Marketing Analytics - Challenges and Opportunities - Samuel Bird - McGill MBA Japan 2016 - 20151210

Conclusion
Marketing Analytics
Challenges and opportunities
Samuel Bird
McGill MBA Japan program, class of 2016
[email protected]
December 2015
EXECUTIVE SUMMARY 2
INTRODUCTION 3
MARKETING TECHNOLOGY AND MARKETING ANALYTICS 5
MARKETING TECHNOLOGY INDUSTRY 10
KEY IMPACTS – OPPORTUNITIES AND THREATS 14
ADVICE FOR MARKETERS 20
JAPAN: OVERVIEW 24
MARKET RESEARCH 28
Insights from interviews and conferences 29
1. Use of marketing technology 30
2. Japan 34
3. Disruption for advertising agencies 38
4. Talent 41
5. Future trends 43
DISCUSSION 46
RECOMMENDATIONS FOR JAPANESE MARKETERS 51
APPENDIX 54
REFERENCES 72
Front cover image courtesy of Gartner. Accessed from:
https://www.gartner.com/technology/research/digital-marketing/transit-map.jsp
Samuel Bird – McGill University, MBA Japan 1

EXECUTIVE SUMMARY
This paper is intended as a briefing document for marketing professionals and attempts to
summarize the main developments in the advertising and marketing industry over the last few
years in regards to digital marketing, marketing technology and marketing analytics. It also
provides perspective on the current state of marketing in Japan and highlights some of the
challenges companies here are facing.
A review of the latest industry analyst reports reveal that marketing budgets are increasing
with a higher proportion being allocated to digital and mobile. To leverage marketing
automation and optimization, companies are investing in marketing technology and analytics
systems. IT and software companies are predictably leading adoption rates with the US
market especially seen as the centre of activity. Europe has a disparate market and Asia is
characterised by two leaders in Australia and Singapore with Japan and China behind.
Interviews with industry executives in Japan revealed that digital marketing is still in its early
stages and that the collection and use of data is in its infancy. Japanese businesses are
characterised as not having sophisticated internal marketing organisations and need to catch
up with the US to capture competitive advantages from marketing technology and analytics.
Marketing management in Japan needs to carefully consider how to build up marketing
capabilities and who to partner with. Advertising agencies, internet media companies,
technology and management consulting firms and new marketing technology firms are all
trying to position themselves as the key partner of the marketing director.
Recommendations for Japanese marketers include: creating a marketing organisation and
train specialists not generalists; creating digital infrastructures and embracing data to improve
marketing effectiveness; adopting and adapting global best practices; being agile and open.

INTRODUCTION
Around the world, advertisers spend an estimated $590 billion a year on media1 and
according to an August 2015 CMO survey, marketing represents on average, 11% of a
company’s budget2. Digital and mobile marketing are becoming increasingly important, and
an estimated $230 billion – 40% of the total – was spent on these channels this year (see
Exhibit 1 - Worldwide Advertising Spend)3. Digital marketing offers new ways to interact
with consumers and measure the effectiveness of marketing approaches. The message and
format of the communication, the pricing, promotional offers, and the type of media or
channels used can all be tested and results analysed in real-time. If a campaign is considered
ineffective, it can be refined as it is running. A/B testing and multivariate testing can be used
to optimize conversion rates of display advertising (banner ads), multi-channel campaigns
and websites including e-commerce sites.
In 2012, Gartner predicted that by 2017, Chief Marketing Officers (CMOs) would spend
more on IT than their counterpart Chief Information Officers (CIOs)4. It has also been said
that marketers are becoming data scientists and engineers5. The amount of data and range of
tools to analyse that data available to marketers now is vast – there are an estimated 2,000
companies that are providing Marketing Technology products or services (see Exhibit 2 –
Marketing Technology Landscape)6. Already, a survey of over 2,800 top US marketers are
spending 6.7% of marketing budgets on analytics and are expected to increase this spend to
11.1% over the next three years7.
How is the digital and data revolution in the marketing industry changing the way companies
interact with consumers? How is the increasing use of marketing analytics causing disruption
to existing ways of conducting marketing and advertising campaigns? Is marketing
technology an arms race or will its effective use become a source of sustainable competitive

advantage for companies? How are existing players in the marketing landscape – advertising
and media buying agencies – being disrupted? What is the current state of marketing in
Japan? What should marketers do to take advantage of new technologies now?
This paper aims to answer these questions by presenting a review of current industry research
on the adoption and use of digital marketing, marketing technology and marketing analytics
in both the US and in Japan; presenting qualitative research – interviews conducted with
industry executives based in Japan; and reporting on advertising technology and marketing
conferences held in Tokyo – between July and October 2015.

MARKETING TECHNOLOGY AND MARKETING ANALYTICS
Marketing analytics
Marketing analytics comprises the processes and technologies that enable marketers to
evaluate the success of their marketing initiatives by measuring performance (for example,
blogging versus social media versus channel communications) using business metrics, such
as ROI, marketing attribution and effectiveness as it relates to sales. Marketing analytics
gathers data from across all marketing channels and consolidates it into a common marketing
view. From this, one can extract analytical results to help improve marketing effectiveness8.
Marketing analytics can take many forms. Looking at the example of web analytics (the
systems that collect, aggregate and report on the activity of visitors to online sites), the
following activities can be included9:
 behavioural analytics – the paths that visitors take and how they interact with pages
 conversion analytics – optimizing a site to convert more visitors into customers
 customer intelligence analytics – customer feedback collection
 customer lifecycle analytics – retention and lifetime value
 messaging analytics – marketing automation, email and inbox reporting
 predictive analytics - use of data, statistical algorithms and machine-learning
techniques to identify the likelihood of future outcomes based on historical data
 real-time analytics – modifying the behaviour of visitors to increase the likelihood of
conversion
 sales analytics – prospects, leads and customer relationship management
 search analytics – monitoring search engine keywords, competitors, and how content
is ranking

 social analytics – tracking social ranking to understand why people follow your
company.
Evolution of digital marketing
One of the most-used providers of analytic tools for SMEs is Google. Google Analytics and
Webmaster Tools allows website owners to track the amount of traffic coming through
referrals (direct links), organic (non-paid) search engine results and through advertising on
Google’s search engine pages and on its advertising network, Google Display Network.
Indeed, when Google launched AdWords in 2000 as a pay-per-click advertising service, it
was a revolution for marketers. AdWords could display relevant ads using immediate
consumer intent and charge you only if an action was taken. AdWords and Google Display
Network, and its ad exchange and ad serving platforms collectively form one of the largest
digital advertising ecosystems.
The emergence of popular social media platforms such as Facebook and Twitter in the mid-
2000s gave anyone the chance to captivate a global audience of millions. Marketers could
now directly talk to a desired customer, and, for the first time, the customer could talk back.
With the development of e-commerce, product advertising could be displayed specifically to
entice an individual to make a purchase. As a result, companies shifted their strategies from
trying to influence large swaths of consumers with mass media, to developing personal
relationships with individuals10.

Figure 1. Traditional marketing model
brand agency media consumer
In the traditional marketing communications model, there was little use of information
technology apart from the use of spreadsheets in the compilation of campaign effectiveness
surveys and media spend reports. Today the marketing experiences landscape (i.e. how a
brand reaches a customer) is a complex web of different channels, media, platforms, content
management systems, search engine optimization and marketing, social media, digital
advertising networks, ad serving platforms, mobile, email marketing, influencers, customer
experience programs, interactive content, content marketing, events and webinars, online
communities and reviews, loyalty and gamification efforts, personalisation, testing and
optimization. These interactions are being planned and managed by marketing operation
functions such as audience and market research, performance and attribution, web and mobile
analytics, and via dashboards and visualization, business intelligence, customer intelligence
and data science. The middleware of marketing technology is now data management and
customer data platforms, integrated with the cloud and with enterprise service buses (ESPs)
and application protocol interfaces (APIs). The backbone of these platforms are customer
relationship management systems (CRM), marketing automation, campaign and lead
management, web content, user experience management and e-commerce systems. At the
infrastructure level, there are databases and big data systems, cloud, IaaS and PaaS providers,
mobile application development and web development teams (see Exhibit 2). Considering the
number and variety of service providers, infrastructure and technical solutions being offered,
some commentators have said that marketing technology is a trillion dollar industry11.

