S U C C E S S F U L
A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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
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
6.5.com 6.6 Conclusion
76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104
6.2 Value Proposition 6.1 Company Overview 6.7.3 Sources of Value .5.6.4 Brand-Building Strategy 184.108.40.206.com 6.2 Value Proposition 6.6 Conclusion Case Study: eBay 6.2 Value Proposition 6.The 7Cs Framework 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research
Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework
.4 Brand-Building Strategy 220.127.116.11.5 Other Factors that Contribute to their Brand Leadership 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.The 7Cs Framework 18.104.22.168 Value Proposition 6.1.1 7.5 Conclusion Case Study: CDnow 6.4.6
6.4 Brand-Building Strategy 6.4
6.3 Sources of Value .2 Value Proposition 6.8
Case Study: Boo.5 Other Factors That Contribute to their Brand Leadership 6.2
106 107 110
Conclusion & Discussion of Key Findings 7.4.1 Company Overview 6.5.8.The 7Cs Framework 6.7
6.5.5 Conclusion Case Study: Yahoo! 6.Extensive Integration 6.1 Company Overview 6.8.3 Sources of Value .4.4 Brand-Building Strategy 6.The Failure of Boo.5.The 7Cs Framework 22.214.171.124.6.4 Brand-Building Strategy .com 6.3 Sources of Value .1 Company Overview 6.4.3 Sources of Value .1 Company Overview 6.5 Conclusion Case Study: Gap.
3 Figure 5.5 Figure 2.4 Figure 4.2 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 6.6 Figure 2.9 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 .4 Figure 5.com's Associates Programme Overview of BarnesandNoble.1 Figure 1.2 Figure 3.1 Figure 4.3 Figure 4.1 Figure 6.com's Website Overview of Boo.6 Figure 6.2 Figure 5.8 Figure 6.6 Figure 5.3 Figure 2.1 Figure 2.4 Figure 6.2 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
LIST OF FIGURES
Figure 1.4 Figure 2.7 Figure 5.5 Figure 5.5 Figure 6.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
.7 Figure 5.2 Figure 2.2 Figure 6.7 Figure 2.com's Website Amazon.7 Figure 6.5 Figure 4.9 Figure 6.8 Figure 5.4 Figure 4.1 Figure 3.3 Figure 3.6 Figure 4.8 Figure 3.1 Figure 5.
1 Table 6.com .Timeline and Major Milestones CDnow .Timeline and Major Milestones eBay .Timeline and Major Milestones 46 63 71 76 80 87 93 99
.6 Table 6.com .1 Table 6.Timeline and Major Milestones BarnesandNoble.2 Table 6.Timeline and Major Milestones Gap.com .Timeline and Major Milestones Boo.com .3 Table 6.5 Table 6.4 Table 6.7 The Emerging Brand-Building Environment Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
LIST OF TABLES
Table 5.Timeline and Major Milestones Yahoo! .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
while providing new tools for promotion.5 2. there has been an explosion in the online world .9 2. Amazon.1 3.mckinseyquarterly. Internet companies such as Yahoo!. As such. McKinsey Analysis (www. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.7
DATE OF INCEPTION
Onsale. and business models revamped.com
MARCH 1997 JULY 1997
Since merged with Egghead. the Internet is changing fundamentals about customers.com
Source: Securities and Exchange Commission Filings.com noble. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. America Online (AOL) and eBay have been able to build powerful brands in a few years.9 3. aggressive Internet start-ups have emerged. products and services reconfigured. as they face each other through an electronic connection.0 1. and is triggering the need for new brand-building strategies and tools. Figure 1.5 million book titles).com's range of 4. As such. interaction and relationship building.com)
.2 3. whereas it has taken decades for traditional companies to achieve the client base. Supply chains are being rethought. relationships.com
JULY 1994 JULY 1994
Barnesand Priceline. In the midst of this.1 . customer affiliation and level of sales. that these Internet start-ups have achieved.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.YEARS TO REACH $100 MILLION IN SALES
Over the past few years. It is empowering customers with more options and more information to make informed decisions.com. service and brands. This is creating new challenges and opportunities.com1 Amazon. creating strong brands that are putting established brands at risk.g. The Internet also represents a fundamental shift in how buyers and sellers interact. FIGURE 1.an explosion that is also a harbinger of how business will operate in the future.
rather than drifting from site to site3. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. May 5.. However.Forget Surfers. & Overdorf. 'Meeting the Challenge of Disruptive Change'. attracting traffic or 'eyeballs'. Harvard Business Review. M. P. Volume 78 Issue 2. companies lack a coherent framework and concrete methods to build an online brand. that extends the brand-customer relationship beyond a single transaction. building awareness. T. 'How to Acquire Customers on the Web'. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. 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.. p..66
. 1997. 66-76 Hoffman. and the high cost of acquiring online customers2.. Therefore..
1 2 3
Christensen. pp.April 2000. as the need to build brand loyalty online is reaching a peak. C.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
As a result. 'Internet Communities . found that 57% of Internet users go to the same sites over and over again. Browder. S. & Elstrom. who are essentially intangible. R. brands are even more critical as customers have little to go on other than a recognised brand. and Novak. D. Harvard Business Review.. March . As such. May-June 2000 Hof. turning browsers into buyers. A New Class of Netizen is Settling Right In' Business Week. For pure online players. P. A Business Week / Harris poll. L. In light of this. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. Given the tremendous clutter in today's e-commerce marketplace.
1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. • To explore how the Internet is changing the brand-building environment. supported by secondary data related to aspects of online business from accredited and published sources.RESEARCH METHODOLOGY
ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION
. and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. tools and strategies to build brands on the Internet. A review and analysis of leading academic thinking will be used to explore these issues.2
The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. This is based on the outcome of the primary research (in-depth case studies).2 . • To identify the key factors and characteristics that contribute to the development of successful Internet brands.3
The methodology used in this dissertation is illustrated in Figure 1. FIGURE 1.2.
Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. Hypothesis (Framework): This is based on the literature review and secondary data. certain key factors are highlighted in their relevance to the dissertation. and factors that contribute to a brand's success. The absence of academic literature on Internet branding posed a major obstacle. however. strategy and economics. this also highlights the true value of the dissertation. While there is no attempt. to provide an in-depth analysis of the psychological and social dimensions of brands. Conclusion: Discusses the key findings and areas for further research. CDnow. Consequently.com). the literature review draws on leading academic thinking in more established areas such as brand management. marketing.com. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble.com). eBay and Yahoo!).com and Gap. relationship management. These are further refined using the insight obtained through the case studies. there is more work in popular rather than academic literature.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Academic Research: Given that the Internet is such a new area. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. The combination of cases provides a useful and practical insight into brand-building issues and problems. and is used to provide insight into some of the factors that contribute to the development of successful brands. as well as a recent Internet failure (Boo.
. nor desire. 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
1. summarises the key findings. Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. This chapter sets the context within which online brands must be built. Chapter 2. The limitations of the Internet in terms of brand-building are also discussed. The final chapter. Chapter 6 examines the brand-building efforts of seven companies. Chapter 7. provides an analysis of leading academic literature in relation to branding. and outlines the opportunities for further research. 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. as well as the interactive approach to attracting customers and building loyalty. by outlining the impact of the Internet on the business and competitive environment. The nature of brands. their purpose and value are discussed. 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.
. and introduces the core concepts that form the backbone of the dissertation.4
The next chapter.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
THE NATURE OF BRANDS
A. R.1. the brand's emotional benefits and its self-expressive benefits . and highlights the importance of brand management. these layers are
Brands are made up of many layers and dimensions. FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
2. creates influence and generates value4" This definition truly captures the essence of a brand. 1996. whether online or offline.see Figure 2. (London: Macmillan Press Ltd. 2000. This value stems from the products and services that companies create and bring to the market. symbolised in a trademark. E. and to companies. which. These concepts are central to brands and brand-building. CEO of Interbrand Newell and Sorrell . vii
.a brand is: "a mixture of tangible and intangible attributes. The chapter proceeds to describe the influence of brands on the buying process. p.2 WHAT IS A BRAND?
According to Rita Clifton.a leading specialist brand consultancy firm . Branding is about creating 'value'. and for the company. both to customers. & Maughan.1
INTRODUCTION In this chapter. p. The concept of brand equity is outlined. explaining the value of brands. D.
unravelled to reveal the nature of brands and their reason for existence.. 2. and they form the backbone of this dissertation. 'The Future of Brands'.A BRAND IS MORE THAN A PRODUCT OR SERVICE
ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY
COUNTRY OF ORIGIN
PRODUCT OR SERVICE
SCOPE ATTRIBUTES QUALITY USES
Source: Adapted from Aaker. 'Building Strong Brands'. both for customers. if properly managed.1 .). but extends further to encompass added values derived from factors such as the brand-customer relationship. 74
Clifton. (New York: Free Press). and the importance of customer satisfaction and brand loyalty.
Figure 2. brands are their most valuable asset.86
. p. They start life as ideas. which grows out of the cumulative memory and the experiences customers have of products or services.the core product or service. January-February. a 'reputation'. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. Harvard Business Review.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Other common descriptions of a brand include . benefits. the augmented brand and the potential brand . FIGURE 2. making their way into planning and strategy documents. yet ultimately reside as consumer perceptions.3 THE LAYERS OF A BRAND
Brands are made up of four layers . T. For some companies. 2. The space a brand occupies inside a customer's head can create a 'mental' patent.of anything'.2. and services to customers.. a 'set of expectations'.2 . 'Marketing success through differentiation .a 'relationship'. 1980. It is a company's promise to consistently deliver a specific set of features.LAYERS OF A BRAND
Name Service Design
PRODUCT OR SERVICE
Quality Credit & Terms
Delivery & Installation
Source: Adapted from Levitt. Brands are richly endowed entities. the basic brand. As such. and a 'promise'.
such as in retailing.
. Planning.com are examples. 2. They are the historical core of branding because they are the most prevalent. These products and services add value and make the offering much more difficult for competitors to emulate. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible.. Service Brands (intangible) are much less numerous than their product counter parts. sign. Coca-Cola.g. or a combination of them. most products and services cannot survive on functionality alone as this is usually matched in time. The Basic Brand The basic brand consists of the "name. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. The most common barrier to competition is building a brand. this is the case with all Internet companies. Implementation. In fact. Kodak. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising.g. P. quick delivery) that enhance the customer’s total purchasing and use experience. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Product / Service At the most basic level. customers buy products to meet certain functional needs. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. preferring things they can see and touch. Certain service brands.Analysis. with supplementary products and services (e. 8th Ed. term. Essentially. & Control'. Southwest Airlines and Amazon. (Europe: Prentice Hall) 1996. not the products it sells .The Gap stores. Levi's). or design.
Kotler. actually sell products. even when the alternatives are substantially cheaper or more readily available (e. information. symbol. and because they most readily come to mind when consumers are asked to recall brands. this should support the offering's performance and differentiate the brand from those of competitors. 'Marketing Management . but the brand itself is the store.4 PRODUCT AND SERVICE BRANDS
Product brands are the original brand carriers.
and selective retention.attitudes of others and unexpected situational factors (Figure 2. selective distortion. either through heightened attention or through an active information search. This can be triggered by internal or external stimuli (advertisements). Planning. Once aroused. two factors can intervene between the purchase intention and the purchase decision . p. it is important to clarify customers' underlying buying behaviour and the buying process.194
The process starts when the buyer recognises a need.3). Consumers develop a set of brand beliefs about the attributes of competing brands. Consumers differ as to which product / service attributes they see as important. 'Marketing Management . Therefore.Analysis..3 . the consumer learns about competing brands. Implementation.
BRANDING & THE BUYING PROCESS
In order to understand the context and the role of brands. In the evaluation stage.. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.
FIGURE 2. and Control'.FIVE-STAGE MODEL OF THE BUYING PROCESS
NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR
Source: Kotler. Through gathering information. These beliefs depend on their previous experiences with the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
2. (Europe: Prentice-Hall) 8th Ed.4). and pay the most attention to the brands that will deliver the sought benefits. P. it is critical to understand what attributes consumers value. and the effect of selective perception. a consumer will be inclined to search for more information. However. The buying process consists of five stages (Figure 2. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). 1996.
word-of-mouth. they will be dissatisfied and look for alternative brands in the future. After a consumer has actually purchased the product or service. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. If perceived performance and quality exceed their expectations then they are satisfied. and a preference for recognised brands they can trust. and especially important when dealing with purchases made through the Internet. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations.the customer will be highly satisfied. Customers' expectations are particularly important when dealing with services.
. or avoid a purchase decision is heavily influenced by perceived risk. somewhat satisfied. advertising and communication. even delighted. as these services are intangible and therefore. or dissatisfied with the purchase decision. they will evaluate their level of satisfaction . If performance falls below their expectations. customers make decisions purely on the basis of their expectations. their negative attitude may influence the consumer's purchase intent or vice versa. These expectations are formed through a combination of past experiences. Customer satisfaction and loyalty are essential to creating successful brands. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. Expensive purchases involve some risk taking. A consumer's decision to modify. A consumer tries to deal with this by gathering information from friends. postpone. locking out potential competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION
ATTITUDES OF OTHERS
EVALUATION OF ALTERNATIVES
PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS
If other people have had a negative experience with the brand.
p. Spring 1999
. FIGURE 2. D..6
THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY
According to Thomas Jones and Earl Sasser (1995)6.Figure 2.
Jones. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Southwest Airlines and Xerox7. and believe that it will always act in their best interest.those who actively attack the brand telling others not to buy from the company. T. Federal Express. 'Why Satisfied Customers Defect' . Nov-Dec 1995. At the opposite end of the satisfaction spectrum are "apostles" . T. C.customers who are satisfied and loyal and talk favourably about the brand .5. 'Growing the Trust Relationship'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
2. Customers that are passionately or emotionally loyal are those that have built trust in a company. 91
Loyalty is derived when customers are continuously satisfied over time. & Sasser. W. Trust is critical for a brand's success.. E. E. and Johnson. M. & Sasser..5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT
NON COMPETITIVE ZONE
HIGHLY COMPETITIVE ZONE
Regulated Proprietary technology • Few substitutes • High switching costs
3 SATISFACTION 4
Commodity Consumer indifference • Many substitutes • Low switching costs
1 Completely Dissatisfied
5 Completely Satisfied
Source: Jones. The customers at the bottom end of the scale are "terrorists" . Marketing Management.Harvard Business Review. Saturn.. Johnson & Johnson. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. This satisfaction encompasses the whole experience and not just a company's products or services.Harvard Business Review. Hewlett-Packard. Nov-Dec 1995 Hart. 'Why Satisfied Customers Defect' ..
