How to Make Smart Japanese Eco-Consumers Buy

Osaka – Tuesday, August 10, 2010

Nikkei, Japanese newspaper specialized in business and economy, reported on August 7 on how “eco-consumption (economic and ecological consumption)” is proliferating among Japanese customers, and how companies are trying to adapt to such customer needs. Japanese customers today seek to gain maximum satisfaction with minimum spending for maximum ROI of their spending. Such trend attributes to deflation, making consumers becoming smarter and smarter, to set extremely high standard in selecting which products and services to buy. In order to make smart consumers buy、 companies are forced to review their business strategy.


1. Why Japanese consumers are so keen on value of “low price plus something”?

It is because of their annually income when deflation is proceeding as mentioned in the previous article How Japan Can Get Out From 10 Year Deflation?. According to the survey executed by MLHW (Ministry of Health, Labour and Welfare), average income of household with children in 2008 was only 6.88 million yen, a decrease by 12% from the peak in 1996. It is estimated that the average income has decreased further in 2009 due to the worldwide economic recession.

2. How companies are trying to convince smart Japanese consumers to buy?

There are mainly 2 ways in which Japanese companies are trying to convince smart Japanese consumers to buy their products and services.

1) “Trial” campaign

This helps and encourages customers, who evaluate and select products and services severely based on their values, to judge ROI (return on investment) and convince that the products and services is pays and match their value.

Tryfeel Collection http://www.tryfeel.jp is a website that provides services that lets its customers try for the first time with average of 30% discount services hotels, restaurants and hair dressers, of total of 2800 nationwide. Its membership increased tenfold to reach 120,000 in only a year. The business owner of Tryfeel comments that women who want to confirm if they can really be satisfied with the products and services with discount rate by trial have increased in particular.

Companies have also been attentive to this strategy as an effective way of acquiring new customers. Many companies including high class hotels have already joined this campaign and the membership hotels and shops quintupled in a year. The Ritz Carton Osaka spokesperson says it pays as long as the new customers are converted into repeaters.

2) Low price plus appealing value/benefit(s)

Low price alone does not appeal to smart customers today; appealing value/benefit(s) to consumers in addition is also crucial. Defining the additional value/benefit(s) appropriately is the key for this strategy.

A good example is laundry detergent, “Attack NEO”, Kao’s best selling brand that recorded sales of 20 billion yen in a year. What attracted consumers is the product concept of “minimizing the number of rinsing in addition to its strong detergency. The concept leads to not only saving water and electricity but also wash time by 13 – 16 minutes in the case of drum-type washer-dryers. Decrease in wash time is supported by housewives, who are happy that that the product saved their house work time.

3. What new trend of customer and company relationship is emerging?

A few new trends of relationship between customer and company are emerging, that was not seen in the old economy. Underlying issue of this new trends is “who decides price = reflecting the value of products and services”.

1) Joint purchase

This is a system in which individuals (not acquaintances) connected on the Internet get together and seek to buy the products they want with low price. In this system, the more individual buyers get together, the lower the price it gets, sometimes as low as the price of major customers.

A good example is the recent case of a leading website called “netprice” http://www.netprice.co.jp/. The website attracted nearly 100 people who wanted to buy Adidas sports shoes in the beginning of this month. As a result, the price dropped from the original recommended retail price of 9,450 yen to 4,700 yen.

2) New pricing restaurant

In this new system, it is the customers that decide the price they pay for the foods they enjoyed.

The event of this new system is held by an organization that supports opening of restaurants in Yokohama. On average 3 events are held monthly and 40 reserved seats are always fully booked. The chef monthly serves cuisines full of originality. There is a rule that each customer needs to pay an admission fee of 1,500 yen and additional fee of the cuisine, maximum being 15,000 yen; however, the final decision of how much to pay is made by the customers who have enjoyed the cuisine.

4. What is the assumed future trend?

The eco-consumption style for lean and streamlined household spending is assumed to accelerate. It is companies and business owners that can catch up with such change and trend that is to open the new door to the new market. There are 3 points that support this assumption.

1) Result of recent household budget survey

A private financial institute recently executed household budget survey, to which 78% respondents answered that they want to review their household budget to make it lean and streamlined. Citizens just need to cut spending when their income decreases. In such a situation, if they want to maintain pleasure of living, they would need to focus more than they used to on spending performance in addition to low price.

2) Further downsizing in household budget

Household budget, that supports consumption, is estimated to further downsize in number of household as well as amount per household (= income). Due to low birthrate, the growth in the number of household in Japan is estimated to become negative in 2016 and by 2030 it will become 48.8 million households, which is decrease by 4% from today.

3) Shift in main players of consumption market

The main players of consumption market will shift to people in 20s and 30s, who have been brought up in “2 decades of deflation” when household budget has been downsizing. This is assumed to accelerate the trend of eco-consumption.