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


5 Conclusion Case Study: Yahoo! 6.The 7Cs Framework 6.2 Value Proposition 6.4 Brand-Building Strategy CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.The 7Cs Framework 6.5 Other Factors that Contribute to their Brand Leadership Brand-Building Strategy .4.1 Company Overview 6.5 Conclusion Case Study: Gap.3 Sources of Value .8.6.com Company Overview 6.2 Value Proposition 6.2 Value Proposition 6.4 6.1 Company Overview 6.1 7.The Failure of Boo.8.3 Sources of Value . 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 .1 Company Overview 6.2 Value Proposition 6.5 6.3 Sources of Value .4 Brand-Building Strategy 6.3 Sources of Value .6.Extensive Integration 6.5 Other Factors That Contribute to their Brand Leadership 6.7 6.6 Conclusion Case Study: eBay 6.com 6.3 Sources of Value .4 Brand-Building Strategy 6.4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1.The 7Cs Framework Conclusion Case Study: CDnow 6.6 6.The 7Cs Framework 6.1 Company Overview Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.com 6.8 Case Study: Boo.7.4.4 Brand-Building Strategy 6.2 Value Proposition 6.7.

4 Figure 6.5 Figure 6.com's Website Overview of Boo.3 Figure 3.9 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 .3 Figure 6.3 Figure 4.5 Figure 2.com's Website Amazon.6 Figure 4.1 Figure 6.2 Figure 4.7 Figure 5.1 Figure 3.6 Figure 2.8 Figure 5.5 Figure 5.7 Figure 6.1 Figure 5.2 Figure 2.2 Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.8 Figure 3.1 Figure 4.7 Figure 5.1 Figure 2.3 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.4 Figure 2.3 Figure 2.8 Figure 6.com's Associates Programme Overview of BarnesandNoble.9 Figure 6.4 Figure 4.6 Figure 6.6 Figure 5.1 Figure 1.4 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 .2 Figure 6.5 Figure 4.4 Figure 4.2 Figure 3.7 Figure 2.2 Figure 5.

4 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .1 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones eBay .com .com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.3 Table 6.5 Table 6.Timeline and Major Milestones Gap.6 Table 6.7 The Emerging Brand-Building Environment Amazon.2 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Boo.


whereas it has taken decades for traditional companies to achieve the client base. while providing new tools for promotion. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com.com1 Amazon. America Online (AOL) and eBay have been able to build powerful brands in a few years. It is empowering customers with more options and more information to make informed decisions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Figure 1.1 OVERVIEW Over the past few years.mckinseyquarterly. As such. that these Internet start-ups have achieved. Internet companies such as Yahoo!. creating strong brands that are putting established brands at risk.com) 7 . FIGURE 1. This is creating new challenges and opportunities. Amazon.g.com's range of 4.0 1.5 2.2 3.9 3. products and services reconfigured. there has been an explosion in the online world .an explosion that is also a harbinger of how business will operate in the future.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.1 . and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. relationships. Amazon.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. the Internet is changing fundamentals about customers. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.1 3.YEARS TO REACH $100 MILLION IN SALES 6 5.9 2. Supply chains are being rethought.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. interaction and relationship building. service and brands. As such. The Internet also represents a fundamental shift in how buyers and sellers interact.com Source: Securities and Exchange Commission Filings. In the midst of this. aggressive Internet start-ups have emerged.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. and business models revamped. and is triggering the need for new brand-building strategies and tools.5 million book titles).com noble. McKinsey Analysis (www. customer affiliation and level of sales. as they face each other through an electronic connection.

