Drug that Made Company Billions

 Bartels, Chuck. “Johnson & Johnson Subsidiary Hid Risks Associated with Risperdal, Drug that Made Company Billions.” The Huffington Post. (April 10, 2012). http://www.huffingtonpost.com/2012/04/ll/johnson-johnson-risperdal-risks_n_1417999.html#es_share_ended (accessed July 1, 2012).

32 Feeley, Jeff, and Eric Francis.“J& J Hid Risperdal’s Risks from Arkansas Doctors, Lawyer Says.” (April 12, 2010). http://www.bloomberg.com/news/2012–04-10/j-j-hid-risperdal-s-risks-from-arkansas-doctors-lawyer-says-l-.html (accessed July 5, 2012).

33 Johnson & Johnson. All News, http://www.jnj.com/connect/news/all. (May 11, 2012). All News, http://www.jnj.com/connect/news/all (accessed on March 7, 2012).

34 Johnson & Johnson. All News, http://www.jnj.com/connect/news/all. (May 11, 2012). All News, http://www.jnj.com/connect/news/all (accessed on May 11, 2012)

35 Johnson & Johnson. “FDA Issues Complete Response Letter for 800 mg PREZISTA® (darunavir) Tablet.” All News. (May 29, 2012). http://www.jnj.com/connect/news/all (accessed on June 2, 2012).

36 Epstein, Samuel S. “Multiple Carcinogens in Johnson & Johnson’s Baby Shampoo.” The Huffington Post. (December 28, 2012). http://www.huffingtonpost.com/samuel-s-epstein/johnson-baby-shampoo_b_1151807.html (accessed on July 6, 2012)

37 FDA. “Firm Press Release Recall: Aveeno Baby Calming Comfort Lotion.” FDA (January 27, 2012). http://www.fda.gov/Safety/Recalls/ucm289619.htm (accessed on July 6, 2012).

Questions for Discussion

1.

Tylenol is a product of the McNeil Consumer Products wing of J & J. When the original deaths occurred, the parent organization moved in and took over both responsibility and spokesmanship. What are the pros and cons of that strategy for the CEO and the communications people in McNeil? What about the news media?

2.

Why do you believe J & J has acted so differently between the first series of problems in the 1980s and the recent problems? What internal communication problems do you surmise might have impeded a more successful handling of the issues? What would you counsel the company to do going forward?

3.

One of the Great Truths of PR is that there is no such thing as corporate ethics. How can an organization install and enforce an ethics policy that works? How might it keep it intact even through leadership changes?

4.

In the 1980s, J & J acted according to its credo and recovered from two separate, fatal tampering problems. Might the credo have provided some guidance in the more recent situations?

Case 6-4 Marriott On the Move Cultivates Customer Relationships

During a flight home from Europe in 2007, Bill Marriott sat next to his new executive vice-president and chief global communications and public affairs officer, Kathleen Matthews. She explained to him that the company needed to find a powerful way to communicate with customers in today’s message-saturated environment.

Her solution: Create a CEO blog that would be a personal way for Marriott to engage customers who sought a deep connection with the company and wanted to join the company in conversations.

A CEO or corporate blog is just one tool in a toolbox filled with ways to reach stakeholder audiences. Selecting the right tool to reach an audience means evaluating the way the audience naturally receives information now. If it is a very connected audience, used to accessing and reading online content, then a blog is likely a good choice. Initial research helps determine current behaviors around medium use. Finding a natural fit for each audience is imperative as is not expecting people to change their behavior to fit your preferred communication style. Like a stream in the woods, follow the natural bank and do not force nature to bend to your will.

Deciding Whether to Dive into the Blogosphere

The first consideration is to have something to say that will interest people,” explained Jay Hamilton, who directs digital corporate relations for Marriott. If the CEO has an abundance of engaging content to share, a communications team can then consider the benefits and drawbacks of creating a blog.

Some of the potential benefits of having a CEO blog for customers include:

 

Humanizing the company by helping customers to get to know the CEO

Building the company’s brand by educating customers about the company’s history and culture

Providing key updates about the organization’s activities and plans

Serving as a direct channel for conversations between the CEO and customers

 

These benefits can enhance customer loyalty. Potential drawbacks, however, include:

 

Amplifying critical comments by hosting them on an official blog that high-value customers would read

Monopolizing significant CEO time over a sustained period

Needing to supply fresh content over a sustained period that would engage readers

Taking the risk of possibly making a misstatement that could result in negative reactions

 

The CEO has to want to blog,” explained John Wolf, vice-president of global brand public relations for Marriott. “In this world of transparency, you need to be ready to talk about things. Spin doesn’t work. It’s about authenticity and transparency. You need to have a CEO who understands what he or she is getting into, wants to do it, and understands that it won’t be all positive.”

