1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion

6.1 6.2


62 62 62 62 64 66 69 70 71 71 72 72 73 75


Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion


4 Brand-Building Strategy 6.com 6.8 Case Study: Boo.1 Company Overview 6.2 Value Proposition Brand-Building Strategy .7 6.5 Conclusion Case Study: Yahoo! 6.5.1 Company Overview 6.3 Sources of Value .com 6.5.2 Value Proposition 6.4 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6 Value Proposition 6.4 Brand-Building Strategy 6.5 Other Factors That Contribute to their Brand Leadership 6.Extensive Integration Sources of Value .1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .5 Value Proposition Conclusion Case Study: Gap.8.4 Brand-Building Strategy 6.5 Other Factors that Contribute to their Brand Leadership 6.7.5 Conclusion Case Study: CDnow 6.6.com 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.4.1 7.3 Sources of Value .6.The Failure of Boo.The 7Cs Framework Value Proposition 6.3 Sources of Value . Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.The 7Cs Framework 6.6 Conclusion Case Study: eBay 6.3 Sources of Value .8.1 Company Overview 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.1 Company Overview 6.The 7Cs Framework 6.

9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .2 Figure 6.3 Figure 5.9 Figure 6.4 Figure 5.2 Figure 3.8 Figure 6.2 Figure 5.6 Figure 4.7 Figure 5.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .com's Associates Programme Overview of BarnesandNoble.1 Figure 3.4 Figure 2.6 Figure 6.1 Figure 5.com's Website Amazon.6 Figure 5.3 Figure 2.4 Figure 4.8 Figure 3.7 Figure 2.5 Figure 5.5 Figure 2.2 Figure 4.7 Figure 6.4 Figure 6.1 Figure 1.1 Figure 2.1 Figure 6.2 Figure 2.3 Figure 3.8 Figure 5.3 Figure 6.1 Figure 4.4 Figure 4.5 Figure 4.6 Figure 2.2 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 5.com's Website Overview of Boo.5 Figure 6.3 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.

6 Table 6.4 Table 6.Timeline and Major Milestones BarnesandNoble.com .com .Timeline and Major Milestones Yahoo! .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.Timeline and Major Milestones CDnow .2 Table 6.Timeline and Major Milestones Gap.Timeline and Major Milestones Boo.5 Table 6.Timeline and Major Milestones eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.com .com .3 Table 6.


Amazon.YEARS TO REACH $100 MILLION IN SALES 6 5. It is empowering customers with more options and more information to make informed decisions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com noble. the Internet is changing fundamentals about customers.5 million book titles). creating strong brands that are putting established brands at risk. Amazon. customer affiliation and level of sales. relationships.com Source: Securities and Exchange Commission Filings. interaction and relationship building. there has been an explosion in the online world . The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. This is creating new challenges and opportunities. that these Internet start-ups have achieved.com. Internet companies such as Yahoo!. whereas it has taken decades for traditional companies to achieve the client base. The Internet also represents a fundamental shift in how buyers and sellers interact.0 1. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.9 2. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. As such.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. aggressive Internet start-ups have emerged.1 OVERVIEW Over the past few years.9 3. Figure 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. America Online (AOL) and eBay have been able to build powerful brands in a few years. and business models revamped. FIGURE 1.5 2.mckinseyquarterly.com's range of 4.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. Supply chains are being rethought. In the midst of this. McKinsey Analysis (www.com) 7 .1 3. while providing new tools for promotion.2 3.an explosion that is also a harbinger of how business will operate in the future. as they face each other through an electronic connection. products and services reconfigured. and is triggering the need for new brand-building strategies and tools.1 . As such.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.g.com1 Amazon. service and brands.

L. attracting traffic or 'eyeballs'. A Business Week / Harris poll. May 5. P. that extends the brand-customer relationship beyond a single transaction.. S. and the high cost of acquiring online customers2. For pure online players. M. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. However. turning browsers into buyers. March . and Novak. building awareness. & Overdorf. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. 1 2 3 Christensen. Harvard Business Review. p.April 2000. As such. pp. Volume 78 Issue 2. brands are even more critical as customers have little to go on other than a recognised brand. rather than drifting from site to site3. T.Forget Surfers. 66-76 Hoffman. May-June 2000 Hof. 'Meeting the Challenge of Disruptive Change'. companies lack a coherent framework and concrete methods to build an online brand. Given the tremendous clutter in today's e-commerce marketplace. this dissertation seeks to explore how companies should go about building a successful Internet brand and to identify the critical factors that must be considered. Harvard Business Review. found that 57% of Internet users go to the same sites over and over again.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. there is a growing recognition that traditional methods are no longer suited to this new interactive environment.. who are essentially intangible.. 1997... A New Class of Netizen is Settling Right In' Business Week. & Elstrom. P. as the need to build brand loyalty online is reaching a peak. Therefore. In light of this. Browder.66 8 . D. 'Internet Communities . C. R. 'How to Acquire Customers on the Web'..

2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. supported by secondary data related to aspects of online business from accredited and published sources.2 . This is based on the outcome of the primary research (in-depth case studies).2. FIGURE 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. 1. tools and strategies to build brands on the Internet. A review and analysis of leading academic thinking will be used to explore these issues.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To explore how the Internet is changing the brand-building environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and to identify new sources of value.

however.com). Consequently. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. CDnow. this also highlights the true value of the dissertation. strategy and economics. the literature review draws on leading academic thinking in more established areas such as brand management. While there is no attempt.com. and factors that contribute to a brand's success. nor desire. there is more work in popular rather than academic literature. eBay and Yahoo!). The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand. relationship management.com and Gap. to provide an in-depth analysis of the psychological and social dimensions of brands. as well as a recent Internet failure (Boo. Conclusion: Discusses the key findings and areas for further research.com). marketing. 10 . certain key factors are highlighted in their relevance to the dissertation. These are further refined using the insight obtained through the case studies. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. and is used to provide insight into some of the factors that contribute to the development of successful brands. Hypothesis (Framework): This is based on the literature review and secondary data. The absence of academic literature on Internet branding posed a major obstacle. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. The combination of cases provides a useful and practical insight into brand-building issues and problems.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area.

Chapter 6 examines the brand-building efforts of seven companies. highlighting some key factors that have contributed to brand success. The final chapter. Chapter 3 explores how brands have traditionally been built. The limitations of the Internet in terms of brand-building are also discussed. 11 . their purpose and value are discussed. This chapter sets the context within which online brands must be built. by outlining the impact of the Internet on the business and competitive environment. Chapter 7. provides an analysis of leading academic literature in relation to branding. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. Chapter 2. and outlines the opportunities for further research.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.4 STRUCTURE The next chapter. The nature of brands. summarises the key findings. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. as well as the interactive approach to attracting customers and building loyalty. Chapter 4 provides an overview of the Internet and its defining characteristics. and introduces the core concepts that form the backbone of the dissertation.


(New York: Free Press). vii 13 . and they form the backbone of this dissertation.1 . The chapter proceeds to describe the influence of brands on the buying process. both to customers. which. A. symbolised in a trademark.2 WHAT IS A BRAND? According to Rita Clifton. and highlights the importance of brand management.A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. This value stems from the products and services that companies create and bring to the market.. 2000. 2.see Figure 2. The concept of brand equity is outlined. creates influence and generates value4" This definition truly captures the essence of a brand. unravelled to reveal the nature of brands and their reason for existence.). 1996. (London: Macmillan Press Ltd. both for customers. 74 4 Clifton. R. explaining the value of brands. and to companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. p. 'The Future of Brands'. E. the brand's emotional benefits and its self-expressive benefits .1.a brand is: "a mixture of tangible and intangible attributes. D. These concepts are central to brands and brand-building. FIGURE 2. if properly managed.a leading specialist brand consultancy firm . 'Building Strong Brands'. and for the company. Branding is about creating 'value'. whether online or offline. and the importance of customer satisfaction and brand loyalty. these layers are Brands are made up of many layers and dimensions.1 INTRODUCTION In this chapter. CEO of Interbrand Newell and Sorrell . but extends further to encompass added values derived from factors such as the brand-customer relationship. & Maughan. p.

Brands are richly endowed entities. the augmented brand and the potential brand . 2. T. FIGURE 2. making their way into planning and strategy documents. Harvard Business Review.86 14 . and services to customers..3 THE LAYERS OF A BRAND Brands are made up of four layers . a 'reputation'. As such. 'Marketing success through differentiation . the basic brand.2 . a 'set of expectations'.the core product or service. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.2. which grows out of the cumulative memory and the experiences customers have of products or services. 1980. brands are their most valuable asset. yet ultimately reside as consumer perceptions. and a 'promise'.Figure 2.of anything'. For some companies. They start life as ideas. The space a brand occupies inside a customer's head can create a 'mental' patent. It is a company's promise to consistently deliver a specific set of features. January-February.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . benefits.a 'relationship'.LAYERS OF A BRAND POTENTIAL BRAND AUGMENTED BRAND BASIC BRAND Name Service Design PRODUCT OR SERVICE Quality Credit & Terms Features Packaging Delivery & Installation Guarantees Source: Adapted from Levitt. p.

as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible.The Gap stores. Certain service brands. 'Marketing Management . The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. 5 Kotler. symbol. sign. customers buy products to meet certain functional needs. most products and services cannot survive on functionality alone as this is usually matched in time. & Control'.g. 2. or a combination of them.. quick delivery) that enhance the customer’s total purchasing and use experience. Essentially. 15 . such as in retailing. information. preferring things they can see and touch. with supplementary products and services (e. They are the historical core of branding because they are the most prevalent. term. The Basic Brand The basic brand consists of the "name. Service Brands (intangible) are much less numerous than their product counter parts. and because they most readily come to mind when consumers are asked to recall brands. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.Analysis.com are examples. P. Southwest Airlines and Amazon. but the brand itself is the store. this should support the offering's performance and differentiate the brand from those of competitors. 8th Ed. The most common barrier to competition is building a brand. In fact. These products and services add value and make the offering much more difficult for competitors to emulate. (Europe: Prentice Hall) 1996. However. Planning. Coca-Cola.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Levi's). not the products it sells .g. even when the alternatives are substantially cheaper or more readily available (e. this is the case with all Internet companies. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. Implementation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. or design. actually sell products. Kodak.

p. and Control'. Once aroused.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Through gathering information. These beliefs depend on their previous experiences with the brand. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).4). FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.3). and selective retention.. 16 . However. it is critical to understand what attributes consumers value. Planning. 'Marketing Management . selective distortion. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.194 The process starts when the buyer recognises a need. Implementation. Consumers differ as to which product / service attributes they see as important. two factors can intervene between the purchase intention and the purchase decision ..FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. (Europe: Prentice-Hall) 8th Ed.3 . it is important to clarify customers' underlying buying behaviour and the buying process. 1996. This can be triggered by internal or external stimuli (advertisements). and pay the most attention to the brands that will deliver the sought benefits. Therefore.attitudes of others and unexpected situational factors (Figure 2. the consumer learns about competing brands. The buying process consists of five stages (Figure 2.Analysis. a consumer will be inclined to search for more information. and the effect of selective perception. either through heightened attention or through an active information search. P. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Consumers develop a set of brand beliefs about the attributes of competing brands. In the evaluation stage.

If performance falls below their expectations. or dissatisfied with the purchase decision. postpone. If perceived performance and quality exceed their expectations then they are satisfied.the customer will be highly satisfied. somewhat satisfied. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. they will be dissatisfied and look for alternative brands in the future. word-of-mouth.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. they will evaluate their level of satisfaction . or avoid a purchase decision is heavily influenced by perceived risk. and a preference for recognised brands they can trust. customers make decisions purely on the basis of their expectations. Customer satisfaction and loyalty are essential to creating successful brands. Customers' expectations are particularly important when dealing with services. Expensive purchases involve some risk taking. These expectations are formed through a combination of past experiences. 17 . advertising and communication. locking out potential competitors. After a consumer has actually purchased the product or service. even delighted. and especially important when dealing with purchases made through the Internet. as these services are intangible and therefore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. their negative attitude may influence the consumer's purchase intent or vice versa. A consumer tries to deal with this by gathering information from friends. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. A consumer's decision to modify.

At the opposite end of the satisfaction spectrum are "apostles" . & Sasser.5. D. 'Why Satisfied Customers Defect' .Harvard Business Review. 91 Loyalty is derived when customers are continuously satisfied over time. p. 'Growing the Trust Relationship'. Spring 1999 18 . Federal Express. Nov-Dec 1995 Hart. M.Harvard Business Review.....customers who are satisfied and loyal and talk favourably about the brand . FIGURE 2. 6 7 Jones. Trust is critical for a brand's success. Marketing Management. This satisfaction encompasses the whole experience and not just a company's products or services. W. The customers at the bottom end of the scale are "terrorists" .Figure 2. Customers that are passionately or emotionally loyal are those that have built trust in a company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 'Why Satisfied Customers Defect' . Nov-Dec 1995. E. T. E. T.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Johnson & Johnson. Saturn. C. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. and believe that it will always act in their best interest. and Johnson. & Sasser.those who actively attack the brand telling others not to buy from the company.. Hewlett-Packard.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. Southwest Airlines and Xerox7. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.