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

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

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

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


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

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

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

16 . 'Marketing Management . 1996. Planning. P. a consumer will be inclined to search for more information. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. Implementation. selective distortion.4).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. These beliefs depend on their previous experiences with the brand. p. The buying process consists of five stages (Figure 2.3 ..attitudes of others and unexpected situational factors (Figure 2. two factors can intervene between the purchase intention and the purchase decision . it is important to clarify customers' underlying buying behaviour and the buying process. Therefore.3). These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). (Europe: Prentice-Hall) 8th Ed.194 The process starts when the buyer recognises a need. either through heightened attention or through an active information search. and the effect of selective perception. FIGURE 2. the consumer learns about competing brands.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. and Control'.Analysis. Consumers develop a set of brand beliefs about the attributes of competing brands.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. This can be triggered by internal or external stimuli (advertisements). Consumers differ as to which product / service attributes they see as important. Through gathering information.. it is critical to understand what attributes consumers value. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. In the evaluation stage. and selective retention. However. Once aroused.

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

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

com. D.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. 1993 McWilliam. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). consistent orders Satisfied customers are the best advertisement . The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985.Sloan Management Review. There is also clear evidence of this on the Internet.. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. Harley-Davidson motorcycle clubs).they provide good word-of-mouth and are the best salespeople for the product / service 2. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. 'Building Stronger Brands through Online Communities' . 'The One to One Future'. Spring 2000 19 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Emotional loyalty can be also created through the formation of a strong user community around the brand. M.. G. Firstly. emotional loyalty is born out of a consumer's personal relationship with a brand. & Rogers. In this way.g. 8 9 Peppers. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand.

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

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

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

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


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

the brand can elicit feelings of confidence that it is of higher quality than competitors'. BRAND = P X I X AV These three characteristics are multiplicative rather than additive .3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . a distinctive brand identity (I). a company must develop a strong understanding of who their potential customers are. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. a compelling value proposition is the combination of an effective product or service (P). In order to do this. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.a strong offer that a potential customer would find compelling and interesting. The value proposition must be continuously re-evaluated to respond to changes in the marketplace.2 . unless differentiation and awareness can be developed. As such. Without a good product or service. Similarly. FIGURE 3.2). It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. and added value (AV). it will never attract a strong client base.DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. it is impossible to build a successful brand. 26 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.each is essential. In this way.

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

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

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

Promotion and Place (distribution strategy).Customers consider whether the product / service will meet their particular needs. pp. E.Figure 3. management style. • Interest . systems.4 .The customer is satisfied and decides to make regular use of the product / service. • Adoption .The McKinsey 7-S Framework).INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. it should lead to satisfaction and re-purchase. 'Diffusion of Innovations'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 1962. FIGURE 3. and its products / services. Advertising and PR are common tools for achieving awareness. E. 17 Rogers. they must learn about it.often referred to as the '4Ps' . skills.79-86 30 . Personal sources such as word-of-mouth from friends. This learning is called the adoption process17 .The company has to create awareness of the brand. (New York: Free Press). • Evaluation . 1962.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. and the product / service's perceived performance. Before potential customers can buy a product / service. If the offering is developed properly.Product and service features. deliver and reinforce this value proposition (see Appendix B .4. culture and staff needed to support. features and advantages. pp. colleagues and opinion leaders become important influences at this stage. strategy (partnerships and alliances).79-86 The Innovation-Adoption Model consists of: • Awareness .. Price. The value proposition must be communicated to entice customers to try the product / service.. 'Diffusion of Innovations'. (New York: Free Press).Customers need to be stimulated to seek information about the brand's uses. • Trial . the company must ensure that it develops the appropriate structure. The value proposition must then be articulated in terms of the 'marketing mix' .

