L2 China Digital IQ Study

September 13, 2011SCOTT GALLOWAY China IQNYU SternDOUG GUTHRIEThe George Washington University School of Business© L2 2011 L2ThinkTank.com

Friday, October 14 HOSTED BY: CEIBS, Shanghai China Europe International Business School Pre-event reception: Thursday, October 13 Four Seasons Shanghai For an invitation & more information, contact: CLINIC Joseph@L2ThinkTank.com CORPORATE PARTNERS:The Social Graph: ChinaL2’s inaugural event in China will probe the underpinnings, platforms,and best practices of social media in China.Year upon year of double-digit economic growth and urbanization has armed tens ofmillions of Chinese consumers with increasing disposable income and a voraciousappetite for luxury goods. In 2009, China surpassed the United States as the world’ssecond-largest luxury market, trailing only Japan. However, while several prestigebrands have been operating in China for almost 20 years, most are still trying todetermine how to best tap this enormous but complex opportunity.The social media landscape in China is dramatically different from other markets. MEDIA PARTNERS:Industry leaders like Facebook, Google, YouTube, and Twitter are non-factors in themarket, requiring even the most digitally adept brands to fundamentally adapt their socialmedia strategies to local platforms like Baidu, Youku, Sina Weibo, and RenRen.The L2 China Clinic will provide a framework for thinking about the overall opportunityin China for prestige brands. Speakers will explore the key digital players and strategiesthat lead to success, as well as findings from the 2011 L2 Prestige 100®: China IQ. 工学坊 GONGXF.COM

Want to know more about your brand’s China IQ? CONTACT US China: The greatest opportunity for prestige brands in a generation Tomorrow Belongs to Me McKinsey reports that 73 percent of Chinese luxury consumers are under the age of 45, and upwards of 45 percent are under the age Over the next 15 years, the global addressable market of 35, suggesting that the majority of prestige purchasers are digitally for luxury goods is expected to grow by 600 million native.3 In the U.S., the average female prestige consumer registers consumers, provoking growth forecasts of 2.2 times GDP.1 Much household income of $150,000 and spends $3,000 annually on of this growth is projected to come from one market: China. In handbags. In contrast, the average female prestige consumer in 2000, the Chinese market accounted for a fraction of luxury sales China makes $18,300 (125 RMB) and spends $2,000 annually on globally, however torrid growth means in 2015, China will likely handbags.4 Often these purchases occur after two to three months overtake Japan as the world’s largest luxury market. of research and consideration, most of it done online. Forget What You Know The fastest growing luxury channel(s) in China: The algorithm for success in China is different: Paris and New York Increasing wariness of counterfeit merchandise, coupled with • Less about a 50-something millionaire, more about a 30-some- significantly lower prices abroad, has led to 56 percent of Chinese thing, upper middle class consumer luxury purchases occurring outside of China, suggesting that a • Less about retail in Tier I cities, more about new modes of distri- brand’s digital marketing investments on the mainland drive sales 1. McKinsey & Com- bution in Tier ll and lll cities in Shanghai and Beijing... and New York, Paris, and Hong Kong.5 pany, “Understanding China’s Love for Luxury”, March 2011. • Less about print, more about mobile and emerging platforms 2. Ibid. • Less about “expert” editorial, more about peer reviews, as Digital Is Different 3. Ibid. 60 percent of consumers indicate that the Internet is one of the Not a single global Internet leader is number one in China. The pro-4. Pao Principle, 2010. 5. Bain & Company, primary sources for information on luxury goods (up from 30 liferation of SNS platforms, BBS sites, and other digital channels“China’s Luxury Market Study 2010”, percent in 2008)2 present a challenge to marketers. The environment favors brands November 2010. © L2 2011 L2ThinkTank.com 3

Want to know more about your brand’s China IQ? CONTACT US that adopt nimble, platform-agnostic digital strategies that can be Internet Tidal Wave adapted to multiple channels. A testament to the pace of change, INTERNET USERS IN THE WORLD’S LARGEST LUXURY MARKETS Chinese microblogging platform Sina Weibo was not analyzed in 2010 vs. 2015 our May 2010 study. Launched in August 2009, the platform has (in Millions) added more than 10 million users per month and recently topped 200 million registered accounts. Sina Weibo has become the 800 platform of choice for prestige brands—57 percent of the brands = CHINA 740 in the study now maintain an official presence. = U.S. = JAPAN = U.K. China IQ = Growth = FRANCE Our thesis is that success in the world’s fastest-growing prestige 600 market is inextricably linked to digital competence. This study attempts to quantify the digital competence in China of 100 iconic TOTAL: Internet Users (in Millions) brands (The Prestige 100®). The majority, 91, compete globally, 450 447 while nine are of Chinese/Hong Kong origin. Our aim is to provide TOTAL: a robust tool to diagnose digital strengths and weaknesses and 401 43 400 help managers achieve greater return on incremental investment. 39 50 44 Like the medium we are assessing, our methodology is dynamic, 97 and we hope you will reach out to us with comments that improve 94 our approach, investigation, and findings. You can reach us at scott@stern.nyu.edu and guthrie@gwu.edu. 200 Sincerely, 257 224 SCOTT GALLOWAY DOUG GUTHRIE Founder, L2 Dean, 0 The George Washington Clinical Professor of Marketing, University School of Business 2010 2015 NYU Stern Source: eMarketer, April 2011.© L2 2011 L2ThinkTank.com 4

Want to know more about your brand’s China IQ? CONTACT US Addressable Market for Luxury Brands POPULATION WITH INCOME > $30,000 USD (1995-2025 Estimates, in Millions) 1,500 = REST OF THE WORLD = CHINA = JAPAN +600 million = EUROPE (2010-2025) = U.S. 1,200 900 Population (in Millions) +300 million (1995-2010) 600 300 0 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 199 199 199 199 199 200 200 200 200 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 201 202 202 202 202 202 202 Source: Goldman Sachs, March 2011.© L2 2011 L2ThinkTank.com 5

Want to know more about your brand’s China IQ? CONTACT USMethodology 40% SITE: China Digital IQ Classes Effectiveness of brand site. IQ Range IQ Class FUNCTIONALITY & CONTENT: 70% BRAND TRANSLATION: 30% • Site Technology: Load Time, • Chinese Social Media • Site Aesthetics 140+ GENIUS Hosting Location Integration • Messaging & Imagery Digital competence is a point • Site Navigation & Search • Customer Service • Chinese Relevance & of differentiation. Site content is • Product & Promotions • Account Services Translation innovative and optimized for the • E-Commerce • Content Localization Chinese consumer. Chinese social media efforts complement broader digital strategy. Brand experience 30% SOCIAL MEDIA: seamlessly extends across mobile Brand presence, community size, content, & engagement on major Chinese social media platforms. platforms. MICROBLOGGING: SNS: ONLINE VIDEO: • Sina Weibo: Presence, Programs, • Renren: Presence, Programs, • Youku: Views, Number of 110-139 GIFTED Community Size, Interaction Rate Community Size, Interaction Rate Uploads, Subscriber Growth, Brands are experimenting and Viral Videos innovating across site, mobile, and • Tencent Weibo: Presence, • Kaixin: Presence, Programs, social platforms. Digital presence Programs, Community Size, Community Size, Interaction Rate • Tudou: Views, Number of is consistent with brand image and Interaction Rate • Douban: Presence, Programs, Uploads, Subscriber Growth, larger marketing efforts. Community Size Viral Videos 90-109 AVERAGE DIGITAL MARKETING: Digital presence is functional yet 15% Marketing efforts, off-site brand presence, and visibility on search engines. predictable. Efforts are often siloed across platforms. • Search: China Site Traffic, Web Authority, SEO and SEM on Baidu and Google • Advertising & Innovation: Recent Brand Initiatives, BBS, Taobao and Jiepang Activity 70-89 CHALLENGED • Brand Buzz: Mentions and Video Uploads on Chinese Social Platforms Limited or inconsistent adoption of • Email: Frequency, Language, Content, Chinese Social Media Integration, Promotions mobile and social media platforms. Site lacks inspiration, does not MOBILE: translate to the Chinese consumer. 15% Compatibility and marketing on smartphones and other mobile devices. • Mobile Site: Compatibility, Functionality, Transaction Capability < 70 FEEBLE • iOS Applications (iPhone & iPad): Availability, Popularity, Functionality Investment does not match opportunity. • Android & Ovi Applications: Availability, Popularity, Functionality © L2 2011 L2ThinkTank.com 6