& Rogers. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. 8 9 Peppers. Firstly.they provide good word-of-mouth and are the best salespeople for the product / service 2.g. emotional loyalty is born out of a consumer's personal relationship with a brand. M. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.Sloan Management Review. 'Building Stronger Brands through Online Communities' .. In this way. G. 1993 McWilliam. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. 'The One to One Future'. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). There is also clear evidence of this on the Internet. Spring 2000 19 . consistent orders Satisfied customers are the best advertisement . Emotional loyalty can be also created through the formation of a strong user community around the brand. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. Harley-Davidson motorcycle clubs).. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.com.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways.

Emotionally loyal customers build a sense of trust and two-way commitment with the brand. whereby customers would be unwilling to substitute it with competitors' offers. which goes well beyond the satisfaction of a specific need. almost irreplaceable bond as well as potentially to the negative feelings of betrayal.. FIGURE 2.6 . Beyond this.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. A stronger brand enjoys a high degree of brand preference over competing brands.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.7). March 1998.7 . there are brands that are unknown by most buyers. a 'powerbrand' tends to have a high degree of brand loyalty. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). pp. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Journal of Consumer Research. FIGURE 2. there are brands that customers perceive as acceptable and would not resist buying. 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. and understanding the needs and buying processes of the target market is essential. 20 . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. S. However. 343-373.

'Managing Brand Equity: Capitalising on the Value of a Brand Name'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. strong brand associations. D. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". The benefits of each are outlined in Figure 2. and relationships with distributors and strategic partners. FIGURE 2. (New York: Free Press). which is the value of the brand over and above its commodity value. and other assets such as patents.Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker.. D.8. name awareness. (New York: Free Press).BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . 1991 10 Aaker. The major brand assets are brand loyalty.8 . perceived quality. 1991 21 .. According to David Aaker (1991). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.Create Awareness . trademarks.

8.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.To be clearly seen. 'Consumer Market Research Handbook'. to its logo.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . N.To have confirmation of your self-image or the image that you present to others • Continuity .Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.To save time and energy through identical repurchasing and loyalty Guarantee . (London: McGraw Hill). 1992 Worcester. 11 12 Kapferer. May 1993.Satisfaction linked to the attractiveness of the brand. J. 1986 13 Golder.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . • Brand Leverage . production and marketing. market share and profits . the best performer for a particular purpose • Characterisation . The brand leader is the most profitable and all beyond number two are unprofitable13. 22 . R.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. and the number two twice the share of the number three12. pp. Premium pricing increases revenue.To be sure of buying the best product in the category. in the following ways: • Brands. 158-170. brands perform several functions that add value and customer benefits: • Identification . & Tellis. 3rd Ed.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. (New York: Free Press).Typically a brand leader obtains twice the market share of the number two brand. Journal of Marketing Research. J.8.. to quickly identify sought after products • • Practicality .. to its communication • Ethical . G. to make sense of the offer.. 'Strategic Brand Management'. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. & Downham. P..

9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. brand leaders can exploit their superiority in the market (e. drives up share price and provides the basis for future growth. 23 .Companies with strong brands attract good recruits.g. Companies can maintain a brand while modifying the underlying product to account for new technology.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . They also tend to elicit community and government support.Strong brands are more attractive to investors. In addition. • Motivating Stakeholders . • The Brand Barrier .Brand leaders usually have the financial strength to fend off competitors. Coca-Cola “the real thing”). companies such as Interbrand (see Appendix A). • Avenues for Growth . 2. fashion or prevailing market conditions. and Young & Rubicam have created complex formulas. The brand can also be used to penetrate new markets. In trying to estimate the monetary value of brands. This. The next chapter describes the process of how brands are built. the tools that are used. but there remains an ongoing controversy about how accurate and meaningful these measures are. When a company creates this type of customer preference and loyalty. it can build a strong market share. • Brand Loyalty and Beliefs . Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. in turn.g. and the characteristics of successful brands.The product life cycle applies to products.Dominating a niche market is usually more profitable than being fifth in a large market. Johnson & Johnson with Tylenol). Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. not brands. maintain good price levels and generate strong cash flows.


BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Once this has been established. 3.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. The major characteristics of successful brands are also reviewed. it should provide a satisfactory experience and lead to a willingness to buy again.1.1 INTRODUCTION Building a strong brand is a complex task. If the offering is developed properly. confidence and brand equity are built. This is illustrated in Figure 3. This chapter spells out the traditional brandbuilding process. selling. and direct marketing.1 . promotion. brand awareness. public relations. the next step is to get customers to try the brand. and keep it turning. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. which are created through advertising. To entice trial and repeat purchase requires triggering mechanisms. highlighting important factors that contribute to the success of each step along the way. FIGURE 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 .

a compelling value proposition is the combination of an effective product or service (P).each is essential.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . unless differentiation and awareness can be developed. FIGURE 3.DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. Without a good product or service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.a strong offer that a potential customer would find compelling and interesting. Similarly. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. a company must develop a strong understanding of who their potential customers are. 26 . In order to do this. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. and added value (AV). the brand can elicit feelings of confidence that it is of higher quality than competitors'. As such. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. In this way.2 . it is impossible to build a successful brand. it will never attract a strong client base. a distinctive brand identity (I).2).

industry endorsements and newspaper editorials. the number of competing alternatives and the large variety of advertising and selling messages. Kellogg's) attached to a new product will transfer positive associations. • Manufacturers' Name and Reputation . Brand values derive from five major sources15: • Experience of Use . it acquires added values of familiarity and proven reliability. it is more likely to work effectively for them. P. 169 Jones. 14 15 Doyle. • User Associations .in many cases. Sony. pp. For pharmaceuticals.. interests. P. 1998. In today's affluent society. • Brand Appearance . if customers have faith that a brand will work.if a brand provides good service over time. values or wealth.In many situations a strong company name (e. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. influenced by brand values. cosmetics and high-tech products. The large number of decisions.3. 2nd Ed. Customers choose brands. Hewlett-Packard. or to gain a sense of belonging.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. mean that buyers look for short cuts. layout and appearance of the brand can clearly affect preference by offering cues to quality. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. which are additional to those based upon real performance. Lexington Books). which they perceive as meeting their needs.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. 'Marketing Management and Strategy'. as they are to be about satisfying basic physical and economic needs14. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. (Europe: Prentice-Hall). Coca-Cola. J. 1986 27 .. People use brands to express their lifestyles. the pace of technical change. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. providing confidence and incentive to trial. Gillette. faith in brand generates satisfaction in use.brands frequently acquire an image from the type of people who are seen as using them. MA.g.the design. these needs are as likely to be about satisfying self-actualisation or esteem needs. • Belief in Efficacy . Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations.

its personality and its image or self-projection . press releases. type of spokesperson / customer image used to advertise the brand).. • The Brand Style .the way the brand communicates through its advertising. friendly). Themes include the physical appearance (logo. and the relationship expressed (e.Figure 3. its reflection (e. (New York: The Free Press).2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. features. colour scheme. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . prestige.3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. J. which remains fixed over time. however the brand style and core tend to be less flexible. A company should seek to differentiate its brand through developing a distinctive identity. 1992 28 . 16 Kapferer. style or cultural differences from one country to another. and advertising.3: • The Brand Core . glamour. visual appearance. packaging.the fundamental or genetic code of the brand. 'Strategic Brand Management'. Brand themes are the most flexible element and will tend to change with fashion.g.g. This may be different from the brand image.articulates the brand core in terms of the culture it conveys. which depends on how the target market perceives the brand. • The Brand Theme . and visual appearance). etc.

'Strategic Brand Management'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. its strengths and opportunities. understanding the brand's core and style helps set the perimeters of brand extensions .how far the brand can be meaningfully stretched to other products and market segments. Secondly. website design.g. structure and ease of use). and through line and brand extensions. advertising.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. 29 .3 . it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. below-the-line activities. 1992 The brand prism enables management to understand the brand. It also facilitates consistency in the message being transmitted through presentation (e. Finally.. J. (New York: Free Press).

strategy (partnerships and alliances).often referred to as the '4Ps' . skills.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. colleagues and opinion leaders become important influences at this stage.The McKinsey 7-S Framework).The company has to create awareness of the brand. Advertising and PR are common tools for achieving awareness. 1962. • Adoption . they must learn about it. The value proposition must then be articulated in terms of the 'marketing mix' .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. culture and staff needed to support. E. deliver and reinforce this value proposition (see Appendix B . 1962.Figure 3. pp. (New York: Free Press).Product and service features. systems. it should lead to satisfaction and re-purchase.4 . (New York: Free Press). Price. Before potential customers can buy a product / service. the company must ensure that it develops the appropriate structure. • Trial .The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.Customers consider whether the product / service will meet their particular needs. • Evaluation . If the offering is developed properly. management style. pp.The customer is satisfied and decides to make regular use of the product / service. Promotion and Place (distribution strategy). This learning is called the adoption process17 . 17 Rogers..INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. Personal sources such as word-of-mouth from friends.. • Interest . 'Diffusion of Innovations'. E. and its products / services.79-86 The Innovation-Adoption Model consists of: • Awareness .79-86 30 .4. FIGURE 3.Customers need to be stimulated to seek information about the brand's uses. 'Diffusion of Innovations'. The value proposition must be communicated to entice customers to try the product / service. and the product / service's perceived performance. features and advantages.

Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. but enhanced customer interaction through relationship building. software) to help customers interact with the company. & Parasuraman. (New York: Free Press). when each trusts the other to deal fairly and reliably. companies can increase the value of each customer.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. L.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. direct marketing. & loyalty / discount cards. Advertising and public relations can be effective in generating awareness and interest. In this way. providing insight into customers' needs and wants. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.136-142 31 . Over time. allowing companies to communicate regularly with their customers and customise their interaction. This is often referred to as Customer Relationship Management (CRM). personal selling and public relations / publicity . this process enables an exchange of information. This focuses on establishing a longterm.g.advertising. sales promotion. 18 Berry.. making them less likely to switch to a competitor. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . the company may supply customers with special equipment or tools (e. multi-transaction relationship. encouraging evaluation and trial.such as airline frequent flyer programmes. 'Marketing Services: Competing Through Quality'. Customer service is an important element of this relationship. Internet linkages.for example. 1991. This information is a key competitive advantage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. pp. while strengthening the position and value of the brand. • Structural Ties . Through building relationships with customers. 3. companies can increase buyers' satisfaction. Social Benefits . A.to move customers through the adoption process. companies have used the tools of the promotions mix .

Once the framework has been established and the organisation configured to provide this proposition. 3. • Strong Communications Programme .176-177 32 .6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. As such. companies have the opportunity to start building relationships with their customers. it has a profound impact on the traditional brand-building process. brands were not built quickly. Without building awareness. It often takes years to build up the added values. 'Marketing Management & Strategy'. but it makes the task easier. 1998. comprehension and intention to buy. its function and psychological values.a segmentation scheme. the brand is meaningless. As a result.A successful brand requires an effective selling. which will add value and distinguish it from competition. It is easier to capture a share of the consumer's mind and build a customer base. (Europe: Prentice-Hall). pp.Satisfactory experience is the major determinant of brand values. advertising or promotional campaign. including: • A Quality Product / Service Experience ..Traditionally..Being first into the market does not necessarily bring success. If the quality of the experience deteriorates. • First-Mover Advantage . 19 Doyle. value proposition or augmented brand. which will communicate the brand's existence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. As customers build trust in the brand through satisfaction of use and experience. strengthening the brand further. and establish a trusting relationship. • Time and Consistency . companies must actively communicate it to the target audience to entice trial. interaction and relationship building. it must have a unique positioning concept . P. • Unique Positioning Concept . The Internet provides the opportunity for companies to create compelling value propositions never before possible. trigger trial and reinforce commitment to it. when the brand has no competitors to rival its position. while providing new tools for promotion. then its position will be undermined. 2nd Ed.If the brand is not the innovator.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. or if the brand is surpassed by superior offers from competitors. and making it more difficult for competitors to emulate.


FIGURE 4. but in practice not in real time. creating new challenges and opportunities. which contain hypertext and pictures. it offers a number of alternative channels that enable businesses and people to communicate.1.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. The three core channels include e-mail (the most common). Information is becoming a major part of the products and services that people buy. In essence. This chapter provides an overview of the Internet and its defining characteristics. E-MAIL Is the part of the Internet that most users use at present. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people. and the 'world wide web' (www) .1 .THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment.1 INTRODUCTION The Internet is transforming the business environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents.Figure 4. and a critical source of added value. news groups and mailing lists. it is a common technology platform that allows computing devices to communicate with each other. 34 . 4. In doing so. Hypertext allows information to be organised in a user-friendly way that is easily accessible. and provides the opportunity for dynamic interaction.

