S U C C E S S F U L

ON

THE

INTERNET

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
AT THE

UNIVERSITY OF CAMBRIDGE

ROBIN S. CLELAND
SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CONTENTS
SUBJECT PAGE

CHAPTER 1
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure

INTRODUCTION

6
7 9 9 11

CHAPTER 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

THE NATURE OF BRANDS

12
13 13 14 15 16 18 19 20 22 22 23

2.9

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

CHAPTER 3
3.1 3.2 3.3

BUILDING BRANDS

24
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

1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CHAPTER 4
4.1 4.2 4.3 4.4 4.5 4.6

THE INTERNET

33
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

CHAPTER 5
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

BUILDING BRANDS ON THE INTERNET

44
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

CHAPTER 6
6.1 6.2

CASE STUDIES

61
62 62 62 62 64 66 69 70 71 71 72 72 73 75

6.3

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

2

7.5.8.The 7Cs Framework 6.4 Brand-Building Strategy .2 Value Proposition 6.7.5 Conclusion Case Study: Gap.5 Conclusion Case Study: Yahoo! 6.2 Value Proposition 6.5 6.3 Sources of Value .4 6.5.6.1 Company Overview 6.5.4.4 Brand-Building Strategy 6.5.5 Conclusion Case Study: CDnow 6.3 Sources of Value .7.com 6.com 6.The 7Cs Framework 6.3 Sources of Value .8.8 Case Study: Boo.8.4.5.The Failure of Boo.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 .6.2 Value Proposition 6.8.8.4 Brand-Building Strategy 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 Sources of Value .The 7Cs Framework 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1.7 6.4.The 7Cs Framework 6.2 Value Proposition 6.6 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 7.5.7.6 6.6.8.5 Other Factors That Contribute to their Brand Leadership 6.Extensive Integration 6.6.6.3 Sources of Value .1 Company Overview 6.1 Company Overview 6.1 Company Overview 6.4 Brand-Building Strategy 6.1 7.1 Company Overview 6.4.6 Conclusion Case Study: eBay 6.4.4 Brand-Building Strategy 6.5 Other Factors that Contribute to their Brand Leadership 6.2 Value Proposition 6.7.com 6.

2 Figure 2.4 Figure 2.6 Figure 4.6 Figure 2.1 Figure 5.1 Figure 1.2 Figure 6.7 Figure 5.1 Figure 2.2 Figure 2.2 Figure 3.9 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 .7 Figure 6.1 Figure 6.com's Associates Programme Overview of BarnesandNoble.com's Website Overview of Boo.9 Figure 6.5 Figure 4.7 Figure 5.8 Figure 6.4 Figure 6.3 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.3 Figure 2.4 Figure 4.com's Website Amazon.4 Figure 4.6 Figure 6.6 Figure 5.1 Figure 3.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 .4 Figure 5.5 Figure 6.3 Figure 5.3 Figure 3.2 Figure 4.5 Figure 5.8 Figure 3.7 Figure 2.5 Figure 2.1 Figure 4.8 Figure 5.3 Figure 4.2 Figure 5.

com .com .7 The Emerging Brand-Building Environment Amazon.3 Table 6.com .com .6 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones Boo.5 Table 6.1 Table 6.2 Table 6.4 Table 6.Timeline and Major Milestones eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Gap.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones BarnesandNoble.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

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

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

2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. supported by secondary data related to aspects of online business from accredited and published sources.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. • To explore how the Internet is changing the brand-building environment. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. FIGURE 1.2 . Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. A review and analysis of leading academic thinking will be used to explore these issues. 1. and to identify new sources of value.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. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. tools and strategies to build brands on the Internet. This is based on the outcome of the primary research (in-depth case studies).RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 .

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

their purpose and value are discussed. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.4 STRUCTURE The next chapter. as well as the interactive approach to attracting customers and building loyalty. 11 . Chapter 2. provides an analysis of leading academic literature in relation to branding. and introduces the core concepts that form the backbone of the dissertation. This chapter sets the context within which online brands must be built.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Chapter 3 explores how brands have traditionally been built. The limitations of the Internet in terms of brand-building are also discussed. summarises the key findings. Chapter 7. Chapter 4 provides an overview of the Internet and its defining characteristics. by outlining the impact of the Internet on the business and competitive environment. and outlines the opportunities for further research. Chapter 6 examines the brand-building efforts of seven companies. highlighting some key factors that have contributed to brand success. The nature of brands. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. The final chapter. 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.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .

2000. vii 13 . and they form the backbone of this dissertation.see Figure 2. explaining the value of brands. unravelled to reveal the nature of brands and their reason for existence. both for customers.2 WHAT IS A BRAND? According to Rita Clifton. p. and highlights the importance of brand management.1 INTRODUCTION In this chapter. symbolised in a trademark. 74 4 Clifton. These concepts are central to brands and brand-building.1 . FIGURE 2.1. This value stems from the products and services that companies create and bring to the market. 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. D. which. A. (London: Macmillan Press Ltd. The chapter proceeds to describe the influence of brands on the buying process. both to customers. & Maughan. E. these layers are Brands are made up of many layers and dimensions. but extends further to encompass added values derived from factors such as the brand-customer relationship.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. p.a leading specialist brand consultancy firm . whether online or offline. creates influence and generates value4" This definition truly captures the essence of a brand. the brand's emotional benefits and its self-expressive benefits . CEO of Interbrand Newell and Sorrell .. R.). 1996. 'The Future of Brands'.a brand is: "a mixture of tangible and intangible attributes. and the importance of customer satisfaction and brand loyalty. The concept of brand equity is outlined. if properly managed. (New York: Free Press). and to companies. Branding is about creating 'value'. and for the company. 'Building Strong Brands'.

