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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
THE NATURE OF BRANDS
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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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
BUILDING BRANDS ON THE INTERNET
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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
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
5 Other Factors that Contribute to their Brand Leadership 6.2 Value Proposition 6.The 7Cs Framework 184.108.40.206 Conclusion Case Study: Gap.2 Value Proposition 6.The Failure of Boo.6.4 Brand-Building Strategy 6.7.1 Company Overview 6.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.The 7Cs Framework 6.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.2 Value Proposition 220.127.116.11 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 18.104.22.168.5 6.4 6.1 Company Overview 6.4 Brand-Building Strategy 6.3 Sources of Value .22.214.171.124 Conclusion Case Study: CDnow 6.5 Other Factors That Contribute to their Brand Leadership 6.5 Conclusion Case Study: Yahoo! 6.7 6.2 Value Proposition 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.6.1 Company Overview 6.1 Company Overview 6.com 6.3 Sources of Value .2 Value Proposition 6.1 7.4 Brand-Building Strategy 6.4.The 7Cs Framework 126.96.36.199 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 .com 6.5.com 188.8.131.52.4.Extensive Integration 6.5.3 Sources of Value .1.3 Sources of Value .8 Case Study: Boo.8.4.The 7Cs Framework 6.4.6 6.8.3 Sources of Value .
6 Figure 5.8 Figure 3.4 Figure 6.6 Figure 6.8 Figure 6.2 Figure 6.5 Figure 5.2 Figure 5.9 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 .com's Website Overview of Boo.8 Figure 5.1 Figure 2.6 Figure 2.1 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 6.5 Figure 2.com's Associates Programme Overview of BarnesandNoble.5 Figure 4.2 Figure 2.4 Figure 4.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 .3 Figure 5.1 Figure 1.2 Figure 4.5 Figure 6.1 Figure 3.4 Figure 5.com's Website Amazon.9 Figure 6.4 Figure 2.7 Figure 5.2 Figure 2.7 Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.3 Figure 2.4 Figure 4.1 Figure 4.3 Figure 4.3 Figure 6.6 Figure 4.7 Figure 5.3 Figure 3.7 Figure 6.2 Figure 3.
1 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones BarnesandNoble.com .4 Table 6.2 Table 6.Timeline and Major Milestones CDnow .com .Timeline and Major Milestones Boo.6 Table 6.1 Table 6.3 Table 6.com .Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .5 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones eBay .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
there has been an explosion in the online world . Internet companies such as Yahoo!.0 1.YEARS TO REACH $100 MILLION IN SALES 6 5. the Internet is changing fundamentals about customers. This is creating new challenges and opportunities.1 3. As such.5 2. whereas it has taken decades for traditional companies to achieve the client base. relationships.com Source: Securities and Exchange Commission Filings.5 million book titles). The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.1 . Amazon. Figure 1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.9 2. In the midst of this.g.com) 7 .1 shows the number of years it has taken some Internet brands to reach sales of $100 million. aggressive Internet start-ups have emerged. creating strong brands that are putting established brands at risk. interaction and relationship building. As such. FIGURE 1.com1 Amazon.9 3. as they face each other through an electronic connection. while providing new tools for promotion.com's range of 4. Amazon. McKinsey Analysis (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com. The Internet also represents a fundamental shift in how buyers and sellers interact.mckinseyquarterly. customer affiliation and level of sales.1 OVERVIEW Over the past few years. It is empowering customers with more options and more information to make informed decisions.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. products and services reconfigured. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.2 3. that these Internet start-ups have achieved. service and brands.com noble. and business models revamped. Supply chains are being rethought. and is triggering the need for new brand-building strategies and tools. America Online (AOL) and eBay have been able to build powerful brands in a few years.an explosion that is also a harbinger of how business will operate in the future.
p.. A Business Week / Harris poll. 'Meeting the Challenge of Disruptive Change'.. turning browsers into buyers. S. found that 57% of Internet users go to the same sites over and over again. Harvard Business Review.. C.. R. 1997.. & Overdorf.66 8 . attracting traffic or 'eyeballs'. A New Class of Netizen is Settling Right In' Business Week. brands are even more critical as customers have little to go on other than a recognised brand. 'Internet Communities . 1 2 3 Christensen. 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. May-June 2000 Hof.April 2000. Therefore. May 5.. and Novak. rather than drifting from site to site3. 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. 66-76 Hoffman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. However. 'How to Acquire Customers on the Web'. M. L. building awareness. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. Volume 78 Issue 2. March . For pure online players. In light of this. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. P. Given the tremendous clutter in today's e-commerce marketplace. P. and the high cost of acquiring online customers2. Harvard Business Review. who are essentially intangible. T. D. Browder. that extends the brand-customer relationship beyond a single transaction. there is a growing recognition that traditional methods are no longer suited to this new interactive environment.Forget Surfers. pp. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. & Elstrom. As such.
2 .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. tools and strategies to build brands on the Internet. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.2.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. and to identify new sources of value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.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. FIGURE 1. This is based on the outcome of the primary research (in-depth case studies). with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. • To explore how the Internet is changing the brand-building environment. supported by secondary data related to aspects of online business from accredited and published sources. 1.
The absence of academic literature on Internet branding posed a major obstacle. CDnow. marketing.com. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble.com). Consequently.com). however. as well as a recent Internet failure (Boo. 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. 10 . 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. While there is no attempt. Conclusion: Discusses the key findings and areas for further research. and is used to provide insight into some of the factors that contribute to the development of successful brands. nor desire. eBay and Yahoo!). Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. there is more work in popular rather than academic literature. These are further refined using the insight obtained through the case studies. to provide an in-depth analysis of the psychological and social dimensions of brands. strategy and economics. 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. the literature review draws on leading academic thinking in more established areas such as brand management. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.com and Gap. relationship management.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Hypothesis (Framework): This is based on the literature review and secondary data.
summarises the key findings. and outlines the opportunities for further research.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Chapter 7. highlighting some key factors that have contributed to brand success. The limitations of the Internet in terms of brand-building are also discussed. 11 . their purpose and value are discussed. This chapter sets the context within which online brands must be built. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. provides an analysis of leading academic literature in relation to branding. Chapter 6 examines the brand-building efforts of seven companies. The final chapter. Chapter 4 provides an overview of the Internet and its defining characteristics. The nature of brands. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.4 STRUCTURE The next chapter. and introduces the core concepts that form the backbone of the dissertation. Chapter 3 explores how brands have traditionally been built. by outlining the impact of the Internet on the business and competitive environment. as well as the interactive approach to attracting customers and building loyalty. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. Chapter 2.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
R. p. (New York: Free Press). and the importance of customer satisfaction and brand loyalty. vii 13 . these layers are Brands are made up of many layers and dimensions. 'The Future of Brands'. the brand's emotional benefits and its self-expressive benefits . FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. p.2 WHAT IS A BRAND? According to Rita Clifton. CEO of Interbrand Newell and Sorrell . (London: Macmillan Press Ltd. explaining the value of brands. symbolised in a trademark. unravelled to reveal the nature of brands and their reason for existence.1 . A. Branding is about creating 'value'. and for the company. 2.). 'Building Strong Brands'. E. This value stems from the products and services that companies create and bring to the market. if properly managed.see Figure 2. These concepts are central to brands and brand-building. The chapter proceeds to describe the influence of brands on the buying process.a brand is: "a mixture of tangible and intangible attributes. 2000. 1996.1. whether online or offline. and highlights the importance of brand management.1 INTRODUCTION In this chapter. 74 4 Clifton.a leading specialist brand consultancy firm . which. both for customers.. D. and to companies. creates influence and generates value4" This definition truly captures the essence of a brand. and they form the backbone of this dissertation. but extends further to encompass added values derived from factors such as the brand-customer relationship. & Maughan.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. both to customers. The concept of brand equity is outlined.
3 THE LAYERS OF A BRAND Brands are made up of four layers .Figure 2.2. benefits. It is a company's promise to consistently deliver a specific set of features. and a 'promise'. p. the augmented brand and the potential brand . Brands are richly endowed entities. January-February. which grows out of the cumulative memory and the experiences customers have of products or services. The space a brand occupies inside a customer's head can create a 'mental' patent. Harvard Business Review.a 'relationship'.. a 'reputation'. For some companies. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . the basic brand.86 14 . making their way into planning and strategy documents. brands are their most valuable asset. 'Marketing success through differentiation . 2. a 'set of expectations'. T. and services to customers.the core product or service.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. FIGURE 2.of anything'. As such. yet ultimately reside as consumer perceptions. 1980. They start life as ideas.
Service Brands (intangible) are much less numerous than their product counter parts. with supplementary products and services (e. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. They are the historical core of branding because they are the most prevalent.Analysis. even when the alternatives are substantially cheaper or more readily available (e. customers buy products to meet certain functional needs. and because they most readily come to mind when consumers are asked to recall brands. (Europe: Prentice Hall) 1996. Coca-Cola. 'Marketing Management . 5 Kotler. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. The Basic Brand The basic brand consists of the "name. such as in retailing.g. but the brand itself is the store. & Control'.g. 15 . Certain service brands. 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. preferring things they can see and touch. Planning. The most common barrier to competition is building a brand.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers.The Gap stores. term. In fact. Implementation. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible.com are examples. not the products it sells . 8th Ed.. However. this is the case with all Internet companies. or design. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. symbol. actually sell products. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. P. or a combination of them. 2. sign.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. Southwest Airlines and Amazon. information. Kodak. Essentially. quick delivery) that enhance the customer’s total purchasing and use experience. Levi's). this should support the offering's performance and differentiate the brand from those of competitors.
selective distortion. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. 16 . (Europe: Prentice-Hall) 8th Ed. it is important to clarify customers' underlying buying behaviour and the buying process.194 The process starts when the buyer recognises a need. FIGURE 2. In the evaluation stage. Implementation. Consumers develop a set of brand beliefs about the attributes of competing brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.3 . P. and selective retention. and the effect of selective perception.4). These beliefs depend on their previous experiences with the brand. 1996. However.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. and pay the most attention to the brands that will deliver the sought benefits.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. either through heightened attention or through an active information search. a consumer will be inclined to search for more information. p.. Planning. and Control'. 'Marketing Management . These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).Analysis. The buying process consists of five stages (Figure 2. two factors can intervene between the purchase intention and the purchase decision . the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. Through gathering information.3). it is critical to understand what attributes consumers value.attitudes of others and unexpected situational factors (Figure 2. the consumer learns about competing brands. This can be triggered by internal or external stimuli (advertisements). Consumers differ as to which product / service attributes they see as important. Once aroused.. Therefore.
These expectations are formed through a combination of past experiences. locking out potential competitors. even delighted. Expensive purchases involve some risk taking. somewhat satisfied.the customer will be highly satisfied. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. and especially important when dealing with purchases made through the Internet. A consumer tries to deal with this by gathering information from friends. word-of-mouth.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. and a preference for recognised brands they can trust. as these services are intangible and therefore. advertising and communication. they will evaluate their level of satisfaction . customers make decisions purely on the basis of their expectations. Customers' expectations are particularly important when dealing with services. If perceived performance and quality exceed their expectations then they are satisfied. or avoid a purchase decision is heavily influenced by perceived risk. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. Customer satisfaction and loyalty are essential to creating successful brands. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. After a consumer has actually purchased the product or service. or dissatisfied with the purchase decision. 17 . their negative attitude may influence the consumer's purchase intent or vice versa. If performance falls below their expectations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. they will be dissatisfied and look for alternative brands in the future. A consumer's decision to modify. postpone.
E. 'Why Satisfied Customers Defect' . This satisfaction encompasses the whole experience and not just a company's products or services.customers who are satisfied and loyal and talk favourably about the brand . The customers at the bottom end of the scale are "terrorists" .Harvard Business Review. T. and Johnson. D. M. 6 7 Jones.those who actively attack the brand telling others not to buy from the company. Customers that are passionately or emotionally loyal are those that have built trust in a company.. and believe that it will always act in their best interest. Federal Express. p. C.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Nov-Dec 1995. & Sasser. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney.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. Nov-Dec 1995 Hart. Marketing Management.Harvard Business Review.5. Johnson & Johnson.. E. W. & Sasser.. 91 Loyalty is derived when customers are continuously satisfied over time. Hewlett-Packard.. 'Why Satisfied Customers Defect' . Southwest Airlines and Xerox7. T. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. At the opposite end of the satisfaction spectrum are "apostles" . 'Growing the Trust Relationship'.. Saturn.Figure 2. FIGURE 2. Spring 1999 18 . Trust is critical for a brand's success.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.
