The Voice of Luxury: Social Media and Luxury Brands in China (GroupM China and CIC)

The Voice of Luxury: Social Media and Luxury Brands in China2011 GroupM Knowledge - CIC White Paper on Luxury

Executive summaryBackground: The luxury market in China is huge and growing fast.• China’s most wealthy are spending more every year, with luxury consumption expected to account for 20% of the global market by 2015.Methodology:• General Market Intelligence: GroupM Knowledge provided a luxury market overview, including data from the GroupM Knowledge/ Hurun Wealth Report 2011• Social Media Intelligence: CIC collected, mined and analyzed millions of Chinese social media comments relating to luxury, utilizing patent pending technology and a team of seasoned analystsCIC L-K-P FRAMEWORK FOR MAKING SENSE OF THE BUZZ Listen听 Know识 Participate融 Topic E-Culture CommunicationListen to the buzz Know the culture Participate in theand find out and context of the conversation.what’s hot online. internet community. The Voice of Luxury: Social Media and Luxury Brands in China i

Executive summaryStrategy 1: Listen to talk about luxury• Brand Overview: Louis Vuitton lead the luxury market’s online discussion in China. Chanel command high buzz volume and positive sentiment.• Category Overview: ‘Leather Goods’ (Bags) - the most discussed luxury category in China.• Efluencer Overview: The top 20% of netizens contributed 80% of the content in luxury category. There are 4 types of luxury efluencer shaping the conversation: Shopaholic, Style Guru, Fashionista and Brand Fan.Strategy 2: Know and understand China’s unique cultural context• ‘shai’ 晒 (showing off) is very popular in Chinese luxury & fashion BBS communities, accounting for an average of 90% of the comments about luxury brands.• Globally speaking, China is positioned as ‘in the show’ stage of luxury consumption, going through different stages of shai. Product Shai, True Man Show and Lifestyle Shai.• Overseas purchase and purchasing agents (i.e. Daigou 代购) are also hot topics.• Live broadcasting from fashion shows is a new way for Chinese netizens to keep in touch with the latest fashion trends. Now ‘runway broadcasting’ is popular via microblog, incorporating pictures, videos and real-time interaction.• Chinese luxury consumers are categorised in four groups: Aspirational Buyer, Quality Pursuer, Status Seeker and Trend-Setter.Strategy 3: Participate in the conversation in a relevant and appropriate way• The microblog (weibo) offers brands a platform that is not only for listening but also for actively participating in the online conversation. Chanel is the most mentioned brand in Chinese microblogs (600,000 tweets between January and May 2011), while Burberry’s account is the most engaged (43,001 retweets and 5,320 comments in the same period).• There are numerous engagement strategies that brands can employ to participate in the conversation, including leveraging celebrities’ massive social reach to spread the brand culture.• Brands should track weibo accounts carefully to ensure they create content that resonates with netizens and is appropriate for the brand’s voice.• Central to microblog engagement and any social media participation is a tone of voice befitting your brand culture. So, luxury brands must find the luxury voice in social media. August 2011 The Voice of Luxury: Social Media and Luxury Brands in China ii

Table of contentsChapter IListen- Listen to the buzz and find out what’s hot onlineP 02 - 1.1 Luxury Category OverviewP 07 - 1.2 Luxury target audienceP 10 - 1.3 Luxury efluencersChapter IIKnow- Know the culture and context of the internet communityP 13 - 2.1 Luxury brand position in ChinaP 17 - 2.2 Purchase driversP 18 - 2.3 Differences between Chinese and Western consumersP 24 - 2.4 Overseas purchaseP 27 - 2.5 CounterfeitsChapter IIIParticipate- Participate in the conversationP 28 - 3.1 Luxury brand microblogsP 33 - 3.2 How do luxury brands utilize social media?P 35 - 3.3 Social media strategies / Marketing luxury brandsP 37 - 3.4 New challenges and opportunities The Voice of Luxury: Social Media and Luxury Brands in China iii

Research Methodology Data Source General market intelligence GroupM Knowledge provided general luxury market overview data, including data from the GroupM Knowledge/ Hurun Wealth Report 2011. The study carried out research both from the ‘bottom-up’ and ‘top-down’. From the ‘bottom-up’, the research looked at the number of key investment and spending indicators amongst mainland Chinese. These included the number of individual properties by region worth between 5 million yuan and 10 million yuan, the number of luxury cars purchased in the last three years costing 500,000 yuan or more, the number of high bracket income tax payers, company registered capital and so on. For the ‘top-down’ approach, it applied the Gini coefficient, measuring income distribution against the 2010 China GDP and 2009 China GNP. Social media intelligence CIC has been collecting and mining luxury conversations from across the unique, fragmented and dynamic social media landscape for over 3 years and boasts an archive of over 10 million comments. For this study, CIC collected, mined and analyzed millions of Chinese social media comments about luxury utilizing patent pending technology and a team of seasoned analysts. • BBS analysis : CIC collected over 4,500,000 comments in Q1 2011 from luxury and fashion related BBS sites. CIC Luxury & Fashion Panel Data BBS Overview (per month) 1,500,000+ messages collected per month -Cover 40+ luxury & fashion sites - Track 1,000+ luxury & fashion related products, 30+ related drivers & attributes - 80,000+ posters - 220,000+ brand messages - 100,000+ driver mentions • Microblog analysis : CIC collected over 2.4 million tweets mentioning luxury brands from Sina Weibo between January and May 2011. CIC also collected tweets from selected luxury brand’s microblog accounts. All of these were then mined for mentions of over 1000 luxury and fashion related products and related attributes.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P01

The Voice of Luxury: Social Media and Luxury Brands in China

Chapter I: Listen Chapter I China’s Vast Luxury Market and Unique Luxury IWOM 1.1. Luxury Category Overview 1.1.1 China’s Luxury Status Chinese luxury consumption is projected to grow 18% annually from 2010 to 2015, by which time accounting for over 20% of the global luxury market. Luxury goods consumption in China, 1998-2015 180 Unit: Billion RMB 80 55 64 5 1998 2008 2009 2010 2015E Global Share (%) <1% 6% 8% 10% 20% Source: Mckinsey Insights China - Understanding of China’s Growing Love for Luxury I. Growing Number of Chinese Rich The number of wealthy Chinese with a personal fortune of 10 million RMB or more reached 960,000 in 2010, an increase of 9.7% compared to the previous year. The top 10 domestic markets by 10million+ RMB population: 1. Beijing 2. Guangdong 3. Shanghai 8 4. Zhejiang Solid macro 1 5. Jiangsu economy 7 6. Fujian 10 5 7. Shandong 3 9 4 8. Liaoning 6 9. Sichuan 2 10. Henan Source: GroupM Knowledge - Hurun Wealth Report 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P02

