1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


1 Company Overview 6.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework 6.5.5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .2 Value Proposition 6.3 Sources of Value .1 Value Proposition 6.5 Conclusion Case Study: Gap.7.5.8.The 7Cs Framework 6.1 Company Overview 6.7.6 Conclusion Case Study: eBay 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 7.6 6.2 Value Proposition 6.6.4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.The Failure of Boo.1 Company Overview 6.1 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 .4 Brand-Building Strategy . Sources of Value . Conclusion Case Study: CDnow 6.Extensive Integration 6.3 Sources of Value .5.4 Brand-Building Strategy 6.2 Value Proposition Company Overview 6.8.5 Other Factors that Contribute to their Brand Leadership 6.8.1 Company Overview 6.6.7.com 6.5 Other Factors That Contribute to their Brand Leadership 6.5 6.4 Brand-Building Strategy 6.5.3 Sources of Value .4.com 6.7.The 7Cs Framework 6.2 Value Proposition 6.8 Case Study: Boo.4 6.com 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.6.

5 Figure 4.8 Figure 3.4 Figure 6.4 Figure 4.5 Figure 6.4 Figure 2.2 Figure 2.1 Figure 3.3 Figure 4.3 Figure 2.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 .1 Figure 1.3 Figure 5.2 Figure 5.9 Figure 6.1 Figure 2.1 Figure 5.2 Figure 4.7 Figure 2.1 Figure 4.6 Figure 4.5 Figure 2.7 Figure 6.4 Figure 5.5 Figure 5.8 Figure 6.6 Figure 6.7 Figure 5.com's Website Overview of Boo.6 Figure 5.3 Figure 6.com's Website Amazon.com's Associates Programme Overview of BarnesandNoble.4 Figure 4.2 Figure 6.7 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.6 Figure 2.8 Figure 5.2 Figure 2.1 Figure 6.2 Figure 3.3 Figure 3.

com .com .Timeline and Major Milestones eBay .com .com .5 Table 6.3 Table 6.Timeline and Major Milestones Boo.4 Table 6.1 Table 6.1 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.6 Table 6.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones CDnow .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .2 Table 6.


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

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

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

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

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


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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . 1980. a 'reputation'. FIGURE 2.86 14 . brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. the basic brand. January-February.of anything'. which grows out of the cumulative memory and the experiences customers have of products or services. Harvard Business Review. They start life as ideas. p. making their way into planning and strategy documents. T. As such.2. and services to customers.2 . yet ultimately reside as consumer perceptions.the core product or service. and a 'promise'. Brands are richly endowed entities. It is a company's promise to consistently deliver a specific set of features. For some companies. 'Marketing success through differentiation . brands are their most valuable asset.a 'relationship'. The space a brand occupies inside a customer's head can create a 'mental' patent.3 THE LAYERS OF A BRAND Brands are made up of four layers .Figure 2.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. a 'set of expectations'. benefits. 2. the augmented brand and the potential brand ..

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

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

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

D. Nov-Dec 1995 Hart. 'Growing the Trust Relationship'. and believe that it will always act in their best interest. Saturn. E. 91 Loyalty is derived when customers are continuously satisfied over time. & Sasser. At the opposite end of the satisfaction spectrum are "apostles" . FIGURE 2. E..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and Johnson. p. 'Why Satisfied Customers Defect' . Johnson & Johnson. M.Figure 2. Southwest Airlines and Xerox7. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services... T.Harvard Business Review. C. & Sasser.those who actively attack the brand telling others not to buy from the company. Hewlett-Packard. 'Why Satisfied Customers Defect' . Some traditional companies identified as having established a strong trust relationship with their customers include: Disney.. Spring 1999 18 . T. Nov-Dec 1995. Federal Express.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.5. W. This satisfaction encompasses the whole experience and not just a company's products or services. The customers at the bottom end of the scale are "terrorists" .Harvard Business Review. Marketing Management. Trust is critical for a brand's success.customers who are satisfied and loyal and talk favourably about the brand . 6 7 Jones.. Customers that are passionately or emotionally loyal are those that have built trust in a company.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.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. FIGURE 2. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.7). a 'powerbrand' tends to have a high degree of brand loyalty. S. Journal of Consumer Research. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 2.6 . A stronger brand enjoys a high degree of brand preference over competing brands.. However. FIGURE 2. which goes well beyond the satisfaction of a specific need. and understanding the needs and buying processes of the target market is essential. whereby customers would be unwilling to substitute it with competitors' offers. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. pp. there are brands that are unknown by most buyers. 20 . March 1998. 343-373.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. there are brands that customers perceive as acceptable and would not resist buying.7 . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).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. Beyond this.

