1. Business Consulting for TAG Heuer China Prepared for: Monique LIN, CFO, LVMH Watches and Jewelry of Greater China

2. Executive Summary (1/2)
TAG Heuer, one of the brands from LVMH’s Watches and Jewelry division, is a Swiss watchmaker known for its line of high-end, sporty watches. With an existing presence in many of the Western countries, China has been identified as a crucial market for TAG Heuer to develop since year However, in 2007, after the push into the Chinese market, TAG Heuer secured less than 1% of the market share within China even after having spent 30%-40% of sales towards its media budget. The situation worsened during the economic downturn in 2008, when the company’s revenue dramatically dropped by 35% after a management decision was made to reduce media spending to 15% of sales. Upon discussion with the client, a target goal has been set—to increase revenue growth by 30% in 2010 through marketing initiatives such as rebranding, advertising, and budget allotted. After conducting an analysis of Tag Heuer’s positioning within the Chinese market, 3 major marketing proposals shown below can be implemented: optimization / re-allocation of media spend, rebranding/repositioning through ambassador selection and a refocus on history/tradition, better targeting and development of existing and new online entities including interactive discussion forums, blogs, and official product sites. Following is a breakdown of the necessary components of each strategy.

3. Executive Summary (2/2)
1.) Increased Media Budget / Re-allocation of Media Buy to include New Media
Media Spend should be increased to 35% of sales to grow brand awareness and share from 1% and to regain from last year’s decline and budget reduction.
Focus on regaining SOV (Share of Voice) through targeted luxury events and shows.
Of the Media Spend budget, which is currently comprised 100% of print, 30% should be allocated to New Media and Internet.
2.) New Local Ambassador Selection / Emphasize Swiss Heritage and History
Change scope of celebrity ambassador from international to local.
Select local recognizable personalities who are not over-used, rather than overexposed celebrities, who fit Tag Heuer’s image.
Telling the Tag Heuer story so as to make the Chinese consumers, who value tradition and heritage in their luxury consumption, understand its Swiss roots and history.
3.) Online Image and Branding–Localized for Consumer engagement and insight
30% of the Media Spend budget will serve to develop online platform to build audience engagement, interaction, and subsequent information-gathering.
Revamp current online presence including official blogs and forums, encouraging more engagement with the customer—linked to higher sales and valuable insight into their behaviors including who they are and what they want.
Localize websites by creating China-centric and specific content to cater to Chinese preferences, and are not merely a translation of the original Western sites.

4. Recommendation 1 Recommendation 1:
Increase marketing budget to 35% of sales to help boost brand awareness and visibility in China.
Recommendation 2:
Select new local ambassadors by matching the brand personality and placing more emphasis on its long traditional Swiss heritage.
Recommendation 3:
Develop and enhance online image and presence by means of localization and feature improvements.

5. TAG Heuer is successful in other markets but not in China! Why?
TAG Heuer ranked 15th in China with around 0.5% market share while ranked 3rd worldwide
Source: AC Nielsen provided by ZenithOptimedia

6. TAG Heuer cut 71% of its advertising expenses
TAG Heuer Dramatically Cut Its Advertising Expense Compared to Its Competitors
TAG Heuer cut 71% of its advertising expenses
Source: AC Nielsen provided by ZenithOptimedia

7. Competitor Analysis – Share of Voice (08 and 09)
Premium Watches
Jan-Jun 2009 %
Jan-Jun 2008
BRAND
TOTAL Pluri media
Rank vs
VAR.
Total
Rolex
71,783 1
-18%
87,376 2
Omega
59,974
-34%
91,383
Tudor
29,156 5 5%
27,889 4
Longines
25,488 7
48%
17,237 10
Rado
21,596 8
19%
18,140
Blancpain
9,455 12
13%
8,392
Patek Philippe
7,918 14
32%
5,981 17
Glashutte
7,634 15
350%
1,696 40
A Lange & Sohne
6,969
23%
5,689 18
Vacheron Constantin
6,777 0%
6,808
Jaeger-Lecoultre
6,283 20
-26%
8,492 11
Movado
5,512 23
190%
1,899 38
TAG Heuer
5,506 24
-71%
18,781
While TAG Heuer is cutting its advertising expenses by 71% from 2008 to 2009, most of the key competitors are increasing their advertising
SOV dropped from 7th to 24th from 2.1% SOV in 2008 to 0.4% in 2009 for the same period (a 81% drop in SOV)
Source: AC Nielsen provided by ZenithOptimedia

8. Recommendation 2 Recommendation 1:
Increase marketing budget to 35% of sales to help boost brand awareness and visibility in China.
Recommendation 2:
Select new local ambassadors by matching the brand personality and placing more emphasis on its long traditional Swiss heritage.
Recommendation 3:
Develop and enhance online image and presence by means of localization and feature improvements.

9. Competitors Are Increasingly Using Targeted Special Events…….
OMEGA - Let the Games begin !
Friday 08. of August 2008 For nearly four years, the giant OMEGA Olympic Countdown Clock in Beijing’s Tiananmen Square ticked down the seconds to the Opening Ceremony of the Beijing 2008 Olympic Games. At exactly 8 p.m. on the 8th of August, 2008 – 08/08/08 – the Countdown Clock reached zero.
Longines
Lin Chi-Ling flying Dreams with Tennis Children (Shanghai, China)
May 13, 2009
Cartier
Cartier Treasures at the Palace Museum in Beijing
September 8th, 2009
Cartier is organizing an exhibition event from September 5 to November 22 at the Palace Museum in Beijing, in a sacred place: the Forbidden City.
The exhibition includes more than 350 items, including archives dating from the founding of Cartier to its creations from the 1970s.
Partly dedicated to royal jewels, the exhibition will be illustrated by historical documents relating to European royal courts.