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

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


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

when the United States Defence Department developed the 'ARPAnet'. • It Allows for Two-way Communication and Interactivity . These defining characteristics have fuelled its explosive growth.this radically alters the process of interaction between communicating parties.2 (Note: 35 . which was intended to link military networks together.The Internet is a global network and can be reached from everywhere. the Internet lets individuals and companies build interactive relationships with customers and suppliers. 4. These qualities eliminate the barriers of time and space that exist in the physical world. allowing both parties to identify each other and build one-to-one relationships . regardless of where the computer or Internet access device is physically located.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . The Internet can also be accessed at any time .3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. • It Overcomes the Barriers of Time and Space . The context of the Internet and certain key developments are highlighted in the Figure 4. 7 days a week. By allowing for direct.2.not previously available with mass medium forms of communication.24 hours a day. These characteristics combine to create a very powerful medium. anywhere.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). ubiquitous links to anyone. Graph is not drawn to scale). and deliver new products and services at low cost.

largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 100.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000. FIGURE 4.000 10.Figure 4. 1996 (www.000.000 1969: 10.2 .a PricewaterhouseCoopers Report.000 1.com) 36 . as cited in 'E-Business Technology Forecast' .000 1.3. 2000 Internet / ARPAnet was created Dell.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.economist.3 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 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. 1998.

FIGURE 4..E-Marketplaces .CyberAtlas Internet Statistics and Market Research. payment. The growth in support services (e. Reed. increasing to 500 million users by 200220. The emergence of open standards in development tools and at the network protocol level (e. The development of critical processes (ordering.2 20 'World Online Populations' .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.Cheap microprocessors & RAM . The McKinsey Quarterly. there will be an estimated 375 million Internet users world-wide.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. and gateway services). the momentum created by all these forces has created a virtuous cycle of growth.High-powered servers . G.internet. hosting. billing.Attractive infrastructure and middleware software . web design.Higher PC penetration among consumers and companies .Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . Multimedia development tools that can be used to create rich content.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. 2000 (http://cyberatlas. offering inexpensive bandwidth. 'Electronic Commerce (finally) Comes of Age'.Cheap bandwidth .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . 1996.4 .g. No. TCP/IP). Easier access to these networks provided by point-and-click web browsers.g. L.com) 37 . etc..Content Aggregators . As shown in Figure 4.4. making it more cost effective for software developers and other technology providers to create interoperable products.Low-cost networking alternatives .). This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.

to interacting (e. as cited in the Economist Intelligence Unit (EIU).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).5 .Figure 4.5. communication and information tool. These activities highlight the adoption of the Internet as an interactive. chat rooms.from communicating (90% use e-mail) and sourcing information. April 13. reveals the wide range of areas where people are embracing the Internet .eiu.com) 38 .g. 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. 2000 (www. FIGURE 4.

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

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

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

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

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


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

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

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

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

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

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

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

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

businessweek. With almost infinite display space and inventory capability. as cited in Business Week Magazine. October 29. ease-of-use. FIGURE 5. 29th October 1999 (www. up-to-date information. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.com) Davenport.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. whereas a slow response time and site downtime will have a significant negative impact. 38 39 Cognitiative Inc. which can enhance the company's value proposition. online companies have the opportunity to provide rich. ease-of-navigation..businessweek. and fast response times are among the most important factors in establishing web brand loyalty38.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.4. February 2000 Issue 53 . expert insights. 'Sticky Business'. and a wide range of products. 1999 (www. CIO Magazine.4 . T. as cited in Business Week.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.

demographics. based on profile information..g. 40 41 Morrisette. 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). and nearly 20% use it for post-sales support. 1999 (www. W. and organise live events. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. A. 54 . On the other hand. J. Online sites can track a customer's purchase history and modify its service accordingly. share information and access a wide range of services. An important contribution of these communities is that they provide members with a medium to communicate with each other. or prior transactions.The McKinsey Quarterly. Community Online communities are emerging as new gathering places for consumers with similar interests (e. 3. An online community offers a compelling way to entice customers back to a site. 31% of online consumers use the Internet for obtaining product information. G.Sloan Management Review. Other content includes community-generated content.com) McWilliam.forrester. Clemmer. It fosters a sense of belonging41 among the members. which is facilitated by a combination of factors (Figure 5. Spring 2000 42 Armstrong. Often.A Forrester Research Report. iVillage and Geocities). S. as well as through loyalty programmes that provide targeted benefits. & Hagel.. No. visitors should not be engulfed with too much information. 'Real Profits from Virtual Communities' . even if they purchase offline.. Customisation Customisation involves tailoring the presentation of a web-site to individuals. 1995.5).. For a community to work. According to Forrester Research40. These sites allow members to interact with one another. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. Members can interact in chat rooms. and advertising (if it is relevant and useful). it needs a critical mass of members42. use bulletin boards. which enhances the user's online experience. Customisation creates the feeling of a one-to-one relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. K. 'Building Stronger Brands through Online Communities' . sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).. . & Bluestein.

