Customer Service: U.S. Firms' Achilles Heel in Japan

In our experience, one of the biggest challenges that U.S. and European firms face in Japan is that of customer service. Japanese retail customers are notoriously "picky" about quality, even on aspects such as product packaging. An American canned beverage manufacturer we worked with, for example, was shocked at the astronomically high reject rate of product by retail store chains in Japan. Japanese shop-keepers were inspecting every can, and returning anything with very small dents or slightly askew labels to the distributor and expecting full credit. After unsuccessfully trying to argue that the cans were fine, just not quite perfect, this U.S. maker was forced to re-design shipping pallets to better protect the product, and to improve labeling standards. This particular client now deploys these improvements world wide, and uses them as a competitive advantage in other markets.

Japanese industrial customers are no different from retail customers: they often place demands on vendors that are uncommon in the West. We regularly hear stories from Japanese manufacturers about frustrations with foreign vendors. The following scenario, based on an actual business situation, highlights many of the common issues:

"Julie Morris, a software engineering manager for TestTek, a large U.S.-based manufacturing test equipment manufacturer, receives an email from Takashi Endo, a technical sales engineer in Japan. Mr. Endo had recently been asked to visit an important customer called Toritsu, a huge Japanese semiconductor manufacturer. Apparently the operators at Toritsu had discovered an annoying bug in the test device's software, but had figured out how to work around the problem without delaying production. Still, the bug was a nuisance, and Toritsu wanted TestTek to know about the problem.

Mr. Endo's email asks Julie when a patch would be available that would fix the bug. Julie's team is working on an upgrade for the software in question that will solve the problem. The upgrade is scheduled for release in four weeks, and therefore Julie cannot pull any resources to work on patching software that is about to become obsolete. She asks Mr. Endo to please explain this to Toritsu with assurances that they will be the first to receive the upgrade.

The following morning Julie is perplexed to discover another email from Mr. Endo, kindly requesting a patch for the bug. Julie, wondering if Mr. Endo had received her email from the day before, sends it again. The next day Mr. Endo sends an email marked URGENT, asking again for the patch, and copies the message to Julie's boss. Julie is now angry and resentful towards Mr. Endo, and wonders why he is ignoring her message.

Julie often finds herself feeling frustration at the demands made by TestTek's Japanese field people, including Mr. Endo. They seem more loyal to the Japanese customer than to TestTek. Julie senses that this must be a Japanese vs. U.S. attitude. TestTek seems constantly to be making customized devices for Japan, while the rest of the world buys global products. Why do the Japanese need everything tweaked just for them? It is expensive, and in the long run costs TestTek (and therefore Toritsu) more money. Moreover, it increases the potential for software glitches and other quality problems."

The above scenario is all too familiar to U.S. technical support people servicing Japanese customers. We have heard similar stories over and over again from many Americans. Before deciding how to handle such issues, one first needs to view the situation from Mr. Endo's perspective:

TestTek-Toritsu Case: Japanese Perspective:
"Takashi Endo, a technical sales engineer for TestTek, a large U.S.-based manufacturing test equipment maker receives a call from Toritsu, one of the top three semiconductor firms in Japan, and a powerful customer. Mr. Yamada, the purchasing manager, reports that a two-year old machine bought from TestTek has a software bug. Mr. Endo apologizes over the phone and offers to inspect the machine personally. Mr. Endo leaves his office immediately and arrives at Toritsu's plant four hours later. After apologizing again to Mr. Yamada in person, Mr. Endo meets with the technical manager who noted the software problem in the first place. Mr. Endo repeats his apology, promising swift action.

Mr. Endo immediately sends an email to the software engineering manager, Julie Morris, in the United States asking for a software patch to repair the problem. Julie replies that an upgrade will be ready in four weeks, and to please ask Toritsu to wait. The color drains from Mr. Endo's face as he reads this. Why can't Julie understand that in Japan you cannot ask a huge customer like Toritsu to wait, just to suit your own engineering schedule? The customer found a problem, and expects it to be fixed. No excuses, no delays. Mr. Endo, thinking perhaps he hasn't explained himself well enough, sends another email requesting a patch. Julie replies again, with the same email as before. Mr. Endo, becoming frantic because Toritsu is getting impatient, sends an email marked URGENT to Julie, and copies her boss to ensure swift action.

