Japan's Ad Community Hopes for Jolt Under New Regime

Green Products, Consumer Protections, Digital Expected to Thrive

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Japan may get a bit easier for multinational marketers and their agencies following the landslide victory of the Democratic Party of Japan (DPJ), following 54 years of nearly unbroken rule by the Liberal Democratic Party (LDP).

That's good news, because Japan has been a tough market for Western companies, especially since the global downturn dried up exports that have sustained the local economy since the early 1990s. Japan's exports fell for a 10th straight month in July. Exports to the U.S. dropped 39.5%, and to Europe, 45.8%. Even shipments to China, where GDP still hovers around 8% growth, fell 26.5%. In response, companies such as Toyota Motor Corp. and Nissan Motor Co. are cutting domestic production.

McCann's Dave McCaughan: 'We're looking for signs that there will be more spending in the economy.'
McCann's Dave McCaughan: 'We're looking for signs that there will be more spending in the economy.'

"To be honest, it couldn't get worse, so the attitude of everyone in the industry is that hopefully, [the election] will improve things. It's very tough right now. We're looking for signs that there will be more spending in the economy," said said Tokyo-based Dave McCaughan, senior VP-director of strategic planning, Asia/Pacific, at McCann WorldGroup.

There are good reasons to be optimistic, as the DPJ's campaign promises include ideas to increase consumer spending, such as through one-off bonus payments for new parents, a move the government also hopes will get the country's population growing as well. The winning party also wants to promote the use of environmentally friendly products and services. Toyota's hybrid business already is one of the few growth areas in Japan's car industry.

"New regulations could bring in more eco-friendly goods. If that's the case, it will encourage people to reassess a lot of their purchases," Mr. McCaughan said.

Marketers should also be prepared to stay on their toes under the new regime. Already, Japanese consumers freely complain to companies if they don't like their products. But the new party is expected to introduce a government-sponsored consumer advocacy organization.

"That may not stimulate sales but will put new dynamics into marketing and raise the importance of being aware of who's saying what and perhaps being more guarded in how we develop background materials like details on packaging and corporate websites with product information," Mr. McCaughan said.

"Greater transparency by the government under the new party will lead to greater transparency in the corporate sector," said Chris Beaumont, a professor at Tokyo University's global center of excellence and the former head of Grey Group's operation in Japan.

The election does not represent a "revolution but a changing of the guard and more new blood on the political stage. We will see more consumer advocacy as a result," Mr. Beaumont said.

Japan has been a tough market for foreign agencies all along, because media spending historically has been controlled by a handful of local giants such as Dentsu and Hakuhodo. These companies often control media buying as well as media inventory, effectively preventing Western companies from being a part of the most profitable aspects of the ad industry.

But that could be changing as well, as Japanese companies feeling the pain of the recession look for cost-effective marketing solutions, like digital marketing, which isn't dictated by local agencies quite as fiercely.

"I expect to see a massive rise in e-marketing in Japan from companies like Procter & Gamble Co., Shisheido and Coca-Cola Corp., especially for products aimed at older consumers, which are relatively rich," Mr. Beaumont said.

Dentsu spokesman Yukihiro Oguchi expects Japan's ad industry "will be all the same as before" the election, but that's undoubtedly not what the company hopes will happen.

On Sept. 7, Dentsu announced its non-consolidated net sales for August reached 97.3 billion yen, a 13.5% drop year-on-year. Sales from TV expenditure, by far the bulk of its business, were down 26.7%, and magazines fell 32.3%. Interactive media and marketing and promotions increased slightly.

The most important thing from marketing point of view is that the people of Japan spoke, reaffirming a noticeable trend in recent years toward self-expression. Both young and old in Japan say they feel they have more freedom than previous generations, according to research by McCann Erickson, Tokyo.

But foreigners should not go too far in comparing the victory of the opposition party to the election of U.S. President Barack Obama.

"People see the DPJ as an alternative that will do, as opposed to a Barack Obama big-vision thing. People on the street cannot articulate the vision of the old or the new party. The election was more about frustration and wanting something different," Mr. McCaughan said.

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