Toyota faces a massive marketing challenge
Toyota has begun the painful and difficult task of trying to convince consumers that they should buy the beleaguered company’s cars -- even as worries mount that more bad news may be ahead.
Capping a week of by-the-book crisis management, including television appearances by top executives, the world’s largest automobile maker has begun to air a commercial aimed at restoring confidence in its vehicles.
Opening with a 1960s-era photograph of what is now Toyota of Hollywood, the ad is airing frequently on network and cable television stations along with YouTube and the company’s website.
“In recent days our company hasn’t been living up to the standards that you expect from us, or that we expect from ourselves,” the narrator says. “We’re working around the clock to make sure we build vehicles of the highest quality -- to restore your faith in our company.”
The spot is just one of Toyota’s efforts to reach consumers. The company has bought banner ads on 400 websites and is running radio commercials in the style of public service announcements to direct people to its website for information on the recalls.
The moves come amid indications that some customers may be steering clear of Toyota Motor Corp. vehicles. New-car sales were down in January, and the automotive website Kelley Blue Book reports that the number of people seeking to buy Toyotas has dropped by a third since the most recent recall was announced last month.
Kelley Blue Book allows people looking for a new car to search the site and contact dealers to request a quote. But since Jan. 20, the day before Toyota announced its latest recall, such requests have dropped significantly, analyst James Bell said.
Before the recall, about 18% of Kelley Blue Book users requested quotes for new cars from Toyota dealers, Bell said. Since then just 11% to 12% did so, he said.
Kelley Blue Book says that values of used Toyotas -- already down 3% -- will decline further this week by about 1.5%. The Prius hybrid, which typically sells for close to its entry-level sticker price of about $23,000, is likely to see its retail value drop by $1,000 to $1,500, Bell said.
The company says it has not tracked values for Toyota’s upscale Lexus line, which has had to recall fewer vehicles.
Toyota reported a drop in new-car sales last month, but it is not clear whether that was because of lessened demand because dealers had been ordered not to sell several models for part of the month. The company is already offering a $1,000 incentive to buy a new Prius, and it is expected to put discounts in place for other vehicles.
Most experts believe that Toyota will eventually win customers back. But they say that to do that, the company will need to reach out -- with direct marketing, more TV commercials and a message that it has solved its safety problems and made its vehicles better than ever.
At Toyota right now, that means embracing a marketing strategy that is evolving rapidly -- a departure for a company that is careful to chart most of its major moves well in advance. As of Tuesday, executives were still reviewing whether the television portion of a campaign for the Sienna minivan would begin as scheduled Friday.
“We are analyzing our options on a day-to-day basis,” said spokeswoman Celeste Migliore. “We’re talking consistently with our customers and measuring their response to us.”
In addition to TV, radio and newspaper outreach, Toyota is buying advertising on Internet search engines in hopes that its message will pop up at the top of the list of sponsored links when people look for auto-related information online, Migliore said. On Monday, Jim Lentz, chief executive of Toyota Motor Sales USA Inc., answered questions from Internet users on the popular site Digg.
The company has also hired additional lobbyists and public relations specialists in its Washington offices, public affairs manager Cindy Knight said. Toyota is not releasing information on how much it is spending on its stepped-up advertising, public relations and lobbying campaigns.
Since fall, Toyota has issued 10 million recalls for problems related to unintended acceleration, with about 2 million vehicles subject to more than one recall. The company temporarily halted sales and production of the eight models affected but these have resumed.
Late Monday, the company recalled 437,000 more vehicles, including 133,000 Prius and 14,500 Lexus models in the U.S.
Rebuilding customer loyalty will be key for a company that for decades has traded on an almost religious adherence on the part of Toyota owners to the idea that the vehicles were reliable and safe, said Jim Stengel, a former marketing chief for Procter & Gamble Co. who teaches at UCLA’s Anderson School of Business.
“They need a massive one-on-one campaign,” Stengel said, in which the company digs into its gigantic customer database and contacts Toyota owners by mail and through electronic means such as e-mail.
The company also must continue to advertise, said Chris Gidez, U.S. director of risk management and crisis communications for public relations firm Hill & Knowlton. But to work, the ads must convince consumers that the company knows what went wrong and is fixing its problems.
“It’s not enough to do the best advertising and the most creative marketing and really smart social-media engagement,” Gidez said. “They first need the compelling story, which is that they’ve got the fix, they have the means to maintain or rebuild that bond of trust.”
After that, experts said, the company can start to rebuild its brand, perhaps embarking on a campaign to highlight new products or technical innovations.
Toyota owner Jonathan Braun said he was skeptical of the ad’s claim that more than 172,000 employees were working to fix the safety problems.
“They didn’t show anything they had actually done to fix the problems,” Braun said. “That’s what made it seem more like a fluffy PR ad.”
Most analysts said they expected the company to eventually recover its image. But few -- including Toyota -- are predicting how long that might take.
“We do believe they will recover to a strong degree, but these are the dark days,” said Bell of Kelley Blue Book. “And it just keeps stacking up on them.”