From his perspective, he - and by extension TestTek - risk seriously damaging their relationship with Toritsu if they do not respond quickly. Mr. Endo knows that Toritsu prefers working with Japanese equipment providers because the customer service is more responsive, and uses TestTek only because of the technical superiority of their equipment. Toritsu would happily work with a Japanese vendor, all things being equal. TestTek does not seem to realize that they need to work harder than their Japanese competitors until they are firmly established in the Japanese market, which will only happen when their Japanese customers begin to trust them."

As in the above situation, Japanese customer service representatives working for Western firms often find themselves squeezed between a rock (Japanese customer) and a hard place (U.S./European corporation). They often feel a lack of support from headquarters, which ultimately hobbles the firm's competitiveness in Japan.

Project yourself and your organization into the above scenario. How would your people have reacted? Is this a likely interaction between your firm and your Japanese customers? Consider the following:

II. Comments from Japanese Procurement Managers
on Working with Western Vendors:

Recently, we reviewed comments made by Japanese purchasing managers from several global Japanese firms regarding their concerns about working with overseas vendors. Here are some statements made during oral interviews:

On the Responsiveness of Western Suppliers:
"The biggest difference between Japanese suppliers and overseas suppliers is the speed of their response to problems and requests. [Japanese] R&D and technical service staff visit the day after we call them to discuss problems in person." - Comment from Japanese Purchasing Manager

"The most important thing overseas suppliers need to improve to get their products adopted is the speed with which they respond to problems and requests. The minimum requirement is for material suppliers to deliver a replacement lot so that there is no lag in production." - Comment from Japanese Purchasing Manager

"Overseas vendors need staff and facilities in Japan." - Comment from Japanese Purchasing Manager

On Quality Control and Assurance:
"Quality control of overseas suppliers, including American and European companies, is generally poor compared to Japanese suppliers. The rate of "off-specification" products is generally higher for foreign suppliers than Japanese. Even ISO standards are not strict enough to meet our requirements." - Comment from Japanese Purchasing Manager

"Foreign companies usually say, "We are responsible for the range the supply contract covers and if there is any claim or trouble within the range, we will replace the product." This is not the way our suppliers in the Japanese market operate. We require the highest quality possible. In general, contracts are not as important in Japan as they are elsewhere. This is something most foreign companies have a difficult time understanding. We expect all suppliers to continuously improve the quality of their materials to the best of their ability." - Comment from Japanese Purchasing Manager

"The attitude towards technical service in the Japanese market is different from that of western countries. Raw material suppliers have to maintain the strictest quality control systems, and Japanese makers may request specifications higher than those stated in the current supply contract." - Comment from Japanese Purchasing Manager

On the Importance of Establishing Long-Term Relationships:
"Long-term experience in the industry in Japan helps gain our trust. Frankly speaking, some people in our firm are anxious about purchasing from foreign companies because of concerns about whether or not foreign firms will make a long-term commitment. If any key person in our company feels negatively toward a foreign supplier, it would be difficult to get the product adopted." - Comment from Japanese Purchasing Manager

"Engineers trust material suppliers they have been dealing with for a long time to put their best efforts into developing new materials and stick through the tedious process involved, even if we are demanding. Our engineers tend to consult material suppliers they have a long-term relationship with first about improvement and new material development." - Comment from Japanese Purchasing Manager

On Language Issues:
"Language is a major issue. Our R&D staff need to interact effectively to develop and customize products, but most Japanese R&D personnel are uncomfortable using English. This obstacle can be overcome if the supplier has a skilled liaison who, in addition to being fluent in Japanese, has the relevant technical knowledge. Our Japanese R&D personnel prefer to communicate directly [with engineers who speak Japanese]." - Comment from Japanese Purchasing Manager

"R&D staff prefer Japanese suppliers to overseas suppliers because it is easier to communicate with domestic suppliers in Japanese than with overseas suppliers in English." - Comment from Japanese Purchasing Manager

III. Strategies for Western Firms:

Overcoming the challenges of customer service requires an attitudinal shift for many U.S.-based companies. Japanese customers expect a broad commitment from suppliers that cannot be captured in contractual language. We realize that some of the following suggestions may be difficult to implement, but must be considered when designing a successful Japan strategy.

Do not be satisfied with "spec" quality standards. Seek to continuously improve (kaizen) your manufacturing process, strive for zero defects. Let your customer know of innovations/improvements you are making.