& Rogers. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. There is also clear evidence of this on the Internet. 'Building Stronger Brands through Online Communities' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Loyal customers are assets. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 'The One to One Future'. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Harley-Davidson motorcycle clubs). emotional loyalty is born out of a consumer's personal relationship with a brand.. 1993 McWilliam.
Peppers. Emotional loyalty can be also created through the formation of a strong user community around the brand..7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY
Emotional loyalty can be brought about in two main ways. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). consistent orders Satisfied customers are the best advertisement . 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. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. Spring 2000
. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. M. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. D.com. In this way. G.g. Firstly.Sloan Management Review.they provide good word-of-mouth and are the best salespeople for the product / service 2.
. pp. almost irreplaceable bond as well as potentially to the negative feelings of betrayal.7). Journal of Consumer Research. However. 2. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 343-373.8 THE CONCEPT OF BRAND EQUITY
Brands vary in the amount of power and value they have in the marketplace (Figure 2.7 . and understanding the needs and buying processes of the target market is essential.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
• Accomplishment of
• Resolution of Current
Source: Fournier. a 'powerbrand' tends to have a high degree of brand loyalty.6 . Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). S. which goes well beyond the satisfaction of a specific need.BRAND PROGRESSION
UNKNOWN BRAND BRAND AWARENESS BRAND
At one extreme. whereby customers would be unwilling to substitute it with competitors' offers.. March 1998. A stronger brand enjoys a high degree of brand preference over competing brands. there are brands that customers perceive as acceptable and would not resist buying. Beyond this.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Emotional loyalty leads to a deeper.
Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. FIGURE 2. there are brands that are unknown by most buyers. FIGURE 2.
The major brand assets are brand loyalty. name awareness.Create Awareness . According to David Aaker (1991). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. and other assets such as patents. strong brand associations. and relationships with distributors and strategic partners.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
A strong brand is said to have high brand equity. trademarks.. D. The benefits of each are outlined in Figure 2. FIGURE 2.8.. which is the value of the brand over and above its commodity value. 1991
. D. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". (New York: Free Press).BRAND EQUITY
• • •
Reduced Marketing Costs Trade Leverage Attracting New Customers . perceived quality. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. (New York: Free Press).Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered
• • •
• • • • • • • • • •
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
Source: Aaker.8 .
to its communication • Ethical .8.
Kapferer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
2.To have confirmation of your self-image or the image that you present to others • Continuity . Premium pricing increases revenue. production and marketing. G. 1986 13 Golder..To be clearly seen. the best performer for a particular purpose • Characterisation . J.. in the following ways: • Brands.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .1
THE VALUE OF BRANDS TO CUSTOMERS
According to Jean-Noel Kapferer (1992)11. Journal of Marketing Research. & Downham. N. 'Strategic Brand Management'. brands perform several functions that add value and customer benefits: • Identification . • Brand Leverage . P.2
THE VALUE OF BRANDS TO COMPANIES
Brands create value for companies. and the number two twice the share of the number three12.
.. & Tellis. 1992 Worcester. market share and profits .To be sure of buying the best product in the category. R. to its logo. 3rd Ed. (London: McGraw Hill).8. J.Satisfaction linked to the attractiveness of the brand. May 1993. The brand leader is the most profitable and all beyond number two are unprofitable13.Satisfaction linked to the responsible behaviour of the brand in its relationship with society
2. 'Consumer Market Research Handbook'.Typically a brand leader obtains twice the market share of the number two brand.To save time and energy through identical repurchasing and loyalty Guarantee . to quickly identify sought after products • • Practicality .To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . pp.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development... to make sense of the offer. (New York: Free Press). 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. 158-170.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
The Value of Niche Brands .Brand leaders usually have the financial strength to fend off competitors. In addition.
Avenues for Growth . brand leaders can exploit their superiority in the market (e. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Johnson & Johnson with Tylenol).The product life cycle applies to products. maintain good price levels and generate strong cash flows. The brand can also be used to penetrate new markets.g. Coca-Cola “the real thing”). When a company creates this type of customer preference and loyalty. companies such as Interbrand (see Appendix A).
Motivating Stakeholders . Potential competitors are usually reluctant to enter the market if existing brands satisfy customers.Companies with strong brands attract good recruits. but there remains an ongoing controversy about how accurate and meaningful these measures are.
Brand Loyalty and Beliefs . it can build a strong market share. fashion or prevailing market conditions. The next chapter describes the process of how brands are built.Strong brands are more attractive to investors.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. in turn. 2.
The Brand Barrier . Companies can maintain a brand while modifying the underlying product to account for new technology. They also tend to elicit community and government support. drives up share price and provides the basis for future growth. not brands.Dominating a niche market is usually more profitable than being fifth in a large market. the tools that are used.
In trying to estimate the monetary value of brands. and the characteristics of successful brands.g. and Young & Rubicam have created complex formulas.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
The major characteristics of successful brands are also reviewed. and direct marketing. confidence and brand equity are built. If the offering is developed properly. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. To entice trial and repeat purchase requires triggering mechanisms. public relations. selling. it should provide a satisfactory experience and lead to a willingness to buy again. the next step is to get customers to try the brand. This is illustrated in Figure 3.1.BRAND BUILDING MECHANISM
PRESENTATIONS DISPLAY ADVERTISING
PRODUCT PRODUCT / OR SERVICE SERVICE
. which are created through advertising. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.1
Building a strong brand is a complex task. This chapter spells out the traditional brandbuilding process. highlighting important factors that contribute to the success of each step along the way.2 OVERVIEW OF THE BRAND-BUILDING PROCESS
The brand building process starts with the development of a strong value proposition.1 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3. brand awareness. Once this has been established. and keep it turning. 3. FIGURE 3. promotion.
Similarly. and added value (AV). It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. it will never attract a strong client base. unless differentiation and awareness can be developed. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.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.
. a compelling value proposition is the combination of an effective product or service (P). As such. FIGURE 3.a strong offer that a potential customer would find compelling and interesting.3
THE VALUE PROPOSITION
Brand-building starts with a clearly defined value proposition . Without a good product or service. In this way. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. it is impossible to build a successful brand.2).
BRAND = P
These three characteristics are multiplicative rather than additive .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3. In order to do this.2 . a distinctive brand identity (I).each is essential. the brand can elicit feelings of confidence that it is of higher quality than competitors'. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. a company must develop a strong understanding of who their potential customers are.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3.. the pace of technical change. cosmetics and high-tech products. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. values or wealth. • Belief in Efficacy . which are additional to those based upon real performance. Hewlett-Packard. 169 Jones. People use brands to express their lifestyles. Kellogg's) attached to a new product will transfer positive associations. which they perceive as meeting their needs. 1986
. if customers have faith that a brand will work. Lexington Books). 2nd Ed. these needs are as likely to be about satisfying self-actualisation or esteem needs.In many situations a strong company name (e.if a brand provides good service over time.. In today's affluent society. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. layout and appearance of the brand can clearly affect preference by offering cues to quality. faith in brand generates satisfaction in use. the number of competing alternatives and the large variety of advertising and selling messages. or to gain a sense of belonging.in many cases. MA. Gillette.1
Added Value Most buying decisions are
Added value is at the heart of building successful brands.g. Sony. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. Brand values derive from five major sources15: • Experience of Use . • User Associations . 'What's in a Name? Advertising and the Concept of Brands' (Lexington. 1998. interests. • Manufacturers' Name and Reputation . mean that buyers look for short cuts. P. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. as they are to be about satisfying basic physical and economic needs14.3. 'Marketing Management and Strategy'. J.
influenced by brand values. • Brand Appearance . The large number of decisions. P.brands frequently acquire an image from the type of people who are seen as using them. it is more likely to work effectively for them. (Europe: Prentice-Hall). industry endorsements and newspaper editorials. Customers choose brands. it acquires added values of familiarity and proven reliability. pp. For pharmaceuticals. Coca-Cola.
Doyle. providing confidence and incentive to trial.the design.
. 'Strategic Brand Management'. press releases. Brand themes are the most flexible element and will tend to change with fashion. which remains fixed over time. which depends on how the target market perceives the brand. and the relationship expressed (e. features. etc. J.Figure 3. colour scheme.
Kapferer. packaging.the way the brand communicates through its advertising. visual appearance.the fundamental or genetic code of the brand. A company should seek to differentiate its brand through developing a distinctive identity.g.. Themes include the physical appearance (logo. its reflection (e. • The Brand Theme . type of spokesperson / customer image used to advertise the brand). (New York: The Free Press). Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . glamour. and advertising. prestige. This may be different from the brand image.g.3: • The Brand Core .2
Distinctive Brand Identity
A brand identity is the message sent out by the brand through its name.3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3. and visual appearance). however the brand style and core tend to be less flexible. style or cultural differences from one country to another. its personality and its image or self-projection . • The Brand Style . friendly).articulates the brand core in terms of the culture it conveys.
and through line and brand extensions.. Secondly.how far the brand can be meaningfully stretched to other products and market segments.
.3 . below-the-line activities. understanding the brand's core and style helps set the perimeters of brand extensions . it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.g.KAPFERER'S BRAND IDENTITY PRISM
PICTURE OF SENDER
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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 3. (New York: Free Press). J. It also facilitates consistency in the message being transmitted through presentation (e. structure and ease of use). its strengths and opportunities. website design. advertising. Finally. 'Strategic Brand Management'. 1992
The brand prism enables management to understand the brand.
pp. E. 'Diffusion of Innovations'. The value proposition must then be articulated in terms of the 'marketing mix' . 1962. management style. • Interest . it should lead to satisfaction and re-purchase. • Evaluation . they must learn about it. 1962. deliver and reinforce this value proposition (see Appendix B . culture and staff needed to support. If the offering is developed properly.. colleagues and opinion leaders become important influences at this stage. E. The value proposition must be communicated to entice customers to try the product / service. • Trial .4
DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION
Once the value proposition is clearly defined. and the product / service's perceived performance.INNOVATION-ADOPTION MODEL
Source: Rogers. (New York: Free Press).79-86
.Product and service features.4. skills. (New York: Free Press). Before potential customers can buy a product / service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3.Customers consider whether the product / service will meet their particular needs.often referred to as the '4Ps' . strategy (partnerships and alliances).Customers need to be stimulated to seek information about the brand's uses.Figure 3. Advertising and PR are common tools for achieving awareness. Personal sources such as word-of-mouth from friends. This learning is called the adoption process17 . • Adoption . FIGURE 3.4 . features and advantages. systems.
Rogers. Price. Promotion and Place (distribution strategy). and its products / services. pp.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.79-86
The Innovation-Adoption Model consists of: • Awareness .The customer is satisfied and decides to make regular use of the product / service. the company must ensure that it develops the appropriate structure.. 'Diffusion of Innovations'.The McKinsey 7-S Framework).The company has to create awareness of the brand.
. this process enables an exchange of information. direct marketing. but enhanced customer interaction through relationship building. Social Benefits . companies have used the tools of the promotions mix .
Berry. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits .for example. (New York: Free Press). the company may supply customers with special equipment or tools (e. personal selling and public relations / publicity .. when each trusts the other to deal fairly and reliably. Advertising and public relations can be effective in generating awareness and interest. Through building relationships with customers. software) to help customers interact with the company. Customer service is an important element of this relationship. Over time. while strengthening the position and value of the brand. companies can increase buyers' satisfaction. 3. In this way. allowing companies to communicate regularly with their customers and customise their interaction. encouraging evaluation and trial. 'Marketing Services: Competing Through Quality'. pp. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. 1991. companies can increase the value of each customer. making them less likely to switch to a competitor.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Traditionally. Internet linkages.g. multi-transaction relationship. providing insight into customers' needs and wants. • Structural Ties . L.to move customers through the adoption process. & Parasuraman.advertising. This information is a key competitive advantage. & loyalty / discount cards.such as airline frequent flyer programmes. This is often referred to as Customer Relationship Management (CRM).5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for
Building relationships with customers extends beyond a single transaction. sales promotion. A. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. This focuses on establishing a longterm.
(Europe: Prentice-Hall).A successful brand requires an effective selling. companies must actively communicate it to the target audience to entice trial. its function and psychological values. 2nd Ed. then its position will be undermined.. As a result. or if the brand is surpassed by superior offers from competitors. As such. It is easier to capture a share of the consumer's mind and build a customer base. • Strong Communications Programme . interaction and relationship building. If the quality of the experience deteriorates.Traditionally. • Unique Positioning Concept .176-177
. 3.Satisfactory experience is the major determinant of brand values. 'Marketing Management & Strategy'.. pp. it must have a unique positioning concept . comprehension and intention to buy. while providing new tools for promotion. which will add value and distinguish it from competition. Without building awareness. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. including: • A Quality Product / Service Experience . It often takes years to build up the added values. companies have the opportunity to start building relationships with their customers. As customers build trust in the brand through satisfaction of use and experience. which will communicate the brand's existence. strengthening the brand further. but it makes the task easier. and making it more difficult for competitors to emulate.
Doyle. value proposition or augmented brand. P. • Time and Consistency .6
CHARACTERISTICS OF SUCCESSFUL BRANDS
Several factors contributing to the success of brands have been identified19. advertising or promotional campaign.a segmentation scheme. 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
3.If the brand is not the innovator.Being first into the market does not necessarily bring success. trigger trial and reinforce commitment to it. the brand is meaningless. and establish a trusting relationship. The Internet provides the opportunity for companies to create compelling value propositions never before possible. Once the framework has been established and the organisation configured to provide this proposition. brands were not built quickly. it has a profound impact on the traditional brand-building process. • First-Mover Advantage .7 CONCLUSION
Building strong brands stems from the creation of a compelling value proposition. when the brand has no competitors to rival its position.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4. This chapter provides an overview of the Internet and its defining characteristics.