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

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

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


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

The value proposition must be continuously re-evaluated to respond to changes in the marketplace.2). a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . it is impossible to build a successful brand. the brand can elicit feelings of confidence that it is of higher quality than competitors'. Without a good product or service. In this way. FIGURE 3. a distinctive brand identity (I).a strong offer that a potential customer would find compelling and interesting. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Similarly.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. In order to do this. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. and added value (AV). 26 . BRAND = P X I X AV These three characteristics are multiplicative rather than additive . unless differentiation and awareness can be developed. a compelling value proposition is the combination of an effective product or service (P).each is essential. it will never attract a strong client base. a company must develop a strong understanding of who their potential customers are. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.2 .

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

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

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

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

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

Being first into the market does not necessarily bring success. Without building awareness. Once the framework has been established and the organisation configured to provide this proposition. strengthening the brand further. advertising or promotional campaign. It is easier to capture a share of the consumer's mind and build a customer base.Satisfactory experience is the major determinant of brand values. As customers build trust in the brand through satisfaction of use and experience. when the brand has no competitors to rival its position. then its position will be undermined. • Strong Communications Programme . If the quality of the experience deteriorates. 3. it has a profound impact on the traditional brand-building process. it must have a unique positioning concept . • Unique Positioning Concept . 2nd Ed. • Time and Consistency . P. which will communicate the brand's existence. • First-Mover Advantage . brands were not built quickly. including: • A Quality Product / Service Experience . the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 'Marketing Management & Strategy'. 1998.176-177 32 .If the brand is not the innovator. As such. 19 Doyle.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. companies must actively communicate it to the target audience to entice trial. value proposition or augmented brand. trigger trial and reinforce commitment to it. while providing new tools for promotion.A successful brand requires an effective selling. interaction and relationship building. the brand is meaningless.a segmentation scheme. and establish a trusting relationship. pp. As a result. and making it more difficult for competitors to emulate. It often takes years to build up the added values. which will add value and distinguish it from competition. but it makes the task easier. companies have the opportunity to start building relationships with their customers. The Internet provides the opportunity for companies to create compelling value propositions never before possible..Traditionally. or if the brand is surpassed by superior offers from competitors.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. (Europe: Prentice-Hall).. its function and psychological values. comprehension and intention to buy.


it is a common technology platform that allows computing devices to communicate with each other. FIGURE 4. In essence. Hypertext allows information to be organised in a user-friendly way that is easily accessible. E-MAIL Is the part of the Internet that most users use at present. news groups and mailing lists. and provides the opportunity for dynamic interaction.1 . which contain hypertext and pictures. and the 'world wide web' (www) . Information is becoming a major part of the products and services that people buy. 34 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and a critical source of added value. but in practice not in real time. 4.Figure 4. 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. This chapter provides an overview of the Internet and its defining characteristics. In doing so. creating new challenges and opportunities.1. The three core channels include e-mail (the most common).1 INTRODUCTION The Internet is transforming the business environment. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. it offers a number of alternative channels that enable businesses and people to communicate.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.

• It Overcomes the Barriers of Time and Space . By allowing for direct. 4. when the United States Defence Department developed the 'ARPAnet'.24 hours a day.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 Internet lets individuals and companies build interactive relationships with customers and suppliers. These defining characteristics have fuelled its explosive growth. anywhere. 7 days a week. allowing both parties to identify each other and build one-to-one relationships . The Internet can also be accessed at any time . and deliver new products and services at low cost. which was intended to link military networks together. • It Allows for Two-way Communication and Interactivity .The Internet is a global network and can be reached from everywhere. ubiquitous links to anyone. These qualities eliminate the barriers of time and space that exist in the physical world.this radically alters the process of interaction between communicating parties.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). Graph is not drawn to scale). The context of the Internet and certain key developments are highlighted in the Figure 4.2.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.not previously available with mass medium forms of communication. regardless of where the computer or Internet access device is physically located. These characteristics combine to create a very powerful medium.2 (Note: 35 .