Contributed by Tiffany DervilleGallicano, Ph.D., University of Maryland

Wolf also explained that with the myriad ways that people can express their views online, it is at a company’s own peril to not be a part of that conversation. By having a blog, a CEO can host the discussion, listen to blog readers, and share his or her views in a venue that is more extensive than microblogs or social networking sites, which can be used to engage in short conversations and encourage people to read the blog.

Earning Buy-In from HR, Legal Counselors, and Executives

Human resources and legal counselors expressed concern about employees posting comments that could cause problems. They also discussed potential problems that could arise from the mention of employees’ names in comments. The communications team alleviated these concerns by explaining that:

 

All comments would be moderated

A terms-of-use policy would be created to describe the kinds of comments that the blog editor would approve and the kinds of comments that would not be accepted

As described in the terms-of-use policy, the blog would be positioned as a communication tool for external audiences only; employees would be directed to report concerns to their managers, human resources, or the Marriott business integrity line (five years later, Marriott launched an internal blog through the company’s intranet)

The last names of Marriott employees would be deleted from comments to protect employees’ privacy

 

Both positive and negative comments would be welcome; however, the terms of use would explain that feedback about a hotel stay should be reported to the Marriott customer care group (and a link to a form was given) rather than posted on the blog. Comments would need to be relevant to the conversation.

The communications team earned executive support by forming a blog advisory board of senior-level executives, to make them part of the process. As the communications team developed components of the blog, such as the editorial policy and terms of use, it shared regular reports with the advisory board. Setting a launch date was important. The internal deadline helped the team propel the project forward in a timely fashion, which can be a challenge in a global corporation.

Orienting the CEO to the Blogosphere

The communications team talked with executives from other organizations, such as Boeing and IBM, who had blogs, to find out what they thought made a successful blog. The team presented what they learned to Marriott and showed him the blog of Randy Tinseth, the vice-president for marketing for Boeing in Seattle, and the blog of the first CEO blogger, Jonathan Schwartz of Sun Microsystems.

The communications team also needed to overcome the barrier to technology. The CEO, who was 75, did not use computers. Marriott and his team wanted the blog to be truly authored by Marriott, rather than having someone ghostwrite his blog posts. “That’s not the way it works,” explained Hamilton. “You can’t fudge these things; you can’t pretend you’re Bill Marriott.”

Marriott decided he would dictate his posts to an audio recorder or a member of the communications team who would then transcribe what he said. An audio recording would be published with each blog post. All comments would be printed and delivered to Marriott for his review. He would decide which comments to respond to and would dictate his responses. To be transparent about the process, Marriott presented these details in a section of the blog titled About Marriott Blog.

To handle the challenge of generating a steady stream of varied content, the communications team decided to meet each month to discuss ideas and establish a month-long editorial calendar. The team considers Marriott’s travel calendar and encourages him to write blog posts about the places he visits. They also encourage Marriott to tell stories each month about the company’s culture. For example, the company’s philosophy is to take care of employees, they’ll take care of the guests, and the guests will keep coming back. Highlighting an event designed to honor top employees is one vehicle for discussing the company’s philosophy.

The team also encourages Marriott to discuss the company’s recent innovations and global growth. For example, a recent blog post describes Marriott’s partnership with Conservation International and a local provincial Chinese government to support a producer of honey that follows sustainable practices. The blog announced that with Marriott’s addition of its 100th hotel in China, it has worked out an agreement with its juice vendor to bottle the honey, serve it in Chinese Marriott hotels, and donate a portion of the profits to the sustainability program.

In addition, Marriott has various topics he wants to address each month. The monthly editorial calendar helps the team ensure that there is a robust pipeline of stories to share on the blog.

When considering story ideas, Hamilton advises, “The best blogs aren’t promotional, they’re individual, and they’re from the heart. You don’t sell products—people don’t want to see that.”

Marriott introduced his blog on January 15, 2007, by discussing why he decided to start a blog, how he felt about entering the blogosphere, and the kinds of topics he planned to cover.

Profiting from the Results

The communications team hoped to get 5,000 visits in the first two weeks; however, the blog received 20,000 visits and numerous comments. The launch received coverage in online media, as well as The Washington Post and USA Today. The blog has a steady readership of travel journalists and bloggers who go to the blog for story ideas.

Today, the blog receives approximately 30,000 visits a month, and during a big news month, the number of visits tends to escalate to about 60,000 a month. The year 2012 is its fifth anniversary. Because Marriott is one of the few octogenarian bloggers and one of the few top executives to blog, The Huffington Post announced that Marriott is now a Huffington Post contributing blogger.

Research About Ghost Blogging

Ghost blogging occurs when a public relations practitioner without disclosure writes a blog post on behalf of the stated author of the blog; this practice is controversial.

