Toyota has announced three major recalls covering a total of eight million vehicles globally since October 2009. The recalls are for defects that have been associated with 52 fatalities and 38 injuries so far.
Not surprisingly, the business media and notable Toyota experts are starkly pessimistic. We looked at 108 Wall Street Journal articles discussing Toyota during February, 2010, and found that 106 were negative to Toyota. In a recent column by Dennis Seid, Jeffrey Liker, an economist and author of The Toyota Way observed that the hearings and the resultant lawsuits could severely damage the company in many ways. Management consultant Kenichi Ohmae expressed reservations regarding the ability of Toyota’s management to meet the “psychological” challenge in the face of mounting political and media attacks in a New York Times op-ed.
It’s a dismal time for once-great Toyota, right? Maybe not. Using a national online panel provided by TRC, a marketing research organization, we interviewed 455 U.S. American vehicle owners between February 20 and March 2 to find out how they feel about Toyota. A total of 58 Toyota owners (13% of total) and 397 owners of other brands (87% of total) completed the survey, which matches the proportion of Toyota to non-Toyota drivers in the U.S. Most of the survey was comprised of satisfaction questions ranked on a 0 to 10 scale (10 being completely satisfied).
Results: Toyota owners’ overall satisfaction was in line with other vehicle owners’. Using regression analysis, we found that Toyota owners cited four drivers of overall satisfaction with vehicle quality: reliability; ease of maintenance; safety; and brakes. These four predictors explained 88% of the variance in overall satisfaction with their vehicles. The same four factors explained 83% of variance in satisfaction with non-Toyota owners. We concluded that safety and brakes are equally important for both Toyota owners and owners of other vehicles when evaluating how satisfied they are with their vehicle’s quality.
These respondents aren’t living under rocks. Both for Toyota and non-Toyota owners, 93% of respondents had heard about the recalls. But contrary to media prognostications, the recalls don’t appear to have affected the Toyota brand image adversely among its customers. Toyota owners, compared to owners of other vehicles, agreed more strongly that Toyota appropriately handled issues with respect to the brake-pedal recall; they were more likely to say they believed that this incident is an outlier, that typically Toyota has a strong reputation for quality, and that recall shows Toyota’s commitment to customer safety.
We measured a number of perceptions regarding other brands among respondents. Toyota owners did not believe that domestic automakers such as GM, Ford, and Chrysler are catching up to Toyota and Honda in either safety or reliability. These results again indicate a clear and solidly strong brand advantage for Toyota among current Toyota vehicle owners.
Finally, the big question: Would you buy another Toyota? Again, the results were clear. Toyota owners did not believe they would be less likely to buy a Toyota vehicle in the future because of this incident, indicated greater willingness than non-Toyota customers to consider a Toyota for purchase, and considered Toyota to be one of the most reliable automotive brands.
Recall from the regression analysis that brakes and safety were two of the four factors that are equally, if not more important for Toyota owners than owners of other makes. Seems that the recalls for problems with these attributes should have made Toyota owners much less satisfied with the brand and seeking alternatives. Yet our respondents seem perfectly sanguine about their Corollas and Priuses.
We’re chalking this up to the “brand insulation effect.” For a brand to be insulated it needs to deliver two things to customers: a high level of satisfaction and, this is key, a consistent satisfaction. If you have both, you can withstand an instance of lapsed performance. If, on the other hand, satisfaction is high but also highly variable, there is no such insulation. If, for example, more recalls become necessary, Toyota’s consistency will begin to wane and its insulation will begin to fail. Instances of negative performance reflect poorly on the brand, leading to a downward spiral of declining satisfaction and sales.
Our results show Toyota has brand insulation. Customers refute the overly pessimistic views being taken by many reporters and business experts. So, it was a great story, the Fall of Toyota. But so far, it’s just a story.
Vikas Mittal is the J. Hugh Liedtke professor of management at the Jones Graduate School of Business, Rice University. Rajan Sambandam is the Chief Research Officer at TRC. Utpal M. Dholakia is an associate professor of marketing at Rice University.