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

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

The buying process consists of five stages (Figure 2.. selective distortion.3).attitudes of others and unexpected situational factors (Figure 2. This can be triggered by internal or external stimuli (advertisements).FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. a consumer will be inclined to search for more information. Therefore. 16 . Once aroused. Planning. These beliefs depend on their previous experiences with the brand. it is critical to understand what attributes consumers value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands.194 The process starts when the buyer recognises a need. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Through gathering information. Implementation. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. it is important to clarify customers' underlying buying behaviour and the buying process. the consumer learns about competing brands. Consumers differ as to which product / service attributes they see as important. p. and the effect of selective perception.. and selective retention.Analysis. two factors can intervene between the purchase intention and the purchase decision . either through heightened attention or through an active information search. 'Marketing Management . Consumers develop a set of brand beliefs about the attributes of competing brands.3 . 1996. (Europe: Prentice-Hall) 8th Ed.4). FIGURE 2. However. P. and pay the most attention to the brands that will deliver the sought benefits. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. In the evaluation stage. and Control'.

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

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

There is also clear evidence of this on the Internet.they provide good word-of-mouth and are the best salespeople for the product / service 2. Harley-Davidson motorcycle clubs). 8 9 Peppers. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 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. 'The One to One Future'. M.g. Firstly. 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). emotional loyalty is born out of a consumer's personal relationship with a brand..BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.Sloan Management Review. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 1993 McWilliam. In this way. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Emotional loyalty can be also created through the formation of a strong user community around the brand. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. 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.. Spring 2000 19 . & Rogers.com. consistent orders Satisfied customers are the best advertisement .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. G. 'Building Stronger Brands through Online Communities' . the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. D.

7). Beyond this. FIGURE 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. A stronger brand enjoys a high degree of brand preference over competing brands. whereby customers would be unwilling to substitute it with competitors' offers. 2. FIGURE 2. 20 . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.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. a 'powerbrand' tends to have a high degree of brand loyalty. pp.7 . 343-373. March 1998. Journal of Consumer Research. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). almost irreplaceable bond as well as potentially to the negative feelings of betrayal.. and understanding the needs and buying processes of the target market is essential.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. However. there are brands that customers perceive as acceptable and would not resist buying. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. S. which goes well beyond the satisfaction of a specific need.6 .BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. there are brands that are unknown by most buyers.

and other assets such as patents. (New York: Free Press).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.8 . FIGURE 2. trademarks. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.. 1991 21 . D. D. name awareness. and relationships with distributors and strategic partners. According to David Aaker (1991). The benefits of each are outlined in Figure 2. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 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".. which is the value of the brand over and above its commodity value.Create Awareness . The major brand assets are brand loyalty.8. perceived quality.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . (New York: Free Press). 1991 10 Aaker.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. strong brand associations.

Satisfaction linked to the attractiveness of the brand. • Brand Leverage . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. Journal of Marketing Research. 'Consumer Market Research Handbook'. pp. R. in the following ways: • Brands. 22 . 158-170. The brand leader is the most profitable and all beyond number two are unprofitable13..To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . (New York: Free Press). and the number two twice the share of the number three12.To be clearly seen.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.. (London: McGraw Hill).To have confirmation of your self-image or the image that you present to others • Continuity .To be sure of buying the best product in the category..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. J. market share and profits . May 1993.8.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. 1992 Worcester. J. G. 11 12 Kapferer. the best performer for a particular purpose • Characterisation . & Tellis.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.Typically a brand leader obtains twice the market share of the number two brand. to its communication • Ethical . to make sense of the offer. 'Strategic Brand Management'. brands perform several functions that add value and customer benefits: • Identification . N. Premium pricing increases revenue.To save time and energy through identical repurchasing and loyalty Guarantee ..8. & Downham. to quickly identify sought after products • • Practicality . P. 1986 13 Golder.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . production and marketing. 3rd Ed. to its logo..

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .

and direct marketing. selling. brand awareness. 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. This chapter spells out the traditional brandbuilding process.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.1 INTRODUCTION Building a strong brand is a complex task. If the offering is developed properly. This is illustrated in Figure 3. The major characteristics of successful brands are also reviewed. confidence and brand equity are built. highlighting important factors that contribute to the success of each step along the way.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 . the next step is to get customers to try the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1. To entice trial and repeat purchase requires triggering mechanisms. 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. Once this has been established. public relations. FIGURE 3.1 . which are created through advertising. it should provide a satisfactory experience and lead to a willingness to buy again. promotion.

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

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

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

1992 The brand prism enables management to understand the brand. below-the-line activities. Finally. It also facilitates consistency in the message being transmitted through presentation (e.how far the brand can be meaningfully stretched to other products and market segments. structure and ease of use). its strengths and opportunities. 'Strategic Brand Management'.g. understanding the brand's core and style helps set the perimeters of brand extensions . (New York: Free Press). website design. advertising. J.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. Secondly.. 29 . and through line and brand extensions.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.

