Neo Marketing Inc. is an independent marketing research company that aims to provide “marketing support from the consumer’s perspective.” The company provides one-stop marketing support services for corporate clients, mainly medium-sized companies and successful firms (manufacturers account for 40% of the client base). It produces all services, from marketing research to promotion and branding, in house.
The company supports the development and sale of client products and services through its Insight Driven (qualitative research based on individual interviews; project-based; client spend of JPY3–8mn) and Customer Driven (quantitative research based on online surveys; project-based; client spend of JPY400,000–700,000) marketing services. Neo Marketing also promotes products and services that have made it to market with its Digital Marketing (building, operating, and generating traffic to e-commerce sites on behalf of the client; monthly fees of JPY500,000–2mn) and PR (advertising and promotion; project-based; client spend of JPY2–5mn) services. It moreover provides Customer Success (operational support and other services; monthly fees of JPY500,000–1mn) to improve customer retention.
Neo Marketing leverages its integrated marketing support system to work closely with clients throughout the marketing process. The company has continued to acquire clients at a rate of roughly 200 to 300 per annum (279 in FY09/21) for a cumulative total of about 2,700. Active clients (those that order services) number around 900 annually, and the ratio of repeat clients is 80–90%. Revenue equals the number of marketing consultants (31 in FY09/21) times average revenue per consultant (JPY67mn in FY09/21). It can also be calculated as the product of the number of active clients (906 in FY09/21) and average client spend (JPY1.9mn in FY09/21). In FY09/21, Customer Driven accounted for 43.0% of revenue, Insight Driven 25.3%, Digital Marketing 7.7%, and Other 24.0%. Other includes PR (2.6%), Customer Success (13.5%), and two consolidated subsidiaries (Sales Support Co., Ltd., and Pile-up Co., Ltd.; 7.9% together).
Neo Marketing’s clients include manufacturers that generate annual revenue of JPY10-200bn and can earmark marketing budgets. Many of them produce national brand products, and the company has perceived and responded to their marketing needs. The company says that these clients are positioned at third or fourth in their respective sectors but aim for further growth. Going forward, Neo Marketing plans to further cultivate its client base by focusing on medium-sized companies and successful firms that have been unable to actively engage in marketing due to a lack of human resources and/or know-how. The company’s recognition and credibility has improved following its IPO on April 21, 2021, leading to more inquiries for larger projects from medium-and-large-sized clients.
Neo Marketing competes with major consulting firms and general advertising agencies in some areas. It differentiates itself with a bottom-up approach (marketing support emphasizing the consumer’s perspective) that contrasts with the top-down approach (focusing on existing brands and increasing mass media exposure) taken by these larger players. The company uses marketing insights to help its clients create products and services designed to stimulate customer interest and trigger purchasing behavior. It ensures success by getting involved from the initial stages of development (concept and basic design) and dispatching personnel to work with clients on-site.
Neo Marketing conducts more than 3,000 custom questionnaires and interviews per year. The company operates its own consumer panel, iResearch (580,000 registered users as of end-September 2021), from which it selects target audiences to send surveys. Registrants can use their PC, tablet, or smartphone to respond to marketing tasks from clients from the comfort of their own home, earning compensation in the form of reward points (JPY1/point; average annual compensation of JPY450 per person). In addition, the company has access to a consumer panel of more than 24mn consumers (as of September 2021) through collaboration with partners. Neo Marketing pays a usage fee to partners, booked as an outsourcing expense, each time it uses their consumer panel to obtain information.
Neo Marketing used OPM and ROE as its KPIs until FY09/19. From FY09/20 onward, the company will focus on the number of marketing consultants, the number of clients, and average client spend in order to secure faster growth and greater profitability. The company has already achieved an OPM above the 15% target of its medium-term plan (16.6% in FY09/21), and plans to focus more on expanding revenue. Its strategy is to encourage its clients to enter multiple service contracts (cross-selling) and to increase the project unit price (up-selling). It plans to grow revenue by increasing the number of marketing consultants (mainly by hiring several new graduates per year and training them over a period of one to two-and-a-half years) and by increasing revenue per consultant.
The company’s lineup includes one-time revenue (fees per project) and recurring-revenue (monthly fees) services. The former services include Customer Driven services, Insight Driven services, PR services, and the offerings of subsidiary Pile-up. These accounted for 73.3% of overall revenue in FY09/21. The company records revenue for one-time revenue orders upon delivery of deliverables, which usually takes one week to two to three months from receipt of an order. The company’s ratio of repeat customers is high at 80–90%, suggesting the tendency of clients to continue using its one-time revenue services over an extended period of time. Recurring-revenue services include Digital Marketing services, Customer Success services, and the offerings of subsidiary Sales Support. They accounted for the remaining 26.7% of overall revenue in FY09/21.
In full-year FY09/21, the company recorded revenue of JPY1.8bn (+28.1% YoY), operating profit of JPY303mn (+74.8% YoY), recurring profit of JPY287mn (+65.0% YoY), and net income attributable to owners of the parent of JPY206mn (+76.6% YoY). The increase in revenue and profit was mainly due to the acquisition of new clients through weekly Web seminars and growth in the volume of business talks achieved through the hiring of marketing consultants, which increased the company’s client count to 906 in FY09/21, up 16% from 781 in FY09/20. Additionally, the company’s proprietary Four Ks Marketing Framework captured more clients using multiple services, which raised customer spend by 11.2% to JPY1.9mn in FY09/21 from JPY1.7mn in FY09/20.
Neo Marketing’s full-year forecasts for FY09/22 are as follows: revenue of JPY2.2bn (+20.3% YoY), operating profit of JPY350mn (+15.3% YoY), recurring profit of JPY350mn (+22.1% YoY), and net income attributable to owners of the parent of JPY237mn (+15.0% YoY). The company believes that manufacturers, which form its main client base, have incurred comparatively less impact from the COVID-19 pandemic and that its earnings would be affected only slightly as a result. The company also sees greater client need for marketing services because these clients need to track medium- to long-term changes in consumer behavior that occur during the COVID-19-era. The company made no changes to its full-year earnings forecasts when announcing Q2 results.
The company’s medium-term management plan (final year: FY09/23) calls for revenue of JPY3.0bn (three-year CAGR of 28.1%) and OPM of 15.0% (guideline). In the medium- to long-term, Neo Marketing is seeking to increase the number of marketing consultants and revenue per consultant on the assumption that it will be able to maintain organic revenue CAGR of 25%. It aims to increase the number of marketing consultants from 24 in FY09/20 to 45 in FY09/23 while increasing revenue per consultant from JPY59mn to JPY72mn during the same time frame.
Shared Research believes that the company’s strengths include:
The ability to provide marketing support for corporate clients in the early stages of product development and leverage its insight into consumer perspectives to help clients create products
A stable client base with a high ratio of repeat clients (80–90%)
A proprietary marketing platform that can be used to select consumer panels of optimal composition according to customer needs
We see its weaknesses as:
Insufficient division of labor, making it difficult for the company to systematically increase orders and shorten delivery times
Inability to handle orders for overseas markets despite many of its clients being manufacturers who export a high percentage of their products
Acquisition of revenue tends to be concentrated in January—March, making stabilization of fixed costs at a uniform level difficult
|Gross profit margin||45.1%||49.6%||50.3%|
|Operating profit margin||1.8%||12.2%||16.6%||15.9%|
|Recurring profit margin||2.2%||3.2%||5.8%||1.7%||12.2%||15.7%||15.9%|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||-||-||-||2,408||2,408||2,448||-|
|Treasury shares ('000)||-||-||-||-||190||-|
|EPS (fully diluted; JPY)||-||-||-||-||-||86.3|
|Dividend per share (JPY)||-||-||-||-||-||-||-|
|Book value per share (JPY)||39.7||50.1||73.7||89.9||95.5||325.6|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||-||-||-||325||476||926||-|
|Total current assets||-||-||-||-||-||-||-|
|Tangible fixed assets||-||-||-||20||19||22||-|
|Investments and other assets||-||-||-||85||80||85||-|
|Total current liabilities||-||-||-||479||440||534||-|
|Total fixed liabilities||-||-||-||196||330||169||-|
|Total net assets||-||-||-||156||212||797||-|
|Total liabilities and net assets||-||-||-||831||982||1,501||-|
|Total interest-bearing debt||-||-||-||331||473||282||-|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||-||-||-||11||233||279|
|Cash flows from investing activities||-||-||-||-11||-156||-1|
|Cash flows from financing activities||-||-||-||35||81||171|
|Total asset turnover||272.5%||157.5%||147.4%|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Gross profit margin||-||49.6%||53.1%||52.1%||50.5%||50.3%||46.8%||48.1%|
|Operating profit margin||12.8%||12.2%||21.4%||24.8%||19.2%||16.6%||14.0%||15.3%||15.9%|
|Recurring profit margin||12.8%||12.2%||20.9%||24.3%||18.0%||15.7%||14.0%||15.3%||15.9%|
|Gross profit margin||-||206.7%||53.1%||51.3%||46.7%||49.5%||46.8%||49.2%|
|Operating profit margin||12.8%||10.1%||21.4%||27.2%||5.6%||8.0%||14.0%||16.4%|
|Recurring profit margin||12.8%||10.1%||20.9%||26.7%||2.6%||8.1%||14.0%||16.4%|
Neo Marketing’s quarterly revenues tend to be concentrated in Q2 (January–March) since the majority of its clients end their fiscal years in March. In FY09/21, Q2 results accounted for 31.5% of total revenue and 51.8% of total operating profit.
|By service (cumulative)||FY09/20||FY09/21||FY09/22||FY09/22|
|% of total||46.1%||45.4%||43.0%||36.5%||43.2%||40.7%|
|% of total||27.3%||26.6%||25.3%||27.3%||22.5%||22.0%|
|% of total||4.6%||7.0%||7.7%||8.6%||8.4%||10.8%|
|% of total||13.5%||16.3%||14.3%||15.9%|
|% of total||2.6%||2.2%||2.6%||3.2%|
|% of total||22.0%||20.9%||7.9%||9.0%||8.9%||7.3%|
|Acquisition of new customers(companies)||225||158||279|
|Clients utilizing multiple services||128||110||154|
1H FY09/22 results (October
The economic outlook remained uncertain in 1H FY09/22.