Chapter I: Listen II. Overview of Luxury Consumption in China - Annual consumption accounts for 5% of total assets. - China’s wealthy are spending more: • 50% spend 1-3 million RMB per annum, a 11% increase from previous year • 37% spend less than 1 million RMB per annum, down by 8% on previous year • 13% spend more than 3 million RMB per annum, down by 3% on previous year - Travel accounts for 29% of millionaire’s consumption, followed by daily luxuries, child education, entertainment, gift giving and finally, saving. Figure 1-1 Millionaire Consumption Patterns Consumption Pattern 2011 (%) 2010 (%) 2009 (%) Travel 29 27 16 Daily luxuries 23 24 25 Child education 22 20 18 Entertainment 12 9 16 Gift giving 7 11 21 Saving 7 10 4 Source: Hurun Best of the Best 2011- Preferred brands of Chinas richest Source: GroupM Knowledge - Hurun Wealth Report 2011 III. Recognition of Luxury Brands Among Wealthy Chinese - Chinese millionaires’ recognition of luxury brands has risen by 20% year on year. - Louis Vuitton once again came in first for luxury brands but Hermès performed outstandingly this year, rising from fourth place to second in the last year. - The average Chinese millionaire has 3.7 watches. Figure 1-2 Best Fashion Brands by Category Category Brand Category Brand Best Jewelry Cartier Best Overall Watch Patek Philippe Best Fashion Label Giorgio Armani Best Watches with High Patek Philippe Best Accessory Hermès complications Best Luxury Writing Instrument Montblanc Best Jewelry Watch Cartier Best Skincare Estee Lauder Best Fashion Watch Gucci Source: Hurun Best of the Best 2011- Preferred brands of Chinas richest© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P03

Chapter I: Listen 1.1.2 Luxury Category Introduction The Chinese luxury market is booming. Many international brands are expanding their investment in China and opening a lot of new stores, not only in tier one cities like Beijing and Shanghai but also in lower tier cities as well. The luxury category, as defined in this white paper, includes leather goods (bags), shoes, fine jewelry, watches, RTW (Ready-to-wear or prêt-à-porter) and accessories (sunglasses, belts and so on). Cars, hotels, cosmetics and service level products are not covered in this report. Figure 1-3 Selected Luxury Category Leather Goods Shoes Fine Jewelry Buzz Volume:79,649 posts Buzz Volume:31,718 posts Buzz Volume:16,489 posts Accessories RTW Watch Buzz Volume:15,182 posts Buzz Volume:13,420 posts Buzz Volume:12,514 posts Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P04

Chapter I: Listen 1.1.2 Luxury Category Buzz Distribution by Site Bulletin Board Systems (BBS) are online discussion forums or communities frequently focusing on high engagement categories. BBS provide a good channel to listen to consumer feedback and to gain category insights in China. BBS play a particularly important role in the unique Chinese social media landscape. Compared with other mature categories like Cosmetics and Auto, there is less brand initiated buzz, mainly dominated by consumers’ organic buzz. In CIC’s luxury panel, about 360,000 posts mention luxury brands and products in each quarter. Fashion sites, Lifestyle communities and Luxury verticals are key buzz distributors, among which 55bbs, Yoka and Iwatch are the top 3 sites where netizens talking about luxury. Understanding the sites with the most buzz can assist in more effective (social) media planning. Figure 1-4 Luxury Category Buzz By Site Sites No. of Posts Post % No. of Conversation No. of Posters 55bbs 112,556 31.7% 2,139 14,868 Yoka 56,176 15.8% 1,955 4,910 Iwatch 36,978 10.4% 3,035 9,399 Belle8 27,877 7.8% 934 3,366 Liba 19,994 5.6% 697 3,541 KDS 15,290 4.3% 3,844 6,652 Watchlead 15,170 4.3% 1,513 719 Taobao 11,025 3.1% 2,571 3,245 Sohu 8,955 2.5% 1,106 598 Dianping 8,801 2.5% 461 1,698 Baidu 6,166 1.7% 1,450 1,353 Cqmmgo 5,940 1.7% 298 2,586 Tianya 5,849 1.6% 1,106 2,625 Mplife 4,493 1.3% 328 1,627 Others 20,303 5.60% 4,087 6,337 TOTAL 355,573 100.0% 25,524 63,524 Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P05

Chapter I: Listen 1.1.3 Community Segmentation Analysis Posting Rate (PR) is one of the online community passion indexes. A higher value indicates that community members are more active and engaged in particular topics. Combined with number of posters and buzz volume, we can map out community segmentation. Figure 1-5 Map of Luxury Community 25 Watchlead 20 Sohu 15 QQ Yoka 10 Belle8 55bbs 5 Liba KDS Taobao Iwatch365 0 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 No. of Posters Note: Bubble Size = Buzz Volume Source: CIC luxury panel data in Q1 2011 Posting Rate= No. of Posts/ No. of Posters (i.e. average num of posts per poster ) Brand can optimize online media planning by understanding of different segment of communities. Figure 1-6 Segmentation of Luxury Communities + Niche Communities Online Community Buzz Leader − Sophisticated campaigns which − Key media spending require high participation − Building awareness Posting Rate − Close cooperation with − Establish loyal users / brand fan communities relations Communities with less influence Popular Communities − Help to spread the campaign or − Low barrier campaign new launches information − Increasing awareness - No. of Posters + Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P06

Chapter I: Listen 1.2 Luxury Target Audience 1.2.1 Luxury Category Poster Analysis In the luxury category, the top 20% netizens contributed nearly 80% of the contents. Those active netizens frequently share their shopping experience, brand news and luxury category knowledge. Figure 1-7 Buzz Distribution by Netizens 100% 20.0% 80% 60% 79.7% 40% 80.0% 20% 20.3% 0% Netizens Contents Source: CIC luxury panel data in Q1 2011 Content Analysis of Active Posters Shopping experience sharing is a common phenomena in luxury category because Chinese consumers are willing to show off their purchasing power and shopping achievements. Secondly, brand news sharing is effective in attracting netizen participation, such as seasonal new products launches, fashion shows, parties and so on. Knowledge sharing is the third hot topic, which is a particularly popular in the watch category. Figure 1-8 Content Analysis of Active Posters Top Posters (ID) Buzz Sample Topic Content Site 烈火坚冰 1,572 爱马仕2011春夏新品鉴赏 Brand news sharing QQ 若然 1,150 Zegna 2011/2012秋冬男装 Brand news sharing Sohu Cathyxu861 1,008 超级血拼在中港加 Shopping experience 55bbs [VACHERON Ohseal 1,005 Knowledge sharing Watchlead CONSTANTIN]6378 Tingtingky 979 TT@2011 P44 3/17更新咯 Shopping experience Liba Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P07

Chapter I: Listen 1.2.2 Hot Online Behavior Overview ‘shai’ (or, showing off a product) is very hot in China’s luxury and fashion BBS communities. Trading second-hand luxury products and counterfeits is also common among Chinese luxury consumers. Figure 1-9 Buzz Ranking of Hot Topics (Buzz Incidence) Shai 57.5% Experience/Knowledge sharing 2.4% Product inquiry 2.4% Brand news sharing 1.9% Trading 1.8% Source: CIC luxury panel data in Q1 2011. Base: 355,573 luxury category posts in Q1 2011 Buzz Incidence: The ratio of a specific topic buzz in the total number of buzz I. Buzz Trend of Shai Post Buzz trend of Luxury ‘shai posts showed obvious seasonality. Buzz peaks occurred around festivals/holidays when people could take shopping trips. From our perspectives, ‘shai’ is an important touching point to link netizens’ offline shopping behavior with online expression. Figure 1-10 Monthly Buzz Trend of ‘shai’ Posts Unit: post National Day & Christmas & Spring Mid-autumn Festival New Year Holiday Festival Labor Day 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Aug.09 Sep.09 Oct.09 Nov.09 Dec.09 Jan.10 Feb.10 Mar.10 Apr.10 May.10 Jun.10 Jul.10 Source: CIC luxury panel data in Aug.2009-Jul. 2010© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P08