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description Innovation in technology: maintains presence on six different social media sites in addition to its 1 AUDI Automobiles 170 Genius own OurAudi.com Luxury’s digital darling doesn’t disappoint. From Jiepang VIP guest passes for Beijing grand 2 BURBERRY Fashion 157 Genius opening to Christopher Bailey soundtrack on Youku, Burberry claims the fashion crown From “beasts to joy”—sheer social pleasure; great translation of a global campaigns for 3 BMW Automobiles 155 Genius the Chinese market 4 VOLVO Automobiles 133 Gifted C70 Sina Weibo challenges consumers to design the plot for the next Volvo commercial Local e-commerce launch caters to consumers with samples and gift-with-purchase offer; Sina 5 BENEFIT COSMETICS Beauty 127 Gifted Weibo and Kaixin “Benefit Beach Honey” contests delight 6 CADILLAC Automobiles 124 Gifted Recently released Route 66 short film starring Karen Mok across site and social media 6 ESTÉE LAUDER Beauty 124 Gifted EL-Lady BBS includes videos, games, Q&A, and link to purchase 8 LAND ROVER Automobiles 122 Gifted “The Evoque Effect” sets the standard for multichannel digital campaigns SLK Mask Party contest provides winners tickets to China Fashion Week and site visitors an 8 MERCEDES-BENZ Automobiles 122 Gifted opportunity to create their own virtual mask Innovative comparison tool and stunning microsites for each model are the engine of their 10 PORSCHE Automobiles 112 Gifted online presence 11 FERRARI Automobiles 111 Gifted Sina Weibo fans earn tickets and tees for Ferrari Racing Days in Shanghai Online owners club provides access to forums, downloads and events; however could be updated 12 INFINITI Automobiles 110 Gifted more frequently 13 HERBORIST Beauty 108 Average Launched sampling program through popular fashion BBS communities Only Lady and Metroer © L2 2011 L2ThinkTank.com 7

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 13 SWAROVSKI Watches & Jewelry 108 Average Dedicated channel on PPTV sparkles with live event feeds 15 CARTIER Watches & Jewelry 107 Average Love microsite is shareable across Kaixin, Douban, and Sina Weibo 15 GUCCI Fashion 107 Average Gucci Style iPhone app transcends language barrier 15 LANCÔME Beauty 107 Average Rose Beauty continues to score points, but Sina Weibo hasn’t been updated since October 2010 18 LOUIS VUITTON Fashion 104 Average Voyages microsite and Jiepang tie-in promote exhibit at National Museum of China 19 CHANEL Fashion 103 Average Chinese iPhone app provides access to Chanel News content and fashion videos 20 KIEHL’S Beauty 102 Average Dedicated Sina blog profiles local influencers 21 CHRISTIAN DIOR Fashion 101 Average Lady Blue Shanghai film disappoints with only 146 views on official Tudou page 22 CLINIQUE Beauty 100 Average More than 145,000 users participated in Renren “Knock Out the Old Me” campaign in early 2011 22 DOLCE & GABBANA Fashion 100 Average Live-streamed summer men’s fashion show exclusively through iOS and Android platforms More that 180,000 user wishes have been submitted through the “Start Early” microsite 24 SK-II Beauty 98 Average for a chance to win gifts and samples Resting on the laurels of China legacy; dedicated Youku page and well-configured watch finder 25 OMEGA Watches & Jewelry 96 Average aren’t enough to keep time 26 M•A•C Beauty 95 Average Dynamic product recommendation engine transcends borders © L2 2011 L2ThinkTank.com 8

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 27 HENNESSY Champagne & Spirits 94 Average China-only Hxindian microsite hosts online contests, product videos and a members-only zone 28 JOHNNIE WALKER Champagne & Spirits 91 Average Yulu campaign features 12 mini films highlighting local personalities 28 LEXUS Automobiles 91 Average Generic site fails in pursuit of perfection 30 COACH Fashion 90 Average Mobile optimized site features the men’s collection DIANE 30 Fashion 90 Average Diane’s personal Sina Weibo account gets a boost from media mogul Hong Huang VON FURSTENBERG 30 LONGINES Watches & Jewelry 90 Average China-specific iPhone app cross-promoted on site 33 ACURA Automobiles 89 Challenged Creative promotions on Sina Weibo drive to the dealership 33 CHOW TAI FOOK Watches & Jewelry 89 Challenged Hong Kong jeweler showcases dedicated Taobao shop Live-streamed a press conference announcing its new models, but needs to push the accelerator 33 JAGUAR Automobiles 89 Challenged on its digital efforts 1,570 participants on the Rouge Aomatique microsite indicates the brand is puckering up to the 36 GUERLAIN Beauty 88 Challenged Chinese market Teaming with Formula 1 racer/blogger Han Han to create limited edition watch and accompanying 37 HUBLOT Watches & Jewelry 87 Challenged Sina Weibo page 38 CLARINS Beauty 86 Challenged “Looking for V-Girl Contest” in search of perfect face shape received more than 7,000 entrants Dedicated Youku page for eight episode miniseries directed by Gil Wadsworth received more than 39 YUE-SAI Beauty 83 Challenged 1.5 million views © L2 2011 L2ThinkTank.com 9

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description Chloé’s short-lived Chinese-language blog live-streamed runway shows and garnered more than 40 CHLOÉ Fashion 82 Challenged 40,000 visitors Almost 9,000 votes were cast in the search to find the best beauty expert on the brand’s 13,660 40 SHISEIDO Beauty 82 Challenged member BBS 42 MASERATI Automobiles 80 Challenged Strong configurator, but available only in English Must spend time on more than a mobile-optimized China site and a Youku channel if it wants 42 ROLEX Watches & Jewelry 80 Challenged to raise its profile E-commerce enabled iPhone app features city guides and taxi cards for Western visitors, 42 SHANGHAI TANG Fashion 80 Challenged but brand is lost on Baidu to Chinese consumers Translated microsite allows Chinese consumers to celebrate the 80th anniversary of the Reverso 45 JAEGER-LECOULTRE Watches & Jewelry 79 Challenged collection 45 RAYMOND WEIL Watches & Jewelry 79 Challenged Global video contest boasts dedicated pages on Douban and eYeka Single post on Sina Weibo account suggests “What Makes Love True” site will be launched 45 TIFFANY & CO. Watches & Jewelry 79 Challenged in September 48 BULGARI Watches & Jewelry 78 Challenged Exhibition at National Museum of China has no digital footprint IWC 48 Watches & Jewelry 78 Challenged Interactive IWC forum is mobile-optimized but available only in English SCHAFFHAUSEN Sina Weibo following more than 400,000 strong; decicated Sina Weibo account provides 50 IDO Watches & Jewelry 77 Challenged customer service 51 CALVIN KLEIN Fashion 76 Challenged CK One virtual box extends life of event 51 L’OCCITANE Beauty 76 Challenged One of three in Index with e-commerce enabled mobile app © L2 2011 L2ThinkTank.com 10

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 53 AUDEMARS PIGUET Watches & Jewelry 75 Challenged Royal Oak Offshore collection microsite is buttressed by Chinese translation 54 RÉMY MARTIN Champagne & Spirits 74 Challenged “Real Man” video contest via Youku encourages user-generated video from macho entrants 55 PANDORA Watches & Jewelry 73 Challenged Limited Chinese site content leaves a lot still trapped in the box 56 LANEIGE Beauty 72 Challenged Café Laneige online community enhances interactivity Faulty store locator is limited to Hong Kong site, but only brand to support Taobao plug-in 56 LUK FOOK Watches & Jewelry 72 Challenged on homepage 56 PIAGET Watches & Jewelry 72 Challenged Official Sina blog has registered only 5,000 visits 59 ARMANI Fashion 71 Challenged E-commerce pioneer with Emporio Armani launch, but fails to innovate elsewhere 59 BOTTEGA VENETA Fashion 71 Challenged Site is slow to load and lean on Chinese customization 59 FENDI Fashion 71 Challenged Placing in-video ads through Youku, but not placing enough attention on its overall strategy 62 LAMBORGHINI Automobiles 70 Challenged Brand-approved Taobao shop showcases eight different models but has yet to post a sale 62 ROLLS-ROYCE Automobiles 70 Challenged It’s hard to “contact us” when info is only for North America 64 HUGO BOSS Fashion 66 Feeble Online footprint pales in comparison to monstrous brick-and-mortar presence 64 MONTBLANC Watches & Jewelry 66 Feeble Huge SNS buzz, but not much else © L2 2011 L2ThinkTank.com 11

