Entrepreneur Association of Tokyo
Seminar Summary - Harry Hill, Oak Lawn Marketing

Lessons from the Shop Japan Success Story
April 04, 2006

If you have ever tuned into infomercials on Japanese television and then promptly changed the channel thinking they are not worth watching, you could well be missing out on observing the main visual interface of a highly successful business that surprisingly – (or maybe not) – was started by foreign entrepreneurs.

Fronting the backroom action of Oak Lawn Marketing (OLM), Japan’s leading infomercial company, is Chief Operating Officer Harry Hill, whose message resonated well among the audience at the 4 April 2006 EA-Tokyo seminar in the City Club of Tokyo.

Introducing himself as the “Infomercial King of Japan,” Hill described the phenomenal growth of the Nagoya-based electronic retailing business, which, since its founding in May 1993, has grown to the point where it now controls 2,200 hours of media time per month and broadcasts in every prefecture in Japan. “That’s essentially like owning three TV stations,” said Hill, who joined the Oak Lawn Marketing management team in 1999 and stepped into the COO role in 2004.

Simple challenge became green light for start-up
First up, how did a company launched by a “couple of gaijin in Nagoya” find their rhythm and end up with 230 full-time employees, several very profitable subsidiaries, a 200-booth call center with over 400 contract employees, and after-tax earnings in 2005 of US$23 million? Well, that’s almost an infomercial in itself, which Hill played on the video system at the beginning of his presentation to the packed audience.

“We were hired by a TV shopping company in Nagoya 14 years ago to import products for them,” Hill explained about how OLM entered the Japanese business space. “As we started doing that, the man who sold us one of our first products recommended that we should try and use our infomercial and start selling the products in Japan. We suggested this to the TV shopping company owner who said that if we were so smart we should buy our own time and do it ourselves.”

This challenge was like a green light to a trophy-hungry Grand Prix driver. The race was on.

Maximum branding for maximum sales
“OLM buys time from everybody, normally in 29 minute increments, and runs a process called PowerBranding, which we call Shop Jabranding,” Hill explained. “This means that instead of selling a little of a lot of products, we brand a certain product to the maximum to sell the maximum amount of units.”
The Shop Jabranding strategy has allowed OLM to create brand awareness and recognition for its top selling products so that in the last few years, the business has had the best selling brand in Japan (yes, all of Japan) in categories such as EMS (Electrical Muscle Stimulation for building muscle tone and strength) devices (Slendertone), mattress toppers (True Sleeper), and steppers (Lateral Thigh Trainer). Hill pointed out that it is key for fixed channel companies to have the maximum amount of households and sell-through many products, while in contrast, infomercial companies like OLM/Shop Japan focus on maximum exposure of a small number of products over all different channels to drive sales and profit.

What can entrepreneurs learn from OLM’s experience in building a business?
As many entrepreneurs will be able to identify with, the founders started with nothing. “We had no money, no contacts, and no ideas,” Hill said bluntly. “But what we did have was the ability to look outward. What we saw was that the direct marketing industry, and in particular TV shopping, was a burgeoning industry in Japan. So, what we did was look for best practices.”

Aiming to excel
To grow their company with a sharp focus on developing long-living brands, the management team then carried out extensive research into the best practices of all the direct marketing companies they could find in the U.S., Europe and Japan.

This research phase was followed by a good dose of revealing self-analysis about the strengths and weaknesses of the company, management, and the local market. As recently as four years ago, OLM was three companies in one – a TV shopping company, a call center, and a retail sales division.
“But what we were finding was that we were not succeeding in any one of these businesses. So we made a decision as owners to investigate how we could be a better company. This involved asking ourselves:
What can we be the best in the world at?
What do we enjoy doing? and
What can be very profitable?”

Hill said that management decided they needed answers to these three questions in order to become a great company. “And we decided that the area we could do best in was PowerBranding. And with that, we learnt the importance of brand image and being able to brand products. Japan was a lucky place for us because, since the country is so inefficient in how it allocates its media, if you get media, it’s like rent-control New York. If you own an apartment, then you own it for the price you paid for it until you leave. And that’s how we have continued to add media. In Japan, to buy media in a cost efficient manner you need to buy in 3, 6, 9 or 12 month cycles. However, once you purchase the cycle, it essentially is your cycle for as long as you continue to buy it. Over the last 15 years, we have continued to build up all spots across all channels in Japan so that now we control over 2,200 hours of programming per month; over 8,000 airings per month. Now, once we secured cost-effective media, the challenge was to decide how to maximize it in a profitable way, and that’s why we came up with a brand management concept.”

