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


BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com 6.Extensive Integration 6.1 Company Overview 6.4.2 Value Proposition 6.5.4 6.3 Sources of Value .8.2 Value Proposition 6.5.8 Case Study: Boo.7 6.3 Sources of Value .The Failure of Boo.5 Other Factors That Contribute to their Brand Leadership 6.3 Sources of Value .4.4 Brand-Building Strategy Brand-Building Strategy 6.2 Value Proposition 6.The 7Cs Framework 6.5 Conclusion Case Study: Gap.6 Conclusion Case Study: eBay 6.6.2 Value Proposition 6.8.4 Brand-Building Strategy Brand-Building Strategy Conclusion Case Study: CDnow 6.The 7Cs Framework 6.4.1 7.3 Sources of Value .The 7Cs Framework Company Overview 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6 6.4 Brand-Building Strategy .4.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.5.6.The 7Cs Framework 6.2 Value Proposition 6.1.8.com Company Overview 6.5 6.5.5 Other Factors that Contribute to their Brand Leadership 6.com 6.1 Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 Company Overview 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 .

3 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 4.5 Figure 2.1 Figure 3.com's Website Amazon.3 Figure 6.6 Figure 2.2 Figure 4.1 Figure 2.5 Figure 4.1 Figure 1.8 Figure 6.6 Figure 4.5 Figure 6.8 Figure 3.7 Figure 5.5 Figure 5.7 Figure 2.2 Figure 5.9 Figure 6.4 Figure 4.3 Figure 4.com's Associates Programme Overview of BarnesandNoble.1 Figure 6.6 Figure 6.4 Figure 6.3 Figure 3.2 Figure 3.8 Figure 5.2 Figure 2.6 Figure 5.9 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 5.4 Figure 5.7 Figure 5.4 Figure 2.4 Figure 4.2 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 6.2 Figure 6.3 Figure 2.com's Website Overview of Boo.

5 Table 6.Timeline and Major Milestones Boo.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .4 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones Gap.2 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .com .com .6 Table 6.7 The Emerging Brand-Building Environment Amazon.1 Table 6.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones Yahoo! .1 Table 6.3 Table 6.Timeline and Major Milestones CDnow .


It is empowering customers with more options and more information to make informed decisions.com1 Amazon. products and services reconfigured.com) 7 . This is creating new challenges and opportunities.9 2. America Online (AOL) and eBay have been able to build powerful brands in a few years. there has been an explosion in the online world .com noble. FIGURE 1.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.5 2. the Internet is changing fundamentals about customers. Amazon. while providing new tools for promotion. Figure 1.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. In the midst of this. Amazon. As such.5 million book titles).9 3.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. As such.1 .YEARS TO REACH $100 MILLION IN SALES 6 5. interaction and relationship building. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. creating strong brands that are putting established brands at risk. that these Internet start-ups have achieved. relationships.1 3. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. McKinsey Analysis (www. service and brands.com's range of 4.0 1. and is triggering the need for new brand-building strategies and tools.an explosion that is also a harbinger of how business will operate in the future.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. The Internet also represents a fundamental shift in how buyers and sellers interact. Internet companies such as Yahoo!.mckinseyquarterly. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com.1 OVERVIEW Over the past few years. and business models revamped. aggressive Internet start-ups have emerged. as they face each other through an electronic connection. whereas it has taken decades for traditional companies to achieve the client base.com Source: Securities and Exchange Commission Filings.g.2 3. customer affiliation and level of sales. Supply chains are being rethought.

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

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

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

Chapter 7. their purpose and value are discussed. Chapter 2. summarises the key findings. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.4 STRUCTURE The next chapter. and outlines the opportunities for further research. Chapter 6 examines the brand-building efforts of seven companies. The final chapter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and introduces the core concepts that form the backbone of the dissertation. highlighting some key factors that have contributed to brand success. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. Chapter 4 provides an overview of the Internet and its defining characteristics. 11 . Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. as well as the interactive approach to attracting customers and building loyalty. provides an analysis of leading academic literature in relation to branding. The nature of brands. Chapter 3 explores how brands have traditionally been built. This chapter sets the context within which online brands must be built. The limitations of the Internet in terms of brand-building are also discussed. by outlining the impact of the Internet on the business and competitive environment.