Graph is not drawn to scale).3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. and deliver new products and services at low cost.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).not previously available with mass medium forms of communication. regardless of where the computer or Internet access device is physically located.The Internet is a global network and can be reached from everywhere. These qualities eliminate the barriers of time and space that exist in the physical world.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. 7 days a week.2.24 hours a day. 4. • It Allows for Two-way Communication and Interactivity . which was intended to link military networks together.2 (Note: 35 . The context of the Internet and certain key developments are highlighted in the Figure 4. ubiquitous links to anyone. when the United States Defence Department developed the 'ARPAnet'. allowing both parties to identify each other and build one-to-one relationships . • It Overcomes the Barriers of Time and Space . the Internet lets individuals and companies build interactive relationships with customers and suppliers. anywhere. These defining characteristics have fuelled its explosive growth. The Internet can also be accessed at any time .1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . By allowing for direct.this radically alters the process of interaction between communicating parties. These characteristics combine to create a very powerful medium.

Figure 4. 1998.3.000 1969: 10.3 . FIGURE 4. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . 1996 (www.000. 2000 Internet / ARPAnet was created Dell.000 1.com) 36 .economist.000 10.000. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 100. as cited in 'E-Business Technology Forecast' .000.a PricewaterhouseCoopers Report.2 .000 1.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.

there will be an estimated 375 million Internet users world-wide. 'Electronic Commerce (finally) Comes of Age'. etc. payment.High-powered servers . hosting. the momentum created by all these forces has created a virtuous cycle of growth..2 20 'World Online Populations' .Higher PC penetration among consumers and companies . 2000 (http://cyberatlas. making it more cost effective for software developers and other technology providers to create interoperable products.. Easier access to these networks provided by point-and-click web browsers. The growth in support services (e.Cheap bandwidth .g.g. offering inexpensive bandwidth.4 .Content Aggregators . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . web design. and gateway services). increasing to 500 million users by 200220.).Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .4. billing. Multimedia development tools that can be used to create rich content.Attractive infrastructure and middleware software .CyberAtlas Internet Statistics and Market Research.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. FIGURE 4.com) 37 .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.E-Marketplaces .Cheap microprocessors & RAM .internet. Reed.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . The development of critical processes (ordering. The emergence of open standards in development tools and at the network protocol level (e. 1996. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. L. G.Low-cost networking alternatives . No. As shown in Figure 4. TCP/IP). The McKinsey Quarterly.

WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). entertainment) and purchasing (37%) .eiu. as cited in the Economist Intelligence Unit (EIU). chat rooms.Figure 4. These activities highlight the adoption of the Internet as an interactive. April 13. to interacting (e. FIGURE 4.g.from communicating (90% use e-mail) and sourcing information.5 . communication and information tool. 2000 (www.com) 38 . reveals the wide range of areas where people are embracing the Internet .

The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. The buyer and seller 'face' each other through an electronic connection. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. fax. projected by Gartner Group. FIGURE 4. content.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. However. no order book. web browsers. The main difference between the Internet and other electronic media (i. Instead there is a website.e. software. and people.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. April 2000 39 . There is no need to travel to a physical location. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. they all project the value e-commerce transactions to grow at unprecedented rates.6 . and no cash register. telephone) is that the Internet goes beyond just enabling transactions. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks.

some of which look set to become the superbrands of the future (e. the explosion of information is placing a premium on skilled information management. This is threatening to undermine many old established brands. Volume 78 Issue 2. & Overdorf. March .how companies operate. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow.g. through the use of extranets).g.April 2000. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Additionally. Harvard Business Review.. Although the particular impact will differ between industries.. At the same time. M.and revolutionary new business models are emerging. C. represents a level of efficiency and integration previously unattainable. 66-76 40 . The Internet also facilitates the development and co-ordination of global activities (e. For example. New brands and business models are emerging to seize this opportunity. a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers. operation (e. partners and other corporate constituencies. and transforming traditional distribution channels.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . how they compete and how they serve their customers . 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. By allowing customers to talk knowledgeably and directly to suppliers. 'Meeting the Challenge of Disruptive Change'. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience.g. the Internet provides the opportunity for Improved business processes and 'virtual companies to integrate with their suppliers and customers in real-time and create previously unachievable synergies at a very low cost. A 'virtual' presence can mitigate the cost of having to invest in physical facilities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. suppliers. Yahoo!). Dell Computers). which are often disruptive to traditional business models21. pp. the Internet is sidelining the role of many traditional intermediaries.

constantly innovate. switching costs are much lower. combined with the emergence of electronic intermediaries. G. it also removes the geographical protection from competitors. According to George Colony.com) 41 . It also provides easy access to competitors' offers and allows customers to consider every available alternative. Now companies need to move at warp-speed. respond to competitive and market dynamics..Forrester Research. allowing employees to share knowledge. and the 24 x 7 environment. Internet technology can be used to exploit collective learning and knowledge.forrester. highest convenience and quickest satisfaction. the typical clock-speed at which companies need to operate has accelerated. as they have access to more information leading to more informed decision-making. CEO of Forrester Research22.internally and externally . or catalogues. 22 Colony. has resulted in a fierce competitive environment. with no time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. The Pace of Business is Accelerating With the fast pace of technological change. improving processes. as they are just one 'click' away. getting closer to customers and ultimately staying ahead of competitors. little loyalty. online stores. fierce competition. They can move from one supplier to another searching for the best prices. commit and deploy resources. the diminishing barriers-to-entry and the lower switching costs. Customers have more options than ever before . As a result. ensuring the delivery of a satisfying customer experience. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. 2000 (www. 'Empowered Fruit Flies' . quick evolution and all the power. This is forcing companies to become flexible and responsive to customer needs. to capture new opportunities. their organisations must harness knowledge . products and services. these new highly informed customers are "empowered fruit flies". and reorganise as appropriate.they can choose between traditional 'bricks-and-mortar' companies. empowered customers. collaborate more effectively and ultimately embed organisational intelligence within processes. This.in developing products. the development of a knowledge economy. the globalisation of business. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed.

However. The opportunity of linking the complete supply chain 'virtually'. supply chain cooperation. which highlights the typical structure and dynamics of an online company. linking companies with competitors and players from entirely different industries and business sectors.A Research Report by TeslaGroup. achieve global reach and realise a new source of cost advantage. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. It allows companies to improve customer service. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. variety. companies have looked upon alliances only as a means of filling gaps. Increasingly. information. how they want and with the levels of customer service they demand. Traditionally. extensive outsourcing. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Revolutionising Sales and Brand Management The Internet provides companies with a new channel to reach a new breed of customer. The extent of this partnering is illustrated in Figure 4.7.(www. Examples of emerging information age business structures include flat versus hierarchical. and most traditional partnerships were vertical. thus creating a 'value net23'. most Internet and e-commerce partnerships extend beyond this. combined with intense competitive pressures. companies can provide customers with a strong value proposition by offering them the best in quality. 1999 . linking companies with suppliers and customers up and down a pre-defined value chain. In this way. and partnering up with the best for the remaining activities. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves. and the need for speed and flexibility have accelerated the unbundling of business systems. and multiple strategic alliances and partnerships. advice and convenience.com) 42 . 23 'The Future of E-Business' . alliances and partnerships have taken on a new level of strategic importance.teslagroup. As such. when they want. it provides the opportunity to reach customers where they want.

a Boston Consulting Group (BCG) Analysis. G. 43 .dot. it is transforming the competitive landscape and brand-building environment. the pace of business is accelerating and power is shifting to the customer. & Stirton. April 2000 In an attempt to provide a rich customer experience. This provides customers with added value. while making the offering hard to duplicate off-line.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. Partnering with portals and affiliate web sites is important in driving traffic to a web site. while triggering the emergence of new brandbuilding strategies. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. D. As such. 4.com CONTENT PARTNERS • Print Media • Broadcast • Online JOINT VENTURE PARTNERSHIP AFFILIATE PROGRAMME CUSTOMER CUSTOMER OUTSOURCING / TECH PARTNERS OFFLINE PRESENCE BACK OFFICE FRONT OFFICE • • • • Customer Services Creative Site Development Hosting CUSTOMER Source: Adapted from Freeland.7 . competition is intensifying.6 CONCLUSION The Internet and its strategic impact are not technological issues .they are business issues.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. The Internet is transforming every business to some degree.. 'Organising for e-Commerce' . This is the substance of the next chapter. tools and opportunities. S. many online companies are blending together the products and services of a wide range of companies. New opportunities for efficiency and co-ordination are emerging.


where the user feels a part of. However. has placed greater importance on trust and security. and the fact that customers are buying goods that.com) 45 . offers interactivity.durlacher.sites that provide a wealth of information and make comparison shopping easy. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. This threatens to undermine the value of brands.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. the Internet makes search and comparison much easier. brands were a substitute for information a way for consumers to simplify the time-consuming process of search and comparison before deciding what to buy. On the other hand. 5. Customers derive added value through the provision of information on the products or services they buy. and projects it onto a third party intermediary (the media). The limitations of brand-building on the Internet are also discussed. People only tend to transact with sites they know and trust . the intangible nature of the Internet. credit card numbers. addresses. etc. the logic of the Internet cuts another way.Durlacher Research. J. Generally.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. In response. brands have been developed in an environment whereby a company creates a brand. as well as on topics of interest related to the brand and product characteristics25. in addition to providing added value. Transactions on the Internet require customers to provide detailed personal information . they have never handled or seen (except on-screen). people have concerns about sharing personal information. May 1999 (www. in most cases. New strategies and tools for building brands on the Internet are identified. The Internet.. on the other hand. Traditionally. 'Internet Portals' . and sites that understand the user's needs and preferences24. In addition.names. many unnamed customers develop a 'relationship' with the brand. including the interactive approach to attracting customers and building loyalty.2 THE NEW DYNAMICS OF BRANDS Traditionally. whereby the company can establish a dialogue and 24 Marathe.

to its delivery to the customer.edu) 26 Peppers. relationship building characteristics of the Internet. January 28. 1999. a company can listen. In maximising the customer experience. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. rather than simply speaking at customers.duke. companies have to find innovative ways of leveraging the information and 25 McCann. B. TABLE 5.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. J. D. .Fuqua School of Business.Harvard Business Review. this also poses a challenge as these relationships may take on a life and character of their own. brand-building must focus on the end-to-end customer experience . M. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. Duke University. Rogers. Prof.1. pp. understand and relate to customers. 'Adding Product Value Through Information'.. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. January-February. This creates the opportunity for companies to build stronger relationships than previously attainable. 'Is Your Company Ready for One-to-One Marketing?' .from the promises made in the value proposition.. 151-160 46 .1 . 1997 (www. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. In doing so. learn... & Dorf.

Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. S. - Loyal customers are more willing to buy other products from the company. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. companies must ensure that they provide a completely satisfying end-to-end customer experience. These points stress the importance of online customer loyalty. This view is reinforced by in-depth studies carried out by Bain & Co.. . it could be argued that customer loyalty is even more critical online. it is very unlikely that an online retailer can break even on a one-time shopper. Harvard Business Review. R. .pwcglobal. 1999 (www. and to recover their investment. T. Therefore. Kearney White Paper. 'The Value of Online Customer Loyalty and How You Can Capture it'. C.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. Baveja.. S. on average.. as cited in 'Creating a High-Impact Digital Customer Experience' .. high-margin items. D. March 17. Rastogi. Repeat purchasing not only binds trust. 'How to Acquire Customers on the Web'.often. This is further reinforced by the fact that.com) 29 Hoffman.An A.. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. P. companies need to retain customers so that they return to the site repeatedly. & Hancock.A Mainspring Communication Report in collaboration with Bain & Co. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . and some are spending over $50029. Chu.. 2000 47 . 2000 (www. Zook. and Novak. - Repeat purchasers spend more and generate larger transactions . In fact. D. 27 'Electronic Business Outlook'. T.converence-board.. and with customers holding all the power..due to more frequent shopping and larger purchases. customer acquisition costs are high.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.com and www. J. For example. - Repeat customers refer more people and bring in more business . a disgruntled online customer tells 10 people about a poor experience30.word-of-mouth is the single most effective and economical way online businesses grow their sites.Research by PricewaterhouseCoopers / The Conference Board.bain. unless they are selling high-price.org) 28 Rigby. MayJune 2000 30 A Forrester Research Study. L. but also provides more opportunities for cross-selling.

Even more important. each additional unit sold does not cost more than the last to deliver. G. additional products. 7th Ed. 'Positive Economics'. and the value that each member realises. this is not the case on the Internet. the costs approach zero32. FIGURE 5. and other features can be added or changed at low marginal cost. 1989. as illustrated in Figure 5. businesses and online communities that rely on connectivity can enjoy 'network effects'.. where the value of the network. pp. However. as the benefits of scale are overwhelmed by the disadvantages of size31. 180-182 48 . increases disproportionately as more people join the network.. As a result.1 . (also referred to as 'viral economics').4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. (London: Harper & Row). customisation for individual customers.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. and in the case of information-based products. Once the up-front investments are made (for research and development and technology infrastructure). Similarly. R.1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. additional customers and transactions can be managed with limited fixed cost investment.

