1. Toyota Safety Recall: Consumer Concern and Consumer Reaction Goggle Trends and Google Insights Study February, 2010

2. Objectives and Business Questions 2 Objectives: estimate consumer and competitor reactions to Toyota safety recall, using information circulated on the Web and in the news Questions: - Which of the Toyota safety problems was the cause for greatest concern among consumers? - Which Toyota model leads to the greatest safety concern? - How loyal are Toyota consumers? Do they switch to competitor models? Which competitor has the highest probability of acquiring dissatisfied Toyota customers? Assumption: - We assume that the search is made by a consumer (or potential consumer). Therefore, if a search share for the term Camry recall is greater than the search share for the term Prius recall, we interpret this as Camry consumers had greater concern than Prius consumers

3. Introduction: Toyota Safety Problems 3 Toyota has stopped selling most of its popular models Toyota is the worlds No. 1 automaker Problems (as of 02/22/2010): (http://www.motoring.co.za/index.php?fSectionId=751&fSetId=381&fArticleId=535 3974)http://www.motoring.co.za/index.php?fSectionId=751&fSetId=381&fArticleId=535 3974 - The US government has received new complaints alleging 34 deaths in Toyota vehicles due to sudden acceleration since 2000 - When the National Highway Traffic Safety Administration (NHTSA) opened its investigation of Prius on February 3, the government had received 124 consumer complaints. By February 11, it had received 1120 complaints alleging 34 crashes with six injuries but no deaths. Therefore, the number of complaints about Toyota Prius grew by nearly 1000 in little more than a week - Three congressional hearings are planned on the Toyota recalls - Toyota has recalled 8.5 million vehicles globally during the past four months because of problems with accelerator pedals, floor mats and brakes - People intending to buy a new Toyota declined by 12% in January, 2010 (http://www.businessweek.com/autos/autobeat/archives/2010/02/with_toyota _ree.html)http://www.businessweek.com/autos/autobeat/archives/2010/02/with_toyota _ree.html However, vehicle recall is not a rare event in automotive industry. Over the last three years we've seen 23 million recalls, and the vast majority were not Toyota (http://liveshots.blogs.foxnews.com/2010/02/24/gm-ford-luring- toyota-drivers/?test=latestnews)http://liveshots.blogs.foxnews.com/2010/02/24/gm-ford-luring- toyota-drivers/?test=latestnews

4. 4 http://pressroom.toyota.com Models involved Sticking accelerator pedal recall: Certain 2009-2010 RAV4*, Certain 2009-2010 Corolla*, 2009-2010 Matrix, 2005-2010 Avalon, Certain 2007-2010 Camry*, Certain 2010 Highlander*, 2007-2010 Tundra, 2008-2010 Sequoia *Highlander hybrids and Camry hybrids are not involved. Further, Camry, RAV 4, Corolla and Highlander with VINs that begin with "J" are not involved too. Floor mat pedal entrapment recall: 2007 - 2010 Camry, 2005 - 2010 Avalon, 2004 - 2009 Prius, 2005 - 2010 Tacoma, 2007 - 2010 Tundra, 2008 - 2010 Highlander, 2009 - 2010 Corolla, 2009 - 2010 Venza, 2009 - 2010 Matrix Lexus: 2006 - 2010 IS 250 2006 - 2010 IS 350 2007 - 2010 ES 350 Introduction: Toyota Safety Problems

5. 5 Worldwide Consumer Concern for the Last 12 Months Google Trends for the search: Toyota recall, Day of search: February 20, 2010, Filters: Worldwide, Last 12 months Scale is based on the average worldwide traffic of Toyota recall in the last 12 months Google Insights for the search: Toyota recall, Day of search: February 20, 2010, Filters: Worldwide, Last 30 days, Automotive Category

6. 6 Toyota Recall vs. Honda Recall: Reflection in Search and News Reference Volumes Google Trends: Toyota recall, Honda recall. Day of search: February 20, 2010, Filters: All regions/USA, Last 30 days Y-axis: Search Volume Index. It reflects the search volume on a relative scale: one unit corresponds to the total average search traffic of the first search phrase, Toyota recall, in the last 30 days time frame. The second search phrase, Honda recall, has approximately 14% of searches of the first term. Toyota recalled 2.3 million cars worldwide over accelerator pedal problem Honda recalled 440,000 cars worldwide over airbag problem Total average traffic is a good measure of relative scale of recall: The ratio of recalled Honda cars to recalled Toyota cars is approximately the same as the ratio of the total average traffic of Honda recall to Toyota recall terms (0.14 to 1). News reference volume produces a similar relationship between these two terms.

