How to Do “BtoB Business” in Japan
If you are in business, you probably hear the word “marketing” a lot. The term “BtoB marketing” refers to marketing activities for business-to-business transactions. When a foreign company does business with a Japanese company, it is basically BtoB.
The word “marketing” may sound simple enough, but when it comes to actually planning and executing a marketing strategy, not many people can give you an immediate answer as to what exactly you should do. Especially when it comes to BtoB in Japan, there are special factors that come into play. In this article, I will explain the basics of BtoB marketing in Japan.
What is BtoB Marketing in Japan?
What is marketing anyway? First of all, marketing is defined as “identifying what customers want, developing and providing products and services that have value. Not only that, but also how to convey information (value) about the product or service to the customer. It is also important to continuously and smoothly provide business activities that provide those values.
Marketing is often perceived as referring only to sales promotion activities, but the entire sequence of providing value to customers is “marketing.” This definition is the same in Japan.
What is the difference between BtoB and BtoC in Japan?
While BtoB is a form of transaction between companies, BtoC is a form of transaction for individuals (general consumers). What is the difference when comparing BtoB and BtoC especially in Japan? The table below summarizes the differences.
|Decision-makers||Multiple people (long decision process)||Individuals or family members (limited)|
|Time to decision||There is a review period and internal approval, and the consideration period to purchase is long.||Since the purchase can be made at the will of the individual or family, the period until decision is short.|
|Purchase criteria||Return on investment, etc.|
Rational criteria are easily set.
|Since impulse purchases are easily allowed, emotions and feelings are also major decision-making factors.|
|Price||Prices are relatively high for many products and services that require advanced functions and extensive after-sales service.||Goods and services that are related to daily life and are purchased frequently are priced low, while those that are purchased infrequently are priced high (e.g., houses and cars).|
In the case of BtoB, not only the person in charge, but also his or her supervisor and his or her supervisor’s approval is required, which means that there are multiple people involved in the process of making a purchase decision, and thus a long period of time is required before a purchase decision is made. This is especially true in Japan. In addition, since it is necessary to obtain the approval of multiple people who will make the purchasing decision, the proposal must be satisfactory to each approver. This might be easier if you could explain it in person to all the decision makers, but that would be difficult in practice. Therefore, promotional materials such as a pamphlet or leaflet that can be conveyed without face-to-face explanation are required.
As for purchasing criteria, a long time ago, building relationships through entertainment and other means was also an effective means in Japan, but compliance is being strengthened, and more and more companies are making rational purchasing decisions based on return on investment. It is necessary to plan marketing strategies based on an understanding of these characteristics in BtoB.
About BtoB Marketing Methods
What are the basics of BtoB marketing in Japan? So, how should you proceed when actually formulating a BtoB marketing strategy? The general flow consists of the following four components: 1) Market Research and Environmental Analysis, 2) STP (Segmentation, Targeting and Positioning), 3) Marketing Mix, and 4) Execution, Evaluation and Management. In this article, let’s consider, for example, a model case of a manufacturing company in Japan with 100 employees (Company A manufactures lighting fixtures for the construction industry).
1) Market research and environmental analysis
Analyze from the perspectives of the market (customers), competitors, and the company itself. There are several frameworks to help with market research and environmental analysis, such as “3C analysis,” “PEST analysis,” and “SWOT analysis,” etc. I will not go into details, but please make use of them when conducting market research and environmental analysis. These are useful in the Japanese market.
The first is to understand the strategies of your competitors, the major manufacturers, because if you use the same strategies as the major manufacturers, you will not be able to win 100% of the time and you may be seriously injured.
The second point is to understand the entire market flow of the products you manufacture until they reach the end user, and determine what kind of products and services the market (customers) are looking for. However, do not listen too much to major needs such as “low price.” If you compete on price, the major manufacturers will have a definite advantage. Listen to the voice of the market where you can utilize your company’s unique and innovative technologies and services.
2) STP (Segmentation, Targeting, and Positioning)
Based on the results of the above analysis, classify the market by attributes (segmentation). After classifying the market, decide which segment to target (Targeting). Within the selected segment, think about how to position your company and differentiate it from the competition (positioning).