No.. FIGURE 5.2 . direct marketing.A Shop.org Study in collaboration with The Boston Consulting Group. This makes it more efficient in improving product selection. It also allows online companies to tap supplementary revenue streams. link revenues 32 33 Melnicoff. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising. including direct marketing. M. cross-selling and up-selling33. Outlook 1999.A Publication by Andersen Consulting 'The State of Online Retailing' .2. R. enhancing the interaction. delivering increased margin per customer .THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. '5 Rules of the eEconomy'. advertising and referrals. being first into a market makes it easier to capture the consumer's share of mind.Figure 5. As the company builds a customer base and develops a relationship with customers. 21 . its ability to track customer preferences and customise offerings improves. With no competitors around. fulfilment • Defensible advantage against competitors SCALEABLE. Nov 1998 49 .

commerce and distribution partners. New marketing strategies. such as 'viral' marketing. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. its growth curve relative to a new entrant is somewhat daunting. larger sites can leverage more customer advocates to reduce customer acquisition costs. the larger customer base provides online companies with more leverage in attracting and negotiating with key content.unless the leader makes a serious mistake. the value of the company rises exponentially with market share. and word-of-mouth even more effective.org Study in collaboration with The Boston Consulting Group. web sites. and the cost of switching to an alternative brand becomes quite high. with a minimal budget and maximum effect. This snowball effect favours first-movers. 5. 34 'The State of Online Retailing' . As a result. chat rooms and bulletin boards. makes communication tighter. This is the logic behind some of the extraordinary valuations of Internet companies. in turn.A Shop. "leveraging the media". Nov 1998 50 . creating a potentially exponential growth (like a virus) in the message's visibility and effect. as once a strong lead is established. the brand begins to take hold. Larger sites can also negotiate better supplier discounts or product placement fees. This. "creating a buzz". An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. When a company reaches 'critical mass'. Given the connectivity of the Internet among customers. as it carries the implied endorsement from a friend. It is often referred to as "word-of-mouth". viral marketing is an effective tool in getting a message out fast. and "network marketing". The Internet. with its e-mail lists.5 VIRAL MARKETING Viral Marketing is a marketing technique that induces web sites or users to pass on a marketing message to other sites or users. These factors help to understand why many online companies are spending aggressively (up to 65% of their revenue34) on marketing and site development to acquire customers and build critical mass. or until a competitor finds a way to change the game again. As a result. Word-of-mouth is a particularly powerful medium. the leader will pick up momentum and will stand to gain an insurmountable advantage . leading to the exponential expansion of the customer base. By the time a company has reached critical mass.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition.

com The classic example of viral marketing is Hotmail. eGroups and Geocities (both recently acquired by Yahoo!). sign up for their own free e-mail.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.com. whether for communications or community. A traditional print publication would hope to reach 100. saying: • "Get Your Private. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.hotmail. they tell all their 51 .5. Free Email at http://www. Geocities enables people to create personal websites for free.000 subscribers every day.com was one of the first free web-based e-mail services. friends to visit it.000 subscribers within a few years of launch. and the message spreads organically. they will have a powerful viral opportunity at their disposal. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). and then propel the message even further to their own ever-increasing circles of friends and associates. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India.5 years. and they created a subscriber base more rapidly than any company in history. Hotmail acquired over 12 million subscribers. seven days a week. In fact.1 The Case of Hotmail. and in doing so spread the word for Geocities. a company now owned by Microsoft. Hotmail. When a user builds a website. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. In its first 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. • Each new user becomes a company salesperson. Today they are the largest e-mail provider in the world with over 40 million users. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. but Hotmail signs up more than 150. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging). where they have never carried out any promotional activities.

Rastogi.3).3 ...A PricewaterhouseCoopers Report. FIGURE 5. Price. T. C. Kearney White Paper. Sites that are difficult to use can cause frustration. making customers 'click off' to another site.com) 52 . & Hancock.An A. In essence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.bain. March 17. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. 2000 (www.An A. 'The Value of Online Customer Loyalty and How You Can Capture it'.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. Kearney White Paper. The customers' ability to access and display information rapidly is extremely important36. T. 2000 'The E-business Technology Forecast' . Place).THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . 30% of potential customers leave sites because they cannot find what they are looking for. As 35 36 'Creating a High-Impact Digital Customer Experience' . J. . Zook.. Promotion. S... 2000 37 Rigby. Baveja. R. S.. Chu. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.. and 66% of people who start a 'shopping basket' fail to complete the transaction37.A Mainspring Communication Report in collaboration with Bain & Co. In fact. D.

businessweek. CIO Magazine.4. expert insights. which can enhance the company's value proposition.com) Davenport.4 . 'Sticky Business'. 38 39 Cognitiative Inc. T. up-to-date information. October 29. as cited in Business Week. and a wide range of products. ease-of-use. With almost infinite display space and inventory capability. 1999 (www.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. 29th October 1999 (www. and fast response times are among the most important factors in establishing web brand loyalty38. whereas a slow response time and site downtime will have a significant negative impact. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. online companies have the opportunity to provide rich.. February 2000 Issue 53 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. ease-of-navigation. as cited in Business Week Magazine. FIGURE 5.businessweek.

A Forrester Research Report. Customisation creates the feeling of a one-to-one relationship. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. An important contribution of these communities is that they provide members with a medium to communicate with each other. 1995.. K. visitors should not be engulfed with too much information.com) McWilliam. demographics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. share information and access a wide range of services. Other content includes community-generated content.Sloan Management Review. & Hagel. even if they purchase offline. or prior transactions. 31% of online consumers use the Internet for obtaining product information. it needs a critical mass of members42. J. Clemmer. and nearly 20% use it for post-sales support.. iVillage and Geocities).g. & Bluestein. A. 54 .5). 40 41 Morrisette. which enhances the user's online experience. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!)..The McKinsey Quarterly.. based on profile information. Spring 2000 42 Armstrong.. 'Building Stronger Brands through Online Communities' . as well as through loyalty programmes that provide targeted benefits. use bulletin boards. An online community offers a compelling way to entice customers back to a site. Some companies have taken this a step further and customise the product or service on offer (Dell offers 'made-to-order' computers through Dell Online). No. S. which is facilitated by a combination of factors (Figure 5. Community Online communities are emerging as new gathering places for consumers with similar interests (e. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. Customisation Customisation involves tailoring the presentation of a web-site to individuals. It fosters a sense of belonging41 among the members. These sites allow members to interact with one another. 'Real Profits from Virtual Communities' . 3. 1999 (www. On the other hand. For a community to work. and organise live events. . Online sites can track a customer's purchase history and modify its service accordingly. G. and advertising (if it is relevant and useful). Often. W. According to Forrester Research40.forrester. Members can interact in chat rooms.

brand-name. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.A PricewaterhouseCoopers Study. Journal of Consumer Research. 343-373. O'Donnell & Gupta. A. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. 'Making Real Sense of Virtual Communities' . as well as attracting traffic from other sites. C. and can create emotional loyalty. Companies can provide a selection of related links that complement the site's purpose and value proposition. This is similar to placing offline stores in high traffic areas.. Once customers know of a site. M.. 1999 Communities enhance the speed and value of information sharing. allowing customers to deepen their experience with a brand and build more personal connection. pp.www. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. March 1998. 55 . 43 Fournier.. when membership in the brand's community becomes an end in itself43. S.5 . they opt to input the URL (Internet address .com) directly into the browser and access the site immediately.6).. Site-tosite connectivity focuses on connecting users to other relevant sites. Mulcahy.

marketwatch. events and subjects of interest to the customer. It is important in building relationships. Other tools such as bookmarking the page can also facilitate connectivity. delivery and return options. toll-free telephone numbers. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. (www. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. In addition. as well as informing and reminding customers of special offers. as well as features such as gift-wrapping. 45 MarketWatch. online chat. customer care activities can involve providing a variety of payment. and can be provided through e-mail.6 . Therefore. and online surveys.CUSTOMER ACCESS TO INFORMATION CUSTOMER INTERNET ACCESS DEVICE SOFTWARE AND BROWSER PORTAL VERTICAL PORTAL WEBSITE CUSTOMER SIDE INTERNET SIDE User-to-site connectivity focuses on providing incentives for users to connect back to the site. Customers share security and privacy concerns. activities. customer support at all stages of the interaction is important. live chat.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. and FAQ pages (Frequently Asked Questions) to solve problems.com) 56 . which provide targeted and unique (customised) benefits to the customer. The development of loyalty programmes. news up-dates. serves this purpose and helps to build customer loyalty. Customer Care Online customers often require assistance and reassurance. Communication can be tailored to specific user interests and should allow for two-way interaction.

& Zeisser.) to online tools. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. McQuade. Interest. Learn and Relate. 'Marketing to the Digital Consumer'.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski.4 .. A. The mechanisms to communicate range from traditional media (TV. The company must build awareness and communicate its value proposition to its target customers. R.mckinseyquarterly. M.. Engage.Attract. Retain. visibility relies solely on Communication. and bring people to the site for the first time. Figure 3.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. McKinsey Quarterly. Evaluation. Magazines. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. FIGURE 5. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ .Awareness. because there is no physical presence.8. billboards. etc. S. This is more difficult online than offline.7 . Waitman. This model consists of five stages . modified to take into account of the interactive dynamics of the Internet. 1996. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Newspapers. Trial. No. e-mail notifications and banner advertisements. Therefore..7.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.2. including affiliate programmes with other websites. 180-183 (www.. Adoption). links from directory searches (Connectivity).

multiplied by the expected rate of transactions. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Attracting customers is only the first step in building online brands. 58 .8 .3 3. The key factors at this stage are Convenience combined with interesting Content. as cited in 'Targeting Consumers via the Internet' .5) 2.4 4.com) The most effective methods are direct e-mail.WEBSITE PROMOTION METHODS . 3.1 3. discounted over the expected duration of the brand-customer relationship. it is important to quickly engage consumers' interest before they move on.6 3. affiliate programmes.4 3. Engage With the multitude of choice available on the Internet. public relations and television advertising.3 Source: Forrester Research.3 2.2 4.3) is useful to ensure that a company develops a distinct and consistent brand identity.ebusinessforum. Kapferer's Brand Prism (Ch. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. Fig.5 3.7 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 3.8 4.0 3.4 3. Companies then need to engage customers to obtain their interest and participation.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .Economist Intelligence Unit 2000 (www.

g. a company can create value by providing a personalised online experience. This helps to create a customer base that spends more time and money at a site. Radio). attitudes and behaviour). • The Internet supports brand-building activities where there is a need to build a relationship. and must be continuously updated due to the multiple visit nature of customers. 59 . such as groceries and convenience goods. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Communities and Customisation are other sticky applications. Learn The Internet provides extensive opportunities to learn about consumers (demographics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. 5. The initial site registration provides an early opportunity to obtain useful information. The objective is to increase the conversion rate (% of browsers converted into buyers). and what additional products and services are they interested in provides companies with valuable information which.9). Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. if used properly.who they are and why they shop online. TV. can create value for the customer and help build the brand-customer relationship. Certain product categories. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Content is the basic driver of retaining customers on a site. Building up a knowledge database on each customer . and forge closer relationships than any offline operator. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.

The interactive brand-building process involves attracting. touch. and as the relationship develops.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. engaging and retaining customers. However.mckinseyquarterly.. McKinsey Quarterly. providing further added value. smell). the experience is the brand. 60 . The 7Cs Framework outlines the key components of the brand experience and the sources of added value. to its delivery to the customer. it is not economically feasible to sell certain products.9 CONCLUSION On the Internet. • Brand-building favours products that can be sold online. No. The next chapter analyses the brand-building efforts of seven companies. M. S. companies must provide a satisfying end-to-end customer experience . In order to create "apostles". R. 1996. Given the high acquisition costs of online customers. These case studies provide a practical insight into how companies are building their online brands. A. 5. Waitman. it is critical for companies to build relationships and foster brand loyalty.9 . & Zeisser. due to high delivery and transaction costs (relative to the value of the product).. McQuade.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 180-183 (www.. pp.from the promises made in the value proposition. 'Marketing to the Digital Consumer'..CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. especially in small quantities.2. and the need to stimulate the other senses (taste. the interaction provides the ability for companies to learn from their customers and relate.


