The Digital IQ of Prestige Brands in China

An exclusive report from L2 and Labbrand

The massive potential for retail businesses in China is no surprise to anyone-least of all prestige brands. After years of annual double-digit growth, China’s booming economy has left tens of millions of consumers seeking new ways to spend their disposable income. In 2009, China became the world’s second largest luxury market behind Japan, surpassing the United States.

Even though these trends were recognizable at least 20 years ago, many prestige brands are still playing catch-up in this diverse and rapidly changing marketplace. With 384 million internet users-more than the U.S. and Japan combined-much of the competition for customers and brand loyalty will play out online. The investment prestige brands make in their own digital competence could be a deciding factor in their ability to survive and thrive in China, and is likely to become increasingly important as the market matures.

What is Digital IQ and How is it Measured?

In July of 2010, L2, a think tank for prestige brands, partnered with Labbrand to measure and rank the digital competence of one hundred prestige brands in China[1]. The measurement methodology, “Digital IQ,” gives each brand a combined score based on website translation, functionality and content, search engine optimization (SEO), social media performance, and digital marketing efforts

Digital IQ Ranking: China

A Closer Look at the Numbers

These rankings reveal several interesting trends and correlations with other available metrics. For example, the eight fashion brands measured show a strong positive correlation (0.72) between Digital IQ and brand value as reported in BusinessWeek’s annual 100 Best Global Brands report[2]. For the six automotive brands measured in both studies, the correlation is also strongly positive, at 0.61. These correlations do not necessarily mean that increasing Digital IQ guarantees an enhanced brand value. Nevertheless, the strength of these correlations suggests that the relationship between brand value and Digital IQ is not arbitrary. It is possible that valuable brands are more likely to have higher brand awareness, and therefore enjoy higher returns on the same or smaller investments in digital. Alternatively, valuable brands may be more likely to have higher marketing budgets and invest more heavily in digital media.

Prestige brands with the highest Digital IQ scores are breaking away from the pack. In mature markets, measurements of digital competence show prestige brands tightly bunched together-

leaders do not achieve significant separation from brands with average Digital IQ scores. But in China, digital Geniuses are not just in the lead-they’re winning big. For example, the five brands in the Genius category boast a mean Digital IQ more than 25 points higher than that of the next five brands. In comparison, brands ranked six through ten show a mean difference of only 13.2 points compared to those ranked eleven through fifteen. Digital leaders start “breaking away” at an inflection point around Digital IQ 120. Brands at the bottom end of the ranking demonstrate a similar but opposite effect-they lag significantly behind brands with average Digital IQ scores.

Fifty-nine percent of the luxury brands in the study of Digital IQ in China were also measured in a separate study of the Digital IQ of luxury brands in the U.S., dated September 2009. Brands measured in both indices demonstrated a correlation of 0.58 between their Chinese Digital IQ and their U.S. Digital IQ, suggesting that digital competence in one market can be leveraged in another. Beauty brands Lancme, Clarins, and Este Lauder show the greatest positive disparity between Chinese and U.S. Digital IQ. This suggests their recognition of the opportunity to build brands in China through digital media. Meanwhile, champagne brands Veuve Clicquot, Mot & Chandon, and Dom Prignon demonstrate the largest negative disparity-none of them support a Chinese language version of their brand site. Negative disparities may speak to inability or carelessness when translating digital competence from West to East.

Missed Opportunities and Winning Strategies

Most prestige brands earning high Digital IQ scores in China share at least two attributes: local relevance and availability across a broad range of media.

Local relevance stems partly from familiarity with Chinese sites like Baidu, Kaixin, and Youku, which can be loosely compared to Google, Facebook, and YouTube, respectively. But brands doing business in China must recognize that for Western sites and their Chinese counterparts, different strategies are required; simply translating site content is often ineffective.

While homegrown search engine Baidu boasts 62 percent market share in China[3], only 39 percent of measured prestige brands come up first in its organic results when searching by English brand name. Meanwhile, 94 percent of brand sites came up first on Google.cn (prior to its departure from China) when using English names. When searching with Chinese names, approximately 30 percent of brand sites are not among the top three search results on either search engine. This indicates the difficulty of brand name translation for many multinational brands. These numbers suggest that many brands approach search visibility with a Google-centric mentality that fails to recognize the Baidu algorithm and other local nuances.