A recent survey of public relations practitioners by Gallicano, Brett, and Hopp (2012) found that most respondents thought it was permissible to engage in ghost blogging, provided that the stated author provided the ideas for the content and gave final content approval. The results also showed that approximately 41 percent of the respondents had at least one executive blog, and slightly more than half of these respondents acknowledged that their executive blogs were ghostwritten.

This study generated wide discussion and disagreement at the International Public Relations Research Conference. Among those disagreeing was social media measurement specialist and thought leader Katie Paine, who termed the study “Most Disturbing to Bloggers” in her summary of the conference.

Although most respondents in the survey approved of ghost blogging, opinions might shift as people learn the results of a subsequent survey of 507 readers of corporate blogs, 510 readers of politicians’ blogs, and 501 readers of nonprofit blogs, which was conducted by Gallicano, Cho, and Bivins (2012). Regardless of the work setting, readers did not widely approve of the practice of having a communications person draft a blog post for the stated author, even if the blog post ideas came from the stated author and the stated author gave final content approval.

Questions for Discussion

1.

Visit www.blogs.marriott.com/marriott-on-the-move and read at least five blog posts. What do you think about the blog?

2.

Explain the distinctive benefits and drawbacks of a blog, as compared with other social media channels, such as microblogs and social networking sites.

3.

If your CEO expressed an interest in starting a blog, what would you need to discuss before deciding to move forward?

4.

Marriott rejected ghost blogging. Explain and justify your position about whether a blog’s stated author should delegate the writing of the blog posts to a public relations practitioner.

Sources

Gallicano, Tiffany. D., Brett, Kevin., and Hopp, Toby. “Is Ghost Blogging Like Speechwriting? A Survey of Practitioners About the Ethics of Ghost Blogging.” Paper presented at the meeting of the International Public Relations Research Conference, Miami, FL (March 2012).

Gallicano, Tiffany D., Cho, Yoon. Y., and Bivins, Thomas. H. “What Do Blog Readers Think? A survey to Assess Ghost Blogging and Ghost Commenting.” Paper presented at the meeting of the Association for Education in Journalism and Mass Communication, Chicago, IL (August 2012).

Case 6-5 Toyota: Growing Too Fast, Responding Too Slowly

On a Thursday morning in February 2010, readers of the national newspaper, USA Today, opened the business section to see two full-page ads. One from Toyota outlined “Our Commitment to Customers,” a pledge to “make things right for our customers today and in the future.”

The second, from General Motors, proclaimed “A Statement About Us. Not From Us.” It seems that one of GM’s vehicles had been named a “best buy” by some consumer magazine.

That the two ads appeared four pages apart on the same day might (or might not) have been a coincidence, but the attitudes expressed certainly were not. Toyota, once the world leader in consumer vehicles, was trying to win back drivers and buyers after a horrific stretch of accidents, incidents, and recalls. GM, emerging from bankruptcy and a government bailout, was crowing that one of its vehicles had won an award. The silent comparison was deafeningly loud.(1)

How Toyota, long a leader in safety and quality, found itself on the defensive is a lesson in corporate communication.

The Situation

The situation literally exploded on the national scene in August 2009 when a Lexus being driven on the San Diego, California, freeway accelerated out of control and crashed, killing four passengers. The accident was “caught on tape” as one of the passengers called 911 to report the car’s acceleration, and that tape was replayed over the mass media and social media thousands of times.(2)

But trouble may have been brewing for Toyota for years. As far back as 2002, according to a report by a consumer advocacy group, Safety Research and Strategies, reports of unintended acceleration among Toyota models spiked.(3)

The National Highway Traffic Safety Administration (NHTSA) conducted an inquiry in 2003, and two minor recalls were issued in 2005 and 2007. But it was the highly visible crash in San Diego that brought the issue to the front burner (and front pages) for American drivers. Over the next two years, Toyota would recall some 10 million vehicles, see its market share drop, post its first operating loss in 50 years, and see its precious consumer franchise crumble beneath the weight of accusations that the company put profits before safety.(4)

Toyota’s automotive problems were twofold: The first was the sudden, unexpected acceleration of its cars, which ultimately was traced to sticky gas pedals, faulty floor mats, and improper installation of aftermarket mats. The second came a year later when some Prius and Lexus hybrids were recalled to address brake problems.((5))

Exacerbating the safety issues was the economic downturn worldwide, which hammered sales and profits across the industry. Those conditions led Toyota to idle two factories in the United States, keeping the workers on the payroll in keeping with the Toyota business model.(6)

Facts versus Perceptions

With the benefit of hindsight, the facts are pretty clear.

 

Some Toyota vehicles were accelerating out of control.

Drivers were concerned over brake times and distances.

Accidents and deaths were occurring.

Toyota sales and profits were down.

