1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


4.7.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.Extensive Integration 6.1 Company Overview 7Cs Framework 6.7.1 7.The 7Cs Framework 6.3 Sources of Value . Failure of Boo.4 Brand-Building Strategy 6.The 7Cs Framework 6.3 Sources of Value .1 Company Overview 6.5.6 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 7.3 Sources of Value .8.3 Sources of Value .2 Value Proposition 6.5 6.4 Brand-Building Strategy 6.com 6.5.1 Company Overview 6.5 Other Factors that Contribute to their Brand Leadership 6.5 Conclusion Case Study: CDnow 6.6 6.2 Value Proposition Conclusion Case Study: eBay 6.7 Brand-Building Strategy 6.4 Brand-Building Strategy 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Case Study: Yahoo! 6.5 Conclusion Case Study: Gap.1 Company Overview 6.6.4.com 6.8 Case Study: Boo.8.5.2 Value Proposition 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .8.2 Value Proposition 6.5.1 Company Overview 6.2 Value Proposition 6.com 6.The 7Cs Framework 6.4 Brand-Building Strategy .3 Sources of Value .5 Other Factors That Contribute to their Brand Leadership 6.

1 Figure 4.6 Figure 4.8 Figure 6.2 Figure 3.8 Figure 3.5 Figure 5.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .1 Figure 1.3 Figure 6.com's Website Amazon.4 Figure 2.2 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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 3.2 Figure 5.3 Figure 3.3 Figure 2.5 Figure 4.5 Figure 6.7 Figure 5.3 Figure 4.4 Figure 5.1 Figure 2.com's Associates Programme Overview of BarnesandNoble.2 Figure 6.4 Figure 6.5 Figure 2.2 Figure 2.4 Figure 4.9 Figure 6.1 Figure 6.1 Figure 5.6 Figure 5.6 Figure 6.4 Figure 4.7 Figure 5.8 Figure 5.com's Website Overview of Boo.3 Figure 5.6 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 6.2 Figure 2.7 Figure 2.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones CDnow .5 Table 6.com .com .Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.1 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Boo.1 Table 6.6 Table 6.3 Table 6.Timeline and Major Milestones eBay .2 Table 6.com .4 Table 6.


America Online (AOL) and eBay have been able to build powerful brands in a few years. and business models revamped. service and brands.0 1.com1 Amazon.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com. This is creating new challenges and opportunities. as they face each other through an electronic connection. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. It is empowering customers with more options and more information to make informed decisions.g. the Internet is changing fundamentals about customers. whereas it has taken decades for traditional companies to achieve the client base. aggressive Internet start-ups have emerged. relationships. customer affiliation and level of sales. Internet companies such as Yahoo!. In the midst of this.an explosion that is also a harbinger of how business will operate in the future. As such.1 OVERVIEW Over the past few years. interaction and relationship building. creating strong brands that are putting established brands at risk.com Source: Securities and Exchange Commission Filings.9 2. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.5 million book titles). As such.2 3.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. and is triggering the need for new brand-building strategies and tools. Figure 1. products and services reconfigured.1 . FIGURE 1.com's range of 4. Amazon.5 2. Supply chains are being rethought. that these Internet start-ups have achieved.mckinseyquarterly.com) 7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com noble.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. there has been an explosion in the online world .1 3.9 3.YEARS TO REACH $100 MILLION IN SALES 6 5. McKinsey Analysis (www. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. while providing new tools for promotion. Amazon. The Internet also represents a fundamental shift in how buyers and sellers interact.

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

3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. A review and analysis of leading academic thinking will be used to explore these issues. • To explore how the Internet is changing the brand-building environment.2.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. tools and strategies to build brands on the Internet. supported by secondary data related to aspects of online business from accredited and published sources. FIGURE 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. 1.2 . • To identify the key factors and characteristics that contribute to the development of successful Internet brands. and to identify new sources of value.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . This is based on the outcome of the primary research (in-depth case studies).

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

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


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

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

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

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

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

T. Nov-Dec 1995. Nov-Dec 1995 Hart. Spring 1999 18 . Federal Express. and Johnson. The customers at the bottom end of the scale are "terrorists" . C. p. Saturn..those who actively attack the brand telling others not to buy from the company... Trust is critical for a brand's success. 6 7 Jones. Southwest Airlines and Xerox7. & Sasser.. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. E. This satisfaction encompasses the whole experience and not just a company's products or services. D. and believe that it will always act in their best interest. FIGURE 2. E. 91 Loyalty is derived when customers are continuously satisfied over time. M.Figure 2. Customers that are passionately or emotionally loyal are those that have built trust in a company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.5. 'Why Satisfied Customers Defect' . At the opposite end of the satisfaction spectrum are "apostles" .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.customers who are satisfied and loyal and talk favourably about the brand . Johnson & Johnson.Harvard Business Review. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. T. Hewlett-Packard.Harvard Business Review. 'Growing the Trust Relationship'.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.. 'Why Satisfied Customers Defect' . & Sasser. W. Marketing Management.

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

6 . and understanding the needs and buying processes of the target market is essential. there are brands that customers perceive as acceptable and would not resist buying.. a 'powerbrand' tends to have a high degree of brand loyalty.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. Beyond this. 20 . there are brands that are unknown by most buyers.7 . Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). Journal of Consumer Research. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. A stronger brand enjoys a high degree of brand preference over competing brands.7).8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 343-373. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. S. FIGURE 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. FIGURE 2. March 1998. 2. which goes well beyond the satisfaction of a specific need. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. pp. whereby customers would be unwilling to substitute it with competitors' offers.

