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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
THE NATURE OF BRANDS
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
BUILDING BRANDS ON THE INTERNET
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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
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
3 Sources of Value .The Failure of Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 6.1.5 Conclusion Case Study: Gap.4.5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .3 Sources of Value .2 Value Proposition 6.5.5.The 7Cs Framework 6.4 Brand-Building Strategy .2 Value Proposition 6.6 Conclusion Case Study: eBay 6.6.Extensive Integration 6.1 Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.The 7Cs Framework 6.6.1 Company Overview 6.com 6.1 Company Overview 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 Company Overview 6.5 Conclusion Case Study: CDnow 126.96.36.199 Brand-Building Strategy 6.The 7Cs Framework 188.8.131.52.com 6.2 Value Proposition 6.8.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.The 7Cs Framework 184.108.40.206 Sources of Value .8.3 Sources of Value .8.4.2 Value Proposition 6.2 Value Proposition 6.7 6.5.5 Other Factors That Contribute to their Brand Leadership 220.127.116.11 7.1 Company Overview 6.5 Other Factors that Contribute to their Brand Leadership 18.104.22.168.com 22.214.171.124.5 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.8 Case Study: Boo.4 126.96.36.199 Brand-Building Strategy 6.
1 Figure 2.2 Figure 3.8 Figure 5.2 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .7 Figure 5.5 Figure 6.1 Figure 1.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .2 Figure 5.com's Associates Programme Overview of BarnesandNoble.7 Figure 2.8 Figure 6.9 Figure 6.4 Figure 2.5 Figure 2.1 Figure 6.3 Figure 2.1 Figure 5.4 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 4.3 Figure 6.4 Figure 6.5 Figure 4.3 Figure 4.7 Figure 5.7 Figure 6.4 Figure 4.2 Figure 4.6 Figure 5.5 Figure 5.2 Figure 2.6 Figure 4.8 Figure 3.1 Figure 3.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.6 Figure 6.3 Figure 5.com's Website Overview of Boo.3 Figure 3.4 Figure 5.6 Figure 2.com's Website Amazon.2 Figure 2.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .7 The Emerging Brand-Building Environment Amazon.com .5 Table 6.com .6 Table 6.Timeline and Major Milestones CDnow .3 Table 6.1 Table 6.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .2 Table 6.Timeline and Major Milestones Boo.Timeline and Major Milestones Yahoo! .4 Table 6.Timeline and Major Milestones Gap.com .1 Table 6.Timeline and Major Milestones eBay .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
g. Figure 1.1 3. Amazon.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. As such. service and brands.com. FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. aggressive Internet start-ups have emerged. and business models revamped.com Source: Securities and Exchange Commission Filings. creating strong brands that are putting established brands at risk. As such. Internet companies such as Yahoo!. This is creating new challenges and opportunities.0 1.com's range of 4.YEARS TO REACH $100 MILLION IN SALES 6 5.5 million book titles).com noble. and is triggering the need for new brand-building strategies and tools.9 3.1 . the Internet is changing fundamentals about customers. as they face each other through an electronic connection. Amazon. America Online (AOL) and eBay have been able to build powerful brands in a few years. Supply chains are being rethought.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.1 OVERVIEW Over the past few years.5 2. The Internet also represents a fundamental shift in how buyers and sellers interact. McKinsey Analysis (www.9 2. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. In the midst of this. whereas it has taken decades for traditional companies to achieve the client base. there has been an explosion in the online world .2 3.mckinseyquarterly. products and services reconfigured. that these Internet start-ups have achieved. customer affiliation and level of sales. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com) 7 . relationships. It is empowering customers with more options and more information to make informed decisions. while providing new tools for promotion.com1 Amazon.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. interaction and relationship building.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.an explosion that is also a harbinger of how business will operate in the future.
S. 1997. P. 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.April 2000. Therefore.. March . 66-76 Hoffman.. A New Class of Netizen is Settling Right In' Business Week. rather than drifting from site to site3. Harvard Business Review. building awareness. 1 2 3 Christensen.. D. Given the tremendous clutter in today's e-commerce marketplace. Browder.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. that extends the brand-customer relationship beyond a single transaction. and the high cost of acquiring online customers2.Forget Surfers. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. found that 57% of Internet users go to the same sites over and over again. L. & Elstrom.. companies lack a coherent framework and concrete methods to build an online brand. who are essentially intangible.. 'Internet Communities . A Business Week / Harris poll. 'Meeting the Challenge of Disruptive Change'. However. For pure online players. attracting traffic or 'eyeballs'. M. T. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. May-June 2000 Hof. Volume 78 Issue 2. Harvard Business Review. 'How to Acquire Customers on the Web'. R. C. pp. and Novak. turning browsers into buyers. as the need to build brand loyalty online is reaching a peak. P. brands are even more critical as customers have little to go on other than a recognised brand. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. In light of this. As such..66 8 . & Overdorf. p. May 5.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. supported by secondary data related to aspects of online business from accredited and published sources. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To explore how the Internet is changing the brand-building environment. FIGURE 1. tools and strategies to build brands on the Internet. A review and analysis of leading academic thinking will be used to explore these issues. This is based on the outcome of the primary research (in-depth case studies). and to identify new sources of value. 1.2 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.2 .2.
The absence of academic literature on Internet branding posed a major obstacle. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. to provide an in-depth analysis of the psychological and social dimensions of brands. there is more work in popular rather than academic literature. nor desire. Conclusion: Discusses the key findings and areas for further research. 10 . and is used to provide insight into some of the factors that contribute to the development of successful brands. as well as a recent Internet failure (Boo. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble.com). strategy and economics. and factors that contribute to a brand's success. certain key factors are highlighted in their relevance to the dissertation.com and Gap. marketing. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com. The combination of cases provides a useful and practical insight into brand-building issues and problems. relationship management. eBay and Yahoo!). this also highlights the true value of the dissertation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. These are further refined using the insight obtained through the case studies. Hypothesis (Framework): This is based on the literature review and secondary data. Consequently. While there is no attempt. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. the literature review draws on leading academic thinking in more established areas such as brand management. CDnow. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.com). however.
as well as the interactive approach to attracting customers and building loyalty. The nature of brands. highlighting some key factors that have contributed to brand success. and outlines the opportunities for further research. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. summarises the key findings. their purpose and value are discussed. Chapter 6 examines the brand-building efforts of seven companies. and introduces the core concepts that form the backbone of the dissertation. Chapter 4 provides an overview of the Internet and its defining characteristics. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. Chapter 3 explores how brands have traditionally been built. Chapter 2. 11 . Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience.4 STRUCTURE The next chapter. This chapter sets the context within which online brands must be built. The limitations of the Internet in terms of brand-building are also discussed. provides an analysis of leading academic literature in relation to branding. The final chapter. Chapter 7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. by outlining the impact of the Internet on the business and competitive environment.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
2000.1. 'The Future of Brands'. which. The concept of brand equity is outlined. but extends further to encompass added values derived from factors such as the brand-customer relationship. both to customers. unravelled to reveal the nature of brands and their reason for existence. and highlights the importance of brand management. These concepts are central to brands and brand-building. whether online or offline. both for customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 'Building Strong Brands'. explaining the value of brands. (New York: Free Press). E. these layers are Brands are made up of many layers and dimensions. and the importance of customer satisfaction and brand loyalty. if properly managed. p.see Figure 2.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.a brand is: "a mixture of tangible and intangible attributes. and they form the backbone of this dissertation. p. FIGURE 2. 1996. A. symbolised in a trademark. and to companies. the brand's emotional benefits and its self-expressive benefits . and for the company. (London: Macmillan Press Ltd. R.. creates influence and generates value4" This definition truly captures the essence of a brand.a leading specialist brand consultancy firm . Branding is about creating 'value'.1 .1 INTRODUCTION In this chapter. This value stems from the products and services that companies create and bring to the market. CEO of Interbrand Newell and Sorrell .). & Maughan.2 WHAT IS A BRAND? According to Rita Clifton. vii 13 . 74 4 Clifton. 2. The chapter proceeds to describe the influence of brands on the buying process. D.
2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . It is a company's promise to consistently deliver a specific set of features.Figure 2. and services to customers. For some companies.2 .a 'relationship'. As such.. yet ultimately reside as consumer perceptions.the core product or service. benefits. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. 1980. brands are their most valuable asset. the basic brand. T. 2.86 14 . a 'reputation'. Harvard Business Review. and a 'promise'.of anything'. FIGURE 2. a 'set of expectations'. making their way into planning and strategy documents. Brands are richly endowed entities. p.3 THE LAYERS OF A BRAND Brands are made up of four layers . January-February. They start life as ideas.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. which grows out of the cumulative memory and the experiences customers have of products or services. 'Marketing success through differentiation . The space a brand occupies inside a customer's head can create a 'mental' patent. the augmented brand and the potential brand .
or a combination of them. The Basic Brand The basic brand consists of the "name. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. 15 . most products and services cannot survive on functionality alone as this is usually matched in time. Service Brands (intangible) are much less numerous than their product counter parts. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. In fact. or design. 'Marketing Management . but the brand itself is the store. 2. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. even when the alternatives are substantially cheaper or more readily available (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. not the products it sells . Certain service brands. (Europe: Prentice Hall) 1996. and because they most readily come to mind when consumers are asked to recall brands. Southwest Airlines and Amazon. this is the case with all Internet companies. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.Analysis. However. information.g. & Control'.g. customers buy products to meet certain functional needs. preferring things they can see and touch. Implementation. They are the historical core of branding because they are the most prevalent. such as in retailing. Levi's). The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service.com are examples. this should support the offering's performance and differentiate the brand from those of competitors. quick delivery) that enhance the customer’s total purchasing and use experience.The Gap stores. These products and services add value and make the offering much more difficult for competitors to emulate. term. P. The most common barrier to competition is building a brand. 5 Kotler. Kodak. sign.. actually sell products. with supplementary products and services (e.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Coca-Cola. 8th Ed. Planning. Essentially. symbol.