Amid the lingering effects of the COVID-19 pandemic, there were concerns about
a resurgence of new cases tied to the new variants. Rising prices and the weak yen
were yet another concern as the tense Russia-Ukraine situation created global uncertainty. Manufacturers, which form Neo Marketing’s
main client base, were less affected by the pandemic than those in other
industries. Thus, based on the current economic situation, the company believes
that the pandemic would have only a limited impact on its earnings.
In 1H, the company focused on upfront investment to strengthen its ability to handle orders, provide services, and offer new marketing services. The company launched the Yokohama office as a new customer success center, and created a system in which specialist employees provided detailed support services to customers using the products and services of client companies. At the same time, the Okinawa Naha Marketing Lab worked to further improve its system for handling orders, including by relocating to an expanded area in order to broaden its ability to offer data processing and call center services.
In terms of measures aimed at bolstering its sales activities, the company actively recruited marketing consultants and focused on expanding its ability to provide services and handle orders over the medium to long term. The company, as part of an effort to enhance its services, also added new operations to the group by acquiring businesses and turning them into a subsidiary. In particular, the company added two new services. One is a content-marketing service that supports effective promotion of client companies and their brands through the creation of quality content. The other is a service that uses AI to analyze data held by client companies to support their business.
In 1H FY09/22, revenue was up 18.2% YoY. The number of business negotiations with both new and
existing clients was in line with the company projection. Thus, the number of
clients increased to 543 (from 490 in 1H FY09/21). In addition,
the company’s “4K” strategy progressed according to plan (Four Ks Marketing
Framework: consumer insight discovery [kakushin],
product development [kaihatsu],
sales promotion [kaitaku],
and improvement of initiatives [kaizen]).
The company was able to identify digital-marketing issues from research
results. This led to continuous proposals that resulted in increased
cross-selling and increased revenue.
SG&A expenses increased 42.1% YoY and the
SG&A-to-revenue ratio reached 32.8% (+5.5pp YoY). This is party due to an
increase in personnel expenses as the company hired employees who would become the
core of the company for the development of regional offices. The company also
made advertising investments and posted M&A-related advisory fees.
Operating profit fell 26.8% YoY while OPM declined to 15.3% (-9.5pp YoY).
This category comprises services that quantify collected data and produce output that can be used in marketing measures by clarifying customer segments. The company reached out to more customers as it increased
the number of marketing consultants. Revenue increased steadily as a result.
This category comprises services that identify unconscious insights (hidden psychology that motivates people) through interviews and observation of behavior for use in product and service development. In 1H, the company continued to receive orders for
product development projects from both new and existing clients.
This category comprises monthly services for designing and executing consistent communication strategies—covering everything from strategy planning related to online advertising to ad creation, operation, and verification of effectiveness—based on data collected by its consumer panel. Cross-selling grew as the company identified digital
marketing issues from research results.
This category comprises services to support the long use of clients’ subscription-based services by those clients’ customers, for example by keeping customers from abandoning their subscriptions. Neo Marketing uses monthly billing for Customer Success services, and the increase in project count led the company to bolster its organizational structure.
This category comprises PR support services to establish branding or improve brand recognition.
|(JPYmn)||FY Act.||1H Act.||2H Act.||FY Act.||1H Act.||2H Est.||FY Est.|
|Cost of revenue||720||476||434||910||278|
|Gross profit margin||49.6%||52.1%||48.1%||50.3%||46.8%|
|Operating profit margin||12.2%||24.8%||6.9%||16.6%||14.0%||16.5%||15.9%|
|Recurring profit margin||12.2%||24.3%||5.4%||15.7%||14.0%||16.5%||15.9%|
The company’s full-year forecast for FY09/22 (October 2021—September 2022) is as follows.
Neo Marketing believes that manufacturers, which form its main client base, have incurred comparatively less impact from the COVID-19 pandemic. Accordingly, the company is confident that it will also only be affected by the pandemic on a limited basis. Additionally, the company sees greater client need for marketing services because these clients will need to track medium- to long-term changes in consumer behavior that occur as we learn to live with COVID-19. The company made no changes to its full-year earnings forecasts when announcing 1H results.
As the company plans to increase the average spend per existing customer by cross-selling multiple services, it expects the proportions of Digital Marketing, PR, and Customer Success, which are the sales promotion (kaitaku) and improvement of initiatives (kaizen) components of its proprietary Four Ks marketing Framework, to grow.
The reason Neo Marketing expects revenue to grow 20.3% YoY, but operating profit to rise a more modest 15.3% YoY is that it also expects personnel costs to increase 20% YoY, since it plans to increase the number of marketing consultants—who are responsible for developing new clients and contracts, managing projects, and serving as the point of contact for clients—to 38 (+7 YoY). The company says the increase in personnel costs is related to the growing headcount, but also to “human resource investment,” such as enhanced internal and external training programs to help new recruits become strategic assets within a short period of time after coming onboard.
In January 2022, the company acquired a content marketing business from Dali Corporation ("Dali") (unlisted). The purpose of the acquisition was a response to the use of online advertising following the abolition* of third-party cookies. Dali has a large number of writers and is able to distribute high-quality articles. In addition, it is skilled in content creation and creative advertising in compliance with the Pharmaceutical Affairs Act and the Act against Unjustifiable Premiums and Misleading Representations. By bringing content production in-house, the company will strengthen in the area of kaitaku (sales promotion) within its Four Ks marketing framework.
*Cookies are text files containing a name and string data that is returned by a server in response to an access of the server. Cookies can be used to distinguish between users, improve user convenience in terms of web access and operation, and provide services. They are also used for marketing analysis, since they can show shopping history and user interests. A third-party cookie is a cookie issued from a domain other than the domain accessed by the user. For example, if an ad from another domain is displayed in displayed content, a cookie is also issued from the web server for this ad. These types of cookies are called third-party cookies, and since they are used for advertising purposes without the user's knowledge, they are the subject of measures being taken around the world to protect personal information. Google has announced that it will remove third-party cookies in Chrome by the end of 2023.
In January FY09/22, Zero Inc., which designs and implements AI algorithms and provides solutions, became a wholly-owned subsidiary. The company's customers often have a lot of data but are not able to leverage it effectively. Consolidation of Zero Inc. will enable the company to design AI systems within the group and provide a wide range of marketing support services, including sales and demand forecasts.
As one measure to increase the client count, the company plans to open sales offices in various regions in Japan, typically assigning one or two marketing consultants to directly contact potential clients, thereby building relationships of trust with excellent local companies. In addition to the Osaka and Sendai sales offices, it plans to open offices in Naha, Fukuoka, and Sapporo during FY09/22, and is seeking candidates from each region to serve as sales office managers. According to the company, there are no plans to make large capital investments in the regional sales offices, as these are basically staffed with one or two marketing consultants. The plan is for these offices to be co-located in the client's offices.
Neo Marketing has not announced a medium-term management plan, but Shared Research believes the company is targeting the following for FY09/23.
- Revenue: JPY3.0bn (three-year CAGR of 28.1%)
- OPM: 15.0% (guideline)
In the medium- to long-term, Neo Marketing is seeking to increase the number of marketing consultants and revenue per consultant on the assumption that it will be able to maintain organic revenue growth of 25% per annum. It aims to increase the number of marketing consultants from 24 in FY09/20 to 45 in FY09/23 while increasing revenue per consultant from around JPY60mn to JPY72mn during the same time frame. The company has hired several new graduates every year since around 2010 (currently six to eight) and trained them on-the-job for one to two-and-a-half years to develop them into full-fledged marketing consultants.
|Key performance indicators||FY09/16||FY09/17||FY09/18||FY09/19||FY09/20||FY09/21||FY09/22|
|No. of marketing consultants||24||31||38|
|Revenue per consultant (JPYmn)||59||67||64|
|No. of corporate customers|
|Acquisition of new customers||225||279|
|No. of active users||781||906|
|Average revenue per customer (JPY'000/year)||1,700||1,890|
The company has established the following management philosophy, vision, identity, and business concept, which are shared by all employees.
Management philosophy: Contribute to the improvement of people’s lives and the development of society by providing valuable information services that serve as a bridge between people and companies.
Vision: “Make everyone wonderful”—Aim to create a society filled with products and services that satisfy people’s hearts.
Identity: “Professional team for client success”—Be a professional team that leads clients to success for the enjoyment of consumers.
Business concept: “Customer Driven marketing”—Serve as a customer-driven marketing support company.
Neo Marketing’s management philosophy is to “contribute to the improvement of people’s lives and the development of society by providing valuable information services that serve as a bridge between people and companies. Its main objective is to continue to exist and grow as an organization that benefits its clients and society at large. By continuing to develop services that solve its clients’ issues and lead their businesses to success, the company aims to create a society where the world is filled with excellent products and services, companies are successful, and people’s lives are enriched. In today’s mature economy, it is becoming more and more difficult to achieve superior differentiation when developing products and services. However, the company is developing new businesses in order to co-create and achieve innovation with our clients.
The company’s medium-term management plan calls for the strengthening of its service lineup to provide integrated support for clients’ marketing processes and to aggressively cultivate successful companies. The basic strategy is to focus on the following three activities.
For Neo Marketing, hiring and training marketing consultants on a stable and continuous basis is a major issue in building a system that can provide extensive support to clients. The company considers personnel to be its most important management resource, and is implementing comprehensive measures covering hiring, training, and improving engagement of both new graduates and mid-career workers.
The company will implement measures to attract customers, such as holding regular webinars and approaching participants, making proposals to prospective customers who have downloaded self-directed survey results and white papers, strengthening inside sales, and disseminating information through evoked set* media. The company is also proactively cultivating relationships with quality companies with a view to establishing regional offices.
*Evoked set: A set of brands that initially come to mind when consumers set out to make purchasing decisions regarding certain products or services. Enclosed is a website that provides survey results: https://neo-m.jp/evoked_set/ (Japanese only)
Neo Marketing’s strategy is to make contact with clients at the beginning of the marketing process when clients are looking for insight into their target consumers. Once it establishes a business relationship with these clients, it works with them in subsequent processes such as product development, promotion, and assessment of advertising effectiveness to maximize average client spend. In order to achieve this, the company’s marketing consultants, who act as sales representatives, serve as the point of contact with clients and propose optimal solutions to address their marketing issues based on the company’s proprietary Four Ks Marketing Framework. The company’s strength lies in the fact that a single marketing consultant can handle multiple clients and propose marketing support services that are optimal for each. The company aims to increase transaction volume by thoroughly educating clients on the Four Ks Marketing Framework to create proposal opportunities.