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

'Pioneer Advantage: Marketing Logic or Marketing Legend?'. brands perform several functions that add value and customer benefits: • Identification . 3rd Ed. to quickly identify sought after products • • Practicality .To be sure of buying the best product in the category. 158-170. 22 . to its logo. Premium pricing increases revenue.Typically a brand leader obtains twice the market share of the number two brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. pp. Journal of Marketing Research.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . to make sense of the offer. & Downham.Satisfaction linked to the attractiveness of the brand. 11 12 Kapferer.To save time and energy through identical repurchasing and loyalty Guarantee . G.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. (London: McGraw Hill)..Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.8. • Brand Leverage . 1992 Worcester. and the number two twice the share of the number three12. 'Consumer Market Research Handbook'..To be clearly seen.8. production and marketing. to its communication • Ethical .. P. N. in the following ways: • Brands. J. 1986 13 Golder..2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. May 1993.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . The brand leader is the most profitable and all beyond number two are unprofitable13.. the best performer for a particular purpose • Characterisation .The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. J. & Tellis.To have confirmation of your self-image or the image that you present to others • Continuity . (New York: Free Press). R. 'Strategic Brand Management'. market share and profits .

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


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

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

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

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

Secondly. structure and ease of use).g.. 'Strategic Brand Management'. advertising.how far the brand can be meaningfully stretched to other products and market segments. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. (New York: Free Press). J.3 . website design. and through line and brand extensions.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. 29 . 1992 The brand prism enables management to understand the brand. below-the-line activities. its strengths and opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. understanding the brand's core and style helps set the perimeters of brand extensions . It also facilitates consistency in the message being transmitted through presentation (e. Finally.

4.Product and service features. the company must ensure that it develops the appropriate structure. pp. (New York: Free Press). colleagues and opinion leaders become important influences at this stage.. (New York: Free Press). 1962.79-86 The Innovation-Adoption Model consists of: • Awareness .Figure 3. it should lead to satisfaction and re-purchase. management style. 17 Rogers.The customer is satisfied and decides to make regular use of the product / service. and its products / services. The value proposition must be communicated to entice customers to try the product / service. • Adoption .often referred to as the '4Ps' . and the product / service's perceived performance. they must learn about it. 'Diffusion of Innovations'. • Evaluation . features and advantages. culture and staff needed to support.Customers need to be stimulated to seek information about the brand's uses. FIGURE 3. • Trial .4 . skills. Promotion and Place (distribution strategy). Personal sources such as word-of-mouth from friends.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers..79-86 30 . If the offering is developed properly.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. E. 1962. This learning is called the adoption process17 . pp. Advertising and PR are common tools for achieving awareness. Before potential customers can buy a product / service.The company has to create awareness of the brand. 'Diffusion of Innovations'.The McKinsey 7-S Framework). E. systems.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.Customers consider whether the product / service will meet their particular needs. Price. strategy (partnerships and alliances). The value proposition must then be articulated in terms of the 'marketing mix' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. deliver and reinforce this value proposition (see Appendix B . • Interest .

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

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


BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. 4. and the 'world wide web' (www) . FIGURE 4.1.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 34 . This chapter provides an overview of the Internet and its defining characteristics. In essence. and a critical source of added value. which contain hypertext and pictures. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents.Figure 4. news groups and mailing lists. and provides the opportunity for dynamic interaction. E-MAIL Is the part of the Internet that most users use at present.1 . creating new challenges and opportunities.1 INTRODUCTION The Internet is transforming the business environment. The three core channels include e-mail (the most common). it is a common technology platform that allows computing devices to communicate with each other. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. it offers a number of alternative channels that enable businesses and people to communicate. In doing so. Information is becoming a major part of the products and services that people buy. but in practice not in real time. 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. Hypertext allows information to be organised in a user-friendly way that is easily accessible.

when the United States Defence Department developed the 'ARPAnet'.this radically alters the process of interaction between communicating parties. regardless of where the computer or Internet access device is physically located. By allowing for direct. These characteristics combine to create a very powerful medium. ubiquitous links to anyone. • It Allows for Two-way Communication and Interactivity .not previously available with mass medium forms of communication.24 hours a day. which was intended to link military networks together. These defining characteristics have fuelled its explosive growth.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. Graph is not drawn to scale). • It Overcomes the Barriers of Time and Space . The context of the Internet and certain key developments are highlighted in the Figure 4.The Internet is a global network and can be reached from everywhere. 7 days a week.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).2.2 (Note: 35 . and deliver new products and services at low cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. anywhere. 4. These qualities eliminate the barriers of time and space that exist in the physical world. allowing both parties to identify each other and build one-to-one relationships . The Internet can also be accessed at any time . the Internet lets individuals and companies build interactive relationships with customers and suppliers.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 .

a PricewaterhouseCoopers Report. as cited in 'E-Business Technology Forecast' . 2000 Internet / ARPAnet was created Dell. 1998. 1996 (www.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1.com) 36 .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. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000.000 10.3 .3.economist.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100.000 1. FIGURE 4.000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .Figure 4.000 1969: 10.

