No company or organisation will ever have a great brand without top of class quality. And great brands become damaged by slips in quality. These two facts make quality a strategic imperative for any aspiring or top brand.
Daimler Chrysler slipped up on quality, lost sales, profits, market share and capitalisation and had to spend around US$3 billion on a huge quality programme to put things right. And heads rolled.
More recently we have seen a similar but more serious quality issue concerning Toyota, particularly in the USA. Quality problems were already on Toyota's radar for about four months before the media frenzy occurred, and even when the media picked up the story about defective parts apparently causing accidents, it took two weeks for Toyota to respond. Toyota had to recall 8.1 million cars, President Akio Toyoda was summoned to Congress in the USA to explain the company's negligence and situation, and hundreds of lawsuits soon got underway. The estimated cost to Toyota just in recalls (without legal issues) was estimated at US$ 2 billion and at US$ 5-8 billion cost including legal and incentives to regain a 15% sales loss, which is equivalent to 0.1% of Japan's GDP!. The exact sum may never be known, but USA sales of Toyota cars went down 15% quickly. Some analysts reckoned that potentially one-third of the brand's value had gone as a result.
In February 2011 some media reported that Toyota has had to recall between 10 and 12 million cars for quality issues, and that its last quarter profits were down 39%.
Now Toyota is a strong enough brand to recover from this challenge, but there are lessons to be learnt here. One is that if there is a problem known deal with it and do not try to hide it or delay solving it. It will be found out sooner or later.
Second, if there is a quality issue and the media are alerted to it, do not delay in dealing with them - tell them the truth, what you are going to do about it, and keep them engaged and informed. Lastly, quality is number one for any brand in any category, in the public or private sector.
Another brand insight from Paul Temporal