These beliefs depend on their previous experiences with the brand. it is important to clarify customers' underlying buying behaviour and the buying process.attitudes of others and unexpected situational factors (Figure 2.. 16 . (Europe: Prentice-Hall) 8th Ed. a consumer will be inclined to search for more information. and selective retention.3 . FIGURE 2. However. and the effect of selective perception. Once aroused. Through gathering information. This can be triggered by internal or external stimuli (advertisements). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. the consumer learns about competing brands. two factors can intervene between the purchase intention and the purchase decision .Analysis. The buying process consists of five stages (Figure 2. Consumers develop a set of brand beliefs about the attributes of competing brands.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands.194 The process starts when the buyer recognises a need. Planning. 1996. and pay the most attention to the brands that will deliver the sought benefits. In the evaluation stage. and Control'.3). p. Implementation.4).. Consumers differ as to which product / service attributes they see as important. either through heightened attention or through an active information search. 'Marketing Management . selective distortion. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. it is critical to understand what attributes consumers value.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. Therefore. P. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.
The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. they will be dissatisfied and look for alternative brands in the future. customers make decisions purely on the basis of their expectations. somewhat satisfied. word-of-mouth. Customers' expectations are particularly important when dealing with services. A consumer's decision to modify. After a consumer has actually purchased the product or service. If performance falls below their expectations. they will evaluate their level of satisfaction . advertising and communication. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. Expensive purchases involve some risk taking. even delighted.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. If perceived performance and quality exceed their expectations then they are satisfied. and especially important when dealing with purchases made through the Internet. These expectations are formed through a combination of past experiences. locking out potential competitors. postpone. and a preference for recognised brands they can trust.the customer will be highly satisfied. Customer satisfaction and loyalty are essential to creating successful brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. their negative attitude may influence the consumer's purchase intent or vice versa. A consumer tries to deal with this by gathering information from friends. or dissatisfied with the purchase decision. 17 . as these services are intangible and therefore. or avoid a purchase decision is heavily influenced by perceived risk. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations.
& Sasser.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Nov-Dec 1995 Hart. 6 7 Jones. Hewlett-Packard. M. p. and believe that it will always act in their best interest. Spring 1999 18 .. Marketing Management.Harvard Business Review. E. Johnson & Johnson.customers who are satisfied and loyal and talk favourably about the brand . FIGURE 2. 'Why Satisfied Customers Defect' . Federal Express. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Trust is critical for a brand's success. W..those who actively attack the brand telling others not to buy from the company. 'Growing the Trust Relationship'.. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. T. and Johnson. Southwest Airlines and Xerox7. E. The customers at the bottom end of the scale are "terrorists" . This satisfaction encompasses the whole experience and not just a company's products or services. Customers that are passionately or emotionally loyal are those that have built trust in a company. D.Figure 2.5. Nov-Dec 1995. Saturn. & Sasser. C.Harvard Business Review. 'Why Satisfied Customers Defect' .. 91 Loyalty is derived when customers are continuously satisfied over time. T.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones.. At the opposite end of the satisfaction spectrum are "apostles" .6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.
M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.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. 'The One to One Future'. 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. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 'Building Stronger Brands through Online Communities' . emotional loyalty is born out of a consumer's personal relationship with a brand. Harley-Davidson motorcycle clubs). & Rogers. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. In this way. G. Spring 2000 19 . 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).com. Emotional loyalty can be also created through the formation of a strong user community around the brand.g. Firstly. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. D. consistent orders Satisfied customers are the best advertisement .. 8 9 Peppers.they provide good word-of-mouth and are the best salespeople for the product / service 2. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 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. 1993 McWilliam..
a 'powerbrand' tends to have a high degree of brand loyalty. Journal of Consumer Research. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).6 . March 1998.7). 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 20 .8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. FIGURE 2. pp.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. However. Beyond this..7 . and understanding the needs and buying processes of the target market is essential. 2. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 343-373. there are brands that customers perceive as acceptable and would not resist buying. S. whereby customers would be unwilling to substitute it with competitors' offers.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. which goes well beyond the satisfaction of a specific need. A stronger brand enjoys a high degree of brand preference over competing brands. FIGURE 2. there are brands that are unknown by most buyers.
1991 10 Aaker. The benefits of each are outlined in Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.8 ..Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker.Create Awareness . perceived quality. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. FIGURE 2.8. and other assets such as patents. D. 1991 21 . which is the value of the brand over and above its commodity value. strong brand associations.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . and relationships with distributors and strategic partners. The major brand assets are brand loyalty. D. (New York: Free Press). According to David Aaker (1991). name awareness. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. trademarks.. (New York: Free Press). 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".
market share and profits . (New York: Free Press).To be clearly seen..1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. • Brand Leverage . to quickly identify sought after products • • Practicality . and the number two twice the share of the number three12. 3rd Ed. Journal of Marketing Research. Premium pricing increases revenue. & Downham..Typically a brand leader obtains twice the market share of the number two brand.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.8. production and marketing.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .. 11 12 Kapferer. 'Consumer Market Research Handbook'. 158-170.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. & Tellis. the best performer for a particular purpose • Characterisation . N. to make sense of the offer. 1992 Worcester. May 1993.To be sure of buying the best product in the category.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. pp. The brand leader is the most profitable and all beyond number two are unprofitable13. J. 1986 13 Golder.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.To have confirmation of your self-image or the image that you present to others • Continuity . R..To save time and energy through identical repurchasing and loyalty Guarantee . G. 'Strategic Brand Management'. to its logo. to its communication • Ethical . J. in the following ways: • Brands..Satisfaction linked to the attractiveness of the brand. P.8. brands perform several functions that add value and customer benefits: • Identification . 22 . (London: McGraw Hill). 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .
Companies can maintain a brand while modifying the underlying product to account for new technology.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . This. Coca-Cola “the real thing”). Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e.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.The product life cycle applies to products. companies such as Interbrand (see Appendix A). in turn. When a company creates this type of customer preference and loyalty. In addition. brand leaders can exploit their superiority in the market (e. it can build a strong market share. the tools that are used. The next chapter describes the process of how brands are built. 2. not brands. and Young & Rubicam have created complex formulas.Companies with strong brands attract good recruits.g. They also tend to elicit community and government support. • The Brand Barrier . The brand can also be used to penetrate new markets. 23 . • Avenues for Growth . • Motivating Stakeholders . Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. but there remains an ongoing controversy about how accurate and meaningful these measures are.Dominating a niche market is usually more profitable than being fifth in a large market. drives up share price and provides the basis for future growth.Strong brands are more attractive to investors.Brand leaders usually have the financial strength to fend off competitors.g. and the characteristics of successful brands. Johnson & Johnson with Tylenol). In trying to estimate the monetary value of brands. maintain good price levels and generate strong cash flows. fashion or prevailing market conditions. • Brand Loyalty and Beliefs .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
and keep it turning. public relations. brand awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. highlighting important factors that contribute to the success of each step along the way. This is illustrated in Figure 3. FIGURE 3. confidence and brand equity are built. The major characteristics of successful brands are also reviewed. Once this has been established. If the offering is developed properly. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. This chapter spells out the traditional brandbuilding process. the next step is to get customers to try the brand.1 . selling. and direct marketing.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 .1. it should provide a satisfactory experience and lead to a willingness to buy again.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. To entice trial and repeat purchase requires triggering mechanisms. 3. promotion.1 INTRODUCTION Building a strong brand is a complex task. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.
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. FIGURE 3. the brand can elicit feelings of confidence that it is of higher quality than competitors'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. a company must develop a strong understanding of who their potential customers are. unless differentiation and awareness can be developed. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . Without a good product or service. it will never attract a strong client base. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers.each is essential. a compelling value proposition is the combination of an effective product or service (P). and added value (AV). In order to do this. Similarly. it is impossible to build a successful brand.a strong offer that a potential customer would find compelling and interesting. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.2 . In this way. a distinctive brand identity (I). As such. 26 .3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition .2). what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.
