e-Marketing

Interactive Marketing Strategies in Japan

JapanInc's Tom Boatman (see his site here) interviews Rick Cogley and other Japan entrepreneurs in an exclusive online article (original here).  The article was published by Japan Inc on their website http://www.japaninc.net/, and originally appeared in the June 2001 issue of Japan Inc Magazine.

June 2001 - e-Marketing - Interactive Marketing Strategies in Japan

by Tom Boatman

Some of the fighters have left the ring. Some have changed their names. The gloves are off and the combat is hand-to-hand. It's round two of Japan's e-marketing free-for-all, where you have to be shrewd, not strong, to survive.
Some might call it a bloodletting, but in the past fiscal year Japan has bid a hasty good-bye to global Web marketing companies Modem Media, and iXL. Others in the industry like MCI, Sapient and PSINet are gasping for air. But the survivors have retrenched and most are painting a positive, if not rosy picture of the future. So what's the secret to staying alive?

"We actually slowed growth, pulled in the reins in the past year, rather than anticipating it. Now we're chasing human resources to accommodate business," says Robinson Collins, a founder of alienbug design, a Tokyo Web development company.

Indeed, gone are the days of buying extra desks and office space and assuming business would fill in the space. The watchwords for e-marketing in Japan today are "slow and steady wins the race."

However, at this time last year, alienbug was a five-person operation, seeking an identity. Today, their tiny office is literally overflowing with a staff of 14, and Collins expects to need 10 to 15 more bodies by the end of the year.

"I believe that the market has not shrunk. There's enough work for everybody," says Collins. "As soon as a company fails today the people are sucked back into the market. They're back to work in no time."

So what, besides plummeting stock prices, makes a global player like Modem Media pull up their stakes and retreat to Hong Kong in "an expense reduction program"?

"Their pricing was too high," says Paul Goldsmith, president of PANACHE, a Tokyo IT consulting and outsourcing firm with an interactive marketing division called Panache Interactive.

"The big Western firms were bidding one to two million dollars for a Web site, while Japanese companies were expecting to pay about one to two million yen," he says.

Goldsmith contends that last year Japanese firms were not ready to make a full commitment to the Web or to fully integrate interactive media into their marketing mix. It's a process that often means an entire corporate reorganization. That's a lot different than just putting up a Web site.

We're now going through a discovery phase in Japan, says Collins. "How do we apply regular business strategies to the Web."

One good example is shufufufu.com, a site created for Procter & Gamble by the digital division of Beacon Communications K.K. Beacon is an agency created by a joint venture between Leo Burnett and DMB&B, of which Dentsu also has a stake.

"Our research showed that Japanese housewives often feel very isolated," says Fergus Kibble, digital director at Beacon.

So Beacon created a site where housewives can go and exchange information with other housewives and get tips from the Japanese Martha Stewart, Harumi Kurihara. Kurihara is also used in product promotions to drive traffic back to the site.

Surprisingly, however, the information on the site is not censored by P&G. So, for example, there could be information about a competitor's product if a housewife posts it. Perhaps, even more surprising is the fact that there is no way to purchase P&G products through the site.

"P&G and other companies have been watching what's going on, and are now applying their tested strategies to the Internet to develop long-term customer relationships," says Kibble.

"We have to start focusing on deeper and less-sexy solutions," says Collins. He points out that Japan Airlines has put their entire part procurement system on line. Suppliers make online bids, and the airline can keep a record of purchases and prices. Not exactly "mission impossible" stuff.

"Users have matured. It's not enough to simply put a brochure on the Web and expect users to purchase products or services of your company," says Thomas Jenkins, senior vice president of renaissance i media.

"An interactive marketing strategy is a very important component in developing any Web property," says Jenkins. "Companies that utilize the Web to personalize and interact with their customer base directly, gear themselves to be not only more attractive online, but to be remembered by consumers and their off-line purchases."

Renaissance has gone through an interesting, and telling, metamorphosis in the past year. Originally, it was part of a joint venture with a New York-based company, Renaissance Multimedia.

Shortly after the joint venture was established, the New York division was purchased by a software manufacturer who made it very clear that they were not interested in offering interactive services in Japan. Thus, the joint venture was dissolved, and the Japanese company changed its name to renaissance i media. But here's the clincher. Renaissance i media has recently established its own New York office.

Local roots are another important feature of the companies who've come out of the latest mini bubble intact. The most successful e-marketing entities in Japan today are home grown. But that doesn't mean old-school corporate Japan.

