The Dentsu Way

Secrets of Cross Switch Marketing from the World's MOST INNOVATIVE ADVERTISING AGENCY

By KOTARO SUGIYAMA, TIM ANDREE

The McGraw-Hill Companies, Inc.

Copyright © 2011 Dentsu Inc.
All rights reserved.
ISBN: 978-0-07-174812-4

Contents

Foreword by Tim AndreeAcknowledgmentsIntroductionPart 1 Dentsu comes of AgeChapter 1 The Origins of the Dentsu WayChapter 2 Breadth and Depth: An Overview of Dentsu's Scope and ServicesPart 2 The cross communication ImperativeChapter 3 From AIDMA to AISAS: The Growing Importance of Cross
CommunicationChapter 4 Cross Communication: A Look at What Makes It WorkChapter 5 Creating Scenarios for Cross CommunicationPart 3 Putting cross Switch into PlayChapter 6 Case Studies of the Cross Switch WayChapter 7 The Cross Switch Design ProcessChapter 8 From Insight to Scenario CreationChapter 9 Structure Design and Measurement for Cross SwitchEpilogueAppendix 1 Outline of Cross Communication Behavior SurveyAppendix 2 Dentsu Group Trophy CaseAppendix 3 Biographies of Key Dentsu ContributorsReferencesIndex

Excerpt

CHAPTER 1

THE ORIGINS OF THE DENTSU WAY

Dentsu Inc., founded in 1901, is the largest advertising company brand and thefifth largest marketing and communications organization in the world. Withoverseas branches and subsidiaries on four continents, whether measured as asingle agency brand or as a holding company, Dentsu routinely ranks among thetop companies of the world in terms of revenue. For the fiscal year ended March31, 2010, Dentsu's consolidated net sales totaled $18,041,897,000 (US $). Thesefigures will be explored further in Chapter 2. We are the largestadvertising agency in Japan, the world's second-largest advertising market afterthe United States. Our share of the mass media (newspaper, magazine, radio andtelevision) advertising market is around 22 percent, almost twice that of ournearest competitor. Dentsu operates in 27 countries worldwide, and our portfolioof more than 6,000 clients includes multinationals in established markets suchas the Unites States and the countries of Europe, as well as companies from theemerging economies in Asia and South Africa. That said, less than 10 percent ofDentsu's revenue comes from outside Japan. In fact, only $363,070,000 (US $), or2 percent of Dentsu's total revenue for fiscal 2009, came from the UnitedStates.

Not only does one marvel at Dentsu's size, but also the breadth and depth of ouroffering. As mentioned in the Introduction, we operate within a framework of"Integrated Communication Design," which extends beyond the traditionalparameters of the advertising business. Beyond the core of print and broadcastmedia advertising, the company does market research, branding, corporate imagedesign, new product planning, publicity, and even major event planning anddesign for sports and expositions. We have traded on the Tokyo Stock Exchangesince 2001. Chapter 2 will also examine some of the services and"Business Domains" in which Dentsu operates.

The company has undergone a major strategic transformation under the policy of"Good Innovation." toward digital marketing and to Integrated CommunicationDesign. This strategic shift is targeted to help us grow in pacewith—really ahead of the pace of—the digital world. It is also aimedto strengthen the offering, and bring growth, outside of Japan; that in fact isa lot of what The Dentsu Way is all about.

We have kept our traditional values, based on our long history, but on the otherhand, we also have the most innovative minds and technology at the same time.This is just like the beauty of Japan, which has traditional values, representedby Kyoto and many other historical centers of culture, and also has one of themost high-tech industries in the world at the same time.

So how did we get so big? How did we start? Where are we going? This chaptertells the story.

The Early Story: 1901–1945

Most view the United States as the birthplace of advertising, and it is stillthe leader, both in size and development, of the advertising and marketingindustry. While the United States leads the way, Asian advertising and marketingpractices have not been far behind and, in fact, have tended to keep up wellwith the development of the industry in their societies.