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 64 TAG HEUER Watches & Jewelry 66 Feeble Tick tock—patience runs out waiting for site to load 64 VERSACE Fashion 66 Feeble Versace Home is e-commerce enabled; Versace Fashion, not so much 68 ALFRED DUNHILL Fashion 65 Feeble Day 8 blog available in Chinese, but only shareable via Facebook and Twitter 68 BALENCIAGA Fashion 65 Feeble July site launch fails to incorporate Chinese language version 70 BOBBI BROWN Beauty 64 Feeble Users can tune into tips from experts on Sina Weibo, but site doesn’t support e-commerce 71 CHOPARD Watches & Jewelry 63 Feeble Chopard Diary boasts strong content; too bad it isn’t in Chinese 71 GIVENCHY Fashion 63 Feeble Sina Weibo alone is not going to move the needle 73 MIU MIU Fashion 62 Feeble Falling into fashion with global site redesign; noticeably absent from SNS 73 PORTS 1961 Fashion 62 Feeble First mover is one of few in Fashion to sell online 75 BALLANTINE’S Champagne & Spirits 61 Feeble Chinese golf fans can follow the action at the Ballantine’s Championship via online and mobile 75 WULIANGYE Champagne & Spirits 61 Feeble More than 9,000 members on site BBS 77 DE BEERS Watches & Jewelry 60 Feeble April site relaunch included simplified Chinese translation 77 FERRAGAMO Fashion 60 Feeble Not much other than a Sina Weibo account with 30,000 fans and not a single post © L2 2011 L2ThinkTank.com 12

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 77 HERMÉS Fashion 60 Feeble Offline innovation doesn’t translate online 80 MOUTAI (MAOTAI) Champagne & Spirits 58 Feeble Eagerly awaiting impending BBS launch and reactivation of online e-commerce 80 PRADA Fashion 58 Feeble Luxury’s digital laggard; Sino efforts arent any different 82 VALENTINO Fashion 56 Feeble Global e-commerce site ships to China, but consumers must be comfortable shopping in English 83 ASTON MARTIN Automobiles 55 Feeble One of two brands with mobile app for Nokia’s Ovi platform 83 CHIVAS REGAL Champagne & Spirits 55 Feeble Supporting site info for “Craft of Chivalry” concert tour is first step Men’s runway at fashion week featured projections of Chinese landscapes; but with limited 83 ERMENEGILDO ZEGNA Fashion 55 Feeble visibility on Baidu, did content even reach Chinese consumers? 86 MARC JACOBS Fashion 54 Feeble Should read Louis Vuitton’s manual on courting China Company website has good localized Chinese content but limited interactivity beyond 87 MOVADO Watches & Jewelry 52 Feeble flash navigation 87 RALPH LAUREN Fashion 52 Feeble U.S. digital fluency has yet to translate 87 VAN CLEEF & ARPELS Watches & Jewelry 52 Feeble Lacks SNS presence and Chinese-specific content on its translated site 90 PATEK PHILIPPE Watches & Jewelry 51 Feeble Strong brand equity; weak digital presence 91 HARRY WINSTON Watches & Jewelry 50 Feeble Rich site heritage content is tempered by poor load times © L2 2011 L2ThinkTank.com 13

Want to know more about your brand’s China IQ? CONTACT USBrandRanking Automobiles Beauty Champagne Fashion Watches & Spirits & Jewelry Rank Brand Category China IQ Class Description 91 MOËT & CHANDON Champagne & Spirits 50 Feeble Recent “Mr. & Miss Moët” Sina Weibo contest suggests IQ is about to pop 93 VACHERON CONSTANTIN Watches & Jewelry 49 Feeble English-only watch configurator and absent concierge need resetting 94 BELVEDERE VODKA Champagne & Spirits 46 Feeble Facebook focus doesn’t help in the East 95 MACALLAN Champagne & Spirits 44 Feeble Interactive elements not translated—blogs, artistry, and photo contest in English only 96 YVES SAINT LAURENT Fashion 43 Feeble Despite the iconic brand’s worst efforts, it still manages to gain some buzz on Chinese social media 97 DAVID YURMAN Watches & Jewelry 42 Feeble Compared to the global site, the Chinese site has no luster 98 BACCARAT Watches & Jewelry 41 Feeble Struggling to shine online 99 DOM PÉRIGNON Champagne & Spirits 26 Feeble China is in love with the brand; its digital presence not so much 100 VEUVE CLICQUOT Champagne & Spirits 24 Feeble Flat © L2 2011 L2ThinkTank.com 14

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT US China IQ DistributionKey % OF BRANDS PER CHINA DIGITAL IQ CLASS:Findings GENIUS CHINA IQ Audi Burberry In the Company of Genius Volvo >140 BMW 3% Benefit Cosmetics Two of 2010’s five Genius brands, Audi and BMW, retained their status, the other three, Cadillac GIFTED Herborist SK-II Estée Lauder CHINA IQ Swarovski Omega Lancôme, Estée Lauder, and Clinique, Land Rover 9% Mercedes-Benz 110-139 Cartier M•A•C remained solidly in the top quartile, buttress- Porsche Gucci Hennessy ing the notion that constant innovation and Lancôme Johnnie Walker investment are requisites for digital success in Ferrari AVERAGE Louis Vuitton Lexus Infiniti Chanel Coach this dynamic market. New to the Genius and Kiehl’s Diane von Gifted ranks, Burberry and Benefit Cosmet- CHINA IQ 20% Christian Dior Furstenberg ics, were among 2011’s biggest winners, both 90-109 Longines Clinique launching e-commerce in the past 12 months Dolce & Acura IWC Gabbana and making significant investments in Chinese Chow Tai Fook Scaffhausen IDo social platforms. Jaguar Calvin Klein CHALLENGED Guerlain Hugo Boss Ermenegildo Hublot L’Occitane Zegna More than two-thirds of the Prestige 100® Montblanc Clarins Audemars Marc Jacobs posted a Challenged or Feeble IQ, suggesting Piguet TAG Heuer Yue-Sai CHINA IQ Versace Movado digital efforts in China remain nascent across Rémy Martin Chloé Pandora 70-89 31% Alfred Dunhill Ralph Lauren the industry. The biggest differentiator between Shiseido Balenciaga Van Cleef & Laneige Arpels Genius and Gifted brands occurred across Maserati Bobbi Brown Luk Fook Patek Philippe Rolex Chopard the Site dimension. Brands that score well Piaget Harry Winston Shanghai Tang Givenchy Armani have developed transaction-oriented sites with Jaeger- Moët & Bottega Veneta Miu Miu Chandon superior customer service, Chinese-specific LeCoultre Fendi FEEBLE Ports 1961 Vacheron Raymond Weil technology integration, tailored content, and Lamborghini Ballantine’s Constantin Tiffany & Co. Wuliangye Belvedere Vodka consistent translation. Bulgari Rolls-Royce De Beers Macallan Ferragamo Yves Saint CHINA IQ Laurent 37% <70 Hermés David Yurman Moutai (Maotai) Baccarat Prada Dom Pérignon Valentino Veuve Clicquot Aston Martin Chivas Regal © L2 2011 L2ThinkTank.com 15

