1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


4.The 7Cs Framework 6.1 Company Overview 6.4 Brand-Building Strategy .6.5.7 6.5.5 Other Factors That Contribute to their Brand Leadership 6.6.8 Case Study: Boo.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.5.6 Value Proposition 6.com 6.8.4 6.7.5 Conclusion Case Study: CDnow 6.5 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.4.5 Other Factors that Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.1 Company Overview 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 .7.2 Value Proposition 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8.1 Company Overview 6.8.5 Conclusion Case Study: Yahoo! 6.com 6.4 Brand-Building Strategy 6.1 Company Overview 6.The 7Cs Framework 6.1 Company Overview 6.3 Sources of Value .6.5 Conclusion Case Study: Gap.The 7Cs Framework 6.5.1 7.4.3 Sources of Value .5.3 Sources of Value .8.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.5.2 Value Proposition 6.3 Sources of Value .6.com 6.2 Value Proposition 6.4 Brand-Building Strategy 6.3 Sources of Value .4.8.8.The Failure of Boo.2 Value Proposition 6.7.Extensive Integration 6.

6 Figure 4.com's Associates Programme Overview of BarnesandNoble.4 Figure 4.4 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 6.9 Figure 6.2 Figure 6.2 Figure 5.5 Figure 4.com's Website Overview of Boo.3 Figure 6.6 Figure 6.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 2.6 Figure 5.8 Figure 6.7 Figure 5.6 Figure 2.5 Figure 2.2 Figure 2.1 Figure 4.7 Figure 2.5 Figure 5.3 Figure 5.7 Figure 5.com's Website Amazon.2 Figure 4.1 Figure 1.3 Figure 3.1 Figure 5.2 Figure 3.4 Figure 2.3 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 .1 Figure 3.4 Figure 5.8 Figure 5.1 Figure 6.3 Figure 2.8 Figure 3.4 Figure 6.5 Figure 6.2 Figure 2.

Timeline and Major Milestones eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .1 Table 6.Timeline and Major Milestones Gap.Timeline and Major Milestones CDnow .2 Table 6.Timeline and Major Milestones BarnesandNoble.com .1 Table 6.5 Table 6.3 Table 6.com .com .4 Table 6.Timeline and Major Milestones Boo.7 The Emerging Brand-Building Environment Amazon.6 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Yahoo! .


1 shows the number of years it has taken some Internet brands to reach sales of $100 million. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. America Online (AOL) and eBay have been able to build powerful brands in a few years.1 3.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com's range of 4. there has been an explosion in the online world . As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. The Internet also represents a fundamental shift in how buyers and sellers interact. Amazon.0 1.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. products and services reconfigured.com. as they face each other through an electronic connection. aggressive Internet start-ups have emerged. FIGURE 1. Supply chains are being rethought. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. As such. and business models revamped.1 .g.com Source: Securities and Exchange Commission Filings. Amazon.YEARS TO REACH $100 MILLION IN SALES 6 5.mckinseyquarterly.com1 Amazon.5 2. whereas it has taken decades for traditional companies to achieve the client base.com noble.5 million book titles).an explosion that is also a harbinger of how business will operate in the future.2 3. This is creating new challenges and opportunities. customer affiliation and level of sales. while providing new tools for promotion. Internet companies such as Yahoo!.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. In the midst of this.9 2. service and brands.9 3. McKinsey Analysis (www. creating strong brands that are putting established brands at risk. that these Internet start-ups have achieved. It is empowering customers with more options and more information to make informed decisions. interaction and relationship building. relationships. Figure 1.com) 7 . the Internet is changing fundamentals about customers. and is triggering the need for new brand-building strategies and tools.1 OVERVIEW Over the past few years.

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

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

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

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


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

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

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

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

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

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

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

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. FIGURE 2. 20 . Emotionally loyal customers build a sense of trust and two-way commitment with the brand. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). pp. 2. 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. A stronger brand enjoys a high degree of brand preference over competing brands.7). whereby customers would be unwilling to substitute it with competitors' offers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. Beyond this.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. Journal of Consumer Research. a 'powerbrand' tends to have a high degree of brand loyalty.7 . 343-373. which goes well beyond the satisfaction of a specific need.6 . March 1998.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. However.. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. S. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. there are brands that are unknown by most buyers. FIGURE 2.