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

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

S. because there is no physical presence.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.8. Waitman... links from directory searches (Connectivity). M. pp. 180-183 (www. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.) to online tools.Attract. Engage. McKinsey Quarterly. Therefore. Learn and Relate.2. This is more difficult online than offline.Awareness. Figure 3. This model consists of five stages .7. including affiliate programmes with other websites. etc. R. billboards. Magazines.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. The company must build awareness and communicate its value proposition to its target customers. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. The mechanisms to communicate range from traditional media (TV. No. Newspapers. 1996. Interest. and bring people to the site for the first time. A.7 . 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 ’ .. Evaluation. 'Marketing to the Digital Consumer'. modified to take into account of the interactive dynamics of the Internet. Adoption).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. McQuade. & Zeisser. Retain. Trial.. e-mail notifications and banner advertisements.mckinseyquarterly. FIGURE 5. visibility relies solely on Communication.4 .

3 2.1 3. multiplied by the expected rate of transactions.5) 2.4 3.8 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3) is useful to ensure that a company develops a distinct and consistent brand identity. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.4 4.7 4.3 3.com) The most effective methods are direct e-mail.0 3. it is important to quickly engage consumers' interest before they move on.8 .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 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.ebusinessforum.WEBSITE PROMOTION METHODS .4 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.5 3.6 3. affiliate programmes. as cited in 'Targeting Consumers via the Internet' . Attracting customers is only the first step in building online brands. The key factors at this stage are Convenience combined with interesting Content. Companies then need to engage customers to obtain their interest and participation.2 4. Fig. Kapferer's Brand Prism (Ch.3 Source: Forrester Research. 3. 58 . public relations and television advertising. Engage With the multitude of choice available on the Internet. 3. discounted over the expected duration of the brand-customer relationship.Economist Intelligence Unit 2000 (www.

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

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


com) .economist.The Economist.com and Yahoo!. Barnesandnoble. The cases are presented in the following sequence . including: increased selection.com. November 11. France. the sources of added value (using the 7Cs Framework). it is the most visited e-commerce website in America.com.2.2.com . combined with its levels of customisation and customer service.1 Company Overview Amazon.2 CASE STUDY: AMAZON.interbrand. and other key factors that have contributed to its success (or failure). 47 48 Interbrand (www. Through its provision of a one-stop shopping experience. Not a River' . and one of the top two or three in Britain. 1999 49 'Amazon's Amazing Ambition' .Amazon.COM 6.2 Value Proposition Amazon. 6. Boo. Figure 6.com has become synonymous with e-commerce. CDnow.It's an Ocean. February 26. more information. and enjoyable experience. 'Amazon. its brand-building strategy (how it generates traffic).Goldman Sachs Report. Amazon has been able to differentiate itself from other online competitors. easy. 6. and is one of the few Internet brands that is recognised all over the world.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 outlines Amazon's timeline and major milestones. Amazon has cultivated a reputation for excellence. Germany and Japan49. and has equity investments in several e-tailers. its value proposition. and higher levels of customisation and service than the traditional shopping experience allows. It is the 57th most valuable brand in the world47. Amazon serves over 23 million customers from 160 countries. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). Amazon.see Appendix A. Amazon.com. a company overview. In addition.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products.com launched with a mission to use the Internet to transform book buying into a fast. In July 1995. 2000 (www. Each case is presented in the same format including. Amazon provides increased added value on several dimensions.com's success stems from its compelling value proposition. greater convenience. Gap. discounted prices. and has sales of over $2 billion.com) 62 . In addition. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).1 INTRODUCTION This chapter provides an analysis of seven companies. innovation and delivering on its promises. eBay.