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. 1998.a PricewaterhouseCoopers Report.economist.000 100.Figure 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 1.com) 36 . FIGURE 4. 2000 Internet / ARPAnet was created Dell. 1996 (www.000.000.000 10.000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. as cited in 'E-Business Technology Forecast' .000 1969: 10. 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.000 1.2 . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .3.3 .

etc.. there will be an estimated 375 million Internet users world-wide. billing. Easier access to these networks provided by point-and-click web browsers. the momentum created by all these forces has created a virtuous cycle of growth. As shown in Figure 4.Cheap bandwidth . offering inexpensive bandwidth. and gateway services).g. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.E-Marketplaces .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.High-powered servers . 2000 (http://cyberatlas.Cheap microprocessors & RAM .. The emergence of open standards in development tools and at the network protocol level (e.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .4 .4. web design. FIGURE 4.2 20 'World Online Populations' . TCP/IP). Reed. No. L. making it more cost effective for software developers and other technology providers to create interoperable products. hosting.com) 37 .Low-cost networking alternatives .Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . The development of critical processes (ordering. Multimedia development tools that can be used to create rich content. G.). The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.Attractive infrastructure and middleware software .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . payment.Higher PC penetration among consumers and companies .Content Aggregators . 1996. The growth in support services (e. 'Electronic Commerce (finally) Comes of Age'. The McKinsey Quarterly. increasing to 500 million users by 200220.internet.CyberAtlas Internet Statistics and Market Research.

These activities highlight the adoption of the Internet as an interactive. as cited in the Economist Intelligence Unit (EIU). 2000 (www.com) 38 . communication and information tool. entertainment) and purchasing (37%) . reveals the wide range of areas where people are embracing the Internet . to interacting (e.from communicating (90% use e-mail) and sourcing information. chat rooms. April 13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).eiu.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.Figure 4.5.g.5 . FIGURE 4.

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

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

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

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

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


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

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

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

However. as the benefits of scale are overwhelmed by the disadvantages of size31. as illustrated in Figure 5. where the value of the network. additional customers and transactions can be managed with limited fixed cost investment. pp. increases disproportionately as more people join the network. FIGURE 5. customisation for individual customers. and other features can be added or changed at low marginal cost. R. 'Positive Economics'. and the value that each member realises.1.1 . (also referred to as 'viral economics').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. 1989. Even more important.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. businesses and online communities that rely on connectivity can enjoy 'network effects'.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. Once the up-front investments are made (for research and development and technology infrastructure). this is not the case on the Internet. Similarly. each additional unit sold does not cost more than the last to deliver.. the costs approach zero32. (London: Harper & Row). and in the case of information-based products. 7th Ed. additional products. As a result. 180-182 48 .. G.

R.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. advertising and referrals..A Shop.A Publication by Andersen Consulting 'The State of Online Retailing' . being first into a market makes it easier to capture the consumer's share of mind. Nov 1998 49 . As the company builds a customer base and develops a relationship with customers. delivering increased margin per customer . With no competitors around. direct marketing.2 . 21 . enhancing the interaction. '5 Rules of the eEconomy'. its ability to track customer preferences and customise offerings improves. Outlook 1999.2. link revenues 32 33 Melnicoff. cross-selling and up-selling33. including direct marketing.Figure 5. 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. M. FIGURE 5. It also allows online companies to tap supplementary revenue streams. 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. No. This makes it more efficient in improving product selection.org Study in collaboration with The Boston Consulting Group.

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

com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. and the message spreads organically. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. saying: • "Get Your Private. eGroups and Geocities (both recently acquired by Yahoo!).5. seven days a week.5 years.com The classic example of viral marketing is Hotmail. but Hotmail signs up more than 150. When a user builds a website. In its first 1.com was one of the first free web-based e-mail services. they tell all their 51 . friends to visit it.1 The Case of Hotmail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.000 subscribers every day. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Today they are the largest e-mail provider in the world with over 40 million users.hotmail. and they created a subscriber base more rapidly than any company in history. In fact. and in doing so spread the word for Geocities. they will have a powerful viral opportunity at their disposal. a company now owned by Microsoft. 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).com. where they have never carried out any promotional activities. Free Email at http://www. Hotmail acquired over 12 million subscribers. sign up for their own free e-mail. A traditional print publication would hope to reach 100. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).000 subscribers within a few years of launch. • Each new user becomes a company salesperson. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. Geocities enables people to create personal websites for free. whether for communications or community. Hotmail. and then propel the message even further to their own ever-increasing circles of friends and associates.

D. Price.com) 52 . Sites that are difficult to use can cause frustration.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 5.3 .bain.. Baveja. Zook. T. Promotion. C. 2000 (www. S. . T.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 'The Value of Online Customer Loyalty and How You Can Capture it'.. 2000 'The E-business Technology Forecast' . March 17. Rastogi...A PricewaterhouseCoopers Report.. & Hancock.. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. In fact. Kearney White Paper. In essence.. and 66% of people who start a 'shopping basket' fail to complete the transaction37. The customers' ability to access and display information rapidly is extremely important36. Chu. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. J. 2000 37 Rigby.An A. making customers 'click off' to another site. R. Place). S.3). As 35 36 'Creating a High-Impact Digital Customer Experience' .A Mainspring Communication Report in collaboration with Bain & Co.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . FIGURE 5. 30% of potential customers leave sites because they cannot find what they are looking for.An A. Kearney White Paper.