The company is focusing on the following priority financial issues in order to achieve a high ROE that exceeds the cost of capital and to enhance stable and continuous shareholder returns.
Neo Marketing is implementing necessary capital and system investments in the course of promoting initiatives to address priority management issues. At the same time, it is improving profitability through companywide efforts to reduce costs by streamlining and improving efficiency.
The company is working to strengthen its financial base by improving asset efficiency through further improvement of investment efficiency and by minimizing working capital requirements by promoting the collection of accounts receivable.
The company is working to strengthen its financial base by improving asset efficiency through further improvement of investment efficiency and by minimizing working capital requirements by promoting the collection of accounts receivable.
Neo Marketing is an independent marketing research company that aims to provide “marketing support from the consumer’s point of view.” The company conducts marketing research aimed at identifying the thoughts and behaviors of consumers, as well as the attitudinal structures behind these, and provides clients with the results of its analysis. Further, it uses the marketing insights* gained to help its clients create products and services designed to stimulate customer interest and trigger purchasing behavior. It ensures success by getting involved from the initial stages of development (concept and basic design) and dispatching personnel to work with clients on-site. The company’s strength lies in its ability to provide clients with one-stop marketing support services that encompass research, promotion, and branding, all of which it conducts in-house.
*In marketing, the word “insight” refers to ascertaining the feelings of consumers to discover exactly what it is that they want. By gaining insight into the thoughts and actions of consumers, it is sometimes possible to see patterns in their behavior or latent wants that even they themselves may not be aware of. The company emphasizes the concept of insight, which it sees as similar to that of design thinking, the practice of adopting the perspective of the user of a product or service as a method of searching for fundamental solutions to issues rather than trying to resolve issues piecemeal as they rise to the surface.
Both market research and marketing research refer to the part of the marketing process that involves researching the needs and wants of consumers and the methods used to do so. However, the two are not synonymous. Market research is about using data to understand the structure of products and services in a given market to date (e.g., grasping the state of the existing market). Marketing research, on the other hand, is about forecasting the future structure of products and services in a given market (e.g., assessing future needs). Recently, it is not uncommon for these two differing approaches to be used in tandem.
The concept of insights has become increasingly important in recent years. In January 2017, the Council of American Survey Research Organizations (CASRO) and the Marketing Research Association (MRA) merged to form the Insights Association. The research targets associated with the European Society for Opinion and Marketing Research’s (ESOMAR’s) “Global Market Research 2020,” a collection of international industry statistics, have expanded to include the new domains of Tech-Enabled Research and Reporting. Consequently, the size of the market covered by these statistics have approximately doubled (global marketing research revenue of USD88.9bn in 2019). According to the Japan Marketing Research Association (JMRA), Japan’s marketing research revenue amounted to JPY229.1bn in the same year, but the JMRA has not yet expanded its definition of marketing research to match ESOMAR’s and is currently contemplating this decision.
The company’s target market size is approximately JPY2.5tn, since it includes not only Japan’s marketing research market of JPY229.1bn (JMRA, 2019), but also the PR market of JPY111.1bn (Japan Public Relations Association, 2020) and the online advertising market of JPY2.2tn (Dentsu, 2020). Assuming the manufacturing industry, Neo Marketing’s main target, accounts for just over 40% of this market, we get a figure of approximately JPY1.0tn. Research companies, online advertising agencies, consulting companies, and general advertising agencies are all market participants. The company is cultivating medium-sized companies and successful firms that have been unable to actively engage in marketing due to a lack of human resources and know-how. It competes with large consulting firms and general advertising agencies for some of its large and medium-sized clients. The company believes that its strategy of differentiating itself by providing customer-driven and integrated in-house services is the key to overcoming competition from the major players.
Neo Marketing integrates and systematizes the services it provides. It divides the marketing process of its clients into four subdivisions based on the “four Ks” of its proprietary Four Ks Marketing Framework: consumer insight discovery (kakushin), product development (kaihatsu), sales promotion (kaitaku), and improvement of initiatives (kaizen). The Four Ks Marketing Framework defines each of these and lays out marketing measures applicable to each so that the company can deliver the appropriate solutions through its various services. Non-consolidated services include Insight Driven, Customer Driven, Digital Marketing, PR, and Customer Success (see below for details*).
Two consolidated subsidiaries (Sales Support Co., Ltd., and Pile-up Co., Ltd.) provide B2B marketing support services and crowdsourcing (a type of outsourcing in which work is entrusted to an unspecified number of people via the internet).
The company lists the following six company highlights: (1) more than 20 years of company history; (2) more than 3,000 projects handled per year; (3) expertise developed through handling more than 20,000 cumulative projects; (4) more than 2,700 cumulative clients served (as of end-September 2021); (5) one of the largest consumer panels in Japan consisting of more than 24 million people (as of end-September 2021; including partner panels); (6) more than 10 solution lineups. (See “KPIs” below for details).
The company’s business model (all solutions) is outlined in the business system diagram below, which shows the relationships between clients, the Neo Marketing group, and consumers. The group consists of the company and two consolidated subsidiaries: Pile-up and Sales Support (both B2B businesses). The company’s B2C clients include manufacturers, think tanks, government ministries and agencies, universities, and local government bodies, while its B2B clients include manufacturers, IT and systems companies, and service developers.
The company operates a marketing platform (including a consumer panel* and a solutions panel) to provide clients with solutions to their marketing issues and leverage data to help them develop products and promote sales. Clients pay the company from their advertising and PR budgets as compensation for these services.
*A consumer panel is a network of general consumers who have agreed to participate in marketing research surveys and other marketing activities conducted by Neo Marketing’s corporate clients. The consumers register with Neo Marketing to receive rewards such as reward points from clients according to the degree of their participation.
Pile-up conducts a crowdsourcing business for the company (recorded as internal transactions) by selecting particularly cooperative iResearch consumer panel members and conducting individual interviews with them. Sales Support operates a B2B marketing support business centered on Urizo, a tool for collecting lists of companies. It earns subscription fees for providing lists to clients as SaaS.
One of key features of the company’s business is that it conducts each part of the marketing process from the consumer’s perspective. Consumer-driven marketing means emphasizing consumer perspectives in marketing strategies. This includes determining the products and services that consumers want, the type of communication that they prefer, and the kind of information that they require, and making sure marketing initiatives are based on these opinions. The company’s proprietary marketing platform forms the basis for this customer-driven approach.
Neo Marketing’s proprietary consumer panel, iResearch, had 580,000 registrants (monitors) as of end-September 2021. The company has established a system in which monitors can respond to marketing task requests from companies from the comfort of their own homes through their PC, tablet, or smartphone to earn rewards (such as reward points, which convert at a rate of JPY1/point). The company has designed the iResearch panel to be composed of consumers with demographics (such as gender, age, and place of residence) approximately in the same proportions to those of the overall internet-connected population in an attempt to limit attribute bias to the greatest possible extent. When conducting marketing research in-house, even the largest of companies can end up with biased results in terms of the attributes and attitudes of the survey targets. Therefore, it is common for companies to order surveys from independent marketing research companies.
SOLPANEL is a consumer panel established by Pile-up to provide promotions and marketing solutions utilizing people. It has approximately 6,000 registrants (as of end-September 2021) and is operated by Pile-up in collaboration with Neo Marketing’s iResearch. Pile-up conducts a crowdsourcing business in which it selects particularly cooperative registrants from the iResearch consumer panel and conducts individual interviews with them. SOLPANEL registrants receive tasks such as reviewing product purchasing experiences, sharing on social networking sites, visiting restaurants, appearing in advertisements or events, and completing SOLPANEL-exclusive surveys. They earn iResearch points for each completed task. Registrants include so-called “extreme users*” who are essential to the company’s Insight Driven services. According to the company, a detailed analysis of the consumption behavior of extreme users can provide hints for the development of innovative new products and services.
*Extreme users are “those who use a certain product in a very particular way, or use it unusually frequently.” For details, please refer to the book “Insight-Driven: Hits Are Born from the Obsession of Just One Person” (Sogo Horitsu Shuppan, Masumi Takakura and Kosuke Nakajima).
Neo Marketing has access to a panel of over 24mn consumers (as of end-September 2021) through collaboration with partner companies. The company pays partners a usage fee each time it uses their consumer panel. The consumer panel is an expanded version of iResearch that approximates the overall internet-connected population across a number of demographics, including region, age, gender, marital status, presence of children, household income, household composition, industry, and occupation.
iResearch and the expanded consumer panel comprise the service infrastructure that forms the basis for the company’s proprietary Customer Driven marketing support business. What sets Neo Marketing’s services apart is its ability to narrow in on specific marketing targets for each project from its database by selecting for certain demographics (age, income, occupation) and location attributes (residence, work location). For example, the company can choose to look at male nurses living in Saitama Prefecture with an annual income of JPY5mn or married women in their 20s or 30s with a household consisting of a married couple with unmarried children.