Chapter I: Listen II. Hot Online Topics by Brand For fashion brands (e.g. Louis Vuitton, Chanel, Gucci), product shai (87.1%) dominated the hot content. For watch brands, like IWC, knowledge sharing and brand news sharing are most common. For trading luxury products, second-hand goods and counterfeit trading were also hot buzzed online. Figure 1-11 Buzz Ranking of Hot Topics by Top 10 Brands (Buzz Share) Louis Vuitton Chanel Gucci Coach Prada Dior Cartier Burberry Hermes IWC TTL Brands 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Shai Experience/Knowledge sharing Product inquiry Brand news sharing Trading Source: CIC luxury panel data in Q1 2011 Buzz Share: Refers to percentage of posts related to each attribute out of the sum of all attributes related posts. The total percentage is 100%. Note: Base is the sum of the top 5 hot attributes. Base: TTL brands: 234,505 posts. Louis Vuitton : 37,105 posts, Chanel: 25,530 posts, Gucci: 24,280 posts, Coach: 27,263 posts, Prada: 14,356 posts, Dior:11,578 posts, Cartier: 8,511 posts, Burberry: 13,832 posts, Hermes: 9,346 posts, IWC: 10,720 posts© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P09

Chapter I: Listen 1.3 Luxury Efluencers 1.3.1 Classify Luxury Efluencers Luxury Efluencers: They have huge influence and effective interaction with luxury fans. Based on the buzz content, there are four clear behavioral characteristics amongst Luxury Efluencers in the online community: • Shopaholic: Showing off collections and ‘building floor’, which is a cumulative update of their shopping achievements in a specific post, regularly updated to attract netizen awareness. • Style Guru: Expertise sharing to build effective interaction with luxury fans, especially in the watch category • Fashionista: Share latest fashion trends and use ‘Street Shot’(街拍) and ‘Self- Shot’(自拍) to show off their trendy lifestyles. • Brand Fan: Fiercely loyal to a particular brand, refer to themselves as ‘Fans’ (粉) to show their dedication to the brand. I. Case Study of Shopaholic: ‘Tingtinky’ (Netizen’s ID) A typical heavy buyer, regularly posting new products to ‘build floor’. In addition, she achieves good interaction with netizens by answering product inquiries. This post attracted over 18,600 replies. ‘Building Floor’ Sample Quote of Social: Sample Quote of Inquiry: Netizens: 我觉得miumiu老合适TT宝贝的风 Netizens:请问Betsey Johnson的鞋子哪里有格//I feel Miu Miu fit your style. 卖啊？ // Where do you buy Betsey’s shoes? Tingtinky:得到SARA额肯定~吾得意地笑啊 Tingtinky:我在香港买的哦得意地笑// I’m happy because of your 上海好像么有专卖店的// I bought in Hong comments. Link Kong. Betsey Johnson does not have store in Shanghai. Link Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P10

Chapter I: Listen II. Case Study of Style Guru: ‘瓜瓜的小光’ (Netizen’s ID) A typical ‘Guru’, sharing watch category knowledge and building effective interaction with netizen by Q&A. This post attracted over 42,800 replies. Sample Quote of Q&A: Netizens: Oris适合初玩表的人戴吗， Netizen’s question 有什么款好推荐的。// Could you give suggestions for new users like me? 瓜瓜的小光: Oris不错，对于男表而言，它的机芯小了。 FM的定位是高端，低端的价格偏高了// Oris is good, but its men watch’s chip is small. FM is 瓜瓜的小光’s answer a high-end brand, and the price of its low-end watches are expensive. Link III. Case Study of the Fashionista: ‘喜欢旅游的小孩子’ (Netizen’s ID) Sharing the latest fashion trends using ‘Street Shots’ of European and US celebrities. This post attract over 1,000 replies. Sample Quote: Subject:欧美明星一周娱乐星闻播报 (街拍+礼服+八卦)第87辑2.14-2.20// Street Shot of Western celebrities in Feb 14th – Feb 20th 2011. Reply: 我喜欢Dianna Agron 。甜死了// I love Dianna Agron, she is a sweet girl. Link IV. Case Study of Brand Fans: ‘外星人也爱美’ (Netizen’s ID) Hermes fans, focused on collecting Hermes products, including bags, scarves, watches and so on. This post attracted over 350 replies. Sample Quote: 2010年买的5个Hermes //My five Hermes bags purchased in 2010 Reply:真美啊……蓝色的真好看 // So beautiful, especially the blue one. Link Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P11

Chapter I: Listen 1.3.2 Daren Models-The interaction of netizens on luxury social networks When plotting the interaction on social networks, there are essentially two axes: conversation and activity. Conversation is about opinions expressed and emotions exchanged, posting, forwarding, replying, supporting and voting. Activities generally occur spontaneously and are initiated by luxury Daren or by the overall community but can be sparked by a third party. By activity we mean things like offline event, brand promotion, and fashion show. Figure 1-12 The connecting threads of personal relationship within a luxury social network Conversation Voting Like Replying Viewing Posting Forwarding Spectator Brand Fan Luxury Shopaholic Spectator Efluencer Private Advertising Messages Sales Task Promotion Brand Gathering Promotion Activity Note: ‘Luxury Efluencer’ refers to both Style Gurus and Fashionistas Source: CIC White Paper, Efluencer Model, Mar 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P12

Chapter II: Know Chapter II Chinese Consumers 2.1 Luxury Brand Position in China 2.1.1 Luxury Brand Buzz Volume Ranking According to the brand buzz volume ranking, Louis Vuitton was most discussed online, followed by Chanel, Gucci and Coach. Figure 2-1 Top 20 Luxury Brand Buzz Volume Ranking Louis Vuitton 66,659 Chanel 55,299 Gucci 40,029 Coach 39,651 Prada 28,162 Dior 26,973 Cartier 25,072 Burberry 24,514 Hermes 23,988 IWC 20,819 Tiffany 17,977 Rolex 16,783 Miu Miu 16,284 Armani 11,093 Balenciaga 9,715 Bottega Veneta 9,385 Longines 7,058 Marni 7,019 Omega 6,716 Ferragamo 6,511 Unit: Post Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P13

Chapter II: Know 2.1.2 Brand IWOM Health Matrix Regarding a brand’s IWOM health, among the top 20 luxury brands, Chanel enjoyed both high buzz volume and sentiment. Louis Vuitton had the most buzz volume but was relatively weak in online sentiment. Figure 2-2 IWOM Health Matrix 100% Balenciaga Miu Tiffany Burberry BV Miu Prada Coach Marni Hermes Rolex Chanel 95% Armani Ferragamo Dior NSR 90% Cartier Omega Gucci Louis Vuitton 85% Longines IWC 80% 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Buzz volume Source: CIC luxury panel data in Q1 2011 NSR= (Positive Post – Negative Post)/ (Positive Post + Negative Post) * Different colored areas were divided by the average of NSR and buzz volume of top 30 brands IWOM Health Matrix: a comparative analysis across selected brands/products: X axis (horizontal axis) stands post number, Y axis (vertical axis) refers to buzz sentiment (higher NSR means more positive). The position of every brand is determined by the buzz volume and net sentiment rate (NSR) of the brand. For the brands with high NSR but low buzz volume, they may need to improve marketing communication to consumers and spread their good reputation more effectively, for the brands with high buzz volume but low NSR, they may need to focus on improving consumer satisfaction and enhancing the brand buzz sentiment.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P14