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

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

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

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

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

8 .8 4.WEBSITE PROMOTION METHODS . Engage With the multitude of choice available on the Internet. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. public relations and television advertising.4 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 3.3 2. The key factors at this stage are Convenience combined with interesting Content. 3.Economist Intelligence Unit 2000 (www.6 3.com) The most effective methods are direct e-mail.4 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 58 . Creativity is also an important factor in gaining attention in today's cluttered marketplace. 3.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 .3) is useful to ensure that a company develops a distinct and consistent brand identity.3 Source: Forrester Research.0 3. Fig.5) 2.1 3. multiplied by the expected rate of transactions. Attracting customers is only the first step in building online brands. it is important to quickly engage consumers' interest before they move on.ebusinessforum.5 3. Companies then need to engage customers to obtain their interest and participation. affiliate programmes.7 4.4 4. as cited in 'Targeting Consumers via the Internet' . Kapferer's Brand Prism (Ch.2 4. discounted over the expected duration of the brand-customer relationship.

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

9 .. M. McQuade. & Zeisser. 180-183 (www. 1996. it is critical for companies to build relationships and foster brand loyalty. providing further added value.mckinseyquarterly. touch. and the need to stimulate the other senses (taste.9 CONCLUSION On the Internet.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. and as the relationship develops.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. to its delivery to the customer.from the promises made in the value proposition. the interaction provides the ability for companies to learn from their customers and relate. Waitman.. 60 . the experience is the brand. 'Marketing to the Digital Consumer'. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. No. it is not economically feasible to sell certain products. companies must provide a satisfying end-to-end customer experience . R.. smell). McKinsey Quarterly. The interactive brand-building process involves attracting.. pp. 5. engaging and retaining customers.2. due to high delivery and transaction costs (relative to the value of the product). • Brand-building favours products that can be sold online. However. Given the high acquisition costs of online customers. The next chapter analyses the brand-building efforts of seven companies. In order to create "apostles". A. S. These case studies provide a practical insight into how companies are building their online brands. especially in small quantities.


Amazon has been able to differentiate itself from other online competitors.It's an Ocean.1 Company Overview Amazon.com launched with a mission to use the Internet to transform book buying into a fast. Each case is presented in the same format including. 47 48 Interbrand (www.com's success stems from its compelling value proposition. and is one of the few Internet brands that is recognised all over the world.com. It is the 57th most valuable brand in the world47.1 INTRODUCTION This chapter provides an analysis of seven companies. and enjoyable experience. more information. Figure 6.com and Yahoo!. combined with its levels of customisation and customer service. Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Through its provision of a one-stop shopping experience.COM 6. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). easy. November 11.economist.2 Value Proposition Amazon.Amazon. and has sales of over $2 billion. it is the most visited e-commerce website in America.com) 62 . Barnesandnoble. innovation and delivering on its promises. and higher levels of customisation and service than the traditional shopping experience allows.see Appendix A.2 CASE STUDY: AMAZON. greater convenience. In addition. 1999 49 'Amazon's Amazing Ambition' .com has become synonymous with e-commerce.1 outlines Amazon's timeline and major milestones. Amazon.interbrand. CDnow. 2000 (www.com) .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. The cases are presented in the following sequence . a company overview. and one of the top two or three in Britain.The Economist. 'Amazon.com. the sources of added value (using the 7Cs Framework). its value proposition. discounted prices. 6.Goldman Sachs Report.com .2. Not a River' . In addition. and has equity investments in several e-tailers. 6. February 26.2. Germany and Japan49. its brand-building strategy (how it generates traffic). ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). including: increased selection. Amazon serves over 23 million customers from 160 countries. eBay. France. Gap. Amazon provides increased added value on several dimensions. In July 1995. Amazon has cultivated a reputation for excellence. and other key factors that have contributed to its success (or failure). Boo.

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

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

By leveraging its vast customer base. In doing so. Amazon introduced Amazon.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. These are discussed in more detail in Section 6. real-time shipping and backorder notices. Amazon creates one-to-one relationships with its customers. This customer-centricity is evident in all Amazon's activities. Community Amazon has also added a community element to the purchasing process. Connectivity Amazon has built relationships with high traffic web portals and sites. which helps to build loyalty and create switching costs. 65 . from its shopping basket applications which lists the estimated time to delivery reliably. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.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 . to the proactive notification of new items of interest. Amazon's content is not reproducible by competition. converting them into a storefront for Amazon. from the customer recognition at the point of interface (Figure 6. therefore. More recently.4.2. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. creates a competitive advantage. and customer interaction. and has developed an Associates Programme.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.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. and Customisation Amazon provides customised features and services. while driving up repeat purchases and cross-selling opportunities. linking it to a large number of other sites.