Larger organisations that are managing marketing campaigns across multiple digital channels
in multiple countries need to be able to collect and analyse data to run effective digital
marketing campaigns and to be able to implement changes on the fly. To achieve this
organisations now have the option to either build or buy a complete marketing technology
platform or build a portfolio (or a “stack”) of technologies from multiple vendors
In 2015, Gartner identified that “improving customer experience and the impact of marketing
and advertising increasingly requires the application of advanced analytical techniques that
were previously reserved for custom projects.”12 Techniques such as predictive, text, graph, and
machine learning are increasingly being adopted by marketing teams. The use of big data
analysis tools such as Hadoop, R and MapReduce can provide insights from disparate sources
of information.
Automated measurement processes provide definitive, reliable and timely insights into
marketing effectiveness and performance. Marketo, a leading marketing analytics provider,
proposed in 2012 that a successful analytics solution has four components13:
1. a centralized marketing database that includes historical data on marketing programs
ran, what their attributes were, who they touched, how much they cost
2. time series analytics that give marketers a full picture of their performance trends over
time
3. powerful, easy-to-use analysers so marketers can explore the data trends and gain
insight quickly
4. ad hoc reporting and dashboards - that allow analysts to “follow the scent” of
particular insights.

In summary
The amount of technology being used in marketing has increased in scope and complexity as
consumers lives have become more digitized over the past 15 years. Marketing analytics
started with being able to assess the effectiveness of advertising placed in search results can
now be used to track and assess consumers’ purchase journeys throughout multiple
touchpoints such as e-commerce, digital channels, social media and connected mobile
devices. Now there are approximately 2,000 companies operating in the marketing
technology space providing the infrastructure and systems to serve billions of digital
advertisements globally every day.

MARKETING TECHNOLOGY INDUSTRY
Enterprise marketing software suites
The marketing technology industry is in a period of both consolidation and diversification
– major enterprise-software companies are building and acquiring large “marketing cloud”
offerings whilst thousands of other start-ups are innovating new ideas around them14.
Marketing clouds, also known as enterprise marketing software suites, comprise of at least
four components15:
1. Multi-channel marketing automation – for publishing and promoting content that
helps marketers engage customers across several different channels, particularly
mobile and social.
2. Content management tools – to create and manage the content and engagement tools
that can be deployed across different channels.
3. Social media tools – for listening to and engaging with social media networks to tap
into consumer conversations, responding with custom content, or social media
advertising.
4. Analytics platform – to create profiles of consumers based on their online behaviour,
and evaluate which marketing campaigns are working and which are not.
Oracle, for example, has been recently acquiring a number of companies to build its
marketing cloud offering including Eloqua (marketing automation), Responsys (email
marketing), BlueKai (data management), Maxymiser (testing and targeting) and Datalogix
(analytics)16. One the other hand, the proliferation of marketing technology start-ups that
provide a single service, is also leading to the development of platforms with open APIs and
official independent software vendor (ISV) ecosystems. An example of this is

Salesforce.com’s App Exchange that has over 2,500 certified apps that marketers can plug
into a common technology backbone thus allowing an organisation to customise the
marketing cloud offering to its particular needs.
Adobe has “distanced itself from the pack” of marketing cloud competitors according to a
2014 Forrester report17, beating out Salesforce.com and six other vendors assessed. The
ranking was based on 46 criteria covering items such as current offerings, product strategy,
customer satisfaction and market share.
Figure 2 - How the leading enterprise marketing software suites rank
Image Credit: Forrester Wave18

Growth of marketing analytics
According to a survey of 130 business professionals in 2012, research firm Aberdeen Group
found that 98 percent of organisations planned to increase their use of data analytics for
marketing19. A July 2015 Gartner survey of 252 digital marketers revealed that the share of
the marketing budget for analytics now comprises 34% of respondents' budgets, up sharply
from 21% two years earlier. Increased investment is being used to hire analysts and to staff
centres of excellence, which 69% of respondents plan to have in two years. It is also being used
to obtain marketing analytics software, which commands a rising 17% of analytics budgets20.
The marketing data and analytics market was estimated to be worth $19 billion in November
2015 and is seen as one that is rapidly evolving21.
In September 2015, Gartner assessed a number of leading marketing analytics vendors along
two dimensions: ability to execute and completeness of vision (see Exhibit 3 - Marketing
Analytics Magic Quadrant)22. This process identified Adobe, Google and SAS as “Leaders”,
comScore, MarketShare and AOL as “Visionaries” and IBM as a “Challenger”. This is a
vibrant and fertile industry with IT service providers, management consulting firms,
marketing software companies, e-commerce solution providers, mass media, internet
companies and start-ups all involved.
Despite $50 billion in investment in the marketing technology industry by venture capital
firms and in mergers and acquisitions, a VentureBeat report states that the top tools only have
a 4.1% penetration rate. These tools include at the SMB level, email marketing, marketing
automation, and web experience optimization tools and at the enterprise level, marketing
automation. It has been said that “marketing technology is still on the wrong side of ‘the
chasm’”, i.e. describing how technology, when first developed, is often seen as too esoteric

for mainstream adoption. The report’s author notes that “while some categories have done
well, the vast majority have yet to capture the hearts and minds of the average marketer.” 23
Figure 3 - Crossing the chasm
Adapted from Moore, G.A. (1991), “Crossing the Chasm”24
In summary
The industry has attracted a lot of start-up investment and has experienced multiple mergers
and acquisitions. Both legacy technology companies and new entrants are jostling to establish
themselves as the preferred vendor of choice to both enterprise organisations and SMBs. We
are still in the early years of this sector’s development and standards are still being
established. The vast majority of companies have yet to implement integrated digital
marketing eco-systems and are yet to take advantage of the benefits offered by the
technology.

KEY IMPACTS – OPPORTUNITIES AND THREATS
Impact of digitization
One major impact that trackable, optimizable digital advertising has brought is a big shift
away from traditional channels of advertising – TV, radio, newspapers, magazines and out-
of-home (billboards etc.) – as they do not offer direct effectiveness tracking capabilities (see
Exhibit 4 - Digital Ad Spending Worldwide). This trend is increasing as digital and
customizable advertising becomes more prevalent. Although a threat for the traditional
media, this offers an opportunity for advertisers that can harness individualisation and
customisation trends and deliver one-to-one messages to consumers in traditional settings.
Google is testing personalised TV advertising25 and Apple’s use of in-store beacons that
communicate with the consumer via smartphone apps26 are not too dissimilar to the
personalised billboards as imagined in the 2002 Hollywood movie Minority Report27. A
future filled with connected devices dubbed the Internet of Things (IoT) will also offer more
opportunities to marketers and threaten traditional advertising agency business models that
rely on revenue from buying media. Social media and the rise of brands as content producers,
e.g. Red Bull TV, is challenging the traditional marketing method – campaigns to push
messaging about a product’s features and benefits – to pull marketing that is always-on.
Another key impact has been the power shift to consumers. Technology empowers people to
easily find the lowest-cost vendors for goods, and by using ad blocking software, they can
avoid digital marketing communications altogether. Individual customers can also influence
millions of potential customers by writing online reviews, tweeting and blogging. They also
expect product and service information that is personally relevant, timely and delivered via
their preferred channels28. Brands need to provide timely access to helpful information at a

time when consumers are open to offers and making purchasing decisions rather than by
interrupting their entertainment29.
To be effective in this new environment and maximize return on marketing investments,
organizations need a process and strategy that is customer-centred and powered by deep
customer insights30. Achieving marketing objectives and strategies will require a much more
granular analysis of customers and prospects than ever before.
Companies that embrace the data available and develop strong analytics functions and
expertise can take advantage of predictive modelling techniques such as decision tree
modelling, clustering, logistic regression modelling, neural networks and survival modelling.
These techniques can allow business to understand attrition propensity, customer value and
purchase patterns. Data and analytics allow for marketing optimization across all campaigns
and platforms and at a much larger scale than was previously possible.
Opportunities for technology vendors
Companies with millions of customers will require a vendor that has experience in handling
projects with vast amounts of data. This presents an opportunity for companies like SAS and
Accenture. Technology giant IBM also sees great opportunity in big data. As well as allowing
improvements to operations and decision making, data can enhance understanding of
customers (see Exhibit 5 – Big Data and Analytics for a Holistic Customer Journey). IBM
suggests that companies can acquire, grow, and retain customers by improving customer
interaction through personalizing marketing messages shown in each customer’s unique
customer journey; enhance profitability by realizing value from customer sentiment; and
build long term relationships through understanding retention and acquisition factors31.
Customer analytics can help organizations gain deep understanding into customer attitudes

and preferences to predict future behaviour and deliver a 360-degree view of the customer
throughout their lifecycle by considering the following three objectives (see Exhibit 6 - 360
Degree Customer View):
1. Obtaining the right data on your customer - sentiment, experiences and feelings
through social media
2. Process, store and manage the data
3. Building predictive models, such as with MapReduce, using the programming
language R, or using text analytics and other techniques can allow the marketer to
visualize patterns and acquire, grow and retain customers through personalization,
profitability, retention and acquisition32.
Threats to advertising agencies
For traditional advertising agencies, the new forces of marketing technology are an existential
threat. As budgets shift to fund digital marketing campaigns and more personalized customer
engagement, marketers at brands and B2B companies now need different competencies in
data analytics, content creation and channel proliferation to improve ROI33. A survey of
CMOs gave negative reviews to advertising and media agencies in three essential areas34:
Figure 4 – CMO Council survey of advertising agencies
Deliverable “Performed well” or “Performed very well”
the ability to manage the data explosion 30%
analysing data to create personalized experiences 29%
overcoming financial restraint and demonstrating ROI Less than 40%

