Episode #320: Over-Servicing Japanese Buyers

A very common complaint from foreign bosses here in Japan is that their sales staff are over-servicing the Japanese buyer. Sometimes they are left to wonder who their staff are really working for – their company or the client’s company. I am sure there are many sales bosses based outside Japan thinking, “that is the type of problem I would like to have with my sales crew”. When we travel out of Japan and we are exposed to service in Western countries, there is always such a negative contrast with Japan. For the most part we are interacting with the service industry in airports, hotels, restaurants and shops. We will have to draw on our memory of what the B2B service standards were like, before we got to Japan to recall what the proper comparison should be.

American B2C service is the outlier, because it is so strongly driven by their tipping culture, which doesn’t really apply that much in the rest of the world, where service industry staff are properly remunerated through their salaries. Australia is a better comparison, because we have a similar non-tipping culture to Japan. I was down there attending a funeral for my relative recently and staying at a city Hotel, when the valet parking young guy scratched my rental car. Interestingly he didn’t make a bee line for me to immediately apologise. In Japan that would be unthinkable. He did eventually apologise, but the timing was too slow from my Japan trained point of view. His manager took over and organised the insurance companies to get to work and he also eliminated the valet parking charges for my stay. That would be a basic response and if that had been Japan, there would no doubt have been additional things they would have done to compensate me for the inconvenience. Here is the difference. In the West we are trained to think in terms of minimums of service, but Japan is trained to think in terms of maximums.

A big part of the over-servicing culture here is driven by the buyer’s expectations of what they regard as appropriate service levels. So we have the foreign minimums boss dealing with maximums Japanese sales staff and the divide is large. The Japanese staff also have a long-term view. Foreign bosses come and go, but customers are based here and are not leaving Dodge for their next posting. I also found that when commissions are involved, staff are happy to get the deal and get paid, no matter how much overservicing is involved. The company may be the loser, but they are the winner and they are fine, because they are not seeing the total financial picture. The boss though is seeing all of this and isn’t happy with the productivity.

Bosses are also not happy with the amount of discounting that gets done to land the deal. It always seems the sale staff are too quick to drop the price and to give extras to get it all across the line. This is a tricky balance, because as the boss, you cannot be involved in the entrails of every deal and you have to trust your people to do their best to get the revenue in. Usually we are involved post-agreement remonstrating with sales staff on why they agreed to such over generous terms to get the business. By that time, it is way too late and you cannot go back to the client and renegotiate the deal if you want to keep the business.

So what is the answer here? Briefing staff on where the line of generosity is being breached is a good idea, but often they will just ignore that and go for the deal anyway. They know it is not a fire able offence. In a few years you will be gone anyway, so just hang in there and keep the relationship with the client, because that is way more valuable than the one with the current boss.

We can try and influence their behaviour by adjusting the commissions paid. You would think that salespeople who get paid by commission, would be really keen and highly motivated to defend the price as much as possible, to gain the highest commission but that is rarely the case in Japan. They prefer to keep the buyer happy and take the hit on their own remuneration. They see the long-term relationship as more beneficial for them and they prefer a deal, to no deal. Now this has a deleterious impact on the company revenues, but that isn’t their main concern.

If we are dealing with a chronic discounter, we may need a bit of shock therapy here. We can set a limit on how much they can discount the price and then adjust their commissions savagely, if they go beyond that red line. For example, say we said 15% was the red line and if they go above that, we will have them bear part of the pain. They are already down 15%, but we will also take another 15% off that lower figure, to further substantially reduce their commission.

Another approach would be to do more coaching on the value they provide, so that they can change the content of their communication with the buyer. Over time buyers beat up our salespeople on pricing and weaken their belief in the value of what they are providing. We need to resuscitate their clarity around the value they bring to the buyer and the way they convey that on the sales call. We presume they know the value they bring to the equation, but they can forget key components or not give them enough credence. We need to re-school them on the finer points of the value continuum.

The cultural predilection in Japan for over-servicing buyers isn’t going away anytime soon. We can try and reduce any negative impacts it may have, although we know we won’t be able to control it perfectly. There are a few levers we can exercise to limit the damage. We should look for where we can scale things back, rather than just resigning ourselves to this is the norm and we just have to accept it. Nothing is easy here and this is always going to be an ongoing challenge, so we have to be up to dealing with it.