1 Added Value Most buying decisions are Added value is at the heart of building successful brands. People use brands to express their lifestyles. 2nd Ed. 1986 27 . which they perceive as meeting their needs. it is more likely to work effectively for them.3.in many cases. P. 14 15 Doyle. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. Coca-Cola. the number of competing alternatives and the large variety of advertising and selling messages. Gillette. it acquires added values of familiarity and proven reliability. • Belief in Efficacy ..brands frequently acquire an image from the type of people who are seen as using them. (Europe: Prentice-Hall). P. these needs are as likely to be about satisfying self-actualisation or esteem needs. • Manufacturers' Name and Reputation . Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. For pharmaceuticals. In today's affluent society.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. cosmetics and high-tech products.the design. • User Associations . Lexington Books). faith in brand generates satisfaction in use. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. pp. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. 'Marketing Management and Strategy'. • Brand Appearance . mean that buyers look for short cuts. the pace of technical change. layout and appearance of the brand can clearly affect preference by offering cues to quality. Sony..g. Customers choose brands. J. industry endorsements and newspaper editorials. Kellogg's) attached to a new product will transfer positive associations. values or wealth. The large number of decisions. if customers have faith that a brand will work. as they are to be about satisfying basic physical and economic needs14. 1998. or to gain a sense of belonging. providing confidence and incentive to trial. interests. Brand values derive from five major sources15: • Experience of Use . 169 Jones.if a brand provides good service over time. influenced by brand values. MA.In many situations a strong company name (e. Hewlett-Packard. which are additional to those based upon real performance.
features. however the brand style and core tend to be less flexible. etc. press releases.3. type of spokesperson / customer image used to advertise the brand).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . • The Brand Theme . glamour. This may be different from the brand image.the way the brand communicates through its advertising. packaging.articulates the brand core in terms of the culture it conveys.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name.Figure 3.the fundamental or genetic code of the brand. visual appearance. Themes include the physical appearance (logo. style or cultural differences from one country to another.. friendly). 'Strategic Brand Management'. and visual appearance). A company should seek to differentiate its brand through developing a distinctive identity. prestige. 1992 28 .g. its reflection (e. and the relationship expressed (e. and advertising.3: • The Brand Core .g. colour scheme. which remains fixed over time. • The Brand Style . (New York: The Free Press). 16 Kapferer. J. its personality and its image or self-projection . Brand themes are the most flexible element and will tend to change with fashion. which depends on how the target market perceives the brand.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. J. Finally. 'Strategic Brand Management'. understanding the brand's core and style helps set the perimeters of brand extensions . It also facilitates consistency in the message being transmitted through presentation (e. 1992 The brand prism enables management to understand the brand. website design. its strengths and opportunities. 29 . Secondly.. below-the-line activities.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. and through line and brand extensions.3 . (New York: Free Press). advertising. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. structure and ease of use).g.how far the brand can be meaningfully stretched to other products and market segments.
Figure 3. FIGURE 3. 1962. systems. Advertising and PR are common tools for achieving awareness.4 . colleagues and opinion leaders become important influences at this stage.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 'Diffusion of Innovations'. The value proposition must then be articulated in terms of the 'marketing mix' .The customer is satisfied and decides to make regular use of the product / service.79-86 The Innovation-Adoption Model consists of: • Awareness . • Trial . management style. deliver and reinforce this value proposition (see Appendix B . E. 1962. The value proposition must be communicated to entice customers to try the product / service. Promotion and Place (distribution strategy)..The company has to create awareness of the brand. pp.Customers need to be stimulated to seek information about the brand's uses. skills. and the product / service's perceived performance. 17 Rogers. If the offering is developed properly. the company must ensure that it develops the appropriate structure. and its products / services. it should lead to satisfaction and re-purchase.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. • Interest . they must learn about it. features and advantages.often referred to as the '4Ps' .79-86 30 . E.Product and service features. strategy (partnerships and alliances).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3..The McKinsey 7-S Framework). culture and staff needed to support.Customers consider whether the product / service will meet their particular needs.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Price. 'Diffusion of Innovations'.4. • Evaluation . • Adoption . This learning is called the adoption process17 . Before potential customers can buy a product / service. (New York: Free Press). pp. Personal sources such as word-of-mouth from friends. (New York: Free Press).
This information is a key competitive advantage. allowing companies to communicate regularly with their customers and customise their interaction. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . companies can increase the value of each customer. & loyalty / discount cards. • Structural Ties . this process enables an exchange of information. companies can increase buyers' satisfaction.for example. sales promotion. 18 Berry. Customer service is an important element of this relationship. 3. This is often referred to as Customer Relationship Management (CRM). & Parasuraman. but enhanced customer interaction through relationship building.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. when each trusts the other to deal fairly and reliably. L. the company may supply customers with special equipment or tools (e.. multi-transaction relationship. personal selling and public relations / publicity . pp.g. This focuses on establishing a longterm. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. Advertising and public relations can be effective in generating awareness and interest. making them less likely to switch to a competitor. Over time.to move customers through the adoption process. companies have used the tools of the promotions mix .advertising.such as airline frequent flyer programmes. 'Marketing Services: Competing Through Quality'. In this way. Social Benefits . 1991. (New York: Free Press). providing insight into customers' needs and wants. software) to help customers interact with the company. Through building relationships with customers. direct marketing.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. A. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. Internet linkages.136-142 31 . while strengthening the position and value of the brand. encouraging evaluation and trial.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally.
Satisfactory experience is the major determinant of brand values. including: • A Quality Product / Service Experience . 'Marketing Management & Strategy'. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. 3. strengthening the brand further. • First-Mover Advantage . • Strong Communications Programme . it has a profound impact on the traditional brand-building process. companies have the opportunity to start building relationships with their customers. • Unique Positioning Concept . the brand is meaningless. but it makes the task easier. or if the brand is surpassed by superior offers from competitors.. As such.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. Once the framework has been established and the organisation configured to provide this proposition. It often takes years to build up the added values. advertising or promotional campaign. Without building awareness. its function and psychological values. 19 Doyle. trigger trial and reinforce commitment to it. companies must actively communicate it to the target audience to entice trial. it must have a unique positioning concept . while providing new tools for promotion.A successful brand requires an effective selling. which will add value and distinguish it from competition. interaction and relationship building.Being first into the market does not necessarily bring success. As a result.If the brand is not the innovator. 2nd Ed. (Europe: Prentice-Hall).6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. If the quality of the experience deteriorates. brands were not built quickly.176-177 32 .. and establish a trusting relationship. then its position will be undermined. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. It is easier to capture a share of the consumer's mind and build a customer base. The Internet provides the opportunity for companies to create compelling value propositions never before possible. value proposition or augmented brand. P. which will communicate the brand's existence. comprehension and intention to buy.Traditionally. and making it more difficult for competitors to emulate.a segmentation scheme. • Time and Consistency . when the brand has no competitors to rival its position. 1998. As customers build trust in the brand through satisfaction of use and experience.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
4. This chapter provides an overview of the Internet and its defining characteristics. news groups and mailing lists. it is a common technology platform that allows computing devices to communicate with each other.1 . highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. 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. In doing so.1 INTRODUCTION The Internet is transforming the business environment. and provides the opportunity for dynamic interaction. Hypertext allows information to be organised in a user-friendly way that is easily accessible. The three core channels include e-mail (the most common). and a critical source of added value. In essence.1. but in practice not in real time. FIGURE 4.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. Information is becoming a major part of the products and services that people buy. it offers a number of alternative channels that enable businesses and people to communicate. which contain hypertext and pictures. 34 . and the 'world wide web' (www) .Figure 4. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. E-MAIL Is the part of the Internet that most users use at present.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. creating new challenges and opportunities.
the Internet lets individuals and companies build interactive relationships with customers and suppliers.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).The Internet is a global network and can be reached from everywhere. which was intended to link military networks together. These qualities eliminate the barriers of time and space that exist in the physical world. 4. The Internet can also be accessed at any time . anywhere. 7 days a week. These defining characteristics have fuelled its explosive growth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. The context of the Internet and certain key developments are highlighted in the Figure 4. regardless of where the computer or Internet access device is physically located.24 hours a day.not previously available with mass medium forms of communication.this radically alters the process of interaction between communicating parties. • It Overcomes the Barriers of Time and Space . • It Allows for Two-way Communication and Interactivity .2. By allowing for direct.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 . These characteristics combine to create a very powerful medium. allowing both parties to identify each other and build one-to-one relationships .2 (Note: 35 . ubiquitous links to anyone. when the United States Defence Department developed the 'ARPAnet'. and deliver new products and services at low cost. Graph is not drawn to scale).3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.
as cited in 'E-Business Technology Forecast' . 2000 Internet / ARPAnet was created Dell. FIGURE 4.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.a PricewaterhouseCoopers Report.000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1969: 10.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 10.000 1.2 .com) 36 .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.3 . 1998.000.000.economist.3. 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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . 1996 (www.000 1.Figure 4.000 100.
increasing to 500 million users by 200220.).Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .Attractive infrastructure and middleware software . hosting. G. The development of critical processes (ordering. 1996. 2000 (http://cyberatlas.g. As shown in Figure 4. The emergence of open standards in development tools and at the network protocol level (e. etc.Cheap bandwidth .2 20 'World Online Populations' .CyberAtlas Internet Statistics and Market Research.4 . FIGURE 4.com) 37 . Easier access to these networks provided by point-and-click web browsers.E-Marketplaces . web design.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS ..Content Aggregators .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.internet. the momentum created by all these forces has created a virtuous cycle of growth. Reed. making it more cost effective for software developers and other technology providers to create interoperable products. TCP/IP). Multimedia development tools that can be used to create rich content. payment.Cheap microprocessors & RAM . and gateway services).4. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. billing.g. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . The McKinsey Quarterly. offering inexpensive bandwidth.Low-cost networking alternatives . No.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.. there will be an estimated 375 million Internet users world-wide.High-powered servers .Higher PC penetration among consumers and companies . L. 'Electronic Commerce (finally) Comes of Age'. The growth in support services (e.
as cited in the Economist Intelligence Unit (EIU). These activities highlight the adoption of the Internet as an interactive.from communicating (90% use e-mail) and sourcing information. chat rooms.5 . to interacting (e. communication and information tool. FIGURE 4. reveals the wide range of areas where people are embracing the Internet .eiu.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.Figure 4.g. entertainment) and purchasing (37%) . 2000 (www.com) 38 .5. April 13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).
no order book. software.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions.6 . The buyer and seller 'face' each other through an electronic connection. The main difference between the Internet and other electronic media (i. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. fax.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. FIGURE 4.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4.e. telephone) is that the Internet goes beyond just enabling transactions. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. There is no need to travel to a physical location. and people. web browsers. However. April 2000 39 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. they all project the value e-commerce transactions to grow at unprecedented rates. Instead there is a website. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. projected by Gartner Group. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. and no cash register. content.
Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. Dell Computers). which are often disruptive to traditional business models21. suppliers. Yahoo!).and revolutionary new business models are emerging.g..5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . 66-76 40 . M. how they compete and how they serve their customers . 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. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. through the use of extranets).how companies operate. This is threatening to undermine many old established brands. At the same time. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. partners and other corporate constituencies. New brands and business models are emerging to seize this opportunity. some of which look set to become the superbrands of the future (e. & Overdorf. the Internet is sidelining the role of many traditional intermediaries. and transforming traditional distribution channels. the explosion of information is placing a premium on skilled information management. 'Meeting the Challenge of Disruptive Change'.g. Harvard Business Review. Additionally.. The Internet also facilitates the development and co-ordination of global activities (e. represents a level of efficiency and integration previously unattainable. Volume 78 Issue 2. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. operation (e. By allowing customers to talk knowledgeably and directly to suppliers. C. pp.April 2000.g. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. For example. March .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. Although the particular impact will differ between industries.
The Pace of Business is Accelerating With the fast pace of technological change. with no time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. ensuring the delivery of a satisfying customer experience. constantly innovate. G. the typical clock-speed at which companies need to operate has accelerated. collaborate more effectively and ultimately embed organisational intelligence within processes. 22 Colony. the globalisation of business. As a result.Forrester Research. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. the development of a knowledge economy. the diminishing barriers-to-entry and the lower switching costs. Now companies need to move at warp-speed. 2000 (www. Customers have more options than ever before . as they have access to more information leading to more informed decision-making. Internet technology can be used to exploit collective learning and knowledge. and reorganise as appropriate. combined with the emergence of electronic intermediaries. little loyalty. quick evolution and all the power. allowing employees to share knowledge. commit and deploy resources. or catalogues. This. it also removes the geographical protection from competitors. improving processes.internally and externally . as they are just one 'click' away. According to George Colony. online stores. to capture new opportunities. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. respond to competitive and market dynamics. empowered customers. products and services. fierce competition. They can move from one supplier to another searching for the best prices. switching costs are much lower.in developing products. these new highly informed customers are "empowered fruit flies". has resulted in a fierce competitive environment. 'Empowered Fruit Flies' . and the 24 x 7 environment.com) 41 ..they can choose between traditional 'bricks-and-mortar' companies.forrester. their organisations must harness knowledge . getting closer to customers and ultimately staying ahead of competitors. CEO of Forrester Research22. highest convenience and quickest satisfaction. This is forcing companies to become flexible and responsive to customer needs. It also provides easy access to competitors' offers and allows customers to consider every available alternative.
Increasingly. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. supply chain cooperation. The extent of this partnering is illustrated in Figure 4. thus creating a 'value net23'. and multiple strategic alliances and partnerships. 23 'The Future of E-Business' . and most traditional partnerships were vertical. combined with intense competitive pressures. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. 1999 . alliances and partnerships have taken on a new level of strategic importance.(www. However. it provides the opportunity to reach customers where they want. when they want. Examples of emerging information age business structures include flat versus hierarchical. variety. Traditionally. As such. and the need for speed and flexibility have accelerated the unbundling of business systems.A Research Report by TeslaGroup. advice and convenience. 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. which highlights the typical structure and dynamics of an online company. extensive outsourcing. how they want and with the levels of customer service they demand. and partnering up with the best for the remaining activities. linking companies with suppliers and customers up and down a pre-defined value chain. companies have looked upon alliances only as a means of filling gaps. The opportunity of linking the complete supply chain 'virtually'. achieve global reach and realise a new source of cost advantage. It allows companies to improve customer service. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon.teslagroup. linking companies with competitors and players from entirely different industries and business sectors.7. most Internet and e-commerce partnerships extend beyond this. companies can provide customers with a strong value proposition by offering them the best in quality.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. In this way. information.com) 42 .
a Boston Consulting Group (BCG) Analysis. while making the offering hard to duplicate off-line. many online companies are blending together the products and services of a wide range of companies. the pace of business is accelerating and power is shifting to the customer.7 .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. G. 4.they are business issues. tools and opportunities. April 2000 In an attempt to provide a rich customer experience. while triggering the emergence of new brandbuilding strategies.6 CONCLUSION The Internet and its strategic impact are not technological issues . New opportunities for efficiency and co-ordination are emerging. competition is intensifying. The Internet is transforming every business to some degree. S. As such.dot. This provides customers with added value. Partnering with portals and affiliate web sites is important in driving traffic to a web site.. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. it is transforming the competitive landscape and brand-building environment. This is the substance of the next chapter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. D. & Stirton. 'Organising for e-Commerce' . 43 .THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. people have concerns about sharing personal information. whereby the company can establish a dialogue and 24 Marathe.names.Durlacher Research. including the interactive approach to attracting customers and building loyalty. This threatens to undermine the value of brands. offers interactivity. where the user feels a part of. in most cases. credit card numbers. However. The limitations of brand-building on the Internet are also discussed. and the fact that customers are buying goods that. The Internet.. 'Internet Portals' . the logic of the Internet cuts another way. addresses.2 THE NEW DYNAMICS OF BRANDS Traditionally. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. in addition to providing added value. etc. they have never handled or seen (except on-screen).sites that provide a wealth of information and make comparison shopping easy. the Internet makes search and comparison much easier. On the other hand. People only tend to transact with sites they know and trust . as well as on topics of interest related to the brand and product characteristics25. Customers derive added value through the provision of information on the products or services they buy. May 1999 (www. 5. brands have been developed in an environment whereby a company creates a brand. and projects it onto a third party intermediary (the media).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Traditionally. Generally.durlacher. has placed greater importance on trust and security. many unnamed customers develop a 'relationship' with the brand. the intangible nature of the Internet. In response. on the other hand. J.com) 45 . and sites that understand the user's needs and preferences24. New strategies and tools for building brands on the Internet are identified. Transactions on the Internet require customers to provide detailed personal information . 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. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. In addition.
. learn. 'Is Your Company Ready for One-to-One Marketing?' .Fuqua School of Business.duke. Duke University..1 . D. pp... 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. 1999.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. In doing so.from the promises made in the value proposition. TABLE 5. 'Adding Product Value Through Information'. January-February. 1997 (www. This creates the opportunity for companies to build stronger relationships than previously attainable. brand-building must focus on the end-to-end customer experience . Rogers. companies have to find innovative ways of leveraging the information and 25 McCann.edu) 26 Peppers. January 28. In maximising the customer experience. B. relationship building characteristics of the Internet. Prof. However. 151-160 46 . & Dorf. M.Harvard Business Review. this also poses a challenge as these relationships may take on a life and character of their own. understand and relate to customers. J. rather than simply speaking at customers.1. a company can listen. service approach Customised The Internet gives companies control over all their interactions with customers and therefore.. to its delivery to the customer.
and Novak.. Zook. 2000 47 .converence-board.Research by PricewaterhouseCoopers / The Conference Board. on average. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . This view is reinforced by in-depth studies carried out by Bain & Co. high-margin items. In fact.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. - Repeat purchasers spend more and generate larger transactions . & Hancock. and to recover their investment. companies need to retain customers so that they return to the site repeatedly. S. customer acquisition costs are high. P. These points stress the importance of online customer loyalty. as cited in 'Creating a High-Impact Digital Customer Experience' . T.. and with customers holding all the power. Harvard Business Review. .due to more frequent shopping and larger purchases. March 17. unless they are selling high-price. 2000 (www. MayJune 2000 30 A Forrester Research Study.word-of-mouth is the single most effective and economical way online businesses grow their sites.. 'How to Acquire Customers on the Web'.An A. R. D.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27..often. D. but also provides more opportunities for cross-selling. 27 'Electronic Business Outlook'. it could be argued that customer loyalty is even more critical online..com and www. companies must ensure that they provide a completely satisfying end-to-end customer experience. Chu..pwcglobal.A Mainspring Communication Report in collaboration with Bain & Co. Repeat purchasing not only binds trust. . - Loyal customers are more willing to buy other products from the company.bain.com) 29 Hoffman. and some are spending over $50029. 'The Value of Online Customer Loyalty and How You Can Capture it'. T. Rastogi. J. L. This is further reinforced by the fact that. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. it is very unlikely that an online retailer can break even on a one-time shopper. Kearney White Paper.org) 28 Rigby. Therefore... S. Baveja. C. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. 1999 (www. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. For example. - Repeat customers refer more people and bring in more business . a disgruntled online customer tells 10 people about a poor experience30.
as the benefits of scale are overwhelmed by the disadvantages of size31. the costs approach zero32.. However. and the value that each member realises.1 .. Even more important. as illustrated in Figure 5. pp. (also referred to as 'viral economics').4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. G. customisation for individual customers. Similarly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 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. 'Positive Economics'. As a result. (London: Harper & Row). increases disproportionately as more people join the network. additional products. this is not the case on the Internet. 7th Ed. additional customers and transactions can be managed with limited fixed cost investment. Once the up-front investments are made (for research and development and technology infrastructure).1. where the value of the network. 1989. 180-182 48 . FIGURE 5. and in the case of information-based products. each additional unit sold does not cost more than the last to deliver.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.
