Manufactured products are subject to defects, they occur at random. We know that the defect rate can never be zero so a higher defect rate doesn’t cause problems if you are purchasing the product in large quantities (large sample size). If I buy a pack of 100 straws for my kids, I am ok with some having holes in them – even up to 10 (10% defect rate). I bought them at the dollar store after all! As consumers we access the true cost of the product by including the defect rate in purchase.
Problems occur when the buyer purchases the product in small quantities (small sample size). We typically purchase cars one at a time. A manufacturer may sell cars with a 1% defect rate, but we buy one car and it either works or it doesn’t. When I buy my Prius and discover a brake defect, suddenly that 10% defect rate is not acceptable!
A 1% defect rate may not be statistically significant over the roughly 2 million cars sold by Toyota in the United States every year, but ask a Toyota marketer if it is practically significant. One percent is 20,000 unsatisfied complaining consumers. An article was written about the defective brakes on Prius Hybrids based on 100 complaints – only .005%! Toyota can improve their defect rate, but never get it to zero. That is when Public Relations becomes invaluable.
All this press over the Toyota recalls made me think of 1982 Tylenol crisis where people were reported dead after taking extra-strength Tylenol capsules. On of Johnson and Johnson’s crisis management techniques was its quick and total response. J & J made it clear right from the start that they put people over profit through an immediate sincere apology and aggressive recall action.
Toyota has sent the opposite signal. They were slow to apologize and slow to react. At first they the press couldn’t even track down CEO Toyoda. Not thinking the crisis was important enough he remained at a World Economic summit in Switzerland where he only made a brief comment because the press forced him right before he sped off in an Audi.
He made his first official public appearance only after two weeks of the company facing a growing crisis over the safety and quality of its vehicles. At the press conference he apologized for the problems that led to the company’s recall of more than 8 million cars, but did not announce any solution for brake problems of its popular Prius hybrid. At a later date Toyota ended up announcing additional recalls on the Prius.
Then Mr. Toyoda apologized again but said he was not going to testify before congress. He delegated that responsibility down to the heads of the U.S. operations. But then later he apologized again saying he changed his mind and would testify. If decisiveness builds confidence Mr. Toyoda is doing the opposite.
Instead of acting quickly and aggressive to show that they put public safety first Toyota has taken a wait and see approach every step of the way giving the public the impression that they will only do what the public forces them to do to protect every bit of profit it can.
Instead of Toyota affirming their company’s concern for their customer’s safety with immediate apology from the company’s leader and aggressive action they now have that president testifying before Congress defending his company’s reaction to the crisis and trying to convince the public that his repeated apologies are sincere. But I don’t think the public is fooled. Actions speak louder than words (“Toyota Chief Hammered by Lawmakers Despite Apology” 2010).
How much money and time did the company invest to get Five Star Crash Ratings? What is it worth now?