The company provides a series of marketing services in line with its Four Ks Marketing Framework based on the collection and analysis of information from consumer panels.
|Kanto||42.2%||7.79||None||3.0%||Agriculture, Forestry, Fishing, Mining||1.7%|
|Kansai||18.2%||3.36||Below JPY2m||9.6%||Construction, manufacturer||7.6%|
|Chubu||13.7%||2.53||JPY2m to JPY4mn||24.9%||Manufacturer||18.3%|
|Hokkaido/Tohoku||10.0%||1.85||JPY4m to JPY6mn||22.9%||Electricity, gas, heat, water suppliers||1.8%|
|Kyushu/Okinawa||8.7%||1.61||JPY6m to JPY8mn||13.6%||Telecommunications||3.5%|
|Chugoku/Shikoku||7.2%||1.33||JPY8m to JPY10mn||8.6%||Transportation||4.9%|
|Total||100.0%||18.46||JPY10m to JPY20mn||7.8%||Wholesaling, retailing||14.2%|
|Age||Above JPY20m||1.8%||Finance, insurance||4.6%|
|20s and under||15.4%||Unknown||7.9%||Real estate||2.7%|
|40s||26.1%||Household composition||Healthcare, welfare||7.9%|
|50s||16.8%||Single-person||19.9%||Education, study support||3.0%|
|60s||8.4%||Married couple||15.9%||Complex services||0.8%|
|70s and over||4.8%||Couple with unmarried children||40.2%||Engraving||0.8%|
|Total||100.0%||Single parent with unmarried children||6.3%||IT services||6.6%|
|Sex||Parent with married children||3.6%||Advertising||0.6%|
|Male||47.7%||Parent, married children, grandchildren||4.7%||Marketing, consulting||1.1%|
|Female||52.3%||Siblings, relatives, friends, lovers||3.8%||Other||16.9%|
|Marital status||Total||100.0%||Job type|
|Married||51.2%||Occupation||President, company management||1.3%|
|Never married||42.2%||Manager/Company employee||38.4%||Planning||2.2%|
|Divorced/Widowed||6.5%||Public servant||2.7%||Specialist, engineer||14.5%|
|Presence of children||Homemaker||15.5%||Clerical, general affairs, HR, legal, accounting||24.9%|
|No children||57.6%||Part-time worker||14.6%||Selling, service, customer service, cooking||13.2%|
|Occupation||University/Vocational school student||6.3%||Marketing, research||1.0%|
|Manager/Company employee||38.4%||High school student or below||5.4%||Technician, laborer||9.2%|
|Public servant||2.7%||Total||100.0%||Information systems||3.7%|
|University/Vocational school student||6.3%|
|High school student or below||5.4%|
The company divides the marketing process of its clients into four subdivisions. The marketing process generally includes market research, product development based on the results of the market research, advertising the products developed, and verification of the effectiveness of the advertising (resulting sales and other results). The company has developed a proprietary Four Ks Marketing Framework, which stipulates appropriate measures for each of these processes, corresponding to each of its services. The unique framework enables it to provide integrated services covering the entire marketing process.
“Four Ks” refers to the consumer insight discovery (kakushin), product development (kaihatsu), sales promotion (kaitaku), and the improvement of each measure (kaizen). Clients develop products and services using the company’s Insight Driven (marketing geared toward creating innovation centered on qualitative research) and Customer Driven (marketing from the consumer’s perspective centered on quantitative research) marketing services. Once the product or service is launched, Neo Marketing promotes it with Digital Marketing and PR, and uses Customer Success to encourage customer loyalty to the client. Neo Marketing works closely with clients through the entire marketing process, leveraging its system to provide integrated marketing support. The company has done business with a cumulative total of more than 2,000 companies since its founding. It strives to cross-sell (provide multiple services) and up-sell (increase the project unit price) to existing clients in addition to generating revenue from acquiring new ones.
|% of total||46.1%||43.0%|
|% of total||27.3%||25.3%|
|% of total||4.6%||7.7%|
|% of total||13.5%|
|% of total||2.6%|
|% of total||22.0%||7.9%|
|Operating profit margin||1.8%||12.2%||16.6%|
Customer Driven refers to marketing centered on quantitative research in which the company collects and analyzes data from consumer panels. In Customer Driven services, Neo Marketing categorizes consumers (active consumers, general consumers, disengaged consumers, non-buyers, and non-recognizers) and analyzes their thoughts, emotions, and behaviors (the so-called “customer journey”) from the time they learn about a product or service to the point when they finally decide to purchase it. The company then uses this information to devise customer-driven promotion strategies and verify their effectiveness.
All of the company’s main services involve collecting information on consumers and formulating marketing strategies based on an understanding of their thoughts and behavior. The Customer Driven service differs by virtue of being based on quantitative research. It is Neo Marketing’s core service, accounting for the largest number of customers and the greatest percentage of revenue. Further, the company positions the service as an entry-level service and keeps prices for it low so that it can attract new clients to whom it will attempt to cross-sell and up-sell the rest of its higher-priced lineup.
By conducting interviews with the most optimal targets from the consumer panel and observing their behavior (how they actually use products), the company uncovers insights that cannot be gained by quantitative means. Insight Driven services use qualitative research to discover the hidden psychology that motivates consumers. These mental patterns are often subconscious and thus in many cases go unrecognized by the consumers themselves. The service aims to discover the essential subconscious needs of users and leverage that information to drive innovation. It is based on an empirical methodology that emphasizes positing hypotheses and verifying results while observing the behavior of “extreme users” (exceptionally frequent or idiosyncratic users of a certain product). The company uses the insights gained through Insight Driven research as a starting point to develop ideas, formulate concepts, and design prototypes, which it then presents to the client.
Neo Marketing provides one-stop digital marketing services in which it formulates, executes, and evaluates the efficacy of an online advertising strategy based on an understanding of the target customer. The company provides a direct-to-consumer (D2C) support service for the manufacturing industry, its main client base, in which it uses Shopify, the world’s most popular e‑commerce platform, to provide comprehensive support for its clients. This includes building and operating e‑commerce sites and generating traffic for them.
The company provides a PR support service for the purpose of expanding awareness and establish branding. A typical example is preparing news releases for the media crafted to promote the brand or worldview that the client is aiming to promote and reach a target audience that Neo Marketing has identified in advance through its Customer Driven services (using evoked set* research as a guide).
Customer Success services help clients maximize the value of the products and services they offer to deliver successful outcomes for end users. Neo Marketing helps end users achieve the outcomes that they want to achieve with certain products and services by engaging with them a variety of ways after they make a purchase or sign a contract. Through Customer Success services, the company develops and implements strategies to achieve the results sought by its clients, such as reducing churn, increasing the ratio of repeat customers, increasing up-selling, and fostering positive word-of-mouth. Neo Marketing has established Customer Success centers in Naha and Ishigaki (both in Okinawa Prefecture), which provide customer support via phone and email, as well as AI chatbots for quality assessment and reducing paid user churn for subscription businesses.
Consolidated subsidiary Sales Support provides Urizo, a tool with approx. 50,000 cumulative corporate users that creates lists of companies to support B2B marketing and sales activities. Urizo is a proprietary tool developed in-house that provides powerful support for companies in approaching new customers and acquiring leads. It is favored by clients for its ease of use, cost-effectiveness, and trustworthiness earned through the long-term provision of services. Urizo targets corporate customers who pay for the tool according to a SaaS model* based on monthly subscriptions. (*A SaaS model is a sales model in which software functions are provided as a service over the internet, rather than sold as a package as in the case of conventional software.)
Neo Marketing has established a system that allows it to leverage crowdsourcing by requesting work from an unspecified number of people using SOLPANEL, a platform of registered members owned by the company and operated by consolidated subsidiary Pile-up (approximately 6,000 members as of end-September 2021).
|Core services||Summary||Revenue per customer|
|Insight Driven||Marketing services for creating innovation, centered on qualitative research. The company uncovers the hidden psychology that subconsciously motivates consumers and uses the information to develop products and services.||JPY3–8mn|
|Customer Driven||Marketing from the consumer’s perspective, centered on quantitative research. The company defines customer segments and provides other information that can be used in marketing initiatives.||JPY400,000–700,000|
|Digital Marketing||One-stop design and execution of customer-centric digital marketing communication strategies. Includes strategic planning, creation, operation, and verification of online advertising campaigns.||JPY500,000–2mn/month|
|PR||PR support services to expand awareness and establish branding. Typical services include the delivery of news releases that express a client’s ideal brand image and worldview to a target that has been defined through Customer-driven services.||JPY2mn–5mn|
|Customer Success||Services that support the client’s customers to ensure that they continue to use the client’s services over a long period of time. These include, for example, programs to prevent users from cancelling their subscriptions.||JPY500,000–1mn/month|
Up until the Neo Marketing’s listing (April 2021), the company had focused on OPM and ROE as its KPIs. Moving forward, in order to secure higher growth and profitability, the company has changed its focus to the number of marketing consultants, the number of clients, and average client spend. OPM has already surpassed its medium-term target of 15% (16.6% in FY09/21), and the company intends to focus more on revenue growth. Revenue equals the number of marketing consultants times revenue per consultant. It can also be calculated as the product of the number of active clients* and average client spend. (*Active clients are defined as those who have signed at least one contract with the company within the past year.)
qqqOther KPIs include the number of business negotiations, the number of new client acquisitions, client and project type, the contract rate, the ratio of repeat clients, the number of projects per year, cross-sell (providing multiple services), up-sell (increasing the unit price of a project), LTV, sources of recurring revenue, average annual utilization of iResearch registrants, average compensation payment and range of compensation, cost per acquisition (CPA, the cost to acquire a new client; includes compensation to monitors related to new client acquisition), and the degree to which clients’ fiscal year-ends are diversified (the company’s quarterly revenue is heavily weighted toward Q2 (January–March) since most clients have a March fiscal year-end).
The company’s marketing consultants are responsible for everything from new client development to project contracting and project management. As of end-March 2021, the company had 134 employees (70 regular, 64 non-regular), of which more than 30 (around half of regular employees) were marketing consultants and another 10 or so were specialist consultants. The number of marketing consultants was 24 at end-FY09/20 and 31 at end-FY09/21, and the company’s medium-term management plan calls for increasing the number to 38 by end-FY09/22 and 45 by end-FY09/23. The company has hired several new graduates every year since around 2010 (currently six to eight) and trained them on-the-job for one to two-and-a-half years to develop them into full-fledged marketing consultants. Most of the specialist consultants are mid-career hires. The company says it conducts almost no walk-in sales activities to develop new clients; it closes a majority of sales through webinars, inquiries from its website, or referrals from existing customers.
Revenue per marketing consultant has been trending upward: the metric was JPY59mn in FY09/20 and JPY67mn in FY09/21. Each marketing consultant acquires an average of seven to ten new clients each year. They handle around 20 clients each when including existing clients. The company’s strategy is to sell multiple services to each client (cross-selling) and increase the project unit price (up-selling) and the targeted increase in revenue per marketing consultant predicated on the success of this strategy.
Neo Marketing has a cumulative client base of over 2,700 and continues to increase the number of new clients by about 200–300 per year (it acquired 279 clients in FY09/21, 154 of whom ordered multiple services). According to the company, the number of active clients (those who contract for at least one project with the company) is roughly 900 per year. With 906 active clients in FY09/21, the average client spend was JPY1.9mn. Since the company handles more than 3,000 projects per year, the average client orders four or five projects per year.
In the B2C business, the company’s clients are mainly manufacturers and other private companies, but also think tanks, government ministries and agencies, universities, and local government bodies. In the B2B business (Sales Support), clients include manufacturers and IT, systems, and service developers. The company’s top 10 clients account for only a few percent of total revenue, which can be interpreted positively as a sign of diversification of the client base, or negatively as a sign that it is not penetrating deeply enough into the market.