Toyota’s stock price was falling, an indication of loss of faith by the public.

 

The acceleration problems stemmed from friction (stickiness) related to wear in the gas-pedal assembly and from floor mats catching (and holding down) the gas pedal. Braking problems required a software adjustment. The corrections were relatively simple. The question was: Why didn’t Toyota just acknowledge the problem and fix it?(7) The answer to that question is much harder. Some of it is a matter of perception—engineers versus consumers.

One of the Great Truths of PR (see p. 20) says, “Perception is reality; facts notwithstanding.” Dr. Jeffrey K. Liker, in his book, Toyota Under Fire, notes that the cultural differences between Japan and the United States played a part.

This started in the United States,” writes Liker, “and at first Toyota viewed it as a regional perception problem that could be handled by management in the United States, but in the Internet age, nothing stays local for very long, and it soon became a global crisis.”.(8)

Also, the Toyota culture was to study a problem thoroughly before taking any action. That might have slowed responses.

The Toyota Way demands that any problem be thoroughly investigated before any conclusions are reached. It demands that problem solvers ‘go and see’ the problem firsthand and not rely on abstract, third-hand reports. It demands thoughtful and critical reflection to find root causes and develop effective solutions….(9)

The perception issue came into play in the way Japanese engineers saw the problem. As Liker explains, “If the sticky pedals kept drivers from stopping, or materially increased the time required to bring the car to a halt, then the sticky pedals were clearly a safety defect and required immediate corrective action. If, on the other hand, braking performance was unaffected by the sticky pedals, then, engineers felt, the pedals were not a safety defect but a customer-satisfaction and component-reliability issue.”(10)

Because a Camry with a wide-open throttle could be brought under control more quickly than a competitor’s car with a similar problem, the Japanese engineers concluded “that the sticky pedals were not a safety issue, and that there was no reason to issue a recall.”(11)

Interestingly, the sticky pedal issue was growing in Europe prior to its eruption in the United States. Toyota had issued technical bulletins asking distributors in Europe to keep an eye out for the problem. But as it was thought to be a problem only in Europe, similar notices were not sent to the United States. The NHTSA was as surprised as anyone, fining Toyota $16 million for not reporting in the United States a safety problem well known in Europe. It is the maximum fine for such offenses, and the largest ever levied on an automobile company.(12)

Unfortunately for American consumers, “major decisions on engineering, safety, and recalls were still being made almost exclusively in Japan, not in the affected region. Just as important, recall decisions, separated as they were from the region, were based primarily on the input of engineers who did not have direct access to customer feedback. Toyota’s culture of fact-based decision making, which has served it so well, essentially excluded from consideration customer complaints or customer sentiment, relying almost entirely on engineering judgments.”(13)

Meanwhile, American managers for Toyota were stuck. Their consumer feedback was telling: Toyota cars are not safe. Japan engineers were saying there is no need for a recall. One American manager, Irv Miller, wrote in an e-mail five days prior to the massive Toyota recall, “We need to come clean” about the acceleration problems. “The time to hide this one is over.”(14)

The sticky pedal recall covered 2.3 million vehicles in the United States, in addition to the 3.8 million cars recalled for floor-mat problems. (These numbers may include some overlap.)

As Liker explains:

 

The gap in perception between the United States and Japan was large. In Japan, the perception was that the sticky pedal recall was an example of Toyota putting customers first by issuing a recall for a very rare situation that had not caused any accidents and wasn’t perceived as a true safety defect. In the United States, however, this latest recall was completely undermining Toyota’s reputation for quality and safety, and the trust that so many Americans had put in it.(15)

 

Faulty breaks on the Prius and Lexus further added to the cultural and perception crises. In 2010, Toyota received more than 100 complaints about brake performance on the Prius. People said the brakes seem to be unresponsive on bumpy, slick surfaces. As Liker explains.(16) the operative word was “seems” because the issue was not that the brakes didn’t slow the car, but that the response “seemed” to be slower than drivers expected. The actual time lag was about 3/100 of a second, during which the brake pedal seemed to be “softer” than drivers expected. “There was no effect on the braking ability or distance,” Liker says, “just on the feel of the pedal.”

Because braking efficiency wasn’t affected, Toyota didn’t at first issue a recall, much as it had decided that the sticky accelerator didn’t warrant a recall, even though the company had changed the production software on cars still in assembly. The media had fun piling on, and Toyota recalled nearly 500,000 cars to alter the software.

The recall continued Toyota’s woes, and added to the growing sentiment that Toyota had suddenly lost the ability to make a safe car.

