An exclusive report from L2 and Labbrand

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

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

What is Digital IQ and How is it Measured?

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

Digital IQ Ranking: China

A Closer Look at the Numbers

These rankings reveal several interesting trends and correlations with other available metrics. For example, the eight fashion brands measured show a strong positive correlation (0.72) between Digital IQ and brand value as reported in BusinessWeek’s annual 100 Best Global Brands report[2]. For the six automotive brands measured in both studies, the correlation is also strongly positive, at 0.61. These correlations do not necessarily mean that increasing Digital IQ guarantees an enhanced brand value. Nevertheless, the strength of these correlations suggests that the relationship between brand value and Digital IQ is not arbitrary http://1bunnyglamazon.com/ . It is possible that valuable brands are more likely to have higher brand awareness, and therefore enjoy higher returns on the same or smaller investments in digital. Alternatively, valuable brands may be more likely to have higher marketing budgets and invest more heavily in digital media.

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

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

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