The Brand Insulation Effect. Toyota Customers Remain Loyal in the Face of a Recall
Despite its recall trouble since last October, Toyota owners remain loyal to the brand, our authors' research discovered. Toyota steers clear of reputation damage.
oyota has announced three major recalls covering a total of 8 million vehicles globally since October 2009. The recalls involve safety problems with brake pedals in many of Toyota's most popular models including the Camry, Corolla, Prius, Avalon and Tundra.
Using vivid anecdotes and opinions of experts, the business media has largely painted a pessimistic outlook for the Toyota brand. To what extent is this qualitative assessment by the media credible? Is the Toyota brand irreparably harmed by this product crisis? What do Toyota's customers think of the brand? Relative to owners of other brands, where do Toyota owners stand on satisfaction and loyalty during this crisis?
A product-harm crisis occurs when there is systematic perception among key constituents—such as customers and regulators—that product malfunction has potentially harmed some of the customers of a brand. Confronted with such a product-harm crisis, the firm can use marketing research to comparatively evaluate its brand. This enables the firm to quantify the current perceptions of its customer base relative to those of customers owning competitor brands. Rather than relying on qualitative media reports, a comparative assessment using a survey-based approach can provide metrics of perceptions, attitudes and intentions of the customer base. From there, the firm can draw useful and actionable insights as we describe here.
During a product-harm crisis, firms can either rely on media reports or systematically measure customer perceptions. What they find may surprise them. According to a recent TRC study, Toyota owners believe that Toyota handled the recall appropriately. The Toyota recall case shows that, despite negative media portrayals, Toyota owners are insulated from the crisis. Relative to owners of other brands, Toyota owners are highly satisfied and loyal to their brand.
A cross-sectional survey measured customer satisfaction, brand perceptions, attitude toward the recall process and loyalty intentions. The survey we conducted was based on a sample of 455 U.S. vehicle owners. Our cross-sectional survey can only compare users of the target brand to users of competitive brands. Ideally, a pre-test/post-test experimental design should be used to draw causal conclusions. With such a design, researchers can measure the change in satisfaction and brand perceptions that occurred due to the recall. However, product-harm crises are usually unanticipated, making such a design infeasible.
A cross-sectional survey thus limits the research analyst to a comparative analysis of customers of the target and competitive brands. Even with this limitation it can provide useful and actionable information. To ensure relatively unbiased responses the following steps must be undertaken:
- Describe the purpose of the survey in general terms to potential participants to prevent biased responses. For example, we described the survey as "a study to understand people's perceptions of their automobiles." We also made sure that the goal of the survey was not described as being related to the recall.
- Do not identify the study's sponsor. If such a study were being commissioned by Toyota, mentioning that to survey participants could polarize responses. Specifically, Toyota owners might give more positive responses toward Toyota; conversely, those disliking Toyota and owning other brands might provide overly negative responses. In our study we made no mention of Toyota even though our study was not sponsored by Toyota or any automotive company.
The survey was conducted from February 20 to March 2, 2010, using a national online panel from TRC, a research and consulting organization. The national panel of respondents was invited to participate in the survey. Among the panel members, 626 chose to respond to the survey. Among these responses, there were 85 incompletes and 84 participants whose survey was terminated because they did not qualify (76 percent completion rate). Among the 457 participants, 58 Toyota owners (12.7 percent of total) and 397 owners of other brands (86.8 percent of total) completed the survey. (Note that there were two Lexus owners in the sample. Instead of including them with Toyota, we chose to exclude them from the analysis to preserve the more explicit comparison of Toyota and non-Toyota brand owners.)
Reassuringly, these proportions reflect the current market share of Toyota in the United States, indicating that our respondent sample is representative of the U.S. market on this metric. In February 2010, Toyota had a market share of approximately 13 percent, down from a January 2010 market share of 14.1 percent, according to Edmunds Auto Observer (available online at: http://www.autoobserver.com/2010/02/ford-set-to-overtake-beleaguered-toyota-in-2010-edmundscom-predicts.html). Wall Street Journal reported a market share of 13.4 percent for Toyota in February 2010 (available online at: http://online.wsj.com/mdc/public/page/2_3022-autosales.html#autosalesE).