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 another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement. universities.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon opens a customer service centre in Huntington. such as the Palm VII organiser.com Anywhere.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.Amazon enters strategic alliance with living.toolcrib.com via the new wireless pocket PC .com Amazon acquires Back to Basics Toys to add to Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.TIMELINE AND MAJOR MILESTONES Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid. a tools and equipment store for professional tool users and woodworkers .Amazon launches lawn & patio store .com Announce Strategic Investment and Promotional Agreement . and minority investment in.Amazon.com invests in wineshopper. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com announce investment and strategic alliance .New home living store from living.com Amazon announces further plans to expand distribution network to meet rapid growth. West Virginia." providing shopping from wireless devices.com .Amazon enters into a strategic partnership with Drugstore.com 63 . Amazon.Amazon and eziba.Amazon opens customer service centre in The Hague .com is founded by Jeff Bezos Amazon. featuring thousands of bestseller lists for hometowns.com opens its virtual doors at amazon.com Electronics and Amazon.com .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.amazon.Amazon launches new kitchen store . Software.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.000 members Amazon.Amazon.com Auctions and zShops provide new tools to its merchant community . 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 .com to create a "home living" store at amazon.amazon.com Amazon invests in Pets.Amazon launches health and beauty store .Amazon. and more Amazon launches "Amazon. Ashford.com and NextCard launch co-branded credit card . to meet rapid growth .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . workplaces.Amazon launches www.com.com Amazon introduces "Purchase CirclesTM".com .com enters European book market Microsoft signs Amazon.com.Amazon announces investment in kozmo.Customers can shop at Amazon.sothebys.Amazon and online car-buying service Greenlight. Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon surpasses 20 million cumulative customer accounts .

discussion boards. The site is easy-to-use.e. live or study. FIGURE 6. offering multiple paths to a given book or product. book summaries.3 Sources of Value .The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. This is an example of 64 . logically structured. mobile phones. the 1-ClickTM express checkout. Customer purchase circles allow shoppers to cross-reference similarities such as where people work.OVERVIEW OF AMAZON.com Anywhere to support access from wireless devices (i. downloads quickly and services visitors adequately . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. expert reviews. Palm VII PDA device). and Amazon.com All Product search (searches the entire web).1.1 . gift click. and customer Purchase CirclesTM. interviews with authors. gift reminders. easy-to-use.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. Content Amazon provides content on several levels. customer testimonials. encourage repeat visits and drive higher conversion rates.2. recommendations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and quick-to-load pages Over time. Amazon has added other features for shopping convenience. wish lists. including book jacket images.Figure 6. such as the Amazon.

converting them into a storefront for Amazon. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. to the proactive notification of new items of interest. Community Amazon has also added a community element to the purchasing process.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.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 . and customer interaction. By leveraging its vast customer base. In doing so. This customer-centricity is evident in all Amazon's activities. More recently. which helps to build loyalty and create switching costs. Amazon introduced Amazon. and has developed an Associates Programme. Amazon's content is not reproducible by competition. creates a competitive advantage. from the customer recognition at the point of interface (Figure 6. 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.thereby increasing conversion rates. therefore.4.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. from its shopping basket applications which lists the estimated time to delivery reliably. linking it to a large number of other sites. Amazon creates one-to-one relationships with its customers. Connectivity Amazon has built relationships with high traffic web portals and sites.2. 65 . and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. while driving up repeat purchases and cross-selling opportunities. and Customisation Amazon provides customised features and services. real-time shipping and backorder notices.