Japan was hardly considered an industrialized country in 1901 when a journalistby the name of Hoshiro Mitsunaga, shown in Figure 1.1, set up a newsagency called "Dempo Tsushin-Sha," or "Telegraphic Service Company," and anadvertising firm called "Nippon Kou-ko-ku KK," or "Japan Advertising Ltd." He nodoubt had a vision at the time to create and distribute the news and advertisingto go with it.

The Merger: An Early Innovation

Five years later Hoshiro Mitsunaga merged the two companies into one and calledit "Nihon Dempo Tsushin-Sha," which translates to "Japan TelegraphicCommunication Co. Ltd." The rather long title was abbreviated to "Dentsu"combining the "Dem" (but pronounced as "Den") and the "Tsu," in casualconversation, although the name of the emerging company didn't officially becomeDentsu until 1955. The full name was actually "Dentsu Advertising Ltd." in 1955.The company changed its name to "Dentsu Incorporated" in April 1978, and then to"Dentsu Inc.," its current name, in September 1987.

The Playing Field Changes

The Japan Telegraphic Communication Co. Ltd, or Dentsu, enjoyed a prosperousexistence for almost 20 years. Then, in 1932, the Japanese government called onall the news services to merge into a single national government-operated newsagency called "Domei Tsushinsha." In 1936, Dentsu was ordered to transition itswire service to this new mandated organization. This led the company to reinventitself as a specialized advertising agency.

Becoming a Media Powerhouse: 1946–1960

World War II was disruptive, to say the least, to Japanese business, and was nota time of prosperity for Dentsu. Hoshiro Mitsunaga, the founder, passed away in1945. After two presidents, the fourth, and perhaps the most famous of allDentsu company presidents, Hideo Yoshida, shown in Figure 1.2, tookcontrol in 1947.

To say the least, Yoshida was an interesting and dynamic leader. He was knownas-—depending on how you translate it from Japanese—"the big demon,"or "the devil of advertising" due to his aggressive leadership style. Forexample, executives were required to report to work one hour before the rest ofthe staff, and department heads were required to submit daily written reports oftheir activities.

Expanding the Meaning of "Agency"

Yoshida not only ran a tight ship, but he also made many significant changes tothe Dentsu business and is credited with setting the course of advertising inJapan into a modern, prosperous industry. He created new departments devoted toactivities beyond advertising and creative activity itself, including marketresearch, audience samplings and ratings, publications of advertisingstatistics, and public relations. Yoshida also brought new focus to what wasthen the new media of the day: radio and, especially, broadcast television.

The practice of market research and analysis was quite progressive for the day.Dentsu introduced random audience samplings, first by polling movie theateraudiences as early as 1948, and then by conducting surveys, initially for thepharmaceutical industry. These activities not only increased understanding ofcustomers to make advertising more effective, but they also helped establishsolid relationships and credibility with both clients and media outlets.

Yoshida's vision was to consolidate the functions of advertising and marketinginto a single agency, delivering a more complete service and making commissionstructures more favorable. Essentially this was a "win-win" for clients and theagency-—better, more complete, and comprehensive services for clients andmore revenue and margin generated for the agency. Yoshida extended this visionbeyond the agency itself into the media, and he played a big role in theestablishment of the first commercial radio stations and, later in the 1950s,television.

Yoshida believed that advertising was an "integration of science and arts" andworked hard to develop the quality of creative activity at Dentsu while at thesame time incorporating the latest advertising and marketing theories andmeasurements. His work went beyond elevating the quality of advertising atDentsu; he set out to improve the industry as a whole. In 1948, he started theannual "Dentsu Advertising Awards" for advertisements with outstanding creativequality. He created advertising trade organizations to measure audience size andbehavior, and to measure advertising activity and quality itself. He contributedto the initiation of the Japan Audit Bureau of Circulation Association and theestablishment of the Japanese Advertising Association in 1950, a predecessor ofthe Japan Advertising Agency Association.

