China Digital IQ Team

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1 China Digital IQ Team MAUREEN MULLEN L2 SCOTT GALLOWAY Founder L2 DOUG GUTHRIE Incoming Dean George Washington School of Business

Transcript of China Digital IQ Team

Page 1: China Digital IQ Team

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China Digital IQ Team

MAUREEN MULLEN

L2

SCOTT GALLOWAY Founder L2

DOUG GUTHRIE

Incoming Dean George Washington School of Business

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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

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The Greatest Opportunity for Prestige Brands in a

Generation

INTRODUCTION:

China GDP Growth vs. World

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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%"

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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+

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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)

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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

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China Digital IQ = "Growth

CONCLUSION:

The L2 Digital IQ Index

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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

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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

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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

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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

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The Rankings

LUDDITE:

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FEEBLE:

FEEBLE:

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CHALLENGED:

AVERAGE:

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GIFTED:

GENIUS:

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Key Findings

Big Winners, Bigger Losers OBSERVATION: 20% of brands do not even have a Chinese site.

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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.

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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

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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.

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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

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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

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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)

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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

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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

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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

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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

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Q & A

Scott Galloway: [email protected]

Doug Guthrie: [email protected]

Maureen Mullen: [email protected]

www.l2thinktank.com

CONTACT US:

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