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

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

com Really Matter?' . buying patterns and viewing habits. which accounts for 66% of Amazon's sales. Amazon has been able to achieve average customer acquisition costs of less than $20 . and improved customisation and recommendations (e. clear presentation. Magazines. 1998 68 . That's not possible anymore50". which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. 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. April 6. billboards. Amazon has also incorporated traditional offline media (TV.. 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. C. with the explosion of websites. however.Forbes. so we didn't have to do much advertising. "we had a world-class site the day we launched . By relating to customer needs. 50 Willis. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon's proven online merchandise selling techniques including easy-to-use search options. According to Jeff Bezos. As the relationship develops. 'Does Amazon. 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. newspapers) to generate awareness. Purchase CirclesTM).significantly lower than other online companies. With this combination of promotional methods. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates.g.but it was only a tenth as good as the site we have now. Once customers are attracted to the site. And we relied on word-of-mouth to build awareness. community feel (as discussed previously). interesting content.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.

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

distribution centres and upgrading the site. 53 Warner.. as the true value of a brand lies in its sustainability. and to sustain a positive image and satisfactory end-to-end experience. Amazon has continuously invested in customer service. however. Amazon also recognised that service quality is a perception. the drain on their cash resources will push them towards bankruptcy. When they're young. but over time they become more and more associated with a particular thing and harder to stretch53". Amazon delivers on its promises of a wide inventory of products. This raises a critical issue. they're stretchable and pliant. which is critical on the Internet. stem from its compelling value proposition and high quality end-to-end customer experience. they have cultivated a reputation for excellence and fulfilment.2. with new products and value added content. have kept it ahead. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. In doing so. However. Amazon's intense focus on customer needs and continual innovation. 'Marketers of the Year: Jeff Bezos.Brandweek.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. not necessarily a reality. and investors lose confidence. 6. Quality is only measurable in the minds of visitors to the site. if it continues to incur losses. Although Amazon has successfully built a strong brand and loyal customer base. Volume Discounter' . speedy delivery and good value. secure payment procedures. 1998 70 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. perhaps trying to defend its view that losses taken to build market share can reap profits later. The key factors driving its growth and high retention rates. This customer-centricity is a key hallmark of a successful Internet brand. B. it has not recorded any profits to date. October 12. Nevertheless. Amazon is claiming to be making profits on its books and music categories.

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

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

Barnesandnoble. However.com had over 17 million.a replica of Amazon's Associates Programme. Both offer 'associate programmes' that let other websites link to their sites. Netscape and Microsoft Network.4 Brand-Building Strategy Barnesandnoble.com was valued at $21. Webcrawler.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. Barnesandnoble. and both are expanding globally. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Lycos.1 billion. however. 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 . Although. prevent cannibalisation of its existing business. compared to Amazon. Yahoo!.com in return for a commission on any purchases that they originated . Barnesandnoble. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. reasons for this are explained in the next section. while Amazon.The Wall Street Journal. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).000 affiliates in its referral network. These initiatives have generated traffic to the site. They have developed an affiliate programme that links sites to Barnesandnoble.64 billion. As of February 2000.com's 1999 revenues were $202. has yet to leverage its strong brand in cyberspace.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. it lags behind first-mover Amazon. Instead. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. and avoid charging sales tax in states where it has stores56. this programme had more than 300. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. The 6.com's $1. while Amazon.com closed 1999 with 4 million customers. Barnesandnoble.com.6 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and Barnes & Noble Inc. Both offer customisation that permits users to personalise the experience.com's market capitalisation was $251 million. December 17.3. Both try to foster a community of readers by letting customers post reviews online.

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

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

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


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.