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

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

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

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

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

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

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

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

which is the value of the brand over and above its commodity value. The major brand assets are brand loyalty. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. According to David Aaker (1991). The benefits of each are outlined in Figure 2. (New York: Free Press). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.Create Awareness . D. FIGURE 2.8 . name awareness. 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". trademarks. D. and relationships with distributors and strategic partners.8.. 1991 21 .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. strong brand associations.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .. (New York: Free Press). perceived quality. 1991 10 Aaker. and other assets such as patents.

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

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


3. To entice trial and repeat purchase requires triggering mechanisms. it should provide a satisfactory experience and lead to a willingness to buy again. This is illustrated in Figure 3. confidence and brand equity are built. If the offering is developed properly. and direct marketing. public relations. and keep it turning. Once this has been established. brand awareness. This chapter spells out the traditional brandbuilding process. FIGURE 3. the next step is to get customers to try the brand. highlighting important factors that contribute to the success of each step along the way.1 .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 . 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. selling.1 INTRODUCTION Building a strong brand is a complex task.1. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. promotion.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. The major characteristics of successful brands are also reviewed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.

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

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

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

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

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

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

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


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

regardless of where the computer or Internet access device is physically located.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. The Internet can also be accessed at any time .this radically alters the process of interaction between communicating parties. Graph is not drawn to scale).the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.2 (Note: 35 .2. • It Allows for Two-way Communication and Interactivity .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 . 7 days a week. and deliver new products and services at low cost. These characteristics combine to create a very powerful medium. By allowing for direct. These defining characteristics have fuelled its explosive growth. These qualities eliminate the barriers of time and space that exist in the physical world. when the United States Defence Department developed the 'ARPAnet'. anywhere. allowing both parties to identify each other and build one-to-one relationships . which was intended to link military networks together. ubiquitous links to anyone. • It Overcomes the Barriers of Time and Space . the Internet lets individuals and companies build interactive relationships with customers and suppliers. 4.The Internet is a global network and can be reached from everywhere. The context of the Internet and certain key developments are highlighted in the Figure 4.not previously available with mass medium forms of communication.24 hours a day.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. FIGURE 4. 1996 (www.2 .com) 36 .000 100. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.a PricewaterhouseCoopers Report.economist. 2000 Internet / ARPAnet was created Dell.3 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . 1998.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.Figure 4.000 1969: 10.000 1.000 1.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 10. as cited in 'E-Business Technology Forecast' .3.000.000.

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

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

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

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

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

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

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


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

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

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

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

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

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

1 The Case of Hotmail.com. a company now owned by Microsoft.000 subscribers within a few years of launch. and then propel the message even further to their own ever-increasing circles of friends and associates.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. and the message spreads organically. Hotmail acquired over 12 million subscribers. but Hotmail signs up more than 150. Geocities enables people to create personal websites for free. friends to visit it. In its first 1. 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). and in doing so spread the word for Geocities. sign up for their own free e-mail. they will have a powerful viral opportunity at their disposal. In fact. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. A traditional print publication would hope to reach 100.com The classic example of viral marketing is Hotmail. seven days a week. they tell all their 51 . Today they are the largest e-mail provider in the world with over 40 million users. Hotmail. When a user builds a website. saying: • "Get Your Private. • Each new user becomes a company salesperson. Free Email at http://www.hotmail. and they created a subscriber base more rapidly than any company in history. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host.com was one of the first free web-based e-mail services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.5.000 subscribers every day. whether for communications or community.5 years. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. where they have never carried out any promotional activities. eGroups and Geocities (both recently acquired by Yahoo!). Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).

