Pointlogic White Paper: Hyundai And The Toyota Recall

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This paper discusses how an expected decrease in market share for Toyota will influence the other competitive brands and specifically what Hyundai could do to leverage the opportunity in terms of their marketing message. This analysis only focuses on the larger side of the medium / large car segment.

For our analysis, we have used Pointlogic’s M3 Automotive study. This study, which was fielded in the fall of 2009, aims to help automotive advertisers with deciding on an appropriate messaging strategy and to build corresponding marketing communication plans. The study uses a survey among 15,000 consumers to understand their purchase behavior across 8 car segments.

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Pointlogic White Paper: Hyundai And The Toyota Recall

  1. 1. A Pointlogic White Paper LEVERAGING OPPORTUNITIES: How the Toyota Recall Affects Hyundai Peter Kloprogge Harald Hoogstrate enabling smart decisions www.pointlogic.com
  2. 2. 2 Hyundai and the Toyota recall Introduction Toyota is facing a massive recall which will negatively affect consumers’ perception of the Toyota brand. The cornerstone of Toyota’s equity is the trust that consumers put into the brand; a trait that could see significant damage. This paper discusses how an expected decrease in market share for Toyota will influence the other competitive brands and specifically what Hyundai could do to leverage the opportunity in terms of their marketing message. This analysis only focuses on the larger side of the medium / large car segment. For our analysis, we have used Pointlogic’s M3 Automotive study. This study, which was fielded in the fall of 2009, aims to help automotive advertisers with deciding on an appropriate messaging strategy and to build corresponding marketing communication plans. The study uses a survey among 15,000 consumers to understand their purchase behavior across 8 car segments. Key to the M3 study is the concept of ‘stimulators’ or factors that are decisive for consumers when they make purchase decisions. Summary Our analysis, which is based on the medium / large car segment, shows that Toyota’s market share will decrease by a relative percentage of 10%. This drop assumes that the level of trust in Toyota will decrease to levels that are similar to that of competitive brands that are considered by consumers that are interested in Toyota. If the damage to the brands trust level is worse, its market share will fall even deeper. We also show that the brands that will take the most advantage of Toyota’s loss are the Asian brands. Honda stands out, of course, but smaller brands such as Hyundai will also benefit disproportionally to its size. American brands will not be able to profit as much from Toyota’s problems. In order to take advantage of Toyota’s loss, Hyundai needs to understand what Toyota’s customers are looking for. We use a logistic regression to find the 7 stimulators that have the largest impact on the probability of being the preferred brand. Brands and stimulators can be divided according to whether they appeal or relate to more ‘rational’ or ‘emotional’ aspects of driving. In the eyes of its customers, Toyota fits in nicely between the emotional and rational aspects whereas Hyundai is perceived to be a brand that appeals to more rational aspects. Considering the positioning of Hyundai, the relevance of stimulators according to our model and consumers current understanding of Hyundai we recommend Hyundai to focus its communication on the reliability of the brand while assuring current strength of the running cost / fuel economy is maintained. The Impact of Toyota’s Problems on its Market Share Among the 15,000 respondents we have surveyed in our M3 study, we have questioned 2,034 on the upper side of the medium / large car segment which includes the Avalon and the Camry. Among those 2,034 respondents, 489 or 24%