Merges with Columbia Records .000 music related items .cdnow. $22. 'How to Acquire Customers on the Web' . On 19th July 2000.ten times the selection of a conventional bricks-and-mortar music store). & Novak.TIMELINE AND MAJOR MILESTONES . customisation and a wealth of information and content to help in the purchase decision. daily music news. and an average daily audience of over 800.000 sound samples.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. a valuable and rewarding experience"63.5 CASE STUDY: CDNOW 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . CDnow provides access to over 500. D. 62 Hoffman. T.Merges with N2K. former arch rival . guides to music genres. good prices. features. pp. announce marketing alliance . whether for browsing or buying. This unprecedented degree of access to music and information is the core of CDnow's value proposition. as well as music reviews. May-June 2000.CDnow and Time Inc. and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow is also driving the digital distribution of music.000 music-related products and 650.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5 million distribution deal with Lycos Signs three-year. $18. by twin brothers Jason and Matt Olim.Site goes live . CDnow was acquired by Bertelsmann AG. cover art.Partnership program with Geffen Records . CDnow is the leading online music store.Forges distribution partnership with Yahoo! $65.Raises $10 million through private placement .5.com) 80 .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Harvard Business Review.000 people. TABLE 6.179-188 63 CDnow website (www.Launches merged CDnow/N2K site .5. and one of the most popular shopping sites on the Internet62. and was the first site to offer the sale of music downloads and custom CDs. convenience. It has a customer base of 4 million people.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.1 Company Overview Founded in 1994. and they aim to "make every visit to the site..

.Figure 6. By partnering with well-known content providers. artists biographies. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. and has secured rights to music reviews. For example. The whole process of searching for albums or music titles to the actual purchase is simple .5. CDnow has leveraged the reputation of their brands to reinforce its own.3 Sources of Value .5.5 . 81 . FIGURE 6. etc. easy-tonavigate. to make it easier for customers to explore new music and make informed purchasing decisions. cover art. CDnow has cultivated similar relationships with MTV.

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

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

1998: $56. It is a powerful source of acquiring new customers at low cost. both in the online and offline worlds.Hampel & Stefanides (www. with 44% of sales coming from new customers65. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. word-of-mouth accounts for the lion's share of CDnow's customers.4 million). 6. It is constantly adding new functionality to the site and has been innovative in its offering . it is in this context that the large investments in advertising and partnerships make sense.hsny.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.they were the first site to offer the sale of music downloads and custom CDs. and to increases in the customer base of more than 30% quarter-to-quarter.(www. The company continually pushed for new distribution partnerships to widen its sphere of influence.htm) 84 . In fact. resulting in increased conversion rates.com/cdnow. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998 . April 28.com) 65 'Pioneering in Cyberspace' .As for many successful online retailers. CDnow's promotion strategies have attracted high levels of traffic.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . and scaled it awareness-building efforts.4 million.Press Release.CDnow made public relations a high priority brand-building tool.cdnow. The story of how CDnow was founded in a basement. as a way to fuel very lucrative word of mouth. This has contributed to a 225% increase in sales (1997: $17.5. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. with repeat customers accounting for more than 50% of sales. Public relations efforts helped to generate word of mouth and influence sales. • Word-of-Mouth .

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

300 categories. People perceive the auction format to offer better prices. with the number of unique daily visitors setting a record of 1.Company Overview' .eBay website (www.A Harvard Business School Case Study. from collectibles and antiques to electronics and toys.6.removing the need for inventory.g. extensive selection and geographical reach. payment) between themselves. and eBay provides added value through its convenience. Auctions make it fun.ebay. garage sales. shipping. the eBay community has grown to include more than 10 million registered users. (A)' . flea markets and auctions.2 Value Proposition eBay offers consumers an efficient.Company Overview' .25% to 5% of the final sale price on any item sold. with emphasis being placed on its unique community feel and culture.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. 1st October 1999 86 . "at its core.6.efficient one-to-one trading in an auction format. eBay effectively created a new business model never before possible . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. The buyer and the seller work out the logistics of the transport (e.com) 70 'Meg Whitman at eBay Inc.782 million in January 200068.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Auctions represent a platform. There are over half a million new auctions. or the payment for the item . eBay is not about auctions. This is a new market . Since its launch in September 1995. 24 hour a day. global trading place for buying and selling personal items in an entertaining auction format.the closest thing in the offline world are trading forums such as classified ads. Sellers pay a nominal fee for placing an item up for sale. and eBay never takes possession of the item being sold. transportation and other overhead costs. Auctions are an enabler. collectable shows. as cited in 'eBay . and 450. Individuals use eBay to buy and sell items in more than 4. According to Meg Whitman.000 new items joining the "for sale" list every 24 hours69. 6. CEO of eBay.com) 'eBay .6 CASE STUDY: EBAY 6. and eBay receives a transaction fee that ranges from 1.ebay.eBay website (www.

