KPI Conflicts: Why Foreign Brands fail in Japan

A top view of a group of business people around a table with KPI Key Performance Indicator written in the center.

In todays globalized and digital driven world, marketing strategies and measurement techniques differ significantly between regions. This is especially true for large global corporations that have success in the West. This leads to a belief that if they replicate the same strategies, in their new market they will succeed or ‘If it works, don’t fix it’ mentality. They’ll however be surprised when they enter the Japanese market and can’t make sales. While both countries rely on data driven decisions, their approach to Key Performance Indicators (KPIs) is vastly different. That is why in this blog post we will be fixing your struggling sales today. We will explore the philosophical differences in KPIs, what metrics the west and Japan focus on, and finally some lessons for those trying to enter the Japanese market. Lets dive in.

Western Approach: Quick Results and Performance Metrics

Three Western Business people lined up.

In the West, marketing strategies often focus on fast results and tracking performance markers. The emphasis is on return on investment (ROI) and trying to make short-term business growth.

Companies rely on real-time digital performance metrics. This includes conversion rate, cost-per-click (CPC), and return on ad spend (ROAS). This allows Western businesses to be flexible and change their strategy quickly to maximize performance and revenue. They focus on trying to make as much as they can as fast as possible.

Western KPIs

  1. Customer Acquisition Cost (CAC) and Conversation Rate Optimization (CRO): Western businesses prioritize how much it costs to acquire a new customer through various marketing channels.
  2. Click-Through Rate (CTR) and Return on Ad Spend (ROAS): In the West, high CTR and ROAS are signals of a successful campaign.
  3. Lead Generation and Customer Data Metrics: Western marketers also invest a lot in lead generation. Metrics like email open rates, social media engagement, and website dwell time help to find prospects.

Google Ads and Meta Suite: Performance Tools

I think a great example of this is a platform many of us are familiar with, Google Ads and Meta Suite. This platforms are entirely based on on trying to maximize your ads performances and control the bidding strategies. This allows companies to fine tune their advertising, usually to maximize ROI, itself a programable metric on these platforms. This gives those companies the ability to change their campaign settings whenever they need to, to adapt to the change if necessary.

Japanese Approach: Customer Trust and Long-Term Brand Equity

Japanese business people gathered for a meeting

In Japan, marketing strategies focus on consumer relationships and developing strong brand equity. They prefer building brand trust, reputation, and repeat customers over short-term sales.

That, of course, means the KPI focus will shift to reflect these preferences. Japanese companies will look more to Customer Lifetime Value, Brand Loyalty, Net Promoter Scores (NPS), and Local Digital Engagement. The shift reflects the desire to develop long-term, sustainable, and consistent growth instead of risky short-term growth. The importance of relationship-building in the Japanese market cannot be stressed enough. Lack of trust and transparency will destroy your brand image and trust, and everyone will know.

Japanese KPIs

  1. Customer Lifetime Value (CLV) and Brand Loyalty: As mentioned long-term relationships are vital. That means tracking metrics like repeat purchase rates and membership retention are prioritized over first-time conversions.
  2. Net Promoter Score (NPS) and Customer Satisfaction (CSAT): While Western companies prefer volume-based metrics, Japanese companies prefer qualitative metrics like customer satisfaction and willingness to recommend. This increases word-of-mouth referrals which is a key consumer behavior in Japan.
  3. Local Digital Engagement: Western brands measure engagement through Instagram and Facebook. In Japan, however, LINE interactions or Rakuten reviews have more value to consumers. So having positive engagements on these platforms is essential.

Toyota: Powerful Brand Equity

A great example of this is Toyota. Toyota focus has always been on long-term customer engagement. They pride themselves on delivering quality, reliability, and excellent post-purchase services. Toyota, unlike some of its other competitors aren’t aggressive in their marketing campaigns, preferring to highlight these aforementioned qualities. In fact, you and me both know without having to look up that Toyotas are the most reliable cars you can buy, which is a testament to their strong brand equity. This is also what makes them the number one car seller in the world.

Challenges in using Western KPIs in Japan

Computer with various graphs and pie charts.

It may not come as a surprise that there are also other practical reasons why these strategies don’t work other than preferences. One of them being privacy in data collection.

I think many of us know but Japan has very strict consumer privacy regulations. Naturally, this makes data tracking much harder than in Western countries like the U.S. In the West retargeting, and third-party cookies dominate in the ad performance metrics. Policies like GDPR exist in Japan limiting personalized ad tracking and having to use softer strategies for engagement.

Another is the slow-decision making and traditional hierarchies. Japanese companies rely on consensus decision-making, which means lots and lots of meetings. It’s no secret that Japanese companies love meetings where many things are talked about, including the weather, but with no significant decisions made.

This means making marketing adjustments takes significantly longer than in fast-paced Western firms. This can be problematic for Western brands who run A/B tests and are constantly looking to optimize. Japanese campaigns often take months and months of planning before launching.

Lesson for Foreign Brands

  1. Long-term metrics over short-term gains: For a foreign brand they will need to strike a balance between quick ad performance with long-term reputation building. This may mean slowing down a little to build trust and relationships before going crazy with ads.
  2. Loyalty Programs and Word-of-mouth Influence: Again instead of focusing solely on conversions, invest in community engagement efforts. This can look like LINE campaigns and communication, loyalty or point cards, and creating meaningful in-store experiences. Leveraging social media for this can also help build trust in your brand.
  3. Cultural Value-Based KPIs: In this case localizing your strategy instead of copy-pasting Western campaigns will deliver results. Tracking customer satisfaction, and relationship-building metrics instead of conversion rate optimization will pay off.

I hope this has been insightful for you and helps you rethink your strategies for companies in Japan or looking to enter.

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