The company’s customers include major electronics manufacturers (Panasonic [TSE1: 6752], Fujitsu [TSE1: 6702], NEC [TSE1: 6701], Canon [TSE1: 7751], Kyocera [TSE1: 6971]) and major beer manufacturers (Kirin Holdings Company [TSE1: 2503], Asahi Group Holdings [TSE1: 2502], Suntory Holdings [unlisted]). However, these large companies tend to entrust the marketing of their top brands to general advertising agencies such as Dentsu (4324) and Hakuhodo (2433), while using Neo Marketing and its competitors to handle the marketing of their second- and third-tier brands.
Neo Marketing says that it has become better known and more trusted since going public, and there have been more cases of it being able to compete for larger orders. It competes with some of the major consulting firms and general advertising agencies for its client base of medium-sized and large companies. It believes that the key to beating the competition is to differentiate itself by providing integrated, in-house services based on understanding the perspective of the consumer.
According to the company, the high level of customer satisfaction has led to a relatively high ratio of repeat clients of around 80–90%. According to the company’s client survey, the reasons for choosing the company were: (1) the quick response to inquiries (same-day response), (2) client-oriented service, (3) the reasonable fee structure, and (4) the integrated service structure. Many clients develop new products or services in two- or three-year cycles. This means that even when it appears that a client has chosen to discontinue services, it often turns out that the client recontracts with the company after a year or so as it undertakes a new project. The high repeat rate suggests that Neo Marketing has been successful in retaining customers. The company’s ability to provide integrated, in-house services gives clients peace of mind when placing orders with the company. Competing general advertising agencies and major consulting firms often outsource their services, and they often lack speed, flexibility, and the ability to respond to detailed customer needs. For the company, increasing the number of regular clients (those with a high number of repeat orders) will increase LTV and secure sources of recurring revenue (Digital Marketing and Customer Success orders).
Client spend for the company’s main services are as follows: Insight Driven (JPY3–8mn), Customer Driven (JPY400,000–700,000), Digital Marketing (JPY500,000–2mn monthly), PR (JPY2–5mn monthly), and Customer Success (JPY500,000–1mn monthly). The Customer Driven service is Neo Marketing’s core service, accounting for the largest number of customers and the highest revenue. Further, the company positions the service as an entry-level service and keeps prices for it low so that it can attract new clients to whom it will eventually attempt to cross-sell and up-sell the rest of its higher-priced lineup. With 906 active clients in FY09/21, the average client spend was JPY1.9mn.
Neo Marketing focuses on the number of business negotiations per month (with new and existing customers) as a management indicator since negotiations tend to lead to orders after approximately two months. The company closely watches the number of business negotiations per month by type of customer and project, region, business format, season, and marketing consultant. Neo Marketing is cultivating medium-sized companies and successful firms that have been unable to actively engage in marketing due to a lack of human resources and know-how. There is relatively little competition for these targets, and the company has been able to increase the percentage of new contracts with local companies by setting up offices in cities. In terms of business negotiations, important indicators include the number of negotiations with new clients, the number of negotiations with existing clients, the quality of negotiations, and the cost of conducting them. The ability of marketing consultants varies widely from new graduates to seasoned veterans. It takes about one to two-and-a-half years for new graduates to become able to operate fully independently.
According to the company, of the 580,000 iResearch registrants, the average annual utilization rate (the percentage of people who complete at least one survey in a year) is about 275,000 people, and the annual compensation payment (including iResearch reward points and outsourcing fees paid to partners) is around JPY120mn. Simply dividing JPY120mn by 275,000 people yields an average annual compensation payment of about JPY450 (450 points) per person. However, the annual compensation earned by registrants varies widely, with some particularly proactive users earning tens of thousands of points for giving individual interviews and completing various other tasks. The company manages its registrants to exclude those who are biased or appear to give extremely arbitrary answers. According to the company, the average survey response rate is 50%–60%.
In terms of the company’s cost structure, outsourcing expenses account for a significant 49% of the cost of revenue in FY09/20 (non-consolidated). These include outsourcing fees paid to consumer panel partners. Cost of revenue and SG&A expenses included provision for reward points and monitor commissions of just under JPY100mn in FY09/20 (non-consolidated). Sales promotion and advertising expenses to acquire clients came to roughly JPY18mn in FY09/20. Simply dividing those sales promotion and advertising expenses of JPY18mn by the annual number of new clients (225 in FY09/20) yields a cost per client (CPA) of approximately JPY80,000. In other words, Neo Marketing spends an average of JPY80,000 per new client to generate revenue of JPY1.7mn.
The majority of the Neo Marketing’s clients end their fiscal year in March, so the company’s revenue tends to be concentrated in Q2 (January–March). For FY09/21, the Q2 revenue ratio was 31.5% and the Q2 operating profit ratio was 51.8%. According to the company, the turnaround time from receiving a project order to delivering the final product is one week to two to three months. Increasing the number of marketing consultants and specialist consultants is time-consuming and costly, and unnecessarily increasing the number of consultants is not a profitable strategy considering this expense along with the annual utilization rate. The company is using AI and other means to mechanize the tabulation and analysis of questionnaire results. However, 10% to 15% of the task involves analyzing comments, which requires human judgment. This ties up personnel, making it difficult to increase orders or shorten delivery times. The company believes it can reduce the impact of seasonal factors by increasing the ratio of non-recurring revenue generated through its Digital Marketing and Customer Success services, which are downstream portions of the marketing process.
The company has served a cumulative total of approximately 2,700 clients and continues to add 200–300 new clients each year (279 in FY09/21, including 154 using multiple services). According to the company, the annual number of active clients (those that order at least one project) is around 700. Roughly 40% of clients are manufacturers and 60% are in other sectors. In the B2C business, the company’s clients are mainly manufacturers and other private companies, but also think tanks, government ministries and agencies, universities, and local government bodies. In the B2B business (subsidiary Sales Support), clients include manufacturers and IT, systems, and service developers. Most of the clients in the manufacturing sector produce daily necessities and consumer goods such as foods, beverages, cosmetics, and home appliances.
These clients produce many of the items found in electronics mass retailers, supermarkets, and convenience stores. Leading manufacturers in each area include Procter & Gamble Corporation (NYSE: PG), Kao Corporation (TSE: 4452), and Lion Corporation (TSE: 4912) in daily necessities, Panasonic Corporation (TSE: 6752) and Sony Corporation (TSE: 6758) in home appliances, Shiseido Company (TSE: 4911) and Kose Corporation (TSE: 4922) in cosmetics, and Asahi Group Holdings, Ltd. (TSE1: 2502), Suntory Holdings Limited (unlisted), and Kirin Holdings Company, Limited (TSE1: 2503) in beverages.
Many of the company’s manufacturing clients are large enough to have ample funds available to spend on marketing. Most them produce national brands and have revenue of JPY10–200bn. That said, the company is also interested in supporting the marketing of companies that rank third or fourth in their industry but aim to take a larger share, as well as successful manufacturers, which are often located in regional areas. The company’s top 10 clients account for only a few percent of total sales, which is a sign indicating that the company has a diversified client base and signaling that there is ample room for the company to increase revenue by promoting its Four Ks Marketing Framework and through cross-selling and up-selling.
The company website displays case studies
of nine clients based on interviews. These delve into what Neo Marketing
support consists of and what makes the company stand out. The nine clients are
all in the private sector (six in manufacturing and three in other sectors). Of
the nine case studies, we infer that six were Customer Driven and four were Insight
Driven (one was both). The interviewees included members of departments that
deal directly with consumers in the manufacturing sector, and decision-makers
such as representatives and business managers in other sectors.
One client, FM Osaka Broadcasting Co., Ltd. (unlisted), ordered Customer Driven services, and then proceeded to add Insight Driven services as well. Other clients also sometimes follow this pattern. Some case-study clients ordered Insight Driven services from the beginning, such as companies setting out to develop a new business (Kirin Beverage Company, Limited [unlisted]) and those with traditional brands searching for new opportunities (Hoyu Co., Ltd. [unlisted] and Ikeda Mohando Co., Ltd. [unlisted]).
Specific projects included the development of Office Smoothie for Kirin Beverage’s KIRIN naturals service for corporate customers, the development of an app for Hoyu that helps select products to be placed in stores, creation of a term for heel skin dryness to promote Ikeda Mohando’s Hibicare FT ointment, and development support for Nightmin Nasal Breathing Strips for Kobayashi Pharmaceutical (TSE1: 4967).
The company’s support goes beyond online surveys and questionnaires to provide opportunities to hear the voices of consumers in group interviews and workshops. Many clients say that listening to these voices changed their perceptions of their target market. In terms of reasons for choosing the company, six companies cited the speed of response, three companies cited Neo Marketing’s emphasis on the client’s perspective (sense of partnership, same viewpoint), and three companies cited price competitiveness. The fact that the company has service locations close to its clients (FM Osaka, SHIBUYA109 Entertainment Corporation [unlisted]) was cited as another merit. In general, clients seem to have a high level of trust in their points of contact at the company, which is a key factor in attracting repeat orders.
