Toyota’s Customer Loyalty

Recalling more than 6 million cars after defects of their automobiles led to the deaths of 52 individuals, a person would naturally assume that Toyota has lost its competitive edge and that its customers would all flee to its competitors. This could not be further from the truth. The article notes that 93% of Toyota owners who were aware of the Toyota recall did not believe American automakers were catching up to Japanese automakers with respect to safety and reliability. When customers are highly satisfied with a brand’s offerings, they are “prone to see occasional performance lapse as an anomaly,” which is known as the “brand insulation effect.” Because Toyota has such a broad base of loyal consumers, it is naturally “insulated” from the impacts of this lapse.

Toyota has developed high levels of brand equity, stemming primarily from its perceived quality and consumer loyalty. As noted in class, Toyota has consistently been ranked in Business Week’s Top 10 Brand Equity as number six in 2007 and 2008. It is this equity that has decreased their vulnerability to the performance crisis and that has increased their elasticity of consumer response to price. Investors and consumers are standing by Toyota, praising the drastic recall as a sign of the company’s commitment to quality. Toyota is here for the long run and will continue to prevail as a result of its highly established brand equity.

This blog post was written by Stephanie Evans, Camille Pereda, Jim Flanagan, and John Haywood