One of the few Japanese advertising agencies to compete on US soil, ADK Group aims to go beyond the traditional communication activities people come to expect in the industry and become an integrated marketing service provider that can actively motivate consumers to take action. With a particular focus on China and Southeast Asia, ADK enables global clients to expand their markets into the region with an accentuated local expertise but with the promise of Japanese quality. President and CEO Shinichi Ueno explains how ADK can “leverage their relationships and offerings into an Asian context” and where the industry is headed. ADK’s Planning Director at the Activation Planning Department Kouhei Fujimoto also shares how the agency’s comprehensive efforts connects it with consumers in one of the market’s most crucial sectors – Japan’s youth – and what they’re really into.
Shinichi Ueno, from your point of view, could you tell us how you see the Japanese economy up to 2020 and what are the key challenges it will face?
Shinichi Ueno (SU): One of the major issues we face is the shrinking population. While the low birth rate is a current problem, it will have long-term consequences. In 2015, the Japanese population started declining for the first time in its history. We have to think about how this issue must be addressed. If we do not act, the Japanese population will keep on shrinking continuously, and just like any other country, Japan needs to grow in order to survive.
What role does the private sector have to play in this recuperation?
SU: Multinationals have a meaningful role to play in creating cross-national dialogues. The government’s role is to set up national policies that stimulate business growth. To that regard, while the public sector acts as a catalyst for the private sector, it is by no means a decider. For example, China and Japan have a rather mitigated diplomatic relationship. However, business affiliations are often more than acceptable.
One of ADK’s main activities is the exportation of anime entertainment to China, which is, to some extent, an exportation of Japanese culture. In doing so, we bridge certain national misunderstandings.
As a private entity, ADK is aiming at becoming a multinational actor. Our objective is to diversify ADK’s activities to transform into a global player, competitive on the world stage.
Hiroyuki Ishuge, Chairman & CEO of the Japan External Trade Organization, said: “Even if Japanese companies excel in terms of know-how technologies and innovation, they are still lacking behind in terms of marketing and communication.” How important is it for Japanese companies to install the Japanese reputation?
SU: Brands make a strong point at being assimilated with their home country, because it depicts associated values that are accepted universally. The more we can position Japan as what it really is, as this ambassador of precision and attention to detail, the more our overall reputation will grow positively. Manufacturing companies are very good at manufacturing new items, at nurturing the Monozukuri tradition. However, they are not good at marketing these items. The reason why so few Japanese brands have successful expanded overseas is linked to their lack of marketing understanding and local interpretation. At ADK, we believe that we can bridge this communication and branding gap.
According to eMarketer, advertisers in Japan will increase their investments in digital placements by 9.0% this year to $9.50 billion. How is ADK working to capitalize on these numbers?
SU: Digital ad spending ranked number two, overtaking newspaper ads, in the entire Japanese advertising industry, with TV advertisement still dominating our sector. In the USA, digital spending will become the dominant platform by 2016-17. However, with the emergence of its popular class, we are also looking at China to expand our activities. Digital advertising in China is supposedly larger than traditional TV ads. Furthermore, the Chinese market has become easier to tap into. End-to-end integrated marketing services, including all activities from branding to creative media planning, passing by sales and promotion, have become an attractive tool when it comes to overseas expansion. The demand for FMCG (Fast Moving Consumer Goods) and CRM (Customer Relationship Management) marketing has been growing exponentially, hence, creating a demand for new types of marketing services. The same observation can be made when looking at web-based promotion, as companies are also keen to bolster their web traffic. Domestically speaking, our business model has changed dramatically and I expect that by 2020 traditional advertising as we know it today will have dramatically changed.
In 2015, the three top advertising agencies in Japan were Dentsu, Hakuhodo and ADK. One of the top players has recently been involved in a scandal. In light of this controversy, how important is to enhance the reliability of ADK?
SU: At ADK, we internally monitor our activities in order to assure that we always deliver quality and timeliness. About 20 years ago, a similar scandal occurred in the TV advertising industry. The client company was billed for a commercial that never aired. This episode triggered our behavioral response, urging us to consider measures to enhance transparency and to be more trustable throughout the industry. At ADK, we learnt from these wrongdoings and we apply the highest standard of integrity throughout all our activities.