|Company||Business||Support tasks||Support service||Department interviewed||Reason for choosing Neo Marketing|
|Hakubaku||Manufacture and sale of foods||Support for resolving issues following revamping of product "Kakeru Dake Mochimugi"||Customer Driven||Product Strategy Department||Objective viewpoint, client perspective, speed of service, precision, new insights and input|
|Kobayashi Pharmaceutical||Drugs, fragrances, hygienic products, etc.||Development and small clinical trial of Nightmin Nasal Breathing Strips||Customer Driven||Daily Necessities Business Department||Speed, price, warmth, agreeableness, balance|
|Kirin Beverage||Manufacture and sale of beverages||KIRIN naturals: Office Smoothie||Insight Driven||New Business Development Office||Speed, ease and comfort, emphasis on interviews|
|SHIBUYA109 ENTERTAINMENT||SHIBUYA109-related business||Visitor survey and group interviews||Customer Driven||Marketing Strategy Department||Flexible support system, ease of consultation, price, location, shared work|
|Tokyo Electric Power Company Holdings||Nuclear, hydroelectric, and new energy generation business||Large-scale external monitor survey on home insulation performance||Customer Driven||Management and Technology Strategy Research Center||Quick response time, sincere and detailed service, quotation that meets the required specifications, and price competitiveness|
|Hoyu||Manufacture and sale of hair coloring products||Support for a "co-creation workshop" with end users||Insight Driven||Sales Management Office, Sales Development Division||Friendliness, approachability, initiative, openness, dependability|
|FM Osaka||Basic broadcasting business based on the Broadcasting Act||50th Anniversary Web Survey, group interviews, workshops||Both||Programming Office, Programming and Production Head||Understanding of local conditions, flexibility, footwork, multifaceted analysis and suggestions|
|Ikeda Mohando||Manufacture and sale of drugs||Creation of new catch copy for use in commercials||Insight Driven||Market Development Office||Same perspective, quick response, prior research, eagerness to learn|
|Tokyo Kikaku||Research and analysis on commercial response||Achieve the "weightiness" of an analog questionnaire in a web survey||Customer Driven||CM General Research Center Representative||Quickness of response, flexibility and speed, and sense of partnership|
Neo Marketing operates in a single segment, Marketing Support, and therefore does not disclose segment-specific information. The company began disclosing revenue by service starting with 1H FY09/21 results. It established its current service classification in FY09/20, and its policy is not to retroactively disclose results for previous years based on the new classification. In 1H FY09/21, Customer Driven revenue accounted for 43.0% of the total, Insight Driven for 25.3%, Digital Marketing for 7.7%, Customer Success for 13.5%, PR for 2.6%, and Other (two subsidiaries) for 7.9%.
|Services||Revenue per customer||% of revenue||Operating profit margin|
|Sales Support||Slightly below JPY200,000/month||5.5%||Low|
The company’s service offerings can be divided into two types: one-time revenue services (fees by project) and recurring-revenue services (monthly fees). The latter includes Digital Marketing, Customer Success, and subsidiary Sales Support. These services account for roughly 26.7% of the company’s revenue (FY09/21). Neo Marketing expects these services to continue to grow due to the impact of the COVID-19 pandemic. One-time revenue services comprise Customer-driven, Insight-driven, PR, and subsidiary Pile-up. Clients order these services on a project-by-project basis and revenue is generated upon delivery. They account for 73.3% of the company’s revenue (FY09/21). It usually takes one week to two to three months from the time a project is received to the time the deliverables are delivered. The company’s ratio of repeat clients is high (80–90%), suggesting that its model allows it to continue to earn one-time revenue orders from clients rather than selling them one-off services.
Customer Driven services from the core of the company’s lineup, accounting for the largest number of clients and highest revenue. These services deliver customer-driven marketing research centered on analysis of quantitative data collected from consumer panels. The company positions the service as an entry-level service and keeps prices low (JPY400,000–700,000), resulting in many new clients signing up for customer-driven services before exploring other offerings.
Insight Driven services are relatively new among the company’s lineup. That said, they are quickly becoming an earnings pillar on par with Customer Driven services. The services consist of qualitative research to uncover the hidden psychology that motivates consumers to action. The company positions Insight Driven services as an important starting point from which to direct clients to other services. The unit cost per client is the highest among the company’s services, ranging from JPY3–8mn.
Digital Marketing is a recurring-revenue service (monthly unit price ranges from JPY500,000–2mn) that mainly uses the Shopify® (supporting 1.7mn businesses in 175 countries, with total distribution value of more than USD20bn) e-commerce platform to provide comprehensive support for clients, including everything from building and managing e-commerce sites to attracting customers. The GPM is the lowest among the company’s services because, unlike other services, there are significant system usage fees. Digital Marketing grew from accounting for 4.6% of revenue in FY09/20 to 7.7% in FY09/21. The company believes that Digital Marketing revenue will continue to grow as the COVID-19 pandemic has pushed up demand for e-commerce site construction among clients.
Customer Success services functions similarly to call center services. The company has established Customer Success centers in Naha and Ishigaki (both in Okinawa Prefecture), which provide customer support via phone and email, as well as AI chatbots for quality assessment and reducing paid user churn for subscription businesses. These services are based on recurring revenue (monthly client spend ranges from JPY500,000–1mn).
PR comprises a support service for the purpose of expanding recognition and branding. These services are relatively expensive (JPY2–5mn per client), account for only about 3% of revenue, and are ordered by a only limited number of clients. PR support services have the largest number of competitors, including online advertising agencies and general advertising agencies. The company needs a strategy to differentiate itself in the field in order to attract new clients.
Consolidated subsidiary Sales Support is a recurring-revenue service (the most popular plan is Premium, which costs just under JPY200,000 per month) that provides Urizo, a tool for collecting lists of companies, to support B2B marketing and sales activities. Urizo has a cumulative total of approximately 50,000 corporate users. Demand for Urizo has been growing during the COVID-19 pandemic, and the company says Sales Support had revenue of roughly JPY100mn in FY09/21 (+20.8% YoY).
Neo Marketing has established a system that allows it to leverage crowdsourcing by requesting work from an unspecified number of people using SOLPANEL, a membership-based platform owned by the company and operated by consolidated subsidiary Pile-up (approximately 6,000 members as of end-September 2021). Pile-up receives orders from Neo Marketing, and internal transactions account for most of its business. External sales are in the JPY20–30mn range, and Pile-up generated revenue of JPY45mn in FY09/21 (+31.3% YoY).
According to the Japan Marketing Research Association (JMRA), marketing research revenue in Japan was approximately JPY220.2bn in 2020. This figure is an estimate based on the total revenue of JMRA member companies (109 companies as of 2020). Revenue has grown at a rate of 1.8% per annum from JPY175bn in 2007 to JPY220.2bn in 2020. However, the number of members decreased from 140 to 109 over the same period, and the average revenue per survey respondent increased from JPY1.2bn to JPY1.9bn. A trend toward consolidation is appearing in the marketing research industry.
By research method, the share of internet research increased from 20.6% (2007) to 36.6% (2020), while the share of existing methods decreased from 43.4% (2007) to 24.6% (2020). Panel surveys have increased incrementally from 31.0% (2007) to 33.4% (2020).
|No. of respondents||companies||122||118||128||123||122||113||104||102||104||98||94||94||90||90|
|Research business revenue of respondent companies||JPYbn||143.4||137.4||130.4||132.9||140.7||140.6||140.6||146.2||157.1||168.4||172.1||174||174.8||172|
|Revenue per respondent company||JPYbn||1.2||1.2||1.0||1.1||1.2||1.2||1.4||1.4||1.5||1.7||1.8||1.9||1.9||1.9|
|Estimate for JMRA member companies||JPYbn||164.6||168.8||159.8||162.4||165.5||173.9||175.3||179.9||185.7||200.3||204.7||208.8||218.6||210.1|
|Estimate for Japan's market research business||JPYbn||175||176.6||167.2||169.9||173.1||181.9||183.5||188.5||194.6||209.9||214.7||219||229.1||220.2|
|Estimated total for Japan's market research business||175||177||167||170||173||182||184||189||195||210||215||219||229||220|
|% of total|
|Estimated total for Japan's market research business||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%||100.0%|
Neo Marketing’s target market is the total addressable market (TAM) of JPY2.5tn, which is the sum of the abovementioned marketing research market (JPY229.1bn in 2019), the PR market (JPY111.1bn in 2020; source: Public Relations Society of Japan), and the online advertising market (JPY2.2tn; source: Dentsu). The company estimates that the manufacturing industry, its main target, accounts for some 40% of TAM. This yields a serviceable available market (SAM) of JPY1tn.
The concept of insights has entered the marketing research industry in Europe and the United States is gaining in importance. In January 2017, the Council of American Survey Research Organizations (CASRO) and the Marketing Research Association (MRA) merged to form the Insights Association. The European Society for Opinion and Marketing Research (ESOMAR)’s Global Market Research 2020 international industry statistics expanded its research target to include the new domains of Tech-Enabled Research and Reporting, which doubled the size of the market covered (global marketing research revenue of USD88.9bn in 2019). According to the Japan Marketing Research Association (JMRA), Japan’s marketing research revenue amounted to JPY229.1bn in the same year, but the JMRA has not yet expanded its definition of marketing research to match that of ESOMAR’s and is currently deliberating whether to do so.
Global Market Research 2020 included new market research industry statistics on data analysis companies, automated data collection companies, and consulting/reporting companies. Over the past 10 years, ESOMAR has compiled data and estimates on these companies in separate subsegments. The decision was made to include these types of companies due to the fact that they are best considered as part of the market research industry in that they are in the business of collecting and analyzing various types of data and providing insights to customers. While revenue in the traditionally defined market research industry has been flat in recent years, the market for these new areas has grown to the point of being comparable in size to the traditional market. The combined size of the traditional and new markets is USD88.9bn (2019), with the traditional market accounting for USD46.5bn and the new market accounting for USD43.4bn. In North America, which accounts for 54% of the global insights market, traditional market research accounts for 43%, while the new domains of tech-enabled research and reporting account for 31% and 26%, respectively.
|(USDbn)||2014||2015||2016||2017||2018||2018/2017 net growth rate*||Share|
|Traditionally-defined market research (ESOMAR GMR 2018)||41.93||39.54||40.05||39.73||40.74||-0.3%||51.0%|
|Research by consulting companies||5.28||5.62||5.94||6.28||6.86||8.9%||8.6%|
|Research via IT and telecommunications||3.84||4.07||4.40||5.13||5.92||15.0%||7.4%|
|Marketing report and research||3.58||3.59||4.51||4.42||4.92||10.5%||6.2%|
|Social media monitoring||1.73||2.08||2.72||3.13||3.55||12.5%||4.4%|
|Social media and communities||1.93||2.01||2.15||2.34||2.57||8.7%||3.2%|
|Sample panel providers||0.95||0.99||0.96||1.00||1.02||-0.8%||1.3%|
|Increase from subsegments||26.83||28.89||32.02||35.40||39.09||10.3%||49.0%|
|Research market size including the increase||68.76||68.43||72.07||75.13||79.83||6.2%||100.0%|
|Central and South America||3%||3%|
|Global revenue of market research business||47,360||88,900|
|Share of revenue by research method in US||2019|
|Conventional market research||43%|
|Tech-enabled research||Includes the following methods that would have been unthinkable without the advent of technology: Online traffic/web analytics (including all advanced analytics such as content tracking and CRM analysis), automated digital/electronic collection (including retail store audits, household consumption panels, location-based services, passive data measurement, log file processing), social media monitoring, online research communities (including social media, in-depth interviews, and online ethnography), social media listening|
|Reporting||Typically is the step following data collection where results are first checked, analyzed (includes secondary analysis in the research process), and presented to the client. The format of the report may include the following: Presentations, workshops, dedicated reports, business process counseling, and advisory services. Reporting disciplines include: research conducted by consulting firms, advisory services, marketing research reports, IT and telecoms companies, and all other secondary analysis (often from companies that focus on providing insights rather than primary data collection such as Gartner, Forrester, Mintel, and Euromonitor)|
The new domains of tech-enabled research and reporting have been further divided into eight subsegments, including already‑existing areas. The following table details the definitions of the subsegments as given by ESOMAR, along with representative players and revenue share. There is a lot of overlap between the business of the traditional market research companies and those categorized in the new domains. While they may compete with each other for some projects, they collaborate with each other for others. A research company may in some instances be the user (client) of the market research services of another company, and in other instances may serve as a subcontractor.