'The One to One Future'. Emotional loyalty can be also created through the formation of a strong user community around 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. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Spring 2000 19 . 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. M. Firstly. emotional loyalty is born out of a consumer's personal relationship with a brand. & Rogers.they provide good word-of-mouth and are the best salespeople for the product / service 2. 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 . G. 'Building Stronger Brands through Online Communities' . D.Sloan Management Review. 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).g. 8 9 Peppers. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand..com. 1993 McWilliam. In this way.. Harley-Davidson motorcycle clubs).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. There is also clear evidence of this on the Internet.
a 'powerbrand' tends to have a high degree of brand loyalty. March 1998. which goes well beyond the satisfaction of a specific need. FIGURE 2.6 . 20 .7 . there are brands that customers perceive as acceptable and would not resist buying. and understanding the needs and buying processes of the target market is essential. Beyond this. Journal of Consumer Research. FIGURE 2. pp. there are brands that are unknown by most buyers.7)..8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 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. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. However. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). A stronger brand enjoys a high degree of brand preference over competing brands. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. S. 343-373.
BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .Create Awareness . and relationships with distributors and strategic partners. D. 1991 21 . (New York: Free Press). FIGURE 2. 1991 10 Aaker. strong brand associations.8 . The major brand assets are brand loyalty. 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". name awareness. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. The benefits of each are outlined in Figure 2.8. D.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'. perceived quality. which is the value of the brand over and above its commodity value. (New York: Free Press).. and other assets such as patents. trademarks.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.
and the number two twice the share of the number three12.. to its logo. Journal of Marketing Research.Typically a brand leader obtains twice the market share of the number two brand. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. G.To be sure of buying the best product in the category. production and marketing. The brand leader is the most profitable and all beyond number two are unprofitable13.Satisfaction linked to the attractiveness of the brand. R.. 3rd Ed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.8. • Brand Leverage . 'Strategic Brand Management'. the best performer for a particular purpose • Characterisation . J.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. P. brands perform several functions that add value and customer benefits: • Identification . in the following ways: • Brands.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. Premium pricing increases revenue. (London: McGraw Hill).To be clearly seen. N. & Tellis.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .. pp. 1986 13 Golder..Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . to quickly identify sought after products • • Practicality . 1992 Worcester. May 1993.To have confirmation of your self-image or the image that you present to others • Continuity .2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.8. 158-170. to make sense of the offer. 11 12 Kapferer. to its communication • Ethical .To save time and energy through identical repurchasing and loyalty Guarantee . 'Consumer Market Research Handbook'. market share and profits . 22 . (New York: Free Press). J. & Downham..The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.
not brands. • Brand Loyalty and Beliefs . • The Brand Barrier . The next chapter describes the process of how brands are built. fashion or prevailing market conditions. in turn. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Coca-Cola “the real thing”). and the characteristics of successful brands. They also tend to elicit community and government support. 2. but there remains an ongoing controversy about how accurate and meaningful these measures are. • Motivating Stakeholders . companies such as Interbrand (see Appendix A).Brand leaders usually have the financial strength to fend off competitors.Dominating a niche market is usually more profitable than being fifth in a large market. maintain good price levels and generate strong cash flows. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. When a company creates this type of customer preference and loyalty. it can build a strong market share.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.Companies with strong brands attract good recruits. and Young & Rubicam have created complex formulas. • Avenues for Growth . the tools that are used.The product life cycle applies to products. Companies can maintain a brand while modifying the underlying product to account for new technology.Strong brands are more attractive to investors. 23 .g. In trying to estimate the monetary value of brands. brand leaders can exploit their superiority in the market (e.g. In addition. drives up share price and provides the basis for future growth. The brand can also be used to penetrate new markets. Johnson & Johnson with Tylenol).BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . This.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
The major characteristics of successful brands are also reviewed. To entice trial and repeat purchase requires triggering mechanisms.1 . 3. This is illustrated in Figure 3. it should provide a satisfactory experience and lead to a willingness to buy again. If the offering is developed properly. selling.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and keep it turning. the next step is to get customers to try the brand. This chapter spells out the traditional brandbuilding process. Once this has been established. promotion. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. FIGURE 3. brand awareness.1.1 INTRODUCTION Building a strong brand is a complex task. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. highlighting important factors that contribute to the success of each step along the way. and direct marketing. confidence and brand equity are built.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. which are created through advertising. public relations.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . Without a good product or service. In this way. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.2 .2). Similarly. 26 . It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . a company must develop a strong understanding of who their potential customers are. In order to do this. it will never attract a strong client base. a compelling value proposition is the combination of an effective product or service (P). a distinctive brand identity (I). unless differentiation and awareness can be developed. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.a strong offer that a potential customer would find compelling and interesting. the brand can elicit feelings of confidence that it is of higher quality than competitors'. As such. and added value (AV). The value proposition must be continuously re-evaluated to respond to changes in the marketplace. it is impossible to build a successful brand.each is essential.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. FIGURE 3.
brands frequently acquire an image from the type of people who are seen as using them. it acquires added values of familiarity and proven reliability. Hewlett-Packard. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. which are additional to those based upon real performance.. it is more likely to work effectively for them. Lexington Books). 169 Jones. Gillette. The large number of decisions. 'Marketing Management and Strategy'. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. mean that buyers look for short cuts. influenced by brand values. the pace of technical change. these needs are as likely to be about satisfying self-actualisation or esteem needs. People use brands to express their lifestyles. 1998.in many cases. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. J. • Manufacturers' Name and Reputation . Coca-Cola. (Europe: Prentice-Hall). which they perceive as meeting their needs. P. Sony. if customers have faith that a brand will work. • Belief in Efficacy .g. For pharmaceuticals. cosmetics and high-tech products. providing confidence and incentive to trial. MA. • Brand Appearance .In many situations a strong company name (e. In today's affluent society. Kellogg's) attached to a new product will transfer positive associations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 1986 27 . 2nd Ed.. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. as they are to be about satisfying basic physical and economic needs14. industry endorsements and newspaper editorials. • User Associations . 14 15 Doyle. or to gain a sense of belonging. faith in brand generates satisfaction in use. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs.the design. Brand values derive from five major sources15: • Experience of Use . Customers choose brands. the number of competing alternatives and the large variety of advertising and selling messages. P.3. interests.if a brand provides good service over time. pp. layout and appearance of the brand can clearly affect preference by offering cues to quality. values or wealth.
g. J. visual appearance.3: • The Brand Core .g. Themes include the physical appearance (logo.. friendly). (New York: The Free Press). features. 1992 28 . Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . glamour. its reflection (e. and visual appearance). colour scheme. etc. Brand themes are the most flexible element and will tend to change with fashion. however the brand style and core tend to be less flexible. prestige. and the relationship expressed (e. • The Brand Style . 'Strategic Brand Management'. 16 Kapferer. A company should seek to differentiate its brand through developing a distinctive identity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.the fundamental or genetic code of the brand.the way the brand communicates through its advertising. press releases.articulates the brand core in terms of the culture it conveys.3. packaging.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. and advertising. • The Brand Theme . type of spokesperson / customer image used to advertise the brand). This may be different from the brand image.Figure 3. which depends on how the target market perceives the brand. style or cultural differences from one country to another. which remains fixed over time. its personality and its image or self-projection .
website design.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. understanding the brand's core and style helps set the perimeters of brand extensions .3 . (New York: Free Press).how far the brand can be meaningfully stretched to other products and market segments. its strengths and opportunities. below-the-line activities. Finally. 'Strategic Brand Management'. 29 . and through line and brand extensions. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. advertising.g. structure and ease of use).. It also facilitates consistency in the message being transmitted through presentation (e. 1992 The brand prism enables management to understand the brand.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. J. Secondly.
INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. If the offering is developed properly. Price. it should lead to satisfaction and re-purchase.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 'Diffusion of Innovations'.4 . (New York: Free Press). strategy (partnerships and alliances). The value proposition must be communicated to entice customers to try the product / service. 1962. • Interest . • Trial .Customers need to be stimulated to seek information about the brand's uses.79-86 30 . Before potential customers can buy a product / service.4.. E.79-86 The Innovation-Adoption Model consists of: • Awareness . 'Diffusion of Innovations'.The McKinsey 7-S Framework).. 17 Rogers. • Adoption . Personal sources such as word-of-mouth from friends.Figure 3.Customers consider whether the product / service will meet their particular needs. • Evaluation . (New York: Free Press). skills. they must learn about it. pp. Advertising and PR are common tools for achieving awareness. systems.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. FIGURE 3. features and advantages.Product and service features. the company must ensure that it develops the appropriate structure. pp. The value proposition must then be articulated in terms of the 'marketing mix' .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 1962.often referred to as the '4Ps' . deliver and reinforce this value proposition (see Appendix B . culture and staff needed to support. Promotion and Place (distribution strategy). and its products / services. and the product / service's perceived performance.The company has to create awareness of the brand. E. management style. This learning is called the adoption process17 . colleagues and opinion leaders become important influences at this stage.The customer is satisfied and decides to make regular use of the product / service.
the company may supply customers with special equipment or tools (e.such as airline frequent flyer programmes. 3. This focuses on establishing a longterm. allowing companies to communicate regularly with their customers and customise their interaction. This information is a key competitive advantage. encouraging evaluation and trial. making them less likely to switch to a competitor.. providing insight into customers' needs and wants. Over time. Advertising and public relations can be effective in generating awareness and interest. A. software) to help customers interact with the company.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. when each trusts the other to deal fairly and reliably. Through building relationships with customers.advertising.for example. (New York: Free Press).by learning customers' individual needs and wants and individualising and customising service and contact with the customer. direct marketing. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . L. this process enables an exchange of information. companies have used the tools of the promotions mix .136-142 31 . This is often referred to as Customer Relationship Management (CRM). companies can increase buyers' satisfaction. companies can increase the value of each customer. sales promotion. 'Marketing Services: Competing Through Quality'. • Structural Ties . but enhanced customer interaction through relationship building. Customer service is an important element of this relationship. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. personal selling and public relations / publicity .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. 18 Berry.g. while strengthening the position and value of the brand.to move customers through the adoption process. 1991. pp. Social Benefits . Internet linkages. & Parasuraman. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. & loyalty / discount cards. In this way. multi-transaction relationship.
when the brand has no competitors to rival its position. If the quality of the experience deteriorates. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. As a result. and establish a trusting relationship. Without building awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. or if the brand is surpassed by superior offers from competitors. • Time and Consistency . and making it more difficult for competitors to emulate. its function and psychological values. brands were not built quickly. while providing new tools for promotion. interaction and relationship building. it must have a unique positioning concept . it has a profound impact on the traditional brand-building process. As customers build trust in the brand through satisfaction of use and experience. 19 Doyle. trigger trial and reinforce commitment to it. Once the framework has been established and the organisation configured to provide this proposition. The Internet provides the opportunity for companies to create compelling value propositions never before possible.A successful brand requires an effective selling. including: • A Quality Product / Service Experience . • Strong Communications Programme . • Unique Positioning Concept .Satisfactory experience is the major determinant of brand values.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. 1998. 3.If the brand is not the innovator. strengthening the brand further. As such. 'Marketing Management & Strategy'. P..a segmentation scheme.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. which will communicate the brand's existence. • First-Mover Advantage . value proposition or augmented brand. pp. comprehension and intention to buy. which will add value and distinguish it from competition. (Europe: Prentice-Hall). companies must actively communicate it to the target audience to entice trial. advertising or promotional campaign..Being first into the market does not necessarily bring success.Traditionally. 2nd Ed. then its position will be undermined. the brand is meaningless. It often takes years to build up the added values. but it makes the task easier. It is easier to capture a share of the consumer's mind and build a customer base.176-177 32 . companies have the opportunity to start building relationships with their customers.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
it is a common technology platform that allows computing devices to communicate with each other. which contain hypertext and pictures.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. Information is becoming a major part of the products and services that people buy. Hypertext allows information to be organised in a user-friendly way that is easily accessible. it offers a number of alternative channels that enable businesses and people to communicate. This chapter provides an overview of the Internet and its defining characteristics.1. and provides the opportunity for dynamic interaction. creating new challenges and opportunities.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. and the 'world wide web' (www) . In essence. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. news groups and mailing lists. and a critical source of added value. FIGURE 4. E-MAIL Is the part of the Internet that most users use at present.1 INTRODUCTION The Internet is transforming the business environment. but in practice not in real time. The three core channels include e-mail (the most common). 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.Figure 4. 34 .1 . In doing so.
