S U C C E S S F U L

ON

THE

INTERNET

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

UNIVERSITY OF CAMBRIDGE

ROBIN S. CLELAND
SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CONTENTS
SUBJECT PAGE

CHAPTER 1
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure

INTRODUCTION

6
7 9 9 11

CHAPTER 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

THE NATURE OF BRANDS

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

2.9

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

CHAPTER 3
3.1 3.2 3.3

BUILDING BRANDS

24
25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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

1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CHAPTER 4
4.1 4.2 4.3 4.4 4.5 4.6

THE INTERNET

33
34 34 35 35 39 40 43

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

CHAPTER 5
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

BUILDING BRANDS ON THE INTERNET

44
45 45 47 48 50 51 52 57 59 60

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

CHAPTER 6
6.1 6.2

CASE STUDIES

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

6.3

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

2

2 Value Proposition 6.1 Company Overview 6.com 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1 Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.8.8.4.4 Brand-Building Strategy 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .6 Conclusion Case Study: eBay 6.The 7Cs Framework 6.5.5.8.4.2 Value Proposition 6.6.1 Company Overview 6.3 Sources of Value .4 Brand-Building Strategy .2 Value Proposition 6.5 Conclusion Case Study: CDnow 6.5 Conclusion Case Study: Yahoo! 6.5 Other Factors That Contribute to their Brand Leadership 6.The 7Cs Framework 6.com 6.3 Sources of Value .7 6.5.8 Case Study: Boo.4.The 7Cs Framework 6.4 Brand-Building Strategy 6.6.7.7.1 Company Overview 6.5.8.6.8.4 6.8.4 Brand-Building Strategy 6.2 Value Proposition 6.The Failure of Boo.4 Brand-Building Strategy 6.5.7.1.3 Sources of Value .3 Sources of Value .7.Extensive Integration 6.7.4.1 7.The 7Cs Framework 6.1 Company Overview 6.5 Conclusion Case Study: Gap.5.5 Other Factors that Contribute to their Brand Leadership 6.6 6.3 Sources of Value .2 Value Proposition 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6.com 6.4.5 6.6.

5 Figure 6.4 Figure 6.com's Website Amazon.3 Figure 5.8 Figure 3.com's Website Overview of Boo.2 Figure 3.7 Figure 5.7 Figure 5.5 Figure 5.8 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.3 Figure 6.2 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 .8 Figure 5.4 Figure 4.2 Figure 4.5 Figure 4.2 Figure 5.1 Figure 2.7 Figure 2.3 Figure 2.6 Figure 6.6 Figure 2.3 Figure 3.4 Figure 2.4 Figure 5.6 Figure 4.1 Figure 1.1 Figure 4.7 Figure 6.3 Figure 4.9 Figure 6.4 Figure 4.9 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 .1 Figure 6.1 Figure 5.1 Figure 3.com's Associates Programme Overview of BarnesandNoble.2 Figure 2.5 Figure 2.2 Figure 2.6 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones eBay .com .6 Table 6.4 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones CDnow .Timeline and Major Milestones Gap.Timeline and Major Milestones Boo.com .1 Table 6.1 Table 6.com .Timeline and Major Milestones BarnesandNoble.3 Table 6.5 Table 6.2 Table 6.com .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

As such. America Online (AOL) and eBay have been able to build powerful brands in a few years. Amazon. In the midst of this. As such.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.1 3. Internet companies such as Yahoo!. customer affiliation and level of sales.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and is triggering the need for new brand-building strategies and tools. there has been an explosion in the online world . Amazon. McKinsey Analysis (www. whereas it has taken decades for traditional companies to achieve the client base. Figure 1. It is empowering customers with more options and more information to make informed decisions.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.an explosion that is also a harbinger of how business will operate in the future.5 2.com) 7 .com's range of 4.5 million book titles). the Internet is changing fundamentals about customers. aggressive Internet start-ups have emerged. The Internet also represents a fundamental shift in how buyers and sellers interact. relationships.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.com. FIGURE 1.1 . products and services reconfigured. interaction and relationship building.mckinseyquarterly.com Source: Securities and Exchange Commission Filings. This is creating new challenges and opportunities. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.g. that these Internet start-ups have achieved.9 3.2 3. and business models revamped.1 OVERVIEW Over the past few years. as they face each other through an electronic connection. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. while providing new tools for promotion. service and brands. Supply chains are being rethought. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.YEARS TO REACH $100 MILLION IN SALES 6 5. creating strong brands that are putting established brands at risk.com1 Amazon.com noble.9 2.0 1.

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

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

to provide an in-depth analysis of the psychological and social dimensions of brands. marketing. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com and Gap. relationship management.com). Conclusion: Discusses the key findings and areas for further research. nor desire. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. The combination of cases provides a useful and practical insight into brand-building issues and problems. there is more work in popular rather than academic literature. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Hypothesis (Framework): This is based on the literature review and secondary data. however. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. 10 . and factors that contribute to a brand's success. Consequently. eBay and Yahoo!).com). The absence of academic literature on Internet branding posed a major obstacle. CDnow. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. and is used to provide insight into some of the factors that contribute to the development of successful brands. While there is no attempt. certain key factors are highlighted in their relevance to the dissertation. as well as a recent Internet failure (Boo. These are further refined using the insight obtained through the case studies. this also highlights the true value of the dissertation.com. the literature review draws on leading academic thinking in more established areas such as brand management. strategy and economics.