Chapter II: Know 2.1.3 Content Exploration for Luxury Negative Comments In the luxury category, negative comments are normally associated with counterfeits, product quality and design, as well as things like service and celebrities. The counterfeit issue and ‘street bag’ are most associated with Louis Vuitton, Gucci and Coach. For product problems, leather goods and watches face the most complaints. Poor BA service and unpleasant shopping experience are associated with most famous brands. Figure 2-3 Negative Content Analysis Counterfeit Related Product Related Others • Counterfeit • Quality issue • Poor BA service & • ‘Street bag’ (too • Don’t like the taste of shopping experience common to see on the design • Celebrity crisis streets) Sample Quotes: Sample Quotes: Sample Quotes: 说实话LV就算是个好牌， Gucci的质量差啊，我的包我在恒隆买的LV有染色问在中国也被糟蹋了，A货没用几次，拉链尾部的金题去换，一个叫Olivia的服太多了，我背个真的出去属就掉下来了//Guccis bag 务员，态度傲慢强硬，说都没劲了。// To be frank, quality is poor. My bags 我完美主义// I found my there are too many zipper was broken with just LV bag had colored handle. I counterfeits of LV in China, a few usage. Link want to change the bag, which does not make me but a BA called Olivia was look good even I carry a arrogant and did not let me real one. Link to change the bag. Link 你看大街上连卖菜的包包觉得coach包和LV包怎么那当年你再嚣张跋扈拿宗教也有双G标志时候你觉得么难看// I feel Coach and 当设计都没人管你，因为买这个牌子还有意思么 LV really ugly. Link 能给DIOR赚的盆满钵满。 //Gucci has become the 现在借机fire你也是虚张声 street bag. Link 势，多年前因为John先生惊世骇俗的破坏性设计而起死回生//Dior leveraged John Galliano to revive. Now he is fired. Link Note: the volume chart indicates the buzz volume of negative posts Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P15

Chapter II: Know 2.1.3 Luxury Category Buzz Ranking Leather Goods (Bags) are most discussed among Chinese consumers, followed by shoes and fine jewelry. Bags are popular in China because they are durable and functional. Figure 2-4 Luxury Category Buzz Ranking Leather Goods (Bags) 79,649 Shoes 31,718 Fine Jewelry 16,489 RTW 13,420 Watches 12,514 Accessories 10,615 Sun Glasses 4,567 Unit: Post Source: CIC luxury panel data in Q1 2011 2.1.4 Buzz Drivers Ranking Price is the most buzzed topic by Chinese luxury consumers, followed by style, celebrity and overseas purchase. While discussion of the brand story/history is low, it is in line with the developing status of the luxury category in China at this stage. Figure 2-5 Top 10 Buzz Drivers Ranking Price 19,857 Style 8,666 Celebrity 6,575 Overseas Purchase 6,375 Advertisement 3,505 Quality 2,731 Service 2,405 Counterfeit 1,764 Designer 1,609 Unit: Post Brand Story/History 90 Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P16

Chapter II: Know 2.2 Purchase Driver Given the fast growth of the luxury category and China’s diversified market, we have observed different typologies with different motivations and behaviors. Based on the IWOM, Chinese luxury consumers are mainly divided into 4 types: • Aspirational Buyer: Most are college students and white-collar, very price sensitive. Another interesting insight we observed amongst aspirational buyers is an increased likelihood to purchase accessories of premium and famous luxury brands. This phenomena is called ‘Big brand, small category’ (大牌小物). • Quality Pursuer: Purchase luxury products in search of fine workmanship and quality. • Status Seeker: Prefer famous brand with big logos to show their status. • Trend Setter: Younger group, willing to purchase trendy but lower awareness brands. Use luxury brands to show their identity and individuality Figure 2-6 Purchase Driver by Four Consumer Types Aspirational Buyer Quality Pursuer Status Seeker Trend-Setter 1. Style & design 1. Price 1. Quality 1. Brand awareness 2. Price 2. Style & design 2. Style & design 2. Style 3. Quality 3. Brand awareness 3. Price 3. Quality 4. Exclusivity Sample Quote： Sample Quote: Sample Quote: Sample Quote：我最贵的包包也不到我也不是名牌的疯炫一下很少出现在55 看到Sergio rossi了，呵 5000哦，我的口号是狂追求者。就是自上的大牌ETRO、呵，这个牌子我也很喜理性败家// My most 己用东西很注重品 GUCCI、PRADA, 欢，设计很大气,鞋子很 expensive bag is lower 质和质感// I’m not MIUMIU等// Show off 舒服，国内知道这个牌 than 5,000 RMB. My big brand fans, my famous luxury 子的人不大多// slogan is purchasing quality is most brands, such as Gucci, Although most of Chinese luxury products import for me to buy Prada, Miu Miu, etc. people do not know rationally Link products. Link Link Sergio Rossi, I like it. It has good design and comfortable. Link Note: the number means the priority of purchase drivers Source: CIC luxury panel data in Q1 2011© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P17

Chapter II: Know 2.3 Differences between Chinese and Western luxury consumers 2.3.1 Chinese Luxury ‘shai’ Culture Chinese luxury consumers are keen to show off (‘shai’) their luxury products and trendy lifestyle. Figure 2-7 Chinese Luxury ‘shai’ Culture Knowledge In the know Show I know (very knowledgeable and (very knowledgeable and not so willing to show off) willing to show off) Don’t know & can’t show In the show (limited knowledge and (limited knowledge and not so willing to show off) willing to show off) Showing off Note: Developed markets Vs. developing markets in Asian countries Evolution of Chinese luxury ‘shai’ Culture Chinese ‘shai’ culture evolved with the development of the luxury market in China. Over time, the form of ‘shai’ is being consistently enriched. Generally, there are three stages: Shai Product, True Man Show (真人秀) and Shai Lifestyle. Figure 2-8 Evolution of Chinese Luxury ‘shai’ Culture Shai The original appearance of ‘shai’ – Product showing off your purchasing power The updated version of ‘shai’ product – True man Show showing off your (真人秀) expertise & creativity Very emotional – Shai showing off your overall taste Lifestyle (what’s your life looks like) Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P18

Chapter II: Know I. Product Shai The original expression of ‘shai’ - showing off your purchasing power. To ‘shai’ a product is one of the favorite online behaviors in the luxury / fashion category. Given that Chinese luxury consumers are still in the preliminary stage (‘in the show’ stage), to ‘shai’ products becomes a very popular way for them to show off and learn more about the luxury category from other consumers’ ‘shai’. In a typical product ‘shai’, there are pictures of the product, normally including the whole collection (全家福), followed by a single picture for each SKU. In addition, it may include some introduction of the product and emotional sharing of personal shopping experience (败家经验分享). ‘Building floor’ is commonly used by luxury Shopaholics to continuously shai their ever expanding collections. (‘Shaiers’ would write a summary on the topic post, which is easier for ‘Shaiees’ to view their interested topics). The regular update of ‘shai’ can consistently attract people’s awareness. Figure 2-9 Building Floor Culture of Product Shai Top 10 topics: P1: Gucci bag, Coach necklace and bag P2: Tissot watch, Biotherm skincare products P3: Swarovski necklace P4: Zhoudafu bracelet ‘Building P5: Bally men’s bag Floor’ P6: LV Palermo PM P8: LV Neverfull P9: True Man Show for LV Neverfull P11: Gucci key bag P12: Giorgio Armani sunglass Link Virtual Luxury Shopping Basket Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P19