|1||Well-established market research||Traditional market research companies (including full service, specialized fieldwork, etc.)||Nielsen, Kantar, IPSOS, Intage, Macromill|
|2||Digital data analysis||Entrants from the marketing tech sector, including companies that provide tools for collecting and processing digital data.||Adobe, Salesforce, Oracle|
|3||Industry-specific research and reports||Companies that provide research, data collection, consulting, and other services specific to a particular industry (IT, automotive, finance, etc.)||Gartner, IHS Markit, IDC|
|4||Management consulting||Companies that conduct research to understand and analyze the market while focusing on strategic management consulting (difficult to clearly define)||McKinsey, Accenture, BCG|
|5||Social listening/community||Companies that provide tools and services to build customer communities for clients, while simultaneously performing social data analysis||Cisio, Brandwatch, Meltwater Group|
|6||Corporate feedback systems||Companies that aggregate information on clients' customers and their needs by combining survey data with data naturally collected through corporate activities||Medallia, Verint, MaritzCX|
|7||DIY survey platforms||Companies that provide a platform that makes it easy to design and implement surveys. These have been gaining in functionality in recent years.||Qualtrics, Confirmit, SurveyMonkey|
|8||Sample panel provision||Companies that build and maintain access panels (research monitor organizations) and provide them to research companies (DIY functions are gaining in functionality)||Dynata, Toluna, Lucid, GMO Research|
|Subsegments of global insight industry||Revenue||Share|
|Well-established market research||36,050||42.6%|
|Digital data analysis||15,507||18.3%|
|Industry-specific research and reports||13,394||15.8%|
|Corporate feedback systems||1,561||1.8%|
|DIY survey platforms||1,227||1.4%|
|Sample panel provision||1,209||1.4%|
The three following trends form the backdrop to the expansion of the definition of market research.
(1) A shift in business direction to take advantage of new technologies and to meet the changing expectations of clients
(2) The development, expansion, and diffusion of new technologies such as DIY-type tools, and a trend toward in-house production
(3) The influx of external capital into the new insight industry
The development of tech-enabled research methods and tools brought about major changes in the structure of the industry that set the above three trends in motion. The global COVID-19 pandemic has accelerated the shift. Certain parts of the work that used to be outsourced to market research firms (especially the labor-intensive ones) can now be handled relatively easily by clients in-house. This is due in part to the influx of external capital into the digital transformation (DX) field, which seeks to leverage the full potential of data for businesses in a wide range of industries worldwide.
The traditional power structure of the market research industry has been drastically redrawn. The following table shows the top 25 companies from ESOMAR’s top 50 (the top 50 companies in terms of global revenue) for FY2019, as well as two companies that were previously in the top 10 but now are ranked 28th and 30th. The top 10 include companies that are well-known but not recognized as market research companies such as Adobe (NASDAQ: ADOBE), Salesforce (NYSE: CRM), IHS Markit (NYSE: INFO), and CoStar (NASDAQ: CSGP). Many of the companies ranked 11th through 25th are newly ascendant and with limited recognition so far; only two companies from FY2018 remained in this range. The companies ranked 9th and 10th (Intage Holdings [TSE1: 4326], the only Japanese company) in FY2018 have dropped to 30th and 28th, respectively.
IHS Markit, which came in at 8th in terms of revenue is slated to be acquired by S&P Global (NYSE: SPGI), a U.S. financial information services company (announced on Nov. 30, 2020). Adobe’s rapid growth has also been supported by M&A. Nielsen (NYSE: NLSN), a long-time leader in the market, is set to spin off and sell (change of ownership) one of its core businesses by the end of 2020. Kantar (the research arm of London-based listed company WPP [LON: WPP]) is also scheduled to be acquired by an investment firm and its future is in a state of flux.
|Ranking||Company name||Headquartered||2019 revenue||Business segment|
|1||1||Nielsen||US||6,498||-0.3||Well-established market research|
|2||3||Gartner||US||4,245||6.8||Industry-specific research and reports|
|3||2||IQVIA||US||4,139||7.6||Well-established market research|
|4||-||Adobe Systems||US||3,206||31.2||Digital data analysis|
|5||4||Kantar||UK||2,870||9.8||Well-established market research|
|6||-||Salesforce.com||US||2,506||32.0||Digital data analysis|
|7||5||IPSOS||France||2,243||8.6||Well-established market research|
|8||-||IHS Markit||UK||2,198||5.6||Industry-specific research and reports|
|9||6||GfK||Germany||1,673||5.2||Well-established market research|
|10||-||CoStar Group||US||1,400||17.4||Industry-specific research and reports|
|11||7||IRi||US||1,225||2.1||Well-established market research|
|12||-||McKinsey & Company||US||1,155||5.0||Management consulting|
|14||-||Booz Allen Hamilton||US||804||8.7||Management consulting|
|15||-||NICE Systems||Israel||793||22.8||Digital data analysis|
|17||8||Dynata||US||675||10.9||Sample panel provision|
|18||-||HubSpot||US||675||31.6||Digital data analysis|
|21||-||Ernst & Young||UK||591||6.1||Management consulting|
|22||-||Oracle||US||574||-10.2||Digital data analysis|
|23||-||Wood Mackenzie||UK||574||11.8||Industry-specific research and reports|
|24||-||Qualtrics||US||569||-0.3||DIY survey platforms|
|25||-||Abt Associates||US||568||2.7||Well-established market research|
|28||10||INTAGE||Japan||520||7.0||Well-established market research|
|30||9||Westat||US||511||1.0||Well-established market research|
|Total of top 25 companies||41,983|
|Estimated global market size||90,092|
|Company name||Ticker||Revenue||Operating profit||Operating profit margin||Main characteristics (and revenue comp.)|
|Neo Marketing||4196||1,829||303||16.6%||Insight Driven, Customer Driver, Digital Marketing, PR, Customer Success; 89 employees, 2,000 clients, 550,000 in-house panels|
|Intage Holdings||4326||57,558||4,421||7.7%||Marketing Support: Consumer Goods and Services (61.8%), Marketing Support: Healthcare (25.6%), Business Intelligence (12.6%); 1,066 employees, over 5,000 clients, 52,500 consumer panels nationwide|
|Macromill||3978||43,175||5,362||12.4%||Japan and Korea business (78.8%), other overseas business (21.2%); 2,616 employees, 4,200 clients, about 1,000 panels|
|Cross Marketing||3675||10,758||1,007||9.4%||Digital Marketing (40.5%), Data Marketing (34.4%), Insight (25.1%); 1,354 employees|
|SoldOut||6553||20,447||381||1.9%||Digital marketing; software; production and operation of media; digital transformation; 417 employees|
|Septeni Holdings||4293||21,384||3,650||17.1%||Digital marketing (96.8%), media platform (3.2%); 1,224 employees|
|ADK Holdings||-||352,861||7,140||2.0%||Formerly Asatsu-DK. A pure holding company that controls companies engaged in the advertising agency business. 3,469 employees|
|Vector||6058||37,273||2,314||6.2%||PR and advertising (46.9%), press release (9.7%), video release (2.9), direct marketing (30.4%), media (1.6%), HR (7.2%), fund (1.3%); 1,592 employees|
|Sunny Side Up||2180||15,356||519||3.4%||PR; planning, creation, and operation of sales promotions; 492 employees|
|Company (Overseas)||Ticker||Revenue||Operating profit||Operating profit margin||Main characteristics (and revenue comp.)|
|Nielsen Holdings Inc.||NLSN(NYSE)||644,725||47,765||7.4%||US-based information, data, and market measurement company; 44,000 employees|
|Ipsos Group SA||IPS(EPA)||230,428||23,815||10.3%||A global marketing research firm headquartered in Paris; 18,000 employees|
|Kantar Group||-||290,864||-21,607||-||A marketing company headquartered in London and part of WPP plc (NYSE, WPP); 25,000 employees|
Neo Marketing’s target markets (marketing research, PR, and online advertising) include research companies, online advertising agencies, consulting firms, and general advertising agencies. The company is cultivating medium-sized companies and successful firms that have been unable to actively engage in marketing due to a lack of human resources and know-how. It competes with large consulting firms and general advertising agencies for some of its large and medium-sized clients. The company believes that its strategy of differentiating itself by providing customer-driven and integrated in-house services is the key to overcoming competition from the major players. It considers the following companies to be competitors in its marketing research, digital marketing, and PR businesses.
Intage Holdings (TSE1: 4326) is the top ranked company in Japan’s marketing research industry in terms of revenue. It had revenue of JPY57.6bn (as of consolidated FY06/21), a headcount of 3,080 (as of end-June 2021), over 5,000 corporate customers, and a consumer panel of 52,500 monitors nationwide. The company’s core business is marketing support (consumer goods and services), in which it provides comprehensive support for the marketing activities of a wide variety of clients, including consumer goods manufacturers, by leveraging its advanced research technologies and data analysis capabilities. The service is based on data obtained from various panel surveys conducted in-house along with custom research. Intage is characterized by long service of its workers: the average number of years of service of regular employees (non-consolidated in FY06/21) was 15.6.
Macromill is the second largest company in Japan’s marketing research industry in terms of revenue. It had revenue of JPY43.2bn (as of FY06/21) and employed 2,637 people on a consolidated basis (as of end-June 2021). The company handles 35,000 projects per year, serves more than 4,200 clients, and has access to a panel of approximately 10 million people. The company’s core businesses are marketing research (internet research, offline research such as FGI/DI, CLT, and HUT, research planning, tabulation, analysis), global research, digital marketing research, database (purchasing database, lifestyle database), and client-directed research ASP, and other marketing-related consulting.