This learning is called the adoption process17 . systems. (New York: Free Press).. it should lead to satisfaction and re-purchase.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. The value proposition must be communicated to entice customers to try the product / service. and its products / services. they must learn about it. E. Advertising and PR are common tools for achieving awareness. 1962. The value proposition must then be articulated in terms of the 'marketing mix' .Product and service features.often referred to as the '4Ps' . FIGURE 3.. culture and staff needed to support.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.The company has to create awareness of the brand.Customers consider whether the product / service will meet their particular needs. 1962. the company must ensure that it develops the appropriate structure. Price. strategy (partnerships and alliances). Before potential customers can buy a product / service. colleagues and opinion leaders become important influences at this stage. management style. (New York: Free Press). • Interest . deliver and reinforce this value proposition (see Appendix B . skills. 'Diffusion of Innovations'.4. 'Diffusion of Innovations'.Figure 3.79-86 30 .4 . and the product / service's perceived performance.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. pp.The customer is satisfied and decides to make regular use of the product / service. • Evaluation . Personal sources such as word-of-mouth from friends. • Adoption . If the offering is developed properly.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. E. features and advantages. Promotion and Place (distribution strategy).The McKinsey 7-S Framework). 17 Rogers.Customers need to be stimulated to seek information about the brand's uses. • Trial .79-86 The Innovation-Adoption Model consists of: • Awareness . pp.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .

Figure 4. and provides the opportunity for dynamic interaction.1 . 4. E-MAIL Is the part of the Internet that most users use at present. news groups and mailing lists. Hypertext allows information to be organised in a user-friendly way that is easily accessible.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. and a critical source of added value.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.1 INTRODUCTION The Internet is transforming the business environment. but in practice not in real time. The three core channels include e-mail (the most common). highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. 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. it offers a number of alternative channels that enable businesses and people to communicate. This chapter provides an overview of the Internet and its defining characteristics. creating new challenges and opportunities. and the 'world wide web' (www) .1. FIGURE 4. which contain hypertext and pictures. In essence. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. In doing so. Information is becoming a major part of the products and services that people buy. it is a common technology platform that allows computing devices to communicate with each other.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 34 .

The context of the Internet and certain key developments are highlighted in the Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.2. ubiquitous links to anyone.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 .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).this radically alters the process of interaction between communicating parties. which was intended to link military networks together. allowing both parties to identify each other and build one-to-one relationships . regardless of where the computer or Internet access device is physically located. 7 days a week.2 (Note: 35 .3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.The Internet is a global network and can be reached from everywhere. the Internet lets individuals and companies build interactive relationships with customers and suppliers. and deliver new products and services at low cost. anywhere. • It Allows for Two-way Communication and Interactivity .24 hours a day. These qualities eliminate the barriers of time and space that exist in the physical world. The Internet can also be accessed at any time . These characteristics combine to create a very powerful medium. These defining characteristics have fuelled its explosive growth. when the United States Defence Department developed the 'ARPAnet'. • It Overcomes the Barriers of Time and Space . By allowing for direct.not previously available with mass medium forms of communication. Graph is not drawn to scale). 4.

000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. as cited in 'E-Business Technology Forecast' .000 1. 2000 Internet / ARPAnet was created Dell.000 1969: 10.2 .000 100. FIGURE 4.3 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000. 1998.000.3.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. 1996 (www.000 1.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.a PricewaterhouseCoopers Report.com) 36 .economist.000 10.Figure 4.

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

g.com) 38 . 2000 (www. chat rooms. These activities highlight the adoption of the Internet as an interactive. entertainment) and purchasing (37%) .eiu. reveals the wide range of areas where people are embracing the Internet .Figure 4. FIGURE 4.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. communication and information tool.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). April 13.from communicating (90% use e-mail) and sourcing information. to interacting (e.5 .5. as cited in the Economist Intelligence Unit (EIU).

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

partners and other corporate constituencies. M. some of which look set to become the superbrands of the future (e. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. 66-76 40 . March . Yahoo!). 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. how they compete and how they serve their customers . represents a level of efficiency and integration previously unattainable. At the same time. pp. & Overdorf. suppliers. By allowing customers to talk knowledgeably and directly to suppliers. through the use of extranets).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. New brands and business models are emerging to seize this opportunity. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. which are often disruptive to traditional business models21. and transforming traditional distribution channels.g. The Internet also facilitates the development and co-ordination of global activities (e. Additionally. operation (e.how companies operate. C.g.April 2000.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . 'Meeting the Challenge of Disruptive Change'.g. This is threatening to undermine many old established brands. the Internet is sidelining the role of many traditional intermediaries. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen.. 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. the explosion of information is placing a premium on skilled information management.and revolutionary new business models are emerging. Volume 78 Issue 2. Harvard Business Review. Although the particular impact will differ between industries. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. For example. Dell Computers)..

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

extensive outsourcing. variety. combined with intense competitive pressures.(www. 1999 . The extent of this partnering is illustrated in Figure 4. The opportunity of linking the complete supply chain 'virtually'.A Research Report by TeslaGroup. It allows companies to improve customer service.7. alliances and partnerships have taken on a new level of strategic importance. 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. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. However. companies can provide customers with a strong value proposition by offering them the best in quality.teslagroup. and most traditional partnerships were vertical. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. linking companies with suppliers and customers up and down a pre-defined value chain. Examples of emerging information age business structures include flat versus hierarchical. thus creating a 'value net23'. supply chain cooperation. how they want and with the levels of customer service they demand.com) 42 . and partnering up with the best for the remaining activities. linking companies with competitors and players from entirely different industries and business sectors. As such. Traditionally. companies have looked upon alliances only as a means of filling gaps. 23 'The Future of E-Business' . Increasingly. In this way. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. achieve global reach and realise a new source of cost advantage. when they want. information. it provides the opportunity to reach customers where they want.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. most Internet and e-commerce partnerships extend beyond this. which highlights the typical structure and dynamics of an online company. and multiple strategic alliances and partnerships. advice and convenience. and the need for speed and flexibility have accelerated the unbundling of business systems.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .

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

understand and relate to customers. a company can listen. However. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. . January-February. Duke University. 'Is Your Company Ready for One-to-One Marketing?' . companies have to find innovative ways of leveraging the information and 25 McCann. 151-160 46 . J.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative.1 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26..Harvard Business Review.Fuqua School of Business. In maximising the customer experience. Prof.from the promises made in the value proposition.duke. rather than simply speaking at customers. TABLE 5.1. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. relationship building characteristics of the Internet. 1999. This creates the opportunity for companies to build stronger relationships than previously attainable. this also poses a challenge as these relationships may take on a life and character of their own. D. M. brand-building must focus on the end-to-end customer experience . January 28.. 'Adding Product Value Through Information'.. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. 1997 (www. pp. & Dorf.edu) 26 Peppers. B. learn. In doing so. to its delivery to the customer. Rogers..

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

customisation for individual customers. increases disproportionately as more people join the network. 1989. Similarly. additional customers and transactions can be managed with limited fixed cost investment. Once the up-front investments are made (for research and development and technology infrastructure). the costs approach zero32. additional products.1. However.1 .. R. and the value that each member realises. and other features can be added or changed at low marginal cost. 7th Ed.. Even more important.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. As a result. businesses and online communities that rely on connectivity can enjoy 'network effects'. where the value of the network. (London: Harper & Row). and in the case of information-based products. this is not the case on the Internet. as the benefits of scale are overwhelmed by the disadvantages of size31. pp. G. each additional unit sold does not cost more than the last to deliver. 'Positive Economics'. as illustrated in Figure 5.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. FIGURE 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. 180-182 48 . (also referred to as 'viral economics').

its ability to track customer preferences and customise offerings improves. 21 .org Study in collaboration with The Boston Consulting Group. This makes it more efficient in improving product selection. As the company builds a customer base and develops a relationship with customers. No. direct marketing. Nov 1998 49 . FIGURE 5.A Shop. fulfilment • Defensible advantage against competitors SCALEABLE.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. cross-selling and up-selling33. It also allows online companies to tap supplementary revenue streams. 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. With no competitors around. being first into a market makes it easier to capture the consumer's share of mind..2 . R.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.A Publication by Andersen Consulting 'The State of Online Retailing' . '5 Rules of the eEconomy'. including direct marketing. enhancing the interaction.2.Figure 5. M. advertising and referrals. Outlook 1999. delivering increased margin per customer . link revenues 32 33 Melnicoff.

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

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

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

businessweek.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. February 2000 Issue 53 . Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. 'Sticky Business'. which can enhance the company's value proposition.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. up-to-date information.. expert insights. FIGURE 5. ease-of-navigation. October 29. as cited in Business Week. whereas a slow response time and site downtime will have a significant negative impact.4.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. as cited in Business Week Magazine. 1999 (www. CIO Magazine. 29th October 1999 (www. and fast response times are among the most important factors in establishing web brand loyalty38. With almost infinite display space and inventory capability. ease-of-use. and a wide range of products. T.businessweek. 38 39 Cognitiative Inc. online companies have the opportunity to provide rich.com) Davenport.4 .

These sites allow members to interact with one another. Often. Customisation Customisation involves tailoring the presentation of a web-site to individuals. Other content includes community-generated content. and organise live events. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. and nearly 20% use it for post-sales support. J.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision.. visitors should not be engulfed with too much information. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. even if they purchase offline. 'Real Profits from Virtual Communities' .. Customisation creates the feeling of a one-to-one relationship. which enhances the user's online experience.A Forrester Research Report. 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). based on profile information. and advertising (if it is relevant and useful). & Bluestein.The McKinsey Quarterly. It fosters a sense of belonging41 among the members. Clemmer. .forrester. On the other hand. use bulletin boards. as well as through loyalty programmes that provide targeted benefits. 3.5).Sloan Management Review. share information and access a wide range of services. An important contribution of these communities is that they provide members with a medium to communicate with each other.. which is facilitated by a combination of factors (Figure 5. or prior transactions. For a community to work. 31% of online consumers use the Internet for obtaining product information. S. No. 1995.. 1999 (www. 40 41 Morrisette. demographics. Community Online communities are emerging as new gathering places for consumers with similar interests (e. Spring 2000 42 Armstrong.com) McWilliam. K. An online community offers a compelling way to entice customers back to a site. Members can interact in chat rooms. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). 54 .. W.g. According to Forrester Research40. G. Online sites can track a customer's purchase history and modify its service accordingly. A. it needs a critical mass of members42. 'Building Stronger Brands through Online Communities' . & Hagel. iVillage and Geocities).

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

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

2. because there is no physical presence. Waitman..7. Engage. & Zeisser. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7 .Attract. Retain. The mechanisms to communicate range from traditional media (TV. Figure 3. 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 ’ . This is more difficult online than offline. pp.. No. Adoption). links from directory searches (Connectivity). Trial. including affiliate programmes with other websites.Awareness. and bring people to the site for the first time. McKinsey Quarterly. etc. This model consists of five stages . visibility relies solely on Communication.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Evaluation.4 . Learn and Relate. 1996. e-mail notifications and banner advertisements. A. Newspapers. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.mckinseyquarterly.. The company must build awareness and communicate its value proposition to its target customers. Magazines. M.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.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. McQuade. 180-183 (www. Therefore.8. modified to take into account of the interactive dynamics of the Internet. Interest. billboards. 'Marketing to the Digital Consumer'. FIGURE 5. S.) to online tools.

