China Digital IQ Team

Transcription

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

2 A Think Tank for Prestige Brands Education Research Want to know more about your brand s ranking? CONTACT US Gen Y Prestige Brand Ranking Want to know more about your brand s ranking? CONTACT US OB S E R VAT I ONS Gen Y BT (JMU DPN BOE SFUBJM TJUFT JODMVEJOH /FU " 1PSUFS DPN ZFU MFTT UIBO POF UIJSE QVSDIBTFE EJSFDUMZ GSPN B CSBOE Prestige Brand site. Female adoption of these web portals signals a shift in Ranking MVYVSZ SFUBJM BOE JT BO JOEJDBUJPO PG UIJOHT UP DPNF 8JUIPVU SPMay 3, 2010 S C OT T G AL LO W AY N YU St e rn WH AT I S I MPOR TA NT TO YOU I N A P RES TIGE BRA ND? % of All Respondents 0% CVTU EJSFDU UP DPOTVNFS F DPNNFSDF TUSBUFHJFT MVYVSZ CSBOET 20% 40% 44% 41% CREATIVITY Print is not dead, and it continues to be a primary source for and #2 for men. 37% EXCLUSIVITY information on prestige brands. It is the #1 source for women 20% HERITAGE 12% INNOVATION 8PSE PG NPVUI SFDPNNFOEBUJPOT GSPN GBNJMZ GSJFOET BSF also crucial, ranking #1 for men and #2 for women. Although respondents do not seem to be directly engaging with brands WJB TPDJBM NFEJB BMNPTU POF JO mwf (FO : T DPOTJEFS CMPHT 100% 82% IMAGE Print Holding and Blogs Rising 80% 46% AUTHENTICITY data, in the hands of third party retailers. L L2THINKTANK.COM 60% QUALITY risk leaving their brands, and the rich sales and marketing 8% SOCIAL RESPONSIBILITY 6% PERSONALIZATION 4% COMMUNITY one of their top three sources for information on prestige brands. WHERE DO YOU PUR CHA S E P RES TIGE BRAN DS? The Pillars of Luxury Still Stand % of Female Respondents 5SBEJUJPOBM MVYVSZ TJHOJmFST RVBMJUZ BVUIFOUJDJUZ BOE JNBHF were the most important attributes of a prestige brand for both 0% Ranking the digital competence MJODIQJOT PG MVYVSZ NBSLFUJOH DBNQBJHOT UBLF B CBDL TFBU of luxury brands NFO BOE XPNFO.FBOXIJMF IFSJUBHF BOE FYDMVTJWJUZ PGUFO 4UBOEJOH PO UIFTF QJMMBST JDPOJD CSBOET MJLF $IBOFM $BSUJFS BOE 5JGGBOZ TUJMM SFTPOBUF QBSUJDVMBSMZ XJUI XPNFO 20% SEPTEMBER % 27% 11% OTHER ONLINE MOBILE 100% 86% 53% RETAILER SITE LuxuryLab % 54% FLASH SITE SALE BRAND SITE SCOTT GALLOWAY NYU STERN 40% IN-STORE 1% 8 L L2THINKTANK.COM Advisory Services L2 Calendar 2010 DIGITAL IQ DIGITAL IQ Automobiles CLINIC The Social Graph Tomorrow s Media Plan Pharma CLINIC Organizing for Digital GEN Y Luxury FORUM Generation Next Social Shopping DIGITAL IQ DIGITAL IQ DIGITAL IQ DIGITAL IQ China CLINIC Mobile U.S. Senate Specialty Retail MASHUP MBA RECRUITING ipad Implications Luxury CLINIC The New Media Plan DIGITAL IQ Travel CLINIC Ecommerce 2.0 FORUM Innovation 2010 Prestige Social Media Case Studies 2

3 INTRODUCTION: The Greatest Opportunity for Prestige Brands in a Generation China GDP Growth vs. World 3

4 World Wealth Creation HNWI Wealth Distribution By Region: 2008 vs % % % % +5.1% +20.2% North America Europe Asia-Pacific Latin America Middle East Africa 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 2010 Projected Luxury Sales Growth Worldwide " (April 2010) AMERICAS: +4%" EUROPE: +3%" JAPAN: -3%" CHINA: +15%" OTHER ASIA: +10%" REST OF WORLD: +2%" Source: Bain April

5 China Online Number of Internet Users:" The World s Three Largest Luxury Markets Million Million 199 Million 221 Million 92 Million China U.S. Japan 96 Million Source: Emarketer December 2009 Chinese Consumer = Digitally Native Profile of Prestige Consumers:" The World s Three Largest Luxury Markets 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% % 70% 81% 80% 30% 19% China U.S. Japan Source: McKinsey

6 China s E-commerce Explosion Projected China E-commerce Growth" (In Billions) $160 $140 $120 $100 $80 $60 $40 $20 $0 Retail C2C YoY Growth 101% 54% 49% 47% 50% 48% Source: Emarketer December 2009 Geographic Challenges Where do the Wealthy in China Live?: Projected Growth Affluent Households " Tier 1 Cities Tier 2 Cities Other Cities Wealthy Households (in Millions) ¾ of Wealth Creation is Expected Outside of Tier 1 Cities % 33% 26% 2008 Tier 1 Cities Tier 2 Cities Other Cities 2015 Source: Mckinsey January