The context of the Internet and certain key developments are highlighted in the Figure 4.2.not previously available with mass medium forms of communication.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. ubiquitous links to anyone. allowing both parties to identify each other and build one-to-one relationships . and deliver new products and services at low cost.2 (Note: 35 . • It Allows for Two-way Communication and Interactivity .this radically alters the process of interaction between communicating parties.The Internet is a global network and can be reached from everywhere. • It Overcomes the Barriers of Time and Space .24 hours a day. These defining characteristics have fuelled its explosive growth. 4. These characteristics combine to create a very powerful medium. 7 days a week.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). which was intended to link military networks together. regardless of where the computer or Internet access device is physically located. These qualities eliminate the barriers of time and space that exist in the physical world. anywhere. The Internet can also be accessed at any time . By allowing for direct. the Internet lets individuals and companies build interactive relationships with customers and suppliers. when the United States Defence Department developed the 'ARPAnet'. Graph is not drawn to scale).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 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.3 .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.com) 36 .000 1. 1998. 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.000 100. as cited in 'E-Business Technology Forecast' .000 10.2 .000 1.a PricewaterhouseCoopers Report. 2000 Internet / ARPAnet was created Dell.000 1969: 10.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000.000.Figure 4. 1996 (www. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.economist.3.000. FIGURE 4.
Higher PC penetration among consumers and companies . Multimedia development tools that can be used to create rich content.com) 37 . Reed.Cheap bandwidth .CyberAtlas Internet Statistics and Market Research.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. and gateway services).High-powered servers . 'Electronic Commerce (finally) Comes of Age'.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . As shown in Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. TCP/IP). Easier access to these networks provided by point-and-click web browsers.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . FIGURE 4. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. G. hosting. 1996. The emergence of open standards in development tools and at the network protocol level (e. increasing to 500 million users by 200220.Content Aggregators .Attractive infrastructure and middleware software . The development of critical processes (ordering..g. there will be an estimated 375 million Internet users world-wide.Low-cost networking alternatives .g.). The growth in support services (e. offering inexpensive bandwidth.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .Cheap microprocessors & RAM . The McKinsey Quarterly. 2000 (http://cyberatlas.4 .E-Marketplaces . the momentum created by all these forces has created a virtuous cycle of growth. billing. L. No. web design. making it more cost effective for software developers and other technology providers to create interoperable products. payment.internet.4.. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. etc.2 20 'World Online Populations' .
reveals the wide range of areas where people are embracing the Internet . These activities highlight the adoption of the Internet as an interactive. FIGURE 4. communication and information tool.from communicating (90% use e-mail) and sourcing information. 2000 (www. as cited in the Economist Intelligence Unit (EIU).com) 38 .5.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. to interacting (e. April 13. chat rooms.Figure 4.eiu. entertainment) and purchasing (37%) .5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).g.
The main difference between the Internet and other electronic media (i.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. content.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. telephone) is that the Internet goes beyond just enabling transactions.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. software. The buyer and seller 'face' each other through an electronic connection. April 2000 39 . FIGURE 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. projected by Gartner Group. web browsers. Instead there is a website. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact.e. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. they all project the value e-commerce transactions to grow at unprecedented rates. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. There is no need to travel to a physical location. fax. However. no order book.6 . and no cash register. and people.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. C. which are often disruptive to traditional business models21.g. through the use of extranets).how companies operate. suppliers. pp. represents a level of efficiency and integration previously unattainable. operation (e. & Overdorf. New brands and business models are emerging to seize this opportunity. 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. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. 'Meeting the Challenge of Disruptive Change'. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. This is threatening to undermine many old established brands. M. how they compete and how they serve their customers . For example. At the same time.g.and revolutionary new business models are emerging. 66-76 40 .5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted .g. Although the particular impact will differ between industries... Additionally. and transforming traditional distribution channels.April 2000. Volume 78 Issue 2. some of which look set to become the superbrands of the future (e. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. the explosion of information is placing a premium on skilled information management. partners and other corporate constituencies. the Internet is sidelining the role of many traditional intermediaries. Dell Computers). The Internet also facilitates the development and co-ordination of global activities (e. March . A 'virtual' presence can mitigate the cost of having to invest in physical facilities. Yahoo!). a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers. By allowing customers to talk knowledgeably and directly to suppliers. Harvard Business Review.
or catalogues. Now companies need to move at warp-speed.in developing products. as they have access to more information leading to more informed decision-making.internally and externally . 2000 (www. and the 24 x 7 environment. as they are just one 'click' away. the diminishing barriers-to-entry and the lower switching costs. quick evolution and all the power. This is forcing companies to become flexible and responsive to customer needs. commit and deploy resources.Forrester Research. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. highest convenience and quickest satisfaction. the typical clock-speed at which companies need to operate has accelerated. respond to competitive and market dynamics. Internet technology can be used to exploit collective learning and knowledge. these new highly informed customers are "empowered fruit flies". little loyalty. products and services. empowered customers. Customers have more options than ever before . fierce competition. their organisations must harness knowledge . combined with the emergence of electronic intermediaries. improving processes. the development of a knowledge economy. This.. The Pace of Business is Accelerating With the fast pace of technological change. to capture new opportunities. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. has resulted in a fierce competitive environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. online stores. getting closer to customers and ultimately staying ahead of competitors. G. and reorganise as appropriate. It also provides easy access to competitors' offers and allows customers to consider every available alternative. 22 Colony. CEO of Forrester Research22. with no time. it also removes the geographical protection from competitors. constantly innovate. As a result. ensuring the delivery of a satisfying customer experience. collaborate more effectively and ultimately embed organisational intelligence within processes. According to George Colony. 'Empowered Fruit Flies' .com) 41 . allowing employees to share knowledge.forrester.they can choose between traditional 'bricks-and-mortar' companies. switching costs are much lower. the globalisation of business. They can move from one supplier to another searching for the best prices.
23 'The Future of E-Business' . variety. most Internet and e-commerce partnerships extend beyond this. 1999 . alliances and partnerships have taken on a new level of strategic importance. achieve global reach and realise a new source of cost advantage. which highlights the typical structure and dynamics of an online company. when they want.com) 42 .(www. The extent of this partnering is illustrated in Figure 4. information.teslagroup. and multiple strategic alliances and partnerships. In this way. The opportunity of linking the complete supply chain 'virtually'.7. advice and convenience. and most traditional partnerships were vertical.A Research Report by TeslaGroup. companies have looked upon alliances only as a means of filling gaps.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. Traditionally. extensive outsourcing. linking companies with suppliers and customers up and down a pre-defined value chain. and the need for speed and flexibility have accelerated the unbundling of business systems. Increasingly. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. companies can provide customers with a strong value proposition by offering them the best in quality. it provides the opportunity to reach customers where they want. However. combined with intense competitive pressures. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. supply chain cooperation. It allows companies to improve customer service. and partnering up with the best for the remaining activities. thus creating a 'value net23'. how they want and with the levels of customer service they demand. linking companies with competitors and players from entirely different industries and business sectors. Examples of emerging information age business structures include flat versus hierarchical. As such. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible.
competition is intensifying. G.a Boston Consulting Group (BCG) Analysis. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. D. 4. the pace of business is accelerating and power is shifting to the customer.7 . 43 .. The Internet is transforming every business to some degree. Partnering with portals and affiliate web sites is important in driving traffic to a web site.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. April 2000 In an attempt to provide a rich customer experience. New opportunities for efficiency and co-ordination are emerging. it is transforming the competitive landscape and brand-building environment. This is the substance of the next chapter.6 CONCLUSION The Internet and its strategic impact are not technological issues .they are business issues. As such. many online companies are blending together the products and services of a wide range of companies. while making the offering hard to duplicate off-line. S. 'Organising for e-Commerce' . & Stirton.dot. while triggering the emergence of new brandbuilding strategies. tools and opportunities. This provides customers with added value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. whereby the company can establish a dialogue and 24 Marathe. The limitations of brand-building on the Internet are also discussed.Durlacher Research. May 1999 (www. etc. The Internet. the Internet makes search and comparison much easier. 5. the logic of the Internet cuts another way. on the other hand. This threatens to undermine the value of brands. and projects it onto a third party intermediary (the media). the intangible nature of the Internet. credit card numbers. brands have been developed in an environment whereby a company creates a brand. and the fact that customers are buying goods that. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. People only tend to transact with sites they know and trust . However. J. many unnamed customers develop a 'relationship' with the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. On the other hand. In response.sites that provide a wealth of information and make comparison shopping easy.durlacher. Transactions on the Internet require customers to provide detailed personal information .2 THE NEW DYNAMICS OF BRANDS Traditionally. they have never handled or seen (except on-screen). addresses. In addition. including the interactive approach to attracting customers and building loyalty.com) 45 . offers interactivity. Customers derive added value through the provision of information on the products or services they buy. 'Internet Portals' . as well as on topics of interest related to the brand and product characteristics25. New strategies and tools for building brands on the Internet are identified. Generally. where the user feels a part of.names. in addition to providing added value. 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. and sites that understand the user's needs and preferences24. has placed greater importance on trust and security. Traditionally.. in most cases. people have concerns about sharing personal information.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'.
from the promises made in the value proposition. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.1. Rogers. J.1 . to its delivery to the customer. 'Adding Product Value Through Information'. 'Is Your Company Ready for One-to-One Marketing?' . D. understand and relate to customers. Prof. rather than simply speaking at customers.Harvard Business Review. & Dorf.edu) 26 Peppers. This creates the opportunity for companies to build stronger relationships than previously attainable. a company can listen.. In maximising the customer experience.. M.. January 28. relationship building characteristics of the Internet.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. Duke University. TABLE 5. B. . service approach Customised The Internet gives companies control over all their interactions with customers and therefore. companies have to find innovative ways of leveraging the information and 25 McCann. January-February. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. learn. 1997 (www. 1999.duke. However.Fuqua School of Business. 151-160 46 . brand-building must focus on the end-to-end customer experience . In doing so. pp.. this also poses a challenge as these relationships may take on a life and character of their own.
R. These points stress the importance of online customer loyalty. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . T.An A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. For example. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. - Repeat purchasers spend more and generate larger transactions . In fact. on average.word-of-mouth is the single most effective and economical way online businesses grow their sites. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. March 17. L. S..often. Harvard Business Review. . Chu.bain.converence-board. - Repeat customers refer more people and bring in more business . Baveja. J. This is further reinforced by the fact that. unless they are selling high-price..due to more frequent shopping and larger purchases. companies must ensure that they provide a completely satisfying end-to-end customer experience. a disgruntled online customer tells 10 people about a poor experience30. high-margin items.. 2000 (www. This view is reinforced by in-depth studies carried out by Bain & Co. customer acquisition costs are high. and to recover their investment. 'The Value of Online Customer Loyalty and How You Can Capture it'. 27 'Electronic Business Outlook'. MayJune 2000 30 A Forrester Research Study. Rastogi. it is very unlikely that an online retailer can break even on a one-time shopper.. & Hancock. 2000 47 . Kearney White Paper. and some are spending over $50029. D. D.A Mainspring Communication Report in collaboration with Bain & Co.Research by PricewaterhouseCoopers / The Conference Board. - Loyal customers are more willing to buy other products from the company. Therefore. and Novak..com and www... Repeat purchasing not only binds trust.org) 28 Rigby. C. but also provides more opportunities for cross-selling. 'How to Acquire Customers on the Web'. it could be argued that customer loyalty is even more critical online.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. and with customers holding all the power. T. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer.com) 29 Hoffman. companies need to retain customers so that they return to the site repeatedly. . P. S. 1999 (www. Zook.. as cited in 'Creating a High-Impact Digital Customer Experience' .pwcglobal.
1 . Once the up-front investments are made (for research and development and technology infrastructure). and the value that each member realises.. As a result.. Similarly. G. as illustrated in Figure 5. additional customers and transactions can be managed with limited fixed cost investment. each additional unit sold does not cost more than the last to deliver. Even more important. this is not the case on the Internet.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish.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. businesses and online communities that rely on connectivity can enjoy 'network effects'. and in the case of information-based products. FIGURE 5. the costs approach zero32.1. However. (also referred to as 'viral economics'). 'Positive Economics'. as the benefits of scale are overwhelmed by the disadvantages of size31. 180-182 48 . 1989. increases disproportionately as more people join the network. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. pp. and other features can be added or changed at low marginal cost. 7th Ed. (London: Harper & Row). additional products. customisation for individual customers. where the value of the network.