In the same survey, only 5% of CMOs overall said they are confident in their media or
agency partner’s performance35. It was reported that marketers are looking well beyond the
traditional group of advertising agencies for expertise to drive marketing performance and
handle disruptive issues such as technology, data, digital migration, channel fragmentation,
and a more diverse, multi-cultural global consumer base36.
The challenge to ad agencies is coming from new competitors such as consulting firms who
can offer strategic planning and an independent view of technology partners and from
internet media platform owners such as Google and Facebook that are offering client services
teams to manage media planning relations without the need for agencies. A further concern
for the advertising industry is also that they are losing a key competitive advantage -
understanding the consumer - to their clients, who are developing in-house analytics team to
understand consumer behaviour from data they can now collect.
Opportunities for advertising agencies
There are opportunities for advertising agencies too. Compared to internet media companies
such as Google or Facebook, marketing cloud providers or marketing technology firms,
agencies can be channel-agnostic, becoming independent advisors and providing strategic
consulting. This will require agencies to keep abreast of new marketing technology trends,
and identify what trends are most important from a long-term strategic point of view. In
addition, according to a McKinsey report, “B2C companies are increasing their reliance on
agencies to help with marketing-effectiveness analytics, mobile, and content development
and management.”37 This should allow agencies to play on their strengths: understanding
marketing from end-to-end; creating content; and helping brands tell stories with emotional
impact.

Impact on marketers
For marketers, the new landscape offers both great opportunities and threats. Opportunities
abound if they can build up new capabilities ahead of their competitors, but if they are slow
to adopt, then they risk being left behind. In an October 2015 survey of 384 Association of
National Advertisers (ANA) members, 75% of marketers were concerned by “threats from
more agile competitors”38. The report also identified that organizational structure is related to
performance with command-and-control and matrixed structures being dropped in favour of
networked organizations. Top performing marketers were found to be more focused on the
customer, understand the entire customer journey and have better processes for capturing
insights. Automation is also seen as a critical capability in order to respond to disruption and
deliver consistent and personalized customer experiences.
Marketers in North America are increasingly seeing themselves as the drivers of business
growth but there are five potentially significant hurdles which if not cleared, could hobble the
prospects for an organization:
1. Being able to identify customers’ decision journeys and the critical stages of them -
key for understanding where to focus marketing efforts.
2. Having the capability to make data-informed decisions and to use insights into
customer behaviours to feedback into the organization and improve marketing
performance.
3. A lack of focus when trying to both build new capabilities and find new partners.
4. With the complexity of omni-channel customer experiences and the proliferation of
new technologies, marketers are at risk of overextending themselves. This will create
opportunities for agencies to support them especially in areas such as customer
insights and data management.

5. The final issue is one of speed. Top-performing companies have flexible
organizational models and agile ways of working to get things done quickly. On
average, ANA survey respondents reported that it takes eight months for an idea to
see the light of day, which is too slow for today’s business environment39.

ADVICE FOR MARKETERS
Evaluating marketing partners
In its Interactive Marketing Agency Evaluation Framework report40, Sirius Decisions
proposed five criteria by which marketers should evaluate their agencies: strategy, creative,
demand generation, social media and reporting. Thirty years ago, marketers sought only
creative from their agencies, and by the 1990s, marketers might have looked for strategic
input and clear reporting. It is only recently that marketers have expected their agencies to get
involved in demand generation or to provide sophisticated reporting. If Moore’s Law
continues to hold true then we can expect to see technology having an ever greater impact on
marketers and their agencies, and the automation landscape to evolve even faster. Many
marketers remain ‘stuck in the dark ages’, and rely on agencies to help them emerge from it.
The marketers who fail to do so will soon find their brands, companies or job are
marginalised. As a necessary effect of this, the agencies that embrace this new technology
now will soon find themselves in possession of a point-of-difference that few potential clients
will be able to resist41.
The shift to customer experience
Marketers also need to adjust for the shift to the customer experience at the heart of modern
marketing. Brand value as a percentage of enterprise value is less important now than repeat
customer value (see Exhibit 7 - Repeat Customer Value vs. Brand Value as a Percentage of
Enterprise Value)42. This means that the end-to-end customer experience is more important
than the flashy advertising campaign. Google speaks of being present during the “micro-
moments” that consumers are researching your product, competing products, reading
reviews, comparing prices and checking availability at local stores43. This is increasingly

happening on smartphones and mobiles so marketers that embrace mobile and the concept of
omni-channel will win in the new B2C marketplace.
Talent: think outside the box
Responding to Gartner’s data-driven marketing survey in the first half of 2015, digital
marketers said they are “all-in” on data-driven marketing; analytics are booming as
organizations staff up and skill up to take advantage of the deluge of information thrown off
by marketing systems and the imperative for insights and accountability44. The survey of 252
digital marketers found that analytics’ share of marketing budgets is rising fast – up to 34%
from 21% in 2013 – and that 27% of the analytics budget goes to outside experts45. The
report also highlights that skilled, deeply experienced analytics talent is scarce. Therefore to
take advantage of these opportunities, companies should be hiring individuals from diverse
and non-traditional backgrounds that have analytical qualifications and an interest in
marketing. Training should also be considered to develop current human resources.
Tech firms lead the way
Despite all of the press surrounding the proposed benefits, marketers are not adopting the
latest marketing technology. Reasons include budget restraints, perceived difficulty to
implement or integrate with existing technology and internal resistance to change (see Exhibit
8 – Understanding the New Martech Buyer Journey)46. For example, in 2014, it was
estimated that only 16% of US-based B2B companies use marketing automation
technology47. While adoption rates for information technology companies is high (65%), only
2% of healthcare companies use it (see Exhibit 9 – Marketing Automation Platform Adoption
Rates). SiriusDecisions’ technology practice director calls this a “tremendous opportunity”
for marketing automation technology providers 48.

Be agile
Companies looking to adopt new marketing technologies should embrace agile project
management and consider that in software, there is “no silver bullet”49, i.e. there is no
singular thing you do to achieve a significant boost in productivity or reliability - you need to
do many things. Taking marketing analytics as an example, a 2015 CMO survey revealed that
there were at least twelve different ways analytics were being utilized including in customer
acquisition and retention, segmentation and pricing strategies and marketing mix planning
(see Exhibit 10 - How Companies Are Using Marketing Analytics).
Be digital
Econsultancy proposed that a marketing organisation with a truly “digital culture” is defined
by seven key characteristics50:
1. Customer-centric in mission and management
2. Data-driven in decision-making and analysis
3. Populated by makers and doers
4. Transparent in how it operates
5. Collaborative beyond the limits of an organizational chart
6. A learning organization that proactively embraces change
7. Agile — able to iterate rapidly and adapt to feedback
Companies with a digital culture will be able to react faster to customers and adapt best-in-
class practices for their businesses. Digital marketing allows for cheap and easy
experimentation on a short-cycle basis — agile marketers are able to quickly launch new
experiments and immediately apply the learnings to the planning to the next cycle, similar to
the start-up mentality of “build-measure-learn”51.