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

1992 Worcester. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. 'Strategic Brand Management'.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . R. • Brand Leverage . to quickly identify sought after products • • Practicality . to make sense of the offer.To have confirmation of your self-image or the image that you present to others • Continuity .To be clearly seen.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. J. brands perform several functions that add value and customer benefits: • Identification . in the following ways: • Brands. 158-170.To save time and energy through identical repurchasing and loyalty Guarantee . the best performer for a particular purpose • Characterisation . 3rd Ed.. to its logo. and the number two twice the share of the number three12.. 22 .Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . & Downham.Typically a brand leader obtains twice the market share of the number two brand. G. market share and profits .Satisfaction linked to the attractiveness of the brand. 1986 13 Golder. pp. J.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2..8.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.8.. N. Premium pricing increases revenue. The brand leader is the most profitable and all beyond number two are unprofitable13. 'Consumer Market Research Handbook'. (New York: Free Press). (London: McGraw Hill).To be sure of buying the best product in the category. Journal of Marketing Research. production and marketing. May 1993.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. 11 12 Kapferer. to its communication • Ethical . & Tellis.. P.

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


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

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

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

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

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

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

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

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


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

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

3.com) 36 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. as cited in 'E-Business Technology Forecast' .000.economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.3 . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 10.000 1969: 10.2 .000 100. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 1. FIGURE 4.000. 2000 Internet / ARPAnet was created Dell.000 1.000.Figure 4.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.a PricewaterhouseCoopers Report. 1996 (www.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist. 1998.

payment. etc. making it more cost effective for software developers and other technology providers to create interoperable products. web design. 'Electronic Commerce (finally) Comes of Age'.Higher PC penetration among consumers and companies .Attractive infrastructure and middleware software .4 . hosting. increasing to 500 million users by 200220.2 20 'World Online Populations' .g.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .Cheap microprocessors & RAM ..Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .com) 37 . The growth in support services (e. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.High-powered servers . 2000 (http://cyberatlas. L. billing. No. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.internet..Content Aggregators . Easier access to these networks provided by point-and-click web browsers. The emergence of open standards in development tools and at the network protocol level (e. there will be an estimated 375 million Internet users world-wide. TCP/IP). As shown in Figure 4.g. Reed.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. FIGURE 4.E-Marketplaces .4. The McKinsey Quarterly. G.CyberAtlas Internet Statistics and Market Research. Multimedia development tools that can be used to create rich content.Cheap bandwidth .Low-cost networking alternatives . 1996. and gateway services). The development of critical processes (ordering.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. offering inexpensive bandwidth.). the momentum created by all these forces has created a virtuous cycle of growth.

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

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

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

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

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

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


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

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

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

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

Outlook 1999. FIGURE 5. As the company builds a customer base and develops a relationship with customers.Figure 5. With no competitors around. 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. This makes it more efficient in improving product selection.A Publication by Andersen Consulting 'The State of Online Retailing' . being first into a market makes it easier to capture the consumer's share of mind.A Shop. 21 .. No. link revenues 32 33 Melnicoff. '5 Rules of the eEconomy'. delivering increased margin per customer . R. cross-selling and up-selling33. It also allows online companies to tap supplementary revenue streams.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.org Study in collaboration with The Boston Consulting Group. direct marketing. Nov 1998 49 . including direct marketing. M. its ability to track customer preferences and customise offerings improves. fulfilment • Defensible advantage against competitors SCALEABLE. advertising and referrals.2.2 . enhancing the interaction.

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

a company now owned by Microsoft. eGroups and Geocities (both recently acquired by Yahoo!). When a user builds a website. 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 in doing so spread the word for Geocities.000 subscribers every day.com The classic example of viral marketing is Hotmail. • Each new user becomes a company salesperson. Today they are the largest e-mail provider in the world with over 40 million users. Hotmail. and the message spreads organically.1 The Case of Hotmail. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). but Hotmail signs up more than 150. where they have never carried out any promotional activities. they will have a powerful viral opportunity at their disposal. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging). sign up for their own free e-mail. Hotmail acquired over 12 million subscribers.000 subscribers within a few years of launch.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. A traditional print publication would hope to reach 100.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.5. Free Email at http://www. In its first 1.hotmail. Geocities enables people to create personal websites for free. and they created a subscriber base more rapidly than any company in history. friends to visit it. whether for communications or community.5 years. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.com was one of the first free web-based e-mail services. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. and then propel the message even further to their own ever-increasing circles of friends and associates. saying: • "Get Your Private. they tell all their 51 .com. In fact. seven days a week.