Cross Marketing ranks third in revenue among marketing research companies in Japan. It had revenue of JPY10.8bn (as of FY06/21, which was a six-month period due to a change in fiscal year-end) and 1,354 employees (including 238 temporary employees; as of end-FY06/21). The company’s core business is the management of subsidiaries engaged in marketing research and IT solutions, as well as other peripheral businesses. It proposes the most appropriate marketing research methods to provide information that will guide clients in decision-making as regards new product development, brand strategy, promotion, pricing, and other tasks. Toward this end, the company provides a full range of services from research design, survey execution, analysis, and reporting. It is particularly strong in online research.
SoldOut had revenue of JPY20.4bn, 375 employees, and on average 42 temporary outside employees as of FY12/20. The company provides digital marketing support for online businesses (online advertising and sales agency business), IT support (development and sales of software centered on marketing), and media support (provision of content marketing).
Septeni Holdings had revenue of JPY21.4bn (FY09/21) and 1,224 employees (FY09/20). The company operates a digital marketing business and a media platform business. In the former, it provides comprehensive support for corporate digital transformation (DX) centered on digital marketing. This includes selling and operating digital ads, providing solutions using data and AI, and providing marketing support by integrating online and offline initiatives in partnership with the Dentsu Group. The media platform business comprises the manga content, recruitment platform, social contribution platform, medical platform, and childcare platform businesses.
ADK Holdings had revenue of JPY352.9bn and 3,469 employees as of FY12/17. The company mainly conducts an all-encompassing advertising-related business that includes the planning and operation of advertising in magazines, newspapers, television, radio, digital media, and out-of-home (OOH) media; the planning and production of advertising content; and sales promotion, marketing, and PR services.
Vector has revenue of JPY37.3bn, 1,288 employees, and an average of 304 temporary employees (FY02/21). The company provides comprehensive strategic support for corporate clients in their media-based communications with consumers through its PR and Advertising, Press Release, Video Release, and Media businesses. Other main businesses include Direct Marketing, in which it focuses on online sales of goods, and HR, in which it provides cloud services for personnel evaluation.
Sunny Side Up had revenue of JPY15.4bn and 455 employees (both as of FY06/21). Registered business areas include PR, PR agency, management of athletes and artists, planning and development of new businesses, and planning, production, and operation of sales promotions. The company operates five businesses: Marketing Communications, Sports, Development, SP/MD, and Bills. The Marketing Communications business forms the earnings base for the entire group. Its core service, PR know-how, underpins all of its businesses.
The company is characterized by its adoption of a customer-driven approach at each stage of the marketing process. The customer-driven marketing approach involves discovering what kinds of products and services, communication, and information consumers want, and reflecting these insights in marketing strategies. The company conducts marketing research aimed at identifying the thoughts and behaviors of consumers, as well as the attitudinal structures behind these, and provides clients with the results of its analysis. Neo Marketing also uses marketing insights to help its clients create products and services designed to stimulate customer interest and trigger purchasing behavior. It ensures success by getting involved from the initial stages of development (concept and basic design) and dispatching personnel to work with clients on-site. The company’s strength lies in its ability to provide clients with one-stop marketing support services that encompass research, promotion, and branding, all of which are conducted in-house.
The company’s clients report a high level of satisfaction, which appears to be behind the high ratio of repeat clients (80–90%). Neo Marketing’s ability to provide integrated services in-house seems to give clients reassurance when placing an order. In fact, the company’s clients cited the integrated service structure as one of the reasons for choosing the company over competitors, as well as its quick responses to inquiries, client-oriented service, and the reasonable fee structure.
Many clients develop new products or services in two- or three-year cycles. This means that even when it appears that a client has chosen to discontinue services, it often turns out that the client recontracts with the company after a year or so as it undertakes a new project. Some clients, such as Hakubaku and SHIBUYA109 Entertainment, order a large number of surveys. Others, like FM Osaka, are led to the company’s Insight Driven services after experiencing its Customer Driven services.
The company competes with major consulting firms and general advertising agencies in some areas. When going up against these larger players, it sets itself apart with its customer-driven marketing approach. These competitors, meanwhile, tend to rely on the use of mass media to increase exposure (especially for existing brands). They often outsource their services, and many times lack speed, flexibility, and the ability to respond to detailed customer needs.
Neo Marketing seeks to increase the number of regular clients (those with a high number of repeat orders) to boost LTV and secure recurring revenue through Digital Marketing and Customer Success orders.
The company operates iResearch, a proprietary marketing platform boasting access to a consumer panel of 580,000 registered monitors (as of end-September 2021), to deliver customer-driven marketing support. The company has designed the iResearch panel to be composed of consumers with demographics (such as gender, age, and place of residence) approximately in the same proportions to those of the overall internet-connected population in an attempt to limit attribute bias to the greatest possible extent. Even the largest of companies can end up with biased results in terms of the characteristics and attitudes of survey targets when attempting to conduct marketing research in-house. Therefore, it is common practice for companies to order surveys from independent marketing research companies. Neo Marketing is able to select consumer panels based on demographic compositions tailored to client needs. Further, the company selects particularly cooperative monitors from the iResearch consumer panel to participate in individual interviews and workshops. These include so-called extreme users, who are essential to the company’s Insight Driven services. According to the company, a detailed analysis of the consumption behavior of extreme users can provide hints for the development of innovative new products and services.
While quantitative research is increasingly being conducted online, group and individual interviews still rely on traditional manpower. The company has insufficient division of labor in the busy period of January–March, and appears to be unable to fulfill all of the orders it receives. The turnaround time from receiving an order to delivering the results ranges from one week to two to three months.
The company has hired several new graduates a year since around 2010 (currently six to eight) and trained them on-the-job for one to two-and-a-half years to develop them into full-fledged marketing consultants. However, increasing the number of marketing and specialist consultants is time-consuming and costly.
While the company has started using AI to automate the tabulation and analysis of questionnaire results, the task still requires human judgement for 10% to 15% of tasks, such as analysis comments. This ties up personnel, which we believe makes it difficult to systematically increase orders or shorten delivery times.
All of Neo Marketing’s revenue is generated in Japan and its iResearch consumer panel is exclusively composed of Japanese residents. All of the company’s top five competitors in the marketing research business operate consumer panels overseas, have researchers dedicated to overseas consumers, and record overseas revenue. Meanwhile, 40% of Neo Marketing’s clients are manufacturers, and many of them export a high percentage of their products. In June 2014, the company established Neo Marketing Asia Limited in Hong Kong, but liquidated the subsidiary in February 2021. Overseas business carries political risks, and the hurdle to overseas expansion was too high considering the company’s limited management resources. That said, Neo Marketing is also looking to expand into Europe, the US, and Southeast Asia in the long term. In the medium term, however, it plans to fully focus its management resources on cultivating domestic clients, especially in cities.
Marketing research expenses are usually classified as advertisement or sales promotion expenses and booked near the end of clients’ fiscal years. The majority of Neo Marketing’s clients end their fiscal years in March, so the company’s acquisition of revenue tends to be concentrated in Q2 (January–March). In FY09/21, the company generated 31.5% of its revenue in Q2, along with 51.8% of its operating profit. One idea for reducing the impact of seasonal factors is to look for more clients whose fiscal years do not end in March, but the company believes it can inhibit this impact by increasing the rate of non-recurring revenue generated through its Digital Marketing and Customer Success services, which are downstream portions of the marketing process. Since marketing consultant count is one of its KPIs, the company plans to expand sales by increasing revenue per consultant. The company has hired six to eight new graduates and trained them on-the-job for one to two-and-a-half years to develop them into full-fledged marketing consultants. Shared Research believes that this process needs to be adjusted to meet peak demand and may lead to higher fixed costs, such as personnel costs.
|Cost of revenue||622||720||910|
|Cost of revenue ratio||54.9%||50.4%||49.7%|
|Gross profit margin||-||-||-||45.1%||49.6%||50.3%|
|Operating profit margin||-||-||-||1.8%||12.2%||16.6%|
|Recurring profit margin||2.2%||3.2%||5.8%||1.7%||12.2%||15.7%|
|Loss on sales of non-current assets||0||-|
|Loss on retirement of non-current assets||1|
|Implied tax rate||0.0%||0.0%||0.0%||56.3%||32.8%||29.0%|
|Net income attributable to owners of the parent||28||27||55||8||117||206|
|Interest-bearing debt, interest expenses||FY09/16||FY09/17||FY09/18||FY09/19||FY09/20||FY09/21|
|Interest-bearing debt (JPYmn)||-||-||-||331||473||282|
|Interest expenses (JPYmn)||-||-||-||3||3||2|
|Interest rate on interest-bearing debt||-||-||-||1.6%||0.7%||0.5%|
|Salaries and allowances||172||213|
|Provision for employee bonuses||0||-0|
|Amortization of goodwill||9||17|
In terms of the company’s cost structure, outsourcing costs accounted for a significant 49% of the cost of revenue in FY09/20 (non-consolidated). These include outsourcing fees paid to consumer panel partners. Cost of revenue expenses and SG&A expenses included provision for reward points and monitor commissions of just under JPY100mn in FY09/20 (non-consolidated). The company does not disclose sales promotion and advertising expenses as major items.
In FY09/21, Neo Marketing posted higher revenue and profits, mainly due to an increase in its client count as a result of an increase in business talks achieved with a larger number of marketing consultants. Gross profit margin is trending upward with improved productivity achieved through the systematization of work processes and the shift of communication design functions in-house starting in August 2021.
|Balance sheet (JPYmn)||FY09/16||FY09/17||FY09/18||FY09/19||FY09/20||FY09/21|
|Cash and deposits||325||476||926|
|Notes and accounts receivable||187||194||228|
|Work in process||14||19||45|
|Allowance for doubtful accounts||-0||-0||-0|
|Total current assets|
|Total tangible fixed assets||20||19||22|
|Total intangible assets||160||158||140|
|Deferred Tax Assets||66||62||65|
|Investments and other assets||85||80||85|
|Total fixed assets||265||258||247|
|Current portion of long-term loans payable||134||143||112|
|Income taxes payable||5||48||61|
|Consumption taxes payable||1||49||33|
|Provision for bonuses|