Amazon provides increased added value on several dimensions. In addition. 6. and has sales of over $2 billion. innovation and delivering on its promises. Each case is presented in the same format including.Goldman Sachs Report.com) . ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).The Economist. and higher levels of customisation and service than the traditional shopping experience allows. including: increased selection.com. 2000 (www.interbrand. Not a River' . France. discounted prices. more information.2 Value Proposition Amazon. 1999 49 'Amazon's Amazing Ambition' . Germany and Japan49. and is one of the few Internet brands that is recognised all over the world.com) 62 . combined with its levels of customisation and customer service. its value proposition. Boo. Amazon serves over 23 million customers from 160 countries.1 INTRODUCTION This chapter provides an analysis of seven companies.2. its brand-building strategy (how it generates traffic). a company overview. February 26.Amazon. Amazon. it is the most visited e-commerce website in America.com . November 11. and enjoyable experience. eBay.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. It is the 57th most valuable brand in the world47. greater convenience. Gap.see Appendix A. easy. CDnow. 47 48 Interbrand (www.com and Yahoo!. Amazon has been able to differentiate itself from other online competitors.COM 6. and has equity investments in several e-tailers.com has become synonymous with e-commerce.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. In July 1995. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).com. Figure 6. Barnesandnoble.It's an Ocean.2 CASE STUDY: AMAZON.economist. 6. and other key factors that have contributed to its success (or failure). 'Amazon. Amazon has cultivated a reputation for excellence.com's success stems from its compelling value proposition. Amazon. the sources of added value (using the 7Cs Framework). In addition. Through its provision of a one-stop shopping experience.1 outlines Amazon's timeline and major milestones.1 Company Overview Amazon. and one of the top two or three in Britain.2. The cases are presented in the following sequence .com launched with a mission to use the Internet to transform book buying into a fast.com.

com .com.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon announces investment in kozmo.amazon. Ashford. a tools and equipment store for professional tool users and woodworkers .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Amazon invests in Pets.Amazon launches new kitchen store .com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon and eziba.com 63 . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com and NextCard launch co-branded credit card .Amazon launches www.com Auctions and zShops provide new tools to its merchant community .Amazon opens a customer service centre in Huntington.com.Customers can shop at Amazon.Amazon enters strategic alliance with living. and minority investment in. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30." providing shopping from wireless devices. and more Amazon launches "Amazon.Amazon.com is founded by Jeff Bezos Amazon.Amazon launches lawn & patio store .Amazon surpasses 20 million cumulative customer accounts . universities.com Announce Strategic Investment and Promotional Agreement . featuring thousands of bestseller lists for hometowns.000 members Amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Amazon enters into a strategic partnership with Drugstore.com announce investment and strategic alliance .com opens its virtual doors at amazon.com .com Amazon announces further plans to expand distribution network to meet rapid growth. Video Games and Gift Ideas Amazon and Sotheby's launch www.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.Amazon.com via the new wireless pocket PC .com .com enters European book market Microsoft signs Amazon. Software.com Anywhere. such as the Palm VII organiser.com Electronics and Amazon.Amazon and online car-buying service Greenlight.sothebys.TIMELINE AND MAJOR MILESTONES Amazon. to meet rapid growth .toolcrib.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com invests in wineshopper. workplaces.Amazon launches health and beauty store . West Virginia. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.COM .amazon.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.Amazon.Amazon opens customer service centre in The Hague .com Amazon acquires Back to Basics Toys to add to Amazon.com to create a "home living" store at amazon.New home living store from living.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com .com Amazon introduces "Purchase CirclesTM". Amazon.

gift click. encourage repeat visits and drive higher conversion rates. wish lists.OVERVIEW OF AMAZON. Content Amazon provides content on several levels.Figure 6. The site is easy-to-use.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. including book jacket images.2. This is an example of 64 . downloads quickly and services visitors adequately . Amazon has added other features for shopping convenience.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. logically structured. book summaries. expert reviews.e. easy-to-use. recommendations. live or study.1.com All Product search (searches the entire web). The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. customer testimonials. and customer Purchase CirclesTM. interviews with authors. Palm VII PDA device). mobile phones.1 .com Anywhere to support access from wireless devices (i. FIGURE 6. offering multiple paths to a given book or product. discussion boards. the 1-ClickTM express checkout. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. gift reminders. and Amazon. and quick-to-load pages Over time. such as the Amazon.

converting them into a storefront for Amazon. linking it to a large number of other sites. and customer interaction. Amazon creates one-to-one relationships with its customers. and Customisation Amazon provides customised features and services. This customer-centricity is evident in all Amazon's activities. which helps to build loyalty and create switching costs. More recently.2. real-time shipping and backorder notices. Amazon introduced Amazon. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. from the customer recognition at the point of interface (Figure 6. and has developed an Associates Programme. Connectivity Amazon has built relationships with high traffic web portals and sites. These are discussed in more detail in Section 6. creates a competitive advantage. In doing so. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers .thereby increasing conversion rates. Community Amazon has also added a community element to the purchasing process. By leveraging its vast customer base.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. Amazon's content is not reproducible by competition. while driving up repeat purchases and cross-selling opportunities. to the proactive notification of new items of interest. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service.4. 65 . Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. therefore. from its shopping basket applications which lists the estimated time to delivery reliably.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.

2). 66 . Eyes and Editors. Instead of paying directly for this exposure.a move that along with the novelty of its business model and the newness of the Internet. helped generate publicity and stories about the company in publications such as The Wall Street Journal.000 members. In July 1996. enticing them to return to the site and purchase repeatedly.com hot-link and offer specific books of interest to their visitors. In addition. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Business Week. which only applied to sales that resulted from the initial click-through. increasing to over 500. New Yorker and The Economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. help maintain contact and build traffic by e-mailing customers when desired products or books become available. In the second half of 1996. Once orders are placed. two personalised services. As a result of all these factors (7Cs). 6. Newsweek. Amazon offered Associates referral fees of up to 15%. The Financial Times.000 by August 2000.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. and by 1999 it had over 200. and customers are also e-mailed when the items are shipped from the warehouse. they are subsequently confirmed by e-mail. This enabled Amazon to reach more customer segments and niches (Figure 6. The Associates Programme has been phenomenally successful. Through the first half of 1996. attracting member sites of all sizes.2. it began to advertise in print media and online . Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. and not subsequent purchases.

Amazon has used viral marketing techniques through customer reviews.com gift certificate (in your name). and Geocities. The Yahoo! agreement. From July 1997 to December 1998. • Amazon. Excite. was also linked to Amazon's entry into Europe Amazon. Amazon closed deals with five of the six most visited Internet addresses.uk the local provider for Yahoo! UK & Ireland. Prodigy and @home. multiyear deals involve exclusive book-selling rights.COM'S ASSOCIATES PROGRAMME Source: Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. 67 . Amazon also established agreements with AltaVista.de became the local provider for Yahoo! Germany and Amazon. People tend to tell their friends about it. mutual links. spreading the word for Amazon. Yahoo!.customers are encouraged to provide e-mail addresses of friends. Netscape's Netcenter and NetSearch. thereby promoting Amazon. These multimillion-dollar.com About Me .co.com.com). and primary button placement on web portal search engines. In return. Therefore.com Refer-A-Friend . each friend is sent a $5 Amazon.amazon.allows customers to create a personal profile (with pictures) on the site. and you are given a $5 gift certificate for each customer you provide.2 .AMAZON. In addition. Interesting viral initiatives include: • Amazon.com's website (www. free eCards and gift certificates (which customers send to friends. the customer acquisition cost is only £10.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. including: America Online (AOL).

.Forbes. "we had a world-class site the day we launched . This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. C. By relating to customer needs. which accounts for 66% of Amazon's sales.but it was only a tenth as good as the site we have now. Amazon is building customer loyalty and encouraging repeat business. Once customers are attracted to the site. Amazon maintains a database of customer preferences. With this combination of promotional methods. and improved customisation and recommendations (e. with the explosion of websites. Amazon has been able to achieve average customer acquisition costs of less than $20 . have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. According to Jeff Bezos. Magazines. Amazon has also incorporated traditional offline media (TV. clear presentation. so we didn't have to do much advertising. And we relied on word-of-mouth to build awareness. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) have significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams.com Really Matter?' . which is analysed (learning) and used to provide value-added services such as the introduction of new product categories.g. 50 Willis. interesting content. Amazon's proven online merchandise selling techniques including easy-to-use search options. As the relationship develops. Purchase CirclesTM). community feel (as discussed previously). buying patterns and viewing habits. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base.significantly lower than other online companies. however. April 6. billboards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. 1998 68 . 'Does Amazon. That's not possible anymore50". This strategy has created an efficient traffic-generating machine by creating virtual loops of traffic so that Amazon is top of mind when customers go online. newspapers) to generate awareness.

Success.. As such. We have been customer obsessed. "we're not a stationary target. L. Saunders. Amazon was able to secure partnerships and alliances with key players. and to convey its vast size and offering. which within six months propelled Amazon to one of the leading online music retailers. to capture the spirit of the site.com obsessed52". 'Business the Amazon. 51 52 Hazleton. For example. Our secret is that we have not been competitor obsessed.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. R. According to Jeff Bezos. July 1998. and our goal is to increase that gap51". memorable. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. because he wanted it to be short. developing customer service centres and expanding its distribution network to support high levels of service.com Way'. due to the hype and coverage it was given. and its safe and secure delivery. Amazon is constantly seeking new ways of improving its offering. establishing Amazon as the leading online bookseller with a large customer base. In addition.2. This has helped them attract customers and move up the learning curve quickly. We were blessed with a two-year head start. As such. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. the balance of power shifts away from the company and goes towards the customer.a wide range of choice. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. while our competitors have been Amazon. Amazon has been able to build a strong brand at relatively low cost. in June 1998. establishing a reputation for excellence and fulfilment. (Oxford: Capstone Publishing). Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). Amazon received criticism for expanding its product line.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. management realised that Amazon had become more associated with other core brand values . good value. In addition. However. "Online. thereby diluting the value of its association with books. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon's understanding of its brand identity has been a critical factor. According to Jeff Bezos. and according to Jeff Bezos. Amazon unveiled a music store. Nevertheless. further enhancing their value proposition.. 1999 69 . Distinct Brand Identity Jeff Bezos chose the name 'Amazon'.

stem from its compelling value proposition and high quality end-to-end customer experience. 'Marketers of the Year: Jeff Bezos.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. The key factors driving its growth and high retention rates. it has not recorded any profits to date. This raises a critical issue. Amazon's intense focus on customer needs and continual innovation. However. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Amazon delivers on its promises of a wide inventory of products. Amazon also recognised that service quality is a perception.. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Amazon has continuously invested in customer service. and to sustain a positive image and satisfactory end-to-end experience. 53 Warner. as the true value of a brand lies in its sustainability. 1998 70 . if it continues to incur losses. B. Nevertheless. Quality is only measurable in the minds of visitors to the site. not necessarily a reality.2.Brandweek. with new products and value added content. In doing so. which is critical on the Internet. distribution centres and upgrading the site. October 12. Volume Discounter' . however. perhaps trying to defend its view that losses taken to build market share can reap profits later. and investors lose confidence. When they're young. Amazon is claiming to be making profits on its books and music categories. secure payment procedures. the drain on their cash resources will push them towards bankruptcy. Although Amazon has successfully built a strong brand and loyal customer base. they have cultivated a reputation for excellence and fulfilment. they're stretchable and pliant. speedy delivery and good value. This customer-centricity is a key hallmark of a successful Internet brand. have kept it ahead. but over time they become more and more associated with a particular thing and harder to stretch53".

com). However. magazines.3 CASE STUDY: BARNESANDNOBLE.com launched its website (www. Barnesandnoble.com's timeline and major milestones is outlined in Figure 6.1 Company Overview Barnesandnoble. etc.COM .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com) .2. Barnesandnoble. contacts.Barnes & Noble went online at AOL May .Barnes & Noble. Currently.Launches Affiliate Network December .Launches Video Store 71 . Barnes & Noble Inc. Dalton bookstores (located in shopping malls). Barnesandnoble.Acquires minority stake in NotHarvard.Acquires equity stake in Mightwords .com announces strategic relationship with Palm Computing .) established by its parent company.Offers same day delivery in Manhatten ..Announces distribution relationship with New York Times September .Barnesandnoble. and 20% owned by the public. as it could capitalise on the infrastructure and back-end operations (warehouses.3.Launches Internet Radio . and 470 B. rare. book databases.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com provides other online categories offering software.com and Microsoft announce that they will create an eBook superstore . Barnes & Noble Inc. Launched in 1997. 40% owned by Bertelsmann AG.Barnes & Noble University opens registration for free online courses .com was able to 'hit the ground running'.Barnesandnoble.2 1997 January BARNESANDNOBLE. music. Inc.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . prints & posters and related products. is one of the best known traditional booksellers in the United States.com . Barnesandnoble.com is approximately 40% owned by Barnes & Noble.barnesandnoble. Besides books.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. promotion) between the online store and the retail stores have been kept separate. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). and is the second largest online bookseller (after Amazon.Launches BNTV .COM 6. all front-end operations (marketing. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. TABLE 6.TIMELINE AND MAJOR MILESTONES .com is the fourth largest e-commerce retailer54.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July .

easy and secure ordering.2 Value Proposition Barnesandnoble. good prices.com's website (www. including title. they offer customers fast delivery. the company created a site very similar to Amazon.3.com offers customers an easy-to-search catalogue of virtually every book currently in print.com let customers sign up to receive email reviews and announcements of new titles.3 Sources of Value . as cited on Barnesandnoble.3).barnesandnoble.3 . previously-owned and rare books.com's virtual storefront is graphically richer than Amazon. software. FIGURE 6. in terms of the 7Cs framework. logically structured.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Both Amazon.COM'S WEBSITE Simple. as well as an extended searchable catalogue of millions of out-of-print.OVERVIEW OF BARNESANDNOBLE. but instead of developing an outstanding interface to its inventory. music New Initiatives Barnesandnoble. 6. In addition. Both offer detailed bibliographic information.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.com's and takes a bit longer to download. Barnes & Noble planned to dominate online book-selling. and easy-to-navigate site Categories focus on books. author. Both have expanded their convenience to offer 54 Media Metrix.bn.com's (Figure 6.com or www.com and barnesandnoble. rich editorial content and a community experience.com) 72 . the features are practically identical. etc. publisher. however.3. edition.

