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Business

Canon makes an impression

Wow the customer with tech specs and service, that's what Canon Singapore's CEO is hoping to do to capture a picture of health.
Written by Isabelle Chan, Contributor on
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newsmaker Delight the customer with good, reliable technology, as well as excellent customer service, and watch the cash registers ring.

At least that's what Canon thinks will pump up sales of its digital compact cameras, copiers and multifunction printers.

Kevin Ogawa, CEO of Canon Singapore, tells ZDNet Asia that delivering customer value is the key to success. His office oversees the island-state's domestic market as well as four subsidiary businesses in Philippines, Thailand, Malaysia and India.

Canon believes success is not just about providing after-sales service and support, but also delighting the customer. "Last year, we expanded the customer service area on the fourth floor. I hope it's impressive," notes Ogawa, who is personally involved in executing the company's "service excellence" vision.

At Canon's spanking Keppel Bay Tower office, the consumer electronics giant has service counters manned by staff trained to keep customers happy. Since the expansion, the average waiting time for customers has been reduced by more than 50 percent.

"You can see that the service counters are brighter and [customers are serviced] faster," says Ogawa, whose team monitors the waiting time. "Customers used to have to wait for 13 minutes. Now it's 5 minutes," he notes with a smile.

"It's minor, but it's very important to delight the customer. Step by step we're going to improve," he adds.

Ogawa has other reasons to smile as the company's regional business is growing as planned.

Canon Singapore ended 2005 on a high note, registering sales of US$1.7 billion, an increase of 115 percent over the previous year. "We expect to hit US$1.9 billion this year… and are on track to hit our target of US$3.4 billion by 2008," says Ogawa.

But as Canon whips its customer service into shape, can the consumer electronics giant keep up with new market trends and maintain its top position in the digital camera space? And how serious is Canon about being a provider of business imaging products, an area which the company has said it wants a bigger slice of the pie?

In this wide-ranging interview, Ogawa explains why Canon has managed to stay on top all these years and why it makes good business sense to go after the wallets of not just consumers, but corporations, too.

Q. How important is technology, compared to price and marketing, to consumers and corporate IT buyers?
A: Both segments are not so different. Everyone is very keen to have leading edge technologies. However, in terms of the sales channel, it is totally different.

We use indirect channels or dealers for the consumer business, and we advertise heavily to build product and brand awareness. Brand is important in this segment because consumers associate certain brand names with a specific level of quality. As for the technology, consumers do not compromise on specifications like high megapixel resolution, or larger LCD displays. Consumers' decision making is also faster. They make faster decisions based on the influence of branding through TV commercials and print advertisements. Although a consumer has been considering a particular purchase for a long time, he makes his final decision at the retail store very fast.

In the business segment, it takes a longer time to close a deal because we are not simply selling the hardware. We're trying to provide solutions. Now, everyone talks about solutions, so what's our approach? The biggest differentiation is our approach to simplify the meaning of solutions. For example, our slogan is 'business can be simple'. There is no need to talk about the complicated technologies--software, connectivity, operating system, applications, so on and so forth. While everyone in the industry talks about these, we're going to simplify the workflow, simplify the security. Businesses have to consider the entire system flow. So it takes a longer time to close the sale, compared to selling to consumers.

Is there a difference between selling to small and large companies?
Most medium-sized enterprises look at ease of use rather than the solution. For example, they're looking for simplified copy functions, scanning, plus some color functions. So among those corporate businesses, it's a relatively faster decision to make.

In terms of the major accounts, we provide software and hardware, and it typically takes a longer time to close a customer sale. For example, we recently had a deal with Temasek Polytechnic worth about S$2 million (US$1.3 million) which took more than one year to close.

Many technology vendors that target the SMB space rely on channel partners. Would Canon consider an indirect sales model? We use our own sales consultants to target small corporations, too. No indirect channels for Canon. We don't use channels because when it comes to selling, say, multifunction printers (MFPs), this requires consulting with the customer on their workflow requirements, and our well-trained sales consultants can provide such service best. We've been doing this for more than 25 years.

"No indirect channels for Canon. We don't use channels because when it comes to selling, say, multifunction printers...our well-trained sales consultants can provide such service best."

How do you view today's competition compared to 10 years ago?
Ten years ago, our competitors were only the copier industry--that is copier manufacturers like Ricoh and Fuji Xerox.

Today, we talk about solutions and there are vendors like Hewlett-Packard (HP) and Dell Computer, which are partial competitors because they also play in certain product categories. But while these IT solutions providers can provide the system itself, the local area network and the software, they're weaker than us in terms of document management. We've been in this market for the past 25 years or more, so that's our strength. We focus on document management, even archiving--technologies that enable the easy and efficient storage, retrieval and distribution of documents throughout any organization. That said, we're entering an era of borderless competition between the IT and copier industries.

Is there a change in terms of who you have to deal with when selling to businesses now? For example, instead of dealing with the office manager, it's the IT manager who makes the decision and whom you have to sell to?
Yes, it's gradually changing. Our contact with the customer used to be [someone from] the general administration division, now, the IT manager must be involved to make the decision on multifunction printers. It also depends on the company, but it's now gradually shifting toward the IT department. If our major account managers do not know IT, it would be difficult for us to close the deal.

How big a threat are the smaller printer companies like Brother?
We don't recognize a huge threat from, say, Brother. They're always [focused] on a pricing strategy rather than quality. Their quality and after-sales service are different, and we believe those are our strengths. The smaller vendors target the more price-conscious market.

How does Canon plan to keep its lead in the digital camera space?
Of course we have to produce innovative products for consumers. We need to also include more functions and make our products easier to use.

When HP decided to stop focusing on digital cameras, did Canon benefit?
Not so much, because HP's market share was not significant. At the beginning of the digital compact camera era, there were over 30 brands available in the market, including Taiwanese brands like Samsung. Today, Sony and Canon are the top 2 vendors for digital compact cameras. Of course, there are players like Nikon who are still in the market, but now there are mainly two to three vendors that have survived in this competitive market.

I understand that Canon digital cameras are manufactured in Japan, while other manufacturing activities are located elsewhere in Asia. Any plans to relocate some of these activities?
Our major production site for digital cameras is in Japan. Inkjet printers are manufactured in Vietnam and Thailand, while copiers are made in China. While we need to look for lower-cost sites, the core or key technology components like print heads, imaging sensors or the drum in the copier, continue to be produced in Japan. This is our policy, so as to protect our technology.

How is Canon Singapore's business doing?
We just closed the first quarter, and Canon Singapore as a group had 17 percent growth over the same period last year. So we are seeing very good results, and we are on track to achieving our US$1.9 billion target for the year. Last month, our corporate business sales in domestic Singapore had its highest sales record. January and February were, as typically expected, quite slow, but we caught up in March.

India is a big growth area, too, where our business grew by 35 percent in the first quarter. We're also doing well in Vietnam, where we saw 15 percent revenue growth, and in the Philippines as well. Malaysia is about the same as last year.

The revenue-split between consumer and business customers for Canon is about 60-40 today. Do you expect this to change?
The BIS (Business Imaging Solution) division, which sells copiers and multifunction printers, is growing. As I said, corporate sales in the domestic Singapore market hit a record in the first quarter, and this part of the business will grow over time. However, businesses will still account for 40 percent of Canon's revenues, and consumer sales will be 60 percent.

What's your target revenue-split?
The ideal revenue target is 50-50. The corporate business is quite stable, while the consumer business can be up or down, depending on the season. For example, sales can be up this month because we may have a product that is a big hit in the market, but we may not see that in the following month. So from management's point of view, we should seek stability, which can be found in the corporate business. Therefore, 50-50 is ideal.

When do you think Canon will achieve this target?
Maybe by the end of next year, or in the next two years, for Canon Singapore.

What do you foresee to be Canon's biggest challenge in achieving its goals?
Fake or counterfeit consumables. That is the big threat.

That is an age-old problem.
Yes, perhaps not [a big problem] in Singapore, but it certainly is in Thailand, Indonesia or Vietnam. Even if we aggressively try to sell genuine ink toners, the fake-ink manufacturer can still affect our business. So that's a barrier for us to grow the business in the region. Sometimes, we put advertisements and try to educate the public. But the fake-ink manufacturers are getting more intelligent now and their products look like they are genuine. This is a big problem for us, because if these fake products damage the hardware, we have to take care of it for the customer.

What steps can you take besides educating consumers?
We are trying to manage the channel partners better. Once we find a dealer using fake products, we will terminate our relationship with them. That's one way of control. Similarly, if a dealer promotes our genuine toner products to consumers, we give them an incentive. This is less of a problem here in Singapore because we have our direct sales force. But in developing countries, it may be difficult to control, and this is something we're trying to manage better.

Obviously this is an industry-wide issue. Do the vendors work together to address this problem?
Sometimes we collaborate. For example, [with HP and Epson], three of us have worked together in Vietnam. We approached the Vietnamese government last year, and together we conducted an exhibition. We respect intellect property rights and must kick out the fake products that are in the market.

Was that the first time the three competitors worked together, and do you have plans to collaborate again?
We've had similar lobbying activities in Hong Kong. Are there plans to do such campaigns again? Well, we're open, if we can find a good opportunity to collaborate with HP and Epson, we can work together.

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