10. TAG Heuer’s selected ambassador in China is not well-recognized
Source: Survey with 28 potential customer via

11. Why not getting payoff? Overuse of ambassadors leading to brand dilution
Yao Ming and Zhang Ziyi representing too many different brands as ambassador
Luxury/ Elegance
Brand Dilution
Mass image

12. Celebrity is not a good reference for choosing a brand!
On average, more than 90% of people do not choose brand due to celebrity
Source: KPMG Report on China’s Luxury Consumers: Moving up the curve (April 2008)

13. Recommendation 3 Recommendation 1:
Increase marketing budget to 35% of sales to help boost brand awareness and visibility in China.
Recommendation 2:
Select new local ambassadors by matching the brand personality and placing more emphasis on its long traditional Swiss heritage.
Recommendation 3:
Develop and enhance online image and presence by means of localization and feature improvements.

14. TAG Heuer should leverage on its 150 years heritage in China market
More than 70% of people willing to pay more at High Income group
Source: KPMG Report on China’s Luxury Consumers: Moving up the curve (April 2008)

15. Internet as one of the most important sources of information to potential customers
Source: Survey with 28 potential customer via

16. Internet is key in gathering product information – because its FREE!
Internet as one of the most important means in getting product information
Internet is key in gathering product information – because its FREE!
Source: Survey with 28 potential customer via

17. TAG Heuer website rated the lowest among its competitors
Overall, how good is TAG Heuer’s website compared with its key competitors?
TAG Heuer website rated the lowest among its competitors
Source: Focus Group of 20 users tested online functionalities.

18. Recommendations Recommendation 1:
Increase marketing budget to 35% of sales to help boost brand awareness and visibility in China.
Recommendation 2:
Select new local ambassadors by matching the brand personality and placing more emphasis on its long traditional Swiss heritage.
Recommendation 3:
Develop and enhance online image and presence by means of localization and feature improvements.

19. Appendix

20. Appendix 1 – Interview Summary
Date
Interviewee
Purpose
Status
Oct 8, 09
Monique Lin, CFO, LVMH
Current Watch Market in China
Establish focus areas in this project
Current marketing strategy and campaign
Completed
Oct 15, 09
Multiple interviewees by survey
(83 s sent with response rate of 34%)
Gather information on how customers view TAG Heuer in various angels
Oct 17, 09
A focus group of 20 people was asked to log onto a list of luxury watch websites to complete a few tasks
Gather information on how online users feel about each of the websites
Oct 22, 99
Ella Kwok, Media Analyst, LVMH
Understand the current TAG Heuer advertising strategy
Traditional media channels Vs. new media
Uniqueness of China luxury watch market

21. Appendix 2 – Interview Summary
Date & Time
October 8, 2009
Interviewers
Peter Kwan, Jennifer Cheng, Tommy Ng
Interviewee
Monique Lin, CFO of Watches and Jewelry , Greater China
Purposes
Key Takeaway
Scope clarification
Distribution channel strategy is defined out-of-scope due to new plan is being implemented
Focus on marketing communications
Issues identified
TAG Heuer ranked no. 3 worldwide but no. 15 in China with less than 0.5% market share
TAG Heuer is growing much slower than market growth rate
SOV ranked the 7th in 2008 but did not see a lift in sales
Top ambassadors in China selected but didn’t help
Very competitive in traditional advertising media (print ads & TV) leading not cost effective
Confidentiality
Agreement on treating meeting conversation as confidential

22. Appendix 3 – Interview Summary
Date & Time
Oct 22, 2009
Interviewers
Peter Kwan
Interviewee
Ella Kwok, Media Analyst of LVMH Asia Pacific
Purpose
Takeaway
Clarification of current marketing communications strategy
Reason why TAG is not focusing on event
View on using local ambassador and international ambassador
Existing e-marketing strategy
Future direction of TAG Heuer brand
Shifting from sporty to luxury
Characteristics of Chinese customer
Chinese customers focus more on luxury than sporty
Website is important but the key how to raise brand awareness to potential customer

23. Appendix 4 – Excerpts From Consumer Survey
Do you know the brand TAG Heuer?
Yes (Please go to question 2)
No (Please go to question 4)
Where did you get product information before making your buying decision of luxury products?
Point of Sales (e.g. Salesperson in retail stores)
Magazines and Newspaper
Internet (e.g. newsgroup, review, etc) TV
Others
From the name list below, please identify who has been TAG Heuer ambassador?
Leonado Dicarprio
Lewis Hamiton
Tiger Woods
Yao Ming
Zhang Ziyi (Please go to question 3)
Rate the below with scale from 0 to 6
(worst=0; best=6)
Ease of navigation
Informative
Customization
Overall Appeal
Where did you hear about TAG Heuer?
Friends
Print Ads (e.g. Magazines & Newspaper)
Internet
TV ads
Outdoor Advertisement
Others (Please go to question 4)

24. Appendix 5 – Focus Group
A focus group of 20 individuals were asked to log on the below websites –
To complete the following tasks –
Find details on a few specific models
Find contact information for watch repair / maintenance
Find a specific local / international retail location
Find details on brand’s history
Find details about upcoming events
Then, they were asked to rank the different websites on
Ease of navigation
Informative
Customization
Speed
Overall Appeal