One way brands can enhance SEO is by creating more opportunities for consumer interaction through a combination of social network sites (SNS), microsites, bulletin-board systems (BBS) and e-commerce and mobile websites.

Although many prestige brands are eliciting thousands of user-generated comments, video uploads, blog posts, and photos on popular SNS like RenRen, Qzone, Kaixin001, and YouKu, very few are interacting directly with consumers on these sites. As consumers are increasingly expecting brand communications to be interactive, rather than one-way broadcasts, digitally savvy brands that are beginning to engage directly with users on SNS platforms stand to gain an edge. Mercedes-Benz, Audi, and BMW host contests on RenRen, while Dior has a page on Qzone. Digital Genius Lancme boasts an official group on Kaixin001 with more than 250,000 members. Johnnie Walker also hosts a group on the platform.

Four of the brands in the study have invested in branded online communities. Digital Genius Lancme launched an online community called Rose Beauty in 2006 and has four million subscribers. Este Lauder and Clarins also host branded beauty communities. BMW has created a community for the estimated 150,000 BMW drivers in China through its MyBMWClub.cn site. Meanwhile, Audi, Mercedes-Benz, and Porsche have created simple-interface BBS to help facilitate discussions with avid fans. Although the appropriateness of microsites as a means of online consumer interaction is debatable, efforts from these brands demonstrate a heightened commitment to the Chinese marketplace.

On average, brands that embrace e-commerce boast Digital IQ scores 50 points higher than brands that do not sell online. The size of the e-commerce market in China may have quadrupled from 2006 to 2009[4], but only ten of the 100 prestige brands in the study offer online transactions. The Beauty & Skincare category leads with six of 13 brands selling online. Many prestige brands opt against e-commerce for fear it will reflect poorly on the brand’s premium status and diminish control over the sales experience. However, as fashion brand and China first-mover Ports 1961 is the only foreign brand outside of the Beauty category to sell online, making e-commerce available would be a clear point of differentiation within many prestige categories.

In addition to website enhancements, SEO, and SNS, it is imperative for luxury brands to develop a mobile strategy. There are an estimated 745 million mobile phone subscribers in China[5], and more than one quarter of mobile users access the internet through their phones[6]. China has considerably lower in-home internet penetration than most developed nations, and many Chinese consumers move directly from no internet to mobile internet. Yet, only 42 percent of the measured brands have mobile-enabled sites. Hong Kong brand Shanghai Tang is one of the first luxury brands to incorporate a Chinese language iPhone application.

Conclusion

While at least rudimentary digital competence is essential for prestige brands operating in China, specific digital strategies should be customized based on a brand’s vision and personality, opportunities and positioning, rather than a “check box” approach. As with other brand communication and media, digital strategy should be informed by comprehensive and up-to-date market research, strengthened by sound analysis and concrete brand positioning, and executed with distinctive and compelling creative work. Ultimately, brands with a deeper understanding of their Chinese customers, local competition, and familiarity with their own reputation and strengths will fare better, both online and off.

[1]”L2 Digital IQ Index: China”. Scott Galloway &, Doug Guthrie, June 16, 2009.

[2]”100 Best Global Brands”, BusinessWeek, September 2009

[3]”China Online”, eMarketer, December 2010

[4]iResearch, February 2009

[5]Ministry of the Information Industry, People’s Republic of China, August 2009

[6]”Global Device Insight Report”, Nielsen, October 2009

Things You Ought To Remember In Line With Prestige Car Leasing

Anybody who knows cars would recognize the Rolls-Royce as the ultimate symbol of luxury. Given their limited releases and customized features, Rolls Royce cars on sale fetch anywhere from $250,000 to $450,000. But their value goes beyond scarcity and looks. These vehicles actually boast advanced driving features and powerful engine performance, making them a close competitor of other luxury brands, such as BMW and Mercedes Benz. Some of its most famous series selections include the Rolls Royce Ghost and Rolls Royce Phantom.