  3. 3. 3 Hyundai and the Toyota recall indicate that they are ‘Most Likely To Purchase’ a Toyota. ‘Most Likely To Purchase’ (MLTP) is the top level in our 5 point awareness / consideration score. Respondents can be MLTP multiple brands, so the sum of the MLTP-scores over all brands does not have to equal 100%. When we normalize the scores so that they do, we get a reasonable estimate for Toyota’s market share in this segment: 15%-16%. To understand the impact of Toyota’s problems on their market share, we need to understand why consumers opt for the brand. Figure 1 below shows how the people that are MLTP a Toyota compare the brand to other brands that they also consider (or are also MLTP). Figure 1. A comparison between the perceptions of Toyota by respondents that are MLTP the brand compared to their perception of other brands they consider or are MLTP. In the eyes of likely Toyota customers, the brand out-performs its competition across the board. The stimulators in which Toyota is relatively weak are ‘Fun’, ‘Special offers and promo’s’ and ‘Equipment & features’. Toyota is especially strong in ‘Trust’, ‘Reliability & durability’ and ‘Running costs’. In the following analysis we will see how important each of the stimulators is for likely Toyota customers. We have done a logistic regression to explain the probability of a brand being ‘MLTP’ depending how the brand is perceived. We have conducted this analysis only with respondents that are MLTP Toyota but of course these respondents have evaluated other brands as well. In total, the analysis is based on 1,656 respondent-brand evaluations.
  4. 4. 4 Hyundai and the Toyota recall glm(formula = MLTP ~ Appearance.style + Personality.fit + Previous.experience + Price + Reliability.durability + Running.costs + Trust, family = binomial, data = performance.consideration.df) Deviance Residuals: Min 1Q Median 3Q Max -1.66 -1 0.765 0.872 1.77 Coefficients: Value Std. Error t value (Intercept) -1.343 0.121 -11.14 Appearance.style 0.162 0.133 1.22 Personality.fit 0.508 0.129 3.95 Previous.experience 0.190 0.147 1.30 Price 0.153 0.125 1.22 Reliability.durability 0.255 0.153 1.67 Running.costs 0.153 0.130 1.18 Trust 0.999 0.149 6.72 Figure 2. A logistic regression that relates MLTP to brand perceptions shows how important 'Trust' is. The results of the regression show that ‘Trust’ is by far the most important stimulator for a brand to become ‘Most Likely To Purchase’ (for details see Figure 2). The next most important stimulators are ‘Personality Fit’ and then ‘Reliability / durability’. If a consumer rates a brand low on ‘Trust’, the probability of the consumer buying the brand decreases with 23%. In Table 1 below we have estimated the change in Toyota’s market share under two scenarios. Table 1. Change in Toyota market share in two scenarios. Scenario Impact on Toyota market share Toyota’s performance on Trust and Reliability (current Drop from 16% to 14.2% levels: 90% and 89%) drop to 65% and 68% (level of other brands being considered) Toyota’s performance on Trust and Reliability (current Drop from 16% to 12.8% levels: 90% and 89%) drop to 45% each. In short, Toyota’s potential market share will drop from anywhere between 10% (assuming Trust doesn’t drop to below the level of trust for competitors) to 20% (which we believe is absolute worst-case scenario). Who will benefit? To understand which brands will benefit most from any loss of market share by Toyota, take a look at Figure 3. Bigger brands will obviously profit more than smaller ones. After Toyota, Honda is the most likely candidate for consumers. However, some brands profit disproportionally from Toyota’s loss. We see that Honda and Nissan (also Asian brands) profit more than we would expect from their general consideration levels and Chevrolet profits less. Hyundai, though smaller, will also profit relatively well.
  5. 5. 5 Hyundai and the Toyota recall Figure 3. Who will benefit from Toyota's market share loss? The blue bars show brand consideration among consumers that are (or were) most likely to purchase a Toyota and the red bar shows consideration levels amongst all that consider within the segment. The index (green line, right axis) shows how the consideration of a brand among consumers that are MLTP Toyota compares to that of all consumers. Positioning of Hyundai To understand why consumers opt for Hyundai, we will take a look at Figure 4 below. It shows how people that are MLTP Hyundai perceive the brand as well as other brands that they consider. Figure 4. A comparison between the perceptions of Hyundai by respondents that are MLTP the brand compared to their perception of other brands they consider or are MLTP. The result shows very clearly what the strengths of Hyundai are: price, running costs & special offers and promotions. It is an advantage that potential customers of Hyundai perceive the brand to have a good price. However, this analysis won’t further look at these price stimulators as we wouldn’t recommend promotions to benefit from Toyota’s recall. Before we make our recommendation for Hyundai’s messaging strategy, let’s take a wider look at the medium / large car segment. In the correspondence analysis in Figure 5 we see several pieces of information. Brands are mapped close together on this graph when they are positioned similarly.