Chapter II: Know II. True man Show (真人秀) The first stage in the evolution of ‘shai’ product – showing off your expertise and creativity. ‘True Man Show’ or Live Demo is an emerging way to ‘shai’ products. Netizens not only shai the product but also show the real efficacy and personal taste of dressing up. Due to its tangible efficacy, it attracts significant popularity among luxury/fashion fans and has become a new means of expression in the luxury/fashion category. It has also been observed that in the ‘True Man Show’, netizens are more willing to share their opinions and interact with others’. In this regard, it could be leveraged in brand campaign ideation to broaden brand awareness and increase consumer engagement. Figure 2-10 True man Show DIY Outfit Matching Show Decoding of Fashion Trend Sample quote Sample quote: Subject: [V] 2009秋冬教你如何打扮色彩 Subject: 十一出游SHOW搭配 Link // My 搭配Link// Teach you how to wear in fall- showcase of outfit for National Day holiday winter outing Topic post:有些MM总认为色彩堆砌越 Re:就喜欢这样的贴，既养眼又叙事清多，越“丰富多彩”。集五色于一身，楚，支持美女继续发贴// I love this post for it’s not only an eye candy but also good 遍体罗绮，镶金挂银，其实效果并不好。 // Some girls hold that the more learning for us. colors they put on, the more fabulous look they will get. However, the fact is quite the opposite. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P20

Chapter II: Know III. Shai Lifestyle ‘Shai Lifestyle’ talks to the emotional side of luxury consumers – showing off their overall taste. Essentially, it’s a question of what your luxury life looks like. On top of product related ‘shai’, Lifestyle related ‘shai’ is also very popular in luxury / fashion category, including ‘street shots’ or ‘self-shots’. The photos are mainly about people’s fashion and luxury lifestyle, such as night life/clubbing, travel and stylish hobbies. Lifestyle related ‘shai’ is a hot trend in China. Brands could consider collaborating with lifestyle communities and leveraging the emerging microblog and SNS platforms to maximize the influence, which would resonate well with luxury fashion consumers. Figure 2-11 Lifestyle Related Shai Street Shot Night Life Hobbies Travel Sample quotes: Sample quotes: Subject: 9月北京街拍全是漂亮的MM Link 三亚圣诞归来，碧海蓝天+亚龙湾+大东海 //September Street Snapshot in Beijing, all +蜈支洲+西岛, 实在太棒了 (Link) // Just the pretty girls. come back from Haina， it’s really great! Re:不错哦，都好潮啊// Good. They are so fashion. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P21

Chapter II: Know 2.3.2 Live Runway Broadcasting Culture Live runway broadcasting is a new form for Chinese netizens to keep in touch with fashion trends. Before the emergence of the microblog in China, runway live broadcasting was on BBS. Now runway live broadcasting is hot via microblog thanks to imbedded pictures, videos and real-time interaction. Case Study: Burberry Beijing Show Burberry broadcast its fashion show for Burberry Prorsum in Bejing on April 13th 2011 and invited Chinese celebrities Su Hong and Cheng Kung to run the brand account, posting photos and video with descriptions to promote interaction with netizens. In addition, designer Christopher Bailey answered netizens questions about Burberry, which attracted over 10,000 retweets. Figure 2-12 Burberry’s 3D Fashion Show in Beijing Sample quotes of Netizens Feedbacks: 我看的触目惊心的非常震撼 Burberry和Keane真的是很好的结合很硬朗很英伦 Link // I’m impressed by Burberry. It’s great, Burberry launched a typical British style with Keane. 我对这个品牌所传达理念的认识也翻新了 Link// I get new understanding of the brand culture of Burberry from this fashion show. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P22

Chapter II: Know 2.3.3 Luxury E-commerce Platform A host of third party e-commerce platforms emerged in 2010. Emporio Armani also launched their first Chinese official online store. The third party e-commerce platforms provide luxury products with big discounts to attract consumers. The safe payment system, mature delivery service and variety of promotions enhance the shopping experience. Emporio Armani’s e-commerce site faces some common problems that branded e- commerce has previously encountered in China, the price is not attractive because the product price is same online and offline, less product choice and the lack of luxury, in-store shopping experience also affect sales. Figure 2-13 Online Luxury E-commerce Platform Emporio Armani E-commerce Platform Third Party E-commerce Platform Emporio Armani launched Chinese online store on Nov 26th 2010 Source: CIC Case Study of Third Party E-commerce Platform: Meici Meici is an e-commerce website selling luxury products at a discount. Meici also has Luxury Care , which provides professional maintenance service for luxury products, including cleansing, color care and repair service. Its maintenance service is popular because luxury brands do not provide maintenance service in China. Furthermore, Meici set up a reliable e-commerce platform, authenticity of products guaranteed, fast and nationwide logistics system and return or refund policy within 7days. Meici Ecommerce Link Meici Luxury Care Link Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P23

Chapter II: Know 2.4 Overseas Purchase 2.4.1 Overseas Purchase Overview As ever larger numbers of Chinese consumers travel overseas, they recognize that certain products are significantly cheaper abroad. One netizen claims that a Prada bag is 12,600 RMB in Beijing but it only 795 EUR (7,398.75 RMB) in Europe (Link). It is more than just price that has netizens talking though. They mention that there is more choice, more styles and a better shopping experience. Of all the destinations, Hong Kong is the most mentioned specially in relation to shopping. Strategy is also popular when netizens discuss the shopping in Hong Kong. The second destination for luxury shoppers is the US, where most netizens leverage business trips to shop and will discuss their preparations before traveling. Paris is the third most popular, regarded as an extremely fashionable and charming city with a good shopping environment. However, in line with the new tax policy, the price difference between HK and the Chinese mainland is becoming smaller. Japan, Korea and Singapore are becoming increasingly popular shopping destinations for Chinese consumers. Duty free shopping (DFS) at the airport is the most mentioned in relation to tax free shopping and credit card promotions. Figure 2-14 Emporio Armani Price Difference: China Vs. France China France China: 3,300 RMB France: 250 EUR Exchange Rate: 1 EUR=9.3066 RMB 250 EUR= 2,326.65 RMB Price difference= 3,300-2326.65=973.35 RMB 肩背包 Sac porté épaule ¥ 3,300.00 EUR 250.00 Source: Ecommerce of Emporio Armani© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P24

Chapter II: Know 2.4.2 Daigou: Types of Purchasing Agent The majority of people are not actually able to travel overseas as frequently as they’d like. So, purchasing agents (Daigou) are emerging quickly in China. Based on scale and motivation, purchasing agents can be divided in to three types: Amateurs, Specialists and Masters. Figure 2-15 Three Types of Purchasing Agents Profit-driven Masters (24/7 and long term) Specialist (regular and long term) Amateurs (random and one off) Relationship- driven Individual Organization Source: CIC Note: The bigger the circle, the higher the visibility/ buzz volume 2.4.3 Comparison of Three Purchasing Agents Masters and Specialists are the main focus of netizens’ discussion of online purchasing agents because they provide a mature purchasing model and a wider variety of brands and products.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P25