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

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

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

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

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

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

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


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

'Adding Product Value Through Information'. this also poses a challenge as these relationships may take on a life and character of their own. Duke University. rather than simply speaking at customers. This creates the opportunity for companies to build stronger relationships than previously attainable.Harvard Business Review. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. a company can listen. brand-building must focus on the end-to-end customer experience . In doing so. .1 . Prof. & Dorf.Fuqua School of Business. However. understand and relate to customers. D.duke. to its delivery to the customer. January-February.edu) 26 Peppers. companies have to find innovative ways of leveraging the information and 25 McCann.. 1997 (www. January 28. relationship building characteristics of the Internet. J. 1999.1. Rogers. In maximising the customer experience.from the promises made in the value proposition. 151-160 46 . service approach Customised The Internet gives companies control over all their interactions with customers and therefore. M. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. pp.. 'Is Your Company Ready for One-to-One Marketing?' .. TABLE 5. learn..BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. B.

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

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

A Publication by Andersen Consulting 'The State of Online Retailing' . link revenues 32 33 Melnicoff. cross-selling and up-selling33. FIGURE 5. As the company builds a customer base and develops a relationship with customers. With no competitors around.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. including direct marketing. its ability to track customer preferences and customise offerings improves.org Study in collaboration with The Boston Consulting Group. direct marketing. enhancing the interaction. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising. '5 Rules of the eEconomy'. being first into a market makes it easier to capture the consumer's share of mind. This makes it more efficient in improving product selection. No.2. Nov 1998 49 . advertising and referrals. 21 .2 . M.Figure 5. delivering increased margin per customer .BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. fulfilment • Defensible advantage against competitors SCALEABLE. R..A Shop. Outlook 1999. It also allows online companies to tap supplementary revenue streams.

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

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

Zook.. Sites that are difficult to use can cause frustration. S.bain.An A.3). . D. making customers 'click off' to another site. Kearney White Paper.. and 66% of people who start a 'shopping basket' fail to complete the transaction37.. J.A Mainspring Communication Report in collaboration with Bain & Co. Chu. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. Promotion. FIGURE 5.. In fact. 2000 (www. As 35 36 'Creating a High-Impact Digital Customer Experience' .An A.3 . Rastogi.. The customers' ability to access and display information rapidly is extremely important36. March 17. Price. C. Place). the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 'The Value of Online Customer Loyalty and How You Can Capture it'.. 30% of potential customers leave sites because they cannot find what they are looking for. T.com) 52 . S. In essence. Kearney White Paper. & Hancock. R.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. Baveja.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . 2000 37 Rigby. T. 2000 'The E-business Technology Forecast' .A PricewaterhouseCoopers Report..

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

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

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

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

mckinseyquarterly. including affiliate programmes with other websites.Awareness. Evaluation. pp. The popularity and effectiveness of the different promotion methods are outlined in Figure 5..7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Adoption). Therefore.7. 'Marketing to the Digital Consumer'. Waitman. No. Retain.) to online tools. A. The company must build awareness and communicate its value proposition to its target customers.2. M. Learn and Relate. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.. McKinsey Quarterly. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.4 . Interest. because there is no physical presence. Figure 3.8. FIGURE 5.. visibility relies solely on Communication. 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 ’ . links from directory searches (Connectivity).7 . etc. Magazines. Newspapers.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski. e-mail notifications and banner advertisements. Trial. 180-183 (www. S. Engage. and bring people to the site for the first time. The mechanisms to communicate range from traditional media (TV. McQuade.. This model consists of five stages . billboards.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. 1996. modified to take into account of the interactive dynamics of the Internet. & Zeisser.Attract. This is more difficult online than offline.

8 4. Fig.0 3.7 4.3 3. it is important to quickly engage consumers' interest before they move on. public relations and television advertising. 3. The key factors at this stage are Convenience combined with interesting Content. Companies then need to engage customers to obtain their interest and participation.1 3.4 3.WEBSITE PROMOTION METHODS .8 .5) 2.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 .Economist Intelligence Unit 2000 (www.ebusinessforum.3 Source: Forrester Research. Attracting customers is only the first step in building online brands. affiliate programmes.4 3. Kapferer's Brand Prism (Ch. multiplied by the expected rate of transactions.5 3.3) is useful to ensure that a company develops a distinct and consistent brand identity.2 4. Engage With the multitude of choice available on the Internet.com) The most effective methods are direct e-mail. discounted over the expected duration of the brand-customer relationship.4 4.3 2. as cited in 'Targeting Consumers via the Internet' . Creativity is also an important factor in gaining attention in today's cluttered marketplace.6 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 58 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.

Building up a knowledge database on each customer .9). This helps to create a customer base that spends more time and money at a site.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. if used properly. 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. such as groceries and convenience goods. 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. Radio). Learn The Internet provides extensive opportunities to learn about consumers (demographics. TV. and forge closer relationships than any offline operator. 59 . and what additional products and services are they interested in provides companies with valuable information which. attitudes and behaviour). It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. 5. can create value for the customer and help build the brand-customer relationship.g.who they are and why they shop online. a company can create value by providing a personalised online experience. The objective is to increase the conversion rate (% of browsers converted into buyers). The initial site registration provides an early opportunity to obtain useful information. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. Certain product categories. • The Internet supports brand-building activities where there is a need to build a relationship. and must be continuously updated due to the multiple visit nature of customers. Communities and Customisation are other sticky applications.