"Ion Global is an Asian company," says Tim Clark, a senior manager at the company that used to be called Web Connection and is a subsidiary of Chinadotcom Corporation. "That gives us an edge over others like Razorfish and Sapient."

One of the first Asian Internet companies listed on Nasdaq, Ion Global is headquartered in Hong Kong and has an office in Tokyo. The company includes a group of regional entities with names like Venex and Cyberimage, but their Japan-based personnel have all been around for a while.
"This is our second bubble. We've been through it all back in '85," says Clark.

Managing director Tatsuma Kouo concurs. "While other Web development companies have been around for a few years, we have 25 years of traditional advertising experience in our mix," he says.

It appears that applying tried and true traditional methods to the interactive world is a key element to long-term success. According to Kibble, people are people and the Internet is just one way of interacting with them.

"We're post Internet now. We are entering the time of the Super Net Generation," says Andreas Voyiadzakis, the deputy managing director of Starcom Worldwide Japan, which helps clients navigate today's complex media environment.

He suggests that to create an environment that facilitates the media, you must approach consumers from every angle and appeal to them in every way. That brings us to the words on everyone's lips these days: wireless and broadband.

NTT Docomo is preparing to launch the world's first 3G mobile telephone information service, called FOMA (freedom of mobile access). This technology is going to make it quick and easy to receive and send large files via wireless mobile handsets.

"It's not the next commerce platform," says Collins. "Let's look at it realistically, it's a limited media in a limited space," he says, while making a small box with his hands.

However, Todd Newfield, founder of The Flying Color Group, another homegrown interactive marketing company, is very fond of that space. His team helped create the Nike Presto campaign in which consumers were directed to access an i-mode site from outdoor advertising in trains and on transit boards.

Flying Color also created the Heinken i-Club that provides i-mode users with up-to-the-minute DJ and concert information for 250 Tokyo clubs. Newfield calls it "brand-sponsored content that is space and time dependent."

"Last year my whole push was for full service, soup to nuts," says Newfield. But now he's focusing efforts on the "e-space" and shying away from traditional media.

"Having the ability to order broadband Internet access, or an i-mode gateway program for a customer means that I can give them a host of other options related to my core business of IT infrastructure, such as Internet phone and video broadcasts, or the browsing of an Exchange Groupware system via an i-mode phone," says Rick Cogley, president of eSolia Inc., an IT services firm specializing in systems and security.

"We are now able to give our customers real choices when it comes to how they connect to the Internet, or how they do their banking or receive their email," says Cogley.

One old-school company that's made a very smooth adjustment to the Internet is AC Nielsen. The brand new, ACNeilsen.online now conducts research via online polls and surveys.

"If you can deliver it online, we can test it for you," says Michael Chadwick, regional director of ACNielsen.online in Tokyo.

Chadwick says that online testing has made global research much easier and in most cases more accurate, because it's easier to set up an online panel in a distant country than to send a team overseas to conduct the research. And, according to Chadwick, regional research can be a real nightmare when you're dealing in several different languages. Online testing eliminates those problems.

"In any market that we have panel access, we can do it online," says Chadwick. And ACNielsen has set up panels in most countries of the world.

"We can tell clients, how good a site is at achieving its objectives, with the ultimate goal of suggesting how to make a site easier to use and more effective," he says. "We try to understand what people think while they're doing something, instead of later after they have forgotten how they feel."

Flying Color is also into testing the effectiveness of email and Web marketing. They have created a consumer response measuring software called PEP 2.0. PEP stands for Precision E-mail Programming and is a method for tracking and profiling the habits of end-users who visit Web sites. The idea is to help develop messages and targeted email tailored to specific user needs. PEP can tell how a person accessed a site (by PC or wireless), what time, how long they stayed and more.

"The Internet offers more accountability than any other media," says Starcom's Voyiadzakis. He sees more direct feedback, more ROI, and believes interactive marketing is going to explode in the next 6 to 12 months. While he and Chadwick have an optimistic view of the e-marketing industry in Japan, others are more cautious.

"This year the market will continue to be sluggish. Right now Japan is just starting to see performance-based applications, so this is really year one," says Ion Global's Kouo.

"If you're a pure-play dot com living off the revenues from your advertisers and you're not a category leader, I wish you luck," says Newfield.

"I'm going to leave Tokyo as soon as possible," says Collins. "But it will probably be 25 years from now." Spoken like a true local businessman.

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