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

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

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

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

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

selective distortion. However.Analysis. Consumers differ as to which product / service attributes they see as important. FIGURE 2. it is important to clarify customers' underlying buying behaviour and the buying process. The buying process consists of five stages (Figure 2.4)... Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. the consumer learns about competing brands. In the evaluation stage.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. a consumer will be inclined to search for more information. (Europe: Prentice-Hall) 8th Ed. 'Marketing Management .FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. p. Consumers develop a set of brand beliefs about the attributes of competing brands. and pay the most attention to the brands that will deliver the sought benefits. and selective retention.3 . 16 . These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). either through heightened attention or through an active information search. Implementation. These beliefs depend on their previous experiences with the brand. P. This can be triggered by internal or external stimuli (advertisements). the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.attitudes of others and unexpected situational factors (Figure 2. Through gathering information. and Control'. and the effect of selective perception. Therefore.3).194 The process starts when the buyer recognises a need. two factors can intervene between the purchase intention and the purchase decision . it is critical to understand what attributes consumers value. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Once aroused. 1996.

Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. 17 . locking out potential competitors. or avoid a purchase decision is heavily influenced by perceived risk. or dissatisfied with the purchase decision. they will be dissatisfied and look for alternative brands in the future. and a preference for recognised brands they can trust. word-of-mouth. Expensive purchases involve some risk taking. postpone. After a consumer has actually purchased the product or service.the customer will be highly satisfied. their negative attitude may influence the consumer's purchase intent or vice versa. somewhat satisfied.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. Customer satisfaction and loyalty are essential to creating successful brands. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. advertising and communication. they will evaluate their level of satisfaction . A consumer tries to deal with this by gathering information from friends. as these services are intangible and therefore. and especially important when dealing with purchases made through the Internet. customers make decisions purely on the basis of their expectations.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. These expectations are formed through a combination of past experiences. A consumer's decision to modify. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. even delighted. If perceived performance and quality exceed their expectations then they are satisfied. If performance falls below their expectations. Customers' expectations are particularly important when dealing with services.

..Harvard Business Review. 91 Loyalty is derived when customers are continuously satisfied over time. This satisfaction encompasses the whole experience and not just a company's products or services. & Sasser.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and Johnson. D.those who actively attack the brand telling others not to buy from the company. C.Figure 2. Federal Express. Southwest Airlines and Xerox7. M. Hewlett-Packard. Nov-Dec 1995. and believe that it will always act in their best interest.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Trust is critical for a brand's success.5..Harvard Business Review. E. FIGURE 2. Nov-Dec 1995 Hart.. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. & Sasser. 'Why Satisfied Customers Defect' . Marketing Management. Johnson & Johnson. T. At the opposite end of the satisfaction spectrum are "apostles" . 'Why Satisfied Customers Defect' . 6 7 Jones. Saturn.. Customers that are passionately or emotionally loyal are those that have built trust in a company. Spring 1999 18 .6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.customers who are satisfied and loyal and talk favourably about the brand . The customers at the bottom end of the scale are "terrorists" . W. T. 'Growing the Trust Relationship'. E. p.

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

343-373.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. there are brands that customers perceive as acceptable and would not resist buying. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 20 . which goes well beyond the satisfaction of a specific need. Beyond this. 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier.6 .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. FIGURE 2. Journal of Consumer Research. A stronger brand enjoys a high degree of brand preference over competing brands.. However. March 1998. pp.7 .7). Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). almost irreplaceable bond as well as potentially to the negative feelings of betrayal. S.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. a 'powerbrand' tends to have a high degree of brand loyalty. FIGURE 2. and understanding the needs and buying processes of the target market is essential. there are brands that are unknown by most buyers. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. whereby customers would be unwilling to substitute it with competitors' offers.

strong brand associations. trademarks. perceived quality.. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.Create Awareness .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. According to David Aaker (1991).8. 1991 21 .8 ..Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. D. and other assets such as patents. The major brand assets are brand loyalty. FIGURE 2. 1991 10 Aaker. (New York: Free Press). which is the value of the brand over and above its commodity value. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". name awareness.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . The benefits of each are outlined in Figure 2. and relationships with distributors and strategic partners. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. D. (New York: Free Press).

market share and profits .. to make sense of the offer.Satisfaction linked to the attractiveness of the brand. 3rd Ed. & Tellis.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .To save time and energy through identical repurchasing and loyalty Guarantee . J.To be sure of buying the best product in the category. Journal of Marketing Research.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. to its logo.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.8.To have confirmation of your self-image or the image that you present to others • Continuity . (London: McGraw Hill).2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.8. 'Consumer Market Research Handbook'. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. the best performer for a particular purpose • Characterisation . 1992 Worcester. P. production and marketing. 1986 13 Golder. N. May 1993..Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. 22 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.To be clearly seen. 158-170. in the following ways: • Brands.Typically a brand leader obtains twice the market share of the number two brand.. and the number two twice the share of the number three12. brands perform several functions that add value and customer benefits: • Identification . pp. • Brand Leverage . 11 12 Kapferer.. 'Strategic Brand Management'. & Downham. (New York: Free Press). J. G. to its communication • Ethical . to quickly identify sought after products • • Practicality ..Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . Premium pricing increases revenue. R. The brand leader is the most profitable and all beyond number two are unprofitable13.

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

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

This is illustrated in Figure 3.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.1 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. If the offering is developed properly.1 INTRODUCTION Building a strong brand is a complex task.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . it should provide a satisfactory experience and lead to a willingness to buy again. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. which are created through advertising. selling.1. 3. confidence and brand equity are built. the next step is to get customers to try the brand. promotion. brand awareness. public relations. FIGURE 3. The major characteristics of successful brands are also reviewed. and keep it turning. To entice trial and repeat purchase requires triggering mechanisms. Once this has been established. This chapter spells out the traditional brandbuilding process. and direct marketing. highlighting important factors that contribute to the success of each step along the way.

