The Dentsu Way: Secrets of Cross Switch Marketing from the World's Most Innovative Advertising Agency

The Dentsu Way

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

The McGraw-Hill Companies, Inc.

Excerpt

THE ORIGINS OF THE DENTSU WAY

Dentsu Inc., founded in 1901, is the largest advertising company brand and the fifth largest marketing and communications organization in the world. With overseas branches and subsidiaries on four continents, whether measured as a single agency brand or as a holding company, Dentsu routinely ranks among the top companies of the world in terms of revenue. For the fiscal year ended March 31, 2010, Dentsu's consolidated net sales totaled $18,041,897,000 (US $). These figures will be explored further in Chapter 2. We are the largest advertising agency in Japan, the world's second-largest advertising market after the United States. Our share of the mass media (newspaper, magazine, radio and television) advertising market is around 22 percent, almost twice that of our nearest competitor. Dentsu operates in 27 countries worldwide, and our portfolio of more than 6,000 clients includes multinationals in established markets such as the Unites States and the countries of Europe, as well as companies from the emerging economies in Asia and South Africa. That said, less than 10 percent of Dentsu's revenue comes from outside Japan. In fact, only $363,070,000 (US $), or 2 percent of Dentsu's total revenue for fiscal 2009, came from the United States.

Not only does one marvel at Dentsu's size, but also the breadth and depth of our offering. As mentioned in the Introduction, we operate within a framework of "Integrated Communication Design," which extends beyond the traditional parameters of the advertising business. Beyond the core of print and broadcast media advertising, the company does market research, branding, corporate image design, new product planning, publicity, and even major event planning and design for sports and expositions. We have traded on the Tokyo Stock Exchange since 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 Communication Design. This strategic shift is targeted to help us grow in pace with—really ahead of the pace of—the digital world. It is also aimed to strengthen the offering, and bring growth, outside of Japan; that in fact is a lot of what The Dentsu Way is all about.

We have kept our traditional values, based on our long history, but on the other hand, 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, represented by Kyoto and many other historical centers of culture, and also has one of the most 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 chapter tells the story.

The Early Story: 1901–1945

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

Japan was hardly considered an industrialized country in 1901 when a journalist by the name of Hoshiro Mitsunaga, shown in Figure 1.1, set up a news agency called "Dempo Tsushin-Sha," or "Telegraphic Service Company," and an advertising firm called "Nippon Kou-ko-ku KK," or "Japan Advertising Ltd." He no doubt had a vision at the time to create and distribute the news and advertising to go with it.

The Merger: An Early Innovation

Five years later Hoshiro Mitsunaga merged the two companies into one and called it "Nihon Dempo Tsushin-Sha," which translates to "Japan Telegraphic Communication Co. Ltd." The rather long title was abbreviated to "Dentsu" combining the "Dem" (but pronounced as "Den") and the "Tsu," in casual conversation, although the name of the emerging company didn't officially become Dentsu 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 prosperous existence for almost 20 years. Then, in 1932, the Japanese government called on all the news services to merge into a single national government-operated news agency called "Domei Tsushinsha." In 1936, Dentsu was ordered to transition its wire service to this new mandated organization. This led the company to reinvent itself 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 not a time of prosperity for Dentsu. Hoshiro Mitsunaga, the founder, passed away in 1945. After two presidents, the fourth, and perhaps the most famous of all Dentsu company presidents, Hideo Yoshida, shown in Figure 1.2, took control in 1947.

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

Expanding the Meaning of "Agency"

Yoshida not only ran a tight ship, but he also made many significant changes to the Dentsu business and is credited with setting the course of advertising in Japan into a modern, prosperous industry. He created new departments devoted to activities beyond advertising and creative activity itself, including market research, audience samplings and ratings, publications of advertising statistics, and public relations. Yoshida also brought new focus to what was then 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 theater audiences as early as 1948, and then by conducting surveys, initially for the pharmaceutical industry. These activities not only increased understanding of customers to make advertising more effective, but they also helped establish solid relationships and credibility with both clients and media outlets.

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

Yoshida believed that advertising was an "integration of science and arts" and worked hard to develop the quality of creative activity at Dentsu while at the same time incorporating the latest advertising and marketing theories and measurements. His work went beyond elevating the quality of advertising at Dentsu; he set out to improve the industry as a whole. In 1948, he started the annual "Dentsu Advertising Awards" for advertisements with outstanding creative quality. He cr
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Excerpted from The Dentsu Way by KOTARO SUGIYAMA. Copyright © 2011 by Dentsu Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
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