Look for best practices and be the first to apply them
Hill then moved on to discuss innovation. He pointed out that one of OLM’s key philosophies for building their business is to look for best practices and be the first to apply them. “The reason we created our own in-house 24/7 multi-channel call center was because no call centers that we tried to hire 7-8 years ago would offer 24-hour service,” he said. “We were told that Japanese consumers don’t mind calling between the hours of 9-5pm. But we were paying a lot of money to air shows at 2-3am in the morning or whenever we decided to air shows and we couldn’t get anyone to do it, so we created our own call center, and in the process became the first 24-hour direct marketing company in Japan to do so.”

With the aim of boosting the bottom line, OLM introduced two other successful sales techniques, both of which may be beneficial for entrepreneurs. Hill said that OLM was the first TV shopping company in Japan to provide multiple payments. The company’s Steam Buggy product was priced at 19,800 yen, but when OLM promoted it with three easy payments of 6,900 yen, the response doubled.
“We were also the first company in Japan to offer a non-conditional 30-day money back guarantee,” Hill said. “All of this cost us no money. So, we were looking for successful sales techniques and strategies from around the world and applied them first in Japan. Seeing who is doing what and how we can apply that to our business here in Japan has been a very effective strategy for us.”

Huge hits should be huge hits
Interestingly, while many foreigners believe Japanese consumers to be fickle, demanding, and almost in a class of their own, Hill’s experience has been quite the opposite.
“One of the things that we learned is that when somebody told us that an idea was not going to work in Japan because the Japanese consumer was so different from foreign or American consumers, almost inevitably, that didn’t turn out to be the case,” Hill said. “We have decided it’s pretty much true of the world that people want to have washboard abdominal muscles, they want their household cleaning chores to be easier and faster, and they want to get stains out of their coats – we look for the universal values, and conversely, there are some things that don’t work, but we are obviously looking for what does.”

The OLM team discovered that top-selling products, such as the Steam Buggy (over 400,000 units sold), PowerJuicer (over 350,000 units sold), and Lateral Thigh Trainer (over 500,000 units sold) were huge hits, and that it was their responsibility to create the proper introduction for the products. Perhaps not surprisingly, they discovered that huge hits should be huge hits.

Worldwide data sources providing product information
To illustrate this point, Hill asked, “What movie would you rather distribute: ‘Titanic’ or some very high brow art movie? If you are looking to make money, you would probably be interested in ‘Titanic’ and this is how we have formulated our business strategy. In the industry, we have built a reputation both in Japan and abroad as the best in the class for successful infomercial products outside Japan. This has allowed us to be the vendor of choice with suppliers wishing to enter the Japanese market, many of whom come looking for us. We also have data sources around the world looking for and giving us information about the best-selling products in, for example Spain, the UK or the U.S. so that we search out products as well as have them come to us.”
Slendertone, for example, is OLM’s current biggest selling product and has racked up sales of 1.3 million units in the UK. “It took us two years to develop the creative but now it has become a huge hit in Japan and has sold over 350,000 units,” Hill said.

One of the practices Hill says OLM needs to be careful of is refraining from releasing all their products out into retail. “Retailers will kill us – they will undercut us on price. We are also very careful in how we manage our sales channels so that we maximize profit per media spend,” he said, providing another tip for entrepreneurs.

Numbers are key
Hill moved on to highlight that when OLM markets a product, they do so based on data and past experience. “We first promote it on TV, and over time we come to understand the customer demographic. Then, based on this demographic, we come up with what we believe is the correct sales strategy. One of the things we are doing very well is accurate data and information management.”
How does he know that?
“I know that because I can watch how other companies are running their shows. We have 8,000 shows/airings per month, with a unique free-dial number for each. These unique numbers allow us to track exactly what it costs us to air the shows, profits, and the customer makeup of each and every show. All this data goes into our database which allows us to schedule our future shows more accurately and intelligently.”

Why is this important?
Hill highlighted that one of the reasons managing the numbers is good strategy is that it helps OLM lengthen product lifecycles. “Product lifecycles used to be 3-6 months, but now average three years.”

Customer testimonials increasing sales
Lastly, Hill mentioned another technique OLM uses to boost sales that could be beneficial for entrepreneurs – customer testimonials. In OLM’s case, testimonials from Japanese customers are integrated into their shows.
“Four or five years ago, we could take a hit U.S. infomercial, put it into Japanese and we would sell the product,” Hill said. “Those days are pretty much over. Now, while Japanese consumers still like the Western images, they now want the message translated; they want to know how it works in Japan. How do Japanese people feel about it?” This led to the utilization of customer testimonials.
“In the 29-minute Lateral Thigh Trainer show, we added about 11 minutes of unique customer testimonial footage. This increased our sales by about 40%.”

That’s more than enough reason to tune into those infomercials.

www.oaklawn.co.jp

Text: Jonathon Walsh

Jonathon Walsh is a professional Corporate Editor and Writer of more than 275 articles published in Japanese and foreign media. He is also Director of Business Grow, an innovative company specializing in providing a wide range of high quality Editorial Content and Advertising services.

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