Clumsy Recall Management Really Can Damage Your Brand
02-28-2011
By Mike Rozembajgier
A new report indicates that Toyota’s recent string of recalls has caused the automaker’s brand value to deteriorate, dropping 16 percent to $25.66 billion over the past year. And the latest round of Toyota recalls has reignited discussions about recall management in the automotive industry. Ford’s recent recall of 135,000 F-150 trucks and Toyota’s recall of more than two million vehicles represent two very different approaches to the recall process.
As I told CNNMoney recently, both automakers probably made their recall decisions at least in part based on each company’s reputation among consumers and regulators. After last year’s recall management approach left a dent on the company’s consumer trust, Toyota has increased its transparency over the past twelve months, taking a more proactive approach when responding to consumer safety issues. Ford, on the other hand, appears to be betting that positive product reviews, increasing sales, and growing goodwill will allow the company to get away with not announcing a recall as extensive as the National Highway Traffic Safety Administration (NHTSA) apparently would like.
According to Interbrand, a brand consultancy that evaluates global brands based on financial strength, influence on purchasing decisions, and earnings potential, Toyota remains Japan’s number one global brand despite its drop in value following months of recalls. As I recently told Christian Science Monitor, Toyota badly needs to be perceived as knowledgeable and proactive, conveying a genuine commitment to consumer safety. This is critical to maintaining brand value even in situations where there is no imminent danger to drivers.
It remains to be seen how NHTSA will react to Ford’s more conservative approach, and how that may impact the automaker’s reputation. But we can expect the agency to investigate Ford’s recall in order to determine whether it should be expanded.
All manufacturers faced with a major recall need to work hard to regain the trust of customers. Regulators are more concerned about safety issues than ever before. Faced with this increased scrutiny, companies cannot afford to wait until public attention forces a recall. Regulators will jump at the chance to make an example out of any company that fails to make consumer safety its number one priority.
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