Future-proofing
Companies with an automated marketing structure can also take advantage of opportunities
thrown off from the coming Internet of Things. In the past five years, there has been a shift
from an era of brand voice (advertising) to an era of consumer voice (social media). This will
be complemented with a third era of product voice, where every product will have a digital
identity. This opens up new worlds of possibilities with products-as-media, products-as-a-
service, and broader ecosystem-connected products52.
In summary
The traditional marketing industry is being disrupted by multiple trends and advertising
agencies need to adapt in order to survive. Especially in the area of marketing technology,
there is a new competitive landscape consisting of IT services firms, digital marketing
agencies and management consulting firms all trying to be the CMO’s “best friend”53. There
is a trend for brands to bring marketing data management and analysis in-house so to better
understand the customer54. Advertising agencies, whose traditional value proposition was
being the expert on consumers, now need to ensure that they are still relevant. There is a risk
that without a refocus on a more consultative approach, they will be pushed down the food
chain into less of a strategic role and with more emphasis on only producing creative content.
Marketers should consider new ways to evaluate their marketing partners and vendors; look
hard at how IT firms are leveraging technologies to get ahead; and plan on implementing
agile and digital cultures that bring into play marketing automation to take advantage of new
marketing channels in the future.

JAPAN: OVERVIEW
State of digital marketing in Japan
Total media ad spending in Japan will top $42 billion in 2015, with 25% going toward digital
media and it is predicted that mobile internet ad spending will drive digital media gains.
Spending on mobile internet ads in Japan will reach $4 billion in 2015, up 40% from last
year, and see double-digit growth rates through 2019 (see Exhibit 11 – Total Media Ad
Spending in Japan). Programmatic advertising is becoming more prominent in Japan,
especially for mobile. Programmatic spending on smartphone ads is rapidly growing and is
expected to reach ¥123 billion, approximately $1 billion (see Exhibit 12 – Programmatic
Digital Display Ad Spending in Japan). Social media, especially Facebook and Twitter, are
also important for brands with 22 million and 18 million monthly unique users in Japan
respectively (see Exhibit 13 – Leading Social Media Properties in Japan).
Asia has now surpassed Europe in terms of digital marketing budget allocation - this is
according to an Adobe-sponsored CMO Council report on the state of digital marketing in the
APAC region55. Not all markets are moving at the same speed though. Australia and
Singapore are digital leaders “creating competitive advantage through omni-channel
engagements” whereas laggards such as Japan and China possess “leadership teams who are
not fully converted into believers” and are “holding back marketers, and by extension, their
own organizations.” The relative positions of countries rated can be seen in the table below56
(see Exhibit 14 - Digital Marketing Performance Dashboard 2014, APAC and Japan - for the
original data).

Figure 5 – State of digital marketing adoption across the Asia-Pacific Region, 2014.
Adapted from Adobe reports
Region/Country Mindset Marketing Organizational Marketing

Readiness Alignment Skills
Australia 7.9 6.4 4.6 2.3
Singapore 7.1 5.2 3.7 1.8
Hong Kong 7.4 4.6 4.4 1.4
APAC 6.7 5.1 3.8 1.7
India 6.6 5.3 3.7 1.6
South Korea 6.8 4.0 3.1 1.7
Japan 6.5 4.6 3.3 1.0
China 5.2 4.7 3.4 1.2
All ratings are on a scale of one to 10, with 10 being the highest. The overall rating for each
category is an average of four key indicators beneath each measure.
The survey reveals that Japan is slow to adopt digital marketing compared to other countries
in the APAC region. On the other hand, Japan’s broadband and mobile environments are well
established and many Japanese consumers actively engage in online shopping. There is
already a strong foundation in place for businesses to improve customer satisfaction and
deliver a richer, more impactful customer engagement experience through a more integrated
use of digital marketing. Japanese businesses have opportunities to advance quickly by
deploying digital marketing57. However Japan lacks a developed talent pool and that “most
marketers lack the skill sets needed to understand and glean insights from data” 58.
Japanese MarTech – a familiar story
Japan’s marketing technology landscape is estimated to be about 10% of the US59. Although
smaller, it has the same basic structure and a number of international companies are present

in the market (see Exhibit 15 – Japan’s Display Advertising Technology Landscape)60. The
wider data analytics market in Japan is estimated to grow at a CAGR of 34% from 2014-2019
and is estimated to command a share of 33% by 2014 of the global big data analytics
market61. Becoming fluent in big data and advanced analytics can help retailers better
understand and segment their customers and make both front- and back-end operations (such
as sales forecasting and employee scheduling) more efficient. Companies can capture new
value added by implementing pricing strategies built on a deeper level of marketing insights
from big data. A December 2014 Nikkei survey showed that many Japanese companies are
tapping into big-data analytics to improve the efficiency of marketing but lack qualified
experts – 93% of companies cite this problem and 42% have 10 or less big data specialists in-
house62.
Both B2B and B2C marketers in Japan consider a campaign to be successful when they gain
“insights into customer behaviour” and “high ROI”, favouring these metrics over regularly
measured metrics such as Click Through Rate (see Exhibit 16 – Ways in Which B2B vs. B2C
Marketers in Japan Measure Campaign Success). Marketing analytics can both bring insights
and improve effectiveness, leading to higher ROI. Marketing software solutions revenues in
Japan are already over ¥80 billion and predicted to grow to ¥130 billion by 2019 (see Exhibit
17 – Marketing Software Solutions Revenues in Japan). Big data software solution revenues
in Japan are also growing at a rapid pace, with ¥11 billion in sales in 2014, a 40% year-on-
year increase. Sales are predicted to grow to ¥47 billion by 2019 (see Exhibit 18 – Big Data
Software Solution Revenues in Japan).
A 2015 Salesforce.com white paper reports that the most pressing business challenges for
Japanese marketers are quality of leads, quantifying marketing’s return on investment and
remaining up to date with current marketing technology (see Exhibit 19 – 2015 State of

Marketing)63. Social media was considered a key area for increased spending, with over 50%
of respondents stating they would spend more on social media listening, marketing and
engagement. As for the technologies needed to create a cohesive consumer journey, about a
quarter of respondents listed mobile applications, marketing analytics and CRM tools. In
contrast, global marketers’ most pressing challenge was new business development and over
two-thirds of respondents said they were planning to increase spending on social media
advertising, marketing and engagement as well as location-based mobile tracking and mobile
applications. As for marketing technologies, mobiles applications, marketing analytics and
CRM tools were identified by over half of respondents. Globally, 38% of marketers said they
plan to shift spending from traditional mass advertising to advertising on digital channels. In
Japan, only 20% said the same.
In summary
Japan’s digital marketing industry is less mature than in North America or Europe. There is
great opportunity for companies to gain competitive advantage by adapting the latest
technology and analytical methods faster than their rivals.
The next section – results from qualitative research with industry executives – explores in
more detail the current state of digital marketing, marketing technology and marketing
analytics in Japan.

MARKET RESEARCH
Methodology
To help understand the current state of digital marketing, marketing technology and the use
of marketing analytics in Japan, a set of qualitative research was conducted. Between July
and October 2015, individual one-on-one interviews were conducted in Tokyo with managers
responsible for the Japan market. Interviewee and company profiles were as follows:
 A data and insights centre leader at a top-three Japanese advertising agency
 Head of consulting and analytics at a global advertising agency
 Managers of a big data team at a Japanese e-commerce retailing platform
 Marketing director at a global technology service provider
 Head of the data science department at a global social media platform
 Digital marketing manager at a global consumer electronics company
 Head of marketing at a global FMCG company
 Head of sales at a global marketing software company
 Digital business director at a global advertising agency
The same set of questions were asked to each interviewee (see Exhibit 20 – Interview
Questions) and the responses were collated and summarised into a set of insights around five
key themes (see an overview of the themes on next page). Comments from presenters at
advertising technology conference ad:tech Tokyo International64 and marketing conference
World Marketing Summit Japan 201565 were also recorded and integrated into the summaries
to give a top-down view of the state of marketing technology and analytics in Japan.

