china digital iq team
TRANSCRIPT
1
China Digital IQ Team
MAUREEN MULLEN
L2
SCOTT GALLOWAY Founder L2
DOUG GUTHRIE
Incoming Dean George Washington School of Business
2
A Think Tank for Prestige Brands
Research
Advisory Services
Education
Ranking the digital competence of luxury brands
SCOTT GALLOWAY NYU STERN SEPTEMBER 2009
™
© LuxuryLab 2009
Want to know more about your brand’s ranking?CONTACT US
© L2 2010 L2THINKTANK.COM
Gen Y Prestige Brand RankingMay 3, 2010SCOTT GALLOWAY
NYU Stern
Want to know more about your brand’s ranking?CONTACT US
© L2 2010 L2THINKTANK.COM 8
Gen Y Prestige Brand Ranking
site. Female adoption of these web portals signals a shift in -
risk leaving their brands, and the rich sales and marketing data, in the hands of third party retailers.
Print Holding and Blogs RisingPrint is not dead, and it continues to be a primary source for information on prestige brands. It is the #1 source for women and #2 for men.
also crucial, ranking #1 for men and #2 for women. Although respondents do not seem to be directly engaging with brands
one of their top three sources for information on prestige brands.
The Pillars of Luxury Still Stand
were the most important attributes of a prestige brand for both
OBSERVATIONS
FLASH SITE SALE
RETAILER SITE
BRAND SITE
OTHER ONLINE
MOBILE
0% 20% 40% 100%80%60%
IN-STORE 86%
54%
53%
27%
11%
1%
AUTHENTICITY
IMAGE
CREATIVITY
EXCLUSIVITY
HERITAGE
INNOVATION
SOCIAL RESPONSIBILITY
PERSONALIZATION
COMMUNITY
0% 20% 40% 100%80%60%
QUALITY 82%
46%
44%
41%
37%
20%
12%
8%
6%
4%
WHERE DO YOU PURCHASE PRESTIGE BRANDS?
% of Female Respondents
WHAT IS IMPORTANT TO YOU IN A PRESTIGE BRAND?
% of All Respondents
L2 Calendar 2010
DIGITAL IQ Automobiles
CLINIC The Social
Graph
DIGITAL IQ Pharma
DIGITAL IQ China
DIGITAL IQ U.S. Senate
DIGITAL IQ Specialty
Retail
DIGITAL IQ Luxury
DIGITAL IQ Travel
CLINIC Organizing for Digital
FORUM Generation
Next
CLINIC Mobile
MASHUP MBA
RECRUITING
CLINIC The New
Media Plan
FORUM Innovation
2010
CLINIC Ecommerce
2.0
Tomorrow’s Media Plan
Social Shopping iPad
Implications Prestige Social
Media Case Studies
GEN Y Luxury
3
The Greatest Opportunity for Prestige Brands in a
Generation
INTRODUCTION:
China GDP Growth vs. World
4
World Wealth Creation
9.1 8.3
7.4
5.8
1.4 0.8
10.7
9.5 9.7
6.7
1.5 1
0
2
4
6
8
10
12
North America Europe Asia-Pacific Latin America Middle East Africa
2008 2009
HNWI Wealth Distribution By Region: 2008 vs. 2009
+17.8% +14.2%
+30.9% +15.0% +5.1% +20.2%
Wealth concentration in Asia surpassed Europe in 2009; China HNWI growth was 31%
Source: CapGemini, Merrill Lynch June 2010
The World’s Fastest Growing Market
CHINA: +15%"
REST OF WORLD: +2%"
JAPAN: -3%"EUROPE: +3%"
AMERICAS: +4%"
2010 Projected Luxury Sales Growth Worldwide "(April 2010)≈
Source: Bain April 2010
OTHER ASIA: +10%"
5
China Online
Source: Emarketer December 2009
0
100
200
300
400
500
600
700
800
900
China U.S. Japan
2009 2013
Number of Internet Users:"The World’s Three Largest Luxury Markets
840 Million
221 Million
96 Million
384 Million
199 Million
92 Million
Chinese Consumer = Digitally Native
Source: McKinsey 2009
Profile of Prestige Consumers:"The World’s Three Largest Luxury Markets
80%
30% 19%
20%
70% 81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