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. especially in small quantities.. the interaction provides the ability for companies to learn from their customers and relate. The next chapter analyses the brand-building efforts of seven companies. & Zeisser. to its delivery to the customer.mckinseyquarterly. The interactive brand-building process involves attracting. 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. companies must provide a satisfying end-to-end customer experience . Given the high acquisition costs of online customers. McKinsey Quarterly. 5. No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.. M. due to high delivery and transaction costs (relative to the value of the product). 60 . However. A. and as the relationship develops. the experience is the brand. 180-183 (www.from the promises made in the value proposition. R.9 . 1996. 'Marketing to the Digital Consumer'. • Brand-building favours products that can be sold online. smell). McQuade. In order to create "apostles".. engaging and retaining customers.2. Waitman. S. providing further added value. pp. and the need to stimulate the other senses (taste. touch. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. These case studies provide a practical insight into how companies are building their online brands.. it is critical for companies to build relationships and foster brand loyalty.9 CONCLUSION On the Internet.


COM 6. Amazon has cultivated a reputation for excellence. and has sales of over $2 billion. It is the 57th most valuable brand in the world47. greater convenience. including: increased selection. 'Amazon. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). Each case is presented in the same format including. Gap. Amazon has been able to differentiate itself from other online competitors.com.com) .com has become synonymous with e-commerce.2 Value Proposition Amazon.1 Company Overview Amazon. 6. Amazon provides increased added value on several dimensions.2. 6.com) 62 . and has equity investments in several e-tailers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.see Appendix A. The cases are presented in the following sequence . innovation and delivering on its promises.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 enjoyable experience.com. CDnow. Through its provision of a one-stop shopping experience. more information.interbrand. Figure 6. 2000 (www. 1999 49 'Amazon's Amazing Ambition' . 47 48 Interbrand (www. and higher levels of customisation and service than the traditional shopping experience allows. its brand-building strategy (how it generates traffic). combined with its levels of customisation and customer service. easy. and one of the top two or three in Britain.2. its value proposition. February 26. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). and is one of the few Internet brands that is recognised all over the world. Barnesandnoble. a company overview.Amazon. it is the most visited e-commerce website in America. Amazon. In July 1995.com . In addition. discounted prices.Goldman Sachs Report.com's success stems from its compelling value proposition. Amazon serves over 23 million customers from 160 countries. Boo.com and Yahoo!. Germany and Japan49. November 11. and other key factors that have contributed to its success (or failure).2 CASE STUDY: AMAZON. Amazon.1 INTRODUCTION This chapter provides an analysis of seven companies. eBay.1 outlines Amazon's timeline and major milestones.It's an Ocean.com launched with a mission to use the Internet to transform book buying into a fast. France. Not a River' .economist. the sources of added value (using the 7Cs Framework).com. In addition.The Economist.

such as the Palm VII organiser.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore." providing shopping from wireless devices.New home living store from living.com.com Electronics and Amazon.com Announce Strategic Investment and Promotional Agreement .Amazon enters into a strategic partnership with Drugstore. and minority investment in.Amazon enters strategic alliance with living.Amazon surpasses 20 million cumulative customer accounts . Amazon. to meet rapid growth . universities.COM .com Amazon acquires Back to Basics Toys to add to Amazon.com . featuring thousands of bestseller lists for hometowns.Customers can shop at Amazon. Software.sothebys.com invests in wineshopper.Amazon launches health and beauty store . Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon announces investment in kozmo.com.Amazon and online car-buying service Greenlight.com Anywhere.com .com .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. West Virginia.com enters European book market Microsoft signs Amazon.000 members Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon opens a customer service centre in Huntington.com 63 .Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Amazon introduces "Purchase CirclesTM".Amazon launches lawn & patio store .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com Amazon announces further plans to expand distribution network to meet rapid growth.amazon.amazon. a tools and equipment store for professional tool users and woodworkers .TIMELINE AND MAJOR MILESTONES Amazon.Amazon launches new kitchen store .Amazon.toolcrib.com to create a "home living" store at amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.Amazon and eziba.Amazon.com via the new wireless pocket PC .Amazon opens customer service centre in The Hague .com Amazon invests in Pets.com and NextCard launch co-branded credit card . Ashford. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. workplaces. and more Amazon launches "Amazon.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com is founded by Jeff Bezos Amazon.Amazon launches www. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Auctions and zShops provide new tools to its merchant community .com announce investment and strategic alliance .com opens its virtual doors at amazon.

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

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

they are subsequently confirmed by e-mail. it began to advertise in print media and online . As a result of all these factors (7Cs). Amazon inaugurated the Associates Programme under which other websites could display the Amazon. This enabled Amazon to reach more customer segments and niches (Figure 6.2).000 by August 2000. In addition. Business Week.a move that along with the novelty of its business model and the newness of the Internet. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. 66 . In the second half of 1996. enticing them to return to the site and purchase repeatedly. Eyes and Editors. 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. and customers are also e-mailed when the items are shipped from the warehouse. help maintain contact and build traffic by e-mailing customers when desired products or books become available. increasing to over 500. 6.com hot-link and offer specific books of interest to their visitors.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Amazon offered Associates referral fees of up to 15%.000 members.2. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Once orders are placed. The Financial Times. The Associates Programme has been phenomenally successful. Instead of paying directly for this exposure. and not subsequent purchases. In July 1996. which only applied to sales that resulted from the initial click-through. attracting member sites of all sizes. Newsweek. and by 1999 it had over 200. two personalised services. New Yorker and The Economist. Through the first half of 1996.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.