Chapter II: Know Masters Specialists Amateurs • B2C sites with suppliers • Individuals with • Individuals travelling Who abroad constant overseas overseas occasionally connections (e.g. family living overseas) • Provide information and • Information on • Information can be on any direct purchase on own purchasing agent sub- site or forum Where e-commerce platform forums portals, lifestyle • Most offline sites or beauty verticals • Both online and offline • For profit • Make a living or subsidize • Out of goodwill/ friendship Why they’re other work • Sometimes also involve good relationship • Set menu: comprehensive • Provide a list of brands/ • As needed. No menu product catalogue on own products • Price tag platform (e-commerce site) • Sometimes provide • A la carte: browse products personal recommendation What & from external sources (e.g. • Buyers sometimes can How brand’s own site) and then order items they want order from purchasing • Very little promotion agent site • Various types of promotion 2.4.4 Tax Policy Influenced the Daigou Price China custom announced the new tax policy for ‘personal postal articles’ from 1st September 2010. The inward/outward tax for ‘personal postal articles’ was adjusted. The lowest duty-free allowance is adjusted from RMB 500 to RMB 50 at one time Daigou price was hugely influenced and lots of taobao stores stopped their Daigou business or raised their Daigou price already. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P26

Chapter II: Know 2.5 Counterfeit Issue 2.5.1 Why do people purchase counterfeit luxury goods? Counterfeits are an inevitable topic when talking about luxury market in China. Based on the IWOM content, it’s observed that Chinese counterfeit buyers had various motivations. For brands though, some of these fake buyers can be converted to authentic luxury consumers. Can’t afford, but driven by vanity “买不起买买山寨的过过念头，虚荣心 Like the design, but not willing to afford the 啊虚荣心～ (link) // I can’t afford. Just price of authenticity bought a counterfeit due to vanity.” “俺看上真货的款式,看不上真货的价格 SO 我买个假的. 款式和价格我都看的上!! (link) // I like the design and pattern of real LV. But I don’t like the price. So I’d like to buy the counterfeit which had good design and acceptable price” No brand awareness Counterfeit “有的人(比如很多阿姨)就压根不知道 Buyer 那个是LV,只当是个寻常包就买了背了 (link)// some people, they have no brand Own both authentic and awareness at all. They just take the counterfeits counterfeit as an ordinary bag.” “真的也有，假的也要.真真假假很好玩啊(link) // I owned both the real ones and counterfeits. It’s interesting to mix use the real and the fake.“ Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P27

Chapter III: Participate Chapter III Luxury Brands Social Media Strategy 3.1 Luxury Brands on Weibo 3.1.1 Luxury Brands Weibo Buzz Overview Weibo (microblog) has emerged as an important channel for real-time information updates, recently capturing the attention of the world’s leading luxury and fashion brands. In October 2010, Louis Vuitton became the first global fashion brand to launch a microblog presence in China. In Q1 2011, we have witnessed a rapid build up of luxury brands on Weibo, including Gucci and Burberry. Among the top 20 most discussed luxury brands on the Chinese Internet, there are 8 luxury brands that have launched official accounts on Sina Weibo. BBS remains an important channel for listening but Weibo also facilitates participation. Figure 3-1 Top 20 Luxury Brand Buzz Ranking by Tweet Ranking Brand No. of Mentions Brand Account (Y/N) 1 Chanel 593,075 N 2 Dior 311,211 N 3 Gucci 253,232 37,548 followers 4 Hermes 236,208 N 5 Prada 204,298 N 6 Burberry 188,860 152,120 followers 7 Armani 92,568 N 8 Tiffany 89,582 N 9 Cartier 88,312 56,496 followers 10 IWC 80,862 1,619 followers 11 Coach 49,475 845 followers 12 Balenciaga 40,963 N 13 Louis Vuitton 38,917 99,491 followers 14 Rolex 36,706 N 15 Omega 31,388 N 16 Ferragamo 27,663 N 17 Longines 26,600 17,408 followers 18 Miu Miu 26,017 N 19 Bottega Veneta 12,767 4,016 followers 20 Marni 4,167 N Data source: CIC Weibo tracking, Jan - May 2011.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P28

Chapter III: Participate 3.1.2 Luxury Brands Account Performance Among the top luxury brands with official accounts on Sina Weibo, Burberry generates the most engagement, that is, more retweets and netizen comments than their competitors. Much of this was driven by its Beijing fashion show and the live runway content released via its Sina Weibo account. Louis Vuitton also attracts high participation and enjoys the highest retweet rate return from their activity due to effective content and strong brand awareness (the most well-know luxury brand in China). Figure 3-2 Luxury Brands’ Weibo Account Performance Overview, Jan-May 2011 Burberry 43,001 5,320 Louis Vuitton 18,067 4,142 Gucci 9,512 3,207 Longines 4,465 3,076 Bottega Veneta 2,777 799 550 Num of Retweets IWC 209 Num of Comments Coach 176 69 Figure 3-3 Brand Account Retweet Rate and Comment Rate Overview, Jan-May 2011 Num of Tweets Retweet Rate Comment Rate 400 342 350 300 277 296 250 200 155 144 150 97 100 61 66 74 57 50 19 13 38 22 10 4 2 68 11 1 0 9 Burberry Louis Vuitton Gucci Longines Bottega Veneta IWC Coach Source: CIC Note: Retweet rate= Num of retweets/No. of tweets, Comment Rate=Num of comments/No. of tweets.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P29

Chapter III: Participate 3.1.3 Content Analysis of Brand Accounts Product introductions, celebrities & designers, fashion events and sponsorships are the most common content produced by luxury brands. In addition, online campaigns employing the ‘@friends’ tactic is also common. For example, Longines launched a series of incentivized retweet campaigns about tennis, while Coach launched emotional campaigns on Mother’s Day. For fashion brands like Burberry, Louis Vuitton and Gucci, the content of articles are most focused on fashion events and celebrities. Watch brands like IWC and Longines share category knowledge, which is also an important tactic in releasing content that resonates with netizens. Figure 3-4 Content Analysis of Luxury Brands’ Account by Tweet, Jan-May 2011 Burberry Louis Vuitton Gucci Longines Bottega Veneta IWC Coach Average* 0% 20% 40% 60% 80% 100% Product Introduction Celebrity & Designer Fashion Event & Sponsorship Online Campaigns Store Promotion & Opening Brand Story Charity Knowledge Sharing Others Source: CIC Weibo Tracking Note*: Average refers to total 7 brands average.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P30

Chapter III: Participate Retweet Rate by Topic by Brand In terms of retweet rate, charity, fashion events and store promotions are the most popular amongst luxury brand accounts. Brands could consider releasing more content relating to fashion events in order to attract netizens’ attention and increase their weibo exposure. Figure 3-5 Retweet Rate by Topic by Brand, Jan-May 2011 TTL Louis Bottega Topic Burberry Gucci Longines IWC Coach Brands Vuitton Veneta Product 74 57 330 72 6 36 12 6 Introduction Celebrity & 64 52 272 85 4 26 8 2 Designer Fashion Event & 109 323 331 41 8 57 4 0 Sponsorship Online Campaigns 14 N/A N/A N/A 26 N/A N/A 1 Store Promotion 90 36 336 100 14 49 6 N/A & Opening Brand Story 43 N/A 146 28 N/A 37 4 0 Charity 175 N/A 644 51 3 N/A 2 N/A Knowledge 6 N/A N/A N/A 7 N/A 5 N/A Sharing Others 50 17 260 13 2 N/A 6 0 Retweet Rate: average num of retweets per tweet TTL Brands are the average of the 7 luxury brand Source: CIC Fashion Event Celebrity & Designer Product Introduction© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P31