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

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

No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. Customisation creates the feeling of a one-to-one relationship. 'Real Profits from Virtual Communities' . even if they purchase offline. For a community to work. These sites allow members to interact with one another. 1999 (www.forrester. An important contribution of these communities is that they provide members with a medium to communicate with each other.. Clemmer. or prior transactions.com) McWilliam. 40 41 Morrisette.. Other content includes community-generated content. and advertising (if it is relevant and useful). sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). 3.5). According to Forrester Research40.. 'Building Stronger Brands through Online Communities' . & Bluestein. share information and access a wide range of services. 31% of online consumers use the Internet for obtaining product information. 1995. Often. use bulletin boards. It fosters a sense of belonging41 among the members. and organise live events. An online community offers a compelling way to entice customers back to a site. On the other hand.. Spring 2000 42 Armstrong. and nearly 20% use it for post-sales support. J. Members can interact in chat rooms. A. Some companies have taken this a step further and customise the product or service on offer (Dell offers 'made-to-order' computers through Dell Online). Community Online communities are emerging as new gathering places for consumers with similar interests (e. based on profile information. . Customisation Customisation involves tailoring the presentation of a web-site to individuals. which is facilitated by a combination of factors (Figure 5. as well as through loyalty programmes that provide targeted benefits.A Forrester Research Report. G.. S. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. 54 . W. visitors should not be engulfed with too much information.Sloan Management Review. which enhances the user's online experience. & Hagel. it needs a critical mass of members42. iVillage and Geocities). demographics.g. K. Online sites can track a customer's purchase history and modify its service accordingly.The McKinsey Quarterly. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.

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

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

The popularity and effectiveness of the different promotion methods are outlined in Figure 5. including affiliate programmes with other websites. The company must build awareness and communicate its value proposition to its target customers. billboards. 180-183 (www..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. Figure 3. Evaluation.7. This is more difficult online than offline. This model consists of five stages . McQuade.. The mechanisms to communicate range from traditional media (TV. Therefore.2. R. & Zeisser.. links from directory searches (Connectivity). A. S. 1996.Attract. 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 ’ . Magazines. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. M.7 . because there is no physical presence. e-mail notifications and banner advertisements. Interest. FIGURE 5. 'Marketing to the Digital Consumer'. and bring people to the site for the first time.4 .8. Adoption).Awareness.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Retain. McKinsey Quarterly.mckinseyquarterly. pp. Newspapers. Trial. etc. Waitman. visibility relies solely on Communication. Learn and Relate.. No.) to online tools. Engage. modified to take into account of the interactive dynamics of the Internet.

4 3.com) The most effective methods are direct e-mail. discounted over the expected duration of the brand-customer relationship.3 Source: Forrester Research.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .8 4. Fig. public relations and television advertising.ebusinessforum. Attracting customers is only the first step in building online brands. Companies then need to engage customers to obtain their interest and participation.6 3.3 2.2 4. Engage With the multitude of choice available on the Internet. The key factors at this stage are Convenience combined with interesting Content. Creativity is also an important factor in gaining attention in today's cluttered marketplace.8 .WEBSITE PROMOTION METHODS .5 3. multiplied by the expected rate of transactions.3 3. affiliate programmes. as cited in 'Targeting Consumers via the Internet' .5) 2.1 3.4 4.4 3. 3.0 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.7 4. 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. it is important to quickly engage consumers' interest before they move on.3) is useful to ensure that a company develops a distinct and consistent brand identity. Kapferer's Brand Prism (Ch.Economist Intelligence Unit 2000 (www. 58 .