Outlook 1999.A Shop.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. It also allows online companies to tap supplementary revenue streams. cross-selling and up-selling33. R.2 . enhancing the interaction. link revenues 32 33 Melnicoff. being first into a market makes it easier to capture the consumer's share of mind. '5 Rules of the eEconomy'. This makes it more efficient in improving product selection. As the company builds a customer base and develops a relationship with customers. including direct marketing. No.2. 21 . With no competitors around. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising. delivering increased margin per customer .Figure 5..org Study in collaboration with The Boston Consulting Group. its ability to track customer preferences and customise offerings improves. advertising and referrals. direct marketing. fulfilment • Defensible advantage against competitors SCALEABLE. Nov 1998 49 .A Publication by Andersen Consulting 'The State of Online Retailing' . M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. FIGURE 5.
This is the logic behind some of the extraordinary valuations of Internet companies.unless the leader makes a serious mistake. "creating a buzz". such as 'viral' marketing. Larger sites can also negotiate better supplier discounts or product placement fees.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. New marketing strategies. the leader will pick up momentum and will stand to gain an insurmountable advantage . and word-of-mouth even more effective.org Study in collaboration with The Boston Consulting Group. larger sites can leverage more customer advocates to reduce customer acquisition costs. commerce and distribution partners. in turn.A Shop. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. with its e-mail lists. chat rooms and bulletin boards. 5. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs.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. its growth curve relative to a new entrant is somewhat daunting. 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. as it carries the implied endorsement from a friend. creating a potentially exponential growth (like a virus) in the message's visibility and effect. and "network marketing". as once a strong lead is established. the value of the company rises exponentially with market share. viral marketing is an effective tool in getting a message out fast. This snowball effect favours first-movers. or until a competitor finds a way to change the game again. makes communication tighter. leading to the exponential expansion of the customer base. As a result. It is often referred to as "word-of-mouth". with a minimal budget and maximum effect. the brand begins to take hold. Nov 1998 50 . the larger customer base provides online companies with more leverage in attracting and negotiating with key content. By the time a company has reached critical mass. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. Given the connectivity of the Internet among customers. The Internet. This. and the cost of switching to an alternative brand becomes quite high. web sites. Word-of-mouth is a particularly powerful medium. 34 'The State of Online Retailing' . As a result. "leveraging the media". When a company reaches 'critical mass'.
com. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). and in doing so spread the word for Geocities. but Hotmail signs up more than 150.000 subscribers every day. sign up for their own free e-mail. friends to visit it. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. and then propel the message even further to their own ever-increasing circles of friends and associates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. • Each new user becomes a company salesperson. In its first 1. In fact. a company now owned by Microsoft.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.1 The Case of Hotmail. Geocities enables people to create personal websites for free.hotmail.com The classic example of viral marketing is Hotmail. Today they are the largest e-mail provider in the world with over 40 million users.5. and they created a subscriber base more rapidly than any company in history. When a user builds a website. where they have never carried out any promotional activities. Hotmail acquired over 12 million subscribers. whether for communications or community. A traditional print publication would hope to reach 100. 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). Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. saying: • "Get Your Private.com was one of the first free web-based e-mail services.000 subscribers within a few years of launch. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. and the message spreads organically.5 years. seven days a week. Free Email at http://www. Hotmail. eGroups and Geocities (both recently acquired by Yahoo!). they will have a powerful viral opportunity at their disposal. they tell all their 51 .
. & Hancock. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Rastogi. making customers 'click off' to another site.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. In essence. J. 2000 'The E-business Technology Forecast' . Baveja.. Kearney White Paper. Promotion. and 66% of people who start a 'shopping basket' fail to complete the transaction37. T..3). 2000 (www.A Mainspring Communication Report in collaboration with Bain & Co.An A. The customers' ability to access and display information rapidly is extremely important36. Zook. 2000 37 Rigby..3 .. Chu. C.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. In fact. Sites that are difficult to use can cause frustration. S.. R..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . D. FIGURE 5.An A. S. Price.com) 52 . Place). T. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. March 17. . 30% of potential customers leave sites because they cannot find what they are looking for.bain. As 35 36 'Creating a High-Impact Digital Customer Experience' . 'The Value of Online Customer Loyalty and How You Can Capture it'.A PricewaterhouseCoopers Report. Kearney White Paper.
4.businessweek. 38 39 Cognitiative Inc. expert insights. and a wide range of products. online companies have the opportunity to provide rich. T. which can enhance the company's value proposition.businessweek. October 29.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. CIO Magazine. as cited in Business Week Magazine. ease-of-use. 1999 (www. up-to-date information. With almost infinite display space and inventory capability. whereas a slow response time and site downtime will have a significant negative impact.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.com) Davenport. February 2000 Issue 53 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. 'Sticky Business'. ease-of-navigation. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. 29th October 1999 (www.4 . FIGURE 5. and fast response times are among the most important factors in establishing web brand loyalty38. as cited in Business Week..
based on profile information. W. Clemmer. . demographics. 31% of online consumers use the Internet for obtaining product information. These sites allow members to interact with one another. Often. For a community to work. 'Building Stronger Brands through Online Communities' . and organise live events.forrester.5). A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.g. J. which enhances the user's online experience. Other content includes community-generated content.. which is facilitated by a combination of factors (Figure 5. An online community offers a compelling way to entice customers back to a site.Sloan Management Review. K. iVillage and Geocities). 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). According to Forrester Research40. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). 3. share information and access a wide range of services. Community Online communities are emerging as new gathering places for consumers with similar interests (e. and advertising (if it is relevant and useful). 'Real Profits from Virtual Communities' . A. Customisation creates the feeling of a one-to-one relationship. G. Spring 2000 42 Armstrong. It fosters a sense of belonging41 among the members.. & Bluestein. and nearly 20% use it for post-sales support. & Hagel.. it needs a critical mass of members42. On the other hand. Online sites can track a customer's purchase history and modify its service accordingly. 40 41 Morrisette.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. An important contribution of these communities is that they provide members with a medium to communicate with each other. 1999 (www.The McKinsey Quarterly. visitors should not be engulfed with too much information. or prior transactions.A Forrester Research Report. Customisation Customisation involves tailoring the presentation of a web-site to individuals.. as well as through loyalty programmes that provide targeted benefits. No. S. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. even if they purchase offline. 1995. Members can interact in chat rooms.. use bulletin boards. 54 .com) McWilliam.
.6). S. Mulcahy. O'Donnell & Gupta. This is similar to placing offline stores in high traffic areas. as well as attracting traffic from other sites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.. Companies can provide a selection of related links that complement the site's purpose and value proposition.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. 55 . allowing customers to deepen their experience with a brand and build more personal connection.5 .. Journal of Consumer Research. when membership in the brand's community becomes an end in itself43. and can create emotional loyalty.www. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 1999 Communities enhance the speed and value of information sharing. Once customers know of a site. pp.com) directly into the browser and access the site immediately. they opt to input the URL (Internet address . Site-tosite connectivity focuses on connecting users to other relevant sites. 'Making Real Sense of Virtual Communities' . 43 Fournier. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. M. March 1998..A PricewaterhouseCoopers Study.brand-name. 343-373. A. C. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.
and online surveys. Therefore.6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. Customers share security and privacy concerns. The development of loyalty programmes. and FAQ pages (Frequently Asked Questions) to solve problems. events and subjects of interest to the customer. as well as features such as gift-wrapping. (www. toll-free telephone numbers.com) 56 . online chat. 45 MarketWatch. Other tools such as bookmarking the page can also facilitate connectivity. serves this purpose and helps to build customer loyalty.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. which provide targeted and unique (customised) benefits to the customer. as well as informing and reminding customers of special offers. Customer Care Online customers often require assistance and reassurance. customer support at all stages of the interaction is important. activities. live chat. and can be provided through e-mail. It is important in building relationships. customer care activities can involve providing a variety of payment. Communication can be tailored to specific user interests and should allow for two-way interaction.marketwatch. delivery and return options. news up-dates. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. In addition.
& Zeisser.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. pp. Adoption). McQuade. e-mail notifications and banner advertisements. including affiliate programmes with other websites. No.8. and bring people to the site for the first time.2. The company must build awareness and communicate its value proposition to its target customers. Engage. Magazines. Therefore. McKinsey Quarterly. Retain. A.7. 1996. Evaluation.) to online tools. billboards. This is more difficult online than offline.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. 'Marketing to the Digital Consumer'. Trial.. R. Learn and Relate. modified to take into account of the interactive dynamics of the Internet. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 180-183 (www. Newspapers.7 . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. because there is no physical presence. FIGURE 5. Interest.. The mechanisms to communicate range from traditional media (TV.Attract. S. M... Waitman. This model consists of five stages .mckinseyquarterly. etc.4 .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.Awareness. visibility relies solely on Communication. Figure 3. links from directory searches (Connectivity). 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 ’ .