Want to know more about your brand’s China IQ? CONTACT USTop 20 2010 2011Brands Rank Brand IQ Class IQ Score Rank Brand IQ Class IQ ScoreChina Digital IQScores #1 Lancôme Genius 167 #1 Audi Genius 170 #2 BMW Genius 157 #2 Burberry Genius 157 = BRANDS THAT RANKED IN TIE THE SAME IQ CLASS IN #2 Estée Lauder Genius 157 #3 BMW Genius 155 2010 & 2011 = BRANDS THAT RANKED #4 Audi Genius 150 #4 Volvo Gifted 133 IN THE TOP 20 IN BOTH 2010 & 2011 BUT #5 Clinique Genius 146 #5 Benefit Cosmetics Gifted 127 CHANGED IQ CLASSES #6 Mercedes Benz Gifted 138 #6 Cadillac Gifted 124 TIE #7 Clarins Gifted 137 #6 Estée Lauder Gifted 124 KEY #8 Acura Gifted 130 #8 Land Rover Gifted 122Automobiles TIE #9 Cadillac Gifted 124 #8 Mercedes Benz Gifted 122 Beauty #10 Wullangye Gifted 121 #10 Porsche Gifted 112 Champagne #11 Lexus Gifted 119 #11 Ferrari Gifted 111 & Spirits #12 Infiniti Gifted 118 #12 Infiniti Gifted 110 TIE Fashion #12 Land Rover Gifted 118 #13 Herborist Average 108 TIE #14 Moutai (Maotai) Gifted 115 #13 Swarovski Average 108 Watches & Jewelry #15 Cartier Gifted 114 #15 Cartier Average 107 #16 Porsche Gifted 113 TIE #15 Gucci Average 107 #17 Herborist Gifted 112 #15 Lancôme Average 107 #18 Christian Dior Average 109 #18 Louis Vuitton Average 104 #19 Louis Vuitton Average 108 #19 Chanel Average 103 TIE #19 Tiffany Average 108 #20 Kiehl’s Average 102 #19 Luk Fook Average 108 © L2 2011 L2ThinkTank.com 16

Want to know more about your brand’s China IQ? CONTACT USKeyFindings GENIUS BRANDS: Audi Sina Weibo: A branded Sina event page, linking to the official Weibo account, features the interactive Audi Driving Experience game. The winner receives a PS3 or iPad 2. Fans on the brand Sina Weibo page grew 70 percent to almost 61,000, from July 1 to August 1. The Audi Driving Experience hashtag #奥迪驾控汇# has generated 147,850 posts on Sina Weibo. Audi also maintains separate Weibo pages for many of its models. Renren: Users compete for a chance to win professional racecar training at Shanghai’s Formula 1 race track. © L2 2011 L2ThinkTank.com 17

Want to know more about your brand’s China IQ? CONTACT US Key Findings Mobile: Multiple Chinese- GENIUS BRANDS: Audi language mobile apps provide virtual tours of the Audi A8L and complement a mobile optimized brand site.Tencent Weibo:Presence onTencent Weibo isin its infancy. Kaixin: 181,450 followers. Youku: 275,590 video views. © L2 2011 L2ThinkTank.com 18

Want to know more about your brand’s China IQ? CONTACT US Key Findings GENIUS BRANDS: Burberry Mobile: E-commerce enabled Chinese- language mobile site translates.Site:Chinese-language,e-commerce enabledsite mirrors the brand’sglobal experience,including Chinesesubtitled versions ofthe Burberry Acoustic Digital Innovation at Brick and Mortar Stores:video series. Burberry’s Chinese stores are outfitted with the latest in digital technology, including full-length touch screens and iPads. © L2 2011 L2ThinkTank.com 19

Want to know more about your brand’s China IQ? CONTACT USKeyFindings GENIUS BRANDS: Burberry Youku: Milan Fashion Show live stream on Youku garnered Burberry almost 1.2 million views on its channel. Live Stream: An all-digital, holographic fashion show was streamed on brand site, marking the grand opening of the flagship Beijing store. © L2 2011 L2ThinkTank.com 20

Want to know more about your brand’s China IQ? CONTACT USKeyFindings GENIUS BRANDS: Burberry Kaixin: 61,920 followers.Sina Weibo:182,250 Sina Weibofans are treatedto product videosand pics, magazinecovers, and celebritysightings. Douban: 20,780 members enjoy Acoustic series videos, product photo galleries, and a music channel on Douban.fm. © L2 2011 L2ThinkTank.com 21

Want to know more about your brand’s China IQ? CONTACT US Key Findings GENIUS BRANDS: BMW Mobile Site: Provides BMW model overviews and pricing, but fails to take advan- tage of mobile features. Sina Weibo: 240,300 fans on Sina Weibo experience the Joy of BMW.iPhone App:Exclusive iPhone app for ChineseBMW owners, MyBMWClubincludes click-to-call customerservice, a dealer locator, andoffline meet-ups and events. © L2 2011 L2ThinkTank.com 22

Want to know more about your brand’s China IQ? CONTACT USKeyFindings GENIUS BRANDS: BMW Youku: There are 31,800 unofficial BMW videos on Youku, the most of any brand and testament to brand strength. Tencent Weibo: BMW has the largest brand following on Tencent Weibo, with more than 173,000 fans. Jiepang: Fans checked in on Jiepang to the Bird’s Nest National Stadium in Beijing for a virtual badge and a chance to win tickets to the BMW 3 Series fashion concert. Kaixin: 622,640 followers. © L2 2011 L2ThinkTank.com 23

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT USKey Top Five Biggest Winners & LosersFindings 2010 VS. 2011 IQ PERCENTILE RANK Benefit Vacheron Constantin FEEBLE GIFTED -41% FEEBLE FEEBLE Top-notch e-commerce and program launches on Youku, Tudou, Kaixin, and Sina Weibo propel this LVMH brand to the top of the Beauty rankings. +67% Hour Lounge BBS available in Chinese receives minimal updates. Dolce & Gabbana Van Cleef & Arpels FEEBLE AVERAGE -43% CHALLENGED FEEBLE Fighting on every front; has launched a presence on nine social media sites globally including three in China. Developed mobile app for Ovi platform. +48% Flash and media-heavy site has had few technology or functionality updates. Johnnie Walker Chivas Regal FEEBLE AVERAGE -56% AVERAGE FEEBLE Launched presence on Sina Weibo and Douban; Yulu campaign featuring Jia Zhangke documen- taries is shareable across social media. +44% With the exception of Douban page, few updates since 2010. Burberry Wuliangye CHALLENGED GENIUS -67% GIFTED FEEBLE One of first in Fashion to launch e-commerce. Has extended social media prowess to Chinese platforms. +40% Localized site and high participation BBS forum aren’t enough to hold their ground. Audemars Piguet Moutai (Maotai) FEEBLE CHALLENGED -68% GIFTED FEEBLE Launch of Chinese site launches brand from Feeble to Challenged. +37% E-commerce functionality alone isn’t enough to keep this iconic liquor brand in the Gifted ranks. © L2 2011 L2ThinkTank.com 24

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT USKeyFindings Brand Site Sophistication % OF SITES WITH THE FOLLOWING ATTRIBUTES: Selling Is Knowing (2010 vs. 2011) The biggest change in site investments year on year are tied directly to sales. The number 88% = 2011 of brands that were e-commerce enabled 85% = 2010 doubled, and one-fifth now sell online. In 80% addition, 23 brands have added offline retail locators. E-commerce continues to be directly correlated with strong digital performance 62% across dimensions, and brands selling online registered average IQs 16 points higher than Feature Adoption (%) those without online sales, suggesting that as an organization begins generating revenue online, additional resources are allocated to digital marketing. 33% 32% The Beauty category leads the way with 11 of the 15 brands in the study boasting e-commerce 20% capability. The Fashion category posted the largest year on year change as the percentage of brands selling went from just seven percent 10% to 24 percent. Some Fashion brands, such as Valentino and Diane von Furstenberg, that do 0% not host a Chinese site sell and ship to China via their global site. (continued on next page) Chinese Locate Retail Site Hosted E-Commerce Language Within China in China Enabled © L2 2011 L2ThinkTank.com 25

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT USKeyFindings E-Commerce Payment Methods % OF E-COMMERCE ENABLED SITES EMPLOYING THE FOLLOWING: Selling Is Knowing (August 2011) (continued from previous page) Weak credit card penetration rates and online fraud fears continue to present e-commerce 79% obstacles. E-commerce enabled brands tackle the payment infrastructure in a variety of ways, the most popular being accepting payments 63% from the customer’s bank online. More than 58% 60 percent of brands provide payment option % of E-Commerce Enabled Sites through Alipay, a PayPal equivalent, popularized by B2C e-commerce site Taobao. Nearly 60 percent of brands still accept cash on delivery. 32% 21% 0% OTHER Online Banking Alipay Cash on Credit Card Other Delivery © L2 2011 L2ThinkTank.com 26