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

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

July 1998. R. Success. According to Jeff Bezos. in June 1998.5 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. For example. Amazon unveiled a music store.a wide range of choice. According to Jeff Bezos. further enhancing their value proposition. Amazon's understanding of its brand identity has been a critical factor.com Way'. Amazon has been able to build a strong brand at relatively low cost. Our secret is that we have not been competitor obsessed. management realised that Amazon had become more associated with other core brand values . while our competitors have been Amazon. to capture the spirit of the site. 51 52 Hazleton. However.com obsessed52". L. memorable. In addition. establishing Amazon as the leading online bookseller with a large customer base.. Saunders. "we're not a stationary target. establishing a reputation for excellence and fulfilment. Amazon received criticism for expanding its product line. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. which within six months propelled Amazon to one of the leading online music retailers. As such. good value.2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. due to the hype and coverage it was given. and to convey its vast size and offering. Amazon is constantly seeking new ways of improving its offering. and according to Jeff Bezos. In addition. We were blessed with a two-year head start. As such. the balance of power shifts away from the company and goes towards the customer. This has helped them attract customers and move up the learning curve quickly. (Oxford: Capstone Publishing). "Online. thereby diluting the value of its association with books. 1999 69 . We have been customer obsessed. because he wanted it to be short. Amazon was able to secure partnerships and alliances with key players. 'Business the Amazon. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Nevertheless. and its safe and secure delivery. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). and our goal is to increase that gap51".. developing customer service centres and expanding its distribution network to support high levels of service.

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

contacts.2. Barnesandnoble.Barnes & Noble University opens registration for free online courses . and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). rare. Barnes & Noble Inc. all front-end operations (marketing.com and Microsoft announce that they will create an eBook superstore .3 CASE STUDY: BARNESANDNOBLE. Barnesandnoble.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . 40% owned by Bertelsmann AG.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.3. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. and 470 B.Offers same day delivery in Manhatten . and 20% owned by the public. Besides books.Barnes & Noble went online at AOL May . etc. However.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com was able to 'hit the ground running'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com is approximately 40% owned by Barnes & Noble.com) . magazines.com's timeline and major milestones is outlined in Figure 6. Currently. prints & posters and related products.Launches Video Store 71 . Dalton bookstores (located in shopping malls). and is the second largest online bookseller (after Amazon. as it could capitalise on the infrastructure and back-end operations (warehouses. Barnesandnoble.Barnesandnoble. Barnesandnoble.Launches Internet Radio .COM 6.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com . is one of the best known traditional booksellers in the United States.Barnes & Noble. TABLE 6.Acquires equity stake in Mightwords ..Barnesandnoble. Barnes & Noble Inc. Launched in 1997.1 Company Overview Barnesandnoble. promotion) between the online store and the retail stores have been kept separate.barnesandnoble.) established by its parent company.com announces strategic relationship with Palm Computing .2 1997 January BARNESANDNOBLE.com is the fourth largest e-commerce retailer54. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. book databases.com provides other online categories offering software.Announces distribution relationship with New York Times September . music.com launched its website (www.TIMELINE AND MAJOR MILESTONES .Launches Affiliate Network December . Inc.Launches BNTV .COM .Acquires minority stake in NotHarvard.com).

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

reasons for this are explained in the next section. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com's market capitalisation was $251 million. Webcrawler.com closed 1999 with 4 million customers. 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. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Yahoo!. compared to Amazon. Both try to foster a community of readers by letting customers post reviews online.com has created a high quality website and customer experience.6 million. while Amazon. it lags behind first-mover Amazon. this programme had more than 300.1 billion. These initiatives have generated traffic to the site.3. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). and both are expanding globally. Barnesandnoble.com had over 17 million. Both offer customisation that permits users to personalise the experience.com.com's 1999 revenues were $202. They have developed an affiliate programme that links sites to Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. however.The Wall Street Journal. Although. Lycos. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . and Barnes & Noble Inc.com's $1.000 affiliates in its referral network. prevent cannibalisation of its existing business. Both offer 'associate programmes' that let other websites link to their sites.com was valued at $21. However. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. The 6. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. while Amazon. Instead. December 17. and avoid charging sales tax in states where it has stores56.64 billion. Barnesandnoble. Netscape and Microsoft Network. As of February 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. has yet to leverage its strong brand in cyberspace.com in return for a commission on any purchases that they originated .4 Brand-Building Strategy Barnesandnoble. Barnesandnoble.a replica of Amazon's Associates Programme. Barnesandnoble.

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

com . 2000 (www. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. meant that Amazon. significant market momentum.Not a Best Seller' . and its lack of innovation (by copying Amazon.com) 75 .com's late start in 1997. it has not been able to establish itself as the leading online bookseller. a wellestablished Internet brand.its key differentiating factors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3. Barnesandnoble.com's experience is instructive. The company failed to leverage its established brand.com has been able to create a high impact and high-quality customer experience. customer relationships and offline presence . feature for feature) has failed to differentiate Barnesandnoble. The Press have also contributed.forbes.com and has given them the image of a second rate 'me too' brand. and was further up the growth curve.Forbes.6 Conclusion Although Barnesandnoble. and allowed them to offer stock options as compensation and achieve a high market capitalisation. In addition. otherwise they risk losing out to other online competitors. by portraying them as slow and clumsy in comparison to the more nimble Amazon. Barnesandnoble.com. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". 57 'Bn. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. August 4. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. even if that means eating into their existing sales.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. it also caused a major setback.