Consumer perceptions of Toyota’s problems were driven largely by media coverage. The Los Angeles Times devoted major amounts of space to the ongoing problems Toyota was suffering, offering more than 100 stories during the crisis.(17)

Transportation Secretary Ray LaHood said Toyota was “safety dead” and needed a trip from federal safety officials to Japan to “wake them up.”(18) USA Today, in an editorial following Toyota’s Congressional testimony, said, “Toyota recalls reflect a company that lost its way.”(19)

Congress, of course, used the opportunity to posture for American voters, calling Toyota president Akio Toyoda to Washington to apologize for his company and its products.(19)

A so-called “blue ribbon” panel formed after the initial recall, criticized Toyota for being “too centralized,” “dismissive of outsiders,” and too “quick to equate safety with quality.”(20)

The San Francisco public relations firm Fineman PR, in its annual “Top Ten PR Blunders,” cited Toyota in 2010, saying “Toyota poorly communicated, provided inconsistent solutions, blamed parts suppliers, and targeted drivers themselves…” in addressing the problems related to its vehicles.(21)

Of interest, however, is the reaction of those who currently owned Toyota vehicles versus those who drove competitors’ cars and trucks. “Toyota’s history insulated it from a great deal of the potential damage from the crisis,” Liker says. “Drivers of Toyota vehicles, although they were the ones who were directly affected by the recalls, felt much more positive about the company than those who were not customers.”(24) A survey of car owners showed that at the height of the crisis, Toyota owners were twice as likely to buy a Toyota than those who owned competitors’ cars.”

In February 2010, calls from car owners “were heavy” at dealers around the country, USA Today reported.(25) “Most of the people just wanted information,” said a service manager in California. “Most of them have been very calm.”

The Problem

Toyota, Liker says, “bears some culpability for what happened…. The primary problems were not technical. They were, first and foremost, in how Toyota communicated, both internally and with customers, the public in general, the media, and NHTSA. The root cause of these errors, Toyota later concluded, was the way it historically handled safety and quality concerns, which was overly centralized in a quality department in Japan and focused on an engineering perspective, while the company had lost direct touch with customer perspectives and concerns.”(22)

Mr. Toyoda said in his remarks to Congress, “Toyota has, for the past few years, been expanding its business quite rapidly. Quite frankly, I fear the pace at which we have grown may have been too quick. I would like to point out here that Toyota’s priority has traditionally been the following: First, safety; second, quality; and third, volume. These priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before…. We pursued growth over the speed at which we were able to develop our people and our organization.”(23)

Had Toyota’s rapid growth caused it to lose sight of what made it the largest car manufacturer in the world?

Here’s one good reason Toyota became the world’s largest automaker,” USA Today said in an editorial. “In 1989, when the company discovered that the Lexus LS400, its new flagship luxury car, had three flaws, it sped into crisis mode. Within weeks, Toyota came up with three fixes. It produced a video to train dealers, and it recalled 8,000 cars. It even sent mechanics to buyers’ homes to repair the Lexus in their driveways.

Here’s one good reason the auto giant has sunk to its current lows: In 2006, when Lexus owner Rhonda Smith reported that her car suddenly accelerated, sped out of control to 100 miles an hour and wouldn’t stop even as she stood on the brakes and pulled the emergency brake, Toyota all but called her a liar. In a letter, the company insisted the brakes will always override the accelerator.”(26) (The lady later traded her Lexus for a Toyota Tundra.)

The Public Relations Impact

Another Great Truth of PR (see page 20) says that if your company is challenged, perform research to see if the challenge has merit. If it does, then remedial action is needed to correct the problem, and corrective actions are then the basis of subsequent communication. Communication always follows performance.

For Toyota, coming to the realization that the crisis was real was the first step in coming to grips with the solutions. As Toyota president Akio Toyoda said, “There was a gap between the time that our U. S. colleagues realized that this was an urgent situation and the time that we realized here in Japan that there was an urgent situation going on in the U. S. It took three months for us to recognize that this had turned into a crisis. In Japan, unfortunately, until the middle of January, we did not think this was really a crisis.”(27)

The strategy, from the beginning, was to:

 

Accept responsibility

Don’t blame the customer, dealer or supplier

Put customers first

 

Included in this was the determination to change the culture from “study the problem” to “solve the problem.”(32)

Toyota began by making sure the corrective actions were in place. Then it was able to start addressing consumer perceptions. Its 1,223 dealers took a lead position in rebuilding trust, sending tow trucks to those who were reluctant to drive suspect cars to the dealership. This was a service Toyota offered to any customer who wanted it.(28) Toyota even bought back cars from those afraid to continue to drive them. To be sure the dealers could meet customer expectations, Toyota committed a $30 million pool to be divided equally among the dealers.(29)

Toyota’s call center (in California, not offshore) was getting some 96,000 calls a day (up from 3,000). Its call center manager called in everyone who had any experience to handle the increased volume.(30) These workers were empowered to authorize expenses (like towing) or service appointments, loaner cars, and extended warranties.