. which contain hypertext and pictures. and provide the opportunity for the creation of Interactivity
The world wide web (www) is a large network of documents. it offers a number of alternative channels that enable businesses and people to communicate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4. and provides the opportunity for dynamic interaction.
E-MAIL Is the part of the Internet that most users use at present. but in practice not in real time.1
The Internet is transforming the business environment. news groups and mailing lists. it is a common technology platform that allows computing devices to communicate with each other.THE THREE LEVELS OF THE INTERNET
NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. Hypertext allows information to be organised in a user-friendly way that is easily accessible. creating new challenges and opportunities.1. In doing so.1 . and a critical source of added value. In essence. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment.Figure 4. FIGURE 4. The system works as an electronic mailing system and can be used as a real time medium
WWW AND CHAT ROOMS Are used by more and more people. and the 'world wide web' (www) . Information is becoming a major part of the products and services that people buy. The three core channels include e-mail (the most common).2 OVERVIEW OF THE INTERNET
The Internet is a world-wide network of networks.
the Internet lets individuals and companies build interactive relationships with customers and suppliers. • It Allows for Two-way Communication and Interactivity . These characteristics combine to create a very powerful medium. 4. 7 days a week. ubiquitous links to anyone. when the United States Defence Department developed the 'ARPAnet'.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).3 THE GROWTH OF THE INTERNET
The origins of the Internet date back to 1969.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . and deliver new products and services at low cost. anywhere.24 hours a day. regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale). The Internet can also be accessed at any time .2. These defining characteristics have fuelled its explosive growth.this radically alters the process of interaction between communicating parties. These qualities eliminate the barriers of time and space that exist in the physical world.2 (Note:
.The Internet is a global network and can be reached from everywhere. By allowing for direct. which was intended to link military networks together.not previously available with mass medium forms of communication. The context of the Internet and certain key developments are highlighted in the Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4. • It Overcomes the Barriers of Time and Space . allowing both parties to identify each other and build one-to-one relationships .
3 .a PricewaterhouseCoopers Report.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS
1995: 100. 1996 (www.Figure 4. Cisco and Amazon begin to aggressively use Internet for commercial transactions
Mosaic browser invented at University of Illinois is released to public
WWW HTML Language invented
Netscape releases Navigator browser
National Science Foundation (NSF) lifts restrictions on commercial use of Internet
The growth of personal computing technology in the 1980s.com)
.000.000 1969: 10.3.000 1.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS
www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45
Source: The Economist.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98
Source: Network Wizards. 2000
Internet / ARPAnet was created Dell.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 4.2 .
FIGURE 4.000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . as cited in 'E-Business Technology Forecast' .000 10.000 100.000 1.economist.000. 1998.
4 .g.. 'Electronic Commerce (finally) Comes of Age'.Cheap bandwidth .
The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.internet. there will be an estimated 375 million Internet users world-wide. Easier access to these networks provided by point-and-click web browsers.). As shown in Figure 4.g.4. making it more cost effective for software developers and other technology providers to create interoperable products. payment. and gateway services).Higher PC penetration among consumers and companies .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET
. Multimedia development tools that can be used to create rich content.Content Aggregators .Consumer Aggregators
TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY
COMPUTING SERVICES BECOME MORE WIDESPREAD
. the momentum created by all these forces has created a virtuous cycle of growth. increasing to 500 million users by 200220.. The emergence of open standards in development tools and at the network protocol level (e. web design. TCP/IP).com)
. Reed.Momentum toward open standards
COMMUNITIES OF INTEREST PROLIFERATE
. offering inexpensive bandwidth. etc.Low-cost networking alternatives .CyberAtlas Internet Statistics and Market Research.2
'World Online Populations' . 2000 (http://cyberatlas. The growth in support services (e. 1996.High-powered servers .E-Marketplaces .Cheap microprocessors & RAM . No. The McKinsey Quarterly. L. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
The number of Internet users is constantly increasing and by end-2000. FIGURE 4.New generation of PDAs and Internet appliances
Web site designers Outsourced networks Web hosts Ancillary services
Source: Harrington. The development of critical processes (ordering. hosting.Attractive infrastructure and middleware software . G. billing.
5 . entertainment) and purchasing (37%) . to interacting (e. chat rooms. These activities highlight the adoption of the Internet as an interactive.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
A recent study by the Stanford Institute for the Quantitative Study of Society (2000).from communicating (90% use e-mail) and sourcing information.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100%
Source: Stanford Institute for the Quantitative Study of Society.5.eiu. as cited in the Economist Intelligence Unit (EIU).com)
. reveals the wide range of areas where people are embracing the Internet . communication and information tool. 2000 (www. April 13.g.
FIGURE 4.Figure 4.
no order book.6 . Instead there is a website. However. FIGURE 4. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact.4
THE INTERNET AND E-COMMERCE
E-commerce describes the use of the Internet as a medium and as a market for commerce. content. as
Source: Gartner Group. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. There is no need to travel to a physical location. and no cash register. fax. telephone) is that the Internet goes beyond just enabling transactions. April 2000
.6 outlines the growth in the value of online
Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions.e. projected by Gartner Group.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003)
5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998
Figure 4. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. they all project the value e-commerce transactions to grow at unprecedented rates. web browsers. The buyer and seller 'face' each other through an electronic connection. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4. and people. The main difference between the Internet and other electronic media (i. software.
and transforming traditional distribution channels. partners and other corporate constituencies.5
THE IMPACT OF THE INTERNET ON BUSINESS
The Internet has had a profound impact on the way business is being conducted . which are often disruptive to traditional business models21. 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. C.April 2000. some of which look set to become the superbrands of the future (e. This is threatening to undermine many old established brands. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. Although the particular impact will differ between industries.g. The Internet also facilitates the development and co-ordination of global activities (e. By allowing customers to talk knowledgeably and directly to suppliers. 'Meeting the Challenge of Disruptive Change'. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience.g. the Internet provides the opportunity for Improved business processes and 'virtual companies to integrate with their suppliers and customers in real-time and create previously unachievable synergies at a very low cost. 66-76
. Additionally. Yahoo!). March . At the same time. operation (e.how companies operate. M. pp. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. & Overdorf. suppliers.g. For example. through the use of extranets). Harvard Business Review.. the Internet is sidelining the role of many traditional intermediaries..and revolutionary new business models are emerging. Volume 78 Issue 2. represents a level of efficiency and integration previously unattainable. the explosion of information is placing a premium on skilled information management. how they compete and how they serve their customers .
integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of
Christensen. Dell Computers).BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4. New brands and business models are emerging to seize this opportunity. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day.
It also provides easy access to competitors' offers and allows customers to consider every available alternative. combined with the emergence of electronic intermediaries. commit and deploy resources. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. these new highly informed customers are "empowered fruit flies". little loyalty. and reorganise as appropriate. 'Empowered Fruit Flies' . products and services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
The Balance of Power is Shifting to the Customer The Internet empowers customers. respond to competitive and market dynamics.forrester. as they are just one 'click' away. Now companies need to move at warp-speed. constantly innovate. fierce competition. ensuring the delivery of a satisfying customer experience. This. online stores.internally and externally . Internet technology can be used to exploit collective learning and knowledge.
. it also removes the geographical protection from competitors. quick evolution and all the power. and the 24 x 7 environment. improving processes.in developing products. CEO of Forrester Research22. or catalogues.they can choose between traditional 'bricks-and-mortar' companies. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. switching costs are much lower. the globalisation of business. This is forcing companies to become flexible and responsive to customer needs.. their organisations must harness knowledge . They can move from one supplier to another searching for the best prices. Customers have more options than ever before . allowing employees to share knowledge. has resulted in a fierce competitive environment. the diminishing barriers-to-entry and the lower switching costs. with no time. empowered customers. According to George Colony. collaborate more effectively and ultimately embed organisational intelligence within processes. as they have access to more information leading to more informed decision-making. getting closer to customers and ultimately staying ahead of competitors. The Pace of Business is Accelerating With the fast pace of technological change. 2000 (www. to capture new opportunities. the typical clock-speed at which companies need to operate has accelerated. As a result. the development of a knowledge economy.Forrester Research. G. highest convenience and quickest satisfaction.
. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible.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. In this way. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. variety. and multiple strategic alliances and partnerships.(www.teslagroup.
'The Future of E-Business' . It allows companies to improve customer service. extensive outsourcing. supply chain cooperation. linking companies with suppliers and customers up and down a pre-defined value chain. 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. Examples of emerging information age business structures include flat versus hierarchical. which highlights the typical structure and dynamics of an online company. alliances and partnerships have taken on a new level of strategic importance.A Research Report by TeslaGroup. and most traditional partnerships were vertical. thus creating a 'value net23'. achieve global reach and realise a new source of cost advantage. advice and convenience. information. 1999 . The extent of this partnering is illustrated in Figure 4. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. The opportunity of linking the complete supply chain 'virtually'. and the need for speed and flexibility have accelerated the unbundling of business systems. As such. how they want and with the levels of customer service they demand. However. linking companies with competitors and players from entirely different industries and business sectors. it provides the opportunity to reach customers where they want. and partnering up with the best for the remaining activities.7. Increasingly. companies have looked upon alliances only as a means of filling gaps. Traditionally. most Internet and e-commerce partnerships extend beyond this. companies can provide customers with a strong value proposition by offering them the best in quality. when they want. combined with intense competitive pressures.
dot.. S. competition is intensifying. Partnering with portals and affiliate web sites is important in driving traffic to a web site. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. The Internet is transforming every business to some degree. As such.they are business issues.7 . New opportunities for efficiency and co-ordination are emerging. many online companies are blending together the products and services of a wide range of companies. & Stirton. G. 'Organising for e-Commerce' . it is transforming the competitive landscape and brand-building environment. April 2000
In an attempt to provide a rich customer experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 4. while triggering the emergence of new brandbuilding strategies. while making the offering hard to duplicate off-line.THE STRUCTURE OF AN ONLINE COMPANY
FULFILMENT AND DISTRIBUTION PARTNERS
PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES
. This provides customers with added value. 4. the pace of business is accelerating and power is shifting to the customer. D.com
• Print Media • Broadcast • Online
JOINT VENTURE PARTNERSHIP
CUSTOMER OUTSOURCING / TECH PARTNERS OFFLINE PRESENCE
BACK OFFICE FRONT OFFICE
• • • •
Customer Services Creative Site Development Hosting
Source: Adapted from Freeland.a Boston Consulting Group (BCG) Analysis. tools and opportunities.6 CONCLUSION
The Internet and its strategic impact are not technological issues . This is the substance of the next chapter.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING BRANDS ON THE INTERNET
the intangible nature of the Internet. People only tend to transact with sites they know and trust . and sites that understand the user's needs and preferences24. whereby the company can establish a dialogue and
Marathe. May 1999 (www. and projects it onto a third party intermediary (the media). etc. the Internet makes search and comparison much easier. on the other hand. brands were a substitute for information a way for consumers to simplify the time-consuming process of search and comparison before deciding what to buy. and the fact that customers are buying goods that. people have concerns about sharing personal information. they have never handled or seen (except on-screen). J.sites that provide a wealth of information and make comparison shopping easy. where the user feels a part of.com)
. in most cases.. the logic of the Internet cuts another way. New strategies and tools for building brands on the Internet are identified. including the interactive approach to attracting customers and building loyalty. many unnamed customers develop a 'relationship' with the brand. as well as on topics of interest related to the brand and product characteristics25. Generally.2 THE NEW DYNAMICS OF BRANDS
Traditionally.durlacher. However. 5. Transactions on the Internet require customers to provide detailed personal information . On the other hand. 'Internet Portals' .Durlacher Research. has placed greater importance on trust and security. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. The Internet. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. This threatens to undermine the value of brands.names.1
The Internet is changing the brand environment or 'brandscape'. The limitations of brand-building on the Internet are also discussed. Customers derive added value through the provision of information on the products or services they buy. credit card numbers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. offers interactivity. addresses. brands have been developed in an environment whereby a company creates a brand. In addition. Traditionally. in addition to providing added value. In response.
January 28. Duke University. understand and relate to customers. J. This creates the opportunity for companies to build stronger relationships than previously attainable. a company can listen. January-February. relationship building characteristics of the Internet.from the promises made in the value proposition. this also poses a challenge as these relationships may take on a life and character of their own. . to its delivery to the customer. 'stimulus-response' approach Standardised • • • • • • • • •
Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.Harvard Business Review.1. 'Is Your Company Ready for One-to-One Marketing?' ..duke.. 'Adding Product Value Through Information'. D. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH
• • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. pp.Fuqua School of Business. TABLE 5. However. B. service approach Customised
The Internet gives companies control over all their interactions with customers and therefore. 1997 (www. learn. In maximising the customer experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
interact with individual consumers on a one-to-one basis26.. Prof. M. 1999. companies have to find innovative ways of leveraging the information and
McCann. In doing so. 151-160
.edu) 26 Peppers. rather than simply speaking at customers. Rogers.1 . & Dorf.. brand-building must focus on the end-to-end customer experience .
almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap...com) 29 Hoffman. Therefore. companies must ensure that they provide a completely satisfying end-to-end customer experience. a disgruntled online customer tells 10 people about a poor experience30. (2000) which identified the following factors28:
Companies will not break-even on one-time shoppers . customer acquisition costs are high. and to recover their investment. 1999 (www. it could be argued that customer loyalty is even more critical online. This is further reinforced by the fact that. as cited in 'Creating a High-Impact Digital Customer Experience' .A Mainspring Communication Report in collaboration with Bain & Co. .. Harvard Business Review. P.. C. and some are spending over $50029.pwcglobal.
These points stress the importance of online customer loyalty. ..
Repeat customers refer more people and bring in more business .. Kearney White Paper. and with customers holding all the power. For example. 'The Value of Online Customer Loyalty and How You Can Capture it'. L. 2000 (www.
Repeat purchasers spend more and generate larger transactions . R. In fact. T.bain. This view is reinforced by in-depth studies carried out by Bain & Co.Research by PricewaterhouseCoopers / The Conference Board.word-of-mouth is the single most effective and economical way online businesses grow their sites. Baveja. & Hancock.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. companies need to retain customers so that they return to the site repeatedly.org) 28 Rigby. but also provides more opportunities for cross-selling. it is very unlikely that an online retailer can break even on a one-time shopper. MayJune 2000 30 A Forrester Research Study. on average. J. S..