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

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


'Amazon.2 Value Proposition Amazon.com.2.1 Company Overview Amazon.economist.com) . Boo. Figure 6. In July 1995.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 6. In addition. Amazon provides increased added value on several dimensions. Germany and Japan49. easy. CDnow. including: increased selection.2. Amazon. and is one of the few Internet brands that is recognised all over the world.The Economist. 47 48 Interbrand (www.com has become synonymous with e-commerce. and enjoyable experience. The cases are presented in the following sequence .interbrand. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). 2000 (www. and one of the top two or three in Britain. combined with its levels of customisation and customer service. November 11. innovation and delivering on its promises. 1999 49 'Amazon's Amazing Ambition' .Goldman Sachs Report. Amazon has cultivated a reputation for excellence.com .see Appendix A. Amazon serves over 23 million customers from 160 countries. Barnesandnoble.com launched with a mission to use the Internet to transform book buying into a fast. In addition. it is the most visited e-commerce website in America. and other key factors that have contributed to its success (or failure). It is the 57th most valuable brand in the world47.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. Through its provision of a one-stop shopping experience. Each case is presented in the same format including.com and Yahoo!. its brand-building strategy (how it generates traffic). February 26. and higher levels of customisation and service than the traditional shopping experience allows. 6. its value proposition. discounted prices.COM 6. a company overview.1 outlines Amazon's timeline and major milestones. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). and has equity investments in several e-tailers.Amazon.com. Amazon has been able to differentiate itself from other online competitors. Not a River' . and has sales of over $2 billion. greater convenience. eBay.It's an Ocean. Amazon.1 INTRODUCTION This chapter provides an analysis of seven companies. more information.com.com) 62 . Gap. the sources of added value (using the 7Cs Framework).2 CASE STUDY: AMAZON. France.com's success stems from its compelling value proposition.

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

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

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

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

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

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

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

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

2. Barnesandnoble. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.3 CASE STUDY: 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 .Barnes & Noble University opens registration for free online courses .Acquires minority stake in NotHarvard. prints & posters and related products. and 20% owned by the public. Inc. book databases. and 470 B. music. all front-end operations (marketing. Barnesandnoble. Dalton bookstores (located in shopping malls).com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.Announces distribution relationship with New York Times September . rare.Launches Internet Radio .Acquires equity stake in Mightwords .Barnesandnoble.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. However. etc. Barnesandnoble.com is approximately 40% owned by Barnes & Noble.com was able to 'hit the ground running'.) established by its parent company. promotion) between the online store and the retail stores have been kept separate.Barnesandnoble.3.com) .com launched its website (www.Barnes & Noble went online at AOL May . Barnes & Noble Inc. contacts.com is the fourth largest e-commerce retailer54.Launches Video Store 71 .Barnes & Noble.COM .Offers same day delivery in Manhatten . Barnesandnoble.Launches BNTV . Besides books.com's timeline and major milestones is outlined in Figure 6. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. magazines.com . Barnes & Noble Inc.barnesandnoble..TIMELINE AND MAJOR MILESTONES . is one of the best known traditional booksellers in the United States. Currently. TABLE 6.2 1997 January BARNESANDNOBLE. Launched in 1997.com provides other online categories offering software. as it could capitalise on the infrastructure and back-end operations (warehouses.com announces strategic relationship with Palm Computing .COM 6. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com).Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .1 Company Overview Barnesandnoble. 40% owned by Bertelsmann AG.com and Microsoft announce that they will create an eBook superstore .Launches Affiliate Network December . and is the second largest online bookseller (after Amazon.

as well as an extended searchable catalogue of millions of out-of-print. logically structured. as cited on Barnesandnoble.bn. FIGURE 6.com and barnesandnoble. music New Initiatives Barnesandnoble.barnesandnoble. in terms of the 7Cs framework.com) 72 . including title. Both have expanded their convenience to offer 54 Media Metrix. edition. etc. but instead of developing an outstanding interface to its inventory. previously-owned and rare books.com's website (www. In addition. however.3 Sources of Value .The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. the company created a site very similar to Amazon.3). 6. author.3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com or www.com's virtual storefront is graphically richer than Amazon.3.3 . the features are practically identical. good prices. software. Both offer detailed bibliographic information.COM'S WEBSITE Simple. easy and secure ordering. Barnes & Noble planned to dominate online book-selling. publisher.com's (Figure 6. Both Amazon. rich editorial content and a community experience.2 Value Proposition Barnesandnoble.OVERVIEW OF BARNESANDNOBLE.com offers customers an easy-to-search catalogue of virtually every book currently in print. and easy-to-navigate site Categories focus on books.com's and takes a bit longer to download.com let customers sign up to receive email reviews and announcements of new titles. they offer customers fast delivery.