Can you tell us more about the future strategy of ADK and your Vision 2020?
SU: To cater for the future, we have endorsed the Vision 2020 objective to transform our advertising entity into a Consumer Activation Company. A traditional advertising agency targets a single step of one’s communication activities. Our aim is to become an integrated marketing service provider that can actively motivate consumers to take action.
In order to reach our Vision 2020 goal, we have engaged in thorough structural reforms to expand our activities to multi-layered content creation. One of our goals is to expand our intellectual property anime business internationally.
Domestically speaking, we want to enhance our live event presence. We can develop multiple use of fine anime works, such as live performance, theatrical play, etc. For example, anime live performances, where a singer or a dancer dresses up as an anime character and performs for the public, have become an increasingly popular event in Japan. We even successfully turned a mega-hit anime into a Kabuki performance, one of the Japanese traditional cultures. We also expect to create synergies with neighboring states by using anime characters as ambassadors of social campaigns.
In 2016, in Vietnam we launched, together with the Police Department and the Vietnamese Government, a campaign to raise awareness of traffic safety by using Doraemon as a leading figure. We believe this campaign can contribute to save children from traffic accidents, because anime characters have the ability to catch children’s attention.
A current trend and necessity of Japanese companies regarding the shrinking Japanese population is to internationalize their operations. In fiscal year 2015, you generated less than 10% of your gross billings from oversea sources. In November 2015, you set up ADK Global to expand operations beyond Japan. What international strategy do you have to diversify your sales?
SU: In terms of revenue, ADK Global has slowly been expanding. While we are present in many countries, not all of them provided us with the necessary productivity to increase our international activities. It is impossible to have a standalone strategy for global expansion because overseas markets are ever changing. Therefore, we look at each individual market separately and we adjust our strategy from country to country.
Our main focus is centered on China and Southeast Asia. We also have an office in New York, which will play a key role in coordinating our North American IP expansion plans.
The United States is the largest advertising market in the world. In 2015, more than $180 billion were spent in advertising. How do you differentiate yourself from local US competitors?
SU: We are aiming at becoming a Japanese multinational, so our difference maker is our culture of precision and of rigorous attention to detail. Anime rights and assets are one of our competitive edges. We are not merely a communications agency; we are one of a few Japanese advertising agencies to compete on US soil. To be relevant to European and American businesses, we have chosen to embody Japanese corporate values by making them relevant to the US market. We have the power to bring a different perspective on doing business.
How do you assist international companies in penetrating the Japanese market?
SW: We have global clients that expand their market to Japan. Our goal is to leverage their relationships and offerings into an Asian context. The latter is even more relevant when it comes to China, both in terms of proximity and quality, we offer an accentuated local expertise but with the promise of Japanese quality.
Mr Ueno, you were appointed as President and CEO of ADK Group in 2013. In five years, where would you like ADK to be?
SU: In a five years’ time, I wish to see a new, evolved style of marketing campaigns. I wish to see a switch from an advertising agency to an integrated marketing Consumer Activation Company.
Kouhei Fujimoto, Planning Director at the Activation Planning Department of ADK Group
Kouhei Fujimoto, can you tell us more about the objective of your company and the value-added services you offer?
Kouhei Fujimoto (KF): To start with, let me explain about the background to the launch of the “Wakamono (Youth) Studio” that I have organized. ADK, as a communication specialist, is responsible for understanding changes in society and consumers occurring in cross-sectorial activities. Using insights and understanding gained from that, we help our clients improve their communication with consumers.
To support that, we carry out research on Japanese consumers on a continuous basis. We also conduct a profound market analysis and study by generation group, such as the kids market, the youth market and the senior market that is the volume zone in the current demographic structure in Japan.
I am working on the youth of today. The reason behind this is that they are a generation with a distinctive dimension. I believe it is an important generation when considering how Japan or Japanese society can evolve, as well as where we are heading for in the future.