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

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

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

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

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

e-mail notifications and banner advertisements. The company must build awareness and communicate its value proposition to its target customers. billboards.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Learn and Relate. pp. Newspapers.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. etc. This is more difficult online than offline. The mechanisms to communicate range from traditional media (TV. 1996. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Evaluation..7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. R. Therefore. McQuade.. including affiliate programmes with other websites. 180-183 (www. & Zeisser. Figure 3. because there is no physical presence.7 .2. FIGURE 5.7. Magazines... Adoption). Interest. This model consists of five stages . 'Marketing to the Digital Consumer'. S. No. Waitman.8.4 . The popularity and effectiveness of the different promotion methods are outlined in Figure 5. A. links from directory searches (Connectivity).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. McKinsey Quarterly. modified to take into account of the interactive dynamics of the Internet.mckinseyquarterly. M.Awareness. Engage. Trial. 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 ’ .) to online tools. Retain.Attract. visibility relies solely on Communication. and bring people to the site for the first time.

public relations and television advertising. discounted over the expected duration of the brand-customer relationship. Creativity is also an important factor in gaining attention in today's cluttered marketplace.3 3.4 3.8 .4 4. affiliate programmes. 3. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.ebusinessforum.Economist Intelligence Unit 2000 (www. Kapferer's Brand Prism (Ch.5) 2. it is important to quickly engage consumers' interest before they move on.5 3.3 Source: Forrester Research. Companies then need to engage customers to obtain their interest and participation.com) The most effective methods are direct e-mail.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3) is useful to ensure that a company develops a distinct and consistent brand identity. Engage With the multitude of choice available on the Internet.2 4.0 3.4 3. 58 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. Fig.WEBSITE PROMOTION METHODS .8 4. as cited in 'Targeting Consumers via the Internet' . Attracting customers is only the first step in building online brands. The key factors at this stage are Convenience combined with interesting Content.6 3.1 3. multiplied by the expected rate of transactions.7 4.

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

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


1 Company Overview Amazon.2. combined with its levels of customisation and customer service. eBay. including: increased selection. discounted prices.com has become synonymous with e-commerce. Amazon has cultivated a reputation for excellence. In addition. the sources of added value (using the 7Cs Framework).com's success stems from its compelling value proposition. Amazon serves over 23 million customers from 160 countries.It's an Ocean.COM 6. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).see Appendix A. CDnow. it is the most visited e-commerce website in America.1 INTRODUCTION This chapter provides an analysis of seven companies. its value proposition.economist.interbrand.Amazon. its brand-building strategy (how it generates traffic).com launched with a mission to use the Internet to transform book buying into a fast.2.com.com and Yahoo!. and is one of the few Internet brands that is recognised all over the world. Not a River' . 47 48 Interbrand (www. Each case is presented in the same format including. Amazon. February 26. Amazon. Barnesandnoble. The cases are presented in the following sequence . 6.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. In July 1995. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). a company overview. Figure 6. innovation and delivering on its promises.com . Amazon has been able to differentiate itself from other online competitors.com. France.com) 62 . It is the 57th most valuable brand in the world47. Germany and Japan49.The Economist. greater convenience. 1999 49 'Amazon's Amazing Ambition' .com) . 2000 (www.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.Goldman Sachs Report. and one of the top two or three in Britain.1 outlines Amazon's timeline and major milestones. November 11.2 Value Proposition Amazon. Through its provision of a one-stop shopping experience. Amazon provides increased added value on several dimensions. easy. and other key factors that have contributed to its success (or failure). Boo. Gap. and higher levels of customisation and service than the traditional shopping experience allows.2 CASE STUDY: AMAZON. and has sales of over $2 billion. In addition. 6. more information. and has equity investments in several e-tailers. and enjoyable experience.