Insights from interviews and conferences
Five broad themes were explored and the insight from the interviews and conference speakers
are contained in the following pages. Key insights and quotes are highlighted in bold.
Overview of themes
1. Marketing technology 4. Talent
 How marketing technology is being used  Competition for talent
 Measurement and attribution  Training
 Agile marketing  Central resources
 Data-driven creativity
2. Japan
5. Future trends
 Behind the curve  Data is integral

 Data challenges  Change of mindset
 Globalization pressures  Mobile
 Opportunities
3. Disruption for advertising agencies
 New competition
 New business models

1. Marketing technology
How marketing technology is being used
Companies in Japan are keen to get up to speed in digital marketing, introduce marketing
technologies or marketing analytics but there is no single direction that companies are
following. Organisations are making different decisions – whether it’s working directly with
a single marketing cloud provider, or using multiple technology and services providers, or
bringing in consulting firms to help navigate the new landscape, or developing in-house
capabilities, or a combination of all of them.
Presentations at the advertising technology conference reveal that big data is becoming a hot
topic across the Asia-Pacific region. In terms of data volume, Japan is seen as a leader but
there are questions on how to make the data, and insights from it, actionable. In Europe there
are “30 countries going at different paces”. For example in the Netherlands, 80% of digital
advertising is bought through programmatic methods, whereas in Germany, the majority of
advertising is still sold over the phone. Overall, Europe has a vibrant industry with lots of
innovation and competition. The US is seen as the most advanced market with lots of
attention currently being paid to mobile. Speakers reported sophisticated mobile campaigns,
including the use of in-store beacons and personalised ads. The US advertising industry is
also reportedly displaying a burgeoning interest in wearables and the Internet of Things.
The e-commerce retailer uses analytics for “targeting marketing offers to users, for
forecasting demand and supply of goods and for fraud detection”. Analytics are also
used to “help merchants on their marketplace platform, providing insights into pricing
strategy and incentive programs”. Data warehousing services from Teradata and a Hadoop
cluster are used to manage the data and python is used for the analysis. 100 people are

employed in the big data department, of which, 50 are directly involved in data analytics.
Data dashboards are planned for all employees with Business Intelligence functionality
provided to strategic management level staff and deep data analysis tools provided to data
scientists.
The technology service provider has six marketing teams and they use their own propriety
tools, which are also sold to customers. These tools are used to “measure how users interact
with the products and services lines’ websites (including bounce rates and the
performance of promotional offers), to track the performance of paid programmatic
media, to perform CRM and database marketing and for marketing automation
efforts”. To help with marketing planning, the teams use predictive modelling tools to assess
the potential effect of changing marketing variables. The company pursues what it calls
“intelligent marketing” and has a set of documented best practices that are followed by all
teams globally.
The US consumer electronics company uses marketing analytics for budget allocation and
optimization with a focus on ROI measured through cost per click and cost per acquisition.
There is a company policy not to use targeting or retargeting techniques after qualitative
research into consumer opinion revealed “people feel that ads that follow them are
creepy”. In addition, in order to control where their digital advertising is displayed and
therefore by extension, their brand image, placement orders are made manually rather than
via automated systems.
The global FMCG company considers and uses analytics from a retail perspective, collecting
data from POS in convenience and drug stores and combining it with consumer tracking data
from a third party market research company. Consumer personas can then be identified via
day-to-day purchase behaviour data. The company spends around 15% of revenues on

advertising and promotion and 10% of that is allocated to digital and social media platforms
such as YouTube, NicoNico, Facebook and Twitter. Marketing analytics reveal “strategic
consumer insights, category insights” and helps with “price and packaging planning as
well as business process optimization, including minimizing stock levels, forecasting and
demand planning”.
Measurement and attribution
The data science department at the global social media company is focused on measuring
advertising performance on their own platform – to improve the visibility and effectiveness
of ads – as well as uncovering new understanding of users’ behaviours. These are combined
into ‘brand lift’ insights for advertisers. The conversion lift test is based on experimental
design and only considers causal effects, which was highlighted as rare when compared to the
competition’s offerings, with the executive saying “many attribution models do not do
enough to separate correlation and causation”.
The US electronics company does not use last-click attribution when assessing digital
advertising effectiveness, instead using “a multi-touch attribution method that weighs
efficiency and contribution”.
The marketing software company reports that data is used to make decisions throughout
every level of the organisation as part of their “consensus culture”. They use their own
marketing automation and analytics tools to track the performance of search engine
marketing, display advertising and email campaigns. Each product has its own web page and
impressions, clicks and conversions are tracked and combined into a weekly scorecard.

Agile marketing
A current trend in software development is the move to an agile world with continual
updates. The example of Microsoft’s Office suite was given at a marketing conference with
the presenter saying, “Before, MS Office would release a new version once in three years.
Now Office 365 is updated once in three weeks.”
The technology service provider reports that all of their marketing campaigns are agile,
meaning that they are “launched, assessed and optimized whilst running using a PDCA [plan,
do, check, act] process”. Feedback from sophisticated versions of A/B testing and progressive
information gathering techniques also allows “deeper questions around user behaviour to be
answered”.
The marketing software company’s advertising budgets are reallocated every Monday based
on the weekly scorecard, with more budget being focused into higher performing channels.
Further, every three months the website content is tested against new hypotheses and
scenarios. 300-400 different combinations of copy – including differing product descriptions,
tone of voice and nuances – and design features like overall style and colours are tested on a
multi-variate basis.
Data-driven creativity
Both global advertising agencies interviewed reported that programmatic advertising
allows the use of multivariate testing on brackets or streams of communications. For
example, 30 audiences segments can be tested with 5 different messages each. This approach
improves the marketing messages: “creative can be more targeted, more time-sensitive
and optimized to the audience”. Taking this idea further is dynamic creative, where
advertising is automatically created with variations of copy, images, calls-to-action and

promotional offers: “the best performing versions will rise to top and can then be further
refined manually to optimize the campaign messaging”. However, despite the benefits that
technology can bring to refining an idea, one agency executive is wary of the impact,
paraphrasing Steve Jobs by saying “don’t let a focus group drive your creativity”.
The Japanese advertising agency is working with a global creative platform to outsource
idea generation and creative development of digital video campaigns. When a Japanese
brand is planning to enter a new product into a foreign market, a contest is held for locally-
based directors to produce digital content like graphics or video that is relevant and engaging
to that market. The users of the platform vote for their favourite and the winning producer
receives a prize. The brand receives ideas from the local market that can also be trialled in
other markets. The executive reported, “We initially faced initial scepticism from Japanese
brands, but after we showed successes they were convinced. We’ve now run over 30 projects
in the past 4 years.”
2. Japan
Behind the curve
The head of consulting and analytics at an advertising agency says that, “Japan is 10 years
behind in the use of data in marketing”. Marketing automation technologies such as data
management platforms or demand-side platforms are starting to be used with adoption
accelerating recently. Measuring and testing was deemed to be “essential” for improving
advertising effectiveness but it was reported that “currently clients are not interested in
investing the time or budget to do so”. His experience is that “marketers have the desire but
that general management do not yet understand the need for digital marketing”. Some of his

clients are reluctant to implement new technology as they are “unwilling to measure
advertising effectiveness in detail as it would increase accountability”. In addition,
traditional methods, that have been retired elsewhere, are still being used in Japan, such as the
Link test66 to test TV ads before launching in the marketplace. According to the interviewee,
this is no longer used by major advertisers in the rest of the world.
The view from the technology service provider is that in the enterprise business, their
company is “ahead in the US and way ahead in Japan”. The executive reported that, “Japan is
still dominated by face-to-face sales organisations and large businesses here didn’t opt-in
and create marketing organisations like in the US”. The issue now is that consumers are
looking for information about products online now and there is a lack of companies that can
serve them well. “In the US, we are having conversations with CMOs. In Japan, we are
helping companies build a marketing practice using our tools.” The company is helping
with organisational design, introducing new systems and providing consulting and training.
The executive reported that, “Japanese businesses need to first install systems to collect the
right kinds of data before they can do any analytics”.
“Japan is not digitally savvy,” was the view of the social media company executive, and is
“not open to new technology”, and compared with the US, which has a “done is better than
perfect” mentality. He also opined that, “there is a fear of failure in Japan”.
For domestic advertising agencies, there is also a negative perception in terms of their speed
of delivery. The marketing manager of the US consumer electronics company says that
“Japanese agencies are super slow. We use a global agency through a global contract.”
The marketing software company executive revealed that “In Japan, marketing is still seen
as art not science” and that the head of marketing at a company or brand is often a creative

professional from an advertising agency. He commented that, “in the US, organisations have
the title of CMO and he oversees the budget for marketing technology. In Japan the budgets
for digital marketing solutions tend to be controlled by IT departments and are small.”
He also reported that US companies are adopting marketing analytics quickly, and that the
pace of adoption in Japan is not as fast. One explanation offered is that “the base level
understanding of statistics is lower in Japan.” He also believes that, “statistic experts tend to
go into finance or engineering not operations, marketing or sales”.
Data challenges
Many interviewees reported on the unique challenges in Japan. Japan’s opt-in email
marketing legislation – in comparison to North America’s opt-out policy – means that new
strategies are required to acquire contacts and tell marketing stories digitally. One
strategy is to leverage third-party media data but this too has its challenges. According to the
technology services provider, “compared to the US, [third-party media data] is archaic
and offers no analytics”. There are also restrictions on the use of data. Personal data
collected in Japan cannot be used or analysed outside of the country. A further challenge is in
leveraging the user data that online publishers can collect. The technology services provider
also said that, “media owners in Japan do not include data in their business model and
therefore don’t have the skillsets or resources to offer to advertisers”.
Globalization pressures
The Japanese advertising agency representative reported that, “Japanese companies are
struggling with a lack of innovation, globalization and responding to global trends in digital.”
In his view, Japanese companies need to change the way they connect with consumers and
the methods of communication. Social media and the emergence of ‘Generation C’ – people