One of the key elements in studying the youth of today is that I need to come face-to-face with them. The digital native is so tactful as to when to show their real intention or polite face. That is not often revealed if I maintain the relationship between the marketer and the subject. Instead, I want to achieve rapport with them, setting a friendly tone which I believe would elicit their real feelings and thoughts. Then I launched the “Wakamono (Youth) Studio” project in cooperation with young people. I continue to study them, together with them, by conducting a workshop twice a month.
We have a responsibility to develop cultural projects further and understand what they really mean. We offer knowledge and communication advice, from education to nursing, in a way to help Japanese society change for the better.
Now let me briefly touch on the image of the youth that has emerged from my study.
My work is truly bound up with the year 1992.
1992 was a turning point for Japan. It was the year where many things changed from the previous generations. From its economic outlook to the composition of family and children’s education, Japanese society was transformed. First of all, the Ministry of Education changed its educational policies, which translated into an overall change of the education system.
Before, they used to assess classes from a competitive point of view, by comparing students to other students. This changed into a style where students were assessed individually and independently of their classmates’ performance. I assume Japan inspired itself from the American model.
Before 1992, there were fixed avenues to develop and follow a certain track, a result of the country’s rapid economic growth. Today, the Japanese market has matured, and developing a unilateral way of understanding has become obsolete. Instead, we decided to bet on innovation by nurturing creative capacities.
Baba-san, from Colopl, mentioned the challenge of the mentality of Japan’s youth, since they were born during the crisis and do not know any better. How do you see their ways of making decisions when choosing products compared to the previous generations?
KF: During the economic bubble period, new products sold like pancakes. Convenience store chains used to sell an extensive amount of new products. To a large extent, these shops had high sales because many young people went to convenience stores.
However, today’s new products and new functions do not attract the youth anymore. The Japanese youth values relationships instead of innovation. They simply prefer brands that they can trust because they have bought their products for a long time. For our youth, the key word has become stability, both in terms of purchasing behavior and product quality.
The same observation occurs when looking at fashion apparel. Fashion used to be one of the main tools for self-expression. One would dress-up like this or like that, and the latter would convey a message about him, about his views and opinions.
Today, the youth do not want to differentiate themselves from the masses because they are acutely concerned about how other people perceive them. This has led to the general adoption of the plain white t-shirt, avoiding categorization and depicting a certain monotonous stability of fashion. This standardization doesn't mean that our youth are not expressing themselves: it means that they are expressing themselves by displaying their belonging to a homogenous group.
This does not mean that consumption has disappeared; it has simply migrated to other fields. Take the example of surprise parties. Surprise parties in Japan have become a booming trend. The center of attention in such events has become the birthday cake tradition, where the guests throw the cake in the face of the birthday boy/girl and immediately upload the video to Instagram. Displaying one’s life on social media has become a crucial component of one’s purchasing behavior.
The youth do not buy a product depending on whether they like it or not, they buy products in relationship to how it will look on Instagram. When choosing a restaurant, they value more the photographic display of the food than the actual taste of it.
This sociological trend can be traced back to our economic state. The majority of Japanese people are wealthy and enjoy a high standard of living. To a large extent, we have a near perfect living environment; we enjoy high income, high security and plenty of materialistic supply. So what happens after? What happens once all your materialistic instincts are catered for?
The answer is simple: you start to wonder how to please others in order to please yourself. Psychological studies have proven that once a desire is fulfilled, in our case individual materialism, humans tend to move to a next stage, a more collaborative one, where it is not yourself that matters most, but how others see and perceive you. Sharing our lives with others has become a model of satisfaction.
Japanese culture is associated with cultivating long-term relationships and business ties. Do you see that value very much present in Japan’s young generation or are their ways of acting changing?
KF: Now Japan faces an urgent need to make significant changes in a variety of fields from business to social system. Who could possibly initiate such changes? The youth, I believe. Those who grew up in an educational environment where individual values were very much respected can question long-established practices or general ideas. They are digital native and have a fresh sense in terms of communication. The economy in Japan has been gloomy ever since they were born. Living in such times, they have developed a feeling of dislike to spend much money and do ineffective things, and rather make a rational judgment. I believe those young people, who accept changes flexibly and adopt a new lifestyle, have the potential to act as an instrument of change toward a better society.