Chapter III: Participate 3.1.4 Brand Owned Weibo Followers Analysis For luxury brands, it’s important to have the both quantity and quality of followers. For example, Bottega Veneta enjoyed a relatively high proportion of quality followers, those whose accounts have more than 100 followers. A high-quality follower group helps branded weibo accounts with reach and exposure of their content. Figure 3-6 Brand Weibo Followers’ Breakdown by Num of Second Layer Followers Followers >200 Followers 101~200 Followers 51~100 Followers 10~50 Followers < 10 100% 15% 12% 12% 19% 21% 17% 27% 28% 80% 16% 29% 28% 33% 36% 16% 18% 60% 35% 27% 18% 17% 21% 15% 40% 19% 18% 15% 18% 19% 17% 19% 17% 13% 20% 15% 14% 34% 19% 22% 19% 15% 14% 17% 12% 0% Average Burberry Louis Gucci Longines Bottega IWC Coach Vuitton Veneta Followers Num 152,120 99,491 37,548 17,408 4,016 80,862 845 Launch Time 2011.2 2010.10 2011.1 2010.11 2011.4 2011.3 2011.4 Source: CIC Weibo tracking, random sampling of brand account followers. (API data access of followers profiles) Note: Average refers to total 7 brands average.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P32

Chapter III: Participate 3.2 How do luxury brands utilize social media? 3.2.1 General Tactics Generally, brands can develop digital tactics in relation to the following perspectives: Platform (where you launch the campaign), People (who you target and leverage to help communication and broadcast) and Culture (the hottest trends, content and behavior). • Brand’s campaign can utilize multiple Platform & Channel: social media platforms, including Multi-channel microblog, blog, BBS, video sharing etc. Broadcasting • BBS good for listening, microblog good for listening, engagement and viral. People: Culture: Efluencers Hot Online Culture • Fashion editors and • The diversified ‘shai’ culture celebrities are good choices • Creative ‘DIY’ culture for luxury brands to leverage • Live broadcasting with campaign activity, especially when it comes to their microblog campaign. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P33

Chapter III: Participate 3.2.2 Case Study: Tweet Diffusion Model for Burberry 3D Fashion Show It’s interesting to look at the tweet’s journey through the social network. In this case, Burberry posted a warm note about a 3D fashion show in Beijing via Sina Weibo, which generated 854 retweets, 104 comments and achieved a total exposure of over 3 million netizens. From the below tweet diffusion model, we can identify efluencers’ performance (e.g. “全球热门排行榜”) and evaluate their effectiveness in spread of brand’s tweet. Figure 3-7 Analysis Tweet Diffusion Model Layer 7 Layer 6 Layer 5 ‘The famous British band, Layer 4 Keane will attend the event @Burberry. They will have Layer 3 their first show in China in Layer 1 Burberry’s Beijing event on Apr 13th, so as to show the close relationship between Burberry and British music. Tom Chaplin, singer of Keane made a special video for Chinese fans’ Layer 2 Layer of % of total Exposure Exposure Layer Retweets % of Retweet Followers Contributed Original 133,274 4.28% 1 324 37.9% 1st 2,525,826 81.04% 2 444 52.0% 2nd 247,868 7.95% 3 47 5.5% 3rd 173,247 5.56% 4 12 1.4% 4th 23,910 0.77% 5 18 2.1% 5th 8,570 0.27% 6 6 0.7% 6th 2,913 0.09% 7 3 0.4% 7th 1,146 0.04% Total 854 100% Total 3,116,754 100% Source: CIC Note: Tweet Exposure = total number of direct followers + Nth (n>1) layer followers of whom did the retweet % of total Exposure Contributed= each layer’s followers/ total followers % of Retweet = Each layer’s retweets count/ total layers’ count© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P34

Chapter III: Participate 3.3 Social Media Strategies/Marketing for Luxury Brands 3.3.1 Offline to Online Luxury brands can increase brand awareness and make a connection with consumers through the ‘O2O’ campaign approach. Figure 3-8 The cycle of ‘O2O’ scenario: Brands can leverage online platforms to promote offline campaigns Brand offline campaigns Online platforms Increase awareness & Making the connection Offline participants would shai their experience and share feedback on online platforms Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P35

Chapter III: Participate 3.3.2 How to Build Brand Relationship with Social Media? As Chinese social media platforms differ in various ways, luxury brands should take advantage of the particular strength of the platform for different marketing strategies. Figure 3-9 Social Media Approach for Luxury Brands Popular Microblog/ Fashion Sites & Brand Fans Club Video Sites Premium SNS (e.g. Weibo brand (e.g. Weibo, Youku) (e.g. Yoka, Liba, P1.cn) account, Douban fans group) • Mass awareness • More relevant target distribution groups • Very focused target • Mainly target • More sophisticated group aspirational luxury consumers • Brand users and consumers • Social elements with brand fans special focus on • Fan management or relation building. CRM Broad Awareness & Appeal Emotional Attachment Brand Appreciation Sina Weibo & Youku P1.cn Fans Group Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P36

Chapter III: Participate 3.4 The Expansion of Weibo Presents New Opportunities and Challenges for Luxury Brands 3.4.1 The Opportunities for Luxury Brands With the expansion of the microblog medium in China, it brings new opportunities for luxury brands to enhance their social media marketing and strategy. I. Source of Celebrities on Weibo Microblogging is largely personality-driven and the top ten accounts are celebrities and other prominent individuals (Chinese actress Yao Chen currently holds the most popular account in China, with over 10 million followers). As a result, the personal accounts of fashion industry figures often attract more followers than the accounts of large fashion brands themselves. Luxury brands could leverage the influence of celebrities and collaborate with them in both awareness and engagement campaigns. Burberry : Chen Kun and Su Hong turn over Burberry account on the Beijing 3D fashion show Burberry announced that Chen Kun and Su Hong would report on its Beijing 3D fashion show in April 2011 via the Burberry Sina Weibo account. This tweet attracted 2,449 retweets . Source: CIC II. Branded Communication via Weibo: What’s the right voice for a luxury microblog? From our perspective, the microblog is a humanized window into brand culture. It is important for luxury brands to use an appropriate tone and content that is in line with their brand image and position. This will help to protect brand image while building an emotional bond with netizens and maintaining a ‘distance’ appropriate for prestige brands. Video: Louis Vuitton City Guide, LV uses text description with attached related video to show the luxurious brand culture Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P37

Chapter III: Participate 3.4.2 The Challenges for Luxury Brands Microblogging also creates challenges for brands, from crisis management to followers maintenance. I. Brand Crisis Management The microblog is an open platform and as such, it is a challenge for luxury brands to maintain the proper image and publicly manage any crisis. When there is such a crisis, the viral nature of the microblog medium will make the spread much faster than any other media channel. Case Study: Dior John Galliano Case On the 25th of February 2011, Dior’s chief designer John Galliano was arrested by French police. This news rapidly spread on Sina Weibo and aroused a lot of discussion, over 16,000 tweets. John Galliano被Dior炒鱿鱼了！消息被 John Galliano，英国的时装icon，因醉酒涉确认了，惊人。大家还是要努力工作及闹事及歧视犹太人言论被拘留，并在今啊//It’s confirmed that John Galliano was 日被Dior公司宣布停职。 Link //John fired by Dior. It’s shocking. Galliano was arrested by police due to abuse Jewish and then was fired by Dior today II. Follower Maintenance With a growing number of followers, brands will spend more time on follower maintenance. Luxury brands with an unmanageably large number of followers find it difficult to build good interaction with the majority, which can reduce the followers’ brand loyalty. In addition, more and more brand accounts face the problem of ghost followers (僵尸粉), which not only increases the cost of follower maintenance but is also detrimental to the efficiency of brand broadcasting. Note: Ghost Followers - Virtual followers are registered by software, its main purpose is to increase the number of an account’s followers. Ghost followers generally post little content and undertake little interaction with others. There are also some artificial ‘real followers’ with account information and the appearance of genuine activity. However, these accounts are not legitimate and their purpose is the same with ghost followers. Source: CIC© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China P38