7. 7 Search Interest Exhibits Only Short-Term Consumer Concern in 2010 and Interest Peaks Coincide with Dates of Recall/Problem Announcement Day of search: February 25, 2010. Filters: Web search, United States, 2010, Category = Automotive. Y-axis is a query share, and 100 corresponds to maximum query share over a 2 month period. First peaks on graphs reflect the Jan 21 Toyota announcement about the recall of 2.3 million US cars, and the second peaks reflect the February 8th announcement about the Prius and Lexus recalls. Lexus, Camry and Prius recalls had the highest shares of searches. Corolla recall search interest has two maxima: the first reflects the pedal recall (Jan 21 st ), and the second – the power steering problem announcement (Feb 17 th ). Google Insights for search: (Toyota model) recall

8. 8 Search Interest Exhibits Only Short-Term Consumer Concern 8 Google Insights for search: Toyota entrapment, Toyota accelerator, Toyota mat, Toyota pedal, and Toyota sticking. Among five indicated keywords the search of Toyota entrapment had the lowest search share, and Toyota pedal had the highest search share Share peaks coincide with dates of recall announcement Google Insights for search: Prius pedal, Corolla pedal, and Camry pedal Search traffic supported the hypothesis that consumers of Camry, Prius, and Corolla exhibited the highest interest/concern among all Toyota recalled model consumers about pedal problems Share peaks coincide with dates of recall announcement Day of search: February 25, 2010 Filters: Web search, United States, 2010, Category = Automotive Y-axis is a query share, and 100 corresponds to maximum query share over 2 month period

9. 9 Consumer Reaction to Toyota Safety Recall by Type of Problem 9 Google Insights for search: Toyota sticking, Toyota mat/floor/ entrapment, and Toyota brakes. The search terms correspond to the types of problem, initiated recalls: – Floor mat pedal entrapment – Sticking accelerator pedal – Braking system Toyota brakes had the highest search share (45% on average). Therefore, data might suggest that consumers main concern is concentrated around braking system. On the other hand, search traffic dynamics supported the hypothesis that consumer concern was only short-term Share peaks coincide with dates of recall announcement Day of search: February 26, 2010 Filters: Web search, United States, 2010, Category = Automotive Y-axis is a query share, and 100 corresponds to maximum query share over 2 month period

10. 10 Competitor Action and Consumer Reaction GM, Ford, and Hyundai Offer Incentives on Toyota Trade-Ins Competitor Action and Consumer Reaction GM, Ford, and Hyundai Offer Incentives on Toyota Trade-Ins 10 GENERAL INFORMATION Ford offers $1,000 rebates to Toyota and Honda Motor Co. customers to encourage them to switch to its models. GMs campaign runs until the end of February, is available for most Chevrolet, Buick, Cadillac and GMC models and targets consumers of 2.3 million Toyota vehicles recalled on Jan. 21. For Toyota lease customers, GM will make as many as three payments up to a total value of $1,000, and dealers will offer another $1,000 toward trade-in assistance. GM is offering no-interest loans of as long as 60 months for purchases of one of its new models with a Toyota trade-in. (http://mobile.plaind.com/story.php?id=8445885)http://mobile.plaind.com/story.php?id=8445885 Toyota sold 18,500 fewer vehicles in the U.S. in January 2010 than it did a year earlier. Ford reported a 24.4% increase and GM is up 14.6%. (http://articles.latimes.com/2010/feb/03/business/la-fi-auto-sales3-2010feb03)http://articles.latimes.com/2010/feb/03/business/la-fi-auto-sales3-2010feb03 GRAPH TO THE RIGHT SHOWS Share of query Toyota Chevrolet (94% on average) is practically two times greater than share of query Toyota GMC (53% on average) and five times greater than share of query Toyota GM, Toyota Buick, and Toyota Cadillac In February, the shares of Toyota GMC and Toyota Chevrolet had upward trends, and share of Toyota GM had a downward trend The following two GM models – Buick and Cadillac – are the least attractive to Toyota consumers In general, based on Web search information, the GM campaign to acquire Toyota customers is successful, especially for Chevrolet and GMC models Google Insights for search: Toyota GM, Toyota Chevrolet, Toyota Buick, Toyota Cadillac, and Toyota GMC. Day of search: February 26, 2010 Filters: Web search, United States, 2010, Category = Automotive

