top exec scratching his head, the only mention of the actual problem in
the NYT article was this quote:
Toyota said Thursday
that it was extending the recall to Europe, and
that "the models and exact number of potentially affected vehicles is
under investigation. It added that "details of corrective action and
implementation will be communicated directly to customers with vehicles
potentially affected."
What's the problem?! It does not matter that this problem began in
November with a very specific issue and has expanded to now include a
potential specific mechanical issue and it includes 8 models of north
American and European cars sold by Toyota.
The real problem is that as of this AM Toyota lost control of the
conversation in a world that demands immediate communication. I have no
doubt the competitive forces are spinning this for all it is worth at
the moment. The Bloomberg
article yesterday afternoon was filled with obviously biased
opinion (quotes) against the company. It was very transparent, in fact
but, politicians and pundits of all kinds know that negative advertising
for the competition is effective in moving perceptions in the short
term. The first time I ever wrote about this topic I discussed how
Perrier in 1990 lost its dominant market share in a wildly
competitive business in the span of a month. That is not likely to
happen in this case but that does not mean extensive damage can be done
to Toyota's 2010 sales in North America.
I wrote this in my last
update on the subject of brands in crisis during a social
correction:
The premise in my
first post in the series
is that brand equity is at greater risk during periods of social
correction (now). If you are an owner or manager of a valuable brand
this is
a very big responsibility. The premise of this post is to fine tune
that point further by showing how the violation must be something that
is correlated with the brand's interaction with the customer. If it
is, the implications are critical and likely to be long lasting.
Toyota's problem with sliding floor mats or sticking accelerators (or
both) got away from them as of this AM. I am posting this now because
it is a great real-time case study of this premise. We'll watch in real
time. I have no idea how this is going to turn out but can already tell
that extreme risk surrounds the company right now in North America and
that any further delay could be very costly to 2010 sales and maybe
beyond depending upon how this is handled going forward.
The
Drudge Report has a CBS story (one paragraph) of a little old lady
driving into the side of a laundromat building in her Toyota saying she
does not know what happened. This is lousy reporting and journalism to
say the least and it is almost intentional piling on by some PR firm
somewhere. Business can be rough and tumble...we all know that well. My
deeper point is how right now, and for the next few years, we are in the
midst of a deep social correction where the natural proclivities of
people will be to accentuate the negative and potentially tear down well
built brands (and people) that are not 100% proactive in communicating
the details of problems associated with brands (as they pertain directly
to their customers) in an instantaneous manner.
Moreover, in a world where social networking on-line has increased
the immediate nature of communication (in two directions), this only
makes this mandate that much more critical now for brand managers when
the problem touches the core of your brand's utility.
I have no idea how Toyota's crisis will turn out (in my thinking)
because right now because I am not even sure if it is a cable problem
with the accelerator or a floor mat problem being spun out of control.
No matter which it is time is of the essence as it pertains to the
general car buying public. When I first sat down to write this post I
was thinking to myself there is no way that my image of Toyota quality
could be permanently damaged by something of this nature....at this
point. My own personal assumption has to be qualified however; I've
bought several cars, foreign and domestic. The American car I did own
was a POS in the early 90's. The Japanese brand car I now own is not
without glitches and if I were in the buying cycle I would be
considering many brands looking for quality because I see cars as
depreciating assets....not status markers. That's just me. Many less
informed people are liable to simply pass by the Toyota dealer if they
are shopping this month or next. Heck, they recalled eight models;
doesn't that mean they don't have many cars for sale right now anyway?!
Like I noted, time is of
the essence for the Toyota brand right now. Even if this does not
produce a death blow to the brand because all those Toyota dealer
buildings across the USA are good advertising by themselves, it can
screw up the entire sales year in just a few weeks. Brands in crisis
during a social correction are worthy of a full court press, every
time.
This
Toyota story thread and post has been monitored and updated daily
since begun and is being offered in a flowing format with links from
major news outlets in an expanding link thread at the bottom. In
ten days we've gone from multiple recalls to a worldwide brand crisis
that will not be fixed with any one move at this point:
My premise when beginning this post was to document the unfolding
brand crisis for Toyota following their multiple recalls worldwide and
to correlate it with the idea that brands expose parent companies to
significantly more downside risk during periods of social correction
(now). It may be tempting to dismiss this as either obvious or not
offering specific value in terms of "what to do with it" but before we
can go there it is important to document that this is what happens to
parent companies of significant brands in crisis during these corrective
days.
I first suggested this idea two years ago by looking back at the
brand crisis encountered by both Tylenol (1982 & 1986) and Perrier
brand (1990) and offering a revisionist perspective on their divergent
outcomes based on the imposing effect of social
mood and whether we are expanding or correcting (in a macro sense)
at the time. Because of the size of this social correction now
developing multiple consumer brands in various industries are facing
this effect and the implication in the years ahead can already be called
dramatic. It is tempting blame the specifics of a crisis for the damage
to the established brand but as we will see over time, it is the
combination of both the crisis and the developing social mood that needs
to be considered. It is a human chemical reaction of sorts that
demonstrates how the oppositely characterized periods of social
expansion and social
correction work to produce wholly different experiences when
managing a crisis.
Link for my earlier thoughts on this subject:
Perrier
& Tylenol:the revisionist lessons of social mood for brand managersManaging
Brands in Crisis:
America's
Financial Brands (an update is in progress)
Brands
in crisis during a social correction - an updateSocial
Corrections: shinning a light on the little parts of the larger process
The crisis thread accumulated over ten days is below. You may
choose to skip down to the list of links for stories from major news
outlets. Below that is an excerpt from Wikipedia about the eerily
similar Audi recalls in the late 1980's and their American decline in a
smaller period of social correction. The parallel is not in how the
issues were similar but in how they were allowed to linger and inflict
damage on a brand that previously had positive momentum in the US. Take
note of their sales decline in that period.
The next post in this
series will be an overview of the "what now" aspect of these
observations. For now, brands serve companies by offering an emotive
connection with both current and potential customers. This edge can cut
both ways and social mood has a lot to do with this dynamic. Dave