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

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

Amazon introduced Amazon. real-time shipping and backorder notices. and customer interaction. and has developed an Associates Programme. Amazon creates one-to-one relationships with its customers.thereby increasing conversion rates. creates a competitive advantage. linking it to a large number of other sites.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.4.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM.2. Amazon's content is not reproducible by competition. converting them into a storefront for Amazon. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. These are discussed in more detail in Section 6. Connectivity Amazon has built relationships with high traffic web portals and sites. 65 . All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. In doing so. This customer-centricity is evident in all Amazon's activities. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. and Customisation Amazon provides customised features and services. Community Amazon has also added a community element to the purchasing process. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. By leveraging its vast customer base. therefore. to the proactive notification of new items of interest. More recently. which helps to build loyalty and create switching costs. from the customer recognition at the point of interface (Figure 6. from its shopping basket applications which lists the estimated time to delivery reliably.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 . while driving up repeat purchases and cross-selling opportunities.

they are subsequently confirmed by e-mail. increasing to over 500. This enabled Amazon to reach more customer segments and niches (Figure 6.000 by August 2000. New Yorker and The Economist. attracting member sites of all sizes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. 6. and customers are also e-mailed when the items are shipped from the warehouse.com hot-link and offer specific books of interest to their visitors. Business Week. In addition. Eyes and Editors. In the second half of 1996. Through the first half of 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal. 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. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. 66 . enticing them to return to the site and purchase repeatedly.2).a move that along with the novelty of its business model and the newness of the Internet. Instead of paying directly for this exposure. two personalised services. In July 1996. As a result of all these factors (7Cs). and not subsequent purchases. help maintain contact and build traffic by e-mailing customers when desired products or books become available.2. Amazon offered Associates referral fees of up to 15%.000 members. Newsweek. The Financial Times. it began to advertise in print media and online . which only applied to sales that resulted from the initial click-through. and by 1999 it had over 200. The Associates Programme has been phenomenally successful. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Once orders are placed.

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

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

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

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

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

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

com closed 1999 with 4 million customers. Instead.com's market capitalisation was $251 million.000 affiliates in its referral network. Barnesandnoble.com had over 17 million. Both offer customisation that permits users to personalise the experience. However. Yahoo!. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Both offer 'associate programmes' that let other websites link to their sites. Barnesandnoble. Barnesandnoble. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. however.com in return for a commission on any purchases that they originated . Both try to foster a community of readers by letting customers post reviews online.com. while Amazon. The 6.1 billion. and Barnes & Noble Inc. reasons for this are explained in the next section. They have developed an affiliate programme that links sites to Barnesandnoble.com's 1999 revenues were $202.4 Brand-Building Strategy Barnesandnoble. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com was valued at $21. Barnesandnoble. has yet to leverage its strong brand in cyberspace. this programme had more than 300. compared to Amazon. it lags behind first-mover Amazon. and avoid charging sales tax in states where it has stores56.The Wall Street Journal. prevent cannibalisation of its existing business. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). 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.a replica of Amazon's Associates Programme.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com has created a high quality website and customer experience. These initiatives have generated traffic to the site. 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 . and both are expanding globally. As of February 2000. Lycos. Netscape and Microsoft Network. Webcrawler.com's $1.6 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. while Amazon.3. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. December 17. Although.64 billion.

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

and was further up the growth curve.its key differentiating factors. 2000 (www. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. meant that Amazon.forbes.com.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. otherwise they risk losing out to other online competitors. 57 'Bn. even if that means eating into their existing sales. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and allowed them to offer stock options as compensation and achieve a high market capitalisation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com and has given them the image of a second rate 'me too' brand. Barnesandnoble.com .com) 75 .com's late start in 1997. The company failed to leverage its established brand.Forbes. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. The Press have also contributed. it has not been able to establish itself as the leading online bookseller.6 Conclusion Although Barnesandnoble. by portraying them as slow and clumsy in comparison to the more nimble Amazon. customer relationships and offline presence . Barnesandnoble. significant market momentum. and its lack of innovation (by copying Amazon.com's experience is instructive.Not a Best Seller' . In addition. it also caused a major setback. August 4.3.com has been able to create a high impact and high-quality customer experience. a wellestablished Internet brand. feature for feature) has failed to differentiate Barnesandnoble.

