Winning in Japans Consumer Electronics Market

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  • 8/3/2019 Winning in Japans Consumer Electronics Market


    Aligning your marketing strategywith the Consumer Decision Journey

    Winning inJapans consumer

    electronics market

    McKinsey Asia Consumer and Retail

  • 8/3/2019 Winning in Japans Consumer Electronics Market


  • 8/3/2019 Winning in Japans Consumer Electronics Market


    Paul McInerney

    Brian Salsberg

    Ian St-Maurice

    Kotaro Ueda

    McKinsey Asia Consumer and Retail

    March 2009

    Winning in Japansconsumer electronics marketAligning your marketing strategywith the Consumer Decision Journey

    Contact for distribution

    Evelyn Lu - Phone: +886 (2) 8758 6765, Email:

  • 8/3/2019 Winning in Japans Consumer Electronics Market



  • 8/3/2019 Winning in Japans Consumer Electronics Market



    Introduction 6

    I. Summary of ndings 8

    II. The industry context:

    Japans consumer electronics market 12

    III. The consumer decision journey:How Japanese consumers buy electronics 16

    IV. A call to action: Market to consumers at

    every stage of the decision journey 24

    V. Opportunities for retailers 28

    VI. Research background and methodology 32

  • 8/3/2019 Winning in Japans Consumer Electronics Market



  • 8/3/2019 Winning in Japans Consumer Electronics Market


    McKinsey Asia Consumer and RetailWinning in Japans consumer electronics market


    Japans consumer electronics

    (CE) manufacturers are facing

    unprecedented challenges due to a

    combination of forcesdepressed

    consumer demand, rapid unfavorable

    shifts in exchange rates, increasing

    retailer consolidation, and product

    commoditization. Despite growth in

    sales of newer-generation products

    like at-panel TVs and new gaming

    systems, growth in Japans CE market

    has been difcult for the last decade

    and is expected to slow even further

    in light of the global economic crisis.

    In such an environment, the imperative

    for CE manufacturers is to win the war

    for market shareand doing so will

    require superior marketing and channel

    management. The need for Japans CEmanufacturers to boost returns on their

    marketing spend has never been greater,

    and yet the challenge of developing

    an effective marketing strategy has

    never been more complex: media and

    marketing vehicles have proliferated,

    the Internet has made information and

    opinions about brands and products

    easily accessible (e.g., via online

    reviews and blogs), and consumers

    are increasingly making purchase

    decisions based on information from a

    very wide gamut of sources. If they are

    to gain market share, CE companies

    must deepen their insights into exactly

    how consumers are learning about and

    choosing brands and products, and align

    their marketing strategies accordingly.

    It is for precisely this reason that we

    have undertaken proprietary research

    on consumers shopping behavior

    in a number of product categoriesand geographies, including CE in

    Japan. Our research has given us a

    more thorough understanding of the

    consumer decision journey, the

    process by which a consumer decides

    which brands and products to purchase.

    We have developed a conceptual model

    of this journey, breaking it down into

    distinct stages and dening the critical

    junctures that marketers must focus

    on to convert the consumer into a

    buyer. The model takes into account

    the many sources of information to

    which a consumer is exposed during

    the journeynot just proactive

    communication from marketers (e.g.,

    advertising) but also more passive

    inuences like word of mouth. We have

    also developed a set of tools to help CE

    players determine potential actions

    they can take to inuence consumers

    at various stages of the journey.

    In Japan, our research has highlighted

    a number of opportunities that CE

    manufacturers can capitalize on to meet

    their performance objectives and gain

    market share, even amid a challenging

    industry context. We have also identied

    opportunities for Japans CE retailers.

    This report, in which we discuss our

    initial ndings and recommendations,

    is divided into six parts:

    I. Summary of ndings

    II. The industry context: Japans

    consumer electronics market

    III. The consumer decision journey:

    how Japanese consumers buy


    IV. A call to action: market to

    consumers at every stage of the

    decision journey

    V. Opportunities for retailersVI. Research background and


  • 8/3/2019 Winning in Japans Consumer Electronics Market


    I. Summary of findings

  • 8/3/2019 Winning in Japans Consumer Electronics Market


    9Winning in Japans consumer electronics marketMcKinsey Asia Consumer and Retail

    Product innovation is, and will continue

    to be, a necessary differentiator in

    the consumer electronics category,

    as evidenced by the success of

    newer technologies such as two-way

    communicators as well as ground-

    breaking improvements to existing

    products such as Apples iPod and

    Nintendos Wii. However, given the rapid

    pace of follow-on or imitator products

    and the ever-shortening shelf lives of

    new technologiesnot to mention the

    sheer difculty of inventing the next

    great breakthrough technologyproduct

    innovation is no longer sufcient. Rather,

    CE manufacturers must nd ways to

    innovate commercially. They must

    build the capabilities to generate deeper

    insights into consumers decision-making

    behavior and, because consumer behaviorevolves over time, continually tailor their

    marketing plans based on these insights.

    In our recent research on Japanese

    consumers shopping behavior in the CE

    space, we sought a deeper understanding

    of what we have come to call the

    consumer decision journey (CDJ)the

    process that a consumer undertakes

    when deciding what brand or product to

    buy. We designed the research to ensure

    the right combination of qualitativemethodsin this case, half-day shop-

    alongs with Japanese consumers at the

    start of their CE shopping journeyand

    quantitative research, consisting of an

    extensive consumer survey with separate

    modules for ve major CE categories,

    namely FPTVs, PCs, mobile handsets,

    digital cameras, and refrigerators. The

    results of this work are relevant to CE

    manufacturers (and, to some extent,

    CE retailers), pinpointing opportunities

    to improve their ability to inuence

    the consumer at key moments in their

    decision journey. Highlights of our

    ndings include the following:

    Being part of a consumers

    initial consideration set



    most CE categories, 72 percent to

    80 percent of Japanese consumers

    have at least one brand in their initial

    consideration set (ICS), which is the

    set of brands that a consumer favors

    at the very beginning of the shopping

    journey. There are usually only one or

    two brands in this set, and between

    67 percent and 78 percent of the

    time consumers purchase a brand

    from their ICS. Manufacturers must

    therefore understand the drivers to

    getting into the ICS and more fullydevelop and employ the tools to

    inuence them.



    The typical Japanese consumers

    information-gathering stage takes

    between two and three months, during

    which time the consumer tends to

    get information from many sources,

    including multiple retail store visits,

    online searches, and word of mouth.

    Although most consumers have an

    ICS, across most CE categories

    20 percent to 28 percent of consumers

    do not have a specic brand in mind

    before they start to gather information,

    and between 22 percent and

    33 percent of consumers who

    begin with a brand preference end

    up purchasing a different brand.

    Manufacturers must therefore

    have a multichannel marketing

  • 8/3/2019 Winning in Japans Consumer Electronics Market



    strategy aimed at maintaining a

    brands connection and relevance

    with target consumers over

    an extended time period.





    ofpurchase. Many Japanese

    consumers (37 percent to 77 percent,

    depending on the CE category) make

    their nal decision about which brand

    to buy while in the retail storethe

    very place where manufacturers

    struggle to have any inuence over

    the shopping experience. Further

    consolidation among retailers will

    only make it more difcult for

    manufacturers to exert control over

    the retail sales oor.


    Across CE categories, 21 percent to

    46 percent of consumers say their

    current brand is their primary choice

    for their next purchase although they

    will consider other brands, while

    49 percent to 75 percent say

    their current brand is only one of

    many brand