7 4. public relations and television advertising. Engage With the multitude of choice available on the Internet. The key factors at this stage are Convenience combined with interesting Content.4 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.3 Source: Forrester Research. Kapferer's Brand Prism (Ch.8 4.4 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 2.4 3.3) is useful to ensure that a company develops a distinct and consistent brand identity.0 3. Companies then need to engage customers to obtain their interest and participation. Attracting customers is only the first step in building online brands.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 . 3.ebusinessforum. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. discounted over the expected duration of the brand-customer relationship.1 3.2 4. affiliate programmes.3 3. 3.Economist Intelligence Unit 2000 (www. it is important to quickly engage consumers' interest before they move on.5 3. as cited in 'Targeting Consumers via the Internet' .6 3.5) 2.WEBSITE PROMOTION METHODS . 58 . Fig. multiplied by the expected rate of transactions.com) The most effective methods are direct e-mail. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.
8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. and forge closer relationships than any offline operator. Building up a knowledge database on each customer . attitudes and behaviour).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.who they are and why they shop online. can create value for the customer and help build the brand-customer relationship. Communities and Customisation are other sticky applications. The initial site registration provides an early opportunity to obtain useful information. • The Internet supports brand-building activities where there is a need to build a relationship. if used properly. a company can create value by providing a personalised online experience. Radio). do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Certain product categories. Content is the basic driver of retaining customers on a site. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. and what additional products and services are they interested in provides companies with valuable information which. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. The objective is to increase the conversion rate (% of browsers converted into buyers). Learn The Internet provides extensive opportunities to learn about consumers (demographics. and must be continuously updated due to the multiple visit nature of customers. 5. 59 . This helps to create a customer base that spends more time and money at a site. such as groceries and convenience goods. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. 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. TV.9).g.
due to high delivery and transaction costs (relative to the value of the product). 60 .. touch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. These case studies provide a practical insight into how companies are building their online brands.. to its delivery to the customer. providing further added value. especially in small quantities.9 . R. • Brand-building favours products that can be sold online. companies must provide a satisfying end-to-end customer experience . smell). McKinsey Quarterly. The 7Cs Framework outlines the key components of the brand experience and the sources of added value.mckinseyquarterly. The next chapter analyses the brand-building efforts of seven companies.2. A. M. S. the experience is the brand. and as the relationship develops.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.9 CONCLUSION On the Internet.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.. 180-183 (www. it is critical for companies to build relationships and foster brand loyalty. 1996.from the promises made in the value proposition. The interactive brand-building process involves attracting. 5. However. & Zeisser. it is not economically feasible to sell certain products. pp. 'Marketing to the Digital Consumer'. the interaction provides the ability for companies to learn from their customers and relate. McQuade. In order to create "apostles". Waitman. Given the high acquisition costs of online customers.. engaging and retaining customers. No. and the need to stimulate the other senses (taste.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
it is the most visited e-commerce website in America. Barnesandnoble. Through its provision of a one-stop shopping experience. 47 48 Interbrand (www.com. its brand-building strategy (how it generates traffic).com.com's success stems from its compelling value proposition.1 Company Overview Amazon. and enjoyable experience. 1999 49 'Amazon's Amazing Ambition' . Amazon. greater convenience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 CASE STUDY: AMAZON. 6. and has sales of over $2 billion. 6. The cases are presented in the following sequence . Not a River' . more information. and other key factors that have contributed to its success (or failure). Gap. Each case is presented in the same format including.1 outlines Amazon's timeline and major milestones.It's an Ocean. February 26. 2000 (www. Amazon provides increased added value on several dimensions. November 11. France.com. 'Amazon. In addition.Goldman Sachs Report. easy. and higher levels of customisation and service than the traditional shopping experience allows.see Appendix A. In July 1995.com . Amazon has been able to differentiate itself from other online competitors.2.com has become synonymous with e-commerce.com) 62 . Amazon has cultivated a reputation for excellence. combined with its levels of customisation and customer service. It is the 57th most valuable brand in the world47. Figure 6.interbrand. Amazon serves over 23 million customers from 160 countries. and one of the top two or three in Britain.com) . a company overview.Amazon.com and Yahoo!. Amazon. eBay.2 Value Proposition Amazon. Boo.economist. Germany and Japan49.COM 6.1 INTRODUCTION This chapter provides an analysis of seven companies.The Economist. its value proposition. CDnow. innovation and delivering on its promises.2. and is one of the few Internet brands that is recognised all over the world. and has equity investments in several e-tailers. including: increased selection.com launched with a mission to use the Internet to transform book buying into a fast.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). In addition. discounted prices. the sources of added value (using the 7Cs Framework).
Amazon launches health and beauty store . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com opens its virtual doors at amazon.com goes live Amazon launches Associate Programme Amazon IPOs for $49million. West Virginia." providing shopping from wireless devices.com.Customers can shop at Amazon.Amazon and eziba.com . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com .com and NextCard launch co-branded credit card .com Anywhere.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com Amazon introduces "Purchase CirclesTM".com Amazon acquires Back to Basics Toys to add to Amazon.com Amazon announces further plans to expand distribution network to meet rapid growth. and more Amazon launches "Amazon.com.amazon.Amazon surpasses 20 million cumulative customer accounts .com Amazon launches online Auction site Amazon agrees to purchase Live/bid. a tools and equipment store for professional tool users and woodworkers .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon. such as the Palm VII organiser.Amazon enters into a strategic partnership with Drugstore.Amazon. featuring thousands of bestseller lists for hometowns.com Announce Strategic Investment and Promotional Agreement .com 63 . to meet rapid growth . workplaces.com Amazon invests in Pets.com announce investment and strategic alliance .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com is founded by Jeff Bezos Amazon.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 via the new wireless pocket PC .com .com to create a "home living" store at amazon.amazon.com Electronics and Amazon.Amazon.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . Ashford.TIMELINE AND MAJOR MILESTONES Amazon.COM .Amazon opens a customer service centre in Huntington.sothebys.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 and online car-buying service Greenlight.com invests in wineshopper.Amazon launches lawn & patio store .Amazon launches new kitchen store .Amazon announces investment in kozmo.com enters European book market Microsoft signs Amazon. universities.New home living store from living. Software. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com .com Auctions and zShops provide new tools to its merchant community .toolcrib. Video Games and Gift Ideas Amazon and Sotheby's launch www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and minority investment in.Amazon opens customer service centre in The Hague .000 members Amazon.Amazon launches www.Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. Amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.Amazon enters strategic alliance with living.
COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. expert reviews.OVERVIEW OF AMAZON.1. customer testimonials. and customer Purchase CirclesTM. Content Amazon provides content on several levels. This is an example of 64 . book summaries. offering multiple paths to a given book or product. mobile phones. downloads quickly and services visitors adequately . encourage repeat visits and drive higher conversion rates. Amazon has added other features for shopping convenience.2.Figure 6. including book jacket images. live or study. The site is easy-to-use. logically structured. easy-to-use. gift click. FIGURE 6.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. wish lists. discussion boards. recommendations.3 Sources of Value . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. interviews with authors. and quick-to-load pages Over time.com Anywhere to support access from wireless devices (i.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Palm VII PDA device). gift reminders. such as the Amazon. the 1-ClickTM express checkout.com All Product search (searches the entire web).e. and Amazon.1 .
therefore. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. converting them into a storefront for Amazon. In doing so. Community Amazon has also added a community element to the purchasing process. and has developed an Associates Programme. to the proactive notification of new items of interest. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. and customer interaction. from its shopping basket applications which lists the estimated time to delivery reliably.2. linking it to a large number of other sites. More recently. Amazon introduced Amazon. 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. By leveraging its vast customer base. Connectivity Amazon has built relationships with high traffic web portals and sites.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 . These are discussed in more detail in Section 6. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.4. 65 . creates a competitive advantage. while driving up repeat purchases and cross-selling opportunities.thereby increasing conversion rates.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. real-time shipping and backorder notices. This customer-centricity is evident in all Amazon's activities. and Customisation Amazon provides customised features and services. Amazon creates one-to-one relationships with its customers. which helps to build loyalty and create switching costs.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. Amazon's content is not reproducible by competition.
increasing to over 500. New Yorker and The Economist. In the second half of 1996.2. In July 1996. Newsweek. The Financial Times. enticing them to return to the site and purchase repeatedly. two personalised services.com hot-link and offer specific books of interest to their visitors. and customers are also e-mailed when the items are shipped from the warehouse. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. helped generate publicity and stories about the company in publications such as The Wall Street Journal. and by 1999 it had over 200. they are subsequently confirmed by e-mail. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Through the first half of 1996. 66 . Instead of paying directly for this exposure.000 by August 2000.000 members. which only applied to sales that resulted from the initial click-through. The Associates Programme has been phenomenally successful. 6. 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. In addition.2). Eyes and Editors. This enabled Amazon to reach more customer segments and niches (Figure 6. Once orders are placed. Amazon offered Associates referral fees of up to 15%.a move that along with the novelty of its business model and the newness of the Internet. As a result of all these factors (7Cs). and not subsequent purchases. it began to advertise in print media and online . attracting member sites of all sizes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Business Week.