3 2. it is important to quickly engage consumers' interest before they move on. 58 . 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. 3.Economist Intelligence Unit 2000 (www.8 4. Kapferer's Brand Prism (Ch. The key factors at this stage are Convenience combined with interesting Content.3) is useful to ensure that a company develops a distinct and consistent brand identity.1 3. multiplied by the expected rate of transactions. Creativity is also an important factor in gaining attention in today's cluttered marketplace.com) The most effective methods are direct e-mail. public relations and television advertising.ebusinessforum. affiliate programmes. Attracting customers is only the first step in building online brands.3 3.0 3. Companies then need to engage customers to obtain their interest and participation.8 .4 3.7 4.6 3.WEBSITE PROMOTION METHODS .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.5) 2.5 3. 3.4 3. discounted over the expected duration of the brand-customer relationship. as cited in 'Targeting Consumers via the Internet' .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 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.2 4. Engage With the multitude of choice available on the Internet.4 4.3 Source: Forrester Research.

Communities and Customisation are other sticky applications. a company can create value by providing a personalised online experience. TV. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. and must be continuously updated due to the multiple visit nature of customers.g. Building up a knowledge database on each customer . The objective is to increase the conversion rate (% of browsers converted into buyers). This helps to create a customer base that spends more time and money at a site. can create value for the customer and help build the brand-customer relationship. and forge closer relationships than any offline operator. Content is the basic driver of retaining customers on a site. 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. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.who they are and why they shop online. Certain product categories.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.9). 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. 59 . • The Internet supports brand-building activities where there is a need to build a relationship. 5. Radio). attitudes and behaviour). The initial site registration provides an early opportunity to obtain useful information. such as groceries and convenience goods. and what additional products and services are they interested in provides companies with valuable information which. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. if used properly.

R.. The next chapter analyses the brand-building efforts of seven companies. and the need to stimulate the other senses (taste. 'Marketing to the Digital Consumer'.. pp. 1996.2.. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. especially in small quantities. In order to create "apostles". companies must provide a satisfying end-to-end customer experience . A. M. smell). due to high delivery and transaction costs (relative to the value of the product).from the promises made in the value proposition.9 . McKinsey Quarterly. McQuade. and as the relationship develops. it is not economically feasible to sell certain products. 180-183 (www. engaging and retaining customers. providing further added value.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. & Zeisser. Waitman. it is critical for companies to build relationships and foster brand loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 5. to its delivery to the customer.mckinseyquarterly. S. the interaction provides the ability for companies to learn from their customers and relate. Given the high acquisition costs of online customers.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.9 CONCLUSION On the Internet. These case studies provide a practical insight into how companies are building their online brands. No.. touch. 60 . • Brand-building favours products that can be sold online. The interactive brand-building process involves attracting. However. the experience is the brand.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .

com launched with a mission to use the Internet to transform book buying into a fast. Amazon.2.economist. 2000 (www. and higher levels of customisation and service than the traditional shopping experience allows.1 outlines Amazon's timeline and major milestones.2 Value Proposition Amazon. discounted prices. Through its provision of a one-stop shopping experience. more information. November 11. Amazon has been able to differentiate itself from other online competitors. combined with its levels of customisation and customer service. 6.com and Yahoo!.com has become synonymous with e-commerce. and is one of the few Internet brands that is recognised all over the world.com. Each case is presented in the same format including. Amazon provides increased added value on several dimensions.COM 6.2. a company overview.It's an Ocean. The cases are presented in the following sequence . Boo. the sources of added value (using the 7Cs Framework). In addition. 1999 49 'Amazon's Amazing Ambition' . innovation and delivering on its promises. Amazon has cultivated a reputation for excellence. Amazon. and enjoyable experience.Amazon. CDnow. it is the most visited e-commerce website in America. 'Amazon.2 CASE STUDY: AMAZON. and one of the top two or three in Britain.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and has sales of over $2 billion. In July 1995. February 26. France.com) . Gap. Amazon serves over 23 million customers from 160 countries. easy. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).1 INTRODUCTION This chapter provides an analysis of seven companies.1 Company Overview Amazon. its value proposition. and has equity investments in several e-tailers. 6. including: increased selection. In addition. and other key factors that have contributed to its success (or failure). ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). Not a River' . its brand-building strategy (how it generates traffic).com. Germany and Japan49. 47 48 Interbrand (www. It is the 57th most valuable brand in the world47. eBay. Barnesandnoble.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.com's success stems from its compelling value proposition.com) 62 .com .interbrand. greater convenience. Figure 6.Goldman Sachs Report.com.see Appendix A.The Economist.

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

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

thereby increasing conversion rates. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service.2. from the customer recognition at the point of interface (Figure 6.4.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. from its shopping basket applications which lists the estimated time to delivery reliably. linking it to a large number of other sites. and has developed an Associates Programme.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM.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 . and Customisation Amazon provides customised features and services. This customer-centricity is evident in all Amazon's activities. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. 65 . while driving up repeat purchases and cross-selling opportunities. Community Amazon has also added a community element to the purchasing process. converting them into a storefront for Amazon. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. More recently. Connectivity Amazon has built relationships with high traffic web portals and sites. and customer interaction. creates a competitive advantage. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. real-time shipping and backorder notices. to the proactive notification of new items of interest. In doing so. Amazon introduced Amazon. These are discussed in more detail in Section 6. which helps to build loyalty and create switching costs. Amazon's content is not reproducible by competition. Amazon creates one-to-one relationships with its customers. By leveraging its vast customer base. therefore.