China U.S. Japan
18-44 45+
6
China’s E-commerce Explosion Projected China E-commerce Growth"
(In Billions)
Source: Emarketer December 2009
$0 $20 $40 $60 $80
$100 $120 $140 $160
2008 2009 2010 2011 2012 2013
Retail C2C
YoY Growth 101% 54% 49% 47% 50% 48%
18.9 29.1
43.3 63.5
95.3
141.4
Geographic Challenges
Source: Mckinsey January 2009
Where do the Wealthy in China Live?: Projected Growth Affluent Households "
0.5 1.2 0.5
1.4
0.6
1.8
2008 Tier 1 Cities Tier 2 Cities Other Cities 2015
Tier 1 Cities Tier 2 Cities Other Cities
0.7
0.9
1.2 41%
33%
26%
¾ of Wealth Creation is
Expected Outside of Tier 1 Cities
Wea
lthy
Hou
seho
lds
(in M
illio
ns)
7
Digital Is Different
62% Market Share in Search
#1 Video Site in China 9 Million Unique Visitors per Week
#2 Most Popular Site in China
No Internet to…Mobile Internet
Source: AOL, Universal McCann “Smart Phone, Smart Marketing” December 2009
CHINA & MOBILE ADOPTION
Chinese Mobile Subscribers
687 Million
155 Million
Access the Mobile Web
Estimated Chinese Smart phones by 2013
116 Million
8
China Digital IQ = "Growth
CONCLUSION:
The L2 Digital IQ Index
9
The only brand audit that benchmarks the digital performance of prestige brands
• 100 prestige brands in 5 categories: Automobiles, Beauty, Champagne & Spirits, Fashion, Watches & Jewelry
• 90 global brands; 10 Chinese brands
• Benchmarks brands across four criteria: • Site Platform (40%) • SEO (25%) • Social Media (20%) • Digital Marketing (15%)
Digital IQ: China
© L2 2010 L2ThinkTank.com 16
Want to know more about your brand’s ranking?CONTACT US
DIGITAL IQ INDEX:
China
K E Y F I N D I N G S
0%
20%
40%
60%
80%
100%
BAIDU: Chinese Brand Name
BAIDU: English Brand Name
GOOGLE: Chinese Brand Name
GOOGLE: English Brand Name
43%
29%
39%
21%
94%
2%
57%
30%
SEARCH RESULTS FOR BRAND NAMESPosition of Brand Sites in Search Results
= 1ST POSITION = OUTSIDE TOP 3
Google: A Distant SecondWhile homegrown search engine Baidu boasts 62 percent market share in China1, only 39 percent of prestige brands come up first in its organic search results when searching for the English brand name. Meanwhile, 94 percent of brand sites come up first on Google.cn, which recently exited China, suggesting that brands approach search visibility with a Google-centric mentality that fails to recognize the Baidu algo-rithm and local nuances. Chinese brand name visibility is very poor, and approximately 30 percent of brand sites are not re-turned among the top three results on either search engine for Chinese brand name searches, indicating the difficulties of brand name translation for many multinational brands.
Mobile: Can You Hear Me Now?There are an estimated 745 million mobile phone subscribers in China 2, and more than one quarter of mobile users access the internet through their phones3, but only 42 percent of brands have mobile-enabled sites. Because China has considerably lower in-home internet penetration than most developed nations, and many Chinese consumers move directly from no internet to mobile internet, it is imperative for luxury brands to develop a mobile strategy. Hong Kong brand Shanghai Tang is one of the first luxury brands to incorporate a Chinese language iPhone application. Launched in April 2010, the app gives users a taste of Shanghai.