A Shop.A Publication by Andersen Consulting 'The State of Online Retailing' . It also allows online companies to tap supplementary revenue streams. As the company builds a customer base and develops a relationship with customers. enhancing the interaction. 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. Nov 1998 49 . link revenues 32 33 Melnicoff. No.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. With no competitors around. Outlook 1999.2.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. '5 Rules of the eEconomy'. its ability to track customer preferences and customise offerings improves. being first into a market makes it easier to capture the consumer's share of mind.org Study in collaboration with The Boston Consulting Group. M. fulfilment • Defensible advantage against competitors SCALEABLE. delivering increased margin per customer . This makes it more efficient in improving product selection. FIGURE 5. cross-selling and up-selling33. R. advertising and referrals. 21 . including direct marketing.Figure 5.. direct marketing.
have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. viral marketing is an effective tool in getting a message out fast. "leveraging the media". the larger customer base provides online companies with more leverage in attracting and negotiating with key content. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. as once a strong lead is established. such as 'viral' marketing. and word-of-mouth even more effective. leading to the exponential expansion of the customer base. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. larger sites can leverage more customer advocates to reduce customer acquisition costs. or until a competitor finds a way to change the game again. Word-of-mouth is a particularly powerful medium. New marketing strategies. as it carries the implied endorsement from a friend. the leader will pick up momentum and will stand to gain an insurmountable advantage . the value of the company rises exponentially with market share. "creating a buzz". and the cost of switching to an alternative brand becomes quite high. Given the connectivity of the Internet among customers. and "network marketing". 5. This snowball effect favours first-movers. Larger sites can also negotiate better supplier discounts or product placement fees. in turn. By the time a company has reached critical mass. As a result. This. It is often referred to as "word-of-mouth". the brand begins to take hold.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. The Internet. 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. As a result.unless the leader makes a serious mistake. creating a potentially exponential growth (like a virus) in the message's visibility and effect. commerce and distribution partners. When a company reaches 'critical mass'. chat rooms and bulletin boards. Nov 1998 50 . its growth curve relative to a new entrant is somewhat daunting.org Study in collaboration with The Boston Consulting Group. with its e-mail lists. with a minimal budget and maximum effect.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. makes communication tighter. 34 'The State of Online Retailing' . This is the logic behind some of the extraordinary valuations of Internet companies. web sites.A Shop.
In its first 1.hotmail. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. A traditional print publication would hope to reach 100. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).com was one of the first free web-based e-mail services. Today they are the largest e-mail provider in the world with over 40 million users. they will have a powerful viral opportunity at their disposal. they tell all their 51 . sign up for their own free e-mail.000 subscribers within a few years of launch. In fact. • Each new user becomes a company salesperson. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. saying: • "Get Your Private.com The classic example of viral marketing is Hotmail.1 The Case of Hotmail. Geocities enables people to create personal websites for free.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. 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). and they created a subscriber base more rapidly than any company in history. but Hotmail signs up more than 150.5. eGroups and Geocities (both recently acquired by Yahoo!). Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. and the message spreads organically. a company now owned by Microsoft. Hotmail acquired over 12 million subscribers. and then propel the message even further to their own ever-increasing circles of friends and associates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.000 subscribers every day. whether for communications or community. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. friends to visit it. Free Email at http://www. and in doing so spread the word for Geocities. Hotmail.com. When a user builds a website.5 years. seven days a week. where they have never carried out any promotional activities.
com) 52 . R. Chu.. T. Zook. D.A PricewaterhouseCoopers Report. Baveja. J.. Kearney White Paper.bain. In essence.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .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. .. Sites that are difficult to use can cause frustration.3 . 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. Place). & Hancock. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. In fact.An A. S. March 17. Promotion. Price. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. 2000 (www. 'The Value of Online Customer Loyalty and How You Can Capture it'. 2000 'The E-business Technology Forecast' . FIGURE 5. T.. Rastogi.An A.. As 35 36 'Creating a High-Impact Digital Customer Experience' . C. S.3). 2000 37 Rigby. making customers 'click off' to another site.. Kearney White Paper. 30% of potential customers leave sites because they cannot find what they are looking for.A Mainspring Communication Report in collaboration with Bain & Co.
38 39 Cognitiative Inc. and a wide range of products. 'Sticky Business'. online companies have the opportunity to provide rich.com) Davenport. CIO Magazine.businessweek. ease-of-navigation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. which can enhance the company's value proposition. With almost infinite display space and inventory capability. February 2000 Issue 53 .4. as cited in Business Week.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.4 . ease-of-use.businessweek. 29th October 1999 (www. as cited in Business Week Magazine. up-to-date information.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. 1999 (www. FIGURE 5. expert insights. T. October 29. and fast response times are among the most important factors in establishing web brand loyalty38.. whereas a slow response time and site downtime will have a significant negative impact.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. & Hagel. and advertising (if it is relevant and useful).. 3. .5).A Forrester Research Report. as well as through loyalty programmes that provide targeted benefits. or prior transactions. 54 . An online community offers a compelling way to entice customers back to a site. Online sites can track a customer's purchase history and modify its service accordingly. 'Building Stronger Brands through Online Communities' . 1999 (www. & Bluestein. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). These sites allow members to interact with one another.. even if they purchase offline. Clemmer. Often. which enhances the user's online experience. 40 41 Morrisette.g. Customisation Customisation involves tailoring the presentation of a web-site to individuals.com) McWilliam. which is facilitated by a combination of factors (Figure 5. According to Forrester Research40. 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). A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.Sloan Management Review. S.forrester. W. It fosters a sense of belonging41 among the members. based on profile information. J. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.. For a community to work. it needs a critical mass of members42. demographics. On the other hand.The McKinsey Quarterly. and organise live events. 'Real Profits from Virtual Communities' . Customisation creates the feeling of a one-to-one relationship. use bulletin boards. iVillage and Geocities).. G. K. share information and access a wide range of services. Members can interact in chat rooms. An important contribution of these communities is that they provide members with a medium to communicate with each other. Other content includes community-generated content. Spring 2000 42 Armstrong.. Community Online communities are emerging as new gathering places for consumers with similar interests (e. and nearly 20% use it for post-sales support. 1995. visitors should not be engulfed with too much information. 31% of online consumers use the Internet for obtaining product information. No. A.
brand-name. 1999 Communities enhance the speed and value of information sharing.6). allowing customers to deepen their experience with a brand and build more personal connection.com) directly into the browser and access the site immediately. Mulcahy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Site-tosite connectivity focuses on connecting users to other relevant sites. S.5 . 'Making Real Sense of Virtual Communities' . Companies can provide a selection of related links that complement the site's purpose and value proposition. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. Journal of Consumer Research. they opt to input the URL (Internet address .www... O'Donnell & Gupta.A PricewaterhouseCoopers Study. This is similar to placing offline stores in high traffic areas. M.. when membership in the brand's community becomes an end in itself43. 343-373. Once customers know of a site. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. as well as attracting traffic from other sites. C. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. March 1998.. 55 . 43 Fournier. and can create emotional loyalty. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. A. pp.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.6 .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. serves this purpose and helps to build customer loyalty. Communication can be tailored to specific user interests and should allow for two-way interaction. online chat. which provide targeted and unique (customised) benefits to the customer. Other tools such as bookmarking the page can also facilitate connectivity. activities. Customer Care Online customers often require assistance and reassurance.marketwatch. The development of loyalty programmes. customer support at all stages of the interaction is important. customer care activities can involve providing a variety of payment. as well as features such as gift-wrapping. toll-free telephone numbers. and online surveys. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. delivery and return options. It is important in building relationships.com) 56 . (www. Therefore. as well as informing and reminding customers of special offers. In addition. and FAQ pages (Frequently Asked Questions) to solve problems. news up-dates. and can be provided through e-mail. 45 MarketWatch. events and subjects of interest to the customer. live chat. Customers share security and privacy concerns. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail.
No.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. 180-183 (www..7.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5...2. billboards. Trial. links from directory searches (Connectivity). Magazines. McQuade. etc. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.4 . modified to take into account of the interactive dynamics of the Internet. pp. Newspapers. 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 ’ .com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. This model consists of five stages . McKinsey Quarterly.8. Evaluation. visibility relies solely on Communication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. including affiliate programmes with other websites.. The company must build awareness and communicate its value proposition to its target customers.7 . FIGURE 5. Retain. The mechanisms to communicate range from traditional media (TV.Attract. Learn and Relate. 1996. A. Interest. & Zeisser.) to online tools. and bring people to the site for the first time. Figure 3. Engage. Waitman.mckinseyquarterly. Therefore. R. 'Marketing to the Digital Consumer'. S. e-mail notifications and banner advertisements. Adoption). This is more difficult online than offline.Awareness. because there is no physical presence. M.
46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.4 3. Kapferer's Brand Prism (Ch.5) 2.8 4.2 4.7 4. multiplied by the expected rate of transactions.6 3. 3. it is important to quickly engage consumers' interest before they move on.3 Source: Forrester Research.ebusinessforum. Fig. as cited in 'Targeting Consumers via the Internet' . public relations and television advertising.4 3. Attracting customers is only the first step in building online brands.3 3.4 4.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 .8 .0 3. Companies then need to engage customers to obtain their interest and participation. Engage With the multitude of choice available on the Internet. discounted over the expected duration of the brand-customer relationship.1 3.com) The most effective methods are direct e-mail. affiliate programmes. The key factors at this stage are Convenience combined with interesting Content.3) is useful to ensure that a company develops a distinct and consistent brand identity.5 3.Economist Intelligence Unit 2000 (www.WEBSITE PROMOTION METHODS .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 3.3 2. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 58 . Creativity is also an important factor in gaining attention in today's cluttered marketplace.
and what additional products and services are they interested in provides companies with valuable information which.g. can create value for the customer and help build the brand-customer relationship.9). Learn The Internet provides extensive opportunities to learn about consumers (demographics. TV. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. The initial site registration provides an early opportunity to obtain useful information. Certain product categories. The objective is to increase the conversion rate (% of browsers converted into buyers). Radio).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. Building up a knowledge database on each customer . and forge closer relationships than any offline operator. if used properly. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. 5. This helps to create a customer base that spends more time and money at a site. and must be continuously updated due to the multiple visit nature of customers. attitudes and behaviour). 59 . Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. Communities and Customisation are other sticky applications. • The Internet supports brand-building activities where there is a need to build a relationship. a company can create value by providing a personalised online experience. Content is the basic driver of retaining customers on a site.who they are and why they shop online. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. such as groceries and convenience goods.
it is not economically feasible to sell certain products. However.. No.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. & Zeisser. 60 . The 7Cs Framework outlines the key components of the brand experience and the sources of added value.mckinseyquarterly. McKinsey Quarterly. and as the relationship develops.9 CONCLUSION On the Internet. it is critical for companies to build relationships and foster brand loyalty. 180-183 (www. Given the high acquisition costs of online customers. 5. the interaction provides the ability for companies to learn from their customers and relate. pp. Waitman. especially in small quantities.2. companies must provide a satisfying end-to-end customer experience . The interactive brand-building process involves attracting. the experience is the brand. • Brand-building favours products that can be sold online. S.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.9 . due to high delivery and transaction costs (relative to the value of the product). engaging and retaining customers. 1996. touch. The next chapter analyses the brand-building efforts of seven companies..from the promises made in the value proposition. 'Marketing to the Digital Consumer'. A. M. R. In order to create "apostles". to its delivery to the customer. smell). McQuade...com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. and the need to stimulate the other senses (taste. providing further added value. These case studies provide a practical insight into how companies are building their online brands.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
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. 'Amazon. Amazon serves over 23 million customers from 160 countries.Goldman Sachs Report. 6. Amazon has been able to differentiate itself from other online competitors.com . and enjoyable experience. Not a River' .1 Company Overview Amazon. and has equity investments in several e-tailers. Amazon has cultivated a reputation for excellence.COM 6. Barnesandnoble.1 outlines Amazon's timeline and major milestones. and one of the top two or three in Britain.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay. In addition. easy. Each case is presented in the same format including.com.interbrand.com has become synonymous with e-commerce.com and Yahoo!.see Appendix A.com. combined with its levels of customisation and customer service. Gap. innovation and delivering on its promises.com) . 2000 (www. the sources of added value (using the 7Cs Framework). CDnow. Amazon.2. Amazon provides increased added value on several dimensions. its value proposition. Through its provision of a one-stop shopping experience. In addition.com launched with a mission to use the Internet to transform book buying into a fast.com's success stems from its compelling value proposition. a company overview. France. February 26. and has sales of over $2 billion. and other key factors that have contributed to its success (or failure). 6. its brand-building strategy (how it generates traffic).2 CASE STUDY: AMAZON.1 INTRODUCTION This chapter provides an analysis of seven companies. and higher levels of customisation and service than the traditional shopping experience allows.economist. more information.It's an Ocean.2 Value Proposition Amazon.Amazon.com) 62 . it is the most visited e-commerce website in America. greater convenience. Figure 6.The Economist. Boo. Germany and Japan49.2. It is the 57th most valuable brand in the world47. The cases are presented in the following sequence . 1999 49 'Amazon's Amazing Ambition' . discounted prices. In July 1995. including: increased selection. November 11. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).com. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Amazon. 47 48 Interbrand (www. and is one of the few Internet brands that is recognised all over the world.