As Jim Lentz, president of Toyota’s U.S. operations said, “Obviously, we’re tracking spending. But we’re doing whatever is necessary to fix any shortcomings that we had in our current process, make sure that we have the right process, and make sure we’re taking care of our customers….”(31)

The new policies were put to the test almost immediately. Soon after the 2010 Lexus GX 460 was introduced, Consumer Reports wrote that the car failed a rigorous stability test and that it was giving the new Lexus a “do not buy” recommendation.

In the past, the Consumer Reports test would probably have led to weeks, if not months, of internal debate and testing at Toyota,” says Liker.(33) “That was no longer Toyota’s approach, and a decision to take action was made first, even before a detailed investigation.” Toyota stopped sales and issued a voluntary recall to update software that would solve the problem.

To help restore sales, Toyota introduced generous sales incentives that helped bring people back to the dealerships. Toyota also began striking back at critics, pointing out that much of the criticism had come from those with a financial interest in Toyota’s plight—plaintiff lawyers and their clients. Negative articles dropped from 235 in February 2010 to seven in August. Toyota paid the fines levied by NHTSA, even without agreeing they were justified.(34)

Today, it’s business as usual at most Toyota dealerships. Toyota’s safety ratings at the end of 2010 were back to normal for the most part, with 17 models rated “most reliable” by Consumer Reports—the most of any manufacturer. Forbes rated five Toyota models as most likely to go past 200,000 miles, and Kiplinger put three models on its list of 10 best cars of the past decade.(35)

All the news wasn’t good, however. J. D. Power’s ratings showed Toyota had slipped behind Ford and Honda in customer loyalty, and 19 percent of new-car buyers were avoiding Toyota because of its “bad reputation.”

One blogger, Edward Niedermeyer of the Truth About Cars Web site, said, “Toyota was operating with a halo. And, that halo is gone. It opened the market for a lot more competition. In a numerical sense, Toyota sales haven’t gone down as much as they might, but in a strategic sense, it’s a much tougher fight sales-wise than it might have been….”(36)

Lessons Learned

Toyota quickly learned that it had not listened carefully to its customers. It didn’t know what consumers thought and worried about or even how they used their vehicles.(37) Further, the company’s attempts at maintaining close control and efficiency had the “unintended consequence” of causing too many delays in responding to customers and other stakeholders.

Back at corporate headquarters in Japan, Toyota had deliberately kept sales and marketing apart from engineering and design. That way, it could keep design considerations away from cost and price pressures. The thinking was “the quality department could put safety and quality ahead of business concerns and not be unduly influenced by sales or regional units which were concerned with revenue and profitability…. But, in trying to protect quality and safety from sales, the company inadvertently choked off a lot of customer feedback….”(38)

In the communication realm, Toyota found that the traditional method of thorough study of an issue resulted in decisions being made in Japan by people who were relatively uninformed about “street conditions” in the States. This had to change.

We should not just be talking to the customer from a purely engineering viewpoint,” said Shinichi Sasaki, executive vice president of global quality. “We have to care more about the customer’s feelings.”(39)

Toyota is serious about reconnecting with its customers. In June and July of 2010, “Customer First” training centers were opened in Japan, North America, Europe, Southeast Asia, and China “to provide team members with additional training on how to integrate customer needs and feedback into their problem solving and design processes more effectively,” Liker says.(40)

In these centers, full-time quality professionals will complete a three-year program, and some 300,000 regular employees will receive between eight and 16 hours of training in the Toyota culture, quality processes, and more.

To further strengthen the bonds with the customers, Toyota extended the two-year free scheduled maintenance program that was originally meant to be a sales incentive. Under this program, the dealer’s service crew will see a customer eight times during the first two years of ownership, giving customers face time with the dealer, and the dealer an opportunity to help the owner get the most from his or her car.(41)

What might Toyota have done differently, from a communications perspective?

James Wiseman, who in the midst of the crisis was named group vice-president for communication in North America, believes Toyota could have been more aggressive from the beginning. “Toyota was too risk averse in the early stages of the crisis and should have done more to clearly explain technical issues, speak directly to customers, and explain Toyota’s efforts to resolve problems and improve, taking some personal responsibility for this. Generally, I wish we had been more proactive, especially on TV, to speak for our company and all our employees and partners in America. We should have been more visible, including me.”(42)

So, in essence, it comes back to Lanny Davis’s old saw about putting an end to any crisis: Tell it all. Tell it yourself. Tell it first.

Had Toyota done those things, the crisis might not have been so long, painful, and expensive.

Questions for Discussion

1.

Discuss the pros and cons of Toyota’s policy of thorough study of a problem versus a quick response.

2.

Why was the American public willing to so readily believe Toyota cars were unsafe?