Not surprisingly, Yoshida is credited with turning the traditional Mount Fujiclimb, which had first started in 1925, into a venerable Dentsu institution. Heset the trip, an overnight ascent of the 12,388-foot peak, not only as a yearlytest of staff strength and commitment but also as a show of his leadershipskills.

Accessing the Power of Radio and Television

Yoshida recognized that private-sector broadcasting was vital not only forDentsu but for the advertising industry as a whole. Dentsu devoted a lot ofenergy to the rise of the broadcast media. From that effort, Japan's firstcommercial station was launched in 1951. As a result, Dentsu became a big partof the history of Japanese broadcast media. See Figure 1.3.

Seeing the potential of television, Dentsu helped the fledgling televisionstations and networks find advertising sponsors. The company also created aspecial group within Dentsu to make the best use of the medium. Dentsu createdthe first television commercial ever shown in Japan; it was for Seiko Ltd.

In 1961, Hideo Yoshida became the "Man of the Year" of the InternationalAdvertising Association (IAA) for his outstanding contribution to theinternational development of advertising. See Figure 1.4. While stillactive with the company, he died in January 1963 at the age of 59. He wasconferred Japan's "Order of the Sacred Treasure" posthumously, and there is aprominent bronze statue of Yoshida at the Dentsu headquarters building in Tokyo.

Yoshida not only achieved acclaim in Japan as a genius of advertising, but healso was famous for his stringent business ethics, which ultimately werecompiled as President Yoshida's Ten Spartan Rules.

Multimedia and Multinational: Dentsu in the 1960–1990 Period

In 1959 Dentsu started an international expansion, first by establishing anoffice in New York, and then by establishing branch offices and subsidiaries inLondon, Paris, Moscow, Taipei, and Beijing. The goal was to help the by-then-booming Japanese companies deploy their business in these countries.

With the growth of the Japanese economy in the 1960s and 1970s, Dentsu expandedfrom a mere advertising agency into a major communications powerhouse. Wecontinued to maintain strong relationships with the media as well as with sportsand entertainment organizations. The 1964 Tokyo Olympic Games was a fusion ofsports and media, and a great momentum builder for Dentsu to expand itsbusiness. See Figure 1.5.

At the same time, the Japanese economy was growing in double digits through the1960s and 1970s, and Dentsu rode the tide. By 1968, Dentsu's billings were justbehind the leading American firms. By then the company had 5,000 accounts,including not only many of the biggest Japanese firms but also the business ofsome large American companies marketing in Japan.

Becoming #1: 1973

In most global markets it is considered unethical for a firm to handle theaccounts of two competitors. In the worldwide model the two accounts are oftenhandled through separate subsidiaries. Dentsu, on the other hand, made itstandard practice to accept competitor accounts, for example, multipleautomobile companies. Where possible, these accounts were handled in separatebuildings or on separate floors if necessary. We also had many strict securitypolicies for information control. The arrangement worked well in Japan andhelped Dentsu obtain greater dominance of the local industry. By 1973, Dentsuhad become the largest advertising agency in the world.

Total Communication Services

Gohei Kogure became the new president of Dentsu in 1985. He reaffirmed thecompany's commitment to gain an international presence, but he also served up anew philosophy and slogan to communicate Dentsu's position as a totalcommunications supplier: "Communications Excellence Dentsu." This slogan canalso be translated as "Total Communications Services," which is what it becamebetter known as later on.

The Total Communications Services idea followed some of the early philosophiesof founder Mitsunaga and President Yoshida, and was created to convey the factthat Dentsu combined all the key elements of marketing communications servicesunder a single roof. Those elements included strategic planning, branding,market research, traditional media advertising, media buying and planning,creative design, marketing analytics, sales promotion, public relations, anddatabase marketing. The company also blended in a few nontraditional services,like sports marketing and event planning. The upshot was that a client could getany necessary mix of services created and delivered in a neutral manner (notfavoring one service or platform over another) and uniquely tailored to theclient's needs and the market. It was "total" in the sense that it covered thebreadth of marketing services; it was "communications" because it transcendedthe limits of traditional mass advertising; the word "services" is self-explanatory.

