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Thursday, May 18, 2006

Aggressive TV commercials paid off -- perhaps too much

Staff writers

Running short of money before payday? No worries.

Aliens, Chihuahuas and office ladies who turn into leotard-sheathed dancers can come to the rescue, according to the consumer finance industry's TV commercials, which until recently bombarded prime-time viewers.

What major consumer lending firms tried to achieve by airing these ads went beyond just improving the industry's dubious image, many observers say. They helped get the word out that quick and convenient services were within easy access whenever people needed some cash.

Indeed, their efforts paid off.

According to the Japan Consumer Finance Association, the market has continued to expand -- the combined amount of outstanding loans at consumer lenders exceeded 11.7 trillion yen in March 2004, 2.5 times the amount reported 10 years before.

"There has always been a strong demand for such loans" that require no collateral or guarantor, said Tomoaki Sakano, a professor at Waseda University's faculty of commerce.

Back in the 1960s, the consumer loan business was an untapped niche market in Japan, where banks were mainly focused on companies and unsecured loans were too risky to match the interest rates they offered.

And despite occasionally drawing heat for aggressive collection tactics and the growing number of people ladened with multiple debts, this is where consumer finance companies have come to play a key role, according to Sakano.

The industry's key weapon is its ability to calculate risk. Loan companies share their customers' real-time credit information and work together to improve the data network's accuracy.

The introduction of automatic screening machines in 1993 triggered another revolution. The machines were quickly embraced by customers, with the number operated by the five major consumer finance companies totaling 7,626 in March 2005.

"The emergence of automatic screening machines allowed consumer lenders to slash personnel costs and the amount of investment per outlet," Sakano said. These unmanned outlets also reached customers in regions that had previously been inaccessible, he added.

In addition to boosting the lenders' image, their advertising effectively helped disseminate such industry innovations.

Mainstream Japan was first exposed to such advertising in 1978, when the Yomiuri Shimbun started running ads for consumer finance companies. This was followed in 1988 by private broadcasters, which began airing commercials by lenders that kept interest rates below 40 percent.

Centerfold models and actresses alike have graced consumer finance commercials, while Takefuji Corp.'s series of ads featuring a team of dancers became immensely popular.

Aliens dropping by Earth to borrow some cash through a screening machine at an Acom Co. unmanned outlet showed how easy and fast taking out a loan could be.

But the biggest hit was the series of Aiful Corp.'s ads featuring Ku-chan the Chihuahua.

It topped the list of viewers' favorite commercials in both 2004 and 2005, according to the private think tank CM Research Center, with close to 30 percent of 3,000 viewers polled saying they loved the commercials.

But Aiful's recent fall from grace has forced consumer finance companies to pull their commercials for the time being, while broadcasters are currently limiting air time for such ads.

Commercials these days are mostly made in the genre of young women warning potential borrowers to have sensible repayment plans.

"It's ironic that consumer lenders, which aim to advertise their business in their commercials, are now trying not to make people want to borrow more," said an industry official who asked not to be named.

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