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Competition is the fundamental reality of business. Companies from around the world strive against each other to offer products and services to at prices that entice consumers. With innumerable options in literally every product category combined with easy and instantaneous access to information, customers have emerged empowered. As such, achieving long-term customer loyalty has become far more difficult.

Amidst such competitive challenges, brand equity has emerged as one of the most strategic assets of any company. Companies around the world are realizing the strategic value of having strong brands that resonate with customers. Brands allow companies to create, maintain and sustain competitive advantage over their competitors over long periods of time.

Brands help create a driving force for employees while externally brands offer customers a very powerful decision trigger. As such, powerful brands are indeed a strategic necessity for survival and success.

As with everything, benefits come with costs. As powerful brands enjoy enormous media attention, high customer awareness, focused engagement from stakeholders and activists and stringent scrutiny by regulators, the positives of the brand are as highlighted and celebrated as the negatives are exaggerated. As such, when popular brands are the subject of any crisis, fraudulent activity or even minor problems, they tend to make big headlines.

Such scenarios can become extremely challenging when they are not handled tactfully and strategically. In the recent past, Toyota experienced such an event. The manufacturing giant’s cars were found to have safety defects and the company recalled hundreds of thousands of cars sold in the US. For a brand that has enjoyed unsurpassed customer loyalty and brand equity, this was an extremely negative event. With a resurgent GM and Ford, this recall led to scathing coverage in the media and gave competitors a window to take advantage. Toyota was also forced to testify before the US Congress as to the safety of its products. All these events undermined Toyota’s brand.

In such scenarios, how should the brand react? More importantly, how severe are the effects of such negative events? The process of minimizing damage done to an iconic brand should be a skill understood by top management in every corporate boardroom. Such understanding is critical in times of crises when companies struggle to minimize fallout and attempt to emerge from the crises unscathed.

Managing the negative events. When a company’s most important strategic asset, its brand equity, is under attack, it should be cause for concern for the management. A good strategy for dealing with such a situation includes three major steps.

First, the chief brand ambassador, usually the chief executive, should assume public responsibility for the event. This not only reduces the negative energy building against a brand, but also preempts moves from competitor companies to portray the brand in a negative light.

Second, the brand should make simple tactical moves like reducing prices, enhancing service or improving the brand experience to ensure that customers don’t abandon the brand.

Finally, the brand should move to aggressively correct the problem in as transparent a way as possible to regain the trust of investors and customers.

Toyota has managed to take all these three steps very effectively. Initially, the brand owned complete responsibility for the defects in its cars and communicated that the reason for the recall was to be honest with its customers and continue the relationship of trust between them.

It followed this initial step by introducing new financing schemes, new service agreements and better upgrading incentives to make sure that customers did not abandon ship.

Finally, Toyota was very aggressive in communicating the corrective measures it took.

Together these measures ensured that Toyota did not suffer tremendously in terms of brand equity and customer loyalty.


Martin Roll is a global business and brand strategist. His Web site is www.martinroll.com.