the company was hindered by technical problems that delayed the site going live by five months (until November 1999). and the resulting loss of investors' confidence.com opens its virtual doors' .1 Company Overview Founded in 1999. June 10. 1999 76 . Puma. and included high profile investors such as Bernard Arnault. Germany and Denmark. CMO of Boo. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com entered six markets: US. P. it means all that brand's product line is available. and was billed as one of Europe's hottest e-commerce ventures.com had set the record as Europe's best-funded European Internet Start-up.4 CASE STUDY: BOO. If a clothing brand is on the Boo site. On going live.TIMELINE AND MAJOR MILESTONES . Italy and Spain within a few months. receiving $125 million of funding.000 unique visitors . Everlast. it's about range and convenience. not the limited range you might get at most London fashion shops58". within six months Boo. arranged through J.4. due to its poor performance and inability to build a customer base. "our marketing thrust is not based on prices. among others. Boo. as well as create a kid's site. and eventually debut in Asia.com.COM . Morgan.com.Announces it has only 500. and Converse.Raises funding of $125 million .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. founder and Chief Marketing Officer of Boo.3 1999 Mid year BOO. 58 Kajsa Leander. TABLE 6. After a high profile launch. Company is put up for sale. Finland.they redesign site.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".Multi-million pound advertising campaign created by BMP DDB .Marketing Week.Appeals for $30 million more funding . They intended to add France.fails and appoints KPMG as liquidator. England. Sweden.Site goes live .4. Boo. Boo. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). sack 20% of staff and sell stock at 40% discount . Boo. November 2000 January February May 6.2 Value Proposition According to Kajsa Leander.COM 6. However. as cited in 'Boo.com collapsed through lack of funds.First sign of problems .com provided a range of 18 fashion and footwear brands including DKNY.


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


Miss Boo

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



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

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

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



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

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


Partnership program with Geffen Records .5. and they aim to "make every visit to the site. TABLE 6.000 people.Launches merged CDnow/N2K site .000 sound samples. CDnow is the leading online music store. and an average daily audience of over 800. & Novak. It has a customer base of 4 million people.5 million distribution deal with Lycos Signs three-year. CDnow is also driving the digital distribution of music. by twin brothers Jason and Matt Olim.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. 62 Hoffman.. May-June 2000. This unprecedented degree of access to music and information is the core of CDnow's value proposition. cover art. former arch rival . D. $18. as well as music reviews. On 19th July 2000. pp. a valuable and rewarding experience"63. and one of the most popular shopping sites on the Internet62.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . announce marketing alliance .Harvard Business Review.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.179-188 63 CDnow website (www.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . daily music news.TIMELINE AND MAJOR MILESTONES .Merges with Columbia Records .000 music related items . features.Raises $10 million through private placement . and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow provides access to over 500. customisation and a wealth of information and content to help in the purchase decision. CDnow was acquired by Bertelsmann AG. T.000 music-related products and 650. whether for browsing or buying. $22.1 Company Overview Founded in 1994. guides to music genres.Merges with N2K.5.com) 80 . 'How to Acquire Customers on the Web' .ten times the selection of a conventional bricks-and-mortar music store).Site goes live . and was the first site to offer the sale of music downloads and custom CDs.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. convenience.Forges distribution partnership with Yahoo! $65.5 CASE STUDY: CDNOW 6.cdnow.CDnow and Time Inc. good prices.

etc. The whole process of searching for albums or music titles to the actual purchase is simple .. CDnow has cultivated similar relationships with MTV. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.3 Sources of Value . 81 . By partnering with well-known content providers. easy-tonavigate. CDnow has leveraged the reputation of their brands to reinforce its own. cover art.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. to make it easier for customers to explore new music and make informed purchasing decisions. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).5.5 . FIGURE 6. and has secured rights to music reviews.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.Figure 6.5. For example. artists biographies.

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

5. as well as more-targeted music-related sites like Billboard. CDnow extended its distribution reach to include more than 250. and spot radio to build reach. • Traditional offline Media . Excite and other powerful Internet content and service providers. customers buy music. By keeping the brand in front of the customer in this way. covering the entire music spectrum. they buy from CDnow. music-oriented websites. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1.They have also stuck exclusive alliances with AOL. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. CDnow is doing everything it can to ensure that the next time that 6.000 small.Through the Cosmic Credit Programme.CDnow's advertisements are targeted to some degree. and radio spots on the Howard Stern Show to build a cult following among radio listeners. and Variety. 83 .CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. CDnow's initiatives include: • Banner Ads . this is their "most successful customer building programme64".4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. • Affiliate Programme . Spin. print advertising is music-related publications such as Rolling Stone. CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences. According to Jason Olim. Yahoo!. • Alliances and Partnerships . It is a revenue-sharing arrangement.

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

The development of an extensive affiliate network. to ensure quick delivery to customers.75 85 . This. This gives the customer the impression that the order is being handled quickly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. (Boston: Harvard Business School Press). "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. a record distributor that handles the majority of CDnow's fulfilment logistics.Building an Internet Business at Breakneck Speed".from how CDnow has personalised its product offering to its capable customer service team .have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.it's what you do66". P. CEO of CDnow. (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. and innovative. According to Jason Olim.Building an Internet Business at Breakneck Speed". and ensure that it exploits its early-mover advantage and keeps ahead of competition.5. 2000 p. "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.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. CDnow has developed a relationship with Valley Records. combined with the high impact customer experience created . 2000 p. "eBrands . 66 Jason Olim. "eBrands . 6.89 67 Jason Olim. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. It was able to create a strong value proposition and high quality customer experience. as cited in Carpenter. P. They also provide the customer with an order number and customer support contact information should they have questions. CEO of CDnow. 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. as cited in Carpenter.