About GroupM Knowledge About GroupM China GroupM is WPP’s consolidated media investment management operation, serving as the parent company to agencies including Kinetic, Maxus, MEC, MediaCom, and Mindshare. GroupM is the global number one media investment management group. GroupM employs more than a thousand people in eight cities across China. With total media billings in excess of USD 4 billion (RECMA: 2010 Definitive), GroupM is China’s top media communications group and the industry’s biggest investor in syndicated and proprietary media research and optimization tool development. About GroupM Knowledge GroupM Knowledge is GroupM’s think tank and knowledge management arm in China. This unit is responsible for industry-wide thought leadership research, exploring issues affecting the media industry in China; working with syndicated research suppliers, and managing the Group’s proprietary tools, research and systems. The unit also manages a media consultancy, advising clients with specific media research requirements.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

About Other GroupM Knowledge Research Projects  Project Deep Dive (PDD) 2011: GroupM proprietary survey on China’s lower tier markets  Digital Touch with TNS: Reveal China’s most effective touch points  Mobile 360: Mobile phone as an effective communications touch point  China’s Youth Research: To understand media consumption habits and aspirations of Chinese youth  LuxC: Understanding luxury car users and segmentation research  ‘Big Bang’Eye Spy Research: Using eye tracking to evaluate effectiveness of magazine and online ads© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

Contact us Shanghai: 28F, The Center, No.989, Changle Rd. Shanghai 200031 China Tel: 021 – 2405 – 1293 / 94 长乐路989号世纪商贸28楼，上海, 200031, 中国电话: 021 – 2405 – 1293 / 94 Beijing: Room1202,12/F Hua Li Building, No.58 Jin Bao Street Dong Cheng District Beijing 10005 China Tel: 010 – 8523 – 3679 东城区金宝街58号华丽大厦12层1202室, 北京, 10005, 中国电话: 010 – 8523 – 3679 Guangzhou: 8/F, Development Center, 3 Lin Jiang Road, Pearl River New City Guangzhou 510623 China Tel: 020 – 2881 – 8288 天河区珠江新城临江大道3号发展中心8楼, 广州, 510623, 中国电话: 020 – 2881 – 8288 Contact us: Lucy Zhang lucy.zhang@groupm.com Futures Director of GroupM Knowledge www.groupmchina.com www.igroupm.cn (Q4.2011) weibo.com/groupmknowledge© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

About CIC About CIC CIC is Chinas leading social business intelligence provider. CIC enables businesses to fully leverage the power of social media and (Internet Word of Mouth) IWOM intelligence across the organization. Since coining the term IWOM in 2004, CIC has pioneered the industry to help companies meet their social media marketing and social business needs by providing customized research, consulting services, syndicated reports, as well as technical solutions and platforms all via an objective, third party perspective. In addition to helping companies leverage social media intelligence for more informed decisions, CIC is monetizing the social business industry in China by creating an integrated social business support system. CIC utilizes its own patent pending technology to capture millions of online conversations and ‘makes sense of the buzz’ by assembling them into easy to understand intelligence and provides interpretation which informs strategic decisions and leads to action. CIC gathers and mines over 100 million naturally occurring consumer comments every month from a range of uniquely Chinese social media platforms including blogs, BBS and social network sites and applies its unique, China-derived methodology and indexes to provide a detailed and comprehensive picture of the social media landscape and its implications for business. CIC has well over 2 billion mentions of brands and products from well over 1 billion consumer comments that have been indexed and archived. CIC has strong, long term retainer relationships with multinational agencies and Fortune 500 companies, including Nike, Pepsi, Intel, L‘Oreal Group, BMW, P&G, Unilever and many more. Copyright Statement This report is copyrighted material owned by CIC. Any improper use of this document or its content will be considered a violation of CIC IP copyright and CIC has the right to take legal action.© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

CIC white paper archive Find more CIC white papers on our CIC slideshare site: www.slideshare.net/CIC_China 2011: CIC 2011 White Paper: From Social Media to Social Business Topic 1: An Overview of the Evolution of Chinese Social Media | view 2010: Chinese Consumer Report (in collaboration with Roland Berger) | view 2010: Internet word of mouth proven to have impact (CIC and R3) | view 2010: ExpoSay: Shanghai Expo tickets are the focus of intense buzz in Chinas Social Media (Edition_1) | view 2009: Making Sense of IWOM Topic 1: IWOM White Paper on the Role of Internet Word of Mouth in Driving Purchase Decisions | view Topic 2: How IWOM is generated and disseminated | view Topic 3: How Brands Can Participate in Online Communities | view 2009: Chinese Consumer Report (in collaboration with Roland Berger) | view 2008: The Internet is THE community Topic 1: The Chinese IWOM Landscape | view Topic 2: Alternative Ways to Measure Internet Community Dynamics | view Topic 3: The Diversity of Chinese Net Language | view Topic 4: Reshaping the Relationship between Brands and Consumers | view 2008: Tuning into Sports IWOM | view 2008: Tuning into Notebook IWOM | view 2007: Whats Driving Auto Buzz | view 2007: The Talk About Phones | view 2007: Word of Health: China | view© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

Contact us Shanghai: Suite 108, Block A, UDC Innovative Plaza, 125 Jiangsu North Road Shanghai, China, 200042 Tel: 021 - 5237 3860 | Fax: 021 - 5237 3632 江苏北路125号华联创意广场A栋108室, 上海, 200042, 中国电话: 021 - 5237 3860 | 传真: 021 - 5237 3632 Beijing: 1006 / 10F, Block C, No. 60, Dongsihuanzhong Road, Chaoyang District Beijing, China, 100025 朝阳区东四环中路60号远洋国际中心C座1006室, 北京, 100025, 中国电话: 010 – 5908 0268 Contact us: info@cicdata.com weibo.com/seeisee www.linkedin.com/companies/359113 www.douban.com/host/cic www.jiepang.com/cic www.seeisee.com @cicdata www.seeisee.com/sam www.tudou.com/home/iwomchina CIC_CN www.slideshare.net/CIC_China© 2011 GroupM Knowledge & CIC The Voice of Luxury: Social Media and Luxury Brands in China

www.groupmchina.com www.igroupm.cn (Q4.2011) weibo.com/groupmknowledgeSite: www.ciccorporate.comBlog: www.seeisee.comFounder Blog: www.seeisee.com/samIWOMmaster platform: www.iwommaster.comIWOMdiscover platform: discover.iwommaster.comIWOMexplorer platform: explorer.iwommaster.comIWOMcooperator platform: cooperator.iwommaster.com The Voice of Luxury: Social Media and Luxury Brands in China

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The Voice of Luxury: Social Media and Luxury Brands in China (GroupM China and CIC)

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The Voice of Luxury: Social Media and Luxury Brands in China (GroupM China and CIC) — Document Transcript