Dentsu finds itself on unstable ground with its key client

Dentsu has come under pressure from increased focus on costs by Toyota, which is understood to be its most important client in terms of billings, suggesting a change in dynamics for the agency following the scandals of recent years.

A July article in Sentaku, a publication that details challenges and sometimes misdeeds involving Japanese corporations, states that Toyota plans to drop Dentsu from its list of vendors in China following an incident in Shenzhen where tensions between the carmaker’s leadership and Dentsu came to a head.

According to the article, Toyota’s China business is worth around 10 billion yen (US$90 million). It says that at a test drive event for Lexus managed by Dentsu in March, Toyota president Akio Toyoda and two senior executives lambasted Dentsu for wasteful spending. This included a luxury trailer equipped with a washroom laid on for Toyoda, installations made from expensive materials and a contingent of female guides for visitors.

Toyota representatives expressed similar frustrations over spending at the Beijing Motor Show, the article says. It details a subsequent visit by Toyota executive vice-president Koji Kobayashi to Dentsu’s Tokyo headquarters. Kobayashi reportedly accused Dentsu staff of making excessive profits from Toyota, reminding them of the 2016 overcharging scandal and asking if they felt remorse.

A Dentsu spokesperson was unable to comment on the events outlined in the article, or on its relationship with Toyota. The spokesperson said Dentsu “does not disclose the content of its transactions and/or contracts with individual clients due to the company’s confidentiality rules regarding business”.

A report by Reuters in June also points to cost-cutting measures by Toyota. It says the company wants to emulate younger companies in the technology space and pursue more cost-effective, non-traditional marketing.

According to Reuters, Toyota plans to move certain work that is currently outsourced in-house. The change in tactics is driven by a desire for closer control over spending. Toyota is under pressure to be more competitive in the face of challenges from the broader technology industry, which is becoming increasingly involved in the automotive and mobility sectors.

An advertising industry observer in Tokyo who did not wish to be named said it seemed likely that Toyota would have approved Dentsu’s spending at the events which it later criticised. The source suggested the subsequent aggressive stance of Toyota’s leadership could be a way to send a message internally, and said major clients are now in a position of greater power due to the fact that Dentsu has been tarnished by recent scandals.

“It is extremely unlikely that the company put something big and expensive together for the Beijing Motor Show without Toyota’s explicit input and approval,” the source said, adding that “poor judgements” were likely made “all round”. The source said Dentsu would be “unable to defend itself because Toyota is so consequential to its business”.

The 2016 overcharging scandal shed light on a systematic practice of inflating the billings for digital work to Toyota and other clients. Observers attributed the incident partly to challenges in making a significant profit from digital assignments.