and eventually debut in Asia. sack 20% of staff and sell stock at 40% discount .COM . among others.com opens its virtual doors' . After a high profile launch.000 unique visitors .com provided a range of 18 fashion and footwear brands including DKNY. "our marketing thrust is not based on prices. Boo.Site goes live . Italy and Spain within a few months.4. However. and was billed as one of Europe's hottest e-commerce ventures. Boo. Finland. November 2000 January February May 6. 1999 76 .Appeals for $30 million more funding . Boo. If a clothing brand is on the Boo site. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).com.fails and appoints KPMG as liquidator.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4. CMO of Boo. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.3 1999 Mid year BOO. Everlast. within six months Boo.4 CASE STUDY: BOO.com. Morgan. due to its poor performance and inability to build a customer base. arranged through J. Company is put up for sale. TABLE 6. June 10. founder and Chief Marketing Officer of Boo. Puma.com entered six markets: US. and the resulting loss of investors' confidence. England. receiving $125 million of funding. it's about range and convenience.com collapsed through lack of funds.2 Value Proposition According to Kajsa Leander. and included high profile investors such as Bernard Arnault.they redesign site.First sign of problems . Germany and Denmark.TIMELINE AND MAJOR MILESTONES .Raises funding of $125 million .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". it means all that brand's product line is available. Sweden. Boo. as well as create a kid's site. P. 58 Kajsa Leander. not the limited range you might get at most London fashion shops58". and Converse.Marketing Week. They intended to add France.Multi-million pound advertising campaign created by BMP DDB .Announces it has only 500.com had set the record as Europe's best-funded European Internet Start-up. On going live.COM 6. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). as cited in 'Boo.1 Company Overview Founded in 1999.


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


Miss Boo

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



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

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

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



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

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


Harvard Business Review. May-June 2000.Merges with Columbia Records .5 CASE STUDY: CDNOW 6. and one of the most popular shopping sites on the Internet62.Site goes live .179-188 63 CDnow website (www.000 music related items .000 people. as well as music reviews. guides to music genres. D. It has a customer base of 4 million people. a valuable and rewarding experience"63.. convenience.CDnow and Time Inc. and an average daily audience of over 800. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . On 19th July 2000.ten times the selection of a conventional bricks-and-mortar music store).1 Company Overview Founded in 1994. and they aim to "make every visit to the site. and exclusive interviews and reviews from CDnow's award-winning editorial staff. 62 Hoffman.Merges with N2K.TIMELINE AND MAJOR MILESTONES .000 sound samples.Partnership program with Geffen Records .5.Launches merged CDnow/N2K site . features. cover art. whether for browsing or buying. CDnow is also driving the digital distribution of music. by twin brothers Jason and Matt Olim.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . TABLE 6.com) 80 . CDnow was acquired by Bertelsmann AG. & Novak.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. $18. daily music news. $22.5 million distribution deal with Lycos Signs three-year.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. announce marketing alliance .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. good prices.cdnow. former arch rival . and was the first site to offer the sale of music downloads and custom CDs. 'How to Acquire Customers on the Web' . CDnow is the leading online music store. T. CDnow provides access to over 500.Forges distribution partnership with Yahoo! $65. customisation and a wealth of information and content to help in the purchase decision.000 music-related products and 650.Raises $10 million through private placement . pp.

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

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

CDnow is doing everything it can to ensure that the next time that 6. 83 . including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. music-oriented websites. According to Jason Olim. • Traditional offline Media . By keeping the brand in front of the customer in this way.5. 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. and radio spots on the Howard Stern Show to build a cult following among radio listeners. • Alliances and Partnerships . CDnow extended its distribution reach to include more than 250.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. and spot radio to build reach. CDnow's initiatives include: • Banner Ads .Through the Cosmic Credit Programme. print advertising is music-related publications such as Rolling Stone. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. they buy from CDnow. and Variety. as well as more-targeted music-related sites like Billboard. customers buy music. It is a revenue-sharing arrangement. Yahoo!.They have also stuck exclusive alliances with AOL. Excite and other powerful Internet content and service providers. Spin. • Affiliate Programme .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. this is their "most successful customer building programme64".CDnow's advertisements are targeted to some degree. covering the entire music spectrum. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL.000 small.

CDnow made public relations a high priority brand-building tool. Public relations efforts helped to generate word of mouth and influence sales.cdnow.they were the first site to offer the sale of music downloads and custom CDs. April 28.5. with repeat customers accounting for more than 50% of sales.(www. it is in this context that the large investments in advertising and partnerships make sense. as a way to fuel very lucrative word of mouth. and to increases in the customer base of more than 30% quarter-to-quarter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .As for many successful online retailers. • Word-of-Mouth .hsny. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. The company continually pushed for new distribution partnerships to widen its sphere of influence.4 million.Hampel & Stefanides (www. 6. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.htm) 84 . with 44% of sales coming from new customers65. resulting in increased conversion rates. The story of how CDnow was founded in a basement.Press Release.com/cdnow.4 million).com) 65 'Pioneering in Cyberspace' . both in the online and offline worlds. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. It is a powerful source of acquiring new customers at low cost. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .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. This has contributed to a 225% increase in sales (1997: $17. word-of-mouth accounts for the lion's share of CDnow's customers. 1998: $56. 1998 . and scaled it awareness-building efforts. It is constantly adding new functionality to the site and has been innovative in its offering . In fact. CDnow's promotion strategies have attracted high levels of traffic.