'Electronic Business Outlook'.due to more frequent shopping and larger purchases. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. D. Rastogi. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. unless they are selling high-price. 2000
.com and www. and Novak. March 17.. D. Repeat purchasing not only binds trust.An A. Zook. Chu. high-margin items.3
THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY
According to a recent study27.converence-board. 'How to Acquire Customers on the Web'.
Loyal customers are more willing to buy other products from the company. S. T.often.
However. Similarly. (also referred to as 'viral economics'). additional customers and transactions can be managed with limited fixed cost investment. as illustrated in Figure 5. 'Positive Economics'. and other features can be added or changed at low marginal cost. customisation for individual customers. as the benefits of scale are overwhelmed by the disadvantages of size31.. and the value that each member realises. additional products. 1989. Once the up-front investments are made (for research and development and technology infrastructure). (London: Harper & Row). pp. 180-182
. businesses and online communities that rely on connectivity can enjoy 'network effects'. 7th Ed.. where the value of the network. this is not the case on the Internet. and in the case of information-based products.1 . Even more important. FIGURE 5.4
INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE
Economists have traditionally taught that businesses grow to the point where returns to scale diminish. each additional unit sold does not cost more than the last to deliver. the costs approach zero32. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. G.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
where N is the number of users
Lipsey.1. As a result. increases disproportionately as more people join the network.
being first into a market makes it easier to capture the consumer's share of mind. This makes it more efficient in improving product selection. With no competitors around. '5 Rules of the eEconomy'. enhancing the interaction. fulfilment • Defensible advantage against competitors
SCALEABLE. 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. cross-selling and up-selling33. No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions.A Shop. Outlook 1999. M. delivering increased margin per customer .2 . 21 .Figure 5. advertising and referrals. direct marketing.
FIGURE 5. Nov 1998
.A Publication by Andersen Consulting 'The State of Online Retailing' .. including direct marketing.org Study in collaboration with The Boston Consulting Group. R. link revenues
Melnicoff. its ability to track customer preferences and customise offerings improves. It also allows online companies to tap supplementary revenue streams.THE VIRTUOUS SPIRAL OF ONLINE GROWTH
• Unique value added for customers • Scaleable customer service.2. As the company builds a customer base and develops a relationship with customers.
and the cost of switching to an alternative brand becomes quite high.A Shop. New marketing strategies. larger sites can leverage more customer advocates to reduce customer acquisition costs. Given the connectivity of the Internet among customers. leading to the exponential expansion of the customer base. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. This is the logic behind some of the extraordinary valuations of Internet companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
In addition. The Internet. with a minimal budget and maximum effect.
'The State of Online Retailing' . and word-of-mouth even more effective. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. web sites. This. the value of the company rises exponentially with market share. in turn. "leveraging the media". 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. Nov 1998
. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. Larger sites can also negotiate better supplier discounts or product placement fees. makes communication tighter. with its e-mail lists. creating a potentially exponential growth (like a virus) in the message's visibility and effect. or until a competitor finds a way to change the game again. the leader will pick up momentum and will stand to gain an insurmountable advantage .org Study in collaboration with The Boston Consulting Group. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. This snowball effect favours first-movers. the brand begins to take hold.5 VIRAL MARKETING
Viral Marketing is a marketing technique that induces web sites or users to pass on a marketing message to other sites or users. 5. When a company reaches 'critical mass'. As a result. "creating a buzz". as it carries the implied endorsement from a friend. its growth curve relative to a new entrant is somewhat daunting. commerce and distribution partners. as once a strong lead is established. By the time a company has reached critical mass.unless the leader makes a serious mistake. It is often referred to as "word-of-mouth". chat rooms and bulletin boards. viral marketing is an effective tool in getting a message out fast. As a result. Word-of-mouth is a particularly powerful medium. such as 'viral' marketing. and "network marketing".
Free Email at http://www. and the message spreads organically. 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.com was one of the first free web-based e-mail services. Hotmail. Geocities enables people to create personal websites for free.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. a company now owned by Microsoft.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.000 subscribers every day. • Each new user becomes a company salesperson. they tell all their
. but Hotmail signs up more than 150. and they created a subscriber base more rapidly than any company in history.hotmail. they will have a powerful viral opportunity at their disposal. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.com. Today they are the largest e-mail provider in the world with over 40 million users.1 The Case of Hotmail. In its first 1.000 subscribers within a few years of launch. whether for communications or community.com The classic example of viral marketing is Hotmail. eGroups and Geocities (both recently acquired by Yahoo!).
Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). friends to visit it.5 years. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. In fact. seven days a week. and in doing so spread the word for Geocities. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. A traditional print publication would hope to reach 100. When a user builds a website. saying: • "Get Your Private.5. where they have never carried out any promotional activities. and then propel the message even further to their own ever-increasing circles of friends and associates.
3 .. C. 'The Value of Online Customer Loyalty and How You Can Capture it'... S.A PricewaterhouseCoopers Report.. S. March 17. & Hancock. making customers 'click off' to another site.. As
'Creating a High-Impact Digital Customer Experience' .. Sites that are difficult to use can cause frustration.A Mainspring Communication Report in collaboration with Bain & Co.3). Kearney White Paper. The customers' ability to access and display information rapidly is extremely important36. J. . 2000 (www. D. Rastogi. Kearney White Paper.com)
.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. 2000 37 Rigby. T. 30% of potential customers leave sites because they cannot find what they are looking for. T.An A. Baveja.An A. 2000 'The E-business Technology Forecast' . and 66% of people who start a 'shopping basket' fail to complete the transaction37. Chu.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. In fact. Price.THE 7CS FRAMEWORK
CUSTOMER CARE CUSTOMISATION
Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .. 2000
Convenience Convenience goes beyond the ability to conduct transactions around the clock. FIGURE 5. Place). Zook. Promotion.bain. R. In essence.
up-to-date information. 29th October 1999 (www.
Cognitiative Inc. expert insights. October 29.businessweek. and a wide range of products.com)
Content Content is relevant and useful information directed at the needs and interests of the targeted users. as cited in Business Week. whereas a slow response time and site downtime will have a significant negative impact.FACTORS AFFECTING WEB BRAND LOYALTY
KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0%
Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information
KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0%
Outdated Information Slow Site Downtime Response Time Poor Customer Service
Source: Cognitiative Inc. February 2000 Issue
.4.com) Davenport.4 .businessweek. ease-of-use. online companies have the opportunity to provide rich. as cited in Business Week Magazine. and fast response times are among the most important factors in establishing web brand loyalty38.
FIGURE 5. ease-of-navigation. T..BUILDING SUCCESSFUL BRANDS ON THE INTERNET
shown in Figure 5. 1999 (www. which can enhance the company's value proposition. With almost infinite display space and inventory capability. CIO Magazine. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. 'Sticky Business'.
& Bluestein. Clemmer. visitors should not be engulfed with too much information. W. which is facilitated by a combination of factors (Figure 5. 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). Community Online communities are emerging as new gathering places for consumers with similar interests (e. and nearly 20% use it for post-sales support.forrester... A.5). and organise live events. Spring 2000 42 Armstrong. 'Building Stronger Brands through Online Communities' .Sloan Management Review.A Forrester Research Report. even if they purchase offline. For a community to work. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.. 1999 (www.
Morrisette.com) McWilliam. These sites allow members to interact with one another. Customisation Customisation involves tailoring the presentation of a web-site to individuals. According to Forrester Research40. 1995. No. It fosters a sense of belonging41 among the members.. as well as through loyalty programmes that provide targeted benefits. An online community offers a compelling way to entice customers back to a site. Customisation creates the feeling of a one-to-one relationship.. iVillage and Geocities). it needs a critical mass of members42. Online sites can track a customer's purchase history and modify its service accordingly. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). or prior transactions. G. & Hagel.g. 3. S. use bulletin boards. K. based on profile information. On the other hand. J.
. which enhances the user's online experience. and advertising (if it is relevant and useful). Members can interact in chat rooms. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. demographics. share information and access a wide range of services.The McKinsey Quarterly. 'Real Profits from Virtual Communities' . Other content includes community-generated content. Often.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
A certain amount of 'commerce content' is important to support the purchase decision. 31% of online consumers use the Internet for obtaining product information. . An important contribution of these communities is that they provide members with a medium to communicate with each other.
M.A PricewaterhouseCoopers Study.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. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.. when membership in the brand's community becomes an end in itself43. Site-tosite connectivity focuses on connecting users to other relevant sites. Mulcahy.
. pp. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.www. This is similar to placing offline stores in high traffic areas. S. 'Making Real Sense of Virtual Communities' .com) directly into the browser and access the site immediately.
Fournier. they opt to input the URL (Internet address . 343-373. and can create emotional loyalty..brand-name. A. C. as well as attracting traffic from other sites. Companies can provide a selection of related links that complement the site's purpose and value proposition. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 1999
Communities enhance the speed and value of information sharing.. Once customers know of a site. March 1998.6). O'Donnell & Gupta. Journal of Consumer Research.5 ..BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 5. allowing customers to deepen their experience with a brand and build more personal connection.
.6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 5. Therefore. and FAQ pages (Frequently Asked Questions) to solve problems. news up-dates. It is important in building relationships.
Online customers often require assistance and reassurance. as well as informing and reminding customers of special offers. customer support at all stages of the interaction is important. which provide targeted and unique (customised) benefits to the customer. The development of loyalty programmes. customer care activities can involve providing a variety of payment. live chat. serves this purpose and helps to build customer loyalty.CUSTOMER ACCESS TO INFORMATION
INTERNET ACCESS DEVICE
SOFTWARE AND BROWSER
User-to-site connectivity focuses on providing incentives for users to connect back to the site. Customers share security and privacy concerns.
MarketWatch. events and subjects of interest to the customer. activities. Communication can be tailored to specific user interests and should allow for two-way interaction. online chat. as well as features such as gift-wrapping. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. (www. and can be provided through e-mail.marketwatch. Other tools such as bookmarking the page can also facilitate connectivity. delivery and return options. In addition. toll-free telephone numbers. and online surveys.
The Internet provides the opportunity to establish dialogue with customers through e-mail.
8. The company must build awareness and communicate its value proposition to its target customers.. Trial. 1996. A. Retain.4 . M.) to online tools. McQuade. Interest. This is more difficult online than offline. e-mail notifications and banner advertisements. modified to take into account of the interactive dynamics of the Internet..mckinseyquarterly. Evaluation. pp. Figure 3.2.7 . Adoption). 'Marketing to the Digital Consumer'.com)
The critical first step of the digital customer experience is to attract 'eyeballs'. Newspapers.
FIGURE 5. visibility relies solely on Communication.7.Awareness. The mechanisms to communicate range from traditional media (TV.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
5. S. including affiliate programmes with other websites. No. Therefore. links from directory searches (Connectivity). etc. Engage. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. & Zeisser. McKinsey Quarterly. 180-183 (www.Attract.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
ATE R EL
Source: Adapted from Kierzkowski.. billboards. Learn and Relate. and bring people to the site for the first time. This model consists of five stages . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.. 57
UM NS K CO A C RE B SU M E O E AK C
RN A PR BO E U FE T C RE O NC NSU ES ME
THE INTERACTIVE BRAND-BUILDING MODEL
The stages in building a loyal customer base are outlined in Figure 5. Waitman. because there is no physical presence. Magazines. R.
0 3. it is important to quickly engage consumers' interest before they move on.3 2.3 3.WEBSITE PROMOTION METHODS . The key factors at this stage are Convenience combined with interesting Content.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 .5 3.5) 2. as cited in 'Targeting Consumers via the Internet' .3
Source: Forrester Research. Fig. 3. affiliate programmes.ebusinessforum.
The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.4 4.Economist Intelligence Unit 2000 (www.2 4. 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Attracting customers is only the first step in building online brands.8 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 5.3) is useful to ensure that a company develops a distinct and consistent brand identity.com)
The most effective methods are direct e-mail.1 3.
.7 4. discounted over the expected duration of the brand-customer relationship.6 3. public relations and television advertising.
With the multitude of choice available on the Internet. Companies then need to engage customers to obtain their interest and participation. Kapferer's Brand Prism (Ch.4 3.4 3. multiplied by the expected rate of transactions.8 4.
a company can create value by providing a personalised online experience.g.
5. Content is the basic driver of retaining customers on a site. if used properly. Radio). can create value for the customer and help build the brand-customer relationship. TV. The initial site registration provides an early opportunity to obtain useful information. The objective is to increase the conversion rate (% of browsers converted into buyers).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.
The Internet provides extensive opportunities to learn about consumers (demographics. Communities and Customisation are other sticky applications. Certain product categories. such as groceries and convenience goods. Building up a knowledge database on each customer .who they are and why they shop online. attitudes and behaviour). and forge closer relationships than any offline operator. 59
. • The Internet supports brand-building activities where there is a need to build a relationship. This helps to create a customer base that spends more time and money at a site. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.9). It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. and what additional products and services are they interested in provides companies with valuable information which. 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. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Maintaining ongoing contact is essential for building relationships.
By leveraging the multidimensional data gathered from ongoing interactions with individual customers. and must be continuously updated due to the multiple visit nature of customers.
the interaction provides the ability for companies to learn from their customers and relate. due to high delivery and transaction costs (relative to the value of the product). Given the high acquisition costs of online customers.9
On the Internet. R. However. & Zeisser. Waitman. M. smell). especially in small quantities. engaging and retaining customers. • Brand-building favours products that can be sold online. 180-183 (www. The next chapter analyses the brand-building efforts of seven companies. it is critical for companies to build relationships and foster brand loyalty. The 7Cs Framework outlines the key components of the brand experience and the sources of added value.from the promises made in the value proposition. These case studies provide a practical insight into how companies are building their online brands. 'Marketing to the Digital Consumer'.. The interactive brand-building process involves attracting. pp. and the need to stimulate the other senses (taste.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
• Not all product categories have a strong fit with interactive media as they still need real life interaction. the experience is the brand. to its delivery to the customer. No..CATEGORIES SUITABLE FOR INTERACTIVE MARKETING
FIT WITH INTERACTIVE MEDIA
NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES
TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY
AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS
CONVENIENCE STORES GASOLINE
POTENTIAL FOR RELATIONSHIP BUILDING
Source: Kierzkowski. it is not economically feasible to sell certain products.
