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.The 7Cs Framework 6.1.7.com 6.8.5 Other Factors that Contribute to their Brand Leadership 6.6.4 Brand-Building Strategy 6.7.1 Company Overview 6.5.1 Company Overview 6.4 Brand-Building Strategy 6.5.4.1 Company Overview 6.5 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6 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 7.4.6 6.4 6.1 7.4 Brand-Building Strategy 6.5 Conclusion Case Study: CDnow 6.8.5 Conclusion Case Study: Yahoo! 6.5.com 6.The 7Cs Framework 6.5 Conclusion Case Study: Gap.3 Sources of Value .5.2 Value Proposition 6.3 Sources of Value .8.5 Other Factors That Contribute to their Brand Leadership 6.The 7Cs Framework 6.3 Sources of Value .4 Brand-Building Strategy 6.The 7Cs Framework 6.6.3 Sources of Value .6.com 6.1 Company Overview 6.6.The Failure of Boo.Extensive Integration 6.8 Case Study: Boo.1 Company Overview 6.2 Value Proposition 6.8.2 Value Proposition 6.4.7.7 6.4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 Brand-Building Strategy .7.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .4.2 Value Proposition 6.6 Conclusion Case Study: eBay 6.8.7.8.5.3 Sources of Value .6.5.

8 Figure 6.7 Figure 5.1 Figure 6.7 Figure 5.5 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 .2 Figure 2.2 Figure 3.3 Figure 5.1 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.5 Figure 2.6 Figure 4.1 Figure 3.6 Figure 6.3 Figure 4.8 Figure 3.6 Figure 5.com's Associates Programme Overview of BarnesandNoble.2 Figure 5.4 Figure 4.4 Figure 2.com's Website Amazon.5 Figure 6.4 Figure 4.4 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.4 Figure 5.2 Figure 6.1 Figure 1.3 Figure 6.2 Figure 2.1 Figure 5.7 Figure 2.9 Figure 6.2 Figure 4.5 Figure 5.1 Figure 4.3 Figure 2.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .6 Figure 2.8 Figure 5.7 Figure 6.3 Figure 3.com's Website Overview of Boo.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.com .1 Table 6.com .com .Timeline and Major Milestones eBay .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .Timeline and Major Milestones Boo.7 The Emerging Brand-Building Environment Amazon.2 Table 6.Timeline and Major Milestones Gap.Timeline and Major Milestones CDnow .4 Table 6.6 Table 6.5 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones BarnesandNoble.3 Table 6.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

relationships. that these Internet start-ups have achieved.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.5 2.com's range of 4. This is creating new challenges and opportunities. 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. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.1 OVERVIEW Over the past few years.mckinseyquarterly. FIGURE 1.com Source: Securities and Exchange Commission Filings.2 3. as they face each other through an electronic connection.1 3.com) 7 .9 2. In the midst of this. Internet companies such as Yahoo!.1 .com noble.com1 Amazon.g. It is empowering customers with more options and more information to make informed decisions. Amazon. McKinsey Analysis (www. The Internet also represents a fundamental shift in how buyers and sellers interact. and business models revamped. and is triggering the need for new brand-building strategies and tools. while providing new tools for promotion.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. whereas it has taken decades for traditional companies to achieve the client base. Amazon.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. America Online (AOL) and eBay have been able to build powerful brands in a few years. Figure 1.5 million book titles). creating strong brands that are putting established brands at risk. products and services reconfigured.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. aggressive Internet start-ups have emerged.0 1.9 3. interaction and relationship building. As such. As such. service and brands. the Internet is changing fundamentals about customers.an explosion that is also a harbinger of how business will operate in the future. there has been an explosion in the online world .com.YEARS TO REACH $100 MILLION IN SALES 6 5. customer affiliation and level of sales.

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

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

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

The final chapter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Chapter 7. The nature of brands. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. highlighting some key factors that have contributed to brand success. as well as the interactive approach to attracting customers and building loyalty. and outlines the opportunities for further research. by outlining the impact of the Internet on the business and competitive environment. summarises the key findings. The limitations of the Internet in terms of brand-building are also discussed. 11 . Chapter 4 provides an overview of the Internet and its defining characteristics. Chapter 2.4 STRUCTURE The next chapter. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. their purpose and value are discussed. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. Chapter 3 explores how brands have traditionally been built. Chapter 6 examines the brand-building efforts of seven companies. provides an analysis of leading academic literature in relation to branding. This chapter sets the context within which online brands must be built. and introduces the core concepts that form the backbone of the dissertation.

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

A. The chapter proceeds to describe the influence of brands on the buying process. and highlights the importance of brand management. These concepts are central to brands and brand-building. both to customers. & Maughan. and for the company.see Figure 2.2 WHAT IS A BRAND? According to Rita Clifton. p. unravelled to reveal the nature of brands and their reason for existence. (London: Macmillan Press Ltd. D. The concept of brand equity is outlined. 'Building Strong Brands'. 1996.). these layers are Brands are made up of many layers and dimensions. but extends further to encompass added values derived from factors such as the brand-customer relationship. and to companies.a leading specialist brand consultancy firm . and the importance of customer satisfaction and brand loyalty. 2. CEO of Interbrand Newell and Sorrell . 74 4 Clifton.. p. creates influence and generates value4" This definition truly captures the essence of a brand.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.1. 'The Future of Brands'. whether online or offline.1 INTRODUCTION In this chapter. symbolised in a trademark. both for customers. R. Branding is about creating 'value'.1 . 2000. the brand's emotional benefits and its self-expressive benefits . This value stems from the products and services that companies create and bring to the market. which. if properly managed. E. FIGURE 2. (New York: Free Press).a brand is: "a mixture of tangible and intangible attributes. vii 13 . and they form the backbone of this dissertation. explaining the value of brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.

Brands are richly endowed entities. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. It is a company's promise to consistently deliver a specific set of features. They start life as ideas. p.3 THE LAYERS OF A BRAND Brands are made up of four layers . Harvard Business Review. yet ultimately reside as consumer perceptions. the augmented brand and the potential brand .the core product or service. January-February. which grows out of the cumulative memory and the experiences customers have of products or services. For some companies.2. FIGURE 2. T. The space a brand occupies inside a customer's head can create a 'mental' patent. and services to customers.of anything'. 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include ..LAYERS OF A BRAND POTENTIAL BRAND AUGMENTED BRAND BASIC BRAND Name Service Design PRODUCT OR SERVICE Quality Credit & Terms Features Packaging Delivery & Installation Guarantees Source: Adapted from Levitt.a 'relationship'. a 'reputation'. and a 'promise'. 1980. 'Marketing success through differentiation . As such.86 14 . a 'set of expectations'. benefits.Figure 2.2 . brands are their most valuable asset. the basic brand. making their way into planning and strategy documents.

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

and the effect of selective perception. Consumers differ as to which product / service attributes they see as important. and Control'.attitudes of others and unexpected situational factors (Figure 2. (Europe: Prentice-Hall) 8th Ed. either through heightened attention or through an active information search. selective distortion.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. In the evaluation stage. 16 . However. p.194 The process starts when the buyer recognises a need. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). This can be triggered by internal or external stimuli (advertisements).. Therefore. it is critical to understand what attributes consumers value.Analysis. FIGURE 2. Consumers develop a set of brand beliefs about the attributes of competing brands. These beliefs depend on their previous experiences with the brand. and pay the most attention to the brands that will deliver the sought benefits. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Through gathering information.3). Once aroused. The buying process consists of five stages (Figure 2.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. 'Marketing Management . Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. it is important to clarify customers' underlying buying behaviour and the buying process. P..4). Implementation. 1996. and selective retention. two factors can intervene between the purchase intention and the purchase decision .3 . the consumer learns about competing brands. a consumer will be inclined to search for more information.

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

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

& Rogers. M. There is also clear evidence of this on the Internet.they provide good word-of-mouth and are the best salespeople for the product / service 2. 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. In this way. consistent orders Satisfied customers are the best advertisement . the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. 8 9 Peppers. Harley-Davidson motorcycle clubs). D.Sloan Management Review.. Emotional loyalty can be also created through the formation of a strong user community around the brand. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. 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). Firstly.g. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 'The One to One Future'. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. emotional loyalty is born out of a consumer's personal relationship with a brand..com. Spring 2000 19 . 1993 McWilliam. 'Building Stronger Brands through Online Communities' . G. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.

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

name awareness. D. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 1991 10 Aaker. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. According to David Aaker (1991)..BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. perceived quality. trademarks. and other assets such as patents. strong brand associations.8 . The benefits of each are outlined in Figure 2. (New York: Free Press). which is the value of the brand over and above its commodity value. 1991 21 . The major brand assets are brand loyalty..8. (New York: Free Press). D.Create Awareness .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. FIGURE 2.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". and relationships with distributors and strategic partners.

The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. G. to quickly identify sought after products • • Practicality . (London: McGraw Hill). P. pp. to make sense of the offer. May 1993. N.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.. to its communication • Ethical . production and marketing. and the number two twice the share of the number three12.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. 'Strategic Brand Management'. brands perform several functions that add value and customer benefits: • Identification . market share and profits . 22 .8. & Tellis.To be clearly seen. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. 3rd Ed. 158-170.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. R.To have confirmation of your self-image or the image that you present to others • Continuity . 1992 Worcester. • Brand Leverage .Satisfaction linked to the attractiveness of the brand. J. in the following ways: • Brands..To be sure of buying the best product in the category. 'Consumer Market Research Handbook'. Journal of Marketing Research.. J..8. the best performer for a particular purpose • Characterisation . Premium pricing increases revenue.To save time and energy through identical repurchasing and loyalty Guarantee .Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 1986 13 Golder. The brand leader is the most profitable and all beyond number two are unprofitable13. 11 12 Kapferer. (New York: Free Press)..Typically a brand leader obtains twice the market share of the number two brand.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . & Downham. to its logo.

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

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

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

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

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

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

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

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

Through building relationships with customers. the company may supply customers with special equipment or tools (e. This focuses on establishing a longterm. encouraging evaluation and trial. & loyalty / discount cards. but enhanced customer interaction through relationship building.to move customers through the adoption process. Advertising and public relations can be effective in generating awareness and interest. companies can increase the value of each customer. multi-transaction relationship. This is often referred to as Customer Relationship Management (CRM). this process enables an exchange of information.such as airline frequent flyer programmes. Customer service is an important element of this relationship.. 18 Berry. (New York: Free Press).for example. A. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. while strengthening the position and value of the brand.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. • Structural Ties . making them less likely to switch to a competitor. Social Benefits . pp. Over time. sales promotion.by learning customers' individual needs and wants and individualising and customising service and contact with the customer.advertising. L. 'Marketing Services: Competing Through Quality'. personal selling and public relations / publicity . In this way. Internet linkages. & Parasuraman. 3. This information is a key competitive advantage. direct marketing. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits .136-142 31 . 1991. 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. companies can increase buyers' satisfaction. providing insight into customers' needs and wants. companies have used the tools of the promotions mix .g. software) to help customers interact with the company. allowing companies to communicate regularly with their customers and customise their interaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally.

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

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

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

the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). • It Overcomes the Barriers of Time and Space .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. These characteristics combine to create a very powerful medium. when the United States Defence Department developed the 'ARPAnet'.this radically alters the process of interaction between communicating parties.2. regardless of where the computer or Internet access device is physically located. These defining characteristics have fuelled its explosive growth.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . The context of the Internet and certain key developments are highlighted in the Figure 4. anywhere.not previously available with mass medium forms of communication. which was intended to link military networks together. By allowing for direct. 4.The Internet is a global network and can be reached from everywhere. 7 days a week.24 hours a day. Graph is not drawn to scale). and deliver new products and services at low cost. ubiquitous links to anyone. • It Allows for Two-way Communication and Interactivity .2 (Note: 35 . The Internet can also be accessed at any time . the Internet lets individuals and companies build interactive relationships with customers and suppliers. allowing both parties to identify each other and build one-to-one relationships . These qualities eliminate the barriers of time and space that exist in the physical world.

GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 1.a PricewaterhouseCoopers Report. 1998.3.000 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 100. 2000 Internet / ARPAnet was created Dell. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . FIGURE 4.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.2 .000. 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. as cited in 'E-Business Technology Forecast' .000.com) 36 .000 1969: 10. 1996 (www.economist.000.000 10.Figure 4.3 .

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

April 13.5.Figure 4.g. chat rooms. to interacting (e. communication and information tool. FIGURE 4. as cited in the Economist Intelligence Unit (EIU). reveals the wide range of areas where people are embracing the Internet . entertainment) and purchasing (37%) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). 2000 (www.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.com) 38 .from communicating (90% use e-mail) and sourcing information. These activities highlight the adoption of the Internet as an interactive.5 .eiu.

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

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

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

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

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

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

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

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

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

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

org Study in collaboration with The Boston Consulting Group. link revenues 32 33 Melnicoff. 21 .THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. delivering increased margin per customer . FIGURE 5. No. It also allows online companies to tap supplementary revenue streams.Figure 5. This makes it more efficient in improving product selection. With no competitors around. direct marketing. enhancing the interaction. Nov 1998 49 . As the company builds a customer base and develops a relationship with customers. advertising and referrals. 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. its ability to track customer preferences and customise offerings improves.2. including direct marketing.A Shop.. being first into a market makes it easier to capture the consumer's share of mind. cross-selling and up-selling33. fulfilment • Defensible advantage against competitors SCALEABLE.A Publication by Andersen Consulting 'The State of Online Retailing' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. R.2 . M. '5 Rules of the eEconomy'. Outlook 1999.

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

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

. Kearney White Paper. J. Price... S.An A.A Mainspring Communication Report in collaboration with Bain & Co. 2000 'The E-business Technology Forecast' . the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. making customers 'click off' to another site. 'The Value of Online Customer Loyalty and How You Can Capture it'. and 66% of people who start a 'shopping basket' fail to complete the transaction37. 2000 37 Rigby. R. Kearney White Paper. March 17. S.. As 35 36 'Creating a High-Impact Digital Customer Experience' . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. T..An A. In fact.A PricewaterhouseCoopers Report. 30% of potential customers leave sites because they cannot find what they are looking for..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.6 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. Rastogi. In essence. Promotion. The customers' ability to access and display information rapidly is extremely important36. Chu.bain.3 .THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . Zook. 2000 (www.com) 52 . Sites that are difficult to use can cause frustration. & Hancock. C. FIGURE 5.3). T. Place). Baveja. .. D.

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

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

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

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

Evaluation. & Zeisser. Figure 3.) to online tools. 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 ’ .. billboards.. including affiliate programmes with other websites. R. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Engage.mckinseyquarterly. 1996. A. This model consists of five stages .8. FIGURE 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Adoption). Newspapers. M.Attract. Magazines. e-mail notifications and banner advertisements. because there is no physical presence. Interest. modified to take into account of the interactive dynamics of the Internet.. S. Learn and Relate. The company must build awareness and communicate its value proposition to its target customers. This is more difficult online than offline. pp.2..4 .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. and bring people to the site for the first time.7. Retain.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski. etc. visibility relies solely on Communication. 'Marketing to the Digital Consumer'. The mechanisms to communicate range from traditional media (TV. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.Awareness. No. McKinsey Quarterly.7 . 180-183 (www.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. links from directory searches (Connectivity). Trial. Waitman. Therefore. McQuade.

6 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. The key factors at this stage are Convenience combined with interesting Content.5 3. 3. Fig.2 4.8 4. Companies then need to engage customers to obtain their interest and participation.3 2. Attracting customers is only the first step in building online brands. discounted over the expected duration of the brand-customer relationship. multiplied by the expected rate of transactions.3) is useful to ensure that a company develops a distinct and consistent brand identity.3 Source: Forrester Research.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 .4 4. Kapferer's Brand Prism (Ch. affiliate programmes. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 3.WEBSITE PROMOTION METHODS .0 3.5) 2. public relations and television advertising.ebusinessforum. as cited in 'Targeting Consumers via the Internet' . 58 . it is important to quickly engage consumers' interest before they move on. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Engage With the multitude of choice available on the Internet.1 3.8 .Economist Intelligence Unit 2000 (www.4 3.7 4.3 3.com) The most effective methods are direct e-mail.4 3.

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

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

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

Amazon has cultivated a reputation for excellence.2 CASE STUDY: AMAZON. Amazon. Not a River' . discounted prices. Through its provision of a one-stop shopping experience. and is one of the few Internet brands that is recognised all over the world. and one of the top two or three in Britain. Amazon has been able to differentiate itself from other online competitors.com. Gap. easy. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). eBay.com launched with a mission to use the Internet to transform book buying into a fast. 'Amazon. its value proposition. a company overview. including: increased selection. greater convenience. In July 1995.com.1 INTRODUCTION This chapter provides an analysis of seven companies. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).It's an Ocean. innovation and delivering on its promises. The cases are presented in the following sequence .com . November 11.2 Value Proposition Amazon. 2000 (www.com. 6.COM 6. Each case is presented in the same format including. It is the 57th most valuable brand in the world47.economist. Amazon.com) . Barnesandnoble. Amazon provides increased added value on several dimensions.The Economist.2. its brand-building strategy (how it generates traffic). Amazon serves over 23 million customers from 160 countries.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. more information. Boo. and enjoyable experience.see Appendix A. Germany and Japan49. In addition. 1999 49 'Amazon's Amazing Ambition' . Figure 6.com and Yahoo!.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. and has sales of over $2 billion. 47 48 Interbrand (www.interbrand.1 outlines Amazon's timeline and major milestones. February 26. it is the most visited e-commerce website in America. combined with its levels of customisation and customer service. France. the sources of added value (using the 7Cs Framework). and other key factors that have contributed to its success (or failure).com) 62 . and higher levels of customisation and service than the traditional shopping experience allows.Amazon.com has become synonymous with e-commerce. 6.1 Company Overview Amazon. and has equity investments in several e-tailers.2.com's success stems from its compelling value proposition. CDnow.Goldman Sachs Report. In addition.

Amazon launches new kitchen store . West Virginia.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear. to meet rapid growth .Amazon.com is founded by Jeff Bezos Amazon.Amazon launches health and beauty store .com.Amazon and eziba.sothebys.TIMELINE AND MAJOR MILESTONES Amazon. a tools and equipment store for professional tool users and woodworkers .com and NextCard launch co-branded credit card .com Amazon introduces "Purchase CirclesTM". universities.com Auctions and zShops provide new tools to its merchant community .Customers can shop at Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com opens its virtual doors at amazon.com Announce Strategic Investment and Promotional Agreement . Video Games and Gift Ideas Amazon and Sotheby's launch www.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.amazon.Amazon. workplaces.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com .000 members Amazon.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. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.Amazon launches lawn & patio store . Amazon. such as the Palm VII organiser. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.toolcrib.Amazon opens customer service centre in The Hague ." providing shopping from wireless devices.COM . and more Amazon launches "Amazon.com 63 .Amazon launches www.amazon. and minority investment in.Amazon surpasses 20 million cumulative customer accounts .New home living store from living.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com .com enters European book market Microsoft signs Amazon.Amazon opens a customer service centre in Huntington.com .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Amazon acquires Back to Basics Toys to add to Amazon. Software.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon. featuring thousands of bestseller lists for hometowns.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com Amazon invests in Pets.Amazon enters strategic alliance with living.com.com .com Electronics and Amazon.Amazon announces investment in kozmo.com via the new wireless pocket PC .Amazon enters into a strategic partnership with Drugstore.Amazon and online car-buying service Greenlight.Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com announce investment and strategic alliance .com Amazon announces further plans to expand distribution network to meet rapid growth.com to create a "home living" store at amazon. Ashford.com Anywhere.com invests in wineshopper.

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

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

In July 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Amazon offered Associates referral fees of up to 15%. it began to advertise in print media and online . 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. help maintain contact and build traffic by e-mailing customers when desired products or books become available.a move that along with the novelty of its business model and the newness of the Internet.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. In the second half of 1996. Instead of paying directly for this exposure. This enabled Amazon to reach more customer segments and niches (Figure 6. The Associates Programme has been phenomenally successful.000 members. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. they are subsequently confirmed by e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Eyes and Editors. enticing them to return to the site and purchase repeatedly. and customers are also e-mailed when the items are shipped from the warehouse. which only applied to sales that resulted from the initial click-through.2.000 by August 2000. Once orders are placed. Business Week. The Financial Times. attracting member sites of all sizes. As a result of all these factors (7Cs). increasing to over 500. and by 1999 it had over 200. two personalised services. Newsweek. 66 . New Yorker and The Economist. 6. and not subsequent purchases.2). Through the first half of 1996. In addition.com hot-link and offer specific books of interest to their visitors.

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

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

and our goal is to increase that gap51". 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'.. Success. Nevertheless. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations).5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. Amazon has been able to build a strong brand at relatively low cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. in June 1998. L. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. In addition. developing customer service centres and expanding its distribution network to support high levels of service. According to Jeff Bezos. Saunders. thereby diluting the value of its association with books. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. establishing a reputation for excellence and fulfilment. We were blessed with a two-year head start. 1999 69 . Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. Our secret is that we have not been competitor obsessed. As such. "Online. the balance of power shifts away from the company and goes towards the customer.a wide range of choice. Amazon was able to secure partnerships and alliances with key players. As such. However. 51 52 Hazleton. 'Business the Amazon.. Amazon received criticism for expanding its product line. We have been customer obsessed. while our competitors have been Amazon. due to the hype and coverage it was given. "we're not a stationary target. and to convey its vast size and offering.com obsessed52". management realised that Amazon had become more associated with other core brand values . July 1998. Amazon unveiled a music store.com Way'. because he wanted it to be short. (Oxford: Capstone Publishing). According to Jeff Bezos. R. This has helped them attract customers and move up the learning curve quickly. further enhancing their value proposition. Amazon's understanding of its brand identity has been a critical factor. which within six months propelled Amazon to one of the leading online music retailers. establishing Amazon as the leading online bookseller with a large customer base. Amazon is constantly seeking new ways of improving its offering.2. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. and its safe and secure delivery. memorable. For example. and according to Jeff Bezos. In addition. good value. to capture the spirit of the site.

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

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

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

000 affiliates in its referral network.com in return for a commission on any purchases that they originated . The 6.com's 1999 revenues were $202. however. compared to Amazon. Barnesandnoble. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.com's $1. 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 .4 Brand-Building Strategy Barnesandnoble.The Wall Street Journal. Both try to foster a community of readers by letting customers post reviews online.3. it lags behind first-mover Amazon. Yahoo!.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). and avoid charging sales tax in states where it has stores56.1 billion. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Lycos. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Both offer 'associate programmes' that let other websites link to their sites. Netscape and Microsoft Network.com's market capitalisation was $251 million. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.a replica of Amazon's Associates Programme. Instead. prevent cannibalisation of its existing business. reasons for this are explained in the next section.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. has yet to leverage its strong brand in cyberspace. They have developed an affiliate programme that links sites to Barnesandnoble.64 billion. while Amazon. and both are expanding globally.com closed 1999 with 4 million customers. Barnesandnoble. December 17. while Amazon. Although.com had over 17 million. Barnesandnoble.com was valued at $21.6 million. However. Barnesandnoble. Webcrawler. 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). and Barnes & Noble Inc.com. this programme had more than 300.com has created a high quality website and customer experience. These initiatives have generated traffic to the site. As of February 2000.

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

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

and eventually debut in Asia.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. arranged through J. Italy and Spain within a few months.Multi-million pound advertising campaign created by BMP DDB . However. England.3 1999 Mid year BOO. it's about range and convenience. Company is put up for sale. TABLE 6.com provided a range of 18 fashion and footwear brands including DKNY.com. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). receiving $125 million of funding. P.fails and appoints KPMG as liquidator.Appeals for $30 million more funding . After a high profile launch. 1999 76 . founder and Chief Marketing Officer of Boo.000 unique visitors .1 Company Overview Founded in 1999.4. Boo. November 2000 January February May 6. Boo.First sign of problems .Site goes live . and was billed as one of Europe's hottest e-commerce ventures.Raises funding of $125 million . Boo.com entered six markets: US. 58 Kajsa Leander. as well as create a kid's site.com had set the record as Europe's best-funded European Internet Start-up. June 10.4 CASE STUDY: BOO. Puma.4.com opens its virtual doors' . On going live.they redesign site. "our marketing thrust is not based on prices. within six months Boo. If a clothing brand is on the Boo site. and included high profile investors such as Bernard Arnault.Marketing Week.TIMELINE AND MAJOR MILESTONES . as cited in 'Boo.COM 6.COM .com. Boo.2 Value Proposition According to Kajsa Leander. Everlast. not the limited range you might get at most London fashion shops58". Morgan. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".Announces it has only 500. sack 20% of staff and sell stock at 40% discount . Sweden. They intended to add France. Germany and Denmark. and the resulting loss of investors' confidence.com collapsed through lack of funds. it means all that brand's product line is available. among others. Finland. and Converse. due to its poor performance and inability to build a customer base. CMO of Boo.

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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Raises $10 million through private placement .Launches merged CDnow/N2K site .1 Company Overview Founded in 1994.Harvard Business Review. features.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. whether for browsing or buying. CDnow was acquired by Bertelsmann AG.000 music related items .179-188 63 CDnow website (www..Merges with Columbia Records .5. guides to music genres. 'How to Acquire Customers on the Web' . and exclusive interviews and reviews from CDnow's award-winning editorial staff. by twin brothers Jason and Matt Olim. announce marketing alliance . May-June 2000. T.Partnership program with Geffen Records .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.CDnow and Time Inc.Site goes live . $18. former arch rival .cdnow.5 million distribution deal with Lycos Signs three-year.Forges distribution partnership with Yahoo! $65. TABLE 6. This unprecedented degree of access to music and information is the core of CDnow's value proposition. daily music news. It has a customer base of 4 million people.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. D.000 people. a valuable and rewarding experience"63. good prices. cover art. CDnow is also driving the digital distribution of music.com) 80 . CDnow provides access to over 500. 62 Hoffman.000 music-related products and 650. and was the first site to offer the sale of music downloads and custom CDs.ten times the selection of a conventional bricks-and-mortar music store). and they aim to "make every visit to the site.5. On 19th July 2000.000 sound samples. CDnow is the leading online music store. & Novak.TIMELINE AND MAJOR MILESTONES . and one of the most popular shopping sites on the Internet62.5 CASE STUDY: CDNOW 6. as well as music reviews.Merges with N2K.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . customisation and a wealth of information and content to help in the purchase decision.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. $22. pp. and an average daily audience of over 800. convenience.

easy-tonavigate. and has secured rights to music reviews. to make it easier for customers to explore new music and make informed purchasing decisions. For example. 81 .5. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).. The whole process of searching for albums or music titles to the actual purchase is simple .3 Sources of Value .OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.Figure 6.5. artists biographies. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. By partnering with well-known content providers. CDnow has cultivated similar relationships with MTV.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. cover art. CDnow has leveraged the reputation of their brands to reinforce its own. etc. FIGURE 6.5 .

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

this is their "most successful customer building programme64".4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. Excite and other powerful Internet content and service providers. print advertising is music-related publications such as Rolling Stone. It is a revenue-sharing arrangement. • Alliances and Partnerships . Yahoo!.They have also stuck exclusive alliances with AOL. • Traditional offline Media . According to Jason Olim. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. By keeping the brand in front of the customer in this way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. • Affiliate Programme . CDnow's initiatives include: • Banner Ads . giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. Spin.Through the Cosmic Credit Programme. customers buy music. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. they buy from CDnow. music-oriented websites. covering the entire music spectrum.000 small. CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences. CDnow is doing everything it can to ensure that the next time that 6.CDnow's advertisements are targeted to some degree. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. and radio spots on the Howard Stern Show to build a cult following among radio listeners. and spot radio to build reach. 83 .CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. and Variety. CDnow extended its distribution reach to include more than 250.5. as well as more-targeted music-related sites like Billboard.

It is constantly adding new functionality to the site and has been innovative in its offering .4 million. Public relations efforts helped to generate word of mouth and influence sales. resulting in increased conversion rates. word-of-mouth accounts for the lion's share of CDnow's customers.htm) 84 . and scaled it awareness-building efforts. as a way to fuel very lucrative word of mouth. • Word-of-Mouth . CDnow's promotion strategies have attracted high levels of traffic. April 28. 6. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.Press Release. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .com/cdnow. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.cdnow. In fact.com) 65 'Pioneering in Cyberspace' .Hampel & Stefanides (www.they were the first site to offer the sale of music downloads and custom CDs.hsny.(www.CDnow made public relations a high priority brand-building tool. It is a powerful source of acquiring new customers at low cost. it is in this context that the large investments in advertising and partnerships make sense. 1998 . with repeat customers accounting for more than 50% of sales. with 44% of sales coming from new customers65. and to increases in the customer base of more than 30% quarter-to-quarter. both in the online and offline worlds. 1998: $56.As for many successful online retailers. The company continually pushed for new distribution partnerships to widen its sphere of influence. This has contributed to a 225% increase in sales (1997: $17.4 million).5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . The story of how CDnow was founded in a basement.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. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.

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

300 categories. According to Meg Whitman. or the payment for the item .efficient one-to-one trading in an auction format. Auctions make it fun.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.A Harvard Business School Case Study. with the number of unique daily visitors setting a record of 1. and eBay provides added value through its convenience.6. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. shipping. This is a new market . garage sales.the closest thing in the offline world are trading forums such as classified ads. 1st October 1999 86 .eBay website (www. global trading place for buying and selling personal items in an entertaining auction format. with emphasis being placed on its unique community feel and culture. from collectibles and antiques to electronics and toys.Company Overview' . Sellers pay a nominal fee for placing an item up for sale. extensive selection and geographical reach. as cited in 'eBay .6 CASE STUDY: EBAY 6. 6. and eBay never takes possession of the item being sold. (A)' .eBay website (www. collectable shows. Individuals use eBay to buy and sell items in more than 4.000 new items joining the "for sale" list every 24 hours69. flea markets and auctions.Company Overview' .6. Auctions are an enabler. and 450.782 million in January 200068.com) 70 'Meg Whitman at eBay Inc. the eBay community has grown to include more than 10 million registered users. People perceive the auction format to offer better prices. transportation and other overhead costs. 24 hour a day. Auctions represent a platform.com) 'eBay .25% to 5% of the final sale price on any item sold.ebay. "at its core.removing the need for inventory. eBay is not about auctions.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. eBay effectively created a new business model never before possible . The buyer and the seller work out the logistics of the transport (e. and eBay receives a transaction fee that ranges from 1.ebay. payment) between themselves.2 Value Proposition eBay offers consumers an efficient. CEO of eBay. There are over half a million new auctions.g. Since its launch in September 1995.

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

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

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

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

The Official eBay Guide to Buying. In 1998. eBay has been able to attract a large customer base. and Collecting Just About Anything and eBay for Dummies.3 million in advertising. but they have other partnerships with over 150 websites of varying scales. $75 million joint marketing alliance and development deal.a four-year. eBay transformed from a pure online play into a 'clicks-and-mortar' company. they decided to target their marketing efforts on these heavy users. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. Recent promotional initiatives include its new publication. representing about 40% of revenues. 91 . 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. provide a wealth of information about the 'ins and outs' of trading on eBay. As a result. and two books.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The AOL partnership was one of the largest strategic partnerships on the Internet . as a result of the high quality experience it provides. the largest of which was with AOL. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. they spent $12. eBay decided that it would not enter into major portal advertising deals in the short term.6. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Mary Beth's Beanie World. and highlight opportunities created by e-commerce. Early on. eBay has since expanded its promotion efforts and engaged in marketing partnerships. Selling. and facilitate the spread of positive wordof-mouth. Doll Collector) and appearance in trade shows. and maintained the same ratio for 1999.g. These new publications appeal to the collecting spirit. Based on this. 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 Magazine. Through this combination of its advertising efforts and targeted promotions. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. who tended to be serious collectors.

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

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

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

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

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

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

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

Yahoo! Launches Business-to-Business Marketplace .3 Sources of Value . .. is the way it has structured and displayed information.The 7Cs Framework Convenience Central to Yahoo!'s success. to allow access.Receives $1 million in venture capital funding from Sequoia Capital $33.TIMELINE AND MAJOR MILESTONES 1994 April . Palm computers).BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com allowing them to offer person-person payment solutions .Yahoo! unveils Yahoo! Finance Vision .8 million IPO (2.Yahoo! acquires Arthas. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! forms agreements with Palm Inc. More recently. regardless of platform (i. mobiles.000 shares at $13.Yahoo! Shopping launches personalised shopping service 6. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.com.7 YAHOO! .8.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.8).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 . TVs. Their goal is not to list everything under the sun.Site goes live September . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.e.Yahoo! acquires eGroups .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. to provide web-based services to PalmTM handheld computers . 99 . Yahoo! extended its convenience through its Yahoo! Everywhere service.600. and unveils Yahoo! Digital Introduces Bill Payment services .

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

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

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

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

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

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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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

147 9.830 14.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .654 43.423 2.643 3.329 4.310 11.184 1.048 20.550 12.197 32.894 14.132 15.281 11.464 3.155 7.603 5.interbrand.404 4.634 1.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.766 14.527 3.792 3.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) 83.510 8.596 3.101 9.806 2.319 1.193 112 .781 17.681 2.052 6.804 2.806 11.502 33.225 11.231 24.895 2.262 1.602 4.909 7.595 17.781 33.422 1.283 4.043 8.361 1.648 1.932 4.143 2.694 17.275 30.845 56.568 3.313 2.231 12.181 21.761 1.076 3.021 26.Interbrand's Ranking of the Top 60 Brands (www.985 2.

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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