In this case, you will classify the segments according to the customer’s needs, such as price, workability, safety, and design. In the targeting stage, since Company A has strong design and engineering capabilities, the target will focus on the need “design” regardless of company size or sales destination. In the positioning stage, you will consider how to differentiate your company from other companies that also produce design lighting to gain an advantageous position.
3) Marketing Mix
Formulate a specific strategy for the targets defined in 2) STP. In this section, the four components of “product, price, distribution, and promotion” are combined, which is why the acronym “4P” is commonly used.
It would not be an exaggeration to say that product strategy has the most impact on satisfying the needs of the target audience. In this case, you will consider not only the “design-focused lighting” product alone, but also the delivery time, customizability, and support during and after delivery as a comprehensive product. If the installation workability of competitor’s design lighting products is not so good, Company A’s strategy is to strengthen products that have easy installation workability for construction stores.
It is important to determine whether customers will judge the price to be reasonable for the product offered.
However, even if you offer a very high value-added product and the customer is convinced of the price, they will not buy it if the price is out of line with the customer’s (market) budget. You should be aware of the market price.
However, if you set a low price based on customer feedback, you will not be able to make a reasonable profit on your manufacturing costs, and your service will deteriorate in terms of quality, delivery problems, and sales quality. As a result, the reputation of the company deteriorates and sales drop, and the only way to recover is to lower the price, which leads to a vicious cycle of losing strength.
For small and medium-sized companies like Company A, it would be effective to take the route of high quality and high price compared to other companies.
Consider the distribution (route) until the product is provided to the customer. It is one way to do this, but if you want to expand your sales network nationwide, or if you are a BtoB company, you will have to increase your own management costs as the volume of transactions increases because cross-over transactions are common.
Therefore, one way to deal with this is to set up a trading company as an agent and not deal directly with the construction store.
However, there is a disadvantage of having an agent in the middle, which increases the cost and decreases the price competitiveness. In this case, we will take these factors into consideration and use a trading company as a sales agent. We will implement measures such as expanding sales promotion materials so that the trading company can conduct sales activities properly.
It is necessary to effectively communicate the appeal and value of the company and its products to customers and distributors in order to attract their interest in the company. It is also effective to conduct promotional activities not only for the company and its products, but also to make customers aware of latent needs that they themselves are not aware of.
For a manufacturing company like Company A, it is important to create a track record, and among these, it is effective to quickly create a track record of delivering to high-profile buildings and doing business with major companies in Japan. In the early stages of business, when you do not have a proven track record, it is a good idea to showcase your company’s technologies at exhibitions and other events where you can get to know prospective Japanese companies.
In addition, it is essential for BtoB companies to have not only the person in charge face-to-face, but also that person to successfully convey the appeal of the product to the decision makers within the company. Therefore, make sure you present brochures and presentation materials. Despite the recent trend toward digitization, the age of decision-makers in Japanese companies is high, and paper-based materials are sometimes easier for them to read. It is also important to keep in mind that older decision-makers may have deteriorating eyesight, so it is important to make sure that the font size and other aspects of the document are easy to read.
4) Execution and evaluation
The implementation step is based on the strategy that has been formulated up to this point. If you have formulated a solid marketing strategy up to this point, your chances of success will have increased significantly. However, this is not the end. In order to determine if you have succeeded, you need to set up evaluation criteria.
It is effective to set goals not only for sales and profits, but also for the processes that lead up to those goals, such as the number of negotiations and the decision rate. By doing so, you will be able to ask yourself, “What part of the marketing process went well and yielded good results? What are the bottlenecks? and “Which parts of the marketing process are bottlenecks?” so that you can make future improvements and develop your business.
Improving the plan over and over again is an essential part of continuous business activities.
In BtoB marketing, you should plan your marketing strategy according to the basic flow of “(1) Market Research and Environmental Analysis,” “(2) STP (Segmentation, Targeting and Positioning),” “(3) Marketing Mix,” and “(4) Execution, Evaluation and Management. This flow is basically the same in Japan.
In most cases, BtoB in Japan does not work well only from the perspective of the company itself.
Analyze your target market and company well, and execute your marketing.