Beyond Fragmentation How has the perception of consumers changed?―①

Building Long-Term Relationships with Customers

Aoki: Mr. Ogawa, you recently published a book titled "Marketing Automation for Omotenashi." I imagine this is grounded in your concrete practical experience in the field. What problem awareness prompted this work?

Ogawa: I felt IT was fundamentally transforming the world of marketing. During my time at Dentsu Inc., marketers worked diligently on segmentation, but the final execution often ended up being TV commercials. Even in product development, retailers wouldn't stock items unless they could sell a certain volume. So, despite meticulous segmentation, I felt unsatisfied about where it actually led. It was during this time that I was seconded to Dentsu Inc. e-Marketing One, which focused solely on IT marketing. There, my entire perspective on marketing fundamentally changed. In the world of marketing technology, it's fundamentally not mass marketing, but one-to-one marketing. That means identifying a specific individual, like Ichiro Suzuki, understanding that individual, and communicating directly with them. Why is this possible? Because big data exists—not just the personal attribute and purchase history data companies hold, but also the complete log of Mr. Ichiro Suzuki's online behavior. By gathering all this data and organizing it into a format marketers can easily use, we can understand that individual and pinpoint specific actions for that one person. Moreover, this is a world where identifying the individual and determining what content to deliver at what timing is standard practice. This fundamentally changed my previous view of consumers.

Aoki: In a sense, the history of marketing has been the history of mass marketing, premised on mass production. For example, even when Ford created a mass production system for automobiles, a mass market capable of consuming them in large quantities was necessary. The means to create that mass market were mass advertising and mass distribution systems, where mass media played an extremely significant role. However, as competition among manufacturers intensified, the problem arose of how to segment the mass market and differentiate products. This is reflected in the title of Wendell Smith's 1956 paper, "Product Differentiation and Market Segmentation as Alternative Marketing Strategies." Yet, until now, the focus remained on market segments, not on communication targeting individual consumers. However, technological advances have made two-way communication with individual consumers possible. But when it comes to tactics, how do we translate this into concrete marketing applications?

Ogawa: One-to-one communication, unlike TV campaigns focused on achieving sales results within a limited timeframe, is based on the premise of building long-term relationships with the individual. It's more akin to communicating with hundreds of thousands or millions of customers in your database over time, gradually becoming "your partner." This approach stems from the idea that in mature markets where the pie isn't growing, it's more effective and efficient to stop fighting rivals for customers and instead build deep relationships with the valuable customers who generate the majority of your profits.

Recently, terms like CRM and Lead Nurturing are often used. This approach, which focuses on building deep, long-term relationships rather than expecting short-term sales results, resembles the traditional "personal shopper" model. It involves thoroughly understanding the customer and their family, then recommending products or value that truly match their needs. Lead nurturing means maintaining a connection, even if it's a light one like an email newsletter, when the customer isn't yet in a buying mindset. When they start showing interest, you carefully select and send content they'll likely enjoy. Then, when you get a clear signal they're seriously considering a purchase, you move beyond digital to real-world interaction—like making a phone call or inviting them to an event. Ultimately, a salesperson might visit their home to close the deal.

The Convergence of IT and Marketing

Aoki: The idea of "building customer relationships first" and then providing products or services tailored to them is incredibly broad and requires discernment. How is the system structured to build these relationships while delivering what customers seek?

Ogawa: First, we create a customer journey map. To put it somewhat dramatically, this spans the entire lifespan of an individual. For instance, when they enter high school or university, when they marry and have children, or when they finish paying off their mortgage and gain financial flexibility. By using digital tools to engage with them at key milestones along this long journey, we can offer various solutions. Since we align marketing execution timing with the customer's life circumstances and timeline, the approach to target strategy is fundamentally different.

Aoki: So it's not about indiscriminately offering solutions for each individual slice of lifestyle, but rather providing what's appropriate for various stages, crossroads, and situations along the timeline of a person's life. Even if each individual piece is a fragment of a life log, technologically speaking, accumulating these allows us to trace a person's life over the long term, or perhaps even predict it. That's the world we've entered, right?

Ogawa: When the initial wave of IT-driven corporate infrastructure development completed its cycle, marketing emerged as the next major theme for IT application. That was in the 1990s. The IT industry started with building customer databases, the foundation for CRM, but marketers weren't involved back then. Ultimately, this left many companies with underutilized assets. However, about ten years ago, pioneering companies began implementing full-fledged CRM using these customer databases.

Aoki: What major changes emerged from the collaboration between marketing experts and IT experts?

Ogawa: It's precisely the realization of one-to-one marketing through this collaboration between marketing and IT. I once worked with a foreign-owned automotive company. They now use a customer database of about one million people for CRM, but they don't aggressively approach all of them all the time. Typically, they just send out mass emails. However, when certain triggers occur—like when a customer has six months left until their vehicle inspection, or someone casually browsing the website starts spending significant time repeatedly viewing detailed specification pages rather than the standard product site, or they request a quote—the IT system identifies this as a switch being flipped. At that point, the IT system automatically sends them a premium brochure or direct mail, or invites them to a test drive event.

IT pinpoints targets: first 50,000 out of a million, then narrows it down to 10,000 within that group who are "genuinely likely to buy this specific model right now." For this final 10,000, both IT and human sales reps collaborate, dedicating all resources to a truly one-on-one sales effort aimed at securing contracts. The role of the human marketer is to design the overall marketing strategy, plan individual tactics, and review the interim results reported by IT to decide whether to proceed as originally planned or adjust the strategy.