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

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

even if that means eating into their existing sales.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Barnesandnoble.com's experience is instructive. 2000 (www. and its lack of innovation (by copying Amazon. otherwise they risk losing out to other online competitors.com and has given them the image of a second rate 'me too' brand.3.its key differentiating factors. Barnesandnoble. it has not been able to establish itself as the leading online bookseller. feature for feature) has failed to differentiate Barnesandnoble.com has been able to create a high impact and high-quality customer experience. The Press have also contributed. customer relationships and offline presence . According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. it also caused a major setback.Not a Best Seller' .com's late start in 1997.6 Conclusion Although Barnesandnoble.forbes. The company failed to leverage its established brand.com) 75 . In addition. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. and allowed them to offer stock options as compensation and achieve a high market capitalisation. and was further up the growth curve. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. a wellestablished Internet brand. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.Forbes. meant that Amazon.com. by portraying them as slow and clumsy in comparison to the more nimble Amazon.com . Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. August 4. significant market momentum. 57 'Bn.

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


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


Miss Boo

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



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

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

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



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

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


5 million distribution deal with Lycos Signs three-year.1 Company Overview Founded in 1994.ten times the selection of a conventional bricks-and-mortar music store). It has a customer base of 4 million people. D.000 people.Site goes live .179-188 63 CDnow website (www. CDnow is also driving the digital distribution of music.Harvard Business Review. and an average daily audience of over 800. cover art.cdnow. and was the first site to offer the sale of music downloads and custom CDs. and one of the most popular shopping sites on the Internet62. daily music news. TABLE 6. CDnow is the leading online music store.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . good prices.CDnow and Time Inc. announce marketing alliance .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. 'How to Acquire Customers on the Web' . On 19th July 2000.Merges with N2K. and exclusive interviews and reviews from CDnow's award-winning editorial staff.5 CASE STUDY: CDNOW 6. CDnow provides access to over 500. guides to music genres.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. T. This unprecedented degree of access to music and information is the core of CDnow's value proposition. former arch rival . as well as music reviews. convenience.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. by twin brothers Jason and Matt Olim.TIMELINE AND MAJOR MILESTONES . & Novak.Merges with Columbia Records .Raises $10 million through private placement . features.000 sound samples.000 music related items . customisation and a wealth of information and content to help in the purchase decision.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5. whether for browsing or buying. $22. and they aim to "make every visit to the site. $18.Partnership program with Geffen Records . a valuable and rewarding experience"63. CDnow was acquired by Bertelsmann AG. May-June 2000. pp.Launches merged CDnow/N2K site .Forges distribution partnership with Yahoo! $65.com) 80 .000 music-related products and 650.5. 62 Hoffman..5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .

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

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

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

they were the first site to offer the sale of music downloads and custom CDs. 1998: $56. resulting in increased conversion rates. CDnow's promotion strategies have attracted high levels of traffic.CDnow made public relations a high priority brand-building tool.5. as a way to fuel very lucrative word of mouth. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. Public relations efforts helped to generate word of mouth and influence sales. In fact. It is a powerful source of acquiring new customers at low cost.Press Release. both in the online and offline worlds. 6.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum.4 million.com) 65 'Pioneering in Cyberspace' .com/cdnow. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.hsny. word-of-mouth accounts for the lion's share of CDnow's customers.cdnow.(www. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . and scaled it awareness-building efforts. and to increases in the customer base of more than 30% quarter-to-quarter.htm) 84 .As for many successful online retailers.4 million). The story of how CDnow was founded in a basement. This has contributed to a 225% increase in sales (1997: $17. it is in this context that the large investments in advertising and partnerships make sense. with 44% of sales coming from new customers65. April 28. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.Hampel & Stefanides (www. 1998 . It is constantly adding new functionality to the site and has been innovative in its offering .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . • Word-of-Mouth . The company continually pushed for new distribution partnerships to widen its sphere of influence. with repeat customers accounting for more than 50% of sales.