In the second half of 1996. help maintain contact and build traffic by e-mailing customers when desired products or books become available. it began to advertise in print media and online . As a result of all these factors (7Cs).com hot-link and offer specific books of interest to their visitors. Business Week. and by 1999 it had over 200. two personalised services. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. This enabled Amazon to reach more customer segments and niches (Figure 6. Through the first half of 1996. they are subsequently confirmed by e-mail.000 by August 2000. The Associates Programme has been phenomenally successful.000 members. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.2). In addition.2. New Yorker and The Economist.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. 66 . Eyes and Editors. 6. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.a move that along with the novelty of its business model and the newness of the Internet. The Financial Times. Newsweek. attracting member sites of all sizes. Once orders are placed. and customers are also e-mailed when the items are shipped from the warehouse. which only applied to sales that resulted from the initial click-through. increasing to over 500. helped generate publicity and stories about the company in publications such as The Wall Street Journal. enticing them to return to the site and purchase repeatedly. Instead of paying directly for this exposure. Amazon offered Associates referral fees of up to 15%. In July 1996. and not subsequent purchases.

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

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

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

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

3 CASE STUDY: BARNESANDNOBLE. However. prints & posters and related products.TIMELINE AND MAJOR MILESTONES . and 20% owned by the public.Announces distribution relationship with New York Times September . as it could capitalise on the infrastructure and back-end operations (warehouses.) established by its parent company. Barnesandnoble. Launched in 1997.COM . Dalton bookstores (located in shopping malls).com launched its website (www.Barnesandnoble. etc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. rare.Barnes & Noble went online at AOL May . all front-end operations (marketing.COM 6.3.Offers same day delivery in Manhatten .com is the fourth largest e-commerce retailer54. Barnesandnoble. magazines.Acquires minority stake in NotHarvard. promotion) between the online store and the retail stores have been kept separate. 40% owned by Bertelsmann AG. Barnesandnoble.Launches BNTV . TABLE 6. book databases. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.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 . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Acquires equity stake in Mightwords . Besides books. is one of the best known traditional booksellers in the United States.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. and is the second largest online bookseller (after Amazon.com).com was able to 'hit the ground running'.com's timeline and major milestones is outlined in Figure 6. Barnes & Noble Inc.com) . and 470 B. Currently..com .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com announces strategic relationship with Palm Computing .Barnes & Noble University opens registration for free online courses . contacts. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). music.Launches Video Store 71 .2 1997 January BARNESANDNOBLE.com is approximately 40% owned by Barnes & Noble.2.Launches Internet Radio .com and Microsoft announce that they will create an eBook superstore .Launches Affiliate Network December . Barnes & Noble Inc.Barnes & Noble.barnesandnoble.com provides other online categories offering software. Inc. Barnesandnoble.1 Company Overview Barnesandnoble.Barnesandnoble.

com's website (www. they offer customers fast delivery. including title.com offers customers an easy-to-search catalogue of virtually every book currently in print. easy and secure ordering. rich editorial content and a community experience. in terms of the 7Cs framework.com let customers sign up to receive email reviews and announcements of new titles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3.com) 72 .com or www.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. edition.3 . logically structured.com's virtual storefront is graphically richer than Amazon. the features are practically identical. In addition.COM'S WEBSITE Simple. Barnes & Noble planned to dominate online book-selling. as cited on Barnesandnoble.3 Sources of Value . etc. software. as well as an extended searchable catalogue of millions of out-of-print. previously-owned and rare books. the company created a site very similar to Amazon.com and barnesandnoble. Both offer detailed bibliographic information.com's and takes a bit longer to download. music New Initiatives Barnesandnoble. good prices. however. Both have expanded their convenience to offer 54 Media Metrix.OVERVIEW OF BARNESANDNOBLE.2 Value Proposition Barnesandnoble. FIGURE 6.3.barnesandnoble. but instead of developing an outstanding interface to its inventory. 6.com's (Figure 6. Both Amazon. author. publisher.3). and easy-to-navigate site Categories focus on books.bn.

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

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

Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. it also caused a major setback. otherwise they risk losing out to other online competitors. The company failed to leverage its established brand. and was further up the growth curve.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. The Press have also contributed. a wellestablished Internet brand.its key differentiating factors. customer relationships and offline presence .com's experience is instructive. feature for feature) has failed to differentiate Barnesandnoble.com and has given them the image of a second rate 'me too' brand. August 4.6 Conclusion Although Barnesandnoble.3. Barnesandnoble.Forbes. and allowed them to offer stock options as compensation and achieve a high market capitalisation. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.com .forbes. 57 'Bn. meant that Amazon. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". even if that means eating into their existing sales. and its lack of innovation (by copying Amazon. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.Not a Best Seller' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. it has not been able to establish itself as the leading online bookseller. by portraying them as slow and clumsy in comparison to the more nimble Amazon.com's late start in 1997.com has been able to create a high impact and high-quality customer experience. 2000 (www. In addition. Barnesandnoble.com.com) 75 . significant market momentum.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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.

FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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
59
60

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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.