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT USKeyFindings Missed Opportunities Fifty-six percent of Chinese luxury purchases Site Features: are made abroad, however, just over half of % OF SITES WITH & WITHOUT THE FOLLOWING TOOLS Chinese language sites provide a U.S. and (August 2011) European store locator, a missed opportunity to provide information to Chinese tourists. % of Sites WITHOUT the following: % of Sites WITH the following: Although, specific international information is European & limited on many sites, so is local customization, 42% U.S. Store 58% and less than a third of sites publish prices in Locator Renminbi. Common 2.0 tools including user reviews and 52% Wish List 48% social media integration, that are ubiquitous on U.S. sites, particularly in commerce-oriented Prices categories such as Auto and Beauty, are only 68% Viewable in 32% RMB incorporated on eight sites. In most cases, when incorporated, social sharing via Chinese SNS and solicitation of user reviews is relegated to User 92% Reviews 8% simple interface BBS forums. Content 92% Shareable on 8% Chinese SNS © L2 2011 L2ThinkTank.com 27

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT US Key Brand Name Search Results Paid Search Tactics Findings POSITION OF BRAND SITES IN ORGANIC SEARCH RESULTS % OF BRANDS PARTICIPATING IN THE FOLLOWING FOR BRANDED SEARCH TERMS Google: (August 2011) (August 2011) A Distant Second = 2010: = 2010: = CHINESE Google continues to lose share in the Chinese 1ST POSITION OUTSIDE TOP 3 = ENGLISH search market since redirecting searches to = 2011: = 2011: Hong Kong in early 2010. The market share of 1ST POSITION OUTSIDE TOP 3 local search engine Baidu stands at 76 percent versus Google’s 19 percent.6 This is a dramatic 71% 67% shift from 2009, when Baidu controlled 58 percent of the market versus Google’s 36 percent. Prestige brands continue to struggle with visibility on the local leader. Only 31 percent of brand sites come up first in organic search 43% 42% results for the Chinese brand name, and 42 percent of sites are not returned in the top 31% three. Organic visibility has actually declined 29% 30% 26% 25% on the platform since our May 2010 report, 22% as the Baidu algorithm increasingly prioritizes 18% organic returns of customers purchasing terms 15% 13% 12% on other Baidu platforms. Brands are doing better on Google, however optimizing for a search engine that has de- 0% creasing relevance is short-sighted. Baidu: Google: Baidu: Baidu: Google: Chinese Brand Chinese Brand Brand Zone Paid Search Paid Search 6. Analysys Name Name International, “Seasonal Survey ofChina Internet SearchMarket in Q2, 2011”, July 2011. © L2 2011 L2ThinkTank.com 28

KEY FINDINGS Want to know more about your brand’s China IQ? CONTACT US Key Findings Six Simple Strategies for Successful SEO in China: Pay to Play 1 Paid search accounts for 31 percent of total online ad spend in China and search revenues Get Your License: were up 67 percent year-over-year for 2010. 7 A legal ICP license is crucial. Without a certificate, site may be omitted from search results. A quarter of the brands are engaging in paid search on Baidu. Many are using paid search 2 to bypass Baidu’s algorithm and ensure visibil- Host Your Site in China: ity of their Chinese site. Despite being a proven Baidu’s crawler is “impatient” and will skip sites experiencing even minor latency issues eliminating source of traffic, less than a quarter of the the chance to appear in organic search results. brands are purchasing Baidu brandzones. 3 Without a presence on Baidu, brands are Buy a Baidu Brandzone: virtually invisible in China. Baidu’s algorithm Brandzones drive results. Brands report up to 30 percent of their traffic originating from a brandzone is different than Google’s and requires a and have seen click through rates up to 75 percent. dedicated strategy. In many ways, Baidu is 4 simpler and more accessible than Google, Reap What You Sow: and can be a very powerful tool with mini- Baidu content is prioritized in the search results. Curating brand content on Baidu platforms Tieba mal investment. (à la forums), Baike (à la Wikipedia), and Zhidao (à la Yahoo Questions) is “free” and can improve search results 10-20 percent if done right. 5 Cut the Code: Baidu’s crawler is not very sophisticated and requires aggressive spoon-feeding. Streamlining code and adding alternative text improves visibility. As with Google, flash-heavy sites encumber the crawler.7. iResearch, “2010 Q4 6 Backlinks Boost: Targeted efforts to acquire backlinks can significantly improve ROI and search visibility. China Search EngineMarket” January 2011. © L2 2011 L2ThinkTank.com 29

Want to know more about your brand’s China IQ? CONTACT US Key Findings Empty Inbox Email in China is often overlooked in favor of Email Marketing: SNS or BBS communication. However, more % OF BRANDS WITH & WITHOUT THE FOLLOWING: than 65 percent of Chinese Internet users (August 2011) regularly use email. The level of adoption across the Prestige 100® indicates a missed % of Brands WITHOUT the following: % of Brands WITH the following: opportunity. Although 69 percent of brands provide email opt-in, only 35 percent send Email Chinese language emails and just 17 percent 31% Opt-in 69% send marketing emails after an initial welcome email. Furthermore, 46 percent of Chinese Welcome users access email through a mobile device,8 57% Email 43% but not a single brand optimized emails for a mobile phone. Chinese 65% Language 35% As brands continue to push towards e-commerce, email marketing becomes imperative. Global consumer research suggests that the Marketing Chinese are more receptive when it comes to 83% Email 17% email as a call to action. Seventy-five percent of Chinese Internet users indicate willingness Link to to purchase after receiving an email, versus 51 90% Chinese 10% Social Media percent in the U.S. and 43 percent in the U.K.9 Viewable 100% on Mobile 0%8. “2010 China Internet Market Annual Review Report”, iResearch, April 18, 2011. 9. China Internet Network Information Center (CNNIC) 2011, eDialogue 2010. © L2 2011 L2ThinkTank.com 30

Want to know more about your brand’s China IQ? CONTACT USKey Social Media AdoptionFindings % OF PRESTIGE BRANDS PRESENT ON CHINESE SOCIAL MEDIA PLATFORMS (August 2011) Social Mania Unlike other global markets, where network Average # of Followers effects lead to natural monopolies, the social CHINESE PLATFORMS VS. FACEBOOK = 2011 media ecosystem in China is fragmented. (August 2011) = 2010 588,902* Sixty-six percent of Prestige 100 brands have ® presence on at least one platform, up from less than five percent in April 2010. More than half 57% are present on two or more, typically combining a microblogging platform (Sina Weibo or Ten- cent Weibo) and a video site (Youku or Tudou). 133,275 101,130 Geniuses Audi and Burberry are fighting a war 25,986 50,501 across several fronts and are present on six and five different social platforms, respectively. Tencent Sina Renren Kaixin Facebook Social media fragmentation coupled with the 22% Weibo Weibo fact that most efforts were launched in the past *June 2011 14% 13% 12 months, leads to social media communities 9% 8% that are much smaller than average Facebook 7% 4% and Twitter equivalents. Brand communities 0% 0% 0% 0% 0% 1% on Kaixin and Renren, Facebook substitutes 0% with some of the longest brand legacies, are the largest, averaging slightly more than 133,000 and 101,000 members, respectively. In Sina Youku Tencent Kaixin Douban Tudou Renren contrast, the average brand page in the June Weibo Weibo 2011 L2 Prestige 100®: Facebook IQ registered 3-Month almost 600,000 likes. 490% 16% No Data -29% 5% 12% 6% Traffic Growth Registered Users 200 231 233 116 50 191 124 (in Millions) © L2 2011 L2ThinkTank.com 31