Implement a policy of immediate response. In Japan, customers often expect a fast personal visit from vendors. Because Japan is relatively small and centralized, it is possible to travel to the customer's site within a few hours, or one day, of a problem.

Assume your customer is right first, and verify problems second. One common frustration felt by Japanese customers is U.S. vendors needing to verify that a product problem exists before taking any corrective action. Often U.S. firms will first request samples of the defective product for analysis. This may take several days or longer, especially if the samples must be returned to a U.S.-based testing facility. Japanese firms may even find themselves having to haggle with U.S. contract managers over the procedure for handling problems. Don't do this! Apologize first, analyze second. Even if you prove to be right, the customer's judgment should never be openly questioned in this manner.

Do not argue about "overly stringent" quality expectations with your Japanese customers. Use gentle, apologetic, but persistent persuasion (after carefully thinking through what your firm is willing to do), rather than defending your existing standards by referring to contractual language.

Hire and train Japanese, and gradually localize. With some exceptions, it usually does not work long-term to be separated from your Japanese clients by time zones or trading companies. Even if you work with local representatives, it is a very good idea to have your own people on the ground in Japan. Initially this may require an expatriate, but eventually you need Japanese.

If your firm has a substantial conflict with a Japanese customer, do not leave your Japanese technical sales/liaison person to defend you alone. Send in top technical experts from the plant to first listen to your customer's concerns, and then to gently explain your processes and position.

Develop a strategy for managing the language barrier. Many U.S. firms simply do not realize the importance of this issue. A Japanese customer may speak English quite well, but that does not mean that he or she would not rather speak in Japanese with a vendor. Assume that most communication you have with Japanese clients will need to be in Japanese. Do not give your customers an excuse for not wanting to work with you. Remember: even one key person on the Japanese side can torpedo your business, so don't give them a target to fire upon.

Build up your resource infrastructure in Japan. As stated earlier, Japanese customers often are looking for a long-term commitment from new vendors. They may start new suppliers with small, non-strategic projects that may be a loss-leader for the vendor. Be patient, and focus on executing initial small projects carefully. If the customer is satisfied, subsequent contracts will grow in volume and profit. Convince your management structure to treat initial small projects as investments, and to not expect payback immediately.

Do not make sudden personnel changes without a transition period. Building relationships takes time. We have watched several new American and European country managers in Japan "clean house" within the first three months. This is almost never a good idea: it kills morale, and can irreparably damage relations with your customers (these relationships were typically fostered and controlled by the people ousted). Remember, the customers' image of your firm is based on what they hear from your sales people. If customers perceive instability or insensitivity in upper management, they may get cold feet about the relationship.

Train your Japanese support personnel to communicate more effectively with the U.S. corporate office and technical staff. Japanese field technicians often have a difficult time explaining why they need support, and what they need, from people in the U.S. This is an area where your Japanese field technicians need training, and perhaps specific guidelines from you.

Train your U.S.-based managers and staff to support Japanese field personnel. Implementing many of these suggestions will require training of U.S. support people who interact with Japan. This goes beyond process training, and should include substantive cross-cultural skills training, and international team-building training.

IV. Summary:

People frequently ask us to what extent Americans should adapt to doing business the Japanese way. This is a good question. After all, isn't a business relationship a two-way street, and shouldn't both sides expect to make accommodations and compromises? Many Americans feel a sense of frustration that even if the U.S. side tries hard to understand Japanese business systems, the Japanese seem less flexible in accommodating U.S. business needs.

The extent to which companies should acculturate (adapt to the cultural and communication needs of the other party) depends largely on the balance of power in the relationship. For example, if an American firm is selling to Japanese customers, the U.S. firm should expect to provide a customer interface that is as Japanese as possible. If the relationship is a partnership between two relatively equal firms, then both sides ideally should adjust and meet in the middle. If the U.S. firm is the customer, the roles are reversed, and the Japanese vendor should expect to do most of the adjustment. This is common business sense.

For U.S. suppliers working with Japanese customers the first goal should be to eliminate disadvantages they may have vis a vis Japanese competitors. This includes developing Japanese representatives, Japanese-language meetings and technical information, and a Japanese-style attitude towards servicing customers. Only then will U.S. firms be able to fully capitalize on competitive advantages in products and services that they have worked hard to develop elsewhere in the world.