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daily music news.5. It has a customer base of 4 million people. CDnow is also driving the digital distribution of music. announce marketing alliance .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.. and was the first site to offer the sale of music downloads and custom CDs.5 CASE STUDY: CDNOW 6. pp.Raises $10 million through private placement .000 music related items . and one of the most popular shopping sites on the Internet62.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .Forges distribution partnership with Yahoo! $65. CDnow is the leading online music store. CDnow was acquired by Bertelsmann AG. by twin brothers Jason and Matt Olim. as well as music reviews.000 sound samples. former arch rival . $22.CDnow and Time Inc. 62 Hoffman.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. T. TABLE 6.TIMELINE AND MAJOR MILESTONES .179-188 63 CDnow website (www. good prices. whether for browsing or buying. customisation and a wealth of information and content to help in the purchase decision. & Novak.000 people. features. CDnow provides access to over 500. $18.1 Company Overview Founded in 1994. and they aim to "make every visit to the site.Site goes live . D.ten times the selection of a conventional bricks-and-mortar music store).com) 80 .Launches merged CDnow/N2K site . cover art.Merges with N2K. a valuable and rewarding experience"63. convenience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 million distribution deal with Lycos Signs three-year. 'How to Acquire Customers on the Web' . On 19th July 2000.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and exclusive interviews and reviews from CDnow's award-winning editorial staff. and an average daily audience of over 800.cdnow. May-June 2000. guides to music genres. This unprecedented degree of access to music and information is the core of CDnow's value proposition.Merges with Columbia Records .Harvard Business Review.000 music-related products and 650.Partnership program with Geffen Records .

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

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

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

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

According to Jason Olim.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. It was able to create a strong value proposition and high quality customer experience. "eBrands . CEO of CDnow. P. CDnow has developed a relationship with Valley Records. (Boston: Harvard Business School Press). a record distributor that handles the majority of CDnow's fulfilment logistics. They also provide the customer with an order number and customer support contact information should they have questions. "eBrands .5. 2000 p. and ensure that it exploits its early-mover advantage and keeps ahead of competition. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. This.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. P.from how CDnow has personalised its product offering to its capable customer service team . It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. 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. CEO of CDnow. 2000 p.Building an Internet Business at Breakneck Speed".75 85 .it's what you do66". to ensure quick delivery to customers. as cited in Carpenter. The development of an extensive affiliate network. as cited in Carpenter. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. combined with the high impact customer experience created . 66 Jason Olim. This gives the customer the impression that the order is being handled quickly. (Boston: Harvard Business School Press).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. 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 .89 67 Jason Olim. 6.Building an Internet Business at Breakneck Speed". and innovative.

Company Overview' .6. 1st October 1999 86 .removing the need for inventory. The buyer and the seller work out the logistics of the transport (e. extensive selection and geographical reach. People perceive the auction format to offer better prices. Since its launch in September 1995. or the payment for the item . Auctions represent a platform. with the number of unique daily visitors setting a record of 1.6 CASE STUDY: EBAY 6.300 categories. This is a new market .eBay website (www. CEO of eBay. Individuals use eBay to buy and sell items in more than 4.the closest thing in the offline world are trading forums such as classified ads. and 450. payment) between themselves. shipping. as cited in 'eBay . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. and eBay never takes possession of the item being sold. (A)' .000 new items joining the "for sale" list every 24 hours69. collectable shows. Sellers pay a nominal fee for placing an item up for sale.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com) 'eBay .g. 24 hour a day.eBay website (www.com) 70 'Meg Whitman at eBay Inc.6. Auctions are an enabler. Auctions make it fun.ebay.2 Value Proposition eBay offers consumers an efficient. transportation and other overhead costs. 6. from collectibles and antiques to electronics and toys.ebay. eBay effectively created a new business model never before possible .25% to 5% of the final sale price on any item sold. and eBay receives a transaction fee that ranges from 1. the eBay community has grown to include more than 10 million registered users.A Harvard Business School Case Study.782 million in January 200068. "at its core.Company Overview' . global trading place for buying and selling personal items in an entertaining auction format.efficient one-to-one trading in an auction format.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. According to Meg Whitman. garage sales. There are over half a million new auctions. with emphasis being placed on its unique community feel and culture. eBay is not about auctions. and eBay provides added value through its convenience. flea markets and auctions.

Providence. . allowing users to create personal homepages . 21st May 1999 (www.com) 87 .eBay teams up with Carclub.eBay launches 'About Me' feature.com to provide automotive service for eBay Users . Since eBay cannot control how one person treats another.eBay IPOed raising $58 million . Seattle & Tacoma. "the first brand-building strategy that we have is to have a great customer experience. Selling. Nashville. Unlike the previous case studies discussed. Milwaukee. and in terms of the '7Cs'.Business Week. And you only get word-of-mouth if you have a great customer experience.Compaq Computer Corporation and eBay form a strategic U.eBay goes live . and Collecting Just About Anything and eBay for Dummies.eBay acquires Blackthorne Software GO.eBay acquires Kruse International . Boston. and its online trading site (Up4Sale) .S. they try to influence customer behaviour by encouraging them to adopt certain values. the eBay customer experience is based on how their customers deal with each other.The 7Cs Framework According to Meg Whitman.eBay and First Auction sign a partnership agreement . . emphasis is placed on community development and customer care. Still the vast majority of our new users come from word-of-mouth.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay expands strategic relationship with Netscape .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .3 Sources of Value . 1 is have a great customer experience71".eBay and AOL launch co-branded site .eBay introduces eBay Magazine in collaboration with Krause Publications. and raises $700 million . and two books -.de . as they rarely deal directly with the company. and Salt Lake City . co-marketing relationship.eBay acquires Butterfield & Butterfield.eBay and Ultimatebid. Dallas & Fort Worth. So brand-building job No.Germany's leading online person-to-person trading site .America Online and eBay announce strategic marketing alliance . The Official eBay Guide to Buying.Launches "My eBay!" to customise the online auction experience .eBay goes wireless with Palm VII connected organiser .6.businessweek.eBay acquires Jump Inc.Com form alliance - 6.5 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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay acquires alando. Norfolk & Virginia Beach.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .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.eBay goes live in Australia . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay launches local websites in Baltimore & Washington DC. This raises challenges in how to control and influence the customer experience.