Company Overview' .300 categories. "at its core.2 Value Proposition eBay offers consumers an efficient. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. eBay effectively created a new business model never before possible . transportation and other overhead costs.com) 70 'Meg Whitman at eBay Inc. 1st October 1999 86 . People perceive the auction format to offer better prices.the closest thing in the offline world are trading forums such as classified ads. (A)' . the eBay community has grown to include more than 10 million registered users.6 CASE STUDY: EBAY 6.A Harvard Business School Case Study. garage sales. and eBay never takes possession of the item being sold.removing the need for inventory.eBay website (www. According to Meg Whitman.25% to 5% of the final sale price on any item sold. Sellers pay a nominal fee for placing an item up for sale. collectable shows. Individuals use eBay to buy and sell items in more than 4. The buyer and the seller work out the logistics of the transport (e. eBay is not about auctions.efficient one-to-one trading in an auction format.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. extensive selection and geographical reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. or the payment for the item . There are over half a million new auctions. Auctions are an enabler. flea markets and auctions.ebay. Since its launch in September 1995.000 new items joining the "for sale" list every 24 hours69. from collectibles and antiques to electronics and toys.eBay website (www. with emphasis being placed on its unique community feel and culture.782 million in January 200068.Company Overview' . 6.com) 'eBay . CEO of eBay. global trading place for buying and selling personal items in an entertaining auction format. with the number of unique daily visitors setting a record of 1. Auctions make it fun.ebay. 24 hour a day. as cited in 'eBay . and 450.6. Auctions represent a platform. shipping.6. and eBay receives a transaction fee that ranges from 1. and eBay provides added value through its convenience. payment) between themselves.g. This is a new market .

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

they have continually invested in system capacity. and since. easy-to-use online service (Figure 6.6 . eBay has also expanded to accommodate access through wireless devices for added convenience. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. which is much more demanding on the system. Nevertheless. Other content includes the banner ads. eBay's site has to process thousands of live bids simultaneously.6). topically arranged.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. 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. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. FIGURE 6. This contributes to the community feel. categorically arranged. increasing the risk of outages. 88 . angering hundreds of thousands of eBay users. eBay had a 'wake up call' when the website crashed for 8 hours. and adds to the experience and the discovery of the auction process. Content Content is primarily user generated through the items listed for sale.

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

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

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

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

announce multi-year partnership. 1999 93 . 6.1 Company Overview Gap opened its first store in San Francisco in 1969. Gap Inc. "this is about being clicks-and-mortar. October 8. According to Jeanne Jackson.htm) 75 Jeanne Jackson. 1999 76 Jeanne Jackson. standard styles are well suited to online shopping. to provide customers with greater convenience and options.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. the growth prospects are enormous. In late 1997. L.com and www. GapKids.Business Week. 73 74 Interbrand (www. service and value to everyone74". Gap's online sales tripled in 1998 alone.an early convert to the then-revolutionary idea of clothes retailing on the Internet. Gap started selling items online . California GapKids opens its first store BabyGap is born Gap opens its online store at www.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.com' . In addition.com/about_us.2 Value Proposition Gap's simple.7 CASE STUDY: GAP. and provides useful insight into how traditional brands can leverage their strength online. Germany and Japan. and are still relatively small compared to Gap's $9 billion in annual sales. up from $20 million in 199875.7. Gap. L."to deliver style. from jeans and T-shirts to khakis and jackets.7. whether in the store or online76".see Appendix A Gap. 'Clicks and Mortar at Gap. October 8. and BabyGap.com) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. America Online (AOL) and Gap Inc. letting customers access the Gap brands.babygap. and analysts estimate that sales in 1999 amounted to $50 . and today it is the 29th most valuable brand in the world73. as cited in Lee.com is an example of successful crossover marketing. The Gap offers a balance of modern and seasonal styles of clothing. however. Currently.com' .800 stores in the US. from shirts to accessories and hard-to-find sizes.gapkids. and Gap online provides access to the full range of items at Gap.gapinc.COM . surpasses $9 billion in net sales and increase earnings by 54% over previous year.interbrand. Canada.$100 million.COM 6.com. This success is largely due to their simple formula . Inc. Its reach extends across more than 1. Gap online exploits the accessibility and convenience of the Internet.Business Week. UK. 'Clicks and Mortar at Gap. online sales are only available to US customers.gap. TABLE 6. head of Gap Online.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. as cited in Lee.'s website (www.

. The Observer.com.7 . Unlike Barnesandnoble..com store one immediately notices the consistency between the online and retail stores.3 Sources of Value . FIGURE 6.7. 1998 94 . feel and design of the site is consistent with the bricks-and-mortar stores. This personality is reinforced online through the simple structure and layout. making it convenient.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. April 18. the extensive integration of Gap's online and offline activities are clearly evident. Visiting the gap. and Customer Care. from the blue and white colour scheme to the easy-toshop format . Michael McCadden. Content. Gap Online primarily focuses on Convenience. Simple. making navigation even faster.very easy..making visual references to its offline roots. Executive Vice President of Global Marketing. very efficient"77. D. reinforcing its brand identity.. and easy-to-use.The 7Cs Framework In terms of the 7Cs framework.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. describes the company's brand personality as "direct and straightforward. The site also offers sharp graphics.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill... but provides customers with the option of viewing text-only.. 'Mind the Gap'.

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

In certain high traffic Gap and GapKids stores. In addition. 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. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. • They offer Online discounts and promotions such as the ShopCard.7.4 Brand-Building Strategy .gap.com.com) in store windows with the slogan "surf. 96 .com" on the display screens between transactions.) that also promote the online store. These efforts doubled the size of Gap's e-mail database. • Gap. etc. however. which can be used towards future purchases.shop.com has also created an affiliate programme encouraging sites to establish links to gap. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. by displaying the URL (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.ship". which displays "Shop online at www. Gap has held in-store campaigns to get customers to submit their e-mail addresses. on counter cards. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. or to refer shoppers to Gap's website. whereby for every $100 a customer spends at Gap Online. Gap has also supplemented this with online promotions: • In August 1999. on shopping bags and even on the cash register.com has links with CDnow to cross promote websites. either online or in stores. • Gap.com has been able to piggy-back on The Gap's offline advertisements (in TV. it is fully leveraging its offline presence to build awareness.gap.com in return for a 5% commission on every sale referred through the site. Gap secured a 3-year commerce and marketing agreement with AOL.Extensive Integration Gap. To convert walk-in shoppers to cybershoppers. by offering a 10% discount and free shipping on their first online purchase. Magazines. they send the customer a $20 Gap ShopCard. providing a useful way to directly reach customers. Most of Gap's online traffic is generated by leveraging its physical presence. billboards.

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

and the number of websites continues to explode.businessweek.D students at Stanford University. advertising. Yahoo! has since morphed from an ordinary search service into a global Internet communications. September 7.8.interbrand. As the first online navigational guide to the web. The Strategy. Yahoo! offers a range of supporting services that add value. The concept exploded (through word-of-mouth) and in less than six months. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. There's nothing in the real world to compare to that79". commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.8.2 Value Proposition At the core of Yahoo!'s value proposition. the amount of information. two Ph. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. who started an online guide as a way to keep track of their personal interests on the Internet. all in a single location. According to Timothy Koogle.The Company. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. 1998 (www. and is one of the few Internet companies to turn a profit early in the development of the Internet. from e-mail services to stock quotes and much more. Yahoo! is a leading guide in terms of traffic. household and business user reach.see Appendix A 'Yahoo! .com) 98 . lies the directory . The company's global web network includes 23 world properties outside the US.8 CASE STUDY: YAHOO! 6. Yahoo! was founded by David Filo and Jerry Yang.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.com) . The Stock' . the site was receiving 1 million hits per day.Business Week. CEO of Yahoo!. 78 79 Interbrand (www.1 Company Overview In April 1994. 6.

TVs. regardless of platform (i.com allowing them to offer person-person payment solutions .e.Yahoo! acquires eGroups . Their goal is not to list everything under the sun. . to provide web-based services to PalmTM handheld computers .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.com.Receives $1 million in venture capital funding from Sequoia Capital $33.The 7Cs Framework Convenience Central to Yahoo!'s success. 99 . to allow access. More recently.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. mobiles.8 million IPO (2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.7 YAHOO! . and unveils Yahoo! Digital Introduces Bill Payment services .Site goes live September . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! forms agreements with Palm Inc. Yahoo! extended its convenience through its Yahoo! Everywhere service. Palm computers).Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .Yahoo! unveils Yahoo! Finance Vision .Yahoo! acquires Arthas..TIMELINE AND MAJOR MILESTONES 1994 April . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.000 shares at $13.8).8.Yahoo! Shopping launches personalised shopping service 6.3 Sources of Value .600.Yahoo! Launches Business-to-Business Marketplace . is the way it has structured and displayed information.

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

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

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

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

They have maintained that lead through the creation of a high quality end-to-end customer experience. 1999. from its convenient and logical structure and display of information. alliances and acquisitions to provide added value services to their customers. These relationships have provided end-users with added-value. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". its choice of partners. p. Yahoo! points them to its competitors by including links to AltaVista. and its openness (for example. In addition. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' .com. To maintain its lead. s4 104 . Yahoo! has benefited from a first-mover advantage. first to turn around an annual profit. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers.8.8.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. and has cultivated a reputation for excellence. Yahoo! has invested relentlessly in new services and marketing programmes. its excellent customer service. Yahoo! has built a strong brand. In addition. while attracting new customers. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. and other search engines at the bottom of its search results page). and first to go mainstream by advertising its name using traditional media. As a result of all these factors. VPBrand Marketing of Yahoo!.Advertising Age. GoTo. they have carried out extensive partnering.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. to its simple design. May 3. their innovative promotional and guerrilla marketing techniques. that have set it apart from the pack. first to go public.6 Conclusion Yahoo! is one of the most successful brands on the Internet. HotBot. while also associating Yahoo! with well known brands. have created a distinct brand identity that differentiates the brand and appeals to its target market. 6. As the first online navigational guide to the web. if a user cannot find what it is searching for. with a large customer base and high levels of customer loyalty. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence.








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



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

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

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

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

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

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

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


681 2.845 56.048 20.694 17.076 3.596 3.806 11.404 4.423 2.155 7.147 9.895 2.184 1.550 12.interbrand.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.281 11.422 1.329 4.262 1.275 30.654 43.602 4.568 3.830 14.Interbrand's Ranking of the Top 60 Brands (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .197 32.643 3.595 17.193 112 .806 2.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) 83.502 33.932 4.648 1.225 11.761 1.781 17.313 2.143 2.101 9.464 3.766 14.603 5.052 6.021 26.781 33.319 1.283 4.792 3.181 21.894 14.231 24.510 8.132 15.361 1.804 2.909 7.310 11.985 2.634 1.231 12.043 8.527 3.

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





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