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

782 million in January 200068.6 CASE STUDY: EBAY 6. transportation and other overhead costs.ebay.the closest thing in the offline world are trading forums such as classified ads. "at its core. with the number of unique daily visitors setting a record of 1. (A)' . 1st October 1999 86 .300 categories. extensive selection and geographical reach. from collectibles and antiques to electronics and toys. garage sales. The buyer and the seller work out the logistics of the transport (e.eBay website (www. People perceive the auction format to offer better prices. as cited in 'eBay .g.6. CEO of eBay. flea markets and auctions. According to Meg Whitman. Since its launch in September 1995. 6. and 450.6. the eBay community has grown to include more than 10 million registered users.com) 70 'Meg Whitman at eBay Inc. Individuals use eBay to buy and sell items in more than 4.A Harvard Business School Case Study. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.25% to 5% of the final sale price on any item sold.Company Overview' .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 .removing the need for inventory. eBay is not about auctions. This is a new market . Sellers pay a nominal fee for placing an item up for sale. Auctions represent a platform. 24 hour a day. and eBay provides added value through its convenience.2 Value Proposition eBay offers consumers an efficient. and eBay receives a transaction fee that ranges from 1.ebay. shipping. Auctions are an enabler. collectable shows. Auctions make it fun.eBay website (www. global trading place for buying and selling personal items in an entertaining auction format. and eBay never takes possession of the item being sold.Company Overview' .000 new items joining the "for sale" list every 24 hours69. There are over half a million new auctions.efficient one-to-one trading in an auction format.com) 'eBay . with emphasis being placed on its unique community feel and culture. or the payment for the item .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. payment) between themselves.

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

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

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

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

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

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

L. Its reach extends across more than 1.7. L. Canada. surpasses $9 billion in net sales and increase earnings by 54% over previous year.'s website (www. "this is about being clicks-and-mortar. announce multi-year partnership. America Online (AOL) and Gap Inc. letting customers access the Gap brands.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.com is an example of successful crossover marketing.com) .com. According to Jeanne Jackson. TABLE 6. whether in the store or online76". the growth prospects are enormous. The Gap offers a balance of modern and seasonal styles of clothing.1 Company Overview Gap opened its first store in San Francisco in 1969. up from $20 million in 199875. 6. Gap started selling items online . Inc. 1999 76 Jeanne Jackson. head of Gap Online. service and value to everyone74".Business Week. Gap's online sales tripled in 1998 alone.com and www. and today it is the 29th most valuable brand in the world73. and Gap online provides access to the full range of items at Gap. GapKids. Gap online exploits the accessibility and convenience of the Internet.an early convert to the then-revolutionary idea of clothes retailing on the Internet. from shirts to accessories and hard-to-find sizes. October 8. In late 1997. however.com/about_us.gapinc.COM 6. and BabyGap.babygap.2 Value Proposition Gap's simple. In addition. Gap.800 stores in the US. and analysts estimate that sales in 1999 amounted to $50 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as cited in Lee.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. 73 74 Interbrand (www. standard styles are well suited to online shopping. UK.$100 million. This success is largely due to their simple formula . California GapKids opens its first store BabyGap is born Gap opens its online store at www.7. Germany and Japan.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.com' .Business Week. from jeans and T-shirts to khakis and jackets.interbrand."to deliver style. 'Clicks and Mortar at Gap.see Appendix A Gap. and provides useful insight into how traditional brands can leverage their strength online.7 CASE STUDY: GAP.COM .gap. 'Clicks and Mortar at Gap. 1999 93 . Currently.com' .htm) 75 Jeanne Jackson. as cited in Lee. online sales are only available to US customers. and are still relatively small compared to Gap's $9 billion in annual sales. Gap Inc.gapkids. to provide customers with greater convenience and options. October 8.