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

and eBay provides added value through its convenience. flea markets and auctions. the eBay community has grown to include more than 10 million registered users. as cited in 'eBay . Auctions are an enabler. extensive selection and geographical reach. According to Meg Whitman. with emphasis being placed on its unique community feel and culture.25% to 5% of the final sale price on any item sold. or the payment for the item . with the number of unique daily visitors setting a record of 1. People perceive the auction format to offer better prices. Individuals use eBay to buy and sell items in more than 4.Company Overview' .ebay. (A)' . CEO of eBay.2 Value Proposition eBay offers consumers an efficient.g.Company Overview' . transportation and other overhead costs.removing the need for inventory. payment) between themselves.6 CASE STUDY: EBAY 6. shipping.300 categories. eBay effectively created a new business model never before possible . There are over half a million new auctions.the closest thing in the offline world are trading forums such as classified ads. Since its launch in September 1995.6. This is a new market .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. 24 hour a day. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com) 'eBay .com) 70 'Meg Whitman at eBay Inc. "at its core. 6.6.A Harvard Business School Case Study.eBay website (www. Sellers pay a nominal fee for placing an item up for sale. global trading place for buying and selling personal items in an entertaining auction format. garage sales. The buyer and the seller work out the logistics of the transport (e. eBay is not about auctions.ebay.000 new items joining the "for sale" list every 24 hours69. from collectibles and antiques to electronics and toys. and 450. and eBay never takes possession of the item being sold. collectable shows. Auctions make it fun.eBay website (www. 1st October 1999 86 .efficient one-to-one trading in an auction format. Auctions represent a platform. and eBay receives a transaction fee that ranges from 1.782 million in January 200068.

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

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

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

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

eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule).a four-year. Early on. who tended to be serious collectors. eBay Magazine. representing about 40% of revenues. and facilitate the spread of positive wordof-mouth.3 million in advertising. 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. The Official eBay Guide to Buying.g. Through this combination of its advertising efforts and targeted promotions. and Collecting Just About Anything and eBay for Dummies. and two books. eBay has since expanded its promotion efforts and engaged in marketing partnerships. Doll Collector) and appearance in trade shows. Mary Beth's Beanie World. eBay has been able to attract a large customer base. but they have other partnerships with over 150 websites of varying scales. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. eBay decided that it would not enter into major portal advertising deals in the short term. The AOL partnership was one of the largest strategic partnerships on the Internet . Selling.6. Recent promotional initiatives include its new publication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. These new publications appeal to the collecting spirit. the largest of which was with AOL. As a result. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. 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 1999.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. as a result of the high quality experience it provides. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. In 1998. and highlight opportunities created by e-commerce. $75 million joint marketing alliance and development deal. they spent $12. and maintained the same ratio for 1999. 91 . eBay transformed from a pure online play into a 'clicks-and-mortar' company. provide a wealth of information about the 'ins and outs' of trading on eBay. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. Based on this. they decided to target their marketing efforts on these heavy users.