com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. workplaces.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 . West Virginia. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.Amazon and online car-buying service Greenlight.sothebys.com .Amazon.com.com Announce Strategic Investment and Promotional Agreement .com Anywhere.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Amazon launches health and beauty store .Amazon enters strategic alliance with living.com .Amazon enters into a strategic partnership with Drugstore. and more Amazon launches "Amazon.Amazon.Amazon announces investment in kozmo.com .Amazon launches new kitchen store .com Amazon invests in Pets.com via the new wireless pocket PC .com Amazon acquires Back to Basics Toys to add to Amazon.com Electronics and Amazon. universities. such as the Palm VII organiser.com to create a "home living" store at amazon.com Auctions and zShops provide new tools to its merchant community . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.Amazon launches lawn & patio store .Amazon and eziba.com ." providing shopping from wireless devices.amazon.com invests in wineshopper.com 63 .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.Customers can shop at Amazon.Amazon opens a customer service centre in Huntington.toolcrib.com goes live Amazon launches Associate Programme Amazon IPOs for $49million. Ashford. featuring thousands of bestseller lists for hometowns.Amazon launches www.Amazon. Software.Amazon opens customer service centre in The Hague .TIMELINE AND MAJOR MILESTONES Amazon.com opens its virtual doors at amazon.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .000 members Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com enters European book market Microsoft signs Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.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. a tools and equipment store for professional tool users and woodworkers . Video Games and Gift Ideas Amazon and Sotheby's launch www.New home living store from living.com Amazon announces further plans to expand distribution network to meet rapid growth. to meet rapid growth .com Amazon introduces "Purchase CirclesTM".amazon. and minority investment in.com and NextCard launch co-branded credit card .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com is founded by Jeff Bezos Amazon. Amazon.Amazon surpasses 20 million cumulative customer accounts .COM . provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.
recommendations. book summaries. The site is easy-to-use. This is an example of 64 . encourage repeat visits and drive higher conversion rates. easy-to-use. live or study. Palm VII PDA device).Figure 6.2.OVERVIEW OF AMAZON. FIGURE 6. downloads quickly and services visitors adequately . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. gift click.1. and Amazon. and customer Purchase CirclesTM. such as the Amazon. wish lists. mobile phones.1 . interviews with authors.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. the 1-ClickTM express checkout. including book jacket images.e. discussion boards. expert reviews. gift reminders.com All Product search (searches the entire web). logically structured. offering multiple paths to a given book or product. customer testimonials. and quick-to-load pages Over time.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. Content Amazon provides content on several levels. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. Amazon has added other features for shopping convenience.com Anywhere to support access from wireless devices (i.3 Sources of Value .
Amazon introduced Amazon. from its shopping basket applications which lists the estimated time to delivery reliably. and customer interaction. Community Amazon has also added a community element to the purchasing process.thereby increasing conversion rates. to the proactive notification of new items of interest. In doing so.2. and has developed an Associates Programme. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. Amazon creates one-to-one relationships with its customers. converting them into a storefront for Amazon.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. therefore. linking it to a large number of other sites. By leveraging its vast customer base. while driving up repeat purchases and cross-selling opportunities. from the customer recognition at the point of interface (Figure 6.4. Amazon's content is not reproducible by competition. creates a competitive advantage. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. Connectivity Amazon has built relationships with high traffic web portals and sites. real-time shipping and backorder notices. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.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 . These are discussed in more detail in Section 6. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. which helps to build loyalty and create switching costs. More recently. 65 . This customer-centricity is evident in all Amazon's activities. and Customisation Amazon provides customised features and services.
attracting member sites of all sizes. The Associates Programme has been phenomenally successful. This enabled Amazon to reach more customer segments and niches (Figure 6. In July 1996.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. and by 1999 it had over 200. it began to advertise in print media and online . help maintain contact and build traffic by e-mailing customers when desired products or books become available. Newsweek. Amazon offered Associates referral fees of up to 15%. they are subsequently confirmed by e-mail. and not subsequent purchases. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. enticing them to return to the site and purchase repeatedly. Once orders are placed. 66 . In the second half of 1996. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.2). and customers are also e-mailed when the items are shipped from the warehouse. Through the first half of 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal. two personalised services.000 by August 2000. New Yorker and The Economist. 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. which only applied to sales that resulted from the initial click-through.2. 6.000 members. Business Week.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways.a move that along with the novelty of its business model and the newness of the Internet. The Financial Times. Eyes and Editors. As a result of all these factors (7Cs). Instead of paying directly for this exposure.com hot-link and offer specific books of interest to their visitors. In addition. increasing to over 500.
and you are given a $5 gift certificate for each customer you provide. These multimillion-dollar.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Amazon has used viral marketing techniques through customer reviews.customers are encouraged to provide e-mail addresses of friends.uk the local provider for Yahoo! UK & Ireland.2 . Interesting viral initiatives include: • Amazon. Yahoo!. multiyear deals involve exclusive book-selling rights.com gift certificate (in your name). was also linked to Amazon's entry into Europe Amazon. each friend is sent a $5 Amazon.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. and primary button placement on web portal search engines. Netscape's Netcenter and NetSearch. Amazon also established agreements with AltaVista. mutual links.com Refer-A-Friend . Amazon closed deals with five of the six most visited Internet addresses. free eCards and gift certificates (which customers send to friends. In addition.AMAZON.com's website (www.allows customers to create a personal profile (with pictures) on the site. From July 1997 to December 1998.amazon. and Geocities.COM'S ASSOCIATES PROGRAMME Source: Amazon. thereby promoting Amazon. spreading the word for Amazon. People tend to tell their friends about it.com About Me . Therefore.com).com. including: America Online (AOL). Prodigy and @home. Excite. the customer acquisition cost is only £10. • Amazon. The Yahoo! agreement. 67 .de became the local provider for Yahoo! Germany and Amazon.co. In return.
g. 1998 68 . This has also helped to generate incremental traffic at no cost to Amazon's existing businesses.. 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. By relating to customer needs. which accounts for 66% of Amazon's sales. 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 . C. buying patterns and viewing habits. As the relationship develops. "we had a world-class site the day we launched . community feel (as discussed previously).com Really Matter?' . billboards. April 6. however. And we relied on word-of-mouth to build awareness. That's not possible anymore50". interesting content.Forbes. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. With this combination of promotional methods. Amazon has also incorporated traditional offline media (TV. According to Jeff Bezos. so we didn't have to do much advertising. and improved customisation and recommendations (e. Amazon is building customer loyalty and encouraging repeat business. with the explosion of websites. Magazines. Amazon's proven online merchandise selling techniques including easy-to-use search options.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. newspapers) to generate awareness. 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. Purchase CirclesTM). have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates.significantly lower than other online companies. 50 Willis. 'Does Amazon.but it was only a tenth as good as the site we have now. Once customers are attracted to the site. clear presentation. Amazon maintains a database of customer preferences.
In addition. "we're not a stationary target. Amazon's understanding of its brand identity has been a critical factor. Our secret is that we have not been competitor obsessed. establishing a reputation for excellence and fulfilment. memorable. According to Jeff Bezos. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. 'Business the Amazon.com obsessed52". In addition. and to convey its vast size and offering. developing customer service centres and expanding its distribution network to support high levels of service. According to Jeff Bezos. As such. which within six months propelled Amazon to one of the leading online music retailers. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'.2. 1999 69 . Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). and its safe and secure delivery. because he wanted it to be short. good value. We were blessed with a two-year head start. to capture the spirit of the site. We have been customer obsessed. the balance of power shifts away from the company and goes towards the customer. However. As such..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. further enhancing their value proposition. Amazon was able to secure partnerships and alliances with key players.com Way'. Nevertheless. Amazon received criticism for expanding its product line. in June 1998. Saunders. establishing Amazon as the leading online bookseller with a large customer base.a wide range of choice. management realised that Amazon had become more associated with other core brand values . while our competitors have been Amazon. For example. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. "Online. This has helped them attract customers and move up the learning curve quickly. thereby diluting the value of its association with books. (Oxford: Capstone Publishing). Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. 51 52 Hazleton. and our goal is to increase that gap51". Amazon unveiled a music store. R. L. July 1998. due to the hype and coverage it was given. Amazon has been able to build a strong brand at relatively low cost. Amazon is constantly seeking new ways of improving its offering.. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. and according to Jeff Bezos.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. Success.
which is critical on the Internet. However. and investors lose confidence. Amazon also recognised that service quality is a perception.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Volume Discounter' . if it continues to incur losses. have kept it ahead. Amazon delivers on its promises of a wide inventory of products. 53 Warner. speedy delivery and good value. perhaps trying to defend its view that losses taken to build market share can reap profits later. not necessarily a reality. distribution centres and upgrading the site. B. stem from its compelling value proposition and high quality end-to-end customer experience. however. 1998 70 . Amazon is claiming to be making profits on its books and music categories. secure payment procedures. Quality is only measurable in the minds of visitors to the site. The key factors driving its growth and high retention rates. they have cultivated a reputation for excellence and fulfilment.Brandweek. Amazon's intense focus on customer needs and continual innovation. and to sustain a positive image and satisfactory end-to-end experience. Amazon has continuously invested in customer service. as the true value of a brand lies in its sustainability. This raises a critical issue. but over time they become more and more associated with a particular thing and harder to stretch53". 'Marketers of the Year: Jeff Bezos. This customer-centricity is a key hallmark of a successful Internet brand. 6. 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. with new products and value added content.2. In doing so. they're stretchable and pliant. October 12. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Nevertheless. When they're young.. the drain on their cash resources will push them towards bankruptcy. Although Amazon has successfully built a strong brand and loyal customer base.
Inc. Barnes & Noble Inc.Barnes & Noble University opens registration for free online courses . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . magazines.COM .1 Company Overview Barnesandnoble. Barnesandnoble. Besides books. and 20% owned by the public. etc. book databases. is one of the best known traditional booksellers in the United States. prints & posters and related products.Barnesandnoble.COM 6.Launches Affiliate Network December . 40% owned by Bertelsmann AG.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.3. as it could capitalise on the infrastructure and back-end operations (warehouses.Launches Video Store 71 .com provides other online categories offering software.com .com).com and Microsoft announce that they will create an eBook superstore .Announces distribution relationship with New York Times September .com's timeline and major milestones is outlined in Figure 6.Barnes & Noble.2.2 1997 January BARNESANDNOBLE. and 470 B. Launched in 1997. all front-end operations (marketing.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. Barnes & Noble Inc.TIMELINE AND MAJOR MILESTONES . rare.Offers same day delivery in Manhatten . music..com launched its website (www.3 CASE STUDY: BARNESANDNOBLE. Barnesandnoble. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). and is the second largest online bookseller (after Amazon. promotion) between the online store and the retail stores have been kept separate. TABLE 6.com) .Launches BNTV .barnesandnoble.) established by its parent company. contacts.Launches Internet Radio .com is approximately 40% owned by Barnes & Noble. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com announces strategic relationship with Palm Computing .Acquires equity stake in Mightwords .Acquires minority stake in NotHarvard. Barnesandnoble.com is the fourth largest e-commerce retailer54.com was able to 'hit the ground running'. Currently. However. Dalton bookstores (located in shopping malls).Barnesandnoble. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.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 .Barnes & Noble went online at AOL May .
FIGURE 6. Barnes & Noble planned to dominate online book-selling.3 . but instead of developing an outstanding interface to its inventory.barnesandnoble. publisher.3. rich editorial content and a community experience.3).2 Value Proposition Barnesandnoble.com let customers sign up to receive email reviews and announcements of new titles. the company created a site very similar to Amazon. etc. however.com's website (www. Both Amazon. edition.com) 72 . Both offer detailed bibliographic information.3 Sources of Value .The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. software. and easy-to-navigate site Categories focus on books. as well as an extended searchable catalogue of millions of out-of-print. as cited on Barnesandnoble. the features are practically identical. easy and secure ordering.com's and takes a bit longer to download.bn. previously-owned and rare books.com or www. logically structured. In addition. they offer customers fast delivery. good prices. author.com's virtual storefront is graphically richer than Amazon. including title.com and barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print. Both have expanded their convenience to offer 54 Media Metrix.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. in terms of the 7Cs framework. music New Initiatives Barnesandnoble.COM'S WEBSITE Simple.OVERVIEW OF BARNESANDNOBLE.3. 6.com's (Figure 6.