who are “connected, creative, collaborative and clicking” – has changed consumers’
expectations of brand communications67. To overcome this, Japanese companies need to
spend time outside of Japan to understand this new group of consumers, to research how to
engage them and to connect with them through new kinds of marketing messages.
A similar message was recorded from head of digital business for a US advertising agency,
“Japanese business are going global and so will need to play by global rules”. In regards to
optimizing marketing through data, he feels Japanese agencies are being pushed from the
outside by international agencies and by Japanese clients going global. He gives a warning to
big agencies like Dentsu, who “are not solving any problems or creating additional value for
their clients”.
Opportunities
The marketing software company sees great opportunities in Japan, citing that Japan’s total
advertising spend is the second-highest in the world. The challenge for the company is to find
marketing technology advocates on their clients’ side. The company finds that they need to
train clients on the benefits and try to influence organizational change. This is demonstrated
in the comment, “clients need to embrace change and adopt new solutions”. From their
perspective, there are signs of growth – the industry is talking about how to digitize and
automate, “Marketing Automation has become a buzzword” – and he reports that some
competitors are doing well. His view is that change is coming soon, saying, “the tipping
point may be next year”.
Not all companies or industries will move at the same pace though. According to the same
executive, “B2C companies in fast-moving, competitive industries, e.g. ANA, Rakuten,
Nissan, Uniqlo and Yahoo, are using multiple marketing solutions whereas B2B companies

are more relationship-based, with long-term accounts managed through face-to-face
interactions.” He also voice frustration about the lack of data that come from brick-and-
mortar stores, saying, “retail channels, like Yodobashi or Bic Camera, are still SKU-
based, and can’t tell us anything about their customer profiles”.
From the US advertising agency’s perspective, firms here are slowly realising the potential
for marketing analytics. There is an issue with moving to the next step, “Japanese
companies have the data but don’t know what to do with it”. An example given was the
national loyalty program, T-point, run by Culture Convenience Club (CCC). T-point cards
are held by 30% of Japanese population but CCC has yet to take advantage of their users’
data as the supermarket Tesco did in the UK68.
The US technology services provider thinks that there are opportunities to expand the
existing marketing ecosystem and create new business models though she conceded that this
was reliant on “Japanese companies having an open mind to work with other vendors and
unproven entrepreneurs”.
3. Disruption for advertising agencies
The general consensus among the industry representatives was that there is major disruption
in the advertising industry and agencies themselves are at risk of extinction or at least
requiring a pivot to new business models. There will be a convergence of services offered by
consulting firms, advertising agencies, marketing technology firms and internet media
owners.

New competition
Advertising agencies are offering analytics and consulting services, consulting firms are
buying digital creative agencies, marketing technology companies are taking budgets away
from traditional media (and therefore advertising and media agencies) and internet companies
like Google are setting up in-house creative and client services teams. From the consulting
firms, so far only Deloitte – who has set up a digital services business that is finding success
in marketing operations – is on the radar of advertising agencies with all three agency
representatives talking of them as current competition having hired a creative director last
year. Accenture and IBM were mentioned as future contenders and Oracle was also
mentioned as a player with its Datalogix offering considered strong, as it combines retail data
with digital advertising to better target specific customers. The US technology service
provider interviewed is entering this space too – selling automation and analytics tools and
helping with marketing organisation design. Their suggestion to clients is to, “build an
internal team of consultants and set up an ecosystem of partners”.
Google is supplying “highly effective ad offerings” and is “educating SMEs and large
organisations on the benefits of digital advertising”. From one agency executive’s
perspective, “Google will be a competitor in 10-20 years”. An alternative perspective was
given by a competing international agency stating that, “the competition is not agencies like
Ogilvy, Dentsu or Hakuhodo; it’s Google, consultancies and start-ups.” To illustrate this
point, he cited that The Zoo, its in-house agency, operates a client services department and
that they are also offering media planning services (on Google’s own media) and creative
solutions to clients directly.
Advertising technology and marketing technology firms are educating Japanese businesses on
using the right metrics to measure effectiveness and also how to conduct research to produce

actionable insights from marketing data. Consulting firms are seen as also educating
companies but are seen as “slower and offering more of a strategic overview”.
New business models
Advertising agency companies are reacting to this new paradigm however. The social media
company executive noted that WPP is seen as ahead of its competition having “invested
heavily in digital, especially at subsidiary MediaCom”. It is also able to “combine digital
insights with offline insights from its research company Kantar”. Similarly, in Japan, “Dentsu
is realising the TV business won’t last forever and are investing in digital”. The same
executive noted that, “within its Aegis network, media planning now starts with digital”.
The three agency executives each said that Japanese advertising agencies need to change their
business model, their role with the client and the structure of their business. One executive
said, “These days agencies don’t have the exclusive connection with consumers they once
had, and social media has allowed companies to directly interact with consumers and gain
insights into their preferences and interests”. The three-largest agencies in Japan - Dentsu,
Hakuhodo and ADK – are finding it hard to change their ways though. The Japanese agency
executive said, “60% of their revenue comes from mass media buying so for them it is hard to
gain support internally to switch focus to new marketing methods”. The same person also
said that some agencies are “setting up consulting businesses focused on consumer-centric
marketing”.
One international agency executive predicts that “in 5-10 years, there will be a new
landscape with much fewer agencies and fewer groups” and also poses the question, ‘Will
agencies still be around?’ In his point of view, “companies will build internal teams to
manage data and analytics, paid media, social, CRM, content creation and their

websites. Agencies will need to offer outside insights on trends and innovation, risks and
opportunities, understanding the consumer and strategy at consultancy-levels of quality”.
The digital business director at the global agency says that the marketing industry also needs
to consider what to measure and what not to measure. Agency staff should be asking ‘what
are the pain points?’ and helping clients’ upper management understand the significance of
findings from data analysis.
4. Talent
One thing that all interviewees agreed on was that people and knowledge are necessary to
build up the expertise necessary to leverage the opportunities from marketing analytics
insights and to lead new initiatives in the organisation.
Competition for talent
There is a dearth of people with data science skills, especially in Japan. The e-commerce
retailer reported that “we require 2-3x more data scientists” – which would be an increase in
headcount of 100-150. Due to a talent shortage and high competition from finance and
healthcare industries, they are looking at hiring from all corners of the world.
At the social media company, there is a need for more English-Japanese bilingual data
scientists. They report that the industry is US-driven and the latest news and developments
are in English. They are also finding it hard to hire from Japanese firms due to their tendency
to hire large numbers of fresh graduates and train them to be generalists over the course of
their careers, rather than develop specialists.

The marketing software company identifies that Salesforce, Oracle and Adobe are fighting
over the hiring of statistics and data professionals. He also wishes that “educational institutes
teach more statistics and business skills”. According to the interviewee, “few professors and
teachers know about the changes in marketing and are still teaching classical
marketing”.
Training
The technology services provider is seeing a lack of talent now but encouraging signs of a
young talent pool from its internship program. To skill-up the current marketing team, the
company has built a “rigorous training organization that offers intensive enablement”. They
are also recruiting, internally, from IT and legal departments and externally, management and
strategy consultants that can “analyse and diagnose campaigns and display horizontal
thinking”. Other companies are also developing internal resources, including the US
advertising agency, where there are training programs and case-study based workshops on
digital marketing and analytics.
Central resources
Some agencies have invested in building data analytics centres in India as it has a high
number of computer science graduates and statisticians. One agency executive explained
about their ‘global centre for data excellence’ that, “support offices around the world with
tools and training as well as by performing the more menial data cleaning and processing
tasks”.

