Brands are Defined by What They Won't Do

The world's leading car-maker Toyota continues to reel from the largest product recall in its history. The company had already shed US$31 billion in market value since late January when it stopped production and sales of eight vehicle models to fix problems with sticky accelerator pedals and loose floor mats. Yesterday its pain intensifed with the recall of 437,000 hybrid cars including the Prius, the company's green 'halo car' for a new era.

But my post today isn't about the besieged brand in the spotlight. It's about the vulture brands circling around it.

GM and Ford have announced specific incentives targeted at unnerved Toyota owners in the US. "We want to make sure whoever's out there driving ... has a high-quality vehicle that's safe," a GM spokesperson told reporters during their announcement. Ouch.

Volkswagen, on the other hand, has written to its dealers requesting them not to employ "predatory price cuts" to lure Toyota customers in the US away from the brand. The Chief Operating Officer of VW's North American unit stated that Toyota "faces unfortunate circumstances in the marketplace. We will remain an aggressive competitor without targeting any one manufacturer."

In the jungle out there, marketshare cannot be achieved without mindshare. Putting aside Toyota, which is currently top of mind for all the wrong reasons, one brand has suddenly catapulted into the place of high awareness, high esteem. Volkswagen instinctively understands that values trumps results. Values mean doing the right thing when no one is looking and even when the consequences are difficult. Authentic brands earn respect by delivering on their brand promise and behaving the way they want others to behave towards them.

Volkswagen's actions reveal a brand strategy that articulates not just what it will do, but also defines what it will not do.

And what it didn't do this week, will generate results for a long time to come.

What Price Do You Put On A Reputation?

If you're in the market for a car or currently drive a Toyota, you'd have to be blind or deaf not to be aware of the problems the car-maker has been grappling with these past few months.

When a few isolated accidents involving Toyota vehicles caused by accelerator pedals 'sticking' to the floorboard increased to a statistically significant number, Toyota swung in action, issuing a series of vehicle recalls from November last year.

In the latest installment of this unfolding saga, Toyota announced on Wednesday this week that it would immediately stop building and selling the Camry, Corolla and Avalon sedans, Matrix wagon, RAV4 crossover, Tundra opickup, and Highlander and Sequoia SUVs. Beyond the USA and Canada, the recall will be extended to China and Europe (though it is currently unclear which models will be affected).

The accidents, and the deaths and injuries they have caused, are truly tragic. The root cause, whether it's a broken accelerator pedal or floor mat interference (as documented in this YouTube video clip: http://youtube.com/watch?v=VTOxYFt1yT8VTOxYFt1yT8), needs to be fixed, and quickly. Toyota is doing all in its power to address the swiftly situation and stem the body blows to its vaunted reputation for product quality. (See http://pressroom.toyota.com/pr/tms/toyota/toyota-consumer-safety-advisory-102572.aspx for details.)

According to some detractors, the Toyota brand is now in tatters, and the business will never recover from this, the largest product recall in its history. The vehicles being recalled account for 57% of the company's US sales; and it is estimated that Toyota will haemorrhage some US$400 million a week due to suspended production and sales. I note with a trace of distaste, however, some telling observations:

1. All the eight affected models in this recall exercise are assembled at five plants in the USA and Canada, with what I must assume to be a predominantly local workforce.

2. In its bid to become the world's #1 car-maker, Toyota moved away from some of the business practices that had served it well for the longest time. One example is its decision to buy parts from companies around the world, rather than from a small group of Japanese suppliers that had been long-time partners. The accelerator pedals in the vehicles affected by the recall come from a supplier's Canadian plant.

3. US Transportation Department officials have taken pains to point out that they had advised Toyota to act quickly. "The reason Toyota decided to do the recall and stop manufacturing is that we asked them to," said Raymond LaHood, the Transportation Secretary. "We were the ones that met with Toyota, our department, our safety folks, and told them, you've got to do the recall." (Ouch.)

4. Journalists say Toyota is almost certain to face lawsuits soon not just from people who claim injuries from the defects, but also -- get this -- class-action suits on behalf of consumers who will claim the crisis has damaged the value of their cars. (Only in America.)

Is it just me, or do some of these news tidbits merely reinforce the quality of Japanese engineering vis-a-viz the rest of the world? Toyota is a savvy organization. Not by accident (pun unintended) is it ranked amongst the world's most admired companies and the world's most respected brands. Granted, the company has skated close to the edge by risking its core brand attribute -- quality -- in its fixation on growth. Toyota now has to reconsider the wisdom of some of the operational decisions taken in its quest for global leadership in the automobile industry. But it would have executed these recalls, LaHood or no hood.

This crisis will likely cost them untold billions of dollars; but a principle isn't a principle until it costs you something.

Chin up, Toyota. You're doing the right thing.

[Disclosure: I have never owned a Toyota, nor shares in the company. But that doesn't stop me from respecting the brand.]

One Audience, Two Responses

How fast should a brand react when child safety is in the balance?

A couple of weeks back I'd blogged about Maclaren, and the fracas that started with its product recall in the USA on 9th November. A few days ago, the 23rd Dec edition of Singapore newspaper TODAY carried a report that the local distributor of Maclaren had (finally) contacted its 1,000 customers who had purchased the affected strollers to collect safety covers for the stroller hinges to prevent injury to stray fingers.