7 Digital Is Different 62% Market Share in Search #2 Most Popular Site in China #1 Video Site in China 9 Million Unique Visitors per Week No Internet to Mobile Internet 687 Million CHINA & MOBILE ADOPTION 155 Million 116 Million Chinese Mobile Subscribers Access the Mobile Web Estimated Chinese Smart phones by 2013 Source: AOL, Universal McCann Smart Phone, Smart Marketing December

8 CONCLUSION: China Digital IQ = " Growth The L2 Digital IQ Index 8

9 While homegrown search engine Baidu boasts 62 percent market share in China 1, 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 algorithm and local nuances. Chinese brand name visibility is very poor, and approximately 30 percent of brand sites are not returned 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. 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 phones 3, 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. A THINK TANK!!!!"#$!!PRESTIGE BRANDS L L2ThinkTank.com 1 China Online, emarketer, December Ministry of the Information Industry, People s Republic of China, August Global Device Insight Report, Nielsen, October % 80% 60% 40% 20% 0% Shanghai Tang s City Chic iphone app, available in Chinese and English BAIDU: Chinese Brand Name BAIDU: English Brand Name Want to know more about your brand s ranking? CONTACT US GOOGLE: Chinese Brand Name GOOGLE: English Brand Name L L2ThinkTank.com 16 43% 29% SEARCH RESULTS FOR BRAND NAMES Position of Brand Sites in Search Results 39% 21% 57% 30% 94% 2% = 1ST POSITION = OUTSIDE TOP 3 Digital IQ: China 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 INDEX: China SCOTT GALLOWAY NYU Stern DOUG GUTHRIE George Washington University KEY FINDINGS Google: A Distant Second Mobile: Can You Hear Me Now? JUNE 16, 2010 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 9

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 10

11 Methodology Dimension: Digital Marketing (15%) Activity on BBS Sites: Presence + Content Brand Blogs & Microsites: Availability + Content Mobile: Compatibility + Applications Marketing: Availability on Site Categorizing Results Brands parsed into six categories based on Digital IQ score: >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 Luddite: Not committing any resources to digital in China 11

12 The Rankings LUDDITE: 12

13 FEEBLE: FEEBLE: 13

14 CHALLENGED: AVERAGE: 14

15 GIFTED: GENIUS: 15

16 Key Findings Big Winners, Bigger Losers OBSERVATION: 20% of brands do not even have a Chinese site. 16

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. 17

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: RENREN Prestige Brands with the Most Mentions (May 2010) = IN ENGLISH = IN CHINESE 70,000 60,000 Number of Mentions 50,000 40,000 30,000 20,000 10,000 0 BMW MERCEDES-BENZ LOUIS VUITTON AUDI CLINIQUE FERRARI SHISEIDO LANCÔME PORSCHE LAMBORGHINI 18

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. 19

20 Google: A Distant Second OBSERVATION: Only 39% of prestige brands come up first in Organic search results on market leader, Baidu. Organic Search Results: Baidu & Google (May 2010) GS Second engine Baidu boasts 62 percent nly 39 percent of prestige brands search results when searching for eanwhile, 94 percent of brand sites n, which recently exited China, proach search visibility with a hat fails to recognize the Baidu algohinese brand name visibility is very 0 percent of brand sites are not ree results on either search engine for ches, indicating the difficulties of r many multinational brands. ear Me Now? 5 million mobile phone subscribers in e quarter of mobile users access the es 3, but only 42 percent of brands. Because China has considerably netration than most developed e consumers move directly from no, it is imperative for luxury brands to. Hong Kong brand Shanghai Tang is ds to incorporate a Chinese language hed in April 2010, the app gives users 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 80% 60% 40% Outside of Top 3 Want to know more about your brand s 94% ranking? CONTACT US 57% 43% 39% 29% SEARCH RESULTS FOR BRAND NAMES 30% 21% Position of Brand Sites in Search Results Baidu: Chinese Brand Name 1st Position Baidu: English Brand Name Google: Chinese Brand 94% Name 2% Google: English Brand Name 21% 20% Mobile: Can You Hear Me Now? 0% 43% 29% 39% OBSERVATION: BAIDU: Chinese While 46% BAIDU: of English Chinese GOOGLE: internet Chinese users GOOGLE: access English the web through Brand Name Brand Name Brand Name Brand Name a mobile phone, only 42% of prestige brand sites are mobile enabled 57% 30% 2% = 1ST POSITION = OUTSIDE TOP 3 er 2010 People s Republic of China, August 2009 lsen, October 2009 Shanghai Tang s City Chic iphone app, available in Chinese and English 16 20

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 SHANGHAI TANG Digital IQ: 107 MOUTAI Digital IQ: 115 LUKFOOK Digital IQ: 108 IQ Correlation 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 Brick & Mortar Brand Equity 3 & 5" * - ' * / 5 7 & $ * " - # 6 ; ; SNS Buzz (RenRen, Qzone, YouKu) OBSERVATION:! There is no correlation between brands retail footprint and Chinese brand awareness Chinese Retail Footprint 10 Commandments" of Doing Business" in China 22

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 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 23

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 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 24

25 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 25

26 Q & A C O N TA C T U S : Scott Galloway: Scott@l2thinktank.com Doug Guthrie: doug.guthrie@nyu.edu Maureen Mullen: maureen@l2thinktank.com 26

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