1 “China Online”, eMarketer, December 20102 Ministry of the Information Industry, People’s Republic of China, August 20093 “Global Device Insight Report”, Nielsen, October 2009
Shanghai Tang’s “City Chic” iPhone app,
available in Chinese and English
SCOTT GALLOWAYNYU Stern
DOUG GUTHRIEGeorge Washington University
A THINK TANK !!! !"#$!!PRESTIGE BRANDS
© L2 2010 L2ThinkTank.com
J U N E 1 6 , 2 0 1 0
Methodology
Dimension: Platform (40%)
• Aesthetics: Translation of Brand Values + Site Themes
• Interactivity: Engagement + Use of Medium
• Chinese Relevance: Quality of Translation + Local Appeal
• Host Location: Local Domain + Technology
• Localized Content Products & Promotions: Content tailored to Chinese Market
• Customer Service: Availability + Accessibility
• E-commerce: Site Transactional Capabilities
10
Methodology
Dimension: Search Engine Optimization (25%)
• Local Traffic: Chinese Site
• Traffic: Global Site from China
• Visibility: Baidu & Google
Methodology
Dimension: Social Media (20%)
• RenRen: Use of Medium + # of Fans + Organic Posts
• Qzone: Use of Medium + # of Fans + Organic Posts
• Youku: Use of Medium + # of Videos (English & Chinese)
• Kaixin001: Use Of Medium + Organic Posts
11
Methodology
Dimension: Digital Marketing (15%)
• Activity on BBS Sites: Presence + Content
• Brand Blogs & Microsites: Availability + Content
• Mobile: Compatibility + Applications
• Email Marketing: Availability on Site
Categorizing Results
Brands parsed into six categories based on Digital IQ score:
140+
110-139
90-109
70-89
40-70
Genius: Digital is a point of competitive differentiation
Gifted: Brand-enhancing, experimenting digitally, conversion oriented
Average: Functional, yet predictable, few innovation leaps
Challenged: Limited attempts to tailor content to Chinese Market
Feeble: Nascent Chinese digital footprint
>40-70 Luddite: Not committing any resources to digital in China
12
The Rankings
LUDDITE:
13
FEEBLE:
FEEBLE:
14
CHALLENGED:
AVERAGE:
15
GIFTED:
GENIUS:
16
Key Findings
Big Winners, Bigger Losers OBSERVATION: 20% of brands do not even have a Chinese site.
17
Big Winners: Lancôme
Selling Is Knowing OBSERVATION: Only 10% of prestige brands are selling online. Brands with e-commerce boast IQs 50 points higher than those that are not.
18
Selling Is Knowing: Clarins
Social Mania OBSERVATION: While most brands are generating significant organic buzz, less than 15% of brands maintain an official presence on Chinese SNS sites
SOCIAL MEDIA BRAND BUZZ: RENRENPrestige Brands with the Most Mentions
(May 2010)
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
BMW
MERCEDES-BENZ
LOUIS VUITTONAUDI
CLINIQUEFERRARI
SHISEIDO
LANCÔME
PORSCHE
LAMBORGHINI
Num
ber o
f Men
tions
= IN ENGLISH
= IN CHINESE
19
Social Mania: Mercedes Benz
Mighty Microsites OBSERVATION: Four of the brands in the study have invested in branded 2.0 communities. Several auto brands maintain simple interface BBS sites.
20
Google: A Distant Second OBSERVATION: Only 39% of prestige brands come up first in Organic search results on market leader, Baidu.