5.. In order to create "apostles".mckinseyquarterly. and as the relationship develops. 60
. McQuade.9 .2. S. A. 1996. McKinsey Quarterly. companies must provide a satisfying end-to-end customer experience . touch.. providing further added value.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
2 CASE STUDY: AMAZON.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.com. Amazon has been able to differentiate itself from other online competitors.
Interbrand (www. and one of the top two or three in Britain.com . 2000 (www.Goldman Sachs Report. 'Amazon. February 26. and higher levels of customisation and service than the traditional shopping experience allows.
Gap. and is one of the few Internet brands that is recognised all over the world. more information. Amazon.economist. France. the sources of added value (using the 7Cs Framework). It is the 57th most valuable brand in the world47. easy. The cases are presented in the following sequence . Germany and Japan49. and has equity investments in several e-tailers.1
This chapter provides an analysis of seven companies. Amazon provides increased added value on several dimensions.com)
. 1999 49 'Amazon's Amazing Ambition' . and has sales of over $2 billion.interbrand. In July 1995.com. In addition. including: increased selection.com and Yahoo!. Barnesandnoble.2. discounted prices. In addition.2 Value Proposition
Amazon.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products.com has become synonymous with e-commerce. and enjoyable experience.COM
6. its value proposition. Figure 6.It's an Ocean.see Appendix A. a company overview. 6. Not a River' . eBay.com) .1 Company Overview
Amazon. Through its provision of a one-stop shopping experience.Amazon.2. and other key factors that have contributed to its success (or failure).1 outlines Amazon's timeline and major milestones. its brand-building strategy (how it generates traffic).com launched with a mission to use the Internet to transform book buying into a fast. greater convenience. innovation and delivering on its promises.com's success stems from its compelling value proposition. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Amazon serves over 23 million customers from 160 countries. Amazon has cultivated a reputation for excellence. Each case is presented in the same format including. November 11. Boo. combined with its levels of customisation and customer service. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). it is the most visited e-commerce website in America. Amazon. CDnow.
com Amazon introduces "Purchase CirclesTM".com announce investment and strategic alliance .com .Amazon and eziba.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com invests in wineshopper.com Electronics and Amazon. a tools and equipment store for professional tool users and woodworkers .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
.com via the new wireless pocket PC . workplaces. and more Amazon launches "Amazon.com Anywhere.com enters European book market Microsoft signs Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Customers can shop at Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.COM .com . to meet rapid growth .Amazon.com Amazon invests in Pets. West Virginia. such as the Palm VII organiser.com to create a "home living" store at amazon.Amazon surpasses 20 million cumulative customer accounts .com .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.Amazon enters into a strategic partnership with Drugstore.Amazon launches www.Amazon launches health and beauty store . and minority investment in. Video Games and Gift Ideas Amazon and Sotheby's launch www. universities.Amazon launches new kitchen store .toolcrib.Amazon.Amazon enters strategic alliance with living. featuring thousands of bestseller lists for hometowns.com opens its virtual doors at amazon.com and NextCard launch co-branded credit card .amazon.Amazon launches lawn & patio store .com Amazon acquires Back to Basics Toys to add to Amazon. Ashford. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com Amazon and Sprint First offer Internet shopping on wireless phones
.com Announce Strategic Investment and Promotional Agreement . Software. Amazon.000 members Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Amazon and online car-buying service Greenlight.com is founded by Jeff Bezos Amazon.Amazon." providing shopping from wireless devices.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.TIMELINE AND MAJOR MILESTONES
Amazon.New home living store from living.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.Amazon opens a customer service centre in Huntington.Amazon announces investment in kozmo.sothebys.com Amazon announces further plans to expand distribution network to meet rapid growth.Amazon opens customer service centre in The Hague .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Auctions and zShops provide new tools to its merchant community .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.amazon.com.com .
customer testimonials. recommendations.The 7Cs Framework Convenience
Amazon provides value-added features to increase the ease of shopping. expert reviews. gift reminders. interviews with authors. including book jacket images. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. mobile phones. This is an example of
. and quick-to-load pages
Over time. downloads quickly and services visitors adequately . encourage repeat visits and drive higher conversion rates. live or study. book summaries. the 1-ClickTM express checkout.1 . logically structured. Palm VII PDA device).1. and Amazon. discussion boards.e.2. such as the Amazon.3 Sources of Value .COM'S WEBSITE
Wide selection of product categories Immediate customer recognition and customisation of product offering
Simple. The site is easy-to-use.com All Product search (searches the entire web).BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Amazon provides content on several levels.Figure 6. Amazon has added other features for shopping convenience.
FIGURE 6. wish lists. and customer Purchase CirclesTM. offering multiple paths to a given book or product. easy-to-use.com Anywhere to support access from wireless devices (i. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. gift click.OVERVIEW OF AMAZON.
creates a competitive advantage. and has developed an Associates Programme. and
Amazon provides customised features and services.2. By leveraging its vast customer base. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. More recently.4. This customer-centricity is evident in all Amazon's activities. real-time shipping and backorder notices. These are discussed in more detail in Section 6. while driving up repeat purchases and cross-selling opportunities.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM.
.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers . Amazon's content is not reproducible by competition.thereby increasing conversion rates. from its shopping basket applications which lists the estimated time to delivery reliably.
Amazon has also added a community element to the purchasing process. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. therefore. Amazon creates one-to-one relationships with its customers. Amazon introduced Amazon. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. which helps to build loyalty and create switching costs. from the customer recognition at the point of interface (Figure 6.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.
Amazon has built relationships with high traffic web portals and sites.
Amazon places great emphasis on satisfying customers and providing high levels of customer service. converting them into a storefront for Amazon. and customer interaction. to the proactive notification of new items of interest. linking it to a large number of other sites. In doing so.
000 members. Once orders are placed.4 Brand-Building Strategy
Amazon has attracted traffic in a number of ways. Instead of paying directly for this exposure.2). In July 1996. The Associates Programme has been phenomenally successful. Amazon offered Associates referral fees of up to 15%. In addition. Newsweek. they are subsequently confirmed by e-mail. increasing to over 500.
.2. two personalised services. In the second half of 1996. and not subsequent purchases. As a result of all these factors (7Cs). 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.000 by August 2000. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. which only applied to sales that resulted from the initial click-through. helped generate publicity and stories about the company in publications such as The Wall Street Journal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Amazon maintains close communication with customers.com hot-link and offer specific books of interest to their visitors. Eyes and Editors. The Financial Times. New Yorker and The Economist. help maintain contact and build traffic by e-mailing customers when desired products or books become available.
6. Through the first half of 1996. Business Week. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.a move that along with the novelty of its business model and the newness of the Internet. This enabled Amazon to reach more customer segments and niches (Figure 6. enticing them to return to the site and purchase repeatedly. and customers are also e-mailed when the items are shipped from the warehouse. it began to advertise in print media and online . attracting member sites of all sizes. and by 1999 it had over 200.
.com About Me . was also linked to Amazon's entry into Europe Amazon.
These multimillion-dollar. including: America Online (AOL).AMAZON. People tend to tell their friends about it.
Amazon has developed alliances and partnerships with high traffic web portals and sites. • Amazon.de became the local provider for Yahoo! Germany and Amazon. The Yahoo! agreement. and primary button placement on web portal search engines. Interesting viral initiatives include: • Amazon. mutual links.COM'S ASSOCIATES PROGRAMME
Source: Amazon. and you are given a $5 gift certificate for each customer you provide.2 .
Excite. multiyear deals involve
exclusive book-selling rights.customers are encouraged to provide e-mail addresses of friends. spreading the word for Amazon.amazon.uk the local provider for Yahoo! UK & Ireland. Netscape's Netcenter and
NetSearch. Amazon also established agreements with AltaVista. In return. Amazon has used viral marketing techniques through customer reviews. and Geocities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 6. Prodigy and @home. From July 1997 to December 1998. Amazon closed deals with five of the six most visited Internet addresses. free eCards and gift certificates (which customers send to friends. the customer acquisition cost is only £10.com Refer-A-Friend .allows customers to create a personal profile (with pictures) on the site.com).com's website (www. thereby promoting Amazon.com. each friend is sent a $5 Amazon.com gift certificate (in your name). Yahoo!.
billboards. with the explosion of websites. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. clear presentation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
The majority of customers continue to be attracted through word-of-mouth. April 6. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. and improved customisation and recommendations (e. According to Jeff Bezos. so we didn't have to do much advertising. "we had a world-class site the day we launched . C. 1998
. With this combination of promotional methods. Amazon is building customer loyalty and encouraging repeat business. As the relationship develops.com Really Matter?' . community feel (as discussed previously). which is analysed (learning) and used to provide value-added services such as the introduction of new product categories.but it was only a tenth as good as the site we have now. interesting content. however. buying patterns and viewing habits. Purchase CirclesTM). 'Does Amazon.Forbes.
Willis.. This strategy has created an efficient traffic-generating machine by creating virtual loops of traffic so that Amazon is top of mind when customers go online. Amazon has also incorporated traditional offline media (TV. Once customers are attracted to the site. By relating to customer needs.significantly lower than other online companies. Amazon's proven online merchandise selling techniques including easy-to-use search options. Magazines. Amazon maintains a database of customer preferences. which accounts for 66% of Amazon's sales.g. That's not possible anymore50". And we relied on word-of-mouth to build awareness. Amazon has been able to achieve average customer acquisition costs of less than $20 . newspapers) to generate awareness. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) have significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams.
Distinct Brand Identity
Jeff Bezos chose the name 'Amazon'. while our competitors have been Amazon.a wide range of choice. As such. (Oxford: Capstone Publishing).. establishing a reputation for excellence and fulfilment.. management realised that Amazon had become more associated with other core brand values . As such. Nevertheless. We have been customer obsessed. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. and our goal is to increase that gap51". Amazon was able to secure partnerships and alliances with key players. further enhancing their value proposition. which within six months propelled Amazon to one of the leading online music retailers. 'Business the Amazon. This has helped them attract customers and move up the learning curve quickly. In addition. In addition. R.2. Our secret is that we have not been competitor obsessed. good value. and to convey its vast size and offering. According to Jeff Bezos. and according to Jeff Bezos.com obsessed52". and its safe and secure delivery.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations).
Hazleton. "Online. Success. According to Jeff Bezos.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage
As an early-mover on the Internet and a first-mover in online bookselling. because he wanted it to be short. "we're not a stationary target. the balance of power shifts away from the company and goes towards the customer. July 1998. Amazon's understanding of its brand identity has been a critical factor. Amazon received criticism for expanding its product line. However. Saunders. Amazon unveiled a music store. thereby diluting the value of its association with books. For example. memorable. 1999
. to capture the spirit of the site. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. establishing Amazon as the leading online bookseller with a large customer base. We were blessed with a two-year head start. Amazon is constantly seeking new ways of improving its offering. in June 1998.
Customer Focus & Reputation for Excellence
Amazon's customer focus is evident throughout all its activities. developing customer service centres and expanding its distribution network to support high levels of service.com Way'. due to the hype and coverage it was given. L. Amazon has been able to build a strong brand at relatively low cost.
speedy delivery and good value. Although Amazon has successfully built a strong brand and loyal customer base. Amazon also recognised that service quality is a perception. have kept it ahead. This customer-centricity is a key hallmark of a successful Internet brand.2.
6. and investors lose confidence. it has not recorded any profits to date. distribution centres and upgrading the site. Amazon delivers on its promises of a wide inventory of products. with new products and value added content. Volume Discounter' . not necessarily a reality. B. stem from its compelling value proposition and high quality end-to-end customer experience. as the true value of a brand lies in its sustainability. 1998
. which is critical on the Internet. 'Marketers of the Year: Jeff Bezos. secure payment procedures. Nevertheless. but over time they become more and more associated with a particular thing and harder to stretch53". they have cultivated a reputation for excellence and fulfilment. they're stretchable and pliant.Brandweek. perhaps trying to defend its view that losses taken to build market share can reap profits later. When they're young. This raises a critical issue.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. Amazon has continuously invested in customer service. however. In doing so. Amazon is claiming to be making profits on its books and music categories. October 12. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Amazon's intense focus on customer needs and continual innovation. if it continues to incur losses.. the drain on their cash resources will push them towards bankruptcy.
Warner. and to sustain a positive image and satisfactory end-to-end experience. The key factors driving its growth and high retention rates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
"Brands to a certain degree are like quick-drying cement. However. Quality is only measurable in the minds of visitors to the site.
etc.COM . Currently.com) .Barnes & Noble University opens registration for free online courses . and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Forges distribution deal with AOL
November Develops distribution alliance with Wired Digital Launches revamped site. contacts.Barnesandnoble.com . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Offers same day delivery in Manhatten .com).com and Microsoft announce that they will create an eBook superstore .3
CASE STUDY: BARNESANDNOBLE.2.com is approximately 40% owned by Barnes & Noble.) established by its parent company. magazines.com was able to 'hit the ground running'. promotion) between the online store and the retail stores have been kept separate.2
BARNESANDNOBLE. prints & posters and related products. Launched in 1997.Launches Video Store
.Launches Internet Radio .Barnes & Noble went online at AOL May . rare.com announces strategic relationship with Palm Computing . Inc. Barnesandnoble. music. Barnes & Noble Inc. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. Barnesandnoble.TIMELINE AND MAJOR MILESTONES
. is one of the best known traditional booksellers in the United States.com provides other online categories offering software.Barnes & Noble.com is the fourth largest e-commerce retailer54.Launches Affiliate Network December . 40% owned by Bertelsmann AG.Launches BNTV . However.com launched its website (www.
TABLE 6.com's timeline and major milestones is outlined in Figure 6. as it could capitalise on the infrastructure and back-end operations (warehouses. and 470 B.Announces distribution relationship with New York Times September .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.Acquires equity stake in Mightwords .COM
6.com on the Go' to provide access to wireless devices
1998 March May July October
1999 May July August October December 2000 January February May June
. and is the second largest online bookseller (after Amazon. Barnesandnoble.barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . Besides books.1 Company Overview
Barnesandnoble. book databases. all front-end operations (marketing. and 20% owned by the public..Acquires minority stake in NotHarvard. Dalton bookstores (located in shopping malls).3. Barnesandnoble.Barnesandnoble. Barnes & Noble Inc.
