The beneficiaries should be the global agencies that have had trouble cracking the Japanese market. They have two distinct advantages. First, the creative vitality of Japanese agencies is weakening, while U.S. and European agency networks have invested heavily in recruiting talent and building creative staffs in Asia. Second, the introduction next month of a new television audience measurement system (Peoplemeter) will give outsiders the rare chance to win media buying assignments. "Japanese advertisers have yet to confront some fundamental inefficiencies in the way advertising is planned and executed in Japan," says Gus Iizuka, president of J. Walter Thompson Japan.

To begin, creative troubles are a direct consequence of Japan’s prolonged domestic recession and faltering economic recovery. Instead of the ‘80s goal of fostering a warm relationship between advertiser and consumer, advertising is under the gun. Now, it’s expected to secure shelf space and help move the product quickly.

As a result, some senior Japanese executives worry that advertising is losing its creative edge. "Since the economic bubble burst, advertising has changed. Advertisers are now looking for an immediate sales effect," says Akira Odagiri, an executive creative director at Dentsu, which billed nearly $11 billion in 1996 [$1 U.S.=125 Yen]. "Advertising is no longer consumer-oriented, and quantity has become more important than quality."

Additional pressure comes from the rush of ad presentations, which leaves little time to consider long-term strategy. "Some ‘advertisers are now asking for competitive creative pitches for the next phase of a campaign every three months. We barely know the effect of one campaign before we present another," Odagiri laments. "Commercials are becoming overloaded with too many messages in a single ad. This pleases the sales force, but whether it communicates with the consumer is another matter."

Odagiri is concerned that Western agencies, whose ads are appearing more often on Japanese television, are doing a better job of reaching consumers and building brand image than Japanese shops. "It’s not an issue of geography," says Garry Titterton, executive vice president, McCann-Erickson, Tokyo. "The agencies that succeed in helping to create brands are those that put brand equity at the core of their thinking. They build brands over borders by making them relevant in local markets."

But the creative stresses Japanese agencies endure may prove insignificant compared with the problem of media planning. On April 1, a Dentsu affiliate, Video Research Co., is launching Peoplemeter, a development long advocated by the Japan Advertisers Association but resisted by the TV networks. Individual viewer ratings will at last replace gross household ratings as the currency for planning and evaluating TV expenditures.

Again, international agencies have a distinct advantage over Japanese agencies, since all have experience using the data streams Peoplemeter measures. These same agencies also have the staff and the planning savvy necessary to make the best use of the data. For Japanese agencies, however, which are used to an environment where media buying is often a bookkeeping exercise, this is new territory. Instead of maintaining an inventory of media space and time, then selling it at whatever price the market might bear, Japanese shops will now buy media in a world where effectiveness and cost efficiency are key.

Given their planning know-how, international agencies can race ahead of Japanese shops, which currently handle over 95 percent of the country’s ad business. This expertise allows global ad networks to position their multinational clients better than their Japanese counterparts. It also means that non-Japanese shops can offer a highly competitive service to Japanese advertisers, thereby reversing the gradual drift of international clients to major Japanese agencies.

In fact, some visionary entrepreneurs have gone a step further. Shortly after Nielsen introduced the first Peoplemeter service in Japan, a group of former Bates executives established SPI, the first independent media company in Japan to offer clients a sophisticated media and strategic planning service. After a mere 18 months, their roster includes Toyota, as well as other large advertisers and agencies.

Still, these visionary clients are in the minority. Most advertisers will need to restructure their approach to ‘90s advertising. "For example, it is still common for advertisers to assign different agencies different components of a campaign based on the media being used," explains Gus Iizuka, president of J. Walter Thompson Japan. "As a result, a number of agencies could each be handling a different newspaper or magazine or group of TV stations. No one agency has overall responsibility."

But change is on the way. New planning disciplines should lead to more clarity about pricing. "There’s a basic lack of transparency in financial dealings in Japan involving major Japanese agencies. An advertiser may never know’ the actual price his agency pays for media or production," says Iizuka. "One of the anomalies in Japan is that the sheer volume of advertising space and time they buy gives Dentsu an ability to set the price an advertiser pays and establish artificial norms. We have, on occasion, won media assignments from Japanese advertisers but ultimately have been asked to invoice at ‘the Dentsu price,’ even though this is higher."

Why have Japanese agencies bowed to such tactics? The conservative bent of Japan’s ad industry reflects a traditional wish to respect and maintain relationships—at all costs. The relationships between Japanese agencies and their clients are deeply institutionalized. Only one major advertiser, Nissan, has defied convention in recent years. In February 1992, Nissan sacked Dentsu and consolidated virtually all of its business at Hakuhodo.

That decision sent shock waves through the industry.

Though many in Japan applauded Nissan’s bravery, no other big advertiser has followed suit. "It’s rare for the top management of major Japanese corporations to become involved with advertising matters. There’s an insensitivity at the very top to the importance of market communications and how to manage the process," says Iizuka. "The heads of advertising and sales departments tend to be at a similar level in corporate hierarchies and fight things out between themselves."

Japan’s leading agencies are more than a century old and have reigned supreme for decades. But the millennium approaches. Market pressures, new technologies and stronger competition from international agencies are challenging the status quo—and a more modern, more efficient Japanese ad industry may be the result.