11. 11 The Success of the Ford Campaign 11 Google Insights for search: Ford Toyota deals, Ford Toyota incentives, Ford Toyota lease, Ford Toyota trade Day of search: February 28, 2010 Filters: Web search, United States, 2010, Category = Automotive Y-axis is a query share, and 100 corresponds to the maximum query share over the 2010 period Search share dynamics support the hypothesis that the Ford campaign of acquiring Toyota customers is successful According to Business Week (http://www.businessweek.com/autos/autobeat/archives/2010/02/with_toyota_ree.html,http://www.businessweek.com/autos/autobeat/archives/2010/02/with_toyota_ree.html February 11, 2010) – People intending to buy a new Toyota declined 12% in January. The biggest beneficiaries were Kia, Honda and Ford. That means Ford is most likely to catch a tailwind from tempest that is pounding Toyota. Sources: 1.Ford and GM Offer Incentives to Lure Toyota Owners (http://www.realcartips.com/news/0155-ford-gm-toyota.shtml, Feb 4th, 2010)http://www.realcartips.com/news/0155-ford-gm-toyota.shtml 2.GM, Ford go after Toyota owners with free financing deals, rebates (http://www.topix.com/autos/2010/01/gm-ford-go-after-toyota-owners-with-free-financing-deals-rebates, Jan 29th, 2010)http://www.topix.com/autos/2010/01/gm-ford-go-after-toyota-owners-with-free-financing-deals-rebates

12. 12 Conclusions: Google Trends and Google Insights are tools to study the past and present, but not the future Goggle Trends and Goggle Insights have limited ability to answer formulated questions, and in particular, questions about loyalty of Toyota customers The most informative terms like Ford trade-ins assistance program for Toyota owners as well as its curtailed counterpart like Toyota trade-ins Ford do not produce any search share info due to a small volume of search. Based on the search shares of the shortest possible but still meaningful terms Toyota Ford, Toyota GM, Toyota Honda, etc. the inference is restricted and unreliable The dynamics of the search share is not robust and can be changed dramatically over several consecutive days. For example, on February 26th the share of terms "Ford Toyota trade", "Ford Toyota deals", "Ford Toyota financing, and Ford Toyota lease had "Not enough search volume to show graphs" (message generated by Google Insights), but on February 28th it unexpectedly showed meaningful graphs for each of these terms. Therefore, the date of search is an important parameter for any search share Predictability of the trend in search share can be very low – any significant market event can change the search share significantly. Therefore, the search share can be useful for evaluation of past and present, but not the future.

13. 13 Conclusions: Toyota Safety Recall Based on the assumption (a search is conducted by a consumer (or potential consumer), we can conclude: – Spikes in search share and trends correspond to date of recall/problem announcement Corolla recall search share has two maxima: the first reflects the pedal recall (Jan 21st), and the second – the power steering problem announcement (Feb 17th). – Total average search traffic is a good measure of relative scale of recall: the ratio of recalled Honda cars to recalled Toyota cars is approximately the same as the ratio of the total average traffic of Honda recall to Toyota recall terms – The highest concerns about safety recall in the USA were expressed by owners/consumers of Lexus, Camry and Prius – Among Toyota safety problems, reflected by keywords entrapment, accelerator, mat, pedal, and sticking the keyword Toyota entrapment had the lowest interest/search share, and Toyota pedal had the highest interest/search share Consumers of Camry, Prius, and Corolla exhibited the highest interest/concern about pedal problems among owners/consumers of all Toyota recalled model – Analysis of interest/concern by types of problem, initiated recalls (Floor mat pedal entrapment, Sticking accelerator pedal, and Braking system) suggest that consumers main concern is concentrated around the braking system – The dynamics of search traffic supported the hypothesis that consumer concern was only short-term (two-three weeks) for all types of safety problems, initiated recalls – The GM campaign to acquire Toyota customers is successful, especially for Chevrolet and GMC models Buick and Cadillac are the least attractive to Toyota consumers – Ford implemented the most successful campaign to acquire Toyota customers among competitors running campaign in 2010. Ford has the highest chance to acquire Toyota customers