43% 39%
57%
94%
29% 21%
30%
2% 0%
10% 20% 30% 40% 50% 60% 70% 80% 90%
100%
Baidu: Chinese Brand Name
Baidu: English Brand Name Google: Chinese Brand Name
Google: English Brand Name
1st Position Outside of Top 3
Organic Search Results: Baidu & Google (May 2010)
Mobile: Can You Hear Me Now? OBSERVATION: While 46% of Chinese internet users access the web through a mobile phone, only 42% of prestige brand sites are mobile enabled
© L2 2010 L2ThinkTank.com 16
Want to know more about your brand’s ranking?CONTACT US
DIGITAL IQ INDEX:
China
K E Y F I N D I N G S
0%
20%
40%
60%
80%
100%
BAIDU: Chinese Brand Name
BAIDU: English Brand Name
GOOGLE: Chinese Brand Name
GOOGLE: English Brand Name
43%
29%
39%
21%
94%
2%
57%
30%
SEARCH RESULTS FOR BRAND NAMESPosition of Brand Sites in Search Results
= 1ST POSITION = OUTSIDE TOP 3
Google: A Distant SecondWhile homegrown search engine Baidu boasts 62 percent market share in China1, only 39 percent of prestige brands come up first in its organic search results when searching for the English brand name. Meanwhile, 94 percent of brand sites come up first on Google.cn, which recently exited China, suggesting that brands approach search visibility with a Google-centric mentality that fails to recognize the Baidu algo-rithm and local nuances. Chinese brand name visibility is very poor, and approximately 30 percent of brand sites are not re-turned among the top three results on either search engine for Chinese brand name searches, indicating the difficulties of brand name translation for many multinational brands.
Mobile: Can You Hear Me Now?There are an estimated 745 million mobile phone subscribers in China 2, and more than one quarter of mobile users access the internet through their phones3, but only 42 percent of brands have mobile-enabled sites. Because China has considerably lower in-home internet penetration than most developed nations, and many Chinese consumers move directly from no internet to mobile internet, it is imperative for luxury brands to develop a mobile strategy. Hong Kong brand Shanghai Tang is one of the first luxury brands to incorporate a Chinese language iPhone application. Launched in April 2010, the app gives users a taste of Shanghai.
1 “China Online”, eMarketer, December 20102 Ministry of the Information Industry, People’s Republic of China, August 20093 “Global Device Insight Report”, Nielsen, October 2009
Shanghai Tang’s “City Chic” iPhone app,
available in Chinese and English
21
Local Learning OBSERVATION: Brands of Chinese or Hong Kong origin outperform global luxury peers by 11 IQ points; Site scores were on average 50% higher
LUKFOOK Digital IQ: 108
MOUTAI Digital IQ: 115
SHANGHAI TANG Digital IQ: 107
IQ Correlation
0
20
40
60
80
100
120
140
160
180
0 20 40 60 80 100 120 140 160 180
OBSERVATION: There is a correlation of .58 between brands’ Chinese & U.S. Digital IQ, suggesting learning and investment can be leveraged across geographies
US Digital IQ vs. China Digital IQ (Brands Included in Both Studies)
22
OBSERVATION: !There is no correlation between brands’ retail footprint and Chinese brand awareness
Brick & Mortar ≠ Brand Equity
Chinese Retail Footprint
SNS
Buzz
(R
enRe
n, Q
zone
, You
Ku)
10 Commandments"of Doing Business"
in China
23
1.
2.
Politics Politics matter as much as they did 15 years ago, but for different reasons
Institutions Understanding institutions is more important than understanding culture
3.
4.
Lawyers, Not Relationship Managers Money is best spent on lawyers and accountants to understand Chinese nuances
Localism China is an exceptionally diverse, decentralized market and approach must be tailored by region
24
5.
6.
Entrepreneurial Local Governments Some of the best opportunities are outside of Shanghai and Beijing
Local Competition Homegrown competition is a threat and an opportunity
7.
8.
Understand Digital,"Chinese Style Not a single global internet or media player has a leadership position in China
Process Innovation Learn from best practices in Chinese operations
25
9.
10.
Leadership Invest in local human capital
Locate Near Universities Pockets of higher education serve as a breeding ground for local talent
Conclusions
Size Matters: "Small successes in the Chinese market will drive more shareholder value than homeruns in other markets
Think Local: !Brand equity remains largely the same, but translation, content, and platforms need to be localized
Your Biggest Door: "Your biggest store in the world in three years should be your Chinese e-commerce site
26
Q & A
Scott Galloway: [email protected]
Doug Guthrie: [email protected]
Maureen Mullen: [email protected]
www.l2thinktank.com
CONTACT US:
27