Brand Crisis

Source: Johar, Birk, & Einwiller (2010)

Introduction
• Major Crisis
• Toyota Motor Corp – 2009
• Sudden acceleration and brake failure
• Massive recall of 8.5 million Toyota vehicles in February 2010
• Toyota knew about the issues, refrained from large-scale recalls

Source: Johar, Birk, & Einwiller (2010)

Consumer Questions when Crisis Hit
• Is this true?

• Who is responsible?

• Was it intentional?

• Will the brand do it again?

• What does this event say about the brand?

Source: Johar, Birk, & Einwiller (2010)
Navigate and Evaluate the crisis
• Is the accusation real or true? Is there any truth in the accusation of wrong
doing?
• Customers’ belief?
• Credibility of the source of information?
• Repeated broadcast of crisis? Reliving the crisis? (Frequency)
• If you repeat a lie often enough it becomes the truth, even if the source is dubious!!
• Who is the affected party? – Consumers and Employees

• Severity of crisis
• Toyota vs Nestle (2005 - traces of ink in baby milk powder – “storm in a teacup”)

• Have customers forged personal identification with the brand?

• Identification with brand -------- > Response to crisis
• Moderator: Transgression (severe or less severe)

Source: Johar, Birk, & Einwiller (2010)

Brand Communication Strategies
• Come clean
• Polish the Halo
• “Not just me” Response
• Rebuttal
• Vilify the Accuser
• Denial
• Inoculation
• “Yes… but …” Response

Source: Johar, Birk, & Einwiller (2010)

Come Clean
• Brand trust at fault + Sever crisis
• Quick apology
• Express empathy
• Accept responsibility
• Why hesitation? – Legal Aspects
• Citizen Journalist, Vigilant Media
• Course correction and Communication
• Quick
• Bad news communicated all at once
• Transparency is essential
• Communication understandable and free from ambiguity and jargons – by customer and employee
• Spokesperson of the brand ?
• Corrective action is a must

• Eg. Toyota – Did they Come Clean?

Source: Johar, Birk, & Einwiller (2010)
Toyota Coming “Clean”…!!!
• Till long time no acknowledgement of problem

• Acknowledgement after NHTSA’s pressure

• 1st Apology by CEO Toyoda in Japan, Recall

• After 4 months, 2nd Apology to US consumers by COO Toyota Motor Sales USA
• Apology posted on Website

• Corrective Measures – Did not work

• April 2010 – Fine of $ 16.4 million

Source: Johar, Birk, & Einwiller (2010)
Polish the Halo
• When Apology becomes necessary
• Bolster Brand Image
• Else customers with less identification will become even more negative
• Spillover effect (one feature of the product to the other feature; one brand to
the other brand)
• Samsung Galaxy Note 7 crisis explosion

• After the crisis, Brand Advertising and Public Relations

Source: Johar, Birk, & Einwiller (2010)

Polish the Halo
• After the crisis, Brand Advertising and Public Relations
• Transparent Communication
• Rebranding
• Crisis-Specific Advertising Campaigns
• Social Media Engagement
• Influencer Partnerships
• Customer Testimonials
• Corporate Social Responsibility (CSR) Initiatives
• Exclusive Offers and Loyalty Programs
• Crisis Management Workshops for Internal Staff
• Continuous Monitoring

• Eg. Toyota
Source: Johar, Birk, & Einwiller (2010)
“Not just me” Response
• Could there be other factors responsible for the crisis?

• Is the crisis unique to the brand?

• Eg. Dell – 2006: 4.2 million laptops voluntarily recall due to battery explosions
• https://www.cpsc.gov/Recalls/2006/dell-announces-recall-of-notebook-
computer-batteries-due-to-fire-hazard

• Auto-parts manufacturer??

• Track record matters

Source: Johar, Birk, & Einwiller (2010)

Inoculation
• “The action of immunizing someone against a disease by introducing
Vaccine in the body”

• Anticipate the crisis and prepare consumer for the negative event by
communicating in small does of accusation together with
counterarguments and refute it – and to do this before the accusation
breaks full-fledge.

• Vaccine before the outbreak

• Wallmart – Our wages are double than bare minimum

Source: Johar, Birk, & Einwiller (2010)
Various Impacts of Brand Crisis
• Consumer Reaction
• Investor Confidence → decline in stock prices and overall market value
• Supplier Worries
• Employee Morale and Recruitment
• Regulatory Scrutiny
• Competitor’s Positioning
• Partnership and Sponsorship Re-evaluation
• Credit Rating
• Government Relations
• Brand Equity and Market Positioning
• Global Expansion Challenges
• Social and Environmental Impact
Source: Johar, Birk, & Einwiller (2010)
“Yes… but …” Response
• Forthright explanation of the reasons for crisis with Justification +
Argument that downplays the damage

Source: Johar, Birk, & Einwiller (2010)

Rebuttal
• When brand is not at fault

• Problems – if lack of response by the brand

• Eg. PepsiCo – 1993: Foreign objects in Pepsi Cans

Source: Johar, Birk, & Einwiller (2010)

Vilify the Accuser
• If source of the accusation is attacked

• Discredit the source of information

• “Shooting the messenger??”

• Eg. Toyota – Southern Illinois University Professor vs Toyota’s

Research + Statement by Stanford Professor

Source: Johar, Birk, & Einwiller (2010)

Denial
• Flat Denial – When?
• When accusation is not true
• Consumers identify with the brand and do not consider the crisis to be severe

• Eg. Tommy Hilfiger (1996)

Source: Johar, Birk, & Einwiller (2010)

Thank You…