Want to know more about your brand’s China IQ? CONTACT US Top 10 Brands: Largest Sina Weibo Fan Base: Key (August 2011) Findings Wild About Weibo Top 10 Brands: Sina Weibo Follower Growth IDo Traffic to Sina Weibo is up more than 490 #1 Followers: 409,374 (August 2011) percent in the past three months, and prestige brands can’t get enough of the microblogging platform. Local jeweler IDo leads all brands on Ports 1961 #1 314% #2 Cadillac Weibo on the heels of its “Irresistibly Appeal- Followers: 366,179 ing” campaign in which users could spin a daily Luk Fook #2 140% prize wheel on the platform to win diamonds. Mercedes-Benz #3 Followers: 293,882 Auto brands claim five of the top 10 spots, Ferrari #3 136% most integrating Sina Weibo efforts with a wealth of cross-platform digital campaigns. Shiseido #4 135% BMW In July, prestige brand Weibo fan growth aver- #4 Followers: 231,056 aged 41 percent among brands with accounts on the platform, a testament to its growth. Herborist #5 128% Burberry Ports 1961 led all brands in growth on Sina Moët & #5 Followers: 180,964 Weibo, tripling its base over the course of the Chandon #6 108% month by referencing popular celebrities in Diane von Furstenberg KEY Calvin Klein #7 77% #6 Followers: 153,693 its posts. Audi was able to grow its alreadyAutomobiles substantial base by 70 percent to more than Audi 148,500 fans through its “Audi Driving Experi- Audi #8 70% #7 Followers: 148,567 Beauty ence” promotion. Rémy Martin #9 70% #8 VolvoChampagne Followers: 117,103 & Spirits Dolce & Gabbana #10 69% Benefit Fashion #9 Followers: 110,803 0% 100% 200% 300% Louis Vuitton Watches & Jewelry #10 Followers: 107,408 © L2 2011 L2ThinkTank.com 32

Want to know more about your brand’s China IQ? CONTACT US Key Findings Top 15 Brands: Organic Buzz RELATIVE AGGREGATED ORGANIC MENTIONS ON SINA WEIBO & QZONE & NUMBER OF VIDEOS ON YOUKU & TUDOU (August 2011) #1 #2 #3 #4 #5 BMW Audi Chanel Ferrari Lamborghini #6 #7 #8 #9 #10 Tiffany Porsche Gucci Moutai Volvo KEY (Maotai)Automobiles BeautyChampagne & Spirits #11 #12 #13 #14 #15 Fashion Hermès Dior Prada Burberry Shiseido Watches & Jewelry © L2 2011 L2ThinkTank.com 33

Want to know more about your brand’s China IQ? CONTACT US Mobile Adoption Rates Key (2010 vs. 2011) 60% Findings Mobile Incompatible Of the 485 million Internet users in China, 25% 318 million access the web through their mobile = 2011 phone.10 Many Internet users have gone from = 2010 16% no Internet directly to mobile Internet. While prestige brand programming on mobile plat- 2% forms has increased dramatically from 2010, 0% it has not kept pace with the opportunity. Mobile Site Mobile App Slightly more than half of brands have apps available in the Chinese iTunes store, but two thirds of these apps do not provide a Chinese Mobile Adoption Rates Across Platforms language option, and only three—Lancôme, % OF BRANDS ON THE FOLLOWING MOBILE PLATFORMS: L’Occitane, and Shanghai Tang—are commerce (August 2011) enabled. Furthermore, only two brands, Aston TOTAL: 51% = AVAILABLE IN CHINESE Martin and Dolce & Gabbana, have created apps for Nokia’s Ovi platform. TOTAL: 31% TOTAL: 25% 19% 14% TOTAL: 10% 6% TOTAL: 3% 2% 0% iPhone iPad Mobile Site Android Ovi iOS Market Share 12% 31% 39% 10. China InternetNetwork Information YOY Change 1% 116% -30% Center (CNNIC), July 2011. © L2 2011 L2ThinkTank.com 34

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius LAND ROVER: The Evoque Effect Land Rover’s 360 digital campaign, “The Evoque Effect,” highlights an ability to expand and customize the user experience across a variety of digital and social platforms. At the core of the campaign is a half-animated, eight- episode, mini action movie series, City of Aurora. Android, iPhone, and iPad apps provide additional screens for viewing the episodes. “The Evoque Effect” microsite On Sina Weibo users can view the mini movies and answer a series of questions for a chance to win a Macbook Air or create a custom poster Sina Weibo page used to drive traffic to custom Sina event pages © L2 2011 L2ThinkTank.com 35

Want to know more about your brand’s China IQ? CONTACT US A virtual drive-in movieFlash theater on Tudou allows users to view the movies, leave comments, createof Genius their own version of the movie using an online editing tool, and paint their own comic cells withThe Evoque Effect continued an online toolOn Douban users write theirown script or use an onlinetool to paint the city for achance to win prizes rangingfrom model cars to notebooksand pens On Renren users answer quizzes around the movie’s plot and characters for a chance to win prizes. The page also included links to other social media properties and a behind-the-scenes photo gallery © L2 2011 L2ThinkTank.com 36

Want to know more about your brand’s China IQ? CONTACT US Flash of Genius Lambos on Taobao Taobao controls 75 percent of all e-commerce transactions in China, with 48,000 items purchased every minute. Among the 800 million products sold on Taobao, is a $1 million Lamborghini.11 The online Taobao store, built by a Shanghai dealer and approved by the brand, is the only Chinese showcase for Lamborghini. The store highlights the brand history that would otherwise be lost in translation on the English language site. Detailed product pages for eight different models feature stunning images and performance specs in Chinese. Customers can leverage Wangwang, Taobao’s online chat functionality, to receive more information about specific models and after-sales customer service. The site is more buzz than business, however. Although it attracted more than 8,000 orders, none of them resulted in an actual purchase.12 In addition to e-commerce enabled sites, Chinese brands Chow Tai Fook, Herborist, Luk Fook, and Wuliangye also maintain Taobao stores. Lamborghini is the 11. “E-Commerce only Western brand in the study with in China: Patriarchic Benevolence”, Tom a Taobao presence. Doctoroff, HuffingtonPost, August 14, 2011. Lamborghini’s Taobao sales stunt succeeds in 12. “Selling Lambo- rghini’s on Taobao. gaining buzz and raising com”, Red Luxury, the brand profile May 26, 2011. © L2 2011 L2ThinkTank.com 37

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius Counteracting Counterfeiting Counterfeiting is a challenge for both brands and consumers. Chinese spirit brand Wuliangye has digitally armed its customers with the means to authenticate its product. Through its website, customers can enter the RFID code from the box or the product code from the bottle. Consumers can also text the RFID code to a designated phone number to receive authentication and to report manufacturers and resellers of counterfeit products online. In-store, Wuliangye provides RFID kiosks at authorized retailers. Wuliangye allows consumers to authenticate their product online © L2 2011 L2ThinkTank.com 38

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius Gucci Style The recently updated Gucci Style app available for iPhone and iPad, although only partially translated into Chinese, and lacking e-commerce capability and Chinese social networking integration, has garnered more than 700 ratings—the most of any brand in the The Gucci Style app available in Chinese has study—and is currently among the 60 most the most ratings of any in the study popular lifestyle apps in the Chinese iTunes store. Users can watch runway and travel videos, add products to wish lists, share products via email, and locate the closest store. © L2 2011 L2ThinkTank.com 39

Want to know more about your brand’s China IQ? CONTACT US DVF’s Sina Weibo brand pageFlashof Genius Personal Appeal Looking to extend their brands, Diane von Furstenberg and Bobbi Brown have joined Diane Von Furstenberg’s forces with Tom Cruise, Ricky Martin, and personal Sina Weibo page Radiohead in signing up for a Sina Weibo account. With the endorsement of Hong Huang, the editor of fashion magazine iLook, Diane’s account has garnered almost 154,000 153,693 fans, more than 34 times the number of fans 4,901 of the official DVF brand Sina Weibo account. Diane von Furstenberg’s weibos are in English Followers on Sina Weibo as of August 2011 and directly lifted from her Twitter account. Her account also reposts DVF brand weibos 107,397 in Chinese. Similarly, most of Bobbi Brown’s weibos are 29,142 curated from her Twitter account and in English. As she does on Twitter, Bobbi Brown accepts questions from her Chinese fans in a monthly series called “#Askbobbi.” Her answers are translated and posted in Chinese. The Sina Weibo accounts of the Chinese make-up artist team are highlighted. She also reposts from the brand account, which has only 29,000 fans compared with her 107,400 fans. Bobbi Brown’s Bobbi Brown’s personal Sina Sina Weibo Weibo page brand page © L2 2011 L2ThinkTank.com 40