2 . Excite.com About Me . In addition.com Refer-A-Friend . Netscape's Netcenter and NetSearch. 67 . spreading the word for Amazon. mutual links.allows customers to create a personal profile (with pictures) on the site.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.customers are encouraged to provide e-mail addresses of friends. Amazon also established agreements with AltaVista.amazon. thereby promoting Amazon. The Yahoo! agreement.co.uk the local provider for Yahoo! UK & Ireland.de became the local provider for Yahoo! Germany and Amazon.com). • Amazon. each friend is sent a $5 Amazon. From July 1997 to December 1998. free eCards and gift certificates (which customers send to friends. was also linked to Amazon's entry into Europe Amazon.com. the customer acquisition cost is only £10.COM'S ASSOCIATES PROGRAMME Source: Amazon. multiyear deals involve exclusive book-selling rights.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. and you are given a $5 gift certificate for each customer you provide. and primary button placement on web portal search engines.AMAZON. Amazon closed deals with five of the six most visited Internet addresses. People tend to tell their friends about it.com's website (www. These multimillion-dollar. including: America Online (AOL). Prodigy and @home. Yahoo!. and Geocities. Interesting viral initiatives include: • Amazon. In return. Amazon has used viral marketing techniques through customer reviews. Therefore.com gift certificate (in your name).
clear presentation. 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. As the relationship develops. newspapers) to generate awareness. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Magazines. April 6. With this combination of promotional methods. so we didn't have to do much advertising. interesting content. Once customers are attracted to the site. 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. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses.com Really Matter?' . which accounts for 66% of Amazon's sales.significantly lower than other online companies. "we had a world-class site the day we launched . community feel (as discussed previously). Amazon maintains a database of customer preferences. C. with the explosion of websites. 'Does Amazon. Purchase CirclesTM). And we relied on word-of-mouth to build awareness. By relating to customer needs.g. According to Jeff Bezos. and improved customisation and recommendations (e. Amazon's proven online merchandise selling techniques including easy-to-use search options. however. buying patterns and viewing habits. 50 Willis. That's not possible anymore50".. Amazon is building customer loyalty and encouraging repeat business. Amazon has been able to achieve average customer acquisition costs of less than $20 . Amazon has also incorporated traditional offline media (TV. 1998 68 . have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth.but it was only a tenth as good as the site we have now. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. billboards.Forbes.
Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. 51 52 Hazleton. which within six months propelled Amazon to one of the leading online music retailers. "we're not a stationary target. memorable.2. L.a wide range of choice. Our secret is that we have not been competitor obsessed. As such.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. According to Jeff Bezos. We were blessed with a two-year head start. "Online. Saunders. and its safe and secure delivery. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'.com obsessed52". further enhancing their value proposition. due to the hype and coverage it was given. As such. in June 1998. For example. This has helped them attract customers and move up the learning curve quickly. while our competitors have been Amazon. management realised that Amazon had become more associated with other core brand values . Success. July 1998. to capture the spirit of the site. developing customer service centres and expanding its distribution network to support high levels of service. According to Jeff Bezos. Amazon is constantly seeking new ways of improving its offering. Amazon received criticism for expanding its product line.. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon unveiled a music store. Amazon was able to secure partnerships and alliances with key players. thereby diluting the value of its association with books. and to convey its vast size and offering. and according to Jeff Bezos. and our goal is to increase that gap51"..com Way'. 'Business the Amazon. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). We have been customer obsessed. the balance of power shifts away from the company and goes towards the customer. good value. because he wanted it to be short. establishing a reputation for excellence and fulfilment. (Oxford: Capstone Publishing). establishing Amazon as the leading online bookseller with a large customer base. Amazon's understanding of its brand identity has been a critical factor. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. In addition. However. Nevertheless. R. In addition. 1999 69 . Amazon has been able to build a strong brand at relatively low cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
When they're young. 53 Warner. The key factors driving its growth and high retention rates. This raises a critical issue. they're stretchable and pliant. but over time they become more and more associated with a particular thing and harder to stretch53". 1998 70 . Amazon delivers on its promises of a wide inventory of products.2.. Amazon is claiming to be making profits on its books and music categories. Amazon's intense focus on customer needs and continual innovation. B. and to sustain a positive image and satisfactory end-to-end experience. they have cultivated a reputation for excellence and fulfilment. 6. However. Nevertheless. however. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Although Amazon has successfully built a strong brand and loyal customer base. speedy delivery and good value. Volume Discounter' . if it continues to incur losses. which is critical on the Internet. have kept it ahead. 'Marketers of the Year: Jeff Bezos.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. perhaps trying to defend its view that losses taken to build market share can reap profits later. not necessarily a reality.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. secure payment procedures. In doing so. with new products and value added content.Brandweek. the drain on their cash resources will push them towards bankruptcy. Amazon also recognised that service quality is a perception. distribution centres and upgrading the site. Quality is only measurable in the minds of visitors to the site. October 12. stem from its compelling value proposition and high quality end-to-end customer experience. This customer-centricity is a key hallmark of a successful Internet brand. and investors lose confidence. as the true value of a brand lies in its sustainability. it has not recorded any profits to date. Amazon has continuously invested in customer service.
including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. magazines.com launched its website (www.Announces distribution relationship with New York Times September . Barnesandnoble. prints & posters and related products.com announces strategic relationship with Palm Computing . Besides books.Launches BNTV .TIMELINE AND MAJOR MILESTONES . TABLE 6.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . all front-end operations (marketing. Barnes & Noble Inc.) established by its parent company.Barnes & Noble.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 . and is the second largest online bookseller (after Amazon.. as it could capitalise on the infrastructure and back-end operations (warehouses.com is approximately 40% owned by Barnes & Noble. Barnes & Noble Inc. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).com's timeline and major milestones is outlined in Figure 6.com) . Inc.com provides other online categories offering software. etc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.COM .com and Microsoft announce that they will create an eBook superstore .Acquires equity stake in Mightwords .com).com was able to 'hit the ground running'.Barnes & Noble went online at AOL May .Offers same day delivery in Manhatten .Acquires minority stake in NotHarvard. Launched in 1997. and 20% owned by the public. Barnesandnoble. music. rare. Barnesandnoble.Launches Affiliate Network December . Currently. promotion) between the online store and the retail stores have been kept separate.com . However.2. Barnesandnoble.Barnes & Noble University opens registration for free online courses .3 CASE STUDY: BARNESANDNOBLE. 40% owned by Bertelsmann AG.2 1997 January BARNESANDNOBLE. Dalton bookstores (located in shopping malls).Barnesandnoble.Launches Video Store 71 . book databases.COM 6. contacts.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.1 Company Overview Barnesandnoble.barnesandnoble.Barnesandnoble.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.3.Launches Internet Radio .com is the fourth largest e-commerce retailer54. is one of the best known traditional booksellers in the United States. and 470 B. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.
Both offer detailed bibliographic information. edition. previously-owned and rare books. as cited on Barnesandnoble.3 . the company created a site very similar to Amazon.com let customers sign up to receive email reviews and announcements of new titles. author. they offer customers fast delivery.bn.com's virtual storefront is graphically richer than Amazon. including title. In addition. Barnes & Noble planned to dominate online book-selling.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.com and barnesandnoble. however. good prices.3. logically structured. FIGURE 6.2 Value Proposition Barnesandnoble.com's website (www. software. rich editorial content and a community experience.3 Sources of Value . etc.barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print. easy and secure ordering. publisher. and easy-to-navigate site Categories focus on books.com) 72 .OVERVIEW OF BARNESANDNOBLE.com or www.COM'S WEBSITE Simple. the features are practically identical. in terms of the 7Cs framework.com's and takes a bit longer to download. Both Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3. but instead of developing an outstanding interface to its inventory. music New Initiatives Barnesandnoble. Both have expanded their convenience to offer 54 Media Metrix.com's (Figure 6. as well as an extended searchable catalogue of millions of out-of-print.3). 6.
however.1 billion. The 6. Webcrawler. it lags behind first-mover Amazon. compared to Amazon.64 billion.000 affiliates in its referral network. Both try to foster a community of readers by letting customers post reviews online. Barnesandnoble.com was valued at $21. Both offer 'associate programmes' that let other websites link to their sites. has yet to leverage its strong brand in cyberspace. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com in return for a commission on any purchases that they originated .com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. They have developed an affiliate programme that links sites to Barnesandnoble. As of February 2000.com's market capitalisation was $251 million.com has created a high quality website and customer experience. Barnesandnoble.a replica of Amazon's Associates Programme. 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 Barnes & Noble Inc. Lycos.com's 1999 revenues were $202. These initiatives have generated traffic to the site. However.com's $1. Instead.com. while Amazon. this programme had more than 300. Barnesandnoble. Although.The Wall Street Journal. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com had over 17 million. and both are expanding globally.4 Brand-Building Strategy Barnesandnoble. prevent cannibalisation of its existing business. and avoid charging sales tax in states where it has stores56. Yahoo!. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . reasons for this are explained in the next section. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. while Amazon.6 million.com closed 1999 with 4 million customers. December 17. 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 . there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Both offer customisation that permits users to personalise the experience. Netscape and Microsoft Network.3.