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

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

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

Finally. below-the-line activities. 29 . its strengths and opportunities.3 . (New York: Free Press). it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.how far the brand can be meaningfully stretched to other products and market segments.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. advertising.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. understanding the brand's core and style helps set the perimeters of brand extensions .g. and through line and brand extensions. 'Strategic Brand Management'. It also facilitates consistency in the message being transmitted through presentation (e.. J. website design. Secondly. 1992 The brand prism enables management to understand the brand. structure and ease of use).

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

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

Traditionally. but it makes the task easier. It is easier to capture a share of the consumer's mind and build a customer base. companies must actively communicate it to the target audience to entice trial. Once the framework has been established and the organisation configured to provide this proposition.If the brand is not the innovator.176-177 32 .a segmentation scheme. or if the brand is surpassed by superior offers from competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. 2nd Ed.Satisfactory experience is the major determinant of brand values... and making it more difficult for competitors to emulate. which will add value and distinguish it from competition. while providing new tools for promotion.A successful brand requires an effective selling. the brand is meaningless. If the quality of the experience deteriorates. 1998. 3. • Time and Consistency . As customers build trust in the brand through satisfaction of use and experience. brands were not built quickly. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.Being first into the market does not necessarily bring success. • Unique Positioning Concept . The Internet provides the opportunity for companies to create compelling value propositions never before possible. 19 Doyle. Without building awareness. and establish a trusting relationship. As a result. it must have a unique positioning concept . advertising or promotional campaign. pp. It often takes years to build up the added values. then its position will be undermined. P. trigger trial and reinforce commitment to it. its function and psychological values. including: • A Quality Product / Service Experience .7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. it has a profound impact on the traditional brand-building process. value proposition or augmented brand. As such. comprehension and intention to buy. • First-Mover Advantage . strengthening the brand further. when the brand has no competitors to rival its position. interaction and relationship building. (Europe: Prentice-Hall). companies have the opportunity to start building relationships with their customers. which will communicate the brand's existence. • Strong Communications Programme . 'Marketing Management & Strategy'.

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

Figure 4. creating new challenges and opportunities.1 INTRODUCTION The Internet is transforming the business environment.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1. Hypertext allows information to be organised in a user-friendly way that is easily accessible. 34 . and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. news groups and mailing lists.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. E-MAIL Is the part of the Internet that most users use at present. and the 'world wide web' (www) . In essence. In doing so. This chapter provides an overview of the Internet and its defining characteristics. it is a common technology platform that allows computing devices to communicate with each other. and provides the opportunity for dynamic interaction. The three core channels include e-mail (the most common). The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people.1 . highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and a critical source of added value. Information is becoming a major part of the products and services that people buy. but in practice not in real time. which contain hypertext and pictures. FIGURE 4. it offers a number of alternative channels that enable businesses and people to communicate.

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. These qualities eliminate the barriers of time and space that exist in the physical world.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. anywhere.2 (Note: 35 . regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale). • It Allows for Two-way Communication and Interactivity .this radically alters the process of interaction between communicating parties.not previously available with mass medium forms of communication. 7 days a week. the Internet lets individuals and companies build interactive relationships with customers and suppliers. These defining characteristics have fuelled its explosive growth. • It Overcomes the Barriers of Time and Space . 4. The Internet can also be accessed at any time . ubiquitous links to anyone. The context of the Internet and certain key developments are highlighted in the Figure 4.1 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. By allowing for direct.The Internet is a global network and can be reached from everywhere.2.24 hours a day. when the United States Defence Department developed the 'ARPAnet'. allowing both parties to identify each other and build one-to-one relationships . These characteristics combine to create a very powerful medium. which was intended to link military networks together.

3.000 10.000. FIGURE 4.000 100.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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 1969: 10.Figure 4.000. 1998.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.com) 36 . Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 1.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1.economist. 1996 (www.000. as cited in 'E-Business Technology Forecast' .2 .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.a PricewaterhouseCoopers Report.

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

reveals the wide range of areas where people are embracing the Internet .com) 38 . as cited in the Economist Intelligence Unit (EIU). FIGURE 4.eiu.5.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.Figure 4. chat rooms. These activities highlight the adoption of the Internet as an interactive.5 . entertainment) and purchasing (37%) .from communicating (90% use e-mail) and sourcing information. April 13. 2000 (www. communication and information tool. to interacting (e.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).

Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. telephone) is that the Internet goes beyond just enabling transactions. Instead there is a website. no order book. April 2000 39 .e.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. and people. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. they all project the value e-commerce transactions to grow at unprecedented rates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. and no cash register. The main difference between the Internet and other electronic media (i. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. projected by Gartner Group. fax. There is no need to travel to a physical location.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. However. FIGURE 4.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions.6 . The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. software. The buyer and seller 'face' each other through an electronic connection. web browsers. content.

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

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

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

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

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

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

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

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

additional products. customisation for individual customers. and other features can be added or changed at low marginal cost. the costs approach zero32. and in the case of information-based products. as illustrated in Figure 5. G. 180-182 48 . R.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. As a result. increases disproportionately as more people join the network. as the benefits of scale are overwhelmed by the disadvantages of size31. FIGURE 5. additional customers and transactions can be managed with limited fixed cost investment. 1989.. (also referred to as 'viral economics').1 . 'Positive Economics'. businesses and online communities that rely on connectivity can enjoy 'network effects'. (London: Harper & Row). However. this is not the case on the Internet. where the value of the network.1.. and the value that each member realises. 7th Ed. each additional unit sold does not cost more than the last to deliver. Once the up-front investments are made (for research and development and technology infrastructure). Even more important. pp.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. Similarly.

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

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

friends to visit it.com The classic example of viral marketing is Hotmail.hotmail. they tell all their 51 .000 subscribers within a few years of launch. When a user builds a website.1 The Case of Hotmail. whether for communications or community. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). • Each new user becomes a company salesperson. saying: • "Get Your Private. and then propel the message even further to their own ever-increasing circles of friends and associates. Geocities enables people to create personal websites for free. 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). Today they are the largest e-mail provider in the world with over 40 million users.com. a company now owned by Microsoft.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. eGroups and Geocities (both recently acquired by Yahoo!).5 years. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. but Hotmail signs up more than 150.5. they will have a powerful viral opportunity at their disposal. A traditional print publication would hope to reach 100. sign up for their own free e-mail. In fact. Free Email at http://www. and the message spreads organically. and they created a subscriber base more rapidly than any company in history.000 subscribers every day. In its first 1. Hotmail. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. seven days a week. and in doing so spread the word for Geocities. Hotmail acquired over 12 million subscribers.com was one of the first free web-based e-mail services. where they have never carried out any promotional activities.

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

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

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

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

news up-dates. online chat. and online surveys. and FAQ pages (Frequently Asked Questions) to solve problems. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. delivery and return options. (www. It is important in building relationships. live chat.marketwatch. serves this purpose and helps to build customer loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.6 . activities. which provide targeted and unique (customised) benefits to the customer. customer care activities can involve providing a variety of payment. 45 MarketWatch. Customer Care Online customers often require assistance and reassurance. toll-free telephone numbers. The development of loyalty programmes. events and subjects of interest to the customer. Therefore. Customers share security and privacy concerns.com) 56 . Other tools such as bookmarking the page can also facilitate connectivity. as well as informing and reminding customers of special offers.CUSTOMER ACCESS TO INFORMATION CUSTOMER INTERNET ACCESS DEVICE SOFTWARE AND BROWSER PORTAL VERTICAL PORTAL WEBSITE CUSTOMER SIDE INTERNET SIDE User-to-site connectivity focuses on providing incentives for users to connect back to the site. 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. In addition. Communication can be tailored to specific user interests and should allow for two-way interaction. and can be provided through e-mail. customer support at all stages of the interaction is important.

4 . M..) to online tools. 180-183 (www. No. etc.7. Waitman.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ . Learn and Relate.2. Therefore. Engage.Attract. Adoption). and bring people to the site for the first time. Magazines. S. pp. Interest.mckinseyquarterly. The company must build awareness and communicate its value proposition to its target customers. R. FIGURE 5. billboards. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. This is more difficult online than offline. 'Marketing to the Digital Consumer'. & Zeisser. McQuade. Newspapers. because there is no physical presence. e-mail notifications and banner advertisements. Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. including affiliate programmes with other websites. Retain. McKinsey Quarterly.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. This model consists of five stages ..7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. visibility relies solely on Communication. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Trial. modified to take into account of the interactive dynamics of the Internet.. Evaluation. A. The mechanisms to communicate range from traditional media (TV.. 1996. links from directory searches (Connectivity).8.7 .Awareness.

multiplied by the expected rate of transactions.ebusinessforum. Attracting customers is only the first step in building online brands. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 58 .3) is useful to ensure that a company develops a distinct and consistent brand identity. affiliate programmes.1 3. Companies then need to engage customers to obtain their interest and participation.6 3. discounted over the expected duration of the brand-customer relationship.4 4. Engage With the multitude of choice available on the Internet.7 4.4 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.8 . Fig.WEBSITE PROMOTION METHODS .3 2. it is important to quickly engage consumers' interest before they move on. as cited in 'Targeting Consumers via the Internet' . Kapferer's Brand Prism (Ch.5) 2.3 3. public relations and television advertising.Economist Intelligence Unit 2000 (www.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 3.8 4.3 Source: Forrester Research. 3.0 3.4 3. The key factors at this stage are Convenience combined with interesting Content.5 3.2 4.com) The most effective methods are direct e-mail.

Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. This helps to create a customer base that spends more time and money at a site. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Radio). Building up a knowledge database on each customer . Content is the basic driver of retaining customers on a site. a company can create value by providing a personalised online experience. • The Internet supports brand-building activities where there is a need to build a relationship. The initial site registration provides an early opportunity to obtain useful information. such as groceries and convenience goods. can create value for the customer and help build the brand-customer relationship. and forge closer relationships than any offline operator. 5.8 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. and must be continuously updated due to the multiple visit nature of customers. attitudes and behaviour). Certain product categories. 59 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.9). Learn The Internet provides extensive opportunities to learn about consumers (demographics. The objective is to increase the conversion rate (% of browsers converted into buyers).who they are and why they shop online. 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. and what additional products and services are they interested in provides companies with valuable information which.g. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. TV. if used properly. Communities and Customisation are other sticky applications.

9 ..2. The 7Cs Framework outlines the key components of the brand experience and the sources of added value.mckinseyquarterly. and the need to stimulate the other senses (taste.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. due to high delivery and transaction costs (relative to the value of the product).from the promises made in the value proposition. Waitman. However. McKinsey Quarterly. and as the relationship develops. In order to create "apostles".. companies must provide a satisfying end-to-end customer experience .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. • Brand-building favours products that can be sold online. it is not economically feasible to sell certain products. it is critical for companies to build relationships and foster brand loyalty. No. engaging and retaining customers. the interaction provides the ability for companies to learn from their customers and relate. 180-183 (www. 'Marketing to the Digital Consumer'.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. M. A. Given the high acquisition costs of online customers. 5. 60 . S. touch. the experience is the brand. providing further added value. pp. McQuade.. smell). The interactive brand-building process involves attracting. These case studies provide a practical insight into how companies are building their online brands..9 CONCLUSION On the Internet. especially in small quantities. 1996. & Zeisser. R. to its delivery to the customer. The next chapter analyses the brand-building efforts of seven companies.

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

economist. its value proposition.com. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). and has sales of over $2 billion.2.Amazon. It is the 57th most valuable brand in the world47. and has equity investments in several e-tailers. November 11. France. 'Amazon.see Appendix A. including: increased selection. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).com has become synonymous with e-commerce.com and Yahoo!. 47 48 Interbrand (www.COM 6.1 INTRODUCTION This chapter provides an analysis of seven companies.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. discounted prices. Amazon provides increased added value on several dimensions. greater convenience. In addition. 6.com) .The Economist.2.Goldman Sachs Report. 2000 (www. combined with its levels of customisation and customer service.com) 62 . easy. it is the most visited e-commerce website in America. and other key factors that have contributed to its success (or failure). Amazon serves over 23 million customers from 160 countries. its brand-building strategy (how it generates traffic). and is one of the few Internet brands that is recognised all over the world. Boo. Not a River' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 outlines Amazon's timeline and major milestones. Through its provision of a one-stop shopping experience. Figure 6. Amazon has cultivated a reputation for excellence. and one of the top two or three in Britain. CDnow.com. Each case is presented in the same format including.com .com's success stems from its compelling value proposition. and enjoyable experience. a company overview. Amazon. Germany and Japan49. Amazon has been able to differentiate itself from other online competitors. The cases are presented in the following sequence . and higher levels of customisation and service than the traditional shopping experience allows. 6.1 Company Overview Amazon.It's an Ocean. the sources of added value (using the 7Cs Framework).com launched with a mission to use the Internet to transform book buying into a fast. Gap.2 Value Proposition Amazon.com.interbrand. February 26.2 CASE STUDY: AMAZON. eBay. Barnesandnoble. 1999 49 'Amazon's Amazing Ambition' . Amazon. In July 1995. more information. innovation and delivering on its promises. In addition.

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

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

and Customisation Amazon provides customised features and services. More recently. converting them into a storefront for Amazon. which helps to build loyalty and create switching costs. By leveraging its vast customer base. Amazon's content is not reproducible by competition. and has developed an Associates Programme. Amazon introduced Amazon.4. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service.thereby increasing conversion rates.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 . In doing so. and customer interaction.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. real-time shipping and backorder notices. from its shopping basket applications which lists the estimated time to delivery reliably. therefore. while driving up repeat purchases and cross-selling opportunities. Community Amazon has also added a community element to the purchasing process.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.2. to the proactive notification of new items of interest. linking it to a large number of other sites. from the customer recognition at the point of interface (Figure 6. Amazon creates one-to-one relationships with its customers. 65 . These are discussed in more detail in Section 6. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. This customer-centricity is evident in all Amazon's activities. Connectivity Amazon has built relationships with high traffic web portals and sites. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. creates a competitive advantage.

Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. New Yorker and The Economist. and customers are also e-mailed when the items are shipped from the warehouse.2. Newsweek.com hot-link and offer specific books of interest to their visitors. The Associates Programme has been phenomenally successful. Amazon offered Associates referral fees of up to 15%. Eyes and Editors.a move that along with the novelty of its business model and the newness of the Internet. Business Week. In July 1996. 6. Once orders are placed. which only applied to sales that resulted from the initial click-through. 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. attracting member sites of all sizes. In the second half of 1996.2).000 members. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. 66 .4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Instead of paying directly for this exposure. Through the first half of 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal.000 by August 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. it began to advertise in print media and online . and by 1999 it had over 200. two personalised services. In addition. The Financial Times. increasing to over 500. This enabled Amazon to reach more customer segments and niches (Figure 6. they are subsequently confirmed by e-mail. enticing them to return to the site and purchase repeatedly. As a result of all these factors (7Cs). and not subsequent purchases. help maintain contact and build traffic by e-mailing customers when desired products or books become available.

Amazon has used viral marketing techniques through customer reviews. multiyear deals involve exclusive book-selling rights.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.com About Me .com. Amazon also established agreements with AltaVista. and primary button placement on web portal search engines.com Refer-A-Friend .com).BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.2 . Prodigy and @home.de became the local provider for Yahoo! Germany and Amazon.AMAZON. In return. 67 .uk the local provider for Yahoo! UK & Ireland. Amazon closed deals with five of the six most visited Internet addresses. In addition. free eCards and gift certificates (which customers send to friends.COM'S ASSOCIATES PROGRAMME Source: Amazon. Yahoo!.amazon. The Yahoo! agreement. spreading the word for Amazon. and you are given a $5 gift certificate for each customer you provide.allows customers to create a personal profile (with pictures) on the site. each friend is sent a $5 Amazon.customers are encouraged to provide e-mail addresses of friends. thereby promoting Amazon. Netscape's Netcenter and NetSearch. Therefore. Excite. mutual links. People tend to tell their friends about it. including: America Online (AOL). These multimillion-dollar. was also linked to Amazon's entry into Europe Amazon. From July 1997 to December 1998.com's website (www. and Geocities. • Amazon.co.com gift certificate (in your name). the customer acquisition cost is only £10. Interesting viral initiatives include: • Amazon.

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

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

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

is one of the best known traditional booksellers in the United States. book databases. Barnesandnoble.com) .com launched its website (www. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.TIMELINE AND MAJOR MILESTONES . Barnes & Noble Inc.Launches Internet Radio . contacts. and 470 B.Acquires minority stake in NotHarvard. 40% owned by Bertelsmann AG.) established by its parent company. Barnesandnoble.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . Dalton bookstores (located in shopping malls). all front-end operations (marketing.3 CASE STUDY: BARNESANDNOBLE.Barnes & Noble went online at AOL May .Barnesandnoble. Barnesandnoble. TABLE 6. promotion) between the online store and the retail stores have been kept separate.1 Company Overview Barnesandnoble. rare.Launches BNTV . and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). as it could capitalise on the infrastructure and back-end operations (warehouses. etc.2 1997 January BARNESANDNOBLE.Announces distribution relationship with New York Times September .com is the fourth largest e-commerce retailer54. Inc. and 20% owned by the public.Acquires equity stake in Mightwords .COM 6.com is approximately 40% owned by Barnes & Noble.barnesandnoble.COM .Barnes & Noble University opens registration for free online courses .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . Besides books.Barnesandnoble. and is the second largest online bookseller (after Amazon. music. Barnes & Noble Inc. However. Barnesandnoble. magazines.Offers same day delivery in Manhatten .Launches Affiliate Network December . Currently.com provides other online categories offering software. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com was able to 'hit the ground running'.com ..Launches Video Store 71 .3.com's timeline and major milestones is outlined in Figure 6.Barnes & Noble.com announces strategic relationship with Palm Computing .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. Launched in 1997.com and Microsoft announce that they will create an eBook superstore .com).2. prints & posters and related products.

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

They have developed an affiliate programme that links sites to Barnesandnoble. has yet to leverage its strong brand in cyberspace. 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. However.3. Although. These initiatives have generated traffic to the site. Barnesandnoble. Barnesandnoble.64 billion. Barnesandnoble.1 billion. Instead. Netscape and Microsoft Network. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). while Amazon.a replica of Amazon's Associates Programme.com had over 17 million. Webcrawler. it lags behind first-mover Amazon.com in return for a commission on any purchases that they originated . and avoid charging sales tax in states where it has stores56. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . December 17. The 6. reasons for this are explained in the next section.6 million.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Lycos. compared to Amazon. As of February 2000.com closed 1999 with 4 million customers.4 Brand-Building Strategy Barnesandnoble. and Barnes & Noble Inc.The Wall Street Journal.000 affiliates in its referral network.com. Both offer 'associate programmes' that let other websites link to their sites.com's market capitalisation was $251 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both try to foster a community of readers by letting customers post reviews online.com was valued at $21. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . this programme had more than 300. however. Both offer customisation that permits users to personalise the experience. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Yahoo!. while Amazon. prevent cannibalisation of its existing business. and both are expanding globally.com's 1999 revenues were $202. Barnesandnoble.com's $1.com has created a high quality website and customer experience.

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

com and has given them the image of a second rate 'me too' brand. feature for feature) has failed to differentiate Barnesandnoble. and its lack of innovation (by copying Amazon. and allowed them to offer stock options as compensation and achieve a high market capitalisation. significant market momentum. customer relationships and offline presence . and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". and was further up the growth curve. 57 'Bn. it also caused a major setback.com. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. August 4.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com has been able to create a high impact and high-quality customer experience. The Press have also contributed.com's late start in 1997. Barnesandnoble.3. a wellestablished Internet brand.com) 75 .6 Conclusion Although Barnesandnoble. meant that Amazon.com's experience is instructive.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.its key differentiating factors.com .Not a Best Seller' . otherwise they risk losing out to other online competitors. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.forbes. 2000 (www. Barnesandnoble. it has not been able to establish itself as the leading online bookseller. In addition. The company failed to leverage its established brand. by portraying them as slow and clumsy in comparison to the more nimble Amazon.Forbes. even if that means eating into their existing sales.

com collapsed through lack of funds. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).TIMELINE AND MAJOR MILESTONES . P. If a clothing brand is on the Boo site. and eventually debut in Asia. Boo. 58 Kajsa Leander. and the resulting loss of investors' confidence.4. arranged through J.fails and appoints KPMG as liquidator. They intended to add France.Marketing Week. founder and Chief Marketing Officer of Boo. Company is put up for sale.Multi-million pound advertising campaign created by BMP DDB .com opens its virtual doors' . as well as create a kid's site. November 2000 January February May 6. not the limited range you might get at most London fashion shops58". Boo. receiving $125 million of funding. Germany and Denmark. "our marketing thrust is not based on prices.1 Company Overview Founded in 1999.2 Value Proposition According to Kajsa Leander.3 1999 Mid year BOO.com had set the record as Europe's best-funded European Internet Start-up.Appeals for $30 million more funding .First sign of problems . CMO of Boo. it means all that brand's product line is available.com. it's about range and convenience. Italy and Spain within a few months. TABLE 6. Morgan. However. as cited in 'Boo. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.4 CASE STUDY: BOO.Raises funding of $125 million . After a high profile launch. Finland. among others. and Converse. and included high profile investors such as Bernard Arnault.Announces it has only 500.4. On going live.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".COM . Sweden. Everlast.they redesign site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and was billed as one of Europe's hottest e-commerce ventures. 1999 76 .000 unique visitors .Site goes live . Puma. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). within six months Boo.COM 6. Boo.com entered six markets: US. sack 20% of staff and sell stock at 40% discount . due to its poor performance and inability to build a customer base.com provided a range of 18 fashion and footwear brands including DKNY. England. June 10. Boo.com.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE

Miss Boo

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

77

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
59
60

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

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

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'How to Acquire Customers on the Web' .5 million distribution deal with Lycos Signs three-year. On 19th July 2000.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .CDnow and Time Inc. CDnow is the leading online music store.179-188 63 CDnow website (www.000 music-related products and 650.Site goes live . It has a customer base of 4 million people. D. and they aim to "make every visit to the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 62 Hoffman. whether for browsing or buying. $18.Launches merged CDnow/N2K site . and one of the most popular shopping sites on the Internet62. This unprecedented degree of access to music and information is the core of CDnow's value proposition. features. and was the first site to offer the sale of music downloads and custom CDs. by twin brothers Jason and Matt Olim. May-June 2000. & Novak.ten times the selection of a conventional bricks-and-mortar music store). CDnow was acquired by Bertelsmann AG. daily music news.Raises $10 million through private placement .000 sound samples. former arch rival .5.. CDnow provides access to over 500. TABLE 6. customisation and a wealth of information and content to help in the purchase decision.000 music related items . guides to music genres.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.cdnow.1 Company Overview Founded in 1994.000 people.Harvard Business Review.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .com) 80 . announce marketing alliance . CDnow is also driving the digital distribution of music.Merges with Columbia Records . pp. T.Forges distribution partnership with Yahoo! $65. as well as music reviews. and exclusive interviews and reviews from CDnow's award-winning editorial staff. $22. and an average daily audience of over 800.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.TIMELINE AND MAJOR MILESTONES . convenience.5 CASE STUDY: CDNOW 6. good prices.Partnership program with Geffen Records . cover art.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.5. a valuable and rewarding experience"63.Merges with N2K.

The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. CDnow has leveraged the reputation of their brands to reinforce its own.. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). 81 .5 . easy-tonavigate. For example.Figure 6. etc. to make it easier for customers to explore new music and make informed purchasing decisions. FIGURE 6. cover art. By partnering with well-known content providers. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow has cultivated similar relationships with MTV. The whole process of searching for albums or music titles to the actual purchase is simple . and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. and has secured rights to music reviews.5.5.3 Sources of Value . artists biographies.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.

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

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

Press Release. with repeat customers accounting for more than 50% of sales. 1998 .Hampel & Stefanides (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . it is in this context that the large investments in advertising and partnerships make sense. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. and to increases in the customer base of more than 30% quarter-to-quarter. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.cdnow. • Word-of-Mouth . 1998: $56. The story of how CDnow was founded in a basement.4 million). CDnow's promotion strategies have attracted high levels of traffic.htm) 84 . and scaled it awareness-building efforts. word-of-mouth accounts for the lion's share of CDnow's customers. April 28. Public relations efforts helped to generate word of mouth and influence sales.com) 65 'Pioneering in Cyberspace' .com/cdnow.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.(www.CDnow made public relations a high priority brand-building tool.hsny. with 44% of sales coming from new customers65.5.they were the first site to offer the sale of music downloads and custom CDs. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . This has contributed to a 225% increase in sales (1997: $17. resulting in increased conversion rates. In fact. The company continually pushed for new distribution partnerships to widen its sphere of influence. It is a powerful source of acquiring new customers at low cost. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. 6.4 million. both in the online and offline worlds. It is constantly adding new functionality to the site and has been innovative in its offering . as a way to fuel very lucrative word of mouth.As for many successful online retailers.

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

from collectibles and antiques to electronics and toys.Company Overview' .com) 70 'Meg Whitman at eBay Inc.eBay website (www.com) 'eBay . flea markets and auctions.2 Value Proposition eBay offers consumers an efficient. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. Auctions represent a platform. 6.000 new items joining the "for sale" list every 24 hours69. Since its launch in September 1995. CEO of eBay. or the payment for the item . and eBay receives a transaction fee that ranges from 1.the closest thing in the offline world are trading forums such as classified ads. 1st October 1999 86 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.efficient one-to-one trading in an auction format. eBay effectively created a new business model never before possible . According to Meg Whitman. Auctions are an enabler.ebay. eBay is not about auctions. Sellers pay a nominal fee for placing an item up for sale.6.Company Overview' . (A)' .6 CASE STUDY: EBAY 6.6. with the number of unique daily visitors setting a record of 1.25% to 5% of the final sale price on any item sold. transportation and other overhead costs. extensive selection and geographical reach.ebay.eBay website (www. 24 hour a day. and eBay never takes possession of the item being sold. and 450. shipping.A Harvard Business School Case Study. People perceive the auction format to offer better prices. and eBay provides added value through its convenience.g. There are over half a million new auctions. Individuals use eBay to buy and sell items in more than 4. with emphasis being placed on its unique community feel and culture. the eBay community has grown to include more than 10 million registered users.300 categories.removing the need for inventory. "at its core.782 million in January 200068. The buyer and the seller work out the logistics of the transport (e. as cited in 'eBay . global trading place for buying and selling personal items in an entertaining auction format. 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. payment) between themselves. This is a new market . garage sales. collectable shows.

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

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

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

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

and maintained the same ratio for 1999. and facilitate the spread of positive wordof-mouth. who tended to be serious collectors. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. they spent $12. the largest of which was with AOL. eBay decided that it would not enter into major portal advertising deals in the short term. eBay Magazine. and Collecting Just About Anything and eBay for Dummies. representing about 40% of revenues. Based on this.3 million in advertising. provide a wealth of information about the 'ins and outs' of trading on eBay.a four-year. Early on. and highlight opportunities created by e-commerce.6.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. Through this combination of its advertising efforts and targeted promotions. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Mary Beth's Beanie World. $75 million joint marketing alliance and development deal. 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. Recent promotional initiatives include its new publication. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. eBay transformed from a pure online play into a 'clicks-and-mortar' company. and two books.g. 91 . As a result. eBay has been able to attract a large customer base. In 1998. they decided to target their marketing efforts on these heavy users. The Official eBay Guide to Buying. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. These new publications appeal to the collecting spirit.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Doll Collector) and appearance in trade shows. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. The AOL partnership was one of the largest strategic partnerships on the Internet . Selling. eBay has since expanded its promotion efforts and engaged in marketing partnerships. as a result of the high quality experience it provides. but they have other partnerships with over 150 websites of varying scales.