Want to know more about your brand’s China IQ? CONTACT US Flash of Genius IDo Does Sina Weibo IDo launched a Sina Weibo effort estimated to have cost the brand millions of Yuan. The “Irresistibly Appealing” campaign generated more than 80,000 posts and 100,000 new Sina Weibo fans.13 During the study period, IDo’s fanbase grew 28 percent to more than 409,000, the largest community on Sina Weibo in the IDo’s “Irresistibly study. Each day fans were able to spin a virtual Appealing” interactive campaign on Sina Weibo prize wheel on its Weibo page for a chance to win a diamond ring or pendant. Fans were also encouraged to post their dreams or submit via mobile, for the chance to have it fulfilled. Weibo was also used to drive online traffic offline. Instructions were posted on Sina Weibo for fans to obtain a free bracelet at an IDo store. These bracelets contained a code that was to be texted to a designated phone number for a chance to win a diamond. Within three days, more than 10,000 bracelets were given away and the company had to order 100,000 more to meet demand.1413. “Weibo Marketing Is ‘Irresistibly Appealing’ to Luxury Brands”, Central Fans show off theirPeople’s Broadcasting bracelets on Sina Weibo Station of China, August 22, 2011. 14. Ibid. © L2 2011 L2ThinkTank.com 41

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius Badges Before Bags Luxury brands have taken to Chinese Foursquare clone Jiepang to raise brand awareness and drive online/offline engagement. Virtual badges on the phone replace shopping bags as a digital symbol of exclusivity and being in the know. Date Brand Badge Jiepang Followers Promotion Sina Weibo fans that checked into one of three Beijing stores received a virtual badge and were April 2011 888 entered into a drawing for the chance to win a VIP pass to the grand opening party for its Beijing Burberry Sparkle Roll Plaza store. Users who checked in at any Chinese Swarovski 126 boutique received a virtual badge. Swarovski April 2011 provided location-based tips and activities to celebrate Spring. Users who checked-in at the Louis Vuitton Art 676 Cosmic Voyage exhibit at the National Museum ofJune 2011 China and shared it via any of the Chinese social networks earned an LV virtual badge. Guerlain and BMW have also experimented with event specific Jiepang promotions, but do not maintain a permanent presence on the platform. © L2 2011 L2ThinkTank.com 42

Want to know more about your brand’s China IQ? CONTACT USFlash “Joy Is BMW”of Genius microsite Users share their Joy Is BMW stories to collect votes in order to The “ Joy Is BMW” microsite features content on win a BMW bicycle the next generation of BMW hybrid technology and a series of videos in which everyday people describe the impact that BMW has had on their life. The site’s contest, launched simultaneously on Sina Weibo and Tencent Weibo, allows users to share their own story in 1,000 words or less. The author of the tale with the most votes per platform will win a BMW bicycle, and the best overall will get to appear in a BMW Joy video. The most popular story to date on the microsite has received almost 315,000 votes. Users submit their stories or place their votes through branded Sina and Tencent event pages. An app analyzes the content of their Weibo page to detect their joy level. If they share their results with 3 friends they receive a BMW virtual badge. BMW’s Tencent Weibo following grew 736 percent to more than 135,000. The hashtag #BMW之悦的故事# (#JoyOfBMWStories) generated 16,766 posts and 3,671,131 mentions during the month “Joy Is BMW” Sina event page of July. The hashtag #BMW在创造什么# (#WhatIsBMWCreating) generated 23,370 posts. BMW’s Tencent Weibo page © L2 2011 L2ThinkTank.com 43

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius ESTÉE LAUDER: Applauded on Social Media In July, Estée Lauder grew its Renren following more than 50 percent (the most of any brand) Estée Lauder’s to more than 200,000. Its Renren page featured interactive game an interactive game in which users were chal- on Renren lenged to collect coins. Additional points could be gained by sharing the game with friends. The top scorers received a tube of the new Idealist eye cream. More than 76,000 users Estée Lauder’s participated in the game, which linked to Estée Renren brand page Lauder’s e-commerce site. Estée Lauder’s BBS, EL-Lady, combines editorial content, interactive games, videos, promotions, product recommendations from featured community members, and online shopping. All BBS content is shareable to Kaixin, and select content can be shared on other SNS platforms. BBS members are encouraged to answer each other’s makeup questions and give tips. Interactive skin care surveys and online tests provide customized product recommendations. Estée Lauder has amassed more than 625,000 followers on Kaixin, a social platform whose traffic is down 28 percent in the last three Estée Lauder’s Estée Lauder’s Kaixin page months. The challenge for Estée Lauder will BBS, EL-Lady be to migrate these fans to new platforms or to its own branded BBS, EL-Lady. Thus far, the brand’s Sina Weibo account has slightly more than 45,500 fans. © L2 2011 L2ThinkTank.com 44

Want to know more about your brand’s China IQ? CONTACT USFlash Sina Weibo account promotes the contests andof Genius encourages voting Made for China Despite the Chinese’ love of foreign brands, a number of prestige brands have launched sub-brands, product lines, or special editions exclusively in China in effort to appeal to the local consumer, increase brand awareness, and build goodwill with the Chinese government. With its China-only brand, Classivm, Hennessy is leveraging digital to help it reach the young, urban Chinese consumer through a dedicated microsite and Sina Weibo account. The membership-based microsite, infused with street culture, promotes sponsored events, provides drink recipes, and hosts a series of contests. In the latest contest, users create a profile, upload their picture, assume one of four hip hop personas—rapper, breakdancer, beat The microsite is sharable on boxer or graffiti artist—to create a custom Kaixin, Baidu video featuring their animated avatar or submit Space, Renren, Qzone, and Sina a new idea with an accompanying photo. Site Weibo members vote on the submissions with the top five vote getters for each contest receiving a $250 watch. Voters are also eligible for a prize. As of August 31, almost 900 people participated in the video contest, and the top five contes- Site members tants had a combined 596,450 votes. Two create a profile and hundred-fifty people participated in the “New animated avatars that Idea” contest, with the top five contestants others can vote on earning a total of 93,210 votes. © L2 2011 L2ThinkTank.com 45

Want to know more about your brand’s China IQ? CONTACT USFlashof Genius Beijing Hologram Fashion Show Live Stream Beijing Backdrop Luxury brands have harnessed online video to introduce themselves to the Chinese market and announce to the world its importance. Fall/Winter Collection Beijing Event Live Stream on PPTV Fall 2011 Ad Campaign–Shanghai Lady Blue Shanghai © L2 2011 L2ThinkTank.com 46