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

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

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

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

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

Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. 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. is the way it has structured and displayed information.Yahoo! Launches Business-to-Business Marketplace .8). .com.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July . Their goal is not to list everything under the sun.Yahoo! Shopping launches personalised shopping service 6.com allowing them to offer person-person payment solutions . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. regardless of platform (i.Yahoo! forms agreements with Palm Inc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Receives $1 million in venture capital funding from Sequoia Capital $33.000 shares at $13. More recently. to allow access. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! acquires Arthas. and unveils Yahoo! Digital Introduces Bill Payment services .8. to provide web-based services to PalmTM handheld computers .Yahoo! unveils Yahoo! Finance Vision . TVs.e.600.7 YAHOO! .TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! acquires eGroups . 99 .Site goes live September .8 million IPO (2. mobiles. Palm computers).The 7Cs Framework Convenience Central to Yahoo!'s success..3 Sources of Value . Yahoo! extended its convenience through its Yahoo! Everywhere service.

OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. They have formed multiple alliances and partnerships with leading online companies such as Amazon. the end-user. 100 . ranging from daily news and weather reports to road maps and books.com and CDnow.9). Yahoo! has increased customer loyalty and retention rates. 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. Their thrust has been to provide valuable content to customers. from stocks and sports results to weather and air fares. while providing partners access to a large customer base. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and is similar to a custom tailored newspaper (Figure 6. well structured. By tailoring the information to users' preferences. and has been at the heart of Yahoo!'s growth and development. easy-touse. and more importantly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.8 . 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.

where groups of people with shared interests can communicate through chat. reinforcing the brandcustomer relationship. Yahoo! acquired GeoCities. and the nature of the navigation business. Customer Care Yahoo! responds to customer inquiries via e-mail. and many-to-many. Yahoo! has also implemented campaigns to persuade users to bookmark the site. It keeps customers on the site for longer periods. message boards. fax. In 1999. In addition. telephone and even traditional mail. 101 . and encourages them to return frequently.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9 . and plans to incorporate other features such as online chat to facilitate communications. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. Connectivity Connectivity is Yahoo!'s core product. and contributing to their reputation as a quality service provider. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. to provide its customer base with access to useful links and content. or to make it their home page. and e-mail. and is driving Yahoo!'s multiple partnerships and alliances.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. Yahoo! spends more on customer support than most companies. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. one-to-many.

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

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

first to go public. HotBot. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. and first to go mainstream by advertising its name using traditional media. and other search engines at the bottom of its search results page). Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. GoTo. 1999.6 Conclusion Yahoo! is one of the most successful brands on the Internet. p. As the first online navigational guide to the web. As a result of all these factors. if a user cannot find what it is searching for. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . In addition. that have set it apart from the pack. while attracting new customers. first to turn around an annual profit. Yahoo! has built a strong brand. its excellent customer service.com. its choice of partners. In addition.8. they have carried out extensive partnering.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. their innovative promotional and guerrilla marketing techniques. s4 104 . They have maintained that lead through the creation of a high quality end-to-end customer experience. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". 6. Yahoo! has benefited from a first-mover advantage. To maintain its lead.Advertising Age. have created a distinct brand identity that differentiates the brand and appeals to its target market. and has cultivated a reputation for excellence. Yahoo! points them to its competitors by including links to AltaVista. and its openness (for example. VPBrand Marketing of Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. from its convenient and logical structure and display of information. May 3. These relationships have provided end-users with added-value.8. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. to its simple design. while also associating Yahoo! with well known brands. Yahoo! has invested relentlessly in new services and marketing programmes. alliances and acquisitions to provide added value services to their customers. with a large customer base and high levels of customer loyalty. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards.








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



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

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

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

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

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

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

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


464 3.052 6.361 1.985 2.193 112 .048 20.602 4.502 33.643 3.568 3.895 2.761 1.143 2.329 4.interbrand.Interbrand's Ranking of the Top 60 Brands (www.423 2.076 3.101 9.804 2.225 11.310 11.231 24.932 4.319 1.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.147 9.404 4.792 3.830 14.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.155 7.510 8.596 3.422 1.603 5.634 1.648 1.197 32.021 26.184 1.654 43.313 2.909 7.275 30.550 12.132 15.894 14.681 2.694 17.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .262 1.043 8.806 11.806 2.766 14.781 17.181 21.231 12.845 56.283 4.527 3.781 33.595 17.281 11.

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





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