The survey asked respondents to report the make and model of the vehicle they currently owned and drove. In addition, we included the following items:
- Overall satisfaction with the vehicle and with specific attributes of the vehicle (0=completely dissatisfied, 10=completely satisfied)
- Statements about the recall and the Toyota brand (0=completely disagree, 10=completely agree)
- Behavioral intentions (0=completely unlikely, 10=completely likely)
- Key demographic variables such as age, gender, and household income
Because of the need to obtain critical information at a short notice, the survey was kept short. The survey, unlike a general satisfaction and brand evaluation survey, queried respondents only about the current vehicle they owned.
We compared Toyota vehicle owners in the sample with owners of other vehicle brands on a number of important dimensions. We used two-tailed t-tests to compare the average ratings of Toyota owners with owners of other vehicles. Unless otherwise noted, all comparisons are statistically significant at the 5 percent level (p < .05).
We also conducted a series of analyses of variance including gender, income, total number of miles on the vehicle and awareness of the recall as covariates. Inclusion of these covariates did not change the conclusions or the results.
In our survey, 93 percent of Toyota owners and 93 percent of owners of other brands were aware of the recall. Note that if awareness of the product-harm crisis is low among the respondent base, it may be useful to compare respondents who are aware to those who are unaware to draw additional conclusions. In the present case, the high awareness of the recall precluded such a comparison.
What We Found
Overall satisfaction and attribute perceptions for Toyota and other owners.Results show that, in most cases, Toyota owners are equally or more satisfied with their vehicle and its various attributes. More specifically:
- The average level of overall satisfaction with vehicle quality was equally high among Toyota owners (mean satisfaction rating, M = 9.2) and owners of other vehicles (M = 8.7).
- Compared to owners of other brands, Toyota owners are more satisfied with different attributes of their vehicle. The difference in mean ratings is statistically significant at the 5 percent level for transmission (9.7 vs. 8.7), safety (9.5 vs. 8.7), ease of maintenance (9.2 vs. 8.5) and brakes (9.1 vs. 8.6). The fact that Toyota owners rate their satisfaction with safety and brakes to be slightly higher is very interesting. Despite the recalls and the media coverage, Toyota does not seem to be disadvantaged compared to competing brands. The use of a pre-test/ post-test study also would enable the company to measure the change in satisfaction before and after the crisis.
Awareness and assessment of Toyota's recall.The survey also measures people's perceptions of and attitude toward the recall. In this study, 93 percent of the respondents were aware of the recall. Toyota owners, compared to owners of other vehicles, agreed more strongly with the following statements:
- Toyota appropriately handled issues with respect to the brake pedal recall (M = 7.7 vs. M = 5.9)
- The current incident is an outlier, and typically Toyota has a strong reputation for quality (M = 8.6 vs. M = 6.9).
- The recall shows Toyota's commitment to customer safety (M = 8.1 vs. M = 6.6).
- The role of government in the recall. Both Toyota owners and owners of competitive brands reported equal levels of agreement with the following:
- We need more government regulation for safety (M = 6.4 vs. M = 6.4)
- The government was too slow to act in this recall (M = 6.2 vs. M = 6.6)
This statistically non-significant comparison is reassuring. It leads us to conclude that Toyota owners are not simply expressing higher agreement with any and all statements pertaining to the recall in the survey.
Assessment of other brands. We measured a number of perceptions regarding other brands among respondents. First, Toyota owners agreed more strongly that other automakers are equally lax when it comes to customer safety (M = 6.8) when compared to other brand owners (M = 5.7). In contrast, they did not believe that domestic automakers such as GM, Ford and Chrysler are catching up to Toyota and Honda in either safety (M = 5.9 vs. M = 7.3) or reliability (M = 5.9 vs. M = 7.1). These results again indicate a relatively strong brand advantage for Toyota among current Toyota vehicle owners.
Brand consideration and purchase intentions. Regarding brand consideration and purchase intentions, Toyota owners have more positive assessments. They did not believe they would be less likely to buy a Toyota vehicle in the future because of this incident (M = 4.0 vs. M = 6.3). Compared to owners of other makes, Toyota owners indicated greater willingness to consider a Toyota for purchase (M = 8.0 vs. M = 4.0). They also more strongly agreed that Toyota is one of the most reliable automotive brands (M = 8.7 vs. M = 6.2). When we asked about their likelihood to repurchase the brand they currently own, Toyota owners indicated higher repurchase likelihood than owners of other makes (8.2 vs. 7.2).
"Toyota owners believe that Japanese automotive brands are superior to U.S. brands when it comes to reliability and safety".
