toyota header Toyotas Recall and Crisis Management 2.0

By Ethan Lyon, Senior Writer

Crisis management is not just about contacting news outlets or writing an apologetic press release. In the digital age, crisis management requires swift, sweeping action on all digital fronts: social media, blogs and company websites. For the potentially long-term damage to Toyota’s no. 1 auto brand, you’d expect the Japanese automaker to be more proactive in managing the media firestorm surrounding its faulty floormats and accelerator pedals.

“It’s not good news because it hurts their image for quality and reliability,” said Thierry Huon, an auto analyst at Exane BNP in Paris to the NYT. “It’s not good advertising.” For a brand whose core competency is superior quality and leadership that needs to grow 50% in the next year to meet it’s ambitious goal of 15% global market share, the company could do better to manage its recent recall crisis.

Toyota has the opportunity to utilize social platforms, such as Facebook and Twitter, to manage this branding crisis, but has shown a half-hearted effort. Facebook, the largest social network, is not being utilized by Toyota to reach out to its nearly 70,000 fans. While loyal fans stick up for the brand — for instance Ron Short points out GM is also recalling its vehicles — Toyota’s voice is silent. The Japanese car manufacturer is also under-utilizing its Twitter account to get the news to its 14,000 followers. Toyota has posted a mere six tweets regarding the recall — not as much as you might expect a brand in crisis management mode.

The consequences of poor crisis management could severely damage its reputation as the number one automotive brand, with $30.5 million brand earnings, according to Interbrand. Should we expect the Toyota brand to move down Interbrand’s list next year? Depends on how they manage the situation. At least for now, Toyota needs to stop the bleeding or it could cede its brand earnings to its automotive counterparts. Since Jan. 15, Toyota’s stock has tanked 430 points, or 10.4% while Honda and Ford have seen a mere 4.3% and 2.1% decline, respectively. While the auto market is slumping, Toyota’s stock is falling like a rock compared to its competitors. Toyota can minimalize damage through effective crisis management.

Successful crisis management requires timing, response and sincerity. Dr Rory Knight and Dr Deborah Pretty have performed extensive research in crisis management. They have studied the stock price of brands facing catastrophic failures (similar to Toyota). They bucketed those company’s whose stock price recovered to the level prior to the catastrophic event and those that did not recover. Knight and Pretty determined effective management is critical in the recovery of company value.

How can a be crisis managed well? Mattel Inc. faced a recall similar to Toyota when it retracted 28 of its products in 2007. The toy manufacturer reacted quickly to identify the problem and took immediate action to recall faulty products. To curb a public outcry, Mattel worked closely with the media. At the end of the day, Mattel contacted 40 major media outlets and a responded to a total of 300 media inquiries. In fact, Mattel established a customer relations page wherein they disclose all product recalls, including the product description, date of recall, country and serial number.

Since Mattel’s catastrophe, the online social space has become a critical crisis management tool. Consumer expectations have changed with the advent of social media and brands in crisis management mode, such as Toyota, must dial-up and utilize all digital tools at their disposal to be a part of the conversation, show sincerity, and be responsive. Has Toyota done this? Toyota could be more proactive by utilizing social media to reach out and start a dialog with its loyal customers and the media.