FIGURE 6.com or www.3).barnesandnoble.com)
. music New Initiatives
Barnesandnoble. publisher.3 .bn. etc.com offers customers an easy-to-search catalogue of virtually every book currently in print. Both have expanded their convenience to offer
Media Metrix. the company created a site very similar to Amazon. in terms of the 7Cs framework.com's and takes a bit longer to download. author. previously-owned and rare books. edition. they offer customers fast delivery.com's (Figure 6.2 Value Proposition
Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. Barnes & Noble planned to dominate online book-selling. as well as an extended searchable catalogue of millions of out-of-print.3 Sources of Value .
6. In addition. Both Amazon.com's virtual storefront is graphically richer than Amazon. rich editorial content and a community experience.3.OVERVIEW OF BARNESANDNOBLE.COM'S WEBSITE
Simple. however. logically structured. including title.com and barnesandnoble. as cited on Barnesandnoble.3. and easy-to-navigate site Categories focus on books.com's website (www. but instead of developing an outstanding interface to its inventory. easy and secure ordering.com let customers sign up to receive email reviews and announcements of new titles.The 7Cs Framework
With decades of experience in developing 'bricks-and-mortar' stores. software. Both offer detailed bibliographic information. the features are practically identical. good prices.
4 Brand-Building Strategy
Barnesandnoble.com's 1999 revenues were $202.com's market capitalisation was $251 million. They have developed an affiliate programme that links sites to Barnesandnoble.3. Webcrawler.com in return for a commission on any purchases that they originated .com's $1. As of February 2000. Barnesandnoble. prevent cannibalisation of its existing business. Netscape and Microsoft
Network. Instead. Both offer 'associate programmes' that let other websites link to their sites. The
6. However. These initiatives have generated traffic to the site. while Amazon. has yet to leverage its strong brand in cyberspace.000 affiliates in its referral network. however.com was valued at $21.1 billion. and both are expanding globally. Although. December 17. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com has created a high quality website and customer experience. while Amazon. Yahoo!. Both offer customisation that permits users to personalise the experience.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.
'AOL is paid $40 Million in 4-Year Marketing Pact' . and Barnes & Noble Inc.com had over 17 million. Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
access through wireless devices. it lags behind first-mover Amazon. Lycos.The Wall Street Journal. Both try to foster a community of readers by letting customers post reviews online. Barnesandnoble. and have formed strategic partnerships with ten of the top twenty websites (others
include ZDnet and CNN). 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
.6 million. and avoid charging sales tax in states where it has stores56. compared to Amazon. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. this programme had more than 300.64 billion.com.com closed 1999 with 4 million customers.a replica of Amazon's Associates Programme. reasons for this are explained in the next section. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.
com has changed its name to Barnes & Noble. and leverage its real-world presence.com. in-store displays. provides access to valuable resources. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. and a same-day delivery option in Manhattan. 74
. Barnes & Noble University (a free online education resource).com has lost access to valuable customers.. In return. when it struck reciprocal marketing deals with Expedia. • Barnesandnoble. Barnesandnoble. with a similar discount.
Barnesandnoble. in the attempt to gain traction and build momentum.com and VitaminShoppe. people began using their stores as a physical showcase for online rivals such as Amazon. as Bertelsmann's book division includes partners such as Random House. Unfortunately. and Internet terminals in the bookstores.com offers links to each partner's site and a discount for visitors who click-through. By failing to leverage it.com.com's key differentiator from Amazon.com.com should have aggressively cross-promoted their stores through advertising.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Barnesandnoble.com has begun to acknowledge some of these mistakes.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). content and distribution opportunities. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com. Jcrew. or deliver books directly from the retailers. At any given point there are hundreds of customers browsing their aisles looking for something to read. LLbean.com.com. Petsmart. each partner offers a similar link to Barnesandnoble.com.com. Barnesandnoble. • Barnesandnoble. 1-800Flowers. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. and in recent months has aggressively sought new ways to differentiate itself. and the tangibility that this provides. • In addition.com. Barnesandnoble.com's link to Bertelsmann AG. Under the seven separate agreements. Planetrx. Barnesandnoble. To signal its intentions. Barnesandnoble.com is its association with Barnes & Noble Inc.com created a new cross-marketing genre in February 2000. and its BMG Entertainment division includes music giants Arista Records and RCA Records.
Bricks-and-mortar stores looking to
translate their brand strength online must be willing to vigorously cross promote the two ventures. August 4.com and has given them the image of a second rate 'me too' brand.forbes. significant market momentum.3. it has not been able to establish itself as the leading online bookseller.its key differentiating factors. 2000 (www. The Press have also contributed.6 Conclusion
. In addition.
'Bn.com .com's late start in 1997.com. otherwise they risk losing out to other online competitors.com's experience is instructive. The company failed to leverage its established brand.Not a Best Seller' . and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". and was further up the growth curve. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. by portraying them as slow and clumsy in comparison to the more nimble Amazon. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. a wellestablished Internet brand. even if that means eating into their existing sales. Barnesandnoble. it also caused a major setback.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. Barnesandnoble.com has been able to create a high impact and high-quality customer experience. and allowed them to offer stock options as compensation and achieve a high market capitalisation. and its lack of innovation (by copying Amazon. feature for feature) has failed to differentiate Barnesandnoble. meant that Amazon.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. customer relationships and offline presence .Forbes. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.
4. arranged through J.com.Announces it has only 500. Everlast. 1999
.000 unique visitors . founder and Chief Marketing Officer of Boo.com collapsed through lack of funds. CMO of Boo. and included high profile investors such as Bernard Arnault. and eventually debut in Asia.they redesign site.First sign of problems .1 Company Overview
Founded in 1999. P.com opens its virtual doors' . Italy and Spain within a few months.Multi-million pound advertising campaign created by BMP DDB . "our marketing thrust is not based on prices. They intended to add France. and the resulting loss of investors' confidence. If a clothing brand is on the Boo site. On going live.3
1999 Mid year
BOO. Germany and Denmark. Boo. June 10.
Kajsa Leander.COM . sack 20% of staff and sell stock at 40% discount .com provided a range of 18 fashion and footwear brands including DKNY. 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.
6. among others. England.fails and appoints KPMG as liquidator. as well as create a kid's site. within six months Boo. Puma.com entered six markets: US.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com had set the record as Europe's best-funded European Internet Start-up.Raises funding of $125 million . and was billed as one of Europe's hottest e-commerce ventures. Sweden.Appeals for $30 million more funding . Morgan. Boo.Marketing Week.4
CASE STUDY: BOO. not the limited range you might get at most London fashion shops58". and Converse. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.TIMELINE AND MAJOR MILESTONES
TABLE 6. After a high profile launch. Boo. Company is put up for sale.2 Value Proposition
According to Kajsa Leander.Site goes live . it's about range and convenience. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).COM
6. due to its poor performance and inability to build a customer base. Boo.4. Finland. receiving $125 million of funding. However. as cited in 'Boo. it means all that brand's product line is available.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
000 sound samples.1 Company Overview
Founded in 1994. convenience. CDnow is the leading online music store. pp. daily music news.
TABLE 6. and an average daily audience of over 800. $18.Merges with Columbia Records . and they aim to "make every visit to the site.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG)
6.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.cdnow. customisation and a wealth of information and content to help in the purchase decision. 'How to Acquire Customers on the Web' .
Hoffman.000 people. and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow provides access to over 500.000 music related items . On 19th July 2000.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign
. CDnow is also driving the digital distribution of music. D. and one of the most popular shopping sites on the Internet62. and was the first site to offer the sale of music downloads and custom CDs. guides to music genres.Launches merged CDnow/N2K site .Site goes live . announce marketing alliance .2 Value Proposition
CDnow offers consumers a high degree of choice (over 500.5. former arch rival .CDnow and Time Inc. T. cover art..Harvard Business Review. May-June 2000. whether for browsing or buying.000 music-related products and 650. CDnow was acquired by Bertelsmann AG.Forges distribution partnership with Yahoo! $65.Partnership program with Geffen Records .4
1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July
CDNOW . features.5
CASE STUDY: CDNOW
.179-188 63 CDnow website (www.Merges with N2K. It has a customer base of 4 million people.TIMELINE AND MAJOR MILESTONES
.ten times the selection of a conventional bricks-and-mortar music store). by twin brothers Jason and Matt Olim. a valuable and rewarding experience"63. $22. good prices.5 million distribution deal with Lycos Signs three-year.5. This unprecedented degree of access to music and information is the core of CDnow's value proposition. & Novak.Raises $10 million through private placement . as well as music reviews.
. and has secured rights to music reviews.Figure 6. CDnow has cultivated similar relationships with MTV. artists biographies. The whole process of searching for albums or music titles to the actual purchase is simple .OVERVIEW OF CDNOW'S WEBSITE
Customisation options Simple. By
partnering with well-known content providers. For example. and quick-to-load pages
CDnow has invested substantially in developing strong content alliances.3 Sources of Value . VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).
FIGURE 6. easy-tonavigate. CDnow has leveraged the reputation of their brands to reinforce its own. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling
Stone music coverage.5. cover art. to make it easier for customers to explore new music and make informed purchasing decisions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.. etc.The 7Cs Framework Convenience
The CDnow site is very easy-to-navigate and quick-to-load.5 .5.
Due to International interest. It also creates switching costs. and key news and entertainment sites . Internet access providers. German.such as AOL. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CDnow provides customisation on two fronts. By customising the store to meets customers' needs. Whenever a customer makes a purchase they earn Fast Forward Reward points. Portuguese. Spanish.
CDnow has linked up with broad-based highly trafficked Internet sites .
CDnow's site can be viewed in English. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. Dutch and Japanese. CDnow hired a group of multilingual customer service representatives to handle questions. 82
. which accumulate and can be spent on a variety of music-related products. French. CDnow developed the Fast Forward Rewards programme.
CDnow has not exploited the potential of creating a community feel. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter).from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). an incentive programme that rewards customers and encourages them to connect back to the site.
Excite. Italian. it gives them a sense of ownership and a compelling reason for them to return. Other features such as My CDnow's Wish List. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. In addition. 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. allow customers to keep track of albums to buy in the future. allowing them to respond to detailed customer queries. they will be reluctant to visit another online store and enter the information again. and Geocities as well as more focused specialist sites. Yahoo!.search engines. CDnow also started an
affiliate programme (called the Cosmic Credit Programme) that links other websites to its site .
Through the Cosmic Credit Programme. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. customers buy music.
. CDnow's initiatives include: • Banner Ads . • Affiliate Programme . It is a revenue-sharing arrangement. • Alliances and Partnerships .They have also stuck exclusive alliances with AOL. they buy from CDnow. Spin. CDnow is doing everything it can to ensure that the next time that
6.5. print advertising is music-related publications such as Rolling Stone. 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. Excite and other powerful Internet content and service providers. and Variety.4 Brand-Building Strategy
CDnow was one of the first companies to develop a multifaceted. this is their "most successful customer building programme64". According to Jason Olim. CDnow extended its distribution reach to include more than 250. music-oriented websites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
From the moment a customer opens an account. These
alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. • Traditional offline Media .
Yahoo!. covering the entire music spectrum.000 small. including national television commercials during the Grammy's and American Music
Awards and on MTV and VH1.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. and radio spots on the Howard Stern Show to build a
cult following among radio listeners. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. By keeping the brand in front of the customer in this way.CDnow's advertisements are targeted to some degree. and spot radio to build reach. as well as more-targeted music-related sites like Billboard.
The company continually pushed for new distribution partnerships to widen its sphere of influence. with repeat customers accounting for more than 50% of sales.4 million). word-of-mouth accounts for the lion's share of CDnow's customers. This has contributed to a 225% increase in sales (1997: $17.
CDnow's promotion strategies have attracted high levels of traffic.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.4 million. as a way to fuel very lucrative word of mouth. April 28.
'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .they were the first site to offer the sale of music downloads and custom CDs. and scaled it awareness-building efforts.htm)
. It is constantly adding new functionality to the site and has been innovative in its offering .(www.Hampel & Stefanides (www.com) 65 'Pioneering in Cyberspace' .cdnow. 1998 . by two twin brothers with little money reflects the 'American dream' and was quickly picked up.
6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Public Relations . Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. 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.hsny. resulting in increased conversion rates. Public relations efforts helped to generate word of mouth and influence sales. 1998: $56.5. it is in this context that the large investments in advertising and partnerships make sense. both in the online and offline worlds. and to increases in the customer base of more than 30% quarter-to-quarter.com/cdnow.CDnow made public relations a high priority brand-building tool.As for many successful online retailers.
Word-of-Mouth . with 44% of sales coming from new customers65. The story of how CDnow was founded in a basement.Press Release. In fact.
and ensure that it exploits its early-mover advantage and keeps ahead of competition. combined with the high impact customer experience created .Building an Internet Business at Breakneck Speed". as cited in Carpenter. They also provide the customer with an order number and customer support contact information should they have questions.
6. well-targeted marketing programmes both online and offline have driven large volumes of traffic to the site and have exposed the brand to millions of potential customers.6 Conclusion
CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. According to Jason Olim.
Jason Olim. This gives the customer the impression that the order is being handled quickly. 2000 p. CEO of CDnow. "eBrands . It was able to create a strong value proposition and high quality customer experience. (Boston: Harvard Business School Press).it's what you do66".from how CDnow has personalised its product offering to its capable customer service team . The development of an extensive affiliate network. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. P. CDnow has developed a relationship with Valley Records.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Customer Focus & Reputation for Excellence
According to Jason Olim.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. as cited in Carpenter. This. (Boston: Harvard Business School Press).5. a record distributor that handles the majority of CDnow's fulfilment logistics. 2000 p.75
. "eBrands . 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.89 67 Jason Olim. CEO of CDnow. to ensure quick delivery to customers. and innovative. "your brand is not just what you say . It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns.Building an Internet Business at Breakneck Speed".
or the payment for the item . This is a new market . and 450. extensive selection and geographical reach. According to Meg Whitman.eBay website (www.300 categories. eBay effectively created a new business model never before possible . transportation and other overhead costs. 24 hour a day. The buyer and the seller work out the logistics of the transport (e. Auctions make it fun.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. global trading place for buying and selling personal items in an entertaining auction format. Auctions represent a platform. "at its core.6.com) 'eBay . CEO of eBay. Since its launch in September 1995.