  6. 6. 6 Hyundai and the Toyota recall Of course, larger brands (shown by bubble size) could perform better across the board so a brand like Volkswagen has a similar profile as Subaru, etc. The stimulators in the graph give a sense to how brands are positioned. Hyundai / Kia, for instance, are mapped to the extreme right as they perform relatively well on ‘running costs’ and ‘environmental impact’. For this correspondence analysis, we have left out the stimulators ‘price’ and ‘offers / promotions’. Figure 5. Correspondence analysis of the medium / large car segment. All brands are evaluated by consumers that are ‘most likely to purchase’ Toyota. The correspondence analysis also shows that Toyota is strongly skewed towards ‘Trust’. This was to be expected: we have seen that ‘Trust’ is the most important stimulator and this analysis is based on people that are most likely to purchase a Toyota. The correspondence analysis shows a great deal of information. The chart shows a clear split moving along the vertical axis with the top being the rational stimulators (running costs, environmental impact, safety, etc) and the bottom shows the more emotional stimulators (appearance/style, fun, etc). We also see that trust has a position on its own only related to the stimulator reliability/durability. These traits are dominated by Toyota and Honda. When we compare the brands in Figure 3 that profit ‘more’ from Toyota’s loss than average with the correspondence analysis, we clearly see that the closer you are to the bottom-right corner the less you are able to relatively profit from and decrease in market share for Toyota. For Hyundai to leverage the expected decrease in market share this means moving its brand to the left. As such the candidate opportunities for Hyundai are ‘Running costs’, ‘Reliability/durability’ and ‘Trust’. We can use the logistic regression model to understand how Hyundai makes the most out of loss from Toyota. Here are the 7 stimulators that our modelling found to be most significant (from most important to least important): - Trust - Personality fit - Reliability durability
  7. 7. 7 Hyundai and the Toyota recall - Previous experience - Appearance style - Price - Running costs The first two stimulators are particularly hard to grow. Reliability & durability seems the best candidate for a multiple of reasons (it moves the brand towards a better spot, it is relatively easy to communicate and it would also increase trust as these stimulators are closely aligned). The results in Figure 6 help us to understand how easy or hard it could be for Hyundai to grow these stimulators. As might be expected, ‘price’ and ‘running costs’ would be hard to lift since most people already have an opinion (mostly positive). ‘Previous experience’ and ‘Reliability’ are stimulators that have a clear growth potential. Figure 6. The percentage of people that indicate that they do not know how well Hyundai performs helps to understand which stimulators might be easiest for Hyundai to grow. Based on people that are MLTP Toyota. The logistic model also enables us to estimate what the impact of an increased perception of Hyundai’s reliability would be. Among people that are / were MLTP Toyota, a 10%-point increase in a perception of ‘reliable’ would increase Hyundai’s share with 1.4%. In conclusion the recommendation is for Hyundai to focus its communication on reliability & durability to grow as a result of Toyota’s recall while maintaining the strong positioning in running costs.
  8. 8. 8 Hyundai and the Toyota recall About Pointlogic | enabling smart decisions Founded in 1992 by Peter Kloprogge and Sjoerd Mostert - with offices in New York, London, Frankfurt, Sydney, Amsterdam, and Rotterdam - Pointlogic combines cutting-edge research, advanced mathematical modeling, and flexible software tools to enable our clients to make smart decisions. Pointlogic works together with clients, applying fresh, analytical thinking to problems. We then use powerful mathematical modeling to generate insight into clients’ choices. And then, most importantly, we deliver concrete, software-based solutions that clients can both implement and distribute across internal and partner networks. For more information about any of Pointlogic’s products or for press inquiries please contact Nicole Alexander: Office: 212-683-2330 E-Mail: alexander@pointlogic.com

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