Tuesday, February 09, 2010

Lessons on Brand Equity: Toyota

When a company wants to launch a brand - what the brand equity is or what the brand will stand for is a big decision. For example you likely won't want to stand for the same thing as your competitor because you will then be fighting over the same consumers. That's why there are so many brands out there as consumers want different things.

Volvo stands for safety, BMW for performance, and Toyota stood for reliability. As you can see not all equities are created equal. When Tiger Woods stood for wholesome, trustworthy competitor - he suffered a major financial set back. When Charles Barkley stands for funny athlete - he's still in a super bowl commercial even after his sex scandals.

So you can see - in addition to actually delivering on your equity - perhaps the toughest challenge is MAINTAINING it. Tiger obviously made more than Sir Charles, but Charles Barkley has a lot more margin for error built in to his personal equity. And Toyota's equity of reliability demands a lot more from their company than BMW continuing to deliver horsepower. And when it rains on Toyota's reliability equity it pours!

In addition to hours of TV dedicated to the fear of run-away Toyotas and tips on what to do if your Toyota goes crazy on you... you get these stories:

(A joke in poor taste is that the only thing worse for Toyota's image than the fatalities of their run-away cars are the survivors of their run-away cars!)

I haven't seen a story where every day you hear something worse like the Toyota one since the John Edwards story. And I think part of the reason is because even though other companies have plenty of recalls - this one cut to the core of what they stood for. Also it was a recall of some freaky run-away car scenario which is as scary a scenario we have seen since the Firestone tires. Now Toyota is the #1 car manufacturer in the world - so I am NOT criticizing their equity position in terms of obtaining market share - but rather for degree of difficulty to maintain it.

I'm just saying there are some brands who become market leaders with more attainable equities like Tide standing for cleaning or Kleenex standing for whatever it is a paper product stands for (hygienic way to blow your nose?) and it's easier to be one of those in many ways. You are just better off standing for the cheapest hotel than standing for the cleanest hotel - because when those reports come out about what fecal bacteria is found where with a black light - at least you can still be a cheap hotel but it's hard to still be a clean hotel in the minds of consumers.

Other equity mistakes are creating a brand around a person. I mentioned Tiger Woods, but think of Martha Stewart. Once your celebrity has a scandal - the entire brand is damaged or destroyed. This is much worse than just having this person as a spokesperson. For example - Gillette is doing fine without Tiger - they will just get the next star (Drew Brees?) and they will continue their performance equity. But Tiger Woods as a brand is in a rough place. That's not to say he couldn't bounce back - but it wouldn't be the same.

If I were launching a cell phone company - I'd much rather stand for cool or cheap phones or fun apps than try to be the most reliable network. My customers will cut me more slack when the reliability isn't perfect because they will take the trade off to get the coolest looking T-Pain phone. Now reliability may be a key seller for people in this market, and the "reliable" brand may have a greater market share - but the day Verizon has a Blackberry-like outage for a day or two - all of their marketing dollars spent to create that brand equity are decimated. You are better off picking an equity you can control more tightly than to be the company that "never makes a mistake".

It's also a little bit like investing in Apple. If they continue to sell the idea that Steve Jobs is the genius behind all of this - then you can see what happens to the stock price when Steve Jobs gets very sick - or what will happen when he retires. Some equities have a short sighted time frame to them - or aren't something you can control well. Many fashion fads rely on the equity of being "in style" but as soon as the fad passes - brands like hyper color or jams etc almost disappear.

What do you think happened to NetZero (free internet) and Napster (free music - though illegal) when these brands started charging for their products after advertising that they were meant to be free? Even if they are still around in some capacity - they lose all credibility and thus - market share. NetZero was also short sighted as their model was built on showing ads while people surfed over the modem, when ad rates plummeted AND people were willing to pay for highspeed - the "free internet" equity bit them in the behind. We all know why Napster's equity was short sighted, though a revolution none the less - but not a sustainable business or brand.

Another equity mistake is of course having too narrow a brand equity. Think of the train companies who went out of business when airplanes came along because they really thought they were train companies instead of Travel companies who could have been investing in developing planes!

I'm all for capturing the most market share - my caution is some equities you can control - like BMW in my opinion - just crank out the next engine - but in Toyota's case they have been banking on consumer perception of reliability - which for a long time scored them some big points, but it will be interesting to see how damaged the brand becomes because of these issues. When the core thing you stand for is where your company has problems - you are in big trouble.

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