000 members. Newsweek. they are subsequently confirmed by e-mail. help maintain contact and build traffic by e-mailing customers when desired products or books become available.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. This enabled Amazon to reach more customer segments and niches (Figure 6. Through the first half of 1996.000 by August 2000. 66 . 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. The Associates Programme has been phenomenally successful. enticing them to return to the site and purchase repeatedly. 6. Amazon offered Associates referral fees of up to 15%.com hot-link and offer specific books of interest to their visitors. In July 1996. Once orders are placed. As a result of all these factors (7Cs). and by 1999 it had over 200. which only applied to sales that resulted from the initial click-through. In addition. In the second half of 1996. New Yorker and The Economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. and not subsequent purchases. attracting member sites of all sizes.2). The Financial Times. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Business Week. two personalised services. Instead of paying directly for this exposure. it began to advertise in print media and online . and customers are also e-mailed when the items are shipped from the warehouse. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Eyes and Editors.a move that along with the novelty of its business model and the newness of the Internet. helped generate publicity and stories about the company in publications such as The Wall Street Journal. increasing to over 500.2.

In return.uk the local provider for Yahoo! UK & Ireland. Prodigy and @home.COM'S ASSOCIATES PROGRAMME Source: Amazon.amazon. • Amazon. Excite. and primary button placement on web portal search engines. each friend is sent a $5 Amazon. Amazon has used viral marketing techniques through customer reviews. including: America Online (AOL). Interesting viral initiatives include: • Amazon. The Yahoo! agreement. Amazon closed deals with five of the six most visited Internet addresses.de became the local provider for Yahoo! Germany and Amazon.com). People tend to tell their friends about it. 67 . was also linked to Amazon's entry into Europe Amazon.AMAZON. thereby promoting Amazon.com gift certificate (in your name). and Geocities.co. Therefore. In addition. From July 1997 to December 1998.2 . mutual links.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. the customer acquisition cost is only £10.customers are encouraged to provide e-mail addresses of friends.com About Me . free eCards and gift certificates (which customers send to friends.allows customers to create a personal profile (with pictures) on the site. Amazon also established agreements with AltaVista. and you are given a $5 gift certificate for each customer you provide. Yahoo!.com's website (www. spreading the word for Amazon.com. Netscape's Netcenter and NetSearch. These multimillion-dollar.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. multiyear deals involve exclusive book-selling rights.com Refer-A-Friend .

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

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

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

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

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

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

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

it has not been able to establish itself as the leading online bookseller. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 Conclusion Although Barnesandnoble. August 4. and its lack of innovation (by copying Amazon.com's late start in 1997. Barnesandnoble.Forbes.3. meant that Amazon. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. 2000 (www. otherwise they risk losing out to other online competitors. In addition.com) 75 .com and has given them the image of a second rate 'me too' brand. 57 'Bn.com . feature for feature) has failed to differentiate Barnesandnoble. and allowed them to offer stock options as compensation and achieve a high market capitalisation.forbes.Not a Best Seller' . by portraying them as slow and clumsy in comparison to the more nimble Amazon. The Press have also contributed. Barnesandnoble. even if that means eating into their existing sales.its key differentiating factors. The company failed to leverage its established brand. and was further up the growth curve. significant market momentum. customer relationships and offline presence . a wellestablished Internet brand.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.com's experience is instructive. it also caused a major setback. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.com.com has been able to create a high impact and high-quality customer experience.

58 Kajsa Leander. Finland. sack 20% of staff and sell stock at 40% discount . Boo. and eventually debut in Asia.2 Value Proposition According to Kajsa Leander. receiving $125 million of funding. Puma. After a high profile launch. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Boo.com. Sweden.com opens its virtual doors' .Raises funding of $125 million . and Converse.com provided a range of 18 fashion and footwear brands including DKNY.com entered six markets: US. They intended to add France. Italy and Spain within a few months.Multi-million pound advertising campaign created by BMP DDB .3 1999 Mid year BOO. not the limited range you might get at most London fashion shops58".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Marketing Week.com.4.com had set the record as Europe's best-funded European Internet Start-up.COM 6.First sign of problems .1 Company Overview Founded in 1999. Germany and Denmark. among others.Appeals for $30 million more funding . TABLE 6.COM . 1999 76 . and the resulting loss of investors' confidence. within six months Boo. Boo.TIMELINE AND MAJOR MILESTONES . 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 launched with the goal of being the world's "first truly online retailer of sportswear and fashion". Boo.com collapsed through lack of funds.4. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). as well as create a kid's site. November 2000 January February May 6. and was billed as one of Europe's hottest e-commerce ventures. Morgan. it's about range and convenience.Site goes live . If a clothing brand is on the Boo site. On going live. arranged through J. founder and Chief Marketing Officer of Boo. P. CMO of Boo. and included high profile investors such as Bernard Arnault. Everlast. England.4 CASE STUDY: BOO.fails and appoints KPMG as liquidator.they redesign site. due to its poor performance and inability to build a customer base. Company is put up for sale. as cited in 'Boo. June 10. However.Announces it has only 500.000 unique visitors . "our marketing thrust is not based on prices. it means all that brand's product line is available.