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

6 1969 1986 1989 1997 1998 1999 - GAP & GAP. In addition. In late 1997. 'Clicks and Mortar at Gap. Gap. and analysts estimate that sales in 1999 amounted to $50 ."to deliver style. whether in the store or online76". up from $20 million in 199875.1 Company Overview Gap opened its first store in San Francisco in 1969. 1999 76 Jeanne Jackson.COM .com.$100 million. Gap's online sales tripled in 1998 alone. Canada.com/about_us.com) . L. from shirts to accessories and hard-to-find sizes. Germany and Japan. Its reach extends across more than 1.Business Week. This success is largely due to their simple formula . head of Gap Online.interbrand. letting customers access the Gap brands. GapKids. UK.an early convert to the then-revolutionary idea of clothes retailing on the Internet.babygap. however. "this is about being clicks-and-mortar. and BabyGap. Gap started selling items online . 6.gapinc. 1999 93 . 73 74 Interbrand (www.7. TABLE 6.see Appendix A Gap. the growth prospects are enormous. as cited in Lee. Gap online exploits the accessibility and convenience of the Internet.com and www.htm) 75 Jeanne Jackson.7 CASE STUDY: GAP. to provide customers with greater convenience and options.com' . and Gap online provides access to the full range of items at Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. and are still relatively small compared to Gap's $9 billion in annual sales.2 Value Proposition Gap's simple. service and value to everyone74".gap.800 stores in the US.com is an example of successful crossover marketing. 'Clicks and Mortar at Gap. Currently.'s website (www. announce multi-year partnership. standard styles are well suited to online shopping.Business Week.7. October 8. online sales are only available to US customers. According to Jeanne Jackson. Inc. America Online (AOL) and Gap Inc. and today it is the 29th most valuable brand in the world73. California GapKids opens its first store BabyGap is born Gap opens its online store at www. October 8. surpasses $9 billion in net sales and increase earnings by 54% over previous year. L. and provides useful insight into how traditional brands can leverage their strength online.COM 6. Gap Inc.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. The Gap offers a balance of modern and seasonal styles of clothing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as cited in Lee.com' . from jeans and T-shirts to khakis and jackets.gapkids.

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

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

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

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

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

More recently.TIMELINE AND MAJOR MILESTONES 1994 April .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.e. regardless of platform (i. is the way it has structured and displayed information.7 YAHOO! .. and unveils Yahoo! Digital Introduces Bill Payment services .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Palm computers).000 shares at $13. 99 .600. Yahoo! extended its convenience through its Yahoo! Everywhere service. Their goal is not to list everything under the sun.com.Yahoo! Launches Business-to-Business Marketplace . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! unveils Yahoo! Finance Vision .Site goes live September .8.8).Yahoo! acquires eGroups . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. TVs. . to allow access. to provide web-based services to PalmTM handheld computers .Yahoo! forms agreements with Palm Inc. 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.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 . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.8 million IPO (2.The 7Cs Framework Convenience Central to Yahoo!'s success.3 Sources of Value .com allowing them to offer person-person payment solutions . mobiles.Yahoo! acquires Arthas.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Yahoo! Shopping launches personalised shopping service 6.Receives $1 million in venture capital funding from Sequoia Capital $33.

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

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

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

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

Yahoo! has built a strong brand. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. To maintain its lead. 6. p. its excellent customer service. s4 104 . have created a distinct brand identity that differentiates the brand and appeals to its target market. May 3.6 Conclusion Yahoo! is one of the most successful brands on the Internet. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. Yahoo! has benefited from a first-mover advantage. HotBot. and other search engines at the bottom of its search results page). 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! points them to its competitors by including links to AltaVista. and has cultivated a reputation for excellence. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. from its convenient and logical structure and display of information.com. first to go public. first to turn around an annual profit.Advertising Age. and its openness (for example. to its simple design. while attracting new customers.8. As the first online navigational guide to the web. while also associating Yahoo! with well known brands. They have maintained that lead through the creation of a high quality end-to-end customer experience.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. 1999. its choice of partners. GoTo. Yahoo! has invested relentlessly in new services and marketing programmes.8. In addition. with a large customer base and high levels of customer loyalty. they have carried out extensive partnering. In addition. VPBrand Marketing of Yahoo!. As a result of all these factors. These relationships have provided end-users with added-value. and first to go mainstream by advertising its name using traditional media. their innovative promotional and guerrilla marketing techniques. that have set it apart from the pack. alliances and acquisitions to provide added value services to their customers. if a user cannot find what it is searching for.

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CHAPTER 7

CONCLUSION

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7.1

CONCLUSION & DISCUSSION OF KEY FINDINGS

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

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7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

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

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

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

596 3.792 3.694 17.283 4.275 30.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .830 14.281 11.502 33.423 2.052 6.181 21.845 56.806 11.568 3.021 26.132 15.766 14.648 1.895 2.147 9.101 9.184 1.404 4.048 20.464 3.781 17.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.361 1.806 2.510 8.319 1.603 5.932 4.155 7.231 24.Interbrand's Ranking of the Top 60 Brands (www.231 12.804 2.761 1.262 1.781 33.681 2.329 4.595 17.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.313 2.interbrand.043 8.634 1.909 7.602 4.197 32.310 11.143 2.643 3.422 1.193 112 .550 12.894 14.985 2.076 3.225 11.527 3.654 43.

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

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BIBLIOGRAPHY

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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