Kogure reiterated the positioning difference between Dentsu and most worldwideagencies, which specialized in mass-media advertising only. This "breadth"strategy became a good foundation, especially with new forms of digitalmarketing to arrive later, for the "depth" strategy—deeper levels ofinvolvement with consumers leading to greater action and interaction betweenthem and the client. Here, the foundation was laid for the later "IntegratedCommunication Services" strategy and the "Cross Switch" application of "CrossCommunication," a Core Idea of The Dentsu Way and the subject of this book fromChapter 3 onward.

The 1990s: Globalization and Digitization

The expansion of consumer economies in Asia shifted Dentsu's expansion planstoward Asia. Dentsu expanded its presence in Asia by expanding its own officesand by buying Asian advertising agencies.

Dentsu had always viewed China as a growth opportunity, even back in the dayswhen few others did. In 1994 the company formed a joint venture with two Chineseadvertising agencies and called it "Beijing Dentsu." In 1996, as part ofDentsu's 95th anniversary activities, the company launched a special "Japan-China Advertisement Education Exchange Project," which focused on the mutualdevelopment of advertising education in both countries.

Expanding Total Communications Services

In 1993 Yutaka Narita became the ninth president of Dentsu. Narita's primarycontribution was to more firmly establish the positioning of Dentsu's servicesas "Total Communications Services," while also undertaking to enrich thecompany's offering through the adoption of investment in new technologies, mostparticularly the Internet.

As Narita put it, "The progress of technology will make human communication ofthe utmost importance. If people communicate better they can reach a higherlevel of mutual understanding and get one step closer to happiness. In thissense, Dentsu is positioned on the right track."

Dentsu Enters the Technology and Digital Age

Besides looking to Asia for new growth, Dentsu turned to new technologies as asource of future income. In 1996, Dentsu launched a new Japanese venture called"Dentsu Tec Inc.," with the "Tec" standing for "Technology for ExcitingCommunication." Dentsu Tec's mission was to "perform integrated salespromotional services and product planning based on marketing ability,creativity, and technology." The focus was using new technologies of the timefor sales promotions. Later, Dentsu Tec would use new digital, networking, andInternet technologies to expand marketing and develop new promotionalopportunities.

At almost the same time, Dentsu also founded another Internet advertising jointventure with Tokyo's Softbank Corporation, called "Cyber Communications, Inc,"or CCI. CCI was Japan's first firm to specialize exclusively in advertising onthe Internet, not only developing and expanding the use of the technology butalso buying and selling advertising space on the Internet in the style of theearly Dentsu days.

2000s: Moving Outward and Upward

The technology boom of the late 1990s and the steady march of globalization werethought of as a revolution in Dentsu's collective mind. Dentsu continued to moveforward to stay at the cutting edge of not only communications methods, but alsocommunications strategies, to make the best use of them. Indeed the world hadbecome much more complex and required a deeper understanding and deeper approachto communications management. With so many more ways to touch the consumer andso many more ways for the consumer to tune out your touch, it became imperativeto take a more "holistic" and "technical" view of the customer communicationprocess.

As President Narita put it at the turn of the millennium: "The years to come areexpected to see revolutions of both technology and globalization. Dentsu willcontinue to be on the cutting edge of communication, providing innovativesolutions around the globe," and, "Nowadays much effort is being made towardpursuing, fostering, obtaining, and investing in digital expertise in order toreact and respond to the flood of new technology, including the Internet."

As early as 1998, the company declared its intention to "go public" (it was aclosely held company at the time) and list its shares on the Tokyo StockExchange. On November 30, 2001, the shares were listed on the First Section,which is reserved for the largest Japanese companies.

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