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


Miss Boo

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



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

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

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



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

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


Merges with N2K.Raises $10 million through private placement .2 Value Proposition CDnow offers consumers a high degree of choice (over 500.5 CASE STUDY: CDNOW 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . former arch rival . CDnow is the leading online music store.TIMELINE AND MAJOR MILESTONES .ten times the selection of a conventional bricks-and-mortar music store).179-188 63 CDnow website (www.Partnership program with Geffen Records . by twin brothers Jason and Matt Olim. cover art. 'How to Acquire Customers on the Web' . customisation and a wealth of information and content to help in the purchase decision.Merges with Columbia Records . features.Launches merged CDnow/N2K site . CDnow provides access to over 500. whether for browsing or buying.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 music-related products and 650. good prices. $22. convenience. daily music news. CDnow was acquired by Bertelsmann AG.CDnow and Time Inc. & Novak. T. On 19th July 2000. It has a customer base of 4 million people.5. and exclusive interviews and reviews from CDnow's award-winning editorial staff. TABLE 6. D.000 sound samples. a valuable and rewarding experience"63.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. and one of the most popular shopping sites on the Internet62.Forges distribution partnership with Yahoo! $65.5. as well as music reviews. and they aim to "make every visit to the site. and was the first site to offer the sale of music downloads and custom CDs.1 Company Overview Founded in 1994. and an average daily audience of over 800..6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Site goes live .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .000 music related items . pp. CDnow is also driving the digital distribution of music.000 people. 62 Hoffman. This unprecedented degree of access to music and information is the core of CDnow's value proposition.cdnow.5 million distribution deal with Lycos Signs three-year. guides to music genres. announce marketing alliance . $18. May-June 2000.com) 80 .Harvard Business Review.

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

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

83 .4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. • Alliances and Partnerships . music-oriented websites. and spot radio to build reach. According to Jason Olim. Excite and other powerful Internet content and service providers. Spin. this is their "most successful customer building programme64". Yahoo!. they buy from CDnow. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. • Affiliate Programme .They have also stuck exclusive alliances with AOL. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. 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. CDnow extended its distribution reach to include more than 250.CDnow's advertisements are targeted to some degree. It is a revenue-sharing arrangement. and Variety. 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 6.5.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. • Traditional offline Media . By keeping the brand in front of the customer in this way. print advertising is music-related publications such as Rolling Stone. covering the entire music spectrum. CDnow's initiatives include: • Banner Ads . as well as more-targeted music-related sites like Billboard.000 small. and radio spots on the Howard Stern Show to build a cult following among radio listeners. customers buy music.Through the Cosmic Credit Programme.

CDnow made public relations a high priority brand-building tool. 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 . Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. In fact.5. 1998 .they were the first site to offer the sale of music downloads and custom CDs. with 44% of sales coming from new customers65.cdnow. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.htm) 84 . Public relations efforts helped to generate word of mouth and influence sales.Press Release. 1998: $56.4 million). April 28. and scaled it awareness-building efforts. • Word-of-Mouth .hsny. word-of-mouth accounts for the lion's share of CDnow's customers. and to increases in the customer base of more than 30% quarter-to-quarter. This has contributed to a 225% increase in sales (1997: $17. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. CDnow's promotion strategies have attracted high levels of traffic. both in the online and offline worlds. as a way to fuel very lucrative word of mouth. The story of how CDnow was founded in a basement. The company continually pushed for new distribution partnerships to widen its sphere of influence. it is in this context that the large investments in advertising and partnerships make sense.4 million. It is a powerful source of acquiring new customers at low cost. with repeat customers accounting for more than 50% of sales.Hampel & Stefanides (www.com/cdnow.(www.As for many successful online retailers.com) 65 'Pioneering in Cyberspace' . 6.5 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.

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

ebay. and eBay provides added value through its convenience. 24 hour a day. flea markets and auctions. eBay is not about auctions. Auctions make it fun.6 CASE STUDY: EBAY 6. transportation and other overhead costs.Company Overview' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. People perceive the auction format to offer better prices. from collectibles and antiques to electronics and toys. Auctions are an enabler.300 categories. 1st October 1999 86 . 6. Sellers pay a nominal fee for placing an item up for sale. "at its core.efficient one-to-one trading in an auction format. Since its launch in September 1995.Company Overview' . payment) between themselves. with emphasis being placed on its unique community feel and culture. Individuals use eBay to buy and sell items in more than 4. extensive selection and geographical reach. global trading place for buying and selling personal items in an entertaining auction format.eBay website (www.2 Value Proposition eBay offers consumers an efficient.ebay.g.000 new items joining the "for sale" list every 24 hours69. There are over half a million new auctions. and eBay receives a transaction fee that ranges from 1. or the payment for the item . with the number of unique daily visitors setting a record of 1.25% to 5% of the final sale price on any item sold. and eBay never takes possession of the item being sold.A Harvard Business School Case Study.eBay website (www. This is a new market . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.782 million in January 200068.6. shipping. Auctions represent a platform. CEO of eBay.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. the eBay community has grown to include more than 10 million registered users.com) 70 'Meg Whitman at eBay Inc. collectable shows.com) 'eBay . as cited in 'eBay .the closest thing in the offline world are trading forums such as classified ads. According to Meg Whitman. garage sales.6. and 450. (A)' . The buyer and the seller work out the logistics of the transport (e.removing the need for inventory. eBay effectively created a new business model never before possible .

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

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

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

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

eBay Magazine.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. The Official eBay Guide to Buying. and maintained the same ratio for 1999. they decided to target their marketing efforts on these heavy users. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.g. Recent promotional initiatives include its new publication. These new publications appeal to the collecting spirit. as a result of the high quality experience it provides. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. but they have other partnerships with over 150 websites of varying scales. the largest of which was with AOL. 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. eBay has since expanded its promotion efforts and engaged in marketing partnerships.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 91 . they spent $12. who tended to be serious collectors. provide a wealth of information about the 'ins and outs' of trading on eBay. As a result. and two books. $75 million joint marketing alliance and development deal. Selling. eBay transformed from a pure online play into a 'clicks-and-mortar' company. 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. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e.a four-year. Early on. Based on this. Through this combination of its advertising efforts and targeted promotions. Doll Collector) and appearance in trade shows. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.6. In 1998. The AOL partnership was one of the largest strategic partnerships on the Internet . eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). and facilitate the spread of positive wordof-mouth. and Collecting Just About Anything and eBay for Dummies.3 million in advertising. eBay has been able to attract a large customer base. and highlight opportunities created by e-commerce. representing about 40% of revenues. Mary Beth's Beanie World. eBay decided that it would not enter into major portal advertising deals in the short term.

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

6.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.an early convert to the then-revolutionary idea of clothes retailing on the Internet.htm) 75 Jeanne Jackson. Gap Inc.Business Week. head of Gap Online. "this is about being clicks-and-mortar. to provide customers with greater convenience and options. L."to deliver style.gapkids. America Online (AOL) and Gap Inc. Its reach extends across more than 1.com and www. Currently.'s website (www. October 8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and provides useful insight into how traditional brands can leverage their strength online.com' . from jeans and T-shirts to khakis and jackets.7. Gap's online sales tripled in 1998 alone. and Gap online provides access to the full range of items at Gap. standard styles are well suited to online shopping.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. California GapKids opens its first store BabyGap is born Gap opens its online store at www. This success is largely due to their simple formula .babygap.gapinc. Gap online exploits the accessibility and convenience of the Internet. as cited in Lee.com/about_us. and analysts estimate that sales in 1999 amounted to $50 .7 CASE STUDY: GAP. 'Clicks and Mortar at Gap. L.800 stores in the US.1 Company Overview Gap opened its first store in San Francisco in 1969. Canada.COM . Inc. In addition. from shirts to accessories and hard-to-find sizes. online sales are only available to US customers. up from $20 million in 199875. 1999 76 Jeanne Jackson.gap. surpasses $9 billion in net sales and increase earnings by 54% over previous year.$100 million. The Gap offers a balance of modern and seasonal styles of clothing. In late 1997.com is an example of successful crossover marketing. and are still relatively small compared to Gap's $9 billion in annual sales. Gap started selling items online . the growth prospects are enormous.com. 'Clicks and Mortar at Gap. however. October 8.2 Value Proposition Gap's simple. announce multi-year partnership.interbrand.7. 73 74 Interbrand (www. service and value to everyone74".COM 6. Germany and Japan. and BabyGap. as cited in Lee. Gap.com' . 1999 93 . letting customers access the Gap brands. whether in the store or online76". According to Jeanne Jackson.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.Business Week. UK.see Appendix A Gap. TABLE 6.com) . GapKids. and today it is the 29th most valuable brand in the world73.