categorically arranged. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. Other content includes the banner ads. they have continually invested in system capacity. Content Content is primarily user generated through the items listed for sale. eBay's site has to process thousands of live bids simultaneously.6). This contributes to the community feel. Nevertheless. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. FIGURE 6.6 . angering hundreds of thousands of eBay users. and adds to the experience and the discovery of the auction process. easy-to-use online service (Figure 6. which is much more demanding on the system.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. 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.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. 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. and since. 88 . increasing the risk of outages. topically arranged.

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

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

4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. eBay decided that it would not enter into major portal advertising deals in the short term. Selling. Based on this.a four-year. 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. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. Mary Beth's Beanie World. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). The AOL partnership was one of the largest strategic partnerships on the Internet . eBay has been able to attract a large customer base. and facilitate the spread of positive wordof-mouth.6. In 1998. 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. eBay transformed from a pure online play into a 'clicks-and-mortar' company. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. 91 . Through this combination of its advertising efforts and targeted promotions. Recent promotional initiatives include its new publication. they spent $12. $75 million joint marketing alliance and development deal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 million in advertising. and Collecting Just About Anything and eBay for Dummies. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. they decided to target their marketing efforts on these heavy users. The Official eBay Guide to Buying.g. the largest of which was with AOL. eBay Magazine. As a result. Early on. provide a wealth of information about the 'ins and outs' of trading on eBay. eBay has since expanded its promotion efforts and engaged in marketing partnerships. and highlight opportunities created by e-commerce. representing about 40% of revenues. and two books. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. as a result of the high quality experience it provides. and maintained the same ratio for 1999. Doll Collector) and appearance in trade shows. who tended to be serious collectors. These new publications appeal to the collecting spirit. but they have other partnerships with over 150 websites of varying scales.

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

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

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

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

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

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

the site was receiving 1 million hits per day. household and business user reach. There's nothing in the real world to compare to that79". 6. and is one of the few Internet companies to turn a profit early in the development of the Internet.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.interbrand. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! was founded by David Filo and Jerry Yang. September 7. and the number of websites continues to explode. from e-mail services to stock quotes and much more.com) 98 . The Strategy.1 Company Overview In April 1994.8. According to Timothy Koogle.Business Week. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. The Stock' . As such. two Ph.8. all in a single location. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. The company's global web network includes 23 world properties outside the US. the amount of information. CEO of Yahoo!. lies the directory .D students at Stanford University. who started an online guide as a way to keep track of their personal interests on the Internet. 1998 (www.businessweek.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com) . advertising. Yahoo! is a leading guide in terms of traffic.see Appendix A 'Yahoo! . As the first online navigational guide to the web. 78 79 Interbrand (www. Yahoo! offers a range of supporting services that add value.8 CASE STUDY: YAHOO! 6. The concept exploded (through word-of-mouth) and in less than six months.The Company. Yahoo! has since morphed from an ordinary search service into a global Internet communications.2 Value Proposition At the core of Yahoo!'s value proposition.

but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.com allowing them to offer person-person payment solutions . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.00 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.Yahoo! Launches Business-to-Business Marketplace .Receives $1 million in venture capital funding from Sequoia Capital $33.TIMELINE AND MAJOR MILESTONES 1994 April . and unveils Yahoo! Digital Introduces Bill Payment services .Site goes live September .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 . regardless of platform (i.8).7 YAHOO! . is the way it has structured and displayed information. TVs.Yahoo! acquires eGroups .Yahoo! Shopping launches personalised shopping service 6.8 million IPO (2.Yahoo! acquires Arthas. Palm computers). to allow access.com. . 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.The 7Cs Framework Convenience Central to Yahoo!'s success. mobiles.e. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. More recently.Yahoo! unveils Yahoo! Finance Vision . Yahoo! extended its convenience through its Yahoo! Everywhere service. Their goal is not to list everything under the sun.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. to provide web-based services to PalmTM handheld computers .000 shares at $13..600. 99 .Yahoo! forms agreements with Palm Inc.8.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.3 Sources of Value .

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

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

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

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

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

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CHAPTER 7

CONCLUSION

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7.1

CONCLUSION & DISCUSSION OF KEY FINDINGS

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

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7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

422 1.319 1.Interbrand's Ranking of the Top 60 Brands (www.310 11.interbrand.043 8.804 2.830 14.147 9.761 1.275 30.231 12.603 5.766 14.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) 83.527 3.262 1.197 32.048 20.595 17.932 4.193 112 .052 6.681 2.985 2.895 2.283 4.231 24.423 2.781 33.643 3.510 8.404 4.845 56.132 15.361 1.909 7.225 11.781 17.076 3.634 1.648 1.596 3.464 3.155 7.654 43.568 3.313 2.181 21.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .281 11.550 12.806 11.021 26.101 9.894 14.502 33.329 4.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.694 17.806 2.184 1.602 4.143 2.792 3.

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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