3.

What role did culture play in this situation? Can you think of other situations in which culture might have played a role?

4.

How important was it that Toyota had a strong balance sheet and ample reserves during the crisis?

5.

Might the definition of safety be different from continent to continent?

6.

How might Toyota have (1) predicted or (2) prevented the situation it found itself in?

7.

Would you consider buying a Toyota? Why? Why not?

Citations

USA Today, February 18, 2010, p 5A

Liker, Jeffery K. Toyota Under Fire, p. xi

Time, February 22, 2010, p. 26

Liker, p. xii

Time, February 22, 2010, p. 29

Time, February 22, 2010, p. 29

Time, February 22, 2010, p. 30

Liker, p. xii

Liker, p. xv

Liker, p. 96

Liker, p. 97

Liker, pp. 98–109

Liker, p. 101

Orlando Sentinel, April 8, 2010, p. B6

Liker, p. 106

Liker, p. 113

Liker, p. 123

USA Today, February 3, 2010, p. 3B

USA Today, February 25, 2010, p. 10A

USA Today, May 24, 2011, p. 3B

PR Tactics, January 2011, p. 4

Liker, p. 94

USA Today, February 25, 2010, p. 10A

Liker, pp. 190–191

USA Today, February 1, 2010, p. 3B

USA Today, February 25, 2010, p. 10A

Liker, p. 128

Liker, p. 130

Liker, p. 132

Liker, pp. 133–134

Liker, p. 137

Liker, p. 138

Liker, p. 141

Liker, p. 150–151

Liker, p. 195–197

Liker, p. 198

Liker, p. 163

Liker, p. 167

Liker, p. 173

Liker, p. 178

Liker, pp. 179–180

Liker, p. 217

PROBLEM 6-A A WINE BAR NEEDS POSITIONING

Berry’s” is a wine bar in a southwestern U.S. city with a population of 400,000. In fact, it is the only full-fledged wine bar in the city. While many other bars serve wine, none specialize in fine wines of the United States and Europe as Berry’s does. The fact that it is the only wine bar in the city is its problem. Although the city has ample well-educated middle-income people, wine has not developed a following as it has in some larger cities. Because no other wine bars are available, wine drinkers have become used to ordering wine at regular bars rather than at “specialty-shop” wine bars.

Berry’s location is good—downtown near some fine hotels and in an area that is being revitalized, further emphasizing its upscale image. The interior is pleasant and has wine vaults for people who want to store their wine there and have it available whenever they come into the bar. All of these vaults have been rented.

The wine bar has been open for only six months. It has a good lunch business, but needs a better evening business (especially during the week).

The total budget for creating the new business is only $11,000. Mr. Berry comes to you because he knows you have just opened your own communications firm. He says, “I know it’s not a lot of money, but it’s a lot for my business. I can’t afford to just buy ads—what do you suggest?”

Consider what type of research you would use to determine how to manage customer satisfaction—how to attract new customers and how to retain the loyalty of existing ones.

On the basis of your research, prepare a one-year strategic marketing plan that prioritizes your publics and uses a mix of one-way and two-way communication activities with evaluation methods built in. Provide a budget that allocates the $11,000 between research and customer relation activities.

Finally, what issues should Berry’s be speaking out on, considering the enormity of alcoholism and driving-while-intoxicated problems, so much in the news today? Think about how to position Berry’s as a socially responsible drinking establishment.

PROBLEM 6-B GOOD INTENTIONS, BAD RESULTS

Earlier this year, when you graduated from college, you were fortunate. You had a job waiting for you at Bart’s Cartmart Inc., the largest distributor of motorized vehicles and accessories in Amarillo. The firm’s slogan is, “Speed Up with Us!” Bart (Cartwright), the owner, happens to be your father. That saves having to work your way up. Besides, you’ve already helped out summers, when you weren’t using one of the products playing golf, cruising off-road, or mowing the lawn.

This job has great promise. You’re an only child, and your dad has long had in mind that you would be taking over the business some day. In preparation, you majored in marketing, minored in public relations, and took several elective courses including one in business law.

To start you out full-time, your dad put you in charge of customer relations. It has been fun and challenging. This first year, you devised a follow-up program in which you or an assistant called on each customer a week or so before the warranty period for the product purchased expired. You asked whether the customer needed anything that you could supply within warranty. Customers praised and liked that attention. And you’ve had Bart’s Cartmart sponsor the winners’ awards in one of the major competitive events at the annual Stock Breeders’ Exhibition (motor vehicles as well as plaques and ribbons, of course).

This week, the Annual Harvest Festival is on, and acting on a request from the committee running it, you have loaned six used golf carts for the festival events.