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

eBay's site has to process thousands of live bids simultaneously. This contributes to the community feel. eBay had a 'wake up call' when the website crashed for 8 hours. easy-to-use online service (Figure 6.6). 88 . and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content. FIGURE 6. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. and adds to the experience and the discovery of the auction process. and since. which is much more demanding on the system. eBay has also expanded to accommodate access through wireless devices for added convenience.6 . Other content includes the banner ads. they have continually invested in system capacity. topically arranged. Nevertheless. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. categorically arranged. increasing the risk of outages. Content Content is primarily user generated through the items listed for sale.OVERVIEW OF EBAY'S WEBSITE Customisation Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. angering hundreds of thousands of eBay users.

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

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

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

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

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

.. very efficient"77.. Visiting the gap... 'Mind the Gap'. D. making navigation even faster. from the blue and white colour scheme to the easy-toshop format . 1998 94 . making it convenient. April 18.3 Sources of Value . the extensive integration of Gap's online and offline activities are clearly evident. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. Unlike Barnesandnoble. Gap Online primarily focuses on Convenience.The 7Cs Framework In terms of the 7Cs framework. FIGURE 6. This personality is reinforced online through the simple structure and layout..OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.. reinforcing its brand identity. feel and design of the site is consistent with the bricks-and-mortar stores.7. Michael McCadden. The Observer. and easy-to-use. Content.com store one immediately notices the consistency between the online and retail stores.very easy.com.. Simple. and Customer Care. describes the company's brand personality as "direct and straightforward.7 . but provides customers with the option of viewing text-only.making visual references to its offline roots. The site also offers sharp graphics. Executive Vice President of Global Marketing.

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

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

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

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

is the way it has structured and displayed information. to allow access. TVs.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 .8. 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. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. to provide web-based services to PalmTM handheld computers .The 7Cs Framework Convenience Central to Yahoo!'s success.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. mobiles. Their goal is not to list everything under the sun. regardless of platform (i.com allowing them to offer person-person payment solutions ..3 Sources of Value .com.Yahoo! unveils Yahoo! Finance Vision .Site goes live September . More recently. .Yahoo! forms agreements with Palm Inc. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.7 YAHOO! .600.TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.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.Yahoo! Shopping launches personalised shopping service 6. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! acquires eGroups . 99 . Yahoo! extended its convenience through its Yahoo! Everywhere service. Palm computers).000 shares at $13.8).e. and unveils Yahoo! Digital Introduces Bill Payment services .8 million IPO (2.Yahoo! acquires Arthas.Receives $1 million in venture capital funding from Sequoia Capital $33.Yahoo! Launches Business-to-Business Marketplace .

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

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

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

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

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








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

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

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

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


654 43.147 9.932 4.568 3.804 2.043 8.830 14.595 17.766 14.404 4.361 1.648 1.interbrand.845 56.806 2.225 11.021 26.197 32.231 24.283 4.694 17.132 15.329 4.422 1.895 2.275 30.048 20.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) 83.101 9.155 7.502 33.781 33.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .464 3.510 8.681 2.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.184 1.596 3.603 5.634 1.806 11.052 6.423 2.181 21.792 3.602 4.231 12.781 17.319 1.281 11.643 3.310 11.761 1.550 12.Interbrand's Ranking of the Top 60 Brands (www.143 2.527 3.909 7.313 2.894 14.262 1.193 112 .076 3.985 2.

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





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