.. and easy-to-use. 1998 94 . FIGURE 6.7 . the extensive integration of Gap's online and offline activities are clearly evident. The site also offers sharp graphics. April 18. Simple. Executive Vice President of Global Marketing. 'Mind the Gap'. reinforcing its brand identity.com store one immediately notices the consistency between the online and retail stores.. describes the company's brand personality as "direct and straightforward. Michael McCadden. Content. 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.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.making visual references to its offline roots. Gap Online primarily focuses on Convenience.com. making it convenient.very easy. feel and design of the site is consistent with the bricks-and-mortar stores. making navigation even faster.The 7Cs Framework In terms of the 7Cs framework. Visiting the gap. This personality is reinforced online through the simple structure and layout. but provides customers with the option of viewing text-only. Unlike Barnesandnoble. D.. The Observer... very efficient"77.7.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.. and Customer Care..

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

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

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

CEO of Yahoo!. The Stock' . all in a single location.businessweek.com) 98 . The company's global web network includes 23 world properties outside the US. who started an online guide as a way to keep track of their personal interests on the Internet. household and business user reach. 6. As the first online navigational guide to the web.8. and the number of websites continues to explode. the amount of information.Business Week. 1998 (www.com) .interbrand. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. from e-mail services to stock quotes and much more.2 Value Proposition At the core of Yahoo!'s value proposition. Yahoo! has since morphed from an ordinary search service into a global Internet communications. Yahoo! was founded by David Filo and Jerry Yang. There's nothing in the real world to compare to that79". The concept exploded (through word-of-mouth) and in less than six months.The Company. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. Yahoo! is a leading guide in terms of traffic. advertising. September 7. two Ph.D students at Stanford University. According to Timothy Koogle.1 Company Overview In April 1994. Yahoo! offers a range of supporting services that add value.8 CASE STUDY: YAHOO! 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8.see Appendix A 'Yahoo! . and is one of the few Internet companies to turn a profit early in the development of the Internet. 78 79 Interbrand (www. The Strategy. lies the directory . As such. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. the site was receiving 1 million hits per day.

Yahoo! forms agreements with Palm Inc.8).3 Sources of Value . .Yahoo! Launches Business-to-Business Marketplace .Receives $1 million in venture capital funding from Sequoia Capital $33.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.000 shares at $13. 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.Site goes live September . to allow access.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.8.The 7Cs Framework Convenience Central to Yahoo!'s success. Yahoo! extended its convenience through its Yahoo! Everywhere service. Palm computers).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 . Their goal is not to list everything under the sun. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. and unveils Yahoo! Digital Introduces Bill Payment services . 99 .Yahoo! Shopping launches personalised shopping service 6. to provide web-based services to PalmTM handheld computers .Yahoo! acquires eGroups . More recently..7 YAHOO! . is the way it has structured and displayed information. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.com allowing them to offer person-person payment solutions .e.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. mobiles.com.Yahoo! acquires Arthas.TIMELINE AND MAJOR MILESTONES 1994 April .600.Yahoo! unveils Yahoo! Finance Vision . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. TVs. regardless of platform (i.8 million IPO (2.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9). and is similar to a custom tailored newspaper (Figure 6. Yahoo! has increased customer loyalty and retention rates. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. Their thrust has been to provide valuable content to customers.com and CDnow.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. ranging from daily news and weather reports to road maps and books. 100 . This creates a win-win situation as its satisfies Yahoo!. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and more importantly. By tailoring the information to users' preferences. the end-user. the partner.8 . well structured. They have formed multiple alliances and partnerships with leading online companies such as Amazon. from stocks and sports results to weather and air fares. 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. while providing partners access to a large customer base. and has been at the heart of Yahoo!'s growth and development. easy-touse.

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

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

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

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








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



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

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

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

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

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

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

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


262 1.894 14.602 4.048 20.143 2.181 21.654 43.197 32.527 3.281 11.231 24.193 112 .845 56.761 1.404 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .781 17.231 12.634 1.792 3.464 3.595 17.502 33.830 14.313 2.147 9.423 2.643 3.Interbrand's Ranking of the Top 60 Brands (www.225 11.interbrand.550 12.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) 83.909 7.422 1.766 14.043 8.329 4.568 3.781 33.184 1.310 11.052 6.932 4.806 11.283 4.694 17.361 1.155 7.510 8.076 3.021 26.985 2.804 2.648 1.101 9.596 3.806 2.132 15.603 5.681 2.895 2.319 1.275 30.

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





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