5. Future trends
Data is integral
There were multiple views on the future of marketing but one common thread was that data
would be integral to it. An executive with a data and media management company at the
ad:tech conference stated that, “The future of marketing will be built on data. There will be a
shift from buying media to buying specific audiences; a shift from individual campaigns to
continuous engagement; agencies will become systems integrators; from manual buying to
programmatic buying; from siloed data to unified user profiles inclusive of both online and
offline activities.”
A prediction raised by several interviewees was that “those who have access to real people
data will win”. The inference being that this kind of data will become hugely valuable in
comparison to indirect data sources such as IP addresses. It was reported that Facebook - with
their real name policy, data on demographics and interests - are championing their dataset as
being more complete than those offered by Google or Twitter.
Further trends for marketing data were identified at the ad:tech conference. A representative
from an advertising platform presented the following, “there is a coming together of AdTech
(paid media) and MarTech (CRM) with big data in the form of data management platforms.”
In addition, “emerging data channels and new formats such as IoT and DOOH [Digital Out
Of Home advertising] offer new opportunities. IoT will allow more personalised, timely
interactions through active devices that talk to you”. He also predicted that “machine
learning, a form of artificial intelligence, will be more common by 2020.” His view was that
“there is too much data being produced so machines are needed to analyse it”.

The future according to head of analytics and consulting at the global advertising agency will
include a shift of focus to more content marketing and that “the role of data in organization
will increase to become the most important thing”. In his view, the questions facing
marketers are ‘How to identify real customer behaviour? And how to insert brand
communications?’ He also sees a different landscape for agencies and brands saying, “data-
mining partnerships with Facebook and Twitter will be developed to use their targeting and
social listening capabilities to get more insights on product feedback, campaign effectiveness
and influencers”.
Change of mindset
At the World Marketing Summit Japan 2015 conference, a marketing professor from Kellogg
School of Management gave his views on “Always On Marketing” and cited a report from
Razorfish that calls for content-led, data-driven experiences across all channels and devices
in real time69. He told the audience that the digital world means that the customer never
sleeps, so brands have to be connected constantly and that this requires moving from
running campaigns to having a conversation. In his words, “from episodic to ongoing;
exposure to engagement; features and benefits to passions and motives; rational to emotional;
advertising messages to brand stories.” A ‘brand story’ should demonstrate a mission and
purpose that is connected with the customer’s passions. “Stories build engagement which
builds advocacy.” Related to this is the emergence of brands as publishers or acting as media
companies, creating content all the time. He predicts that a new metric will be also be
introduced, ROE will become ‘Return on Engagement’. According to the presenter,
“consumers' time is limited. They are thinking 'if I engage with your content, what's in it for
me?' Companies need to inspire and help the customer.”

Mobile
An executive at a marketing technology company presented that “one of the biggest
opportunities in Japan is mobile commerce.” According to his data source, in June 2015,
6% of goods were bought through mobile. The presenter went on to say that in order to take
advantage, companies need to merge the different channels to create a single customer
experience, the same offline as online. According to him, this is not as difficult as it first may
seem – “the difficulties are not technical, they are organizational. The challenge is to bring
together different data sources”.
Mobile and mobile-native social networking sites such as LINE was also brought up as
important communication channels by the FMCG company. High smartphone adoption rates
among young consumers was also highlighted as a key driver for the increased focus on
online video by Japanese advertisers.

DISCUSSION
Summary of insights
Interviewees and conference presenters all spoke of the benefits of marketing technology and
analytics to improve message delivery and effectiveness. Digital marketing is still exploring
standards and there is debate over how to measure effectiveness and attribute a sale to a
particular marketing message or touchpoint. Marketing automation combined with agile
marketing allows for campaigns to be adapted in real time but few companies in Japan are
taking advantage. For Japanese companies expanding overseas, some are experimenting with
data-driven creativity.
In a digital world, consumers expect more information available to them anytime online and
at the moment there are few Japanese companies that are taking advantage of the opportunity
to connect with consumers. The few marketers that are making moves are faced with building
up data points or knowing how to analyse it in line with business goals. Multiple vendors are
offering assistance and marketers need to assess their own current status and limitations
before choosing the right partner. Japan needs to embrace a digital culture especially for
those companies that have global expansion goals.
Interviewees reported that the marketing industry landscape is changing fast and that
advertising agencies are bearing the full brunt of the disruption. New competitors are on the
scene and their clients are gaining insights into customers that used to come from agencies.
New business models or pivots are required to survive.
Japan is lacking in people that understand digital marketing or that have data science skills.
Current training and educational programs are insufficient and there is some reliance on
central resource pools in places like India.

It was predicted that the winners in the modern marketing industry will be brands, media and
internet platforms that have real people’s data rather than relying on implied consumer
profiles. Marketers need to change their mindset from running campaigns to constantly
engaging with customers and being of service. Mobile marketing will be a huge growth area
along with the Internet of Things.
Final thoughts
There are two seismic shifts in marketing today: the scope of marketing has expanded to
cover the entire customer experience and the exponential increase in the use of technology in
marketing70. Within these shifts, there are seven disruptive changes:
1. From traditional to digital
2. From media silos to converged media
3. From outbound to inbound channels
4. From communications to experiences
5. From art and copy to code and data
6. From rigid plans to agile iterations
7. From agencies to in-house marketing.
Marketing today is in a rapidly changing stage of its punctuated equilibrium71 and marketers
“have two choices: adapt and survive, or stand still and die.”72 Technology is playing a more
important role and organizations must empower their marketing functions with people that
understand and can get the best from technology, including data management and analytics.

Figure 6 – Evolution of marketing
Adapted from Brinker, S. (2014), “A New Brand of Marketing” 73
Traditional advertising agencies are being squeezed from all sides. Their clients are investing
their marketing budgets on developing in-house teams to manage always-on communications
and build data management and analytics capabilities. Media budgets are being cut and
diverted to cheaper and more cost-effective alternatives often bypassing agencies in favour of
the online media owner (e.g. Google or Facebook). In addition, clients are having their
strategic marketing conversations with management consulting firms and IT service
providers.
Marketing accountability and return on investment are much more easily defined and
measured. Marketing metrics allow for more accurate forecasting in ways that were not
possible even a few years ago74.
The marketing technology sector is booming. Between September and December 2014 there
were $6 billion marketing technology deals, more than two-thirds came from funding,
acquisitions, or mergers of businesses relating to intelligence and data75. Despite this, there
are low levels of adoption currently and there is uncertainty as to what is the right path to

take. Multiple IT service providers are trying offer complete solutions and there are hundreds
of start-ups providing point solutions. Marketers are reporting to be “overwhelmed” with
choice76. As with all software, there is no one silver bullet and most mid-to-large
organizations are building a portfolio of capabilities and technologies.
Marketing analytics is in its infancy. In the US, companies are adopting new technologies and
agile marketing methods to learn from their existing data sets and by leveraging second- and
third-party data. With Japanese companies still a few years from catching up, they would do
well to learn from best practices and avoid pitfalls currently facing US firms. A major
challenge for CMOs is how to ensure analytics teams are focused on the bigger picture and
not just hiring data scientists with PhDs because their competitors are doing so. Cesar Brea,
author of Marketing and Sales Analytics says the problem is “making sure senior teams are
aligned on questions worth asking, ensuring practical access to good-enough data, matching
analytic sophistication with the operational flexibility needed to act on it, and cultivating an
“analytic marketer” mind-set that moves us beyond “right-brain” marketers and “left-brain”
analysts lobbying requests and reports back and forth.”77 His book offers a diagnostic to
evaluate a company’s marketing analytics maturity which can also be found below.

Figure 7: A diagnostic for evaluating your company’s marketing analytics maturity
Adapted from Brea, C. (2014) “Marketing and Sales Analytics: Proven Techniques and Powerful
Applications from Industry Leaders”78

RECOMMENDATIONS FOR JAPANESE MARKETERS
1. Create a marketing organisation and train specialists not generalists
Japanese companies do not place a lot of importance on marketing and as such it is treated as
one of the departments that general hires will be rotated through in their careers. There is no
career development within the marketing function and no marketing training. This means
companies are overly reliant on external suppliers such as advertising agencies. Japanese
companies cannot afford to leave marketing to amateurs as global firms become more-and-
more expert at utilizing data. Marketing specialists with analytics skills must be developed.
2. Create digital infrastructures and embrace data to improve marketing effectiveness
Despite its futuristic image, Japan is behind in the digital economy. To take advantage of
marketing automation and the consumer insights gained through marketing analytics,
companies must start collecting data and analysing it. The resulting improvement in
advertising effectiveness will have a positive ROI. Product planning can be improved and
new business opportunities can be identified through marketing data analysis.
3. Adopt and adapt global best practices
Customer engagement on social media is a significant part of marketing globally but in
Japan, there is still a reluctance to fully embrace it. For Japanese companies that want to
capture international markets, they must adapt digital marketing practices to be able to
communicate effectively with potential customers in new markets. For domestic marketing,
partnerships between brands, media, retailers and marketing technology firms can improve
data collection and lead to unified customer profiles and personalised timely messaging that
helps the customer on their purchasing journey.