December 17.com. and both are expanding globally. Instead. Both offer customisation that permits users to personalise the experience.3.a replica of Amazon's Associates Programme. These initiatives have generated traffic to the site.com had over 17 million. Netscape and Microsoft Network.The Wall Street Journal. They have developed an affiliate programme that links sites to Barnesandnoble.1 billion. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.4 Brand-Building Strategy Barnesandnoble. Barnesandnoble. Barnesandnoble. while Amazon.com has created a high quality website and customer experience. 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.com's market capitalisation was $251 million.com in return for a commission on any purchases that they originated . 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . has yet to leverage its strong brand in cyberspace. this programme had more than 300.000 affiliates in its referral network. However. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.64 billion.com's 1999 revenues were $202. The 6. Yahoo!. and Barnes & Noble Inc. As of February 2000. prevent cannibalisation of its existing business. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Webcrawler. it lags behind first-mover Amazon.com was valued at $21. Lycos. reasons for this are explained in the next section. however.com's $1. Although. Both offer 'associate programmes' that let other websites link to their sites. Barnesandnoble. and avoid charging sales tax in states where it has stores56.6 million. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). 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 . compared to Amazon.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com closed 1999 with 4 million customers. while Amazon. Both try to foster a community of readers by letting customers post reviews online.
com. content and distribution opportunities. Barnesandnoble. and its BMG Entertainment division includes music giants Arista Records and RCA Records. with a similar discount.com created a new cross-marketing genre in February 2000. At any given point there are hundreds of customers browsing their aisles looking for something to read. To signal its intentions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. and leverage its real-world presence. and the tangibility that this provides. Barnes & Noble University (a free online education resource).com.com should have aggressively cross-promoted their stores through advertising.com's link to Bertelsmann AG. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. 74 .com is its association with Barnes & Noble Inc.com. In return. Barnesandnoble. people began using their stores as a physical showcase for online rivals such as Amazon. Under the seven separate agreements.com. each partner offers a similar link to Barnesandnoble.com. or deliver books directly from the retailers. Barnesandnoble. Jcrew.com. • Barnesandnoble. Petsmart. LLbean.com has changed its name to Barnes & Noble. 1-800Flowers. and in recent months has aggressively sought new ways to differentiate itself. as Bertelsmann's book division includes partners such as Random House. Barnesandnoble.com and VitaminShoppe. Barnesandnoble. provides access to valuable resources. Unfortunately. • In addition. • Barnesandnoble.. Planetrx. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. and Internet terminals in the bookstores. in the attempt to gain traction and build momentum.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet).com.com.com.com's key differentiator from Amazon. when it struck reciprocal marketing deals with Expedia. Recent Initiatives Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through.com has lost access to valuable customers. and a same-day delivery option in Manhattan. By failing to leverage it.com. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. in-store displays.com has begun to acknowledge some of these mistakes.
6 Conclusion Although Barnesandnoble. by portraying them as slow and clumsy in comparison to the more nimble Amazon. 2000 (www. 57 'Bn. In addition.forbes. customer relationships and offline presence . it also caused a major setback.its key differentiating factors.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. even if that means eating into their existing sales. it has not been able to establish itself as the leading online bookseller. The company failed to leverage its established brand. The Press have also contributed. Barnesandnoble.Forbes. a wellestablished Internet brand.com and has given them the image of a second rate 'me too' brand.com's experience is instructive.3.com's late start in 1997. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.Not a Best Seller' . and was further up the growth curve. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". Barnesandnoble. August 4. and allowed them to offer stock options as compensation and achieve a high market capitalisation. feature for feature) has failed to differentiate Barnesandnoble.com) 75 . otherwise they risk losing out to other online competitors. meant that Amazon.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com has been able to create a high impact and high-quality customer experience.com . and its lack of innovation (by copying 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. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. significant market momentum.
If a clothing brand is on the Boo site. Company is put up for sale.com entered six markets: US.3 1999 Mid year BOO.Announces it has only 500.they redesign site.Appeals for $30 million more funding . within six months Boo. Boo. as cited in 'Boo.Marketing Week. 58 Kajsa Leander.4 CASE STUDY: BOO. Finland.Site goes live . due to its poor performance and inability to build a customer base. 1999 76 . November 2000 January February May 6. Germany and Denmark.com opens its virtual doors' . P. sack 20% of staff and sell stock at 40% discount . and Converse.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".2 Value Proposition According to Kajsa Leander. Everlast.TIMELINE AND MAJOR MILESTONES .com provided a range of 18 fashion and footwear brands including DKNY.1 Company Overview Founded in 1999.4. as well as create a kid's site. TABLE 6. Sweden. it means all that brand's product line is available. On going live. arranged through J. it's about range and convenience. Boo. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).fails and appoints KPMG as liquidator. Italy and Spain within a few months. and the resulting loss of investors' confidence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CMO of Boo. and eventually debut in Asia. However.4. receiving $125 million of funding. Boo. "our marketing thrust is not based on prices.com. June 10. and was billed as one of Europe's hottest e-commerce ventures.com collapsed through lack of funds. among others.First sign of problems . Puma. 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. After a high profile launch. and included high profile investors such as Bernard Arnault. They intended to add France. England.Multi-million pound advertising campaign created by BMP DDB .com. Boo.000 unique visitors . not the limited range you might get at most London fashion shops58". the company was hindered by technical problems that delayed the site going live by five months (until November 1999).com had set the record as Europe's best-funded European Internet Start-up.COM .Raises funding of $125 million .COM 6. founder and Chief Marketing Officer of Boo. Morgan.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
Harvard Business Review. convenience. & Novak. and was the first site to offer the sale of music downloads and custom CDs.179-188 63 CDnow website (www.TIMELINE AND MAJOR MILESTONES . and exclusive interviews and reviews from CDnow's award-winning editorial staff.000 music related items .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. 'How to Acquire Customers on the Web' . pp. CDnow was acquired by Bertelsmann AG.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. cover art.000 people. features. whether for browsing or buying.5.Launches merged CDnow/N2K site . customisation and a wealth of information and content to help in the purchase decision. TABLE 6. daily music news.5 CASE STUDY: CDNOW 6. announce marketing alliance .Raises $10 million through private placement . a valuable and rewarding experience"63.1 Company Overview Founded in 1994. On 19th July 2000.cdnow.5. as well as music reviews.Site goes live .CDnow and Time Inc. D. It has a customer base of 4 million people.ten times the selection of a conventional bricks-and-mortar music store). CDnow is also driving the digital distribution of music. T. good prices. and they aim to "make every visit to the site. 62 Hoffman.Forges distribution partnership with Yahoo! $65.000 sound samples. former arch rival . CDnow provides access to over 500.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5 million distribution deal with Lycos Signs three-year. $22.Merges with N2K. and an average daily audience of over 800.Partnership program with Geffen Records . CDnow is the leading online music store..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. This unprecedented degree of access to music and information is the core of CDnow's value proposition.000 music-related products and 650. and one of the most popular shopping sites on the Internet62.Merges with Columbia Records .com) 80 . $18. guides to music genres. by twin brothers Jason and Matt Olim. May-June 2000.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.
. FIGURE 6. and has secured rights to music reviews.5. artists biographies.3 Sources of Value . By partnering with well-known content providers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow has leveraged the reputation of their brands to reinforce its own.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.5 .Figure 6. easy-tonavigate. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. The whole process of searching for albums or music titles to the actual purchase is simple .OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. For example. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. etc. cover art. 81 . to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has cultivated similar relationships with MTV. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).5.
French.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Portuguese. it gives them a sense of ownership and a compelling reason for them to return. they will be reluctant to visit another online store and enter the information again. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. It also creates switching costs. Dutch and Japanese. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . Customer Care CDnow's site can be viewed in English. which accumulate and can be spent on a variety of music-related products. 82 .such as AOL. Excite. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. German. and key news and entertainment sites . CDnow developed the Fast Forward Rewards programme. Italian. allowing them to respond to detailed customer queries. Internet access providers.search engines. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Spanish. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. Whenever a customer makes a purchase they earn Fast Forward Reward points. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. and Geocities as well as more focused specialist sites. Due to International interest. 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. Yahoo!. an incentive programme that rewards customers and encourages them to connect back to the site. Other features such as My CDnow's Wish List. allow customers to keep track of albums to buy in the future. Community CDnow has not exploited the potential of creating a community feel. CDnow hired a group of multilingual customer service representatives to handle questions. By customising the store to meets customers' needs.
CDnow's initiatives include: • Banner Ads . integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.5. and spot radio to build reach. Yahoo!. Excite and other powerful Internet content and service providers. • Traditional offline Media . 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. print advertising is music-related publications such as Rolling Stone. 83 . Spin. CDnow extended its distribution reach to include more than 250.Through the Cosmic Credit Programme. covering the entire music spectrum. they buy from CDnow. By keeping the brand in front of the customer in this way.000 small. It is a revenue-sharing arrangement. music-oriented websites. this is their "most successful customer building programme64". as well as more-targeted music-related sites like Billboard. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. According to Jason Olim. and radio spots on the Howard Stern Show to build a cult following among radio listeners. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce.They have also stuck exclusive alliances with AOL. customers buy music.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL.CDnow's advertisements are targeted to some degree. • Affiliate Programme . These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. CDnow is doing everything it can to ensure that the next time that 6. • Alliances and Partnerships . and Variety.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account.
cdnow. and scaled it awareness-building efforts. word-of-mouth accounts for the lion's share of CDnow's customers. as a way to fuel very lucrative word of mouth. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.Hampel & Stefanides (www.Press Release. It is constantly adding new functionality to the site and has been innovative in its offering .com) 65 'Pioneering in Cyberspace' .htm) 84 . Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. both in the online and offline worlds. • Word-of-Mouth .As for many successful online retailers. resulting in increased conversion rates.they were the first site to offer the sale of music downloads and custom CDs. and to increases in the customer base of more than 30% quarter-to-quarter.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. with 44% of sales coming from new customers65.CDnow made public relations a high priority brand-building tool. Public relations efforts helped to generate word of mouth and influence sales. In fact. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. This has contributed to a 225% increase in sales (1997: $17. 6. 1998: $56. The company continually pushed for new distribution partnerships to widen its sphere of influence. It is a powerful source of acquiring new customers at low cost.5. it is in this context that the large investments in advertising and partnerships make sense. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998 .4 million. The story of how CDnow was founded in a basement.com/cdnow. with repeat customers accounting for more than 50% of sales.4 million).hsny.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . April 28.(www. CDnow's promotion strategies have attracted high levels of traffic.
well-targeted marketing programmes both online and offline have driven large volumes of traffic to the site and have exposed the brand to millions of potential customers. CEO of CDnow. as cited in Carpenter. This. P. 2000 p. "eBrands .from how CDnow has personalised its product offering to its capable customer service team .6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. 66 Jason Olim. combined with the high impact customer experience created . They also provide the customer with an order number and customer support contact information should they have questions.89 67 Jason Olim. CDnow has developed a relationship with Valley Records.75 85 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim.Building an Internet Business at Breakneck Speed". According to Jason Olim. as cited in Carpenter. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns.Building an Internet Business at Breakneck Speed". 6. and innovative. (Boston: Harvard Business School Press).5.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. a record distributor that handles the majority of CDnow's fulfilment logistics. The development of an extensive affiliate network. This gives the customer the impression that the order is being handled quickly. (Boston: Harvard Business School Press). It was able to create a strong value proposition and high quality customer experience.it's what you do66". CEO of CDnow. and ensure that it exploits its early-mover advantage and keeps ahead of competition. P. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. "eBrands . "your brand is not just what you say . to ensure quick delivery to customers. 2000 p.