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

Currently.gapinc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap Inc. L. 1999 93 .6 1969 1986 1989 1997 1998 1999 - GAP & GAP.7 CASE STUDY: GAP.800 stores in the US. from jeans and T-shirts to khakis and jackets. and analysts estimate that sales in 1999 amounted to $50 . The Gap offers a balance of modern and seasonal styles of clothing. Germany and Japan. October 8. 1999 76 Jeanne Jackson.7. Gap's online sales tripled in 1998 alone.com is an example of successful crossover marketing. online sales are only available to US customers. Gap started selling items online .TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.7.com) . and Gap online provides access to the full range of items at Gap.com and www. America Online (AOL) and Gap Inc. 6. to provide customers with greater convenience and options. standard styles are well suited to online shopping.an early convert to the then-revolutionary idea of clothes retailing on the Internet.gap. 'Clicks and Mortar at Gap. however. October 8. and BabyGap. In addition.htm) 75 Jeanne Jackson. whether in the store or online76".com' . and today it is the 29th most valuable brand in the world73. Its reach extends across more than 1.babygap.com/about_us.com' . Gap online exploits the accessibility and convenience of the Internet.'s website (www. and provides useful insight into how traditional brands can leverage their strength online.$100 million. the growth prospects are enormous.2 Value Proposition Gap's simple. GapKids. L. 73 74 Interbrand (www. announce multi-year partnership. as cited in Lee. In late 1997.see Appendix A Gap.COM . California GapKids opens its first store BabyGap is born Gap opens its online store at www.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. up from $20 million in 199875.Business Week."to deliver style. as cited in Lee. Inc.gapkids.com. from shirts to accessories and hard-to-find sizes. letting customers access the Gap brands. TABLE 6.1 Company Overview Gap opened its first store in San Francisco in 1969. According to Jeanne Jackson. head of Gap Online. Gap.Business Week. and are still relatively small compared to Gap's $9 billion in annual sales.interbrand. Canada. UK. surpasses $9 billion in net sales and increase earnings by 54% over previous year.COM 6. service and value to everyone74". 'Clicks and Mortar at Gap. "this is about being clicks-and-mortar. This success is largely due to their simple formula .

Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. FIGURE 6. Unlike Barnesandnoble. feel and design of the site is consistent with the bricks-and-mortar stores. Executive Vice President of Global Marketing..making visual references to its offline roots... Content.The 7Cs Framework In terms of the 7Cs framework.3 Sources of Value . making it convenient.com store one immediately notices the consistency between the online and retail stores. the extensive integration of Gap's online and offline activities are clearly evident. reinforcing its brand identity.. 'Mind the Gap'...7 . This personality is reinforced online through the simple structure and layout. making navigation even faster. 1998 94 . The Observer. Michael McCadden. 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.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.7. describes the company's brand personality as "direct and straightforward. The site also offers sharp graphics. April 18. very efficient"77.very easy.com. and easy-to-use. and Customer Care. Gap Online primarily focuses on Convenience.. Visiting the gap.. from the blue and white colour scheme to the easy-toshop format . D.

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

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

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

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

TVs. regardless of platform (i.Yahoo! acquires eGroups .7 YAHOO! .com allowing them to offer person-person payment solutions .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Yahoo! extended its convenience through its Yahoo! Everywhere service.600.8 million IPO (2.00 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. and unveils Yahoo! Digital Introduces Bill Payment services .Yahoo! acquires Arthas. Palm computers).8. More recently. to allow access.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 .e. 99 . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.000 shares at $13.Yahoo! unveils Yahoo! Finance Vision .Yahoo! Shopping launches personalised shopping service 6.Receives $1 million in venture capital funding from Sequoia Capital $33.Yahoo! forms agreements with Palm Inc. is the way it has structured and displayed information. to provide web-based services to PalmTM handheld computers .8)..TIMELINE AND MAJOR MILESTONES 1994 April .The 7Cs Framework Convenience Central to Yahoo!'s success. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.3 Sources of Value .com. . Their goal is not to list everything under the sun. 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. mobiles.Yahoo! Launches Business-to-Business Marketplace .Site goes live September . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.

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

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

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

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

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








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

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

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

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


550 12.694 17.048 20.101 9.766 14.909 7.806 2.043 8.806 11.510 8.464 3.310 11.634 1.596 3.181 21.143 2.654 43.021 26.502 33.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) 83.932 4.281 11.interbrand.231 12.845 56.895 2.404 4.595 17.052 6.147 9.781 33.422 1.197 32.319 1.985 2.648 1.076 3.313 2.761 1.602 4.527 3.225 11.781 17.643 3.792 3.184 1.155 7.Interbrand's Ranking of the Top 60 Brands (www.329 4.804 2.193 112 .568 3.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.603 5.231 24.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .423 2.894 14.283 4.681 2.132 15.361 1.262 1.275 30.830 14.

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





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