4. Be agile
Once marketing automation systems are in place, marketing campaigns and long-term
communication strategies can be refined and improved upon using a PDCA cycle. Agile
marketing that reacts to campaign’s actual performance in relation to sales is much more
effective that the set-it-and-see approach from traditional annual budgeting and planning.
5. Be open
As marketing technology evolves and new analytical approaches are developed, marketers
should consider flexible and adaptable systems to avoid the risk of being locked into systems
that become obsolete. Open Marketing proponents suggest a modular approach with multiple
data sources and technologies building a unified customer profile.
In addition, Japanese firms should be open to new ideas and working with entrepreneurs and
start-ups to capture innovation and creativity.
Figure 8: Open Marketing

Approach
Adapted from
https://www.acquia.com/open-marketing

Marketing Analytics
Challenges and opportunities
Samuel Bird, MBA Japan 2016
[email protected]
260498964

APPENDIX
Exhibit 1: Worldwide Advertising Spending
Accessed from: http://www.emarketer.com/Article/Advertisers-Will-Spend-Nearly-600-Billion-
Worldwide-2015/1011691

Exhibit 2: Marketing Technology Landscape
Accessed from http://chiefmartec.com/2015/01/marketing-technology-landscape-supergraphic-
2015/

Exhibit 3 – Marketing Analytics Magic Quadrant
Adapted from: https://www.gartner.com/doc/3132517/magic-quadrant-digital-marketing-analytics

Exhibit 4 – Digital Ad Spending Worldwide
Data is from the March 2015 Nomura Securities study titled "Global Advertising Forecasts." The
data is based on information from the Interactive Advertising Bureau (IAB) and MAGNA
GLOBAL.79

Exhibit 5 - Big Data and Analytics for a Holistic Customer Journey
Adapted from http://www.ibmbigdatahub.com/whitepaper/big-data-and-analytics-holistic-
customer-journey

Exhibit 6 – 360 Degree Customer View
Adapted from: http://www.ibmbigdatahub.com/whitepaper/big-data-and-analytics-holistic-
customer-journey
Exhibit 7 - Repeat Customer Value vs. Brand Value as a Percentage of Enterprise Value
Adapted from: http://chiefmartec.com/2015/10/36-marketing-tech-leaders-europe-share-lot/

Exhibit 8 – Understanding the New Martech Buyer Journey
Adapted from:
http://www.walkersands.com/pdf/Walker%20Sands'%20State%20of%20Marketing%202016%20
Understanding%20the%20New%20Martech%20Buyer%20Journey!.pdf

Exhibit 9 - Marketing Automation Platform Adoption Rates
Adapted from: http://adage.com/article/btob/16-b2b-companies-marketing-automation-
study/293410/
Exhibit 10 – How Companies Are Using Marketing Analytics
Adapted from: https://hbr.org/2015/11/quantifying-the-impact-of-marketing-analytics

Exhibit 11 – Total Media Ad Spending in Japan
Accessed from: http://www.emarketer.com

Exhibit 12 – Programmatic Digital Display Ad Spending in Japan, by Device, 2013-2018

Exhibit 13 – Leading Social Media Properties in Japan

Exhibit 14 – Digital Marketing Performance Dashboard 2014, APAC and Japan
Adapted from: http://blogs.adobe.com/digitaldialogue/news-reports/japanese-marketers-seek-
collaboration-successful-digital-marketing-deployment/ and
http://blogs.adobe.com/digitaldialogue/news-reports/apac-digital-marketing-performance-
dashboard-2014/

Exhibit 15 – Japan’s Display Advertising Technology Landscape
Accessed from: http://www.slideshare.net/HiroshiKondo/jp-chaosmap-20142015

Exhibit 16 – Ways in Which B2B vs. B2C Marketers in Japan Measure Campaign
Success

Exhibit 17 – Marketing Software Solutions Revenues in Japan

Exhibit 18 – Big Data Software Solution Revenues in Japan

Exhibit 19 – 2015 State of Marketing
Adopted from: https://www.salesforce.com/blog/2015/01/2015-state-of-marketing.html

Exhibit 20 – Interview Questions
 Tell me about your role in the company
 How do you see data and analytics being used in your company?
 Do you use 3rd party or proprietary tools? If 3rd party, what tools?
 What differences do you see between Japan and other markets (US/Europe/Asia)?
 Are your customers (clients) aware of data and analytics?
 How are they using data?
 What challenges are you facing?
 In terms of the use of analytics, how do you see yourselves against the competition?
Ahead or behind?
 Do you rely on any partners?
 What role are advertising agencies playing now? In the future?
 What role are management consulting firms playing?
 What role are media platforms like Google and Facebook playing?
 In terms of data/analytics, are you facing training / hiring challenges?
 If so, what are the challenges?
 Is your company investing in training programs?
 If so, what kinds of training?
 What do you see as the future of data/analytics in Japan?

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What is the purpose of this paper?

What is the purpose of this paper?

What are some of the challenges facing Japanese marketers according to interviews?

What are some of the challenges facing Japanese marketers according to interviews?

Conclusion

MARKETING TECHNOLOGY AND MARKETING ANALYTICS 5

MARKETING TECHNOLOGY INDUSTRY 10

KEY IMPACTS – OPPORTUNITIES AND THREATS 14

ADVICE FOR MARKETERS 20

Insights from interviews and conferences 29

1. Use of marketing technology 30

3. Disruption for advertising agencies 38

RECOMMENDATIONS FOR JAPANESE MARKETERS 51

Front cover image courtesy of Gartner. Accessed from:

Samuel Bird – McGill University, MBA Japan 1

challenges companies here are facing.

Marketing management in Japan needs to carefully consider how to build up marketing

trying to position themselves as the key partner of the marketing director.

Recommendations for Japanese marketers include: creating a marketing organisation and

Samuel Bird – McGill University, MBA Japan 2

according to an August 2015 CMO survey, marketing represents on average, 11% of a

to optimize conversion rates of display advertising (banner ads), multi-channel campaigns

and websites including e-commerce sites.

11.1% over the next three years7.

to existing ways of conducting marketing and advertising campaigns? Is marketing

Samuel Bird – McGill University, MBA Japan 3

Japan? What should marketers do to take advantage of new technologies now?

conferences held in Tokyo – between July and October 2015.

Samuel Bird – McGill University, MBA Japan 4

as ROI, marketing attribution and effectiveness as it relates to sales. Marketing analytics

following activities can be included9:

 conversion analytics – optimizing a site to convert more visitors into customers

 customer intelligence analytics – customer feedback collection

 customer lifecycle analytics – retention and lifetime value

 messaging analytics – marketing automation, email and inbox reporting

 predictive analytics - use of data, statistical algorithms and machine-learning

techniques to identify the likelihood of future outcomes based on historical data

 real-time analytics – modifying the behaviour of visitors to increase the likelihood of

 sales analytics – prospects, leads and customer relationship management

Samuel Bird – McGill University, MBA Japan 5

Evolution of digital marketing

Indeed, when Google launched AdWords in 2000 as a pay-per-click advertising service, it

digital advertising ecosystems.

With the development of e-commerce, product advertising could be displayed specifically to

relationships with individuals10.

Samuel Bird – McGill University, MBA Japan 6

brand agency media consumer

advertising networks, ad serving platforms, mobile, email marketing, influencers, customer

relationship management systems (CRM), marketing automation, campaign and lead

Samuel Bird – McGill University, MBA Japan 7

platform or build a portfolio (or a “stack”) of technologies from multiple vendors

marketing effectiveness and performance. Marketo, a leading marketing analytics provider,

proposed in 2012 that a successful analytics solution has four components13:

1. a centralized marketing database that includes historical data on marketing programs

Samuel Bird – McGill University, MBA Japan 8

advertisements globally every day.

Samuel Bird – McGill University, MBA Japan 9

Enterprise marketing software suites

The marketing technology industry is in a period of both consolidation and diversification

1. Multi-channel marketing automation – for publishing and promoting content that

helps marketers engage customers across several different channels, particularly

mobile and social.

that can be deployed across different channels.

into consumer conversations, responding with custom content, or social media