ROI: 10 good reasons to research Japan

JMI recently surveyed over 400 market researchers, based overseas, who commission projects in Japan from time to time. A reoccurring theme in the results was the cry of “My client often drops the Japan leg … it’s just so expensive. Please help me convince them that they need market research in Japan. After all isn’t Japan pretty much the same as other Asian countries...?”

Well we hear you! JMI has been trying to convince its own clients on this issue for years. Really it has to be looked at from an ROI perspective i.e. while the expenses associated with market research in Japan can be high relative to other markets, the returns on getting it right by making informed business decisions are very substantial.

So here are 10 reasons why Japan IS worth keeping in any global research project:

1)	2nd largest economy in the world. Long after the economic bubble has burst, the declining economy trend persists. Sounds like a lost cause, right? Wrong! Japan is still the world’s second largest economy, second only to the United States. In most categories, market size alone should justify including Japan in global research. And with a population of 127 million crowded on to an island the size of California; the Japanese population is fairly homogeneous and easy to reach.
2)	Different from other Asian countries. Although Japan is geographically located in Asia, its unique culture, its huge domestic companies, developed economy, standard of living and consumption behavior make it VERY different from Asian countries. In fact, no other Asian market is sufficiently similar as to be considered representative of likely response among Japanese. As such, conducting research in other Asian countries and thinking that results may apply to Japan can be costly in the long run.
3)	Consumers ARE fickle, consumer understanding is a must. The Japanese are among the most discriminating consumers in the world. Just take the skin care market as an example; Japanese women spend thousands of dollars on skincare products every year and the market is complex and competitive. Product selection is rigorous and usually involves much discussion and checking with "store counselors" in order to arrive at the optimal solution for a given skin condition. In this context good consumer understanding is a prerequisite to building a relationship with consumers and hopefully providing reasons for them to switch brands.
4)	Local adaptation needed for international mixes. To succeed in Japan, international mixes need to be “Japanified”: Brand names shortened (typically to 2-3 syllables maximum), fragrances made less strong, tastes made more natural, light and portions made smaller, cuter... The fine-tuning of mixes brought to Japan from overseas requires the highest level of consumer insight, gathered in the context of the competitive environment of the Japanese market. Many global brands fail in Japan by adopting a "one-size fits all" approach to Asia.
5)	High turnover rate of consumer goods. The Japanese switch products frequently and they tend to stay away from “used” goods. As an example when young people get married, everything will be bought new, refrigerators, beddings, dishes, furniture, etc. Very few used consumer electric goods or furniture is sold in Japan; perfectly good electronics are often discarded after a couple of years for simply not being new enough. Consumers have a taste for innovations and as a result markets change quickly. For marketers, it's a constantly shifting playing field that demands up-to-date data if competitive advantage is to be achieved.
6)	New trendsetters. Japan is also known as a trendsetter nation, especially for other Asian markets. This is seen most clearly in the categories of consumer electronic goods and mobile phones. Just take a ride on a commuter train in Tokyo and you will immediately notice the number of mobile phone users who are not using the device for voice communications but are actually sending/reading e-mails, or playing games. Get it right in Japan and others will follow!
7)	High spending on luxury goods. Japan continues to show a voracious appetite for high-end luxury goods, irrespective of the economic environment. The fashionable and stylish ladies in Ginza will not settle for being underdressed, often going to great lengths to acquire the latest fashion or handbag. When Louis Vuitton opened a new flagship store in 2002, 1400 queued for several days, and thousands of limited edition bags and watches sold out in hours.
8)	And an ageing population that also likes to spend. The Japanese savings rate remains high. With deterioration of the economy, the savings rate actually climbed from 24.7% in 1990 to 27.9% in 2000. Is this bad news for consumption? When looked into further, the high savings rate is coming from working households. The savings rate of non-working households, which primarily consists of retired households, has actually been negative at -16.2%. The number of non-working households has been climbing since the late 80s and is expected to grow in the future as the baby boomer generation ages. The portion of the population over 65 was 17.3% in 2000, compared to 12% in 1990. This means that the spending of the older generation will be significant in Japanese economy in the future (for more on this phenomenon -> click here).
9)	Recovery. Finally, the economy is showing clear signs of a comeback. Both household spending and consumer confidence are up, and spending on capital goods is also on the rise. The unemployment rate has declined to around 4.5%, as many Japanese companies have been shifting to aggressive hiring strategies. Now is the time to take a good look at doing business in Japan; the timing couldn’t be better.
10)	And finally, researching Japan doesn’t have to be so expensive. Japan has undoubtedly been an expensive location to do market research in the past. However, online and wireless research now offers cost-effective methods for gaining consumer insight, with shorter lead-times (for more on the latest technologies for testing online -> click here). Next time you’re thinking of doing a telephone survey in Japan, check the price and timing for doing the same study via the Internet. You should be pleasantly surprised.