Netscape and Microsoft Network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.000 affiliates in its referral network. while Amazon.a replica of Amazon's Associates Programme.com was valued at $21.com in return for a commission on any purchases that they originated .3. Although. while Amazon. The 6. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). These initiatives have generated traffic to the site. Barnesandnoble.com's 1999 revenues were $202.com's market capitalisation was $251 million.4 Brand-Building Strategy Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Both offer customisation that permits users to personalise the experience. reasons for this are explained in the next section. and both are expanding globally.com's $1.The Wall Street Journal. however. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. prevent cannibalisation of its existing business. has yet to leverage its strong brand in cyberspace. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com has created a high quality website and customer experience. However. Yahoo!.com. and avoid charging sales tax in states where it has stores56. it lags behind first-mover Amazon.64 billion. December 17. compared to Amazon. Barnesandnoble. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com closed 1999 with 4 million customers. As of February 2000. Barnesandnoble. and Barnes & Noble Inc.6 million. They have developed an affiliate programme that links sites to Barnesandnoble. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. Both try to foster a community of readers by letting customers post reviews online. Barnesandnoble. Webcrawler.com had over 17 million. Lycos. Both offer 'associate programmes' that let other websites link to their sites. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . Instead.1 billion. this programme had more than 300.

By failing to leverage it. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. as Bertelsmann's book division includes partners such as Random House. Recent Initiatives Barnesandnoble. Barnesandnoble. in-store displays.com. or deliver books directly from the retailers. Barnesandnoble. and the tangibility that this provides. At any given point there are hundreds of customers browsing their aisles looking for something to read.com. and in recent months has aggressively sought new ways to differentiate itself. Barnesandnoble. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. and a same-day delivery option in Manhattan.. Under the seven separate agreements. • Barnesandnoble. 1-800Flowers. Jcrew.com should have aggressively cross-promoted their stores through advertising.com. To signal its intentions. people began using their stores as a physical showcase for online rivals such as Amazon.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). and its BMG Entertainment division includes music giants Arista Records and RCA Records.com created a new cross-marketing genre in February 2000.com. content and distribution opportunities. Unfortunately.com. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com is its association with Barnes & Noble Inc. In return. Planetrx. LLbean. each partner offers a similar link to Barnesandnoble. with a similar discount. provides access to valuable resources.com's link to Bertelsmann AG. 74 .com has changed its name to Barnes & Noble. Barnesandnoble. when it struck reciprocal marketing deals with Expedia.com. • Barnesandnoble.com. Petsmart.com's key differentiator from Amazon.com has begun to acknowledge some of these mistakes.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. Barnesandnoble.com has lost access to valuable customers. in the attempt to gain traction and build momentum.com offers links to each partner's site and a discount for visitors who click-through. and Internet terminals in the bookstores. • In addition.com.com and VitaminShoppe. Barnes & Noble University (a free online education resource).com. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. and leverage its real-world presence.

forbes. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".Forbes.3.Not a Best Seller' . meant that Amazon.com) 75 . Barnesandnoble. 57 'Bn. 2000 (www.com's experience is instructive. otherwise they risk losing out to other online competitors.com.com and has given them the image of a second rate 'me too' brand. The company failed to leverage its established brand. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. and was further up the growth curve.6 Conclusion Although Barnesandnoble. it has not been able to establish itself as the leading online bookseller. The Press have also contributed.com's late start in 1997. and its lack of innovation (by copying Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and allowed them to offer stock options as compensation and achieve a high market capitalisation. Barnesandnoble.com . even if that means eating into their existing sales. In addition. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. significant market momentum. a wellestablished Internet brand.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.its key differentiating factors. it also caused a major setback. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. customer relationships and offline presence . by portraying them as slow and clumsy in comparison to the more nimble Amazon. feature for feature) has failed to differentiate Barnesandnoble.com has been able to create a high impact and high-quality customer experience. August 4.

as well as create a kid's site. Italy and Spain within a few months. arranged through J. and Converse. 58 Kajsa Leander. England. P.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and the resulting loss of investors' confidence.com collapsed through lack of funds.Announces it has only 500.com.3 1999 Mid year BOO. founder and Chief Marketing Officer of Boo.First sign of problems .com entered six markets: US. Boo.1 Company Overview Founded in 1999. as cited in 'Boo.Multi-million pound advertising campaign created by BMP DDB . After a high profile launch. Sweden.COM 6. However. and included high profile investors such as Bernard Arnault.2 Value Proposition According to Kajsa Leander. If a clothing brand is on the Boo site. receiving $125 million of funding. Boo. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).they redesign site. Morgan. Finland. it's about range and convenience. due to its poor performance and inability to build a customer base. CMO of Boo.000 unique visitors . November 2000 January February May 6. within six months Boo. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com provided a range of 18 fashion and footwear brands including DKNY. Everlast.Raises funding of $125 million .4. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). not the limited range you might get at most London fashion shops58". Puma. sack 20% of staff and sell stock at 40% discount . Company is put up for sale. They intended to add France.Site goes live .TIMELINE AND MAJOR MILESTONES . "our marketing thrust is not based on prices. among others.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". June 10.Marketing Week. and was billed as one of Europe's hottest e-commerce ventures. and eventually debut in Asia. On going live. TABLE 6.fails and appoints KPMG as liquidator. Boo. it means all that brand's product line is available. Germany and Denmark. 1999 76 . Boo.4 CASE STUDY: BOO.com.4.COM .Appeals for $30 million more funding .com opens its virtual doors' .com had set the record as Europe's best-funded European Internet Start-up.


6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.


Miss Boo

However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of



European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.

6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the

Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999



amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.

6.4.5 Conclusion
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.


Harvard Business Review.Merges with Columbia Records .Site goes live .CDnow and Time Inc.Merges with N2K.com) 80 . as well as music reviews.Raises $10 million through private placement .5 million distribution deal with Lycos Signs three-year.000 sound samples. good prices. daily music news. It has a customer base of 4 million people. $18. CDnow provides access to over 500. D.Forges distribution partnership with Yahoo! $65.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow was acquired by Bertelsmann AG. T. and exclusive interviews and reviews from CDnow's award-winning editorial staff. former arch rival .000 music related items . customisation and a wealth of information and content to help in the purchase decision. and was the first site to offer the sale of music downloads and custom CDs. & Novak.5. announce marketing alliance . features. pp. CDnow is also driving the digital distribution of music.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. guides to music genres.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.000 people. a valuable and rewarding experience"63. On 19th July 2000.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . and one of the most popular shopping sites on the Internet62.1 Company Overview Founded in 1994.179-188 63 CDnow website (www. TABLE 6. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5 CASE STUDY: CDNOW 6.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5.Partnership program with Geffen Records . CDnow is the leading online music store. whether for browsing or buying. convenience.. and an average daily audience of over 800.cdnow.ten times the selection of a conventional bricks-and-mortar music store). 62 Hoffman. by twin brothers Jason and Matt Olim. 'How to Acquire Customers on the Web' . May-June 2000. cover art.TIMELINE AND MAJOR MILESTONES .Launches merged CDnow/N2K site .000 music-related products and 650. $22. and they aim to "make every visit to the site.

The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has leveraged the reputation of their brands to reinforce its own. to make it easier for customers to explore new music and make informed purchasing decisions.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. FIGURE 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. artists biographies. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. For example. easy-tonavigate..3 Sources of Value . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. cover art. By partnering with well-known content providers.5.5 . CDnow has cultivated similar relationships with MTV. 81 .5. etc. and has secured rights to music reviews.Figure 6.

search engines. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. allow customers to keep track of albums to buy in the future.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). it gives them a sense of ownership and a compelling reason for them to return. In addition. Internet access providers. and Geocities as well as more focused specialist sites. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. and key news and entertainment sites . Due to International interest. 82 . and could consider introducing customer reviews or set-up communities around different music genres such as a Jazz Club or Classical Club offering members relevant content and the option to chat with other club members. It also creates switching costs.such as AOL. Yahoo!. German. Italian. Spanish. Whenever a customer makes a purchase they earn Fast Forward Reward points. By customising the store to meets customers' needs. Excite. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Portuguese. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . allowing them to respond to detailed customer queries. CDnow hired a group of multilingual customer service representatives to handle questions. French. CDnow developed the Fast Forward Rewards programme. Other features such as My CDnow's Wish List. which accumulate and can be spent on a variety of music-related products. Dutch and Japanese. Customer Care CDnow's site can be viewed in English. Community CDnow has not exploited the potential of creating a community feel. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. they will be reluctant to visit another online store and enter the information again. an incentive programme that rewards customers and encourages them to connect back to the site.

CDnow extended its distribution reach to include more than 250. CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences. It is a revenue-sharing arrangement. as well as more-targeted music-related sites like Billboard. 83 . print advertising is music-related publications such as Rolling Stone.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. they buy from CDnow. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. • Alliances and Partnerships .Through the Cosmic Credit Programme. By keeping the brand in front of the customer in this way. CDnow's initiatives include: • Banner Ads . music-oriented websites. • Traditional offline Media .000 small.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. covering the entire music spectrum. According to Jason Olim. Excite and other powerful Internet content and service providers.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. Yahoo!. and radio spots on the Howard Stern Show to build a cult following among radio listeners. and spot radio to build reach. and Variety.5. • Affiliate Programme . customers buy music. Spin. CDnow is doing everything it can to ensure that the next time that 6.They have also stuck exclusive alliances with AOL. this is their "most successful customer building programme64". including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.CDnow's advertisements are targeted to some degree.

5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.hsny. both in the online and offline worlds. 1998: $56.Hampel & Stefanides (www.cdnow.Press Release. It is constantly adding new functionality to the site and has been innovative in its offering . and to increases in the customer base of more than 30% quarter-to-quarter. and scaled it awareness-building efforts.they were the first site to offer the sale of music downloads and custom CDs. It is a powerful source of acquiring new customers at low cost. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.4 million.4 million). This has contributed to a 225% increase in sales (1997: $17.(www.htm) 84 . resulting in increased conversion rates.5.CDnow made public relations a high priority brand-building tool. 6.As for many successful online retailers. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. with 44% of sales coming from new customers65. with repeat customers accounting for more than 50% of sales. Public relations efforts helped to generate word of mouth and influence sales. CDnow's promotion strategies have attracted high levels of traffic.com/cdnow. it is in this context that the large investments in advertising and partnerships make sense. as a way to fuel very lucrative word of mouth. word-of-mouth accounts for the lion's share of CDnow's customers. • Word-of-Mouth .com) 65 'Pioneering in Cyberspace' . 1998 . April 28. The company continually pushed for new distribution partnerships to widen its sphere of influence. The story of how CDnow was founded in a basement. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . In fact.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim.Building an Internet Business at Breakneck Speed". CDnow has developed a relationship with Valley Records. P. combined with the high impact customer experience created .5. (Boston: Harvard Business School Press). It was able to create a strong value proposition and high quality customer experience. to ensure quick delivery to customers. as cited in Carpenter.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. 66 Jason Olim. This gives the customer the impression that the order is being handled quickly.89 67 Jason Olim. P. This. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. (Boston: Harvard Business School Press).from how CDnow has personalised its product offering to its capable customer service team . They also provide the customer with an order number and customer support contact information should they have questions. well-targeted marketing programmes both online and offline have driven large volumes of traffic to the site and have exposed the brand to millions of potential customers. and innovative. a record distributor that handles the majority of CDnow's fulfilment logistics. 6.Building an Internet Business at Breakneck Speed". 2000 p. The development of an extensive affiliate network. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. CEO of CDnow. According to Jason Olim. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. "eBrands .75 85 . CEO of CDnow. as cited in Carpenter. and ensure that it exploits its early-mover advantage and keeps ahead of competition.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. 2000 p. "eBrands .it's what you do66". and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. "your brand is not just what you say .

and 450.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. Auctions are an enabler.2 Value Proposition eBay offers consumers an efficient.efficient one-to-one trading in an auction format. 24 hour a day. 1st October 1999 86 . eBay is not about auctions. from collectibles and antiques to electronics and toys.6 CASE STUDY: EBAY 6.com) 'eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Since its launch in September 1995. Individuals use eBay to buy and sell items in more than 4. and eBay provides added value through its convenience.Company Overview' .removing the need for inventory. Sellers pay a nominal fee for placing an item up for sale. "at its core.782 million in January 200068. payment) between themselves.000 new items joining the "for sale" list every 24 hours69.A Harvard Business School Case Study. with the number of unique daily visitors setting a record of 1. garage sales.300 categories. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. The buyer and the seller work out the logistics of the transport (e.25% to 5% of the final sale price on any item sold. eBay effectively created a new business model never before possible .g. According to Meg Whitman.6. the eBay community has grown to include more than 10 million registered users.ebay. extensive selection and geographical reach. flea markets and auctions. as cited in 'eBay . transportation and other overhead costs. or the payment for the item .eBay website (www.com) 70 'Meg Whitman at eBay Inc. CEO of eBay. with emphasis being placed on its unique community feel and culture. Auctions represent a platform. shipping. collectable shows. and eBay receives a transaction fee that ranges from 1.the closest thing in the offline world are trading forums such as classified ads. global trading place for buying and selling personal items in an entertaining auction format.6. There are over half a million new auctions. Auctions make it fun. This is a new market . (A)' .eBay website (www.Company Overview' . 6. and eBay never takes possession of the item being sold.ebay. People perceive the auction format to offer better prices.

