If you are currently doing business in Japan but there has been no sales growth for the past three quarters, you may find the reasons in this issue.
The following are facts of Japan.
- Economy has begun to grow.
- Population of 130 million people.
- Same size as state of California.
- One of world’s longest life expectancy.
- The world’s second largest economic power.
- The world’s highest disposable income holder.
- The world’s highest oral, skin and health care notion.
- The world’s highest quality standard.
- Manufacturing society with world’s topnotch mega manufacturers.
- Highly technically-oriented nation.
- Over 40% of Japanese housewives have Louis Vuitton bags.
- Over 60% of Japanese housewives use PC at home.
As an international business executive, what do you think of the Japanese market and how do you develop the market for your product or service in Japan?
The chances are that you will be able to successfully develop your business in Japan as long as you do not underestimate the Japanese unique business practice and culture.
Remember money is not everything for Japanese people, so there is no custom of tip in Japan. Japanese people in general are motivated entirely differently from Americans. Assuming that there are two same products here, one made in Japan and the other made in U.S.A., and that American product is 10% cheaper than Japanese product. Most Japanese people would buy the Japanese product. Why? Because: The Japanese are after value and peace of mind.
How to know if your product will be accepted in Japan.
- Conduct preliminary research of your new product
If you are seriously thinking about doing business in Japan, you need to check the market response to your product in Japan to find out whether or not your product can be salable. So, the first step is to conduct some market acceptance test on your product.
Caution:
Do not use any market research company or focus group in Japan if your product is already completed.
Our experience shows:
1) Japanese people in general do not make good comments on the new product because they do not prefer changes and the market research results would just reflect those comments. Negative response.
2) Focus Group provides critiques about the product and usually ends up with their suggestions for radical changes for improvement. Huge investment.
3) Integrated marketing strategy by the consolidated efforts among U.S. maker, Japanese distributor (or U.S. sales company in Japan) and retailers can move the Japanese consumers’ mind. Retailers’ opinions and response to your product are the most reliable and valuable information you can get as they know how to convince the customers to buy.
In order to conduct a Product Acceptance Test in Japan, we recommend the following steps.
1) Hire a Japanese market expert.
2) Provide product training to him.
3) He will provide you with his test methodology, test length and the budget for the test.
4) Mutual consent of the test.
5) He will conduct test.
6) Review results.
7) Determine the Japanese business model.
The responsibility of the Japanese market expert is:
1) To meet the select number of different classes of retail stores in the major Metropolitan areas in Japan, and with the largest TV infomercial firm and catalog houses.
2) To discuss your product with them for their candid opinions.
3) To discuss what it takes to successfully sell your product in Japan Without major physical changes.
4) To discuss provisional pricing structure.
Selection of Your Business Model
If your product receives favorable response from the Japanese retail people and other potential customers, the next step is to determine the business model that best fit your business purpose in Japan.
Based on our experience, there are seven major business models to choose from in doing business in Japan
- Build own operation
- Appoint national distributor
- Form a joint venture with a Japanese company
- Sell through Japanese trading company
- Sell directly to retail stores and consumer businesses
- OEM business
- E-commerce
Build Own Operation
You will build your own sales organization in Japan from the scratch. If your company has a right product with sufficient financial resources and sound U.S. marketing and sales strategies, this is the best business model for your company to generate maximum revenue.
Based on our experience, the following process is the best practice in building own operation.
Step 1: Hire English/Japanese Bilingual VP of Japan Operations in the U.S. Headquarters.
There are several reasons for creating this high position in the U.S. Headquarters.
1) Japan is the second largest market in the world.
2) Japan has spillover effect on other Asian countries.
3) Japan has potential to become your strategic partner.
4) Close communication between Headquarters and VP.
Step 2: Hire Japan Office Manager
He will run the Japan business under the directive of the VP of Japan Operations and is one of the strong candidates for future President of Japan Office
Caution:
Do not send your non-Japanese speaking junior executive to Japan to run your Japan operations even if he or she has MBA degree. Due to the Japanese unique culture, Japanese people more or less make misrepresentation in business and make untrue remarks in daily life. This unique practice is called “Honne (true) and Tatemae (lie). Unless he or she can understand the Japanese language and culture just like native Japanese, he or she cannot run the real Japanese business satisfactorily.
Step 3: Complete Business Plan
VP of Japan Operations and Japan Office Manager will prepare the business plan.
Japanese people are largely influenced by PR, so it may be a good idea to get a reliable but reasonably-priced PR agency involved in the initial stage of preparing business plan.
Step 4: Begin hiring
Imagine the average life expectancy of both Japanese male and female is now 82 years old. Given that the retirement age of the Japanese workers is 55 years to 60 years depending on the companies, there are many quality workers in the market who have just retired but still want to work even at the reduced salary. They are experienced, some of them are Japanese/English bilingual, have street knowledge and emphasize relationship-building business that is the practice in most businesses in Japan. Consider hiring such quality workers at greatly reduced salaries.
Step 5: Find the office
There are many good agents who have good portfolio on the vacant offices that will meet your budget and location requirements.
Step 6: Finalize the sales and marketing organization
Japan is a highly competitive market and most companies have the similar level of sales and marketing capability. The area you can make substantial difference from your competitors is Customer Support, which gives peace of mind to your customers (retail stores and consumers). You need to provide the same level of customer support as your competitors do.
Step 7: Complete web site
Web should not be very fancy or complicated. Just states your value proposition.
1. How good your product is.
2. How your product differs from others.
3. Peace of mind (customer support).
Step 8: Press and media release
As mentioned previously, PR activities are very important. A&P (advertising and promotion) is also very important. However, stereotyped creative does not attract information-rich Japanese consumers.
Out-of-box creativity is needed. Sonicare sonic toothbrush was first introduced in Japan about 10 years ago, when over 10 Japanese electric mega manufacturers were making and selling electric toothbrushes in Japan. How could a small U.S. toothbrush maker of Sonicare compete against the Japanese giants? The editor-in-chief of JapanBusinessConsultancy.com was in charge of developing the Japanese market for Sonicare. He decided not to compete against the giants but decided to change the Japanese consumers’ mentality by implementing very unique marketing strategy.
In Japan, there is a Decayed Tooth Prevention Week starting on June 4 every year. Prior to, on and after June 4, he put one full page ad in the most prestige national newspaper in Japan with the following catch phrases.
- A week before June 4 – Farewell to electric toothbrush (This caused sensation across Japan).
- A week after June 4 – Sonicare is gentle on gum and cleans beyond the bristles. It will help improve gingivitis.
- On June 4 – Don’t brush your teeth. (Japanese people were stunned and many including celebrities rushed to the retail stores to purchase).
The ads cost only US$300,000 and generated the retail sales of US$8 million for that year (for only 7 months).
In the third year from the initial launch of Sonicare in Japan, the annual sales of the maker turned US$11 million with profit of US$10 million. Sonicare is now a Japanese household brand in and is also the best selling electric toothbrush Japan.
We are looking forward to your comments and questions.
JapanBusinessConsultancy.com
Peter H. Sakurai
Editor-In-Chief
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