24 hour a day.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. "at its core.com) 70 'Meg Whitman at eBay Inc.eBay website (www. Auctions represent a platform.removing the need for inventory.782 million in January 200068. from collectibles and antiques to electronics and toys. 1st October 1999 86 . Since its launch in September 1995.000 new items joining the "for sale" list every 24 hours69. The buyer and the seller work out the logistics of the transport (e.Company Overview' . People perceive the auction format to offer better prices. flea markets and auctions. (A)' . the eBay community has grown to include more than 10 million registered users. global trading place for buying and selling personal items in an entertaining auction format. with emphasis being placed on its unique community feel and culture. Sellers pay a nominal fee for placing an item up for sale. eBay is not about auctions.efficient one-to-one trading in an auction format. 6. transportation and other overhead costs. Auctions are an enabler. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. and eBay never takes possession of the item being sold.6 CASE STUDY: EBAY 6. extensive selection and geographical reach.g.Company Overview' .6.300 categories. garage sales. and eBay receives a transaction fee that ranges from 1. and eBay provides added value through its convenience. with the number of unique daily visitors setting a record of 1.ebay. shipping. and 450.the closest thing in the offline world are trading forums such as classified ads.25% to 5% of the final sale price on any item sold.eBay website (www. payment) between themselves. Auctions make it fun.ebay.A Harvard Business School Case Study. or the payment for the item .2 Value Proposition eBay offers consumers an efficient. According to Meg Whitman.com) 'eBay . This is a new market . as cited in 'eBay . collectable shows. CEO of eBay. Individuals use eBay to buy and sell items in more than 4.1 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. eBay effectively created a new business model never before possible . There are over half a million new auctions.6.
eBay teams up with Carclub.eBay and Ultimatebid.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.com to provide automotive service for eBay Users . Las Vegas. Milwaukee. This raises challenges in how to control and influence the customer experience.Germany's leading online person-to-person trading site . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay acquires Kruse International . Nashville. Providence. .eBay acquires Butterfield & Butterfield. 21st May 1999 (www.eBay goes wireless with Palm VII connected organiser . as they rarely deal directly with the company. allowing users to create personal homepages .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 . and Salt Lake City .eBay launches 'About Me' feature.eBay and First Auction sign a partnership agreement . and Collecting Just About Anything and eBay for Dummies. Seattle & Tacoma.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay introduces eBay Magazine in collaboration with Krause Publications. Dallas & Fort Worth.eBay launches local websites in Baltimore & Washington DC. they try to influence customer behaviour by encouraging them to adopt certain values.eBay acquires Blackthorne Software GO. And you only get word-of-mouth if you have a great customer experience.Launches "My eBay!" to customise the online auction experience .6. and its online trading site (Up4Sale) .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques . Unlike the previous case studies discussed. "the first brand-building strategy that we have is to have a great customer experience.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay goes live in Australia . The Official eBay Guide to Buying.America Online and eBay announce strategic marketing alliance . and raises $700 million . co-marketing relationship.3 Sources of Value . .eBay acquires alando. and in terms of the '7Cs'. and two books -.eBay IPOed raising $58 million . Still the vast majority of our new users come from word-of-mouth. Since eBay cannot control how one person treats another. the eBay customer experience is based on how their customers deal with each other.eBay acquires Jump Inc.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.businessweek.Compaq Computer Corporation and eBay form a strategic U.The 7Cs Framework According to Meg Whitman. Boston. emphasis is placed on community development and customer care.eBay and AOL launch co-branded site .de .com) 87 .eBay goes live . 1 is have a great customer experience71". So brand-building job No. Selling. Norfolk & Virginia Beach.eBay expands strategic relationship with Netscape .Com form alliance - 6.S.Business Week.
which is much more demanding on the system.6). Nevertheless. eBay has also expanded to accommodate access through wireless devices for added convenience. categorically arranged. eBay's site has to process thousands of live bids simultaneously. Other content includes the banner ads. and adds to the experience and the discovery of the auction process. they have continually invested in system capacity. Content Content is primarily user generated through the items listed for sale. and since. easy-to-use online service (Figure 6. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. topically arranged.6 . increasing the risk of outages. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. 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. This contributes to the community feel. FIGURE 6.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. 88 . eBay had a 'wake up call' when the website crashed for 8 hours. angering hundreds of thousands of eBay users.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.
Whitman describes eBay's community culture as a site "of the people. For many 'eBayers' . and is considered by many users as one of the best features on the website. eBay's community has a distinct culture based on trust. 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). Recent initiatives such as the development of local websites in major US cities (e. eBay Boston. e-mail. After a sale.as eBay users refer to themselves . and there are several reports of eBay users vacationing together. bulletin boards. for the people". This has created a self-regulating mechanism that encourages good behaviour. autonomy. has enabled eBay to foster a strong sense of community on its site. It is a place where people can meet with similar interests.g. eBay Salt Lake City) have helped them restore that community feel. empowerment and equality. Community eBay attributes much of its success to a strong sense of community among its users. respect. which is then added to the partner's trading profile. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. a "giving-board" for charitable donations to user-identified causes. each user is encouraged to submit feedback through eBay's 'Feedback Forum'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. and in doing so. However.eBay represents more than just a place to buy and sell goods. the culture has come under strain due to the company's rapid growth from a small community into a "big city". by the people. eBay offers its users category-specific chat rooms. To encourage this sense of community. 89 . working together and helping each other offline. the community spirit and personal relationships also transcend the online experience. a monthly newsletter. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. In addition. discuss topics they care about. and share information. which is posted to the site.
which was dedicated to investigating misuses of the system (e. and the Safe Harbour group. 90 . in which the company hired active. but they have other partnerships with over 150 websites of varying scales. eBay was able to cost-effectively offer 24x7 customer support early on. the largest of which was with AOL. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. and respected members of its own user community to serve as customer support representatives. fraud. its user community. eBay also engaged in marketing partnerships. geographically dispersed users as customer support representatives. eBay's approach to customer care has evolved over time. links to high traffic sites.the Community Watch group. This also reinforced the company's respect for. Communication eBay maintains close communication with its members. As such. shill bidding) and helping to resolve user-to-user conflicts. By using its own enthusiastic.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network.g. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. eBay employed a "remote" customer support model. Customer support activities were constantly upgraded and expanded as the business developed. answering e-mails and responding to questions posted on the site's bulletin boards. and willingness to empower. 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. which was dedicated to monitoring the site for illegal and infringing activities. These people worked from their homes. knowledgeable. During the first two years. This was later expanded to include customer support representatives who worked out of eBay's headquarters. eBay has invested in customer care and support to ensure people conduct safe transactions. Customer Care eBay controls neither end of the transaction. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users.
and highlight opportunities created by e-commerce. representing about 40% of revenues. who tended to be serious collectors. Based on this. they spent $12. as a result of the high quality experience it provides. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. eBay decided that it would not enter into major portal advertising deals in the short term. they decided to target their marketing efforts on these heavy users.6. and maintained the same ratio for 1999. The Official eBay Guide to Buying.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. The AOL partnership was one of the largest strategic partnerships on the Internet . These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Early on. Mary Beth's Beanie World.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 million in advertising. 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. 91 . In 1998. eBay has been able to attract a large customer base. eBay has since expanded its promotion efforts and engaged in marketing partnerships. provide a wealth of information about the 'ins and outs' of trading on eBay. and Collecting Just About Anything and eBay for Dummies. Doll Collector) and appearance in trade shows. 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. Recent promotional initiatives include its new publication. Selling.a four-year. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Through this combination of its advertising efforts and targeted promotions. eBay Magazine. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. but they have other partnerships with over 150 websites of varying scales. $75 million joint marketing alliance and development deal. the largest of which was with AOL. These new publications appeal to the collecting spirit. and two books. As a result. and facilitate the spread of positive wordof-mouth. eBay transformed from a pure online play into a 'clicks-and-mortar' company.g.
eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. have been instrumental in building a 'quality' customer base. have been key factors that have contributed to the success of the brand. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. and according to research carried out by eBay.contributing to its strong lead and competitive advantage. such as the Feedback Form. eBay has also faced difficult challenges in scaling the organisation fast enough.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'. which in turn attracts more sellers . I think you are not well served by moving incredibly rapidly and not doing things well72". And while we have to move very.6. As a result.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. the Personal Shopper and the eBay Life Newsletter. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . This has become part of the eBay culture. However. and according to Meg Whitman. Their focus on heavy users and targeted promotions. 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 their first-mover advantage. very fast. as they could not opt for a 'go slow' strategy. 21st May 1999 (www. "the devil in so much of this is in the detail. which has established eBay above other online auction communities.Business Week. 6.5 Conclusion eBay's compelling value proposition. however.com) 92 . eBay prefers the opt-in model whereby users have the option to choose such services if they were interested.businessweek. which were all ideas of eBay users. eBay attracts a broader selection of buyers. This is achieved by listening to their community (learning) and developing new improved products and services (relating). their ability to create a new market using Internet technology.
73 74 Interbrand (www.com/about_us. to provide customers with greater convenience and options. In addition. and BabyGap. In late 1997. According to Jeanne Jackson. from jeans and T-shirts to khakis and jackets. Germany and Japan. online sales are only available to US customers. and Gap online provides access to the full range of items at Gap. as cited in Lee.7.com' . Gap Inc.gap. service and value to everyone74".com and www.800 stores in the US.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.Business Week. whether in the store or online76".com is an example of successful crossover marketing. Gap started selling items online . TABLE 6. GapKids.7. from shirts to accessories and hard-to-find sizes. Gap. and analysts estimate that sales in 1999 amounted to $50 . UK. however. "this is about being clicks-and-mortar.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. L."to deliver style. California GapKids opens its first store BabyGap is born Gap opens its online store at www. Gap's online sales tripled in 1998 alone.$100 million.Business Week. This success is largely due to their simple formula .babygap. head of Gap Online. and today it is the 29th most valuable brand in the world73. the growth prospects are enormous. Inc. October 8.COM .htm) 75 Jeanne Jackson. surpasses $9 billion in net sales and increase earnings by 54% over previous year.COM 6. Canada. and are still relatively small compared to Gap's $9 billion in annual sales.2 Value Proposition Gap's simple. 6.gapkids.com' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. standard styles are well suited to online shopping. 1999 76 Jeanne Jackson. October 8.interbrand. Its reach extends across more than 1.com) . up from $20 million in 199875.1 Company Overview Gap opened its first store in San Francisco in 1969.see Appendix A Gap.'s website (www.com. announce multi-year partnership.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.gapinc. and provides useful insight into how traditional brands can leverage their strength online. as cited in Lee. America Online (AOL) and Gap Inc.7 CASE STUDY: GAP.an early convert to the then-revolutionary idea of clothes retailing on the Internet. Currently. 1999 93 . The Gap offers a balance of modern and seasonal styles of clothing. 'Clicks and Mortar at Gap. 'Clicks and Mortar at Gap. Gap online exploits the accessibility and convenience of the Internet. letting customers access the Gap brands. L.
7 .com store one immediately notices the consistency between the online and retail stores. very efficient"77.7. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.. the extensive integration of Gap's online and offline activities are clearly evident.. D. Simple. and Customer Care..making visual references to its offline roots. Executive Vice President of Global Marketing.. making navigation even faster. FIGURE 6. feel and design of the site is consistent with the bricks-and-mortar stores.very easy.. describes the company's brand personality as "direct and straightforward.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. Unlike Barnesandnoble. and easy-to-use. The Observer. from the blue and white colour scheme to the easy-toshop format . 'Mind the Gap'. Content. making it convenient... but provides customers with the option of viewing text-only.com.. This personality is reinforced online through the simple structure and layout. Gap Online primarily focuses on Convenience. April 18. Visiting the gap.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. reinforcing its brand identity.The 7Cs Framework In terms of the 7Cs framework. The site also offers sharp graphics. Michael McCadden. 1998 94 .
as most Gap online shoppers have a good idea of how Gap clothes fit. GapKids.com. twice a month.com's content consists of detailed information on its full range of products.com also provides a Gift Central feature which offers gift suggestion from Gap. Gap communicates with customers through customised e-mails. promoting its specials and including links directly to items on Gap's website. once customers are registered online. standard styles are well suited to online clothes shopping. The Gap site connects to other Gap online stores including GapKids and BabyGap. and BabyGap. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. and had recently established marketing deals with AOL and CDnow. In addition. and goods bought online get returned at the same rate as store purchases . allowing shoppers to contrast different cuts and styles. Gap made a decision to charge sales tax on online sales. Gap.com allows customers to track the status of online purchases and provides contact information on the nearest store. In order to integrate its offline and online operations and logistics. as well as sample all of the latest shades of fingernail polish on a virtual hand. However. Gap has also developed an affiliate programme. which would not be possible in the store. Unlike the case of Boo. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. 95 . Gap's simple. and customers can register to get e-mail reminders of upcoming holidays and birthdays.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. Gap does not provide any community features on its site. customers can return goods purchased online to their neighbourhood store. without causing complications. By doing so. and customers can view their latest TV adverts for buying inspiration. Gap.
on counter cards. • They offer Online discounts and promotions such as the ShopCard.) that also promote the online store.gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. etc. providing a useful way to directly reach customers. 96 .shop.Extensive Integration Gap. 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. • Gap.ship".com has been able to piggy-back on The Gap's offline advertisements (in TV. Gap has held in-store campaigns to get customers to submit their e-mail addresses. Most of Gap's online traffic is generated by leveraging its physical presence. which displays "Shop online at www.4 Brand-Building Strategy . Magazines. however.com in return for a 5% commission on every sale referred through the site. by displaying the URL (www. or to refer shoppers to Gap's website. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. whereby for every $100 a customer spends at Gap Online. • Gap. by offering a 10% discount and free shipping on their first online purchase. In addition. Gap secured a 3-year commerce and marketing agreement with AOL.com) in store windows with the slogan "surf. billboards. To convert walk-in shoppers to cybershoppers. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com has links with CDnow to cross promote websites. it is fully leveraging its offline presence to build awareness. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. on shopping bags and even on the cash register.com" on the display screens between transactions.com has also created an affiliate programme encouraging sites to establish links to gap.gap. Gap has also supplemented this with online promotions: • In August 1999. These efforts doubled the size of Gap's e-mail database. which can be used towards future purchases.com. they send the customer a $20 Gap ShopCard. either online or in stores.7. In certain high traffic Gap and GapKids stores.
