When my phone rang at 8 pm, the CBS producer introduced himself with a question: “How much trouble is Toyota facing, as a brand?” I responded, “Am I allowed to say the words ‘they’re screwed’ on-air?”
Above, you’ll see the interview that aired 12 hours later.
The bottom line here is that Toyota carefully engineered its brand’s value with the most precious of all brand triggers: trust. As I describe in my book, “Trusted brands carefully pay attention to detail, reinforcing consistency between expectations they set and results they deliver. In return, the reward for earning trust is a big one: loyalty.”
Immediately after my interview with Harry Smith, CBS issued my prediction of a lengthy recovery in an article titled, Expert: Toyota Will Restore Trust in 10 Years.
“We’ll be seeing for at least a decade, maybe two, that there will be major problems with the Toyota brand because the brand has been founded upon trust, upon reliability and safety and certainty,” Hogshead told Smith. “So the very core bedrock of the brand has now been struck hard by this, and consumers are doubting whether or not Toyota was forthcoming enough with them.”
USAToday.com also quoted my prediction of how long the brand might have to work to recover consumer trust.
Earlier today, the company announced it is “planning a new level of disclosure about car problems beyond what the automaker is legally required to reveal as it seeks to rebuild consumer trust.” (Wise move, Toyota.) But is this too little, too late? Could it still take decades for Toyota to recover from this crisis?
In 1986, Audi faced a very similar situation, after a 60 Minutes investigation pointed to the Audi 5000 model’s “unexpected acceleration.” Sales plunged 80%, and it took 15 years for the brand to recover to pre-crisis levels (until 2000). Audi’s allegations of mechanical defect are similar, however, Toyota’s recovery might be even slower than Audi’s. First, the Wall Street Journal revealed that the Audi 5000 never actually had severe mechanical issues, whereas Toyota’s defects are proven. Second, Toyota may have deliberately covered up the problem for years, as evidenced by the fact that insurance companies repeatedly warned Toyota of the issues. Had Toyota acknowledged the problem earlier, there would have been fewer accidents and lower liability. By failing to act, the company bears greater responsibility for the damage, and even deaths, that happened as a result.
This news contradicts what we believe about Toyota. It raises consumers’ suspicions, and lowers the value of the brand. It even lowers the value of current owners’ cars themselves: LA Times reports that “owners trading in their recalled models are collecting 6% less than before the recalls.” More expensive than the $2 billion recall and $3 billion loss of company value could be Toyota’s cost to reinstate their reputation for reliability.
Consumers have more forgiveness than you might expect. They’ll even forgive products that make lethal mistakes– as long as the company takes immediate responsibility and also immediate action. Toyota did neither.
What can we learn from Toyota? If trust is your primary brand trigger, maintain full disclosure and accountability to your customers at all times. Otherwise, like Toyota’s cars, your own brand crisis could be unexpectedly accelerating.
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Really interesting analysis – and congrats on all the great press, Sally.
I wouldn’t be surprised if Toyota comes back way sooner than ten years. After all, their customers want to believe in them. They want to believe that the folks behind the Prius are good people at heart and will do what they can to make it right. They’re just looking for a reason to do so.
I would imagine that’s the strong difference between Toyota and Audi’s situation in the 90s.
Well that, and the fact that Toyota spends a whole lot more on marketing. I just hope they’ve got a serious brain trust working on it right now.
Liz, great observation that Toyota’s consumer’s want to believe in them. And if anything is noble enough to escalate a brand out of the muck, it’s certainly Prius.
You mention how the brand needs a “serious brain trust” behind the brand right now, and I agree wholeheartedly. Their agency has brilliant people in place, so I bet we’re going to see a strong marketing push toward a turnaround. Like you– like most consumers– I hope to see them succeed sooner rather than later.
It is painful to watch a brand squander the goodwill and trust it has built over the years. But Toyota bungled this so badly from the start I can’t waste the tears.
If from day one they validated consumer concerns and got in front of the solution curve they’d have scored a huge coup. Instead they acted like — well — an American car company without any commitment to excellence.
Hey Sally, great piece with CBS. I’m so happy to see our industry step up to these topical issues with a smart voice like yours. If they’d have asked me, I would’ve had them all strung up. Having lived in Japan for over three years, and having done business there, I’ve never felt a company as large as Toyota would ever be completely honest about how they do their business/make their money. After all, Toyota was just another of the industrial super-companies that enjoyed massive profits while helping build the imperial army that devastated most of Asia during the 30’s and 40’s. What came out of it may have been the benevolent Toyopet Crown, but they were still making military vehicles in the 50’s, for the Americans. Most of that history may have nothing to do with what the company now faces as a crisis in marketability, but when I saw the video clip last week of Akio Toyoda on vacation during this hoopla, I thought, why isn’t he kneeling down and committing seppuku? (or it’s 21st century version, stepping down in exile) It’s the only way to save face, and keep from having all the ugly details of a corporation whose road to success has been paved with government level intrigue, international espionage, and the lives of ordinary citizens. If you ask me, Toyota stole a lot from America, starting with their original trucks, made mostly from the Dodge power wagon, to their core business processes that amazed Americans during the 70’s with their ability to make such efficient cars. They learned it from studying American corporations after WWII, just how Akio Morita had done with Sony. Plus, they had cheap labor, some would say “slave labor”, the kind China enjoys today. Either way, what is occurring now is basically the chikens coming home to roost. It’ll be interesting to see how it all falls out.
Roger and Jim, thanks for your comments. A Newsweek blog supports your comments:
“Note to Japan: you don’t get it. Recalls for minor technical problems are common, but recalls of millions of vehicles for problems that can produce nightmarish, fatal crashes are not. Toyota’s recall of 6.6 million cars is the sixth largest in U.S. history so far, and one of the scariest. Most automakers have learned to handle these PR disasters forthrightly, but Toyota CEO Akio Toyoda performed a duck-and-denial routine…”
Great piece, Sally. You make a great case for the importance of transparency. Your point about them losing $3 billion in stock value because they wouldn’t face a $2 billion problem is probably the most compelling. When we let stubborn pride get in the way of admitting a mistake, we only end up in a much deeper hole later.
Thanks, @Mark. Edmunds.com estimated on Friday that they’ll fall to third in U.S. auto sales. Their sales will probably return, and they may soon once again lead the market, however this will always be a smear on their reputation.
A good lesson. Brands should get a spraybottle of Windex, and make their transparency sparkle!
Sally