3 Sources of Value . and Salt Lake City . .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . Boston.Business Week.eBay goes live . Selling.eBay expands strategic relationship with Netscape . And you only get word-of-mouth if you have a great customer experience. Milwaukee. and two books -.eBay goes live in Australia .America Online and eBay announce strategic marketing alliance .eBay and First Auction sign a partnership agreement . 1 is have a great customer experience71".eBay acquires Blackthorne Software GO. the eBay customer experience is based on how their customers deal with each other.eBay goes wireless with Palm VII connected organiser .5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES . they try to influence customer behaviour by encouraging them to adopt certain values. Seattle & Tacoma.eBay and Ultimatebid. .eBay acquires Kruse International . The Official eBay Guide to Buying. and raises $700 million . Norfolk & Virginia Beach. Dallas & Fort Worth. and in terms of the '7Cs'. So brand-building job No.Compaq Computer Corporation and eBay form a strategic U. co-marketing relationship. Since eBay cannot control how one person treats another.de .Com form alliance - 6. 21st May 1999 (www. and Collecting Just About Anything and eBay for Dummies. emphasis is placed on community development and customer care. and its online trading site (Up4Sale) .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .com to provide automotive service for eBay Users .Launches "My eBay!" to customise the online auction experience .eBay launches local websites in Baltimore & Washington DC. Unlike the previous case studies discussed.businessweek.The 7Cs Framework According to Meg Whitman.eBay acquires alando.eBay IPOed raising $58 million .eBay and AOL launch co-branded site .eBay launches 'About Me' feature. as they rarely deal directly with the company. Providence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. "the first brand-building strategy that we have is to have a great customer experience.eBay acquires Butterfield & Butterfield.com and eBay announce multi-year strategic marketing agreement eBay and NEC form a joint venture in Japan eBay launches in Japan eBay and Autotrader. Las Vegas.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.6.eBay acquires Jump Inc.com) 87 .Germany's leading online person-to-person trading site . Still the vast majority of our new users come from word-of-mouth. Nashville.eBay introduces eBay Magazine in collaboration with Krause Publications. allowing users to create personal homepages .eBay teams up with Carclub. This raises challenges in how to control and influence the customer experience.S.

eBay's site has to process thousands of live bids simultaneously. topically arranged. categorically arranged. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. Content Content is primarily user generated through the items listed for sale. easy-to-use online service (Figure 6.6). which is much more demanding on the system. and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content. Nevertheless. Other content includes the banner ads.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. eBay had a 'wake up call' when the website crashed for 8 hours. eBay has also expanded to accommodate access through wireless devices for added convenience. they have continually invested in system capacity. angering hundreds of thousands of eBay users. This contributes to the community feel.6 . and since. increasing the risk of outages. FIGURE 6. and adds to the experience and the discovery of the auction process. 88 .

the community spirit and personal relationships also transcend the online experience. and is considered by many users as one of the best features on the website. a "giving-board" for charitable donations to user-identified causes. working together and helping each other offline. the culture has come under strain due to the company's rapid growth from a small community into a "big city". This has created a self-regulating mechanism that encourages good behaviour. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. In addition. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. Community eBay attributes much of its success to a strong sense of community among its users. e-mail. eBay's community has a distinct culture based on trust.eBay represents more than just a place to buy and sell goods. eBay offers its users category-specific chat rooms. a monthly newsletter. discuss topics they care about. To encourage this sense of community. 89 . while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. by the people. which is then added to the partner's trading profile. autonomy. For many 'eBayers' . eBay Boston. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). has enabled eBay to foster a strong sense of community on its site. eBay Salt Lake City) have helped them restore that community feel. After a sale.g. However.as eBay users refer to themselves . for the people". respect. bulletin boards. and in doing so. empowerment and equality. Whitman describes eBay's community culture as a site "of the people. It is a place where people can meet with similar interests. Recent initiatives such as the development of local websites in major US cities (e. and share information. which is posted to the site. and there are several reports of eBay users vacationing together.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface.

As such. By using its own enthusiastic. This also reinforced the company's respect for. geographically dispersed users as customer support representatives. eBay's approach to customer care has evolved over time. This was later expanded to include customer support representatives who worked out of eBay's headquarters. Customer Care eBay controls neither end of the transaction. and the introduction of two specialised customer support groups . These people worked from their homes. shill bidding) and helping to resolve user-to-user conflicts. and willingness to empower. in which the company hired active. and the Safe Harbour group. During the first two years.the Community Watch group. links to high traffic sites. the largest of which was with AOL. eBay has invested in customer care and support to ensure people conduct safe transactions. Customer support activities were constantly upgraded and expanded as the business developed. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. which was dedicated to investigating misuses of the system (e. knowledgeable. 90 . banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. answering e-mails and responding to questions posted on the site's bulletin boards. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. fraud. which was dedicated to monitoring the site for illegal and infringing activities. eBay employed a "remote" customer support model. and respected members of its own user community to serve as customer support representatives. eBay also engaged in marketing partnerships. its user community.g. eBay was able to cost-effectively offer 24x7 customer support early on. but they have other partnerships with over 150 websites of varying scales. Communication eBay maintains close communication with its members.

as a result of the high quality experience it provides. The AOL partnership was one of the largest strategic partnerships on the Internet . Through this combination of its advertising efforts and targeted promotions. These new publications appeal to the collecting spirit. and facilitate the spread of positive wordof-mouth. As a result. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Mary Beth's Beanie World. 91 . Early on. eBay decided that it would not enter into major portal advertising deals in the short term.3 million in advertising. and maintained the same ratio for 1999.6. In 1998. Recent promotional initiatives include its new publication. but they have other partnerships with over 150 websites of varying scales. who tended to be serious collectors.a four-year. eBay Magazine. and Collecting Just About Anything and eBay for Dummies. Selling. eBay has been able to attract a large customer base. and highlight opportunities created by e-commerce.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and two books. they spent $12. Based on this. provide a wealth of information about the 'ins and outs' of trading on eBay. they decided to target their marketing efforts on these heavy users. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. representing about 40% of revenues. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Doll Collector) and appearance in trade shows. eBay has since expanded its promotion efforts and engaged in marketing partnerships. whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. the largest of which was with AOL. The Official eBay Guide to Buying. eBay transformed from a pure online play into a 'clicks-and-mortar' company. $75 million joint marketing alliance and development deal.g.

businessweek. very fast. their ability to create a new market using Internet technology. This has become part of the eBay culture. the Personal Shopper and the eBay Life Newsletter. I think you are not well served by moving incredibly rapidly and not doing things well72". which were all ideas of eBay users. and according to Meg Whitman.5 Conclusion eBay's compelling value proposition.6. This is achieved by listening to their community (learning) and developing new improved products and services (relating). 6. such as the Feedback Form. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET eBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer 'lock-in'. however. and according to research carried out by eBay.contributing to its strong lead and competitive advantage. "the devil in so much of this is in the detail. However. And while we have to move very. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . eBay attracts a broader selection of buyers. have been key factors that have contributed to the success of the brand. as they could not opt for a 'go slow' strategy. which has established eBay above other online auction communities. As a result.com) 92 . and their first-mover advantage. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. Their focus on heavy users and targeted promotions.the ultimate network effect . have been instrumental in building a 'quality' customer base. eBay has also faced difficult challenges in scaling the organisation fast enough. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. which in turn attracts more sellers .Business Week. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. 21st May 1999 (www.

America Online (AOL) and Gap Inc.gapkids.gap. Inc.'s website (www."to deliver style.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.2 Value Proposition Gap's simple.7 CASE STUDY: GAP.$100 million. 'Clicks and Mortar at Gap. October 8. Gap Inc. up from $20 million in 199875. service and value to everyone74".800 stores in the US.com. and analysts estimate that sales in 1999 amounted to $50 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and provides useful insight into how traditional brands can leverage their strength online.Business Week.com is an example of successful crossover marketing.7.com and www. from shirts to accessories and hard-to-find sizes. Gap's online sales tripled in 1998 alone. L. and BabyGap. GapKids. to provide customers with greater convenience and options.htm) 75 Jeanne Jackson. letting customers access the Gap brands. 'Clicks and Mortar at Gap.see Appendix A Gap. Gap online exploits the accessibility and convenience of the Internet. Germany and Japan. October 8. the growth prospects are enormous.1 Company Overview Gap opened its first store in San Francisco in 1969.babygap. Gap. This success is largely due to their simple formula .an early convert to the then-revolutionary idea of clothes retailing on the Internet. In addition. standard styles are well suited to online shopping. Its reach extends across more than 1.interbrand.com) . and Gap online provides access to the full range of items at Gap. In late 1997. however. online sales are only available to US customers.7.com' . Gap started selling items online .COM 6. California GapKids opens its first store BabyGap is born Gap opens its online store at www.Business Week. 6. as cited in Lee.gapinc. from jeans and T-shirts to khakis and jackets. and are still relatively small compared to Gap's $9 billion in annual sales. Currently. surpasses $9 billion in net sales and increase earnings by 54% over previous year.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.com' . and today it is the 29th most valuable brand in the world73. 73 74 Interbrand (www. as cited in Lee. "this is about being clicks-and-mortar. UK.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. head of Gap Online.com/about_us. The Gap offers a balance of modern and seasonal styles of clothing. announce multi-year partnership. 1999 76 Jeanne Jackson.COM . L. whether in the store or online76". Canada. 1999 93 . According to Jeanne Jackson. TABLE 6.

but provides customers with the option of viewing text-only.7 . feel and design of the site is consistent with the bricks-and-mortar stores. FIGURE 6. This personality is reinforced online through the simple structure and layout.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.7. April 18. making it convenient. Visiting the gap.making visual references to its offline roots... and easy-to-use. the extensive integration of Gap's online and offline activities are clearly evident.. Executive Vice President of Global Marketing. and Customer Care. reinforcing its brand identity. The site also offers sharp graphics.3 Sources of Value .OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. describes the company's brand personality as "direct and straightforward. Unlike Barnesandnoble.very easy.. 'Mind the Gap'. Content. 1998 94 ... D.com store one immediately notices the consistency between the online and retail stores. Gap Online primarily focuses on Convenience. very efficient"77.com. The Observer. Simple.The 7Cs Framework In terms of the 7Cs framework.. making navigation even faster. from the blue and white colour scheme to the easy-toshop format . Michael McCadden.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.

twice a month. and customers can view their latest TV adverts for buying inspiration. The Gap site connects to other Gap online stores including GapKids and BabyGap. Gap made a decision to charge sales tax on online sales. Gap has also developed an affiliate programme. However. Gap. Gap communicates with customers through customised e-mails. allowing shoppers to contrast different cuts and styles.com also provides a Gift Central feature which offers gift suggestion from Gap. Unlike the case of Boo.com. once customers are registered online. standard styles are well suited to online clothes shopping. promoting its specials and including links directly to items on Gap's website. and goods bought online get returned at the same rate as store purchases . without causing complications. Gap's simple. Gap does not provide any community features on its site. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. which would not be possible in the store. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. In order to integrate its offline and online operations and logistics.com's content consists of detailed information on its full range of products. Gap. By doing so. and customers can register to get e-mail reminders of upcoming holidays and birthdays.com allows customers to track the status of online purchases and provides contact information on the nearest store. and BabyGap. GapKids.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. 95 . customers can return goods purchased online to their neighbourhood store. In addition. and had recently established marketing deals with AOL and CDnow. as well as sample all of the latest shades of fingernail polish on a virtual hand.as most Gap online shoppers have a good idea of how Gap clothes fit.

providing a useful way to directly reach customers. billboards. which can be used towards future purchases. it is fully leveraging its offline presence to build awareness.Extensive Integration Gap. These efforts doubled the size of Gap's e-mail database. whereby for every $100 a customer spends at Gap Online.ship". • They offer Online discounts and promotions such as the ShopCard.com has links with CDnow to cross promote websites. by offering a 10% discount and free shipping on their first online purchase.shop. Magazines.com has also created an affiliate programme encouraging sites to establish links to gap. Most of Gap's online traffic is generated by leveraging its physical presence. on shopping bags and even on the cash register. In addition. To convert walk-in shoppers to cybershoppers.com) in store windows with the slogan "surf. • Gap.) that also promote the online store.4 Brand-Building Strategy . Store clerks are also trained to look for products online for their customers if the store does not have them in stock. 96 . however. etc.com in return for a 5% commission on every sale referred through the site. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials. by displaying the URL (www. on counter cards. they send the customer a $20 Gap ShopCard. Gap has held in-store campaigns to get customers to submit their e-mail addresses. Gap secured a 3-year commerce and marketing agreement with AOL.7. which displays "Shop online at www. In certain high traffic Gap and GapKids stores.com has been able to piggy-back on The Gap's offline advertisements (in TV.com.com" on the display screens between transactions. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. either online or in stores. or to refer shoppers to Gap's website.gap. Gap has also supplemented this with online promotions: • In August 1999. • Gap. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap.gap.