Your father has been most tolerant of your activities. He obviously wants you to enjoy your job and to relish growing with the company. At the same time, Bart is no softie. He came off a farm and rose in business the hard way. He knows what he wants and is determined to get it. At times he can be tough, if he feels he has to, and even dictatorial.

When you got to work recently, you were handed a morning newspaper by the receptionist. In it there was a story about a 12-year-old boy, the son of a local farmer and Harvest Festival official, who was driving one of your carts around late yesterday afternoon for fun. Something happened, and the cart tipped over on his leg, mangling it, with possible permanent damage. The kid, in the hospital, told his parents, and they told the newspaper reporter, that he “didn’t know what happened.” He was “just going along fine,” when he felt a bump and he couldn’t turn the steering wheel. Next thing he knew, the cart was headed for a big harvest machine. He tried to turn the wheel, but it wouldn’t work and he became jammed between the cart and the machine. The newspaper carried a head shot of the boy. He was cute. The story indicated that the cart had been borrowed from Bart’s Cartmart.

You sought out your father immediately. He said he’d gotten a call from the newspaper late in the evening, but there was no reason to disturb you. He had called the boy’s father and mother, with whom he was acquainted, to express concern and sympathy. They were very upset. When he’d mentioned to them that these heavy carts weren’t really made for handling by little kids, the father had made some critical remarks about lending out used carts that might have something wrong with them.

I don’t like it,” your father said to you. “People don’t react reasonably when their own flesh and blood is involved. I doubt we’ve heard the last of it.” You asked him what you could do. Should you send someone in the shop with a trailer to bring the cart back and have it inspected, send the boy a book to read, arrange to retrieve all the loaned carts, or what? “We shouldn’t touch that cart,” your father said, “not until I can talk to our lawyer. Just sit tight for a few hours, and we’ll know where this thing is going.”

Within the hour, a lawyer representing the injured boy and his family called the company to say he had requested that local authorities “impound” the cart, and indicated he would want to talk with Bart soon. Also within the hour, your father had talked with the company’s lawyer, the agent of the firm handling the company’s insurance, and with a person at the police department who said he would hold the cart. Your father’s lawyer, he said, would be talking with the legal department of Rundo, the manufacturer of the carts.

Before the day was over, you and your father talked again in some detail. “This is the kind of thing you dread in a business like this,” he told you. “And with so damn many ambulance-chasing lawyers around, good intentions and fair dealing don’t always come out the way you had in mind. With the reporters looking for things to blow up into headlines, I can see this thing heating up into a court case and a local issue where people who should be minding their own business stick their noses into ours and choose up sides.”

You assure your father that the good intentions in loaning the carts will pay off in the end and that if you’re open with the newspeople they’ll be fair in whatever they write or say. He says, “We’ll see. If you have any ideas as this thing goes along, come tell me. I’ll welcome them. But don’t go off half-cocked talking with others at the newspaper, with the people on the Festival Committee, or with the next-door neighbors. Come see me first.”

Obviously, you are anxious to help, to apply what you learned over four years, and to retain the conviction that if you treat others fairly, you’ll be treated fairly in return.

Given the four-step planning process, and the aforementioned events, what might you set as your objective, your strategy, and your main tactics in helping resolve the problem before it boils over into the community and into a courtroom? What might you recommend to your father about the dos and don’ts of customer and community relations in the future, and communications about those relations?

PROBLEM 6-C TURNING CUSTOMER COMPLAINTS TO CUSTOMER DELIGHT

Eagle’s Wings Airlines is a young company that flies no-frills flights within the United States. You work for its public relations department. Winter holiday time is approaching and flights are booked, but customer complaints are increasing. For now, the cheaper ticket prices are keeping reservations high, but if the level of complaints continues, customers will be lost. In fact, you have just been informed that Eagle’s Wings has been named the worst airline in customer service. The number of customer complaints has been piling up on your desk. Flights continually arrive and depart late due to inefficient airport crew members, and the on-flight crew has received poor ratings because of rudeness.

To add to this pressure, flight attendants and pilots are complaining about being overscheduled. They want time off to enjoy the holidays at home with their families, not in some remote location as they wait for a flight back—a result of poor scheduling, which has been happening more frequently.

The number of customer complaints is growing as are employee complaints. You do not have responsibility for human relations but you can see that it impacts customer relations. The head of human relations is very busy and understaffed, but she has agreed to meet with you tomorrow. In the meantime, you need to get a plan formulated because you can’t afford to further antagonize customers. In fact, you want to delight customers. How will you do that knowing what you know about this situation? What is your immediate plan of action?

Put together a one-year strategic plan to build consumer relationships, and outline possible problems and solutions. Put into action an evaluation process that will help you gauge the minds of your consumers as well as your employees. This will make it easier for both sides to communicate what they like, don’t like, and would like to see improved. You hope this will bring about improvements and repeat customers, which will help business in