6. and eBay provides added value through its convenience. People perceive the auction format to offer better prices. (A)' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.Company Overview' . from collectibles and antiques to electronics and toys. shipping.000 new items joining the "for sale" list every 24 hours69.g.6. with the number of unique daily visitors setting a record of 1.Company Overview' .2 Value Proposition
eBay offers consumers an efficient. eBay is not about auctions.removing the need for inventory.efficient one-to-one trading in an auction format. Individuals use eBay to buy and sell items in more than 4. as cited in 'eBay . garage sales. and eBay receives a transaction fee that ranges from 1.A Harvard Business School Case Study.com) 70 'Meg Whitman at eBay Inc. the eBay community has grown to include more than 10 million registered users. flea markets and auctions. There are over half a million new auctions. 1st October 1999
.the closest thing in the offline world are trading forums such as classified ads. collectable shows. payment) between themselves. But eBay is really about a unique sense of community that eBay users are creating for themselves70"
Media Metrix.782 million in January 200068. Sellers pay a nominal fee for placing an item up for sale.eBay website (www. with emphasis being placed on its unique community feel and culture.ebay. and eBay never takes possession of the item being sold. Auctions are an enabler.25% to 5% of the final sale price on any item sold.6
CASE STUDY: EBAY
Com form alliance -
6. Providence. 21st May 1999 (www.de .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. Selling. Still the vast majority of our new users come from word-of-mouth.The 7Cs Framework
According to Meg Whitman. And you only get word-of-mouth if you have a great customer experience. and Salt Lake City . .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . they try to influence customer behaviour by encouraging them to adopt certain values. Unlike the previous case studies discussed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
TABLE 6. 1 is have a great customer experience71".eBay and AOL launch co-branded site . Las Vegas. The Official eBay Guide to Buying. the eBay customer experience is based on how their customers deal with each other. co-marketing relationship. Dallas & Fort Worth.Launches "My eBay!" to customise the online auction experience . and in terms of the '7Cs'. Norfolk & Virginia Beach.eBay goes live .eBay introduces eBay Magazine in collaboration with Krause Publications. and Collecting Just About Anything and eBay for Dummies.eBay teams up with Carclub.
Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .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
TIMELINE AND MAJOR MILESTONES
. Seattle & Tacoma.eBay launches local websites in Baltimore & Washington DC.eBay and Ultimatebid. and its online trading site (Up4Sale) .eBay IPOed raising $58 million . .businessweek.3 Sources of Value . Milwaukee. and two books -.Business Week. emphasis is placed on community development and customer care.S.eBay launches 'About Me' feature.Compaq Computer Corporation and eBay form a strategic U.eBay acquires Jump Inc.com to provide automotive service for eBay Users .eBay acquires Butterfield & Butterfield.eBay acquires alando.eBay expands strategic relationship with Netscape .eBay acquires Kruse International . Since eBay cannot control how one person treats another.Germany's leading online person-to-person trading site . as they rarely deal directly with the company.eBay acquires Blackthorne Software GO. Boston.eBay and First Auction sign a partnership agreement . and raises $700 million .com)
. "the first brand-building strategy that we have is to have a great customer experience.eBay goes live in Australia .eBay goes wireless with Palm VII connected organiser .6.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .America Online and eBay announce strategic marketing alliance . So brand-building job No. Nashville. This raises challenges in how to control and influence the customer experience. allowing users to create personal homepages .
and since. eBay has also expanded to accommodate access through wireless devices for added convenience.
FIGURE 6. easy-to-use online service (Figure 6. increasing the risk of outages. which is much more demanding on the system. Other content includes the banner ads. eBay's site has to process thousands of live bids simultaneously.
. 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. eBay had a 'wake up call' when the website crashed for 8 hours.OVERVIEW OF EBAY'S WEBSITE
Customisation Simple. they have continually invested in system capacity. This contributes to the community feel.6 . Content Content is primarily user generated through the items listed for sale. angering hundreds of thousands of eBay users. Nevertheless. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. categorically arranged. topically arranged. and adds to the experience and the discovery of the auction process. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated.6).
For many 'eBayers' . However. autonomy. empowerment and equality. and is considered by many users as one of the best features on the website. which is then added to the partner's trading profile. a "giving-board" for charitable donations to user-identified causes.eBay represents more than just a place to buy and sell goods. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. eBay offers its users category-specific chat rooms. which is posted to the site. and share information. the culture has come under strain due to the company's rapid growth from a small community into a "big city". discuss topics they care about. working together and helping each other offline. To encourage this sense of community.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Customisation eBay provides My eBay which allows users to customise the interface. respect.g. eBay's community has a distinct culture based on trust. Recent initiatives such as the development of local websites in major US cities (e. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. It is a place where people can meet with similar interests. bulletin boards. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. In addition. for the people". After a sale. This has created a self-regulating mechanism that encourages good behaviour. Community eBay attributes much of its success to a strong sense of community among its users. a monthly newsletter. has enabled eBay to foster a strong sense of community on its site.as eBay users refer to themselves . 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). and in doing so. eBay Boston. the community spirit and personal relationships also transcend the online experience. and there are several reports of eBay users vacationing together. Whitman describes eBay's community culture as a site "of the people. e-mail. eBay Salt Lake City) have helped them restore that community feel. by the people.
the largest of which was with AOL. links to high traffic sites. fraud. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. This also reinforced the company's respect for. its user community.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Connectivity eBay has created an affiliate network. eBay has invested in customer care and support to ensure people conduct safe transactions. eBay's approach to customer care has evolved over time. eBay employed a "remote" customer support model. By using its own enthusiastic. and the introduction of two specialised customer support groups . which was dedicated to monitoring the site for illegal and infringing activities.
. and respected members of its own user community to serve as customer support representatives. eBay was able to cost-effectively offer 24x7 customer support early on. and willingness to empower. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. but they have other partnerships with over 150 websites of varying scales. This was later expanded to include customer support representatives who worked out of eBay's headquarters. geographically dispersed users as customer support representatives. which was dedicated to investigating misuses of the system (e. knowledgeable. Customer Care eBay controls neither end of the transaction. These people worked from their homes. answering e-mails and responding to questions posted on the site's bulletin boards. Customer support activities were constantly upgraded and expanded as the business developed. During the first two years. Communication eBay maintains close communication with its members. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics.the Community Watch group. eBay also engaged in marketing partnerships. shill bidding) and helping to resolve user-to-user conflicts. and the Safe Harbour group. in which the company hired active. As such. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself.
as a result of the high quality experience it provides. The AOL partnership was one of the largest strategic partnerships on the Internet . eBay has been able to attract a large customer base. Based on this. who tended to be serious collectors. and highlight opportunities created by e-commerce. In 1998. they spent $12. $75 million joint marketing alliance and development deal. eBay decided that it would not enter into major portal advertising deals in the short term. eBay Magazine.a four-year.
.6. Recent promotional initiatives include its new publication.g. Selling. The Official eBay Guide to Buying. provide a wealth of information about the 'ins and outs' of trading on eBay.4 Brand-Building Strategy
The majority of eBay's users have been attracted through word-of-mouth. and Collecting Just About Anything and eBay for Dummies. and facilitate the spread of positive wordof-mouth. but they have other partnerships with over 150 websites of varying scales. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Through this combination of its advertising efforts and targeted promotions. representing about 40% of revenues. Early on. 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. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Doll Collector) and appearance in trade shows. eBay has since expanded its promotion efforts and engaged in marketing partnerships. As a result. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. eBay transformed from a pure online play into a 'clicks-and-mortar' company.3 million in advertising. and two books. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. the largest of which was with AOL. Mary Beth's Beanie World. These new publications appeal to the collecting spirit. they decided to target their marketing efforts on these heavy users. and maintained the same ratio for 1999. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.
eBay's compelling value proposition. I think you are not well served by moving incredibly rapidly and not doing things well72".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'.contributing to its strong lead and competitive advantage. and according to research carried out by eBay. have been key factors that have contributed to the success of the brand. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. as they could not opt for a 'go slow' strategy. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions.the ultimate network effect .
Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. such as the Feedback Form. have been instrumental in building a 'quality' customer base. and their first-mover advantage. which in turn attracts more sellers . their ability to create a new market using Internet technology. which were all ideas of eBay users. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. very fast. eBay has also faced difficult challenges in scaling the organisation fast enough. and according to Meg Whitman.Business Week. This has become part of the eBay culture. eBay attracts a broader selection of buyers.6. However.
6. however. And while we have to move very. Their focus on heavy users and targeted promotions.businessweek.com)
. 21st May 1999 (www. the Personal Shopper and the eBay Life Newsletter. This is achieved by listening to their community (learning) and developing new improved products and services (relating). As a result. "the devil in so much of this is in the detail. which has established eBay above other online auction communities.
Canada. Gap online exploits the accessibility and convenience of the Internet. America Online (AOL) and Gap Inc. surpasses $9 billion in net sales and increase earnings by 54% over previous year.interbrand. In late 1997. 1999
. October 8.com' . 'Clicks and Mortar at Gap. Currently. as cited in Lee.7.see Appendix A Gap. California GapKids opens its first store BabyGap is born Gap opens its online store at www. GapKids. up from $20 million in 199875. According to Jeanne Jackson. Gap started selling items online . letting customers access the Gap brands.com.'s website (www. This success is largely due to their simple formula . as cited in Lee.800 stores in the US. In addition."to deliver style.TIMELINE AND MAJOR MILESTONES
The first Gap store opens in San Francisco. head of Gap Online.7
CASE STUDY: GAP. The Gap offers a balance of modern and seasonal styles of clothing.7. Gap's online sales tripled in 1998 alone.6
1969 1986 1989 1997 1998 1999 -
GAP & GAP.COM . to provide customers with greater convenience and options. Germany and Japan. announce multi-year partnership. 1999 76 Jeanne Jackson. the growth prospects are enormous.
TABLE 6. and are still relatively small compared to Gap's $9 billion in annual sales. from jeans and T-shirts to khakis and jackets.COM
6.gap.$100 million.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.htm) 75 Jeanne Jackson.an early convert to the then-revolutionary idea of clothes retailing on the Internet.
Interbrand (www. and today it is the 29th most valuable brand in the world73. Gap. and BabyGap. October 8. and Gap online provides access to the full range of items at Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. L. Inc.gapkids.Business Week. online sales are only available to US customers. service and value to everyone74". Its reach extends across more than 1.2 Value Proposition
Gap's simple.babygap. and analysts estimate that sales in 1999 amounted to $50 .com/about_us.com) . and provides useful insight into how traditional brands can leverage their strength online.com' . "this is about being clicks-and-mortar. UK. Gap Inc.com and www.
6.Business Week.com is an example of successful crossover marketing.gapinc. however.1 Company Overview
Gap opened its first store in San Francisco in 1969. L. 'Clicks and Mortar at Gap. from shirts to accessories and hard-to-find sizes. standard styles are well suited to online shopping. whether in the store or online76".
making navigation even faster. D. making it convenient. Executive Vice President of Global Marketing.The 7Cs Framework
In terms of the 7Cs framework.. very efficient"77. feel and design of the site is consistent with the bricks-and-mortar stores.7. Visiting the gap.3 Sources of Value . the extensive integration of Gap's online and offline activities are clearly evident.. 'Mind the Gap'. Unlike Barnesandnoble. and Customer Care.
FIGURE 6. easy-to-use site with option to view text-only (no graphics) to allow quick loading
Hill.com store one immediately notices the consistency between the online and retail stores... Michael McCadden. from the blue and white colour scheme to the easy-toshop format .very easy. and easy-to-use. April 18. reinforcing its brand identity. This personality is reinforced online through the simple structure and layout.com.. 1998
. but provides customers with the option of viewing text-only.OVERVIEW OF GAP'S WEBSITE
Immediate customer recognition The look.. The Observer. The site also offers sharp graphics.. describes the company's brand personality as "direct and straightforward. Gap Online primarily focuses on Convenience..BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.7 .making visual references to its offline roots. Content.
com also provides a Gift Central feature which offers gift suggestion from Gap. which would not be possible in the store. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Gap. promoting its specials and including links directly to items on Gap's website. and goods bought online get returned at the same rate as store purchases .
. once customers are registered online. Gap made a decision to charge sales tax on online sales. without causing complications. as well as sample all of the latest shades of fingernail polish on a virtual hand.com's content consists of detailed information on its full range of products. Gap has also developed an affiliate programme. Gap does not provide any community features on its site. and had recently established marketing deals with
AOL and CDnow. customers can return goods purchased online to their neighbourhood store. Gap. In addition. In order to integrate its offline and online operations and logistics.com. Gap communicates with customers through customised e-mails. standard styles are well suited to online clothes shopping. allowing shoppers to contrast different cuts and styles. Gap's simple. twice a month. GapKids.as most Gap online shoppers have a good idea of how Gap clothes fit. and customers can register to get e-mail reminders of upcoming holidays and birthdays. Unlike the case of Boo. and customers can view their latest TV adverts for buying inspiration.com allows customers to track the status of online purchases and provides contact information on the nearest store. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. Gap. By doing so. The Gap site connects to other Gap online stores including GapKids and BabyGap. and BabyGap.
either online or in stores. which can be used towards future purchases.com in return for a 5% commission on every sale referred through the site. it is fully leveraging its offline presence to build awareness. To convert walk-in shoppers to cybershoppers.gap. Most of Gap's online traffic is generated by leveraging its physical presence. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. etc.com" on the display screens between transactions. on shopping bags and even on the cash register.ship". Gap has held in-store campaigns to get customers to submit their e-mail addresses. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.gap.com.) that also promote the online store.com has been able to piggy-back on The Gap's offline advertisements (in TV.