com is an example of successful crossover marketing. and allowing each to leverage the strengths of the other. By aggressively marketing both the stores and the website. 97 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and can also provide access to different customer segments who may not usually buy the products at all .7. on the other hand. Pure online players have to invest heavily in logistics.thereby increasing the company's reach. such as Gap.5 Conclusion Gap. thereby reinforcing its brand identity. The Internet. whereas established companies. With their brand awareness and network of retail outlets. provides existing customers with added value through the convenience of purchasing online. while reaping the benefits of low customer acquisition costs and extended reach. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. Gap has been able to significantly strengthen their brand-customer relationship. have already established the back-end operations and can use them as the cornerstone of their online business. Gap had a significant advantage over pure online players in attracting customers and building critical mass.

the amount of information. all in a single location. the site was receiving 1 million hits per day.see Appendix A 'Yahoo! .8. According to Timothy Koogle. two Ph.8 CASE STUDY: YAHOO! 6.interbrand. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. As such. 1998 (www. and the number of websites continues to explode.businessweek. 6. Yahoo! was founded by David Filo and Jerry Yang. The company's global web network includes 23 world properties outside the US. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. household and business user reach.com) 98 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition At the core of Yahoo!'s value proposition.D students at Stanford University. The concept exploded (through word-of-mouth) and in less than six months. and is one of the few Internet companies to turn a profit early in the development of the Internet. from e-mail services to stock quotes and much more. There's nothing in the real world to compare to that79". lies the directory . who started an online guide as a way to keep track of their personal interests on the Internet. Yahoo! has since morphed from an ordinary search service into a global Internet communications. CEO of Yahoo!. 78 79 Interbrand (www.Business Week.1 Company Overview In April 1994. The Stock' .The Company. advertising. Yahoo! offers a range of supporting services that add value. Yahoo! is a leading guide in terms of traffic.8.com) .a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. As the first online navigational guide to the web. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. September 7. The Strategy.

to provide web-based services to PalmTM handheld computers . .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.com.3 Sources of Value . Yahoo! extended its convenience through its Yahoo! Everywhere service. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast. Their goal is not to list everything under the sun. TVs. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. More recently.e.8.The 7Cs Framework Convenience Central to Yahoo!'s success. Palm computers).TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! acquires eGroups .Yahoo! Launches Business-to-Business Marketplace . mobiles. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.000 shares at $13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Receives $1 million in venture capital funding from Sequoia Capital $33. and unveils Yahoo! Digital Introduces Bill Payment services .8).Yahoo! acquires Arthas. regardless of platform (i.Yahoo! unveils Yahoo! Finance Vision .7 YAHOO! .Yahoo! forms agreements with Palm Inc. 99 .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. is the way it has structured and displayed information.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .Yahoo! Shopping launches personalised shopping service 6.600.com allowing them to offer person-person payment solutions . to allow access.8 million IPO (2.Site goes live September .

and has been at the heart of Yahoo!'s growth and development. This creates a win-win situation as its satisfies Yahoo!. 100 . while providing partners access to a large customer base. from stocks and sports results to weather and air fares. and is similar to a custom tailored newspaper (Figure 6. well structured.9).8 . and more importantly. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.com and CDnow. easy-touse. and quick-toload webpages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies. the partner.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Their thrust has been to provide valuable content to customers. ranging from daily news and weather reports to road maps and books. They have formed multiple alliances and partnerships with leading online companies such as Amazon. By tailoring the information to users' preferences. Yahoo! has increased customer loyalty and retention rates. the end-user. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.

(one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. In addition. reinforcing the brandcustomer relationship. and plans to incorporate other features such as online chat to facilitate communications. telephone and even traditional mail. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. and many-to-many.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. to provide its customer base with access to useful links and content. and e-mail. Yahoo! acquired GeoCities. Yahoo! spends more on customer support than most companies. and is driving Yahoo!'s multiple partnerships and alliances. and the nature of the navigation business. one-to-many. In 1999. and encourages them to return frequently. and contributing to their reputation as a quality service provider. Yahoo! has also implemented campaigns to persuade users to bookmark the site.9 . fax. or to make it their home page.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. Connectivity Connectivity is Yahoo!'s core product. It keeps customers on the site for longer periods. 101 . Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. where groups of people with shared interests can communicate through chat. message boards. Customer Care Yahoo! responds to customer inquiries via e-mail.

Yahoo! extended beyond this to use traditional offline media. This was especially important. 80 'Web Survey Shows Yahoo! Tops'. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . 82% of Internet users and 23% of people intending to go online. which conveyed the brand's irreverent personality. At the time this was considered a breakthrough. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". Yahoo! avoided characterising itself as a technology-oriented company. Given the unease with which the average consumer approaches technology. 6. an approachable nature. and according to Intelliquest80. as experience surfers tend to be loyal to their search engine. (www. While Internet companies were targeting existing Internet users through the use of online promotion methods.8.intelliquest. by building a recognised brand name.a sense of irreverence. These near surfers represented (and still do) a large and fast growing group and. recognise the name Yahoo!.com) 102 . and its implications of a good time. Intelliquest. Yahoo! would be one of the first sites that they visited. Yahoo! aggressively promoted the site through public relations. and through communications via email.4 Brand-Building Strategy Yahoo! is a marketing machine. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. and it formed a critical link in Yahoo!'s brandbuilding strategy. Their strategy was to target "near surfers" .people who are not yet online but are likely to use the Internet in the near future. and an inherent friendliness. In 1996. Yahoo! maintains close contact with customers. therefore. Yahoo!'s brand-building success starts with its name. Yahoo! also encourages customers to e-mail ideas and feedback. TV commercials and radio spots during drive time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. As a result.

and yo-yos. According to a recent study. p. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. organisers. They even have a barter deal with the San Francisco 49ers.higher than all other services81. They also teamed up with publisher Ziff-Davis Co.yahoo. to create Yahoo! Internet Life. including backpacks. it's too late. Yahoo! has paid little for this exposure. breath mints. Yahoo! adopted 'guerrilla marketing' techniques . 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. 1997 (www. the research shows that 73% of Yahoo! users bookmark the service . We need to be one step ahead in order to have a better service than our competition82". ER) and Hollywood movies. Once customers access the site. parachutes. a little wacky and inviting'. customers quickly discover its value and through a high quality experience (7Cs). which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. T-shirts.it must reinforce the image of the company as 'a service that is fun. which has been instrumental in establishing Yahoo! as a household name. new services and customised features highlight their ability to relate to customers' needs. s4 103 .with its name being plastered on everything. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. May 3. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products.Advertising Age. Visa and MCI. as well as TV shows (Ally McBeal. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . In addition. 1999. services and contests with well known brands such as Ben & Jerry's.Yahoo! Press Release. VP-Brand Marketing. According to Karen Edwards. Yahoo! has managed to cultivate high brand loyalty. Their innovation. snowboards. August 26. a monthly magazine guide to what's new on the web and it has co-branded products.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . stating that "if we wait to hear about it in the news. sailboats. and 76% turned to Yahoo! before visiting another search engine or navigational site. Although this seems like a shotgun approach.

and its openness (for example. they have carried out extensive partnering. Yahoo! has benefited from a first-mover advantage. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . As a result of all these factors. from its convenient and logical structure and display of information. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. and other search engines at the bottom of its search results page). to its simple design. In addition. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. alliances and acquisitions to provide added value services to their customers. while also associating Yahoo! with well known brands. To maintain its lead. first to go public.6 Conclusion Yahoo! is one of the most successful brands on the Internet. VPBrand Marketing of Yahoo!. In addition. if a user cannot find what it is searching for. Yahoo! points them to its competitors by including links to AltaVista. HotBot.com. p.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. As the first online navigational guide to the web. Yahoo! has built a strong brand. They have maintained that lead through the creation of a high quality end-to-end customer experience. GoTo. first to turn around an annual profit. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. while attracting new customers. Yahoo! has invested relentlessly in new services and marketing programmes. These relationships have provided end-users with added-value. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. its choice of partners. and has cultivated a reputation for excellence.8. May 3. 1999. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". 6. that have set it apart from the pack.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. and first to go mainstream by advertising its name using traditional media.8. with a large customer base and high levels of customer loyalty. have created a distinct brand identity that differentiates the brand and appeals to its target market. its excellent customer service.Advertising Age. their innovative promotional and guerrilla marketing techniques. s4 104 .








This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This



There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.

A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.

A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107

They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. but also provide added value to the brand community. to maintain consistency. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. before it fractures. while ultimately benefiting the end-customers. leading brands have focused on building strong partnerships and alliances. brands are harder for competitors to emulate. 108 . these companies are creating even stronger value propositions. integrated customer acquisition strategies. variety. offering customers the best in quality. ranging from online methods to traditional offline media. and by partnering with well-known brands. Alliances and partnerships play an important role in achieving speed and momentum. and exclusive alliances can lock out competitors from valuable content or online real estate. The most successful partnerships are symbiotic matches. As a result. a company can leverage the partner's brand and reputation to reinforce its own. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. particularly to secure content and widen reach to new customer segments and niches. In addition. whereby each party benefits from the other's expertise or skills.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and have developed multifaceted. and convenience. By distinguishing their offering and focusing on unique sources of value-added. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. to distinguish themselves from competitors. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. content. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. as well as determine how far the brand can be meaningfully stretched to other products and market segments. these companies must have an inherent understanding of their brand identity and core values.

these innovations are difficult for competitors to reproduce. and it aligns itself with the most influential venture capital sources. giving the brand an edge. Many strong online brands were also early-movers on the Internet. and benefited from additional hype. As Internet penetration exploded. It locks up important content and distribution partnerships. and traffic. A first-mover advantage is an important asset for an online brand. customisation and customer care. By getting to market early. and it can acquire customers while it is still inexpensive to do so. are leveraging this customer knowledge (learning) to nurture relationships (relate). These brands are accumulating knowledge about customers. In many cases. and by focusing on customer needs. By leveraging unique customer information. The challenge then lies in keeping up the momentum. the company benefits from the buzz. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and develop a detailed understanding of their customers' needs. and extensive word-of-mouth due to its novelty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. these well-publicised brands also took off. by providing better services. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. that comes with innovation. and are continuously adding new services and functionality to their sites. and differentiating it from other brands. through past transactions and solicited input. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. 109 . • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. the innovations are the result of the company's ability to data mine its vast database of customer information. to create new services and content that satisfy customer needs.

2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. would represent an exciting opportunity for further research. with the emergence of wireless access and new platforms. The Internet has radically changed the business and competitive environments. 7. building relationships and satisfying needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Ability to Leverage Offline Brand and Assets Bricks-and-mortar brands are often well positioned to succeed on the Internet. Having established a strategic perspective on building online brands. 110 . established customer relationships. drawing on several case studies from business markets. and a physical presence (tangibility) . they are equally important in business markets. an in-depth analysis.value remains (and always will) the basic building block for every successful brand. tools and key factors outlined in this dissertation are also applicable to business markets. Through extensive and seamless integration.factors that clearly differentiate them from pure players. ongoing research would be necessary to build on the findings of this dissertation. there has been a limited time horizon to evaluate the durability of Internet brands. established fulfilment systems and infrastructure. Yet while everything is being turned upside down. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Nevertheless. clicks-andmortar brands are providing customers with true added-value. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. Nevertheless. but at the same time. however. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. Brands and brand-building tools tend to be associated with consumer markets. In addition. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. They possess critical assets that give them an advantage over pure online start-ups. In doing so. Therefore. As such. the concepts. one component remains unchanged . They have an established brand. expand the brand experience to meet customers' expectations in the online world. while reaping the benefits of lower customer acquisition costs and extended reach.


422 1.147 9.464 3.527 3.310 11.681 2.602 4.101 9.076 3.761 1.643 3.048 20.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.423 2.052 6.181 21.603 5.985 2.313 2.806 11.654 43.184 1.231 24.895 2.231 12.143 2.193 112 .021 26.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .909 7.275 30.932 4.550 12.596 3.283 4.404 4.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.510 8.781 33.319 1.792 3.694 17.281 11.502 33.806 2.197 32.interbrand.894 14.Interbrand's Ranking of the Top 60 Brands (www.155 7.781 17.225 11.830 14.845 56.361 1.568 3.043 8.804 2.634 1.262 1.766 14.132 15.648 1.595 17.329 4.

As such. constantly innovate. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. whereas entrepreneurial Internet companies must focus on 'managing for change'. (Harper & Row). respond to competitive and market dynamics. global competition. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. & Waterman. and the emergence of a knowledgebased economy.. and structures are aligned differently. Internet companies must be able to move at warp-speed. with the fast pace of technological change. the informal management style and the constant strategy re-calibration. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. They must move quickly to capture new opportunities. 1982 113 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . all these dimensions must change accordingly. R. * Peters. However. customer empowerment. T. commit and deploy resources. It is critical that all these dimensions come together and are re-enforcing. activities. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. 'In Search of Excellence'. and as the business environment changes. showing how they are interrelated. and reorganise as appropriate. all their operations. As a result. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure.





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