Now, given the economic landscape, buying Rolls Royce cars on sale may not be the smartest thing to do. They are, after all, depreciating assets. And given their prices, you might just end up losing comfort, rather than gaining it with an investment that does not generate income, and will only be sporadically used. However, if you believe in it so much, there may be a way for you to satisfy your craving without breaking the bank. There are dealerships today that offer prestige car leasing in order to curb the negative effects of a brand new purchase, giving people a chance to enjoy a charmed life. To ensure though, that you are making the right transactions, here are a few tips you might want to go over.

First, know what you want. Start researching on your options. Don’t just allow yourself to get dictated. Test-drive the models, and then inspect it thoroughly. It would be best to get your own mechanic to survey. But this particular tip goes beyond determining the model of the Rolls Royce car you want to drive. Leasing entails a number of responsibilities and conditions. You could let the dealership offer you their best terms, or you could make your own. It’d be more convenient if you are able to secure the latter, since that would give you the chance to negotiate. As everyone knows, negotiation is the only way one can protect their own interest. Look into the maintenance and insurance requirements, especially, since you are bound to get a car that has been used by different people before. Consider the variables – penalties, extra fees, and interests – things that might affect your ability to honor the contract and the financial plan set out.

Second, take advantage of the competition. Shop around. Ask different resources to give you everything they could possibly offer. See, even though you are just getting prestige car leasing services, the money that entails is still significant. So you have to make sure your business is valued. Don’t look too eager to buy, since that would make agents less interested in winning you over. And don’t just limit yourself to your locality because you might find a better offer in the next town.

Third, work with someone who takes care of you. Affordability will not be much of an advantage if you end up dealing with a sales person who does not treat you respectfully and honestly. Remember that car leasing is tantamount to establishing a long term relationship with a dealer. The last thing you want to do is allow them to get access to your finances, withhold you of support and affection, and then take advantage of you until you lose confidence and quit. And when you think about it, the same thing actually goes when you are out to buy Rolls Royce cars for sale.

Do You Know Why Your Travel Business, YTB, Might Not Be Legitimate? I Do

Your Travel Business has been under investigation of whether it is a good investment or a scam. Even though I don’t believe that the company is trying to pull any strings on anybody, i do suspect that the corporate side has not been doing everything that they could to prove to their distributors that they have an investment-worthy product.

Now we will take a glance at the reasons guiding the suspicion about YTB Travel Business.

To begin, there have been countless lawsuits against the company, not to mention the numerous complaints made to the BBB. Although this does not directly depict that the YTB Travel is a scam, nobody from the company, including the corporate and public relations managers, have not made very much attempt to argue with them.

YTB is now undergoing investigation, and since they have chosen to stay out of these problems, it has brought many people’s attention. Even though there the likelihood of the company to be found guilty of the accused offenses is slim, their latest press release avoids to describe how they will improve their model.

Though the claims are minuscule, this can impact the prestige of the business. Various companies have dealt with claims and BBB complaints far worse, but have ensued success because they worked challengingly to cover up the black marks to persist to affect their prestige. For me to want to continue to invest time and money into YTB Travel business, I need to be certain that they have been making the same effort to ensure the reputation of the company I give my time and money.

If they are hoping that the cases will fade into the blue, they better be right. Even though this will probably happen, if they are wrong it will lead to more problems far more serious than the existing problems now. To counter this problem, more attention must be paid to the maintenance of the prestige of the company, otherwise this WILL effect the choice of future distributors.

YTB Travel still has many positive characteristics about it.

YTB has developed into a time-honored company in the travel business. Once the lawsuits blow over, there future will be successful. Considering the lawsuits, many are being rejected due to cases being of no worth and repetitive, and the remaining have not been proved guilty.

Since 2001, when YTB was first recognized in the industry, YTB Travel has shot up the ladder to become one of the top 30 North American travel sales companies, toppling over hundreds of other companies. On top of also becoming part of the stock market, it also has been awarded countless awards in the travel industry.

Is it certain that YTB Travel’s business model is not a scam? What can you do to make sure that the spoiled repute of the company will not ruin the capability to be successful inside YTB?

Due to inclination in travel itineraries and the fact that almost 75% of them are currently online, the probability of rise is extraordinary. If Your Travel Business realized how much the internet could improve their business, you and your networking abilities can create a prestigious reputation for your YTB team by taking advantage of the internet.

If you take advantage of the internet and how to market a business like YTB, you could create a lucrative network.