and can also provide access to different customer segments who may not usually buy the products at all .com is an example of successful crossover marketing. With their brand awareness and network of retail outlets. provides existing customers with added value through the convenience of purchasing online. whereas established companies. Pure online players have to invest heavily in logistics. have already established the back-end operations and can use them as the cornerstone of their online business. By aggressively marketing both the stores and the website.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap had a significant advantage over pure online players in attracting customers and building critical mass. such as Gap.7. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. thereby reinforcing its brand identity. and allowing each to leverage the strengths of the other.5 Conclusion Gap. The Internet. while reaping the benefits of low customer acquisition costs and extended reach. Gap has been able to significantly strengthen their brand-customer relationship. on the other hand.thereby increasing the company's reach. 97 . 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 Strategy. who started an online guide as a way to keep track of their personal interests on the Internet. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. As the first online navigational guide to the web.Business Week. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.2 Value Proposition At the core of Yahoo!'s value proposition. Yahoo! offers a range of supporting services that add value.see Appendix A 'Yahoo! . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.D students at Stanford University. the site was receiving 1 million hits per day. the amount of information. There's nothing in the real world to compare to that79". Yahoo! has since morphed from an ordinary search service into a global Internet communications. CEO of Yahoo!. Yahoo! was founded by David Filo and Jerry Yang.8 CASE STUDY: YAHOO! 6. Yahoo! is a leading guide in terms of traffic.com) 98 .8.1 Company Overview In April 1994. lies the directory . and the number of websites continues to explode. and is one of the few Internet companies to turn a profit early in the development of the Internet. two Ph. The concept exploded (through word-of-mouth) and in less than six months.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.The Company.interbrand. from e-mail services to stock quotes and much more.businessweek. all in a single location. The Stock' . 6. According to Timothy Koogle. 78 79 Interbrand (www. 1998 (www. September 7. advertising.com) . household and business user reach. As such. The company's global web network includes 23 world properties outside the US.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
TVs. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.The 7Cs Framework Convenience Central to Yahoo!'s success. 99 .com allowing them to offer person-person payment solutions . regardless of platform (i.. and unveils Yahoo! Digital Introduces Bill Payment services . mobiles. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb. Palm computers). More recently. Yahoo! extended its convenience through its Yahoo! Everywhere service.600.com.8). is the way it has structured and displayed information.Site goes live September .8.Yahoo! Launches Business-to-Business Marketplace .8 million IPO (2.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Their goal is not to list everything under the sun.Receives $1 million in venture capital funding from Sequoia Capital $33. to provide web-based services to PalmTM handheld computers .Yahoo! acquires eGroups .000 shares at $13.3 Sources of Value . .e.7 YAHOO! .TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! forms agreements with Palm Inc.Yahoo! acquires Arthas. 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.Yahoo! Shopping launches personalised shopping service 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. to allow access.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .Yahoo! unveils Yahoo! Finance Vision .
and has been at the heart of Yahoo!'s growth and development. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. This creates a win-win situation as its satisfies Yahoo!. the partner. well structured.8 .9). ranging from daily news and weather reports to road maps and books.com and CDnow.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. and is similar to a custom tailored newspaper (Figure 6. easy-touse. while providing partners access to a large customer base. By tailoring the information to users' preferences. Their thrust has been to provide valuable content to customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. 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. Yahoo! has increased customer loyalty and retention rates. and more importantly. the end-user. They have formed multiple alliances and partnerships with leading online companies such as Amazon. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. 100 . from stocks and sports results to weather and air fares.
Yahoo! spends more on customer support than most companies. and encourages them to return frequently. In 1999. 101 . and e-mail. where groups of people with shared interests can communicate through chat. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and is driving Yahoo!'s multiple partnerships and alliances. one-to-many. and plans to incorporate other features such as online chat to facilitate communications. Customer Care Yahoo! responds to customer inquiries via e-mail. Yahoo! acquired GeoCities. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. telephone and even traditional mail. message boards.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and many-to-many. to provide its customer base with access to useful links and content. or to make it their home page. fax. Connectivity Connectivity is Yahoo!'s core product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. and the nature of the navigation business. and contributing to their reputation as a quality service provider. reinforcing the brandcustomer relationship. It keeps customers on the site for longer periods. In addition. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one.9 .
(www.intelliquest.people who are not yet online but are likely to use the Internet in the near future. At the time this was considered a breakthrough. Yahoo! also encourages customers to e-mail ideas and feedback. Yahoo!'s brand-building success starts with its name. This was especially important. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . an approachable nature. and it formed a critical link in Yahoo!'s brandbuilding strategy. and its implications of a good time. Given the unease with which the average consumer approaches technology.com) 102 . These near surfers represented (and still do) a large and fast growing group and. Yahoo! extended beyond this to use traditional offline media.4 Brand-Building Strategy Yahoo! is a marketing machine. recognise the name Yahoo!. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". Yahoo! avoided characterising itself as a technology-oriented company. and according to Intelliquest80. Their strategy was to target "near surfers" . TV commercials and radio spots during drive time. Yahoo! would be one of the first sites that they visited. In 1996. Intelliquest. 6.a sense of irreverence. 80 'Web Survey Shows Yahoo! Tops'. 82% of Internet users and 23% of people intending to go online.8. which conveyed the brand's irreverent personality.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. As a result. therefore. by building a recognised brand name. Yahoo! maintains close contact with customers. Yahoo! aggressively promoted the site through public relations. and an inherent friendliness. 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. While Internet companies were targeting existing Internet users through the use of online promotion methods. as experience surfers tend to be loyal to their search engine. and through communications via email.
According to a recent study. T-shirts.it must reinforce the image of the company as 'a service that is fun. sailboats. Although this seems like a shotgun approach. which has been instrumental in establishing Yahoo! as a household name. including backpacks. Their innovation. They even have a barter deal with the San Francisco 49ers.with its name being plastered on everything. a monthly magazine guide to what's new on the web and it has co-branded products. s4 103 . the research shows that 73% of Yahoo! users bookmark the service .higher than all other services81. May 3. Yahoo! has paid little for this exposure. 1997 (www. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . According to Karen Edwards. p. parachutes. We need to be one step ahead in order to have a better service than our competition82". it's too late. to create Yahoo! Internet Life. August 26.yahoo. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. They also teamed up with publisher Ziff-Davis Co. services and contests with well known brands such as Ben & Jerry's. new services and customised features highlight their ability to relate to customers' needs. customers quickly discover its value and through a high quality experience (7Cs). stating that "if we wait to hear about it in the news.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. and 76% turned to Yahoo! before visiting another search engine or navigational site. In addition. Yahoo! has managed to cultivate high brand loyalty. and yo-yos.Yahoo! Press Release. Visa and MCI. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success.Advertising Age. Once customers access the site. snowboards. a little wacky and inviting'. organisers. Yahoo! adopted 'guerrilla marketing' techniques . 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . 1999. VP-Brand Marketing. breath mints. as well as TV shows (Ally McBeal. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. ER) and Hollywood movies. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test .
8. May 3. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". if a user cannot find what it is searching for. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. 6.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. GoTo. 1999.6 Conclusion Yahoo! is one of the most successful brands on the Internet. As the first online navigational guide to the web. their innovative promotional and guerrilla marketing techniques. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. VPBrand Marketing of Yahoo!. Yahoo! has invested relentlessly in new services and marketing programmes. They have maintained that lead through the creation of a high quality end-to-end customer experience. alliances and acquisitions to provide added value services to their customers. have created a distinct brand identity that differentiates the brand and appeals to its target market. with a large customer base and high levels of customer loyalty. In addition. and other search engines at the bottom of its search results page). HotBot. they have carried out extensive partnering. Yahoo! points them to its competitors by including links to AltaVista. first to turn around an annual profit. These relationships have provided end-users with added-value. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. that have set it apart from the pack. s4 104 .Advertising Age. to its simple design. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . To maintain its lead. and its openness (for example.8. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. and has cultivated a reputation for excellence. from its convenient and logical structure and display of information. its excellent customer service. and first to go mainstream by advertising its name using traditional media. In addition. Yahoo! has built a strong brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. As a result of all these factors. while also associating Yahoo! with well known brands.com. while attracting new customers. first to go public. its choice of partners. p. Yahoo! has benefited from a first-mover advantage.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
108 . Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. brands are harder for competitors to emulate. these companies must have an inherent understanding of their brand identity and core values. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. while ultimately benefiting the end-customers. and convenience. to maintain consistency. offering customers the best in quality. In addition. By distinguishing their offering and focusing on unique sources of value-added. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. but also provide added value to the brand community. integrated customer acquisition strategies. The most successful partnerships are symbiotic matches. to distinguish themselves from competitors. 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.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. variety. particularly to secure content and widen reach to new customer segments and niches. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. As a result. before it fractures. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. content. ranging from online methods to traditional offline media. as well as determine how far the brand can be meaningfully stretched to other products and market segments. these companies are creating even stronger value propositions. and by partnering with well-known brands. a company can leverage the partner's brand and reputation to reinforce its own. leading brands have focused on building strong partnerships and alliances. whereby each party benefits from the other's expertise or skills.
The challenge then lies in keeping up the momentum. A first-mover advantage is an important asset for an online brand. and develop a detailed understanding of their customers' needs. Many strong online brands were also early-movers on the Internet. and it aligns itself with the most influential venture capital sources.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. that comes with innovation. giving the brand an edge. These brands are accumulating knowledge about customers. 109 . and benefited from additional hype. are leveraging this customer knowledge (learning) to nurture relationships (relate). and it can acquire customers while it is still inexpensive to do so. In many cases. by providing better services. the innovations are the result of the company's ability to data mine its vast database of customer information. By getting to market early. and by focusing on customer needs. to create new services and content that satisfy customer needs. these well-publicised brands also took off. By leveraging unique customer information. through past transactions and solicited input. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. and are continuously adding new services and functionality to their sites. • 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. As Internet penetration exploded. and traffic. the company benefits from the buzz. • 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. and extensive word-of-mouth due to its novelty. and differentiating it from other brands. these innovations are difficult for competitors to reproduce. customisation and customer care.
this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. In addition. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. and a physical presence (tangibility) . they are equally important in business markets. drawing on several case studies from business markets. established fulfilment systems and infrastructure.factors that clearly differentiate them from pure players. with the emergence of wireless access and new platforms. Therefore. ongoing research would be necessary to build on the findings of this dissertation. As such. tools and key factors outlined in this dissertation are also applicable to business markets. Through extensive and seamless integration. one component remains unchanged . the concepts. clicks-andmortar brands are providing customers with true added-value. would represent an exciting opportunity for further research. expand the brand experience to meet customers' expectations in the online world. Yet while everything is being turned upside down. They possess critical assets that give them an advantage over pure online start-ups. but at the same time.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. Nevertheless. while reaping the benefits of lower customer acquisition costs and extended reach. They have an established brand. there has been a limited time horizon to evaluate the durability of Internet brands. Nevertheless. In doing so. Brands and brand-building tools tend to be associated with consumer markets. 7. established customer relationships. an in-depth analysis. The Internet has radically changed the business and competitive environments. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. Having established a strategic perspective on building online brands. building relationships and satisfying needs.value remains (and always will) the basic building block for every successful brand. however. 110 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
319 1.225 11.interbrand.143 2.792 3.132 15.909 7.197 32.681 2.155 7.262 1.510 8.052 6.193 112 .694 17.643 3.806 2.361 1.181 21.603 5.310 11.329 4.806 11.043 8.568 3.Interbrand's Ranking of the Top 60 Brands (www.654 43.894 14.932 4.423 2.281 11.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .596 3.404 4.147 9.781 33.076 3.021 26.184 1.527 3.275 30.845 56.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) 83.464 3.502 33.231 12.313 2.761 1.231 24.048 20.595 17.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.985 2.283 4.101 9.895 2.550 12.634 1.602 4.648 1.781 17.422 1.804 2.766 14.830 14.
with the fast pace of technological change. respond to competitive and market dynamics. showing how they are interrelated. Internet companies must be able to move at warp-speed. and structures are aligned differently. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. (Harper & Row). The fundamental difference is that traditional companies have focused on 'managing for efficiency'. R. & Waterman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. constantly innovate. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. global competition.. activities. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. commit and deploy resources. As a result. 'In Search of Excellence'. 1982 113 . all these dimensions must change accordingly. all their operations.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. They must move quickly to capture new opportunities. T. However. and the emergence of a knowledgebased economy. As such. * Peters. and as the business environment changes. whereas entrepreneurial Internet companies must focus on 'managing for change'. the informal management style and the constant strategy re-calibration. customer empowerment. It is critical that all these dimensions come together and are re-enforcing. and reorganise as appropriate.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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