Aoki: So, it's not enough to just have a customer database. It becomes possible because it incorporates the marketer's knowledge, and furthermore, the salesperson's knowledge as well.

Ogawa: There's also sales automation (SFA: Sales Force Automation). For example, when a salesperson boots up their computer at the office, they see a list of their assigned prospects along with relevant information: "For this product, approach Mr./Ms. So-and-so. This person has these attributes and is interested in these things..." The system also shares the current status of the sales process, and ultimately, whether a contract was secured or not. This integration between the sales environment and the marketing environment is precisely the "end-to-end" marketing process I envisioned long ago, and it has now become possible. That is, we can now track in real time, for each individual customer, the entire journey from the initial contact through advertising or promotions, through multiple subsequent interactions with the company via various initiatives, through the gradual shift in their awareness, all the way to whether or not they ultimately accept the salesperson's approach. Real-time visibility means marketers can flexibly adjust tactics based on their judgment. This is impossible with mass marketing.

The Divide and Circuit Between Mass and Individual

Aoki: Earlier, you mentioned that in traditional marketing, no matter how much you segmented based on differences in customer needs or purchasing behavior, you inevitably had to rely on mass media when actually executing the plan, which felt incongruous. However, as IT technology advances and we reach a point where, at least at the communication level, we can confirm actions on an individual basis, I suspect new problems will emerge there. Conversely, doesn't it become too easy to see each individual's face, or rather, doesn't it raise the question of how to group them as a market?

Ogawa: When we talk about marketing, if we distinguish between branding and acquisition, branding is about creating a shared perception among everyone. That falls within the realm of mass marketing, where television remains the most powerful tool. However, when it comes to acquiring individual contracts, understanding the customer and communicating directly with them increases both efficiency and the likelihood of a purchase. Therefore, acquisition will increasingly shift towards one-to-one marketing.

That said, even with one-to-one marketing, planning involves some segmentation. Companies identify who their key customers are – those they want to invest resources in and build long-term relationships with – segmenting them and creating personas. They then plan to deliver the optimal content, through the optimal method, at the optimal timing for those personas. Then, if we can identify which specific persona each individual customer fits within the many personas, we can execute the strategy. The fundamental marketer's task—segmenting and determining what resonates with each segment—remains the same in one-to-one marketing.

Aoki: Consumer needs and purchasing behaviors differ individually, so we must segment the market somewhere, and that importance remains unchanged. On the other hand, specific initiatives and approaches are increasingly moving down to the individual level, and results can also be verified at that level. This makes reconciling these two aspects a crucial challenge for marketers.

Ogawa: While IT enhances the precision of understanding the individual and tailoring approaches accordingly, the nature of the relationship itself must be conceived by humans—marketers. The planning itself—deciding what content to deliver, how to deliver it, and when to deliver it to this type of customer—is done by human marketers. IT only handles the execution and reporting of results. Ultimately, IT is just a tool, which conversely means the marketer's skill is put to the test.

Aoki: The key lies in bridging the gap between IT and marketing, collaborating to deliver value to consumers. Even with advanced technology, it won't solve everything 100%. Michael Porter once wrote in a paper that "IT is an enabler," and I certainly agree. IT evolution doesn't automatically solve everything; rather, it makes things that were previously difficult to achieve relatively easier. IT serves as that facilitator. Consequently, how marketers engage with the consumers who make up that market becomes even more crucial.

Ogawa: You're absolutely right. IT is not the goal; it's a tool. The reason people from the IT industry want to come to marketing companies like Dentsu Inc. e-marketing One is because they feel the limitations of continuing solely in IT. Technology evolves rapidly, but since technology itself isn't the goal, even if something seems cutting-edge for a moment, it quickly becomes obsolete. Many likely feel a sense of futility. Instead, they want to work at a higher level—specifically, they want to use IT for marketing, or use IT to develop games, and so on. IT is what powerfully supports marketers in achieving their dreams and ambitions.

Conversely, there are bad examples where everything is attempted to be solved without marketing. Take many recommendation engines, for instance. They try to find answers using only statistics and IT. Statistics has an algorithm called collaborative filtering, which divides people into clusters based on their purchasing behavior and online actions, then assumes people in the same cluster should buy similar products. When you try to find answers using only IT and statistics, you end up chasing only behavioral data. This inevitably leads to answers that merely confirm the status quo. The result is a barrage of recommendations that are unsurprising and utterly uninteresting. Ultimately, I believe that without a marketer's perspective—one that captures and understands not just customer behavior, but the underlying consciousness and values—it's impossible to make proposals that truly delight customers. Collaboration between Marketing, IT, and Statistics is essential.

Aoki: Creating new products, services, or markets inherently involves transforming consumers' lives. Therefore, the marketer's values and qualities are truly put to the test.

Ogawa: Exactly. Not only are marketers' values tested, but so are the values of the consumers they serve. I believe incorporating laddering techniques into recommendation engine algorithms is crucial. Purchasing behavior is driven by values—what kind of life one wants to live, and even what kind of person one aspires to be. Before brandishing big data and statistics, we must properly extract the values of those who buy our products. By linking these values to customers and then linking those values to the products and content we should recommend, recommendation engines should become entities that provide delightful proposals that enrich customers' lives from their perspective.

[Continued in Part 2 (Final)]

*The full text is available on the Hideo Yoshida Memorial Foundation website.