com.com's link to Bertelsmann AG. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. provides access to valuable resources. To signal its intentions. 74 . when it struck reciprocal marketing deals with Expedia. and leverage its real-world presence. with a similar discount. • Barnesandnoble. as Bertelsmann's book division includes partners such as Random House.com.. and in recent months has aggressively sought new ways to differentiate itself. Recent Initiatives Barnesandnoble.com and VitaminShoppe.com. Unfortunately.com has lost access to valuable customers. and the tangibility that this provides.com. Barnesandnoble. Barnesandnoble. • In addition. and a same-day delivery option in Manhattan.com.com should have aggressively cross-promoted their stores through advertising.com created a new cross-marketing genre in February 2000. Barnesandnoble.com. Jcrew.com.com has begun to acknowledge some of these mistakes.com has changed its name to Barnes & Noble. people began using their stores as a physical showcase for online rivals such as Amazon. By failing to leverage it. 1-800Flowers. Under the seven separate agreements.com.com. each partner offers a similar link to Barnesandnoble. in the attempt to gain traction and build momentum. in-store displays. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. Barnesandnoble. and Internet terminals in the bookstores. Planetrx.com's key differentiator from Amazon.com. In return. Petsmart. content and distribution opportunities. LLbean. or deliver books directly from the retailers. • Barnesandnoble. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet).com is its association with Barnes & Noble Inc. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. Barnes & Noble University (a free online education resource).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through. At any given point there are hundreds of customers browsing their aisles looking for something to read. Barnesandnoble. and its BMG Entertainment division includes music giants Arista Records and RCA Records.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com's late start in 1997. even if that means eating into their existing sales.its key differentiating factors.3.com) 75 .forbes. significant market momentum. it has not been able to establish itself as the leading online bookseller. by portraying them as slow and clumsy in comparison to the more nimble Amazon. it also caused a major setback.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. 2000 (www. In addition. and allowed them to offer stock options as compensation and achieve a high market capitalisation. otherwise they risk losing out to other online competitors.Not a Best Seller' .6 Conclusion Although Barnesandnoble. customer relationships and offline presence .com has been able to create a high impact and high-quality customer experience. The company failed to leverage its established brand. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.com. and was further up the growth curve. 57 'Bn. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". Barnesandnoble. a wellestablished Internet brand.com and has given them the image of a second rate 'me too' brand.Forbes. 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 experience is instructive. and its lack of innovation (by copying Amazon. Barnesandnoble. meant that Amazon. feature for feature) has failed to differentiate Barnesandnoble. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. The Press have also contributed. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.com . August 4.
Everlast. 1999 76 . P.COM . and Converse.com. due to its poor performance and inability to build a customer base. June 10.com had set the record as Europe's best-funded European Internet Start-up.com provided a range of 18 fashion and footwear brands including DKNY. Morgan. arranged through J. 58 Kajsa Leander. as well as create a kid's site. Sweden.Site goes live . Company is put up for sale. If a clothing brand is on the Boo site. and the resulting loss of investors' confidence.Announces it has only 500.Raises funding of $125 million .they redesign site. Boo. not the limited range you might get at most London fashion shops58". TABLE 6.2 Value Proposition According to Kajsa Leander. Italy and Spain within a few months. England.com collapsed through lack of funds. among others. They intended to add France. "our marketing thrust is not based on prices.Appeals for $30 million more funding .4. Boo. it means all that brand's product line is available. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). and was billed as one of Europe's hottest e-commerce ventures.000 unique visitors .1 Company Overview Founded in 1999. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Puma.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".3 1999 Mid year BOO.COM 6. founder and Chief Marketing Officer of Boo.TIMELINE AND MAJOR MILESTONES . Finland. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com.Marketing Week. Boo. After a high profile launch. receiving $125 million of funding. On going live.4. CMO of Boo. Germany and Denmark.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com opens its virtual doors' . and included high profile investors such as Bernard Arnault. within six months Boo. However. as cited in 'Boo. Boo. November 2000 January February May 6.First sign of problems . sack 20% of staff and sell stock at 40% discount .4 CASE STUDY: BOO.com entered six markets: US. it's about range and convenience.fails and appoints KPMG as liquidator. and eventually debut in Asia.Multi-million pound advertising campaign created by BMP DDB .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
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.
good prices. and was the first site to offer the sale of music downloads and custom CDs. announce marketing alliance . & Novak. This unprecedented degree of access to music and information is the core of CDnow's value proposition.Merges with N2K. $18. pp.com) 80 . TABLE 6. CDnow is the leading online music store. CDnow was acquired by Bertelsmann AG. D. 'How to Acquire Customers on the Web' .ten times the selection of a conventional bricks-and-mortar music store).2 Value Proposition CDnow offers consumers a high degree of choice (over 500.1 Company Overview Founded in 1994.000 music-related products and 650.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. whether for browsing or buying. features. guides to music genres.5 million distribution deal with Lycos Signs three-year.cdnow.Site goes live . convenience.5.. It has a customer base of 4 million people.Merges with Columbia Records . daily music news. as well as music reviews.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . On 19th July 2000. May-June 2000. and an average daily audience of over 800.Launches merged CDnow/N2K site . $22. former arch rival .000 people. cover art.Partnership program with Geffen Records . and they aim to "make every visit to the site.5 CASE STUDY: CDNOW 6. 62 Hoffman.179-188 63 CDnow website (www. customisation and a wealth of information and content to help in the purchase decision. by twin brothers Jason and Matt Olim. a valuable and rewarding experience"63. and one of the most popular shopping sites on the Internet62.Raises $10 million through private placement .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .000 music related items . T.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Forges distribution partnership with Yahoo! $65. and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow is also driving the digital distribution of music.Harvard Business Review.CDnow and Time Inc.000 sound samples.TIMELINE AND MAJOR MILESTONES . CDnow provides access to over 500.5.
The whole process of searching for albums or music titles to the actual purchase is simple .OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. By partnering with well-known content providers. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has cultivated similar relationships with MTV.3 Sources of Value .5 . FIGURE 6. etc. For example.5.Figure 6. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. and has secured rights to music reviews.. artists biographies. cover art. 81 .5. easy-tonavigate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow has leveraged the reputation of their brands to reinforce its own.
allowing them to respond to detailed customer queries. it gives them a sense of ownership and a compelling reason for them to return. Other features such as My CDnow's Wish List. 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. 82 . CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Customer Care CDnow's site can be viewed in English. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. allow customers to keep track of albums to buy in the future. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . CDnow developed the Fast Forward Rewards programme. By customising the store to meets customers' needs. Dutch and Japanese. and Geocities as well as more focused specialist sites. Portuguese. In addition. an incentive programme that rewards customers and encourages them to connect back to the site. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. German. It also creates switching costs. they will be reluctant to visit another online store and enter the information again. CDnow hired a group of multilingual customer service representatives to handle questions. Internet access providers. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow.search engines. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). which accumulate and can be spent on a variety of music-related products. Due to International interest. Spanish. Italian. Yahoo!.such as AOL. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). French. Whenever a customer makes a purchase they earn Fast Forward Reward points. Excite. Community CDnow has not exploited the potential of creating a community feel. and key news and entertainment sites .
• Alliances and Partnerships .4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. as well as more-targeted music-related sites like Billboard. CDnow's initiatives include: • Banner Ads . and radio spots on the Howard Stern Show to build a cult following among radio listeners.CDnow's advertisements are targeted to some degree. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. this is their "most successful customer building programme64". Yahoo!.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. • Traditional offline Media . Spin. print advertising is music-related publications such as Rolling Stone.Through the Cosmic Credit Programme. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. By keeping the brand in front of the customer in this way. CDnow extended its distribution reach to include more than 250. they buy from CDnow. and Variety.000 small. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. music-oriented websites. • Affiliate Programme . According to Jason Olim. CDnow is doing everything it can to ensure that the next time that 6.5. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. 83 .They have also stuck exclusive alliances with AOL. covering the entire music spectrum. It is a revenue-sharing arrangement. Excite and other powerful Internet content and service providers. and spot radio to build reach. customers buy music.
(www. word-of-mouth accounts for the lion's share of CDnow's customers.Hampel & Stefanides (www.4 million.CDnow made public relations a high priority brand-building tool. and to increases in the customer base of more than 30% quarter-to-quarter.cdnow. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. it is in this context that the large investments in advertising and partnerships make sense. 6.4 million). as a way to fuel very lucrative word of mouth. This has contributed to a 225% increase in sales (1997: $17. It is constantly adding new functionality to the site and has been innovative in its offering . with 44% of sales coming from new customers65.htm) 84 . Public relations efforts helped to generate word of mouth and influence sales. April 28. CDnow's promotion strategies have attracted high levels of traffic.they were the first site to offer the sale of music downloads and custom CDs.com/cdnow. both in the online and offline worlds.hsny.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .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. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .Press Release. It is a powerful source of acquiring new customers at low cost. • Word-of-Mouth . by two twin brothers with little money reflects the 'American dream' and was quickly picked up. In fact. with repeat customers accounting for more than 50% of sales. 1998 . and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.As for many successful online retailers.com) 65 'Pioneering in Cyberspace' . The company continually pushed for new distribution partnerships to widen its sphere of influence.5. resulting in increased conversion rates. and scaled it awareness-building efforts. 1998: $56. The story of how CDnow was founded in a basement.
and ensure that it exploits its early-mover advantage and keeps ahead of competition. 66 Jason Olim. as cited in Carpenter. CDnow has developed a relationship with Valley Records.from how CDnow has personalised its product offering to its capable customer service team . (Boston: Harvard Business School Press). CEO of CDnow.Building an Internet Business at Breakneck Speed".5.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. