Inside job: '30,000 people, but still a start-up', says CMO Naho Kono on Rakuten’s human-first marketing

“Our marketing advantage is our users”. It’s something almost any CMO might say about their business, but for few leaders is it truer than Rakuten’s Naho Kono. The Japanese e-commerce giant operates one of the most efficient and effective integrated marketing models in the world, having ridden the original dot-com boom from its formation in 1997 to become established as a data-rich conglomerate with enviable loyalty among its vast customer base.

Rakuten today operates more than 70 different business units, among them instant messaging programme Viber, streaming service Rakuten TV, e-book provider Kobo and its original Ichiba online marketplace. What this gives it, aside from a huge diversity of revenue streams, is access to data at scale – the Rakuten Group has more than 2 billion customer touchpoints globally, albeit around half of those are through Viber sign-ups.

It has achieved near ubiquity in its home market and has advanced gradually into the US and Europe. But it’s also a poster child for affiliate marketing: the company’s success has from the outset been built on an ecosystem that prioritises partnerships, with Ichiba alone boasting more than 57,000 affiliates who use its marketplace as a shopfront and partner on its campaigns.

The Rakuten Advertising business, which services and upsells to these affiliates, effectively locks partners into the business throughout the customer lifecycle and has kept Amazon from dominating in Japan, as well as inspiring countless imitators.

For CMO Kono, a 20-year veteran of the business, overseeing this vast ecosystem and leveraging its economies of scale requires a centralised model built around in-housing. Brand, product, performance marketing, creative and operations take place exclusively in the Tokyo suburb that the business has effectively colonised, an unusual move in a country where agencies are part of the marketing fabric.

"External agencies are used in specific cases, such as events and celebrity partnerships, added Kono. “In-house is key… if we rely too much on external agencies, our marketing becomes standardised and we can't fully leverage the strengths of our ecosystem.”

Data, loyalty and the Omotenashi effect

The challenge for Rakuten, albeit one many marketing teams would love to face, is utilising an onslaught of data to make key decisions. With 100 million members in Japan alone, an astonishing level of penetration in a country of 120 million people, there’s very little the business doesn’t know about customer behaviour.

“The most important thing is how the ecosystem contributes to nurturing the customer,” says Kono. “Lifetime value has increased dramatically – we monitor user behaviour, so if they are a shopping user who starts with Rakuten Mobile, shopping transactions also increase. The more they use, the more loyal they become, the greater the lifetime value. In the past, we always saw that but we couldn’t prove it. Now we integrate data and we can.”

The key metric here is the cross-use ratio – a term used to describe the proportion of Rakuten members who are active in two or more business units within a 12-month period, which has taken on almost evangelical importance within the business. It recently hit 77.5%, the highest level on record, with the average customer accessing 3.7 different services each year.

Kono’s job is to manage the possibilities of such a data onslaught in a way that is consistent with Rakuten’s central philosophy, the Japanese concept of omotenashi —a dedicated attention to detail and quality of service. It means, for example, that the brand is fiercely guarded. 

“Each business has a unique culture, but from the user point of view, they need to know this is Rakuten. The quality, the brand experience should be better than standard. That’s a fundamental of our culture,” says Kono.

She gives the example of Rakuten Symphony, a cloud and internet infrastructure provider, as a business that has ‘flexed’ its brand while remaining closely related to its parent. Equally, the integration of AI has been given an omotenashi flavour.

AI at scale, human at core

Brand design by the in-house marketing team

Rakuten has gone all-in on AI – an average of 13,000 employees, around 40% of the total, use it every day, and far more within marketing – but has been judicious in its deployment, preferring to focus on areas where it can add value rather than cut corners. That means an AI-powered workflow covering the creation of landing pages, wireframing, coding, and implementation, which the business says has led to an 81% reduction in the time taken to complete certain creative tasks, allowing hours to be reinvested elsewhere. This fits in with Rakuten’s 20/20/20 targets, which mandate AI should lead to 20% improvements in marketing, operational and client productivity to be considered worthwhile.

The effects of AI are seen most profoundly in Rakuten’s work with affiliate merchants – the business claims partners have seen a 13.7% annual increase in clickthrough rates since integrating AI tools into search tools, while ad revenue per search request was up 5.9% over the same period. Recent product launches include a ‘transparency API’ that gives greater visibility over customers’ conversion journeys, and a storefront programme aimed at encouraging affiliates to work more closely with influencers.

Undoubtedly, these shifts will alter the skills mix the business requires in marketing, but Kono expects the transition to be subtle: “Until now, we’ve needed skills around planning or research. In future, 90% of that work might come through AI. But we need that [other] 10%. Marketing in the past was just about knowledge. In the future, we need out-of-the-box ideas, more understanding of human behaviour.”

“It’s about how we can connect our platform and service to the human,” adds Matthew Xudong, senior manager of brand enhancement. “At the end of the day, we’re delivering our services to a human and AI has some challenges about really syncing up to human psychology. That’s what we’re focusing on.”

Rakuten, by any reading, has a challenging few years ahead. Its revenues remain healthy, but profitability has been consistently challenged by heavy investment in the mobile division, of which Kono is also managing executive officer. Chinese e-commerce businesses Shein and Temu are eating into its market share in Japan, where it controls a third of the market, comfortably ahead of domestic rivals Aron and Fast Retailing.

There are plenty of reasons for optimism, however. A recent investment in India is a significant expansion into a nascent market and Rakuten’s fintech products continue to yield impressive margins. Most of all, in a corporate culture that champions stability, AI-induced change and market turmoil needn’t be a cause for concern. Rakuten, says Kono, will just keep reinventing itself: “We have more than 30,000 people, but we are still like an entrepreneurial start-up.”