Want to know more about your brand’s China IQ? CONTACT USBiographies SCOTT GALLOWAY in-depth look at how China’s government-driven form of media clients, including The New York Times Company, Clinical Professor of Marketing, NYU Stern capitalism has successfully overcome traditional theories of NBC Universal, Disney/ABC, Maxim magazine, and Zagat. Founder, L2 development and helped China become the economic and While at L2 she has benchmarked the digital competence Scott is the founder of L2, a think tank for digital innova- political juggernaut it is today. In addition to these major of brands spanning the Specialty Retail, Public Sector, tion, and a Clinical Professor of Marketing at the NYU Stern works, Doug has published more than 60 articles on China Pharma, Wine & Spirits, Travel, and Financial Services School of Business where he teaches brand strategy and and has been an invited speaker on a number of occasions. industries. Danielle has a B.S. in Systems Engineering from digital marketing. Scott is also the founder of Firebrand the University of Virginia and an M.B.A. from NYU Stern. Doug is currently the Dean of the George Washington Partners, an operational activist firm that has invested more School of Business and has taught at NYU Stern, Harvard CHRISTINE PATTON than $1 billion in U.S. consumer and media companies. In Business School, INSEAD, and the Graduate Schools of Creative Director, L2 1997, he founded Red Envelope, an Internet-based con- Business at Stanford University, Columbia University, and sumer gift retailer (2007 revenues: $100 million). In 1992, Christine is a brand and marketing consultant with more Emory University. He received his B.A. in Chinese literature Scott founded Prophet, a brand strategy consultancy that than 15 years of experience creating brand identities and from the University of Chicago and a Ph.D. in organizational employs more than 120 professionals in the United States, marketing communications for aspirational and luxury sociology from the UC Berkeley. Europe, and Asia. Scott was elected to the World Economic brands. As creative director of L2, she leads the transla- Forum’s “Global Leaders of Tomorrow,” which recognizes tion of the L2 brand across all touchpoints, with a particular MAUREEN MULLEN 100 individuals under age 40 “whose accomplishments focus on the visual packaging of L2’s research. She began L2 have had impact on a global level.” her career at Cosí, where she developed the brand and Maureen leads L2’s Research and Advisory Practice where oversaw its evolution from concept through growth to 100 Scott has served on the boards of directors of Eddie Bauer, she helped developed the Digital IQ Index®. She has bench- restaurants. Since then she has provided creative direction The New York Times Company, Gateway Computer, eco- marked digital marketing, e-commerce, and social media for a wide array of clients, including the launch of Kidville America, and UC Berkeley’s Haas School of Business. He efforts of more than 300 brands across Pharma, Auto, and CosmoGIRL! magazine. Christine received a B.A. in received a B.A. from UCLA and an M.B.A from UC Berkeley. Luxury, Specialty Retail, Beauty, and the Public Sector. Mau- Economics and Journalism from the University of Connecti- reen also has led digital strategy consulting engagements cut and an M.B.A from NYU Stern. DOUG GUTHRIE for a variety of Fortune 1000 clients. Before joining L2, Mau- Dean, GWSB reen was with Triage Consulting Group and led managed JESSICA BRAGA care payment review and payment benchmarking projects L2 Doug has been an expert in Chinese economic reform for for hospitals, including UCLA Medical Center, UCSF, and Jessica, a freelance art director, specializes in identity, more than decade, a trusted adviser of both multinationals HCA. Maureen has a B.A. in Human Biology from Stanford iconography, event graphics, and invitations. She began and local Chinese companies, and a student of China for University and an M.B.A. from NYU Stern. her career in fashion, designing textiles and prints at Elie some 25 years. He is the author of Dragon in a Three-Piece Suit: The Emergence of Capitalism in China and China and Tahari’s design studio in New York City. She then focused R. DANIELLE BAILEY on the Elie Tahari brand aesthetic and consistency in design Globalization: The Social, Economic and Political Transfor- L2 across its many developing disciplines. She went on to mation of Chinese Society, and is co-editor of Social Con- nections in China: Institutions, Culture, and the Changing Danielle began her career at The Home Depot, Inc., where become the art director of a small, prestigious design firm in Nature of Guanxi. He is currently writing China’s Radical she led a variety of internal consulting engagements Chelsea, where she focused on event graphics, digital and Transformation: Economic Reform, Global Integration, and focused on supply chain, merchandising, and in-store pro- print collateral, and brand aesthetics for companies both Political Change in the World’s Largest Nation, which is an cess improvement. She went on to manage the implemen- large and small. Jessica has a B.F.A. in Graphic Design and tation of award-winning mobile initiatives for several large an A.A.S. in Illustration from Rochester Institute of Technology. © L2 2011 L2ThinkTank.com 47

Want to know more about your brand’s China IQ? CONTACT USBiographies SAGE BRENNAN and education. Richard lectures regularly in the subjects of China Luxury Network brand development and multi-disciplinary design at Colum- Sage is a longtime media and Internet analyst in China, bia University, New York University, Tongji University, and the most recently based in Shanghai. He has a broad range of Central Academy of Fine Arts Beijing. marketing, consumer research, market entry, and financial analysis experience, as both an advisor and a manager EMMA LI of entrepreneurial companies in China. Sage is a founder L2 and curator of the Shanghai chapter of MobileMonday and Emma has served as a research analyst in China and has TEDxShanghai. worked on a number of engagements advising foreign companies on their China expansion strategies and market Most recently, Sage was research director of Hong Kong- prospects. For two years, she supported the online publica- based hedge fund Pacific Sun Investment Management tion Jing Daily, conducting research and assessing trends and chief representative of the firm’s China operations, in the Chinese luxury and contemporary art markets. Born based in Shanghai. Before that, he was general manager and raised in China, Emma speaks Mandarin and Canton- of Shanghai-based Pacific Epoch, a boutique telecom and ese. She received her Bachelor of Commerce degree from technology research firm later acquired by Pacific Crest the University of Windsor and has a M.A. in Cross-Cultural Securities. He contributed the weekly “This Week in China” Communication from New York University. column to Dow Jones’ MarketWatch for two years, and re- mains a frequent commentator on China-related media and technology issues in print media and on programs such as XI CHEN CNBC’s Asia Squawk Box. L2 Born and raised in Beijing and a resident of New York for A native of Boston, Sage has both an undergraduate de- more than two years, Xi serves as a bridge between Ameri- gree in International Studies and an M.B.A. from the Univer- can and Chinese culture. Her experience running a store on sity of North Carolina at Chapel Hill and has been speaking Taobao provides her with a unique perspective on fashion and studying Mandarin since he first lived in Beijing in 1987. and commerce in China. Xi previously worked in personal banking for RBC, providing customized and localized bank- RICHARD HSU ing services to Chinese clients. Xi has a B.B.A. from Capital Brand Translation Expert University of Economics and Business in Beijing and an H+ Branding M.A.in International Education from New York University. Born in Shanghai, Richard studied architecture in the U.S., developing a career in retail, advertising, branding, Additional thanks to Yvonne Du, Winnie Rui, and and design across the U.S., Europe, Japan, and Asia. In Flora Lan, who served as additional data collection 2003, Richard returned to China to lead the opening of resources and advised on methodology. Wieden+Kennedy’s China office in Shanghai. In 2006, he opened the brand consultancy firm [h+] in Shanghai, which focuses on China and China-related brands, talents, © L2 2011 L2ThinkTank.com 48

L2 is a think tank for digital innovation. UPCOMING 2011 EVENTSWe are a membership organization that brings together thought leadership 10. 14.11 L2 Clinic The Social Graph: China SHANGHAIfrom academia and industry to drive digital marketing innovation. L2’s inaugural event in China will probe the underpinnings, platforms, and best practices of social media in China. This intensive executive session will enhance participants’ fluency inRES E A R C H brand-driven social media efforts on Chinese platforms.Digital IQ Index®: The definitive benchmark for online competence, Digital IQ Index® reports scorebrands against peers on more than 350 quantitative and qualitative data points, diagnosing their 11. 10.11 L2 Forum Innovation 2011 NYCdigital strengths and weaknesses. Called the “TED for marketing,” L2’s third-annual InnovationPrestige 100 : These reports index and analyze the IQs of 100 iconic prestige brands in areas key to ® Forum will bring together the highest density of scholars,future growth. Publications in 2011 will measure the performance of the Prestige 100® brand set in two business leaders, startups, and marketing executives inof the world’s largest “markets”, Facebook and China, as well as on Mobile platforms. North America. 11. 21.11 L2 Clinic The Social Graph: Europe PARISEVE N T SForums: Big-picture thinking and game-changing innovations meet education and entertainment. Academics and industry professionals highlight theThe largest gatherings of prestige executives in North America. 300+ attendees opportunities, challenges, and underpinnings of social media in the prestige industry in a one-day, intensive Clinic.Clinics: Executive education in a classroom setting with a balance of theory, tactics, and casestudies. 60 –120 attendeesWorking Lunches: Members-only lunches led by digital thought leaders and academics. UPCOMING 2011 RESEARCHTopic immersion in a relaxed environment that encourages open discussion. 12 – 24 attendees PRESTIGE 100® Reports:MBA Mashups: Access and introduction to digital marketing talent from top MBA schools. Mobile DIGITAL IQ INDEX® Reports:CON S U LT I N G BeautyAdvisory Services: L2 works with brands to garner greater return on investment in digital initiatives. Fashion & Leather GoodsAdvisory work includes Digital Roadmaps, Social Media Strategy, and Site Optimization engagements. Watches & JewelryMEM B E R S H I PFor membership info and inquiries: membership@L2ThinkTank.com

A THINK TANK for DIGITAL INNOVATION51 East 12th Street, 2nd FloorNew York, NY 10003W: L2ThinkTank.comE: info@L2ThinkTank.com

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