In the absence of comparative survey results, and misled by the media coverage, one may easily draw the incorrect conclusion(s). To provide a clearer understanding, our study leads to the following broad conclusions:
- After the product-harm crisis, Toyota owners are equally, if not more, satisfied with their vehicle compared to owners of competitive brands. They are more satisfied with brakes and safety than owners of competitive makes.
- Their likelihood to repurchase a Toyota in the future is somewhat higher than the equivalent repurchase likelihood among owners of other brands.
- Regarding the recall process, Toyota owners are more positive about the company than owners of other automotive brands. In other words, Toyota owners support their brand with respect to the recall process thus far.
- Toyota owners, despite the recall, believe that Japanese automotive brands are superior to U.S. brands when it comes to reliability and safety.
- Finally, Toyota owners consider it to be one of the most reliable brands in the U.S., compared to owners of other brands.
Brand insulation. In the midst of the recall, what may explain this relatively high level of positive opinion and satisfaction among Toyota owners. We believe it is due to a "brand insulation effect" that occurs when the consistent and high level of satisfaction with the brand experience in the past insulates the brand during a product-harm crisis. When satisfaction is consistently high (i.e., high satisfaction with low variability), customers view the occasional performance lapse as an anomaly. Toyota, as indicated by our results, seems to enjoy such a brand insulation effect. After the recall, the satisfaction ratings of its customers with various attributes and with the vehicle are at par or higher relative to satisfaction ratings among competitive brands. An additional reason may be that consumers who have high levels of brand loyalty may become relatively insensitive to negative information about the brand. Such inoculation to negative information among those with high brand commitment has been reported in many previous studies.
Customer retention and acquisition. Strategically, this research suggests that Toyota needs to focus heavily on its customer base to improve and maintain customer retention. The likelihood of buying a Toyota among owners of other makes is low, but the likelihood of buying a Toyota among owners of Toyota is high. Thus, customer retention will be much easier and important for Toyota. In contrast, customer acquisition—especially by attracting owners of competitive makes—is likely to be an uphill task in light of this recall. This may also be an opportunity for Toyota to ensure that its current customers, especially those planning to buy another vehicle in the near future, are not vulnerable to competitive actions. Thus, introducing one-time price rebates and customer rewards programs could be useful to ensure high customer acquisition and retention.
It is true that in the short run Toyota may lose some sales. Toyota will have to work extra hard at acquiring customers owning competitive brands during this crisis. On the other hand, its ability to retain and grow its existing customer base remains strong. Thus, based on the survey results, the loss in sales is unlikely to last if the recall is expeditiously and judiciously handled.
Managing the recall process. According to the survey, Toyota owners believe that Toyota handled the recall appropriately. Moving forward, Toyota needs to be highly vigilant in addressing the recall and any issues its customers have with the recall process. How Toyota handles the recall will clearly affect how its customers view the brand and their satisfaction. If the process by which the recall is executed reinforces the importance that Toyota places on customer satisfaction, its customer satisfaction and brand ratings can only improve. Toyota, it seems, is already doing well, even going to the extent of providing "white glove" service to many customers (i.e., providing them with rental cars and pickup service when needed).
If, on the other hand, the recall process unfolds unevenly and is seen as shoddy by customers, or if new problems arise, Toyota's satisfaction and brand ratings may decline from its current levels.
Surviving the Crisis
A single survey represents a snapshot, and conclusions based on a single, cross-sectional survey may not apply over time in product-harm crises. During such crises, events unfold quickly and the firm must be vigilant while also attending to other sources of information. For example, user comments from social media Web sites could be analyzed to further enhance the firm's understanding of the views of different stakeholders. Such an ad hoc survey during a product-harm crisis could be combined with the firm's tracking study to enable the firm to measure pre-post changes in customer satisfaction and brand perceptions.
What happens in the future will depend, to a great degree, on Toyota's actions and customer reactions in the future. Naturally, periodically conducting such a survey to track the changes over time will provide Toyota with a quantitative and reliable measure of where it stands in the customer's mind. This, in our opinion, is the true value added of conducting marketing research during a product-harm crisis.
Vikas Mittal is the J. Hugh Liedtke professor of marketing at Rice University. Rajan Sambandam is chief research officer at TRC, a marketing research firm near Philadelphia. Utpal M. Dholakia is the William S. Mackey, Jr. and Verne F. Simons associate professor of marketing at Rice University.