. billboards.shop.Extensive Integration
Gap. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.7. on counter cards. Magazines. • They offer Online discounts and promotions such as the ShopCard. • Gap.4 Brand-Building Strategy . In certain high traffic Gap and GapKids stores. or to refer shoppers to Gap's website. which displays "Shop online at www. Gap has also supplemented this with online promotions: • In August 1999.com) in store windows with the slogan "surf.com has also created an affiliate programme encouraging sites to establish links to gap. In addition. Gap secured a 3-year commerce and marketing agreement with AOL. they send the customer a $20 Gap ShopCard. by displaying the URL (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. by offering a 10% discount and free shipping on their first online purchase.com has links with CDnow to cross promote websites. These efforts doubled the size of Gap's e-mail database. however. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. whereby for every $100 a customer spends at Gap Online. • Gap. providing a useful way to directly reach customers.
com is an example of successful crossover marketing. such as Gap. Gap had a significant advantage over pure online players in attracting customers and building critical mass.7. whereas established companies. have already established the back-end operations and can use them as the cornerstone of their online business.5 Conclusion
Gap. provides existing customers with added value through the convenience of purchasing online. The Internet. By aggressively marketing both the stores and the website. With their brand awareness and network of retail outlets. Gap has been able to significantly strengthen their brand-customer relationship. on the other hand. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. and can also provide access to different customer segments who may not usually buy the products at all .thereby increasing the company's reach. and allowing each to leverage the strengths of the other.
. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. thereby reinforcing its brand identity. Pure online players have to invest heavily in logistics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. while reaping the benefits of low customer acquisition costs and extended reach.
com) . The Stock' . CEO of Yahoo!.D students at Stanford University. According to Timothy Koogle. The concept exploded (through word-of-mouth) and in less than six months. As the first online navigational guide to the web. the amount of information. The company's global web network includes 23 world properties outside the US. who started an online guide as a way to keep track of their personal interests on the Internet. There's nothing in the real world to compare to that79".businessweek.Business Week.2 Value Proposition
At the core of Yahoo!'s value proposition.The Company.com)
. two Ph. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. household and business user reach.interbrand. 1998 (www.1 Company Overview
In April 1994. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. Yahoo! was founded by David Filo and Jerry Yang.
Interbrand (www. As such. Yahoo! is a leading guide in terms of traffic. and the number of websites continues to explode.8
CASE STUDY: YAHOO!
6.8.8. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. from e-mail services to stock quotes and much more.
6. Yahoo! offers a range of supporting services that add value. September 7. lies the directory . all in a single location. advertising. The Strategy. and is one of the few Internet companies to turn a profit early in the development of the Internet. the site was receiving 1 million hits per day. Yahoo! has since morphed from an ordinary search service into a global Internet communications.see Appendix A 'Yahoo! .a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.
Yahoo! Shopping launches personalised shopping service
6.600. to provide web-based services to PalmTM handheld computers . More recently.Receives $1 million in venture capital funding from Sequoia Capital
$33.Site goes live September .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.8).Yahoo! acquires eGroups .Yahoo! forms agreements with Palm Inc.8 million IPO (2. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.3 Sources of Value .000 shares at $13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
TABLE 6.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.7
YAHOO! .TIMELINE AND MAJOR MILESTONES
1994 April . mobiles.com. and unveils Yahoo! Digital Introduces Bill Payment services
.8. 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! unveils Yahoo! Finance Vision .Yahoo! Launches Business-to-Business Marketplace . to allow access. Palm computers). is the way it has structured and displayed information.
. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. TVs. 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. regardless of platform (i.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! extended its convenience through its Yahoo! Everywhere service.e.com allowing them to offer person-person payment solutions .The 7Cs Framework Convenience
Central to Yahoo!'s success.Yahoo! acquires Arthas.
the partner. and quick-toload webpages
Important contact point to search information on any subject
Yahoo! has pursued a broad range of deals with content and commerce companies. easy-touse.OVERVIEW OF YAHOO!'S WEBSITE
Customisation options Simple.
.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 6. and has been at the heart of Yahoo!'s growth and development. from stocks and sports results to weather and air fares. By tailoring the information to users' preferences. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. Yahoo! has increased customer loyalty and retention rates. and more importantly. This creates a win-win situation as its satisfies Yahoo!. well structured.com and CDnow. ranging from daily news and weather reports to road maps and books. while providing partners access to a large customer base. They have formed multiple alliances and partnerships with leading online companies such as Amazon.9). Their thrust has been to provide valuable content to customers. the end-user.
My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.8 . and is similar to a custom tailored newspaper (Figure 6.
In 1999. to provide its customer base with access to useful links and content.
Yahoo! responds to customer inquiries via e-mail. 101
.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
FIGURE 6. telephone and even traditional mail. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and e-mail. Yahoo! spends more on customer support than most companies.
Connectivity is Yahoo!'s core product. It keeps customers on the site for longer periods. where groups of people with shared interests can communicate through chat. and is driving Yahoo!'s multiple partnerships and alliances. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site.OVERVIEW OF MY YAHOO!
Instant name recognition Customer's preferred categories of news and information
Customisation is a 'sticky' application. and contributing to their reputation as a quality service provider. and plans to incorporate other features such as online chat to facilitate communications. and the nature of the navigation business. one-to-many.
Yahoo! has developed customisable web communities called Yahoo! Clubs. and many-to-many. In addition. Yahoo! acquired GeoCities. reinforcing the brandcustomer relationship. fax. or to make it their home page.9 . message boards. and encourages them to return frequently.
Intelliquest. 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. an approachable nature. (www. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . Yahoo! avoided characterising itself as a technology-oriented company. recognise the name Yahoo!. Yahoo! extended beyond this to use traditional offline media. Yahoo! also encourages customers to e-mail ideas and feedback. and it formed a critical link in Yahoo!'s brandbuilding strategy.intelliquest. Given the unease with which the average consumer approaches technology. While Internet companies were targeting existing Internet users through the use of online promotion methods.8. As a result.people who are not yet online but are likely to use the Internet in the near future.a sense of irreverence. 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. In 1996.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
By positioning itself as a site that users frequent often. and through communications via email. Yahoo!'s brand-building success starts with its name.4 Brand-Building Strategy
Yahoo! is a marketing machine. Yahoo! maintains close contact with customers. Yahoo! aggressively promoted the site through public relations. Their strategy was to target "near surfers" . This was especially important. At the time this was considered a breakthrough.
'Web Survey Shows Yahoo! Tops'. as experience surfers tend to be loyal to their search engine. TV commercials and radio spots during drive time. Yahoo! would be one of the first sites that they visited. therefore. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". by building a recognised brand name. and an inherent friendliness.com)
. which conveyed the brand's irreverent personality. and its implications of a good time. and according to Intelliquest80.
sailboats. including backpacks. Yahoo! has paid little for this exposure. as well as TV shows (Ally McBeal.Yahoo! Press Release. May 3. a little wacky and inviting'. They even have a barter deal with the San Francisco 49ers. breath mints. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. new services and customised features highlight their ability to relate to customers' needs.yahoo.higher than all other services81. a monthly magazine guide to what's new on the web and it has co-branded products. Once customers access the site.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . to create Yahoo! Internet Life. services and contests with well known brands such as Ben & Jerry's.with its name being plastered on everything. customers quickly discover its value and through a high quality experience (7Cs). VP-Brand Marketing. and yo-yos. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. and 76% turned to Yahoo! before visiting another search engine or navigational site. stating that "if we wait to hear about it in the news. 1999. Visa and MCI. 1997 (www. According to a recent study. ER) and Hollywood movies. snowboards. August 26. parachutes. Their innovation. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. Yahoo! has managed to cultivate high brand loyalty. We need to be one step ahead in order to have a better service than our competition82". organisers.it must reinforce the image of the company as 'a service that is fun. the research shows that 73% of Yahoo! users bookmark the service . s4
. They also teamed up with publisher Ziff-Davis Co. T-shirts. Although this seems like a shotgun approach. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
In addition. Yahoo! adopted 'guerrilla marketing' techniques . Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. p. According to Karen Edwards.
'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . which has been instrumental in establishing Yahoo! as a household name. it's too late.Advertising Age.
8. while attracting new customers. if a user cannot find what it is searching for. they have carried out extensive partnering.8. s4
. In addition.
'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! has benefited from a first-mover advantage. Yahoo! has built a strong brand. alliances and acquisitions to provide added value services to their customers. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence.
6. and other search engines at the bottom of its search results page).5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage
Yahoo! was first to market with a detailed search engine. first to go public. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. VPBrand Marketing of Yahoo!. As a result of all these factors. Yahoo! points them to its competitors by including links to AltaVista. from its convenient and logical structure and display of information. and its openness (for example. that have set it apart from the pack. its excellent customer service. These relationships have provided end-users with added-value.com. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6. May 3. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". As the first online navigational guide to the web. They have maintained that lead through the creation of a high quality end-to-end customer experience. GoTo. p. have created a distinct brand identity that differentiates the brand and appeals to its target market. its choice of partners.Advertising Age. 1999. In addition. while also associating Yahoo! with well known brands. with a large customer base and high levels of customer loyalty. first to turn around an annual profit. HotBot.
Customer Focus & Reputation for Excellence
Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. Yahoo! has invested relentlessly in new services and marketing programmes. and first to go mainstream by advertising its name using traditional media. To maintain its lead. to its simple design. their innovative promotional and guerrilla marketing techniques. and has cultivated a reputation for excellence.6 Conclusion
Yahoo! is one of the most successful brands on the Internet.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
as well as determine how far the brand can be meaningfully stretched to other products and market segments. while ultimately benefiting the end-customers. The most successful partnerships are symbiotic matches. particularly to secure content and widen reach to new customer segments and niches. ranging from online methods to traditional offline media. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. to distinguish themselves from competitors.
Unique Positioning Concept & Distinct Brand Image
Strong brands are developing unique positioning concepts. brands are harder for competitors to emulate. these companies must have an inherent understanding of their brand identity and core values.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Strong Communications Programme & Efficient Customer Acquisition Strategy
The key Internet brands have made major commitments to building awareness and have developed multifaceted. variety. In addition. offering customers the best in quality. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. whereby each party benefits from the other's expertise or skills. As a result. and convenience.
. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. content. but also provide added value to the brand community. integrated customer acquisition strategies. a company can leverage the partner's brand and reputation to reinforce its own. to maintain consistency. and exclusive alliances can lock out competitors from valuable content or online real estate. Alliances and partnerships play an important role in achieving speed and momentum. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. these companies are creating even stronger value propositions. leading brands have focused on building strong partnerships and alliances.
Strong Partnerships and Strategic Alliances
Rather than doing everything on their own. By distinguishing their offering and focusing on unique sources of value-added. and by partnering with well-known brands. before it fractures. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market.
and it can acquire customers while it is still inexpensive to do so. these well-publicised brands also took off. These brands are accumulating knowledge about customers. and develop a detailed understanding of their customers' needs. In many cases. are leveraging this customer knowledge (learning) to nurture relationships (relate). to create new services and content that satisfy customer needs. By getting to market early. and benefited from additional hype. and it aligns itself with the most influential venture capital sources. by providing better services. and differentiating it from other brands. By leveraging unique customer information. giving the brand an edge. Many strong online brands were also early-movers on the Internet. and by focusing on customer needs. and traffic. As Internet penetration exploded. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. The challenge then lies in keeping up the momentum. these innovations are difficult for competitors to reproduce. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. through past transactions and solicited input. and are continuously adding new services and functionality to their sites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Intense Customer Focus
Leading online brands have an intense customer focus.
. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. A first-mover advantage is an important asset for an online brand. customisation and customer care.
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. that comes with innovation. the company benefits from the buzz. It locks up important content and distribution partnerships. and extensive word-of-mouth due to its novelty. the innovations are the result of the company's ability to data mine its vast database of customer information.
Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering.
the concepts. with the emergence of wireless access and new platforms. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. Therefore. established fulfilment systems and infrastructure.
The Internet has radically changed the business and competitive environments. however. In addition. one component remains unchanged .
7. In doing so. 110
. building relationships and satisfying needs. drawing on several case studies from business markets. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. and a physical presence (tangibility) . there has been a limited time horizon to evaluate the durability of Internet brands. tools and key factors outlined in this dissertation are also applicable to business markets. while reaping the benefits of lower customer acquisition costs and extended reach. They possess critical assets that give them an advantage over pure online start-ups. Nevertheless. clicks-andmortar brands are providing customers with true added-value. They have an established brand. Brands and brand-building tools tend to be associated with consumer markets. Yet while everything is being turned upside down.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
Ability to Leverage Offline Brand and Assets
Bricks-and-mortar brands are often well positioned to succeed on the Internet. Nevertheless. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Through extensive and seamless integration. they are equally important in business markets. Having established a strategic perspective on building online brands.2
OPPORTUNITIES FOR FURTHER RESEARCH
Given that the commercial Internet only began to take off in 1994. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. established customer relationships. As such. expand the brand experience to meet customers' expectations in the online world. ongoing research would be necessary to build on the findings of this dissertation.value remains (and always will) the basic building block for every successful brand. would represent an exciting opportunity for further research.factors that clearly differentiate them from pure players. an in-depth analysis. but at the same time.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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.interbrand.648 1.043 8.143 2.568 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
APPENDIX A .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
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)
83.310 11.281 11.076 3.792 3.231 12.262 1.603 5.132 15.184 1.766 14.694 17.761 1.048 20.422 1.781 33.404 4.155 7.550 12.193
.361 1.804 2.527 3.806 2.502 33.894 14.895 2.909 7.319 1.021 26.830 14.423 2.510 8.681 2.634 1.197 32.464 3.845 56.806 11.596 3.Interbrand's Ranking of the Top 60 Brands (www.225 11.654 43.275 30.932 4.313 2.329 4.283 4.643 3.052 6.231 24.595 17.602 4.985 2.147 9.781 17.181 21.101 9.
(Harper & Row).The McKinsey 7S Framework
The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. and as the business environment changes. They must move quickly to capture new opportunities. and structures are aligned differently. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET
APPENDIX B . and the emergence of a knowledgebased economy. R. constantly innovate. all their operations. 'In Search of Excellence'. activities. It is critical that all these dimensions come together and are re-enforcing. Internet companies must be able to move at warp-speed. all these dimensions must change accordingly. with the fast pace of technological change. & Waterman. However. whereas entrepreneurial Internet companies must focus on 'managing for change'. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. commit and deploy resources. respond to competitive and market dynamics. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. As a result..
THE MCKINSEY 7S FRAMEWORK
Traditionally. the informal management style and the constant strategy re-calibration. customer empowerment. T. and reorganise as appropriate. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. As such. global competition. 1982
. showing how they are interrelated.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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