by Randall Hull of The Br@nd Ranch®
AKA: "Oh What a feeling".
Unless you have been on a trek to one of the poles or living in a cabin deep in the woods somewhere, you have likely heard about the huge problem facing Toyota Motor Corporation and its U.S. organization Toyota Motor Sales USA Inc. Here's a quick recap just in case:
Toyota Motor Corporation began a recall in late 2009, which – as of March – totaled 8.5 million cars globally due to braking problems and accelerator pedal defects which were initially blamed on other things such as "floor mat entrapment". The initial recall included Toyota's Corolla, Matrix, Camry, Highlander SUV, RAV4, as well as Tundra and Sequoia trucks. After Toyota admitted the 2010 Prius had a design defect in its anti-lock brake system, it too joined the list, and the U.S government began investigating the automaker.
And then there's the Black Box. As in commercial airlines, automobiles have "black boxes" known as Event Data Recorders, or EDRs, which keep a data record of various things the automobile was doing a few seconds prior to and after a crash. The EDRs in Toyotas use a proprietary software which, according to an Associated Press investigation, until recently could be read by only one laptop in the U.S. In response to growing pressure Toyota has delivered three laptops to the National Highway Traffic Safety Administration with the software capable of reading their EDR data. The AP investigation also found that Toyota was not offering full disclosure about what their device did and did not record.
Discussing the legal implications and what was and was not disclosed is beyond the scope of this article and my expertise. I want to focus on how this could throttle the Toyota brand and how they can put the brakes on this situation before it spins out of control. After reading all the news releases and legal saber rattling, "Oh What a feeling" is taking on a whole new meaning for me.
Toyota has been producing vehicles since 1936, and up to now, safety and reliability has been the foundation of their brand. Yet, in the middle of all this Toyota officials admitted the company's rapid growth may have gotten in the way of maintaining the highest standards of quality control. Its the familiar company profits before customer safety scenario -- hardly confidence building.
Added to this poor communications mix, when Toyota should have reassured the world they had the recall situation in hand, they made a fundamental faux pas, overlooking the importance of not only what you say but also how you deliver the message. In January, a Toyota executive addressed television cameras wearing – gasp! – a surgical mask. Perhaps this is common in Japan during cold season, but the message was broadcast worldwide, where a cultural nuance such as this could easily be misconstrued. First, it projected a "we are in toxic triage" image, and secondly, CEO Akio Toyoda should have delivered the message – sans mask. The U.S. marketplace, particularly, does not take kindly to aloof leadership in a crisis, and quite simply, this was a crisis of confidence, where brands live or die.
This debacle holds so many lessons for brand managers and executives, alike. Primary amongst them what not to do when your product demonstrates a performance problem that puts your customers at risk. When building public trust in your product and your company, transparency followed by action is fundamental. The risk in failing to staunch eroding customer confidence is forever tarnishing your brand.
The Toyota recall, of course, is not the first time well known brands have faced a crisis.
In 1994, a professor at Lynchburg College reported a bug in the Intel Pentium floating point unit. He sent a memo to Intel reporting what became know as the Pentium FDIV bug. Intel, caught by surprise, had no crises strategy in place and chose to deny the problem. When public pressure became too great, Intel announced a recall and Andy Grove, Intel CEO at the time, offered one of the greatest mea culpas in corporate history. Although jokes prevailed for some time, the public forgave and moved on.
Johnson & Johnson had a huge headache in 1982 when cyanide-laced Tylenol in the Chicago area resulted in 7 fatalities. Johnson & Johnson took only 6 days to respond and recalled 30 million packages. At the time the incident was thought to be fatal to the company, but the public saw the action as a prime example of corporate responsibility. The final result was tamper-proof packaging on medications and Johnson & Johnson's brand intact.
Perrier recalled 160 million bottles of mineral water in 1990 when traces of benzene were discovered. Although the amounts were not considered enough to present a risk, Perrier acted to protect its reputation and was hailed as responsible public citizens.
Companies, who have dealt with critical challenges promptly and well, demonstrate how a brand can be guided through crises and emerge untarnished, if not stronger for it. A genuinely sincere apology timed appropriately will go far in winning back customer loyalty and restoring trust. Many companies have learned their customers listen most closely when they honestly admit failure.
Toyota is one of the world’s strongest brands according the Interbrand's rankings. CEO Akio Toyoda must utilize his best public communication skills and convince the public that he has taken control of this crisis. Then act swiftly and effectively. Should Toyota successfully address the many product issues, they will recover with nothing more than a bloody nose. But should they fail to resolve the problems fully, as recent reports indicate, the damage incurred may be fatal and the Toyota brand could be so severely tarnished, it will take years and millions of dollars to restore. "Oh what a feeling" that would be.
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