Is 44 days a reasonable time for a company to respond to a threat to its goodwill and reputation? (And we haven't even begun talking about customer safety.)

Consider this: Swedish furniture giant IKEA announced earlier this week (on 22 December) a global recall of 5,474 children's high chairs after IKEA received 11 reports of malfunctions of the locks securing the seat to the frame of the high chair. "As soon as we started to get the incident reports, we decided to stop selling the product," an IKEA spokesman said. The company is discontinuing the product and issuing a full refund to all purchasers of the Leopard high chair.

Two different companies, serving -- in this case -- one single customer segment. No prizes for guessing which one has earned my respect and trust.

Brands Behaving Badly

If you have young children, chances are the Maclaren scandal would have been brought to your attention recently. No, we're not talking about fast cars here, but furious parents outraged at reports of Maclaren strollers being responsible for fingertip laceration or amputation in the USA. In 8 cases over the past two years (and 15 such reported incidents over a 10-year period), children's fingertips were lacerated or amputated when they got caught in the pushchairs' hinges. The 42-year-old British brand's response has been revealing.

Maclaren had planned to announce a product recall on Tuesday Nov 10th, but the news leaked over the weekend of Nov 7th-8th, so concerned parents jammed Maclaren's consumer hotline -- which was not set up to take those calls -- on the Monday, effectively short-circuiting any hope Maclaren might have harboured to conduct a low-key, orderly recall. The company scrambled to issue their recall announcement by the end of that day, affecting about 1 million strollers that had been sold nationwide over the past 10 years.

Significantly, the company chose not to recall affected strollers in its home base of Britain -- perhaps because there have been fewer reported cases of injury across the pond. (The company's website lists 53 markets in which it does business -- should the rest of us take comfort in Maclaren's tacit message: that our kids are less reckless and we are less litigious than the Americans?) Instead, it merely issued safety warnings -- only to amend this policy a week later to offer hinge covers to any customer who requested them, after being inundated with protests closer to home.

What can we learn from this sorry sequence of events? Can the brand's reputation for quality survive this very public smear?

First, be prepared. Conduct disaster planning and run the drills annually at the very least. We can hope for the best -- but should plan for the worst.

Second, don't discriminate. Maclaren inexplicably seemed to be treating American children's fingertips as more precious than those of children in the UK and other countries. It failed to remember that in the Internet Age, a local problem can easily become a global one.

Third, remember that some things just won't stay quiet. In a TIME magazine article on the unfolding saga (http://news.yahoo.com/s/time/20091110/us_time/08599193700300), Pete Blackshaw, a brand consultant for Nielsen Online, states that "anything relative to child safety tends to be off-the-charts viral". New mothers are more likely to use social media and start blogs than other consumer segments. The search term "Maclaren fingertip amputation" has pulled more than 5,000 results on Google.

Other brands have misbehaved -- to their detriment -- in the past. In 2000, Ford Explorers and the Firestone tyres mounted on them came under fire for hundreds of deaths and injuries caused by tyre blowouts while on the road. Ford and Firestone executives bickered publicly while a wave of negative publicity mounted against both brands on the Web. Ford finally ended up recalling 13 million tyres at a cost of US$3 billion.

In 2004 an Internet posting reported that Kryptonite bicycle locks -- a long-standing market leader -- could be opened with a Bic ballpoint pen. Other postings quickly surfaced with similar tales. The company totally ignored the blogosphere before issuing a statement after five interminable days -- stubbornly contending that Kryptonite locks were completely theft-deterrent. The final outcome: A recall of the locks which cost the company US$10 million (nearly half its annual revenue).

Thankfully, some brands are better-behaved. In 2007 a freak snowstorm hit New York's JFK airport on a winter's day. Over 1,000 flights were cancelled. JetBlue, the fledgling entrepreneurial airline, suffered a startling breakdown, and took nearly a week to get its services back to normal. The difference here? CEO David Neeleman handled the crisis with authenticity and humility. He accepted responsibility for bad decisions and overwhelmed departments. He said he'd fix the problems and promised refunds and credits for angry passengers. He apologized repeatedly on his company's website, in his blog, on TV and in print. Despite the collosal Valentine's Day meltdown, a consumer poll conducted a month later revealed that 43% preferred JetBlue, the most for any airline.

A brand's story and mythology are fundamental building-blocks of how the brand is built over time. Brand stories help to articulate the persona and identity of the brand, and define the role and behaviour you can expect from it. Storytelling conceptualizes a strategic message in a far more emotive and engaging way than a press release could ever hope to accomplish. Maclaren's website speaks of the renowned features of all Maclaren strollers (or "buggys" as the Brits would say): from "the lightweight frame, durable fabric and one-hand fold, to the above-industry standard safety features".... but its current misadventures are shredding that hard-earned credibility. Negative stories can't always be avoided. However, it is not what happens to you, but how you react to it that matters.

David Neeleman and JetBlue understand that intimately. It remains to be seen if Maclaren will recover sufficiently to make some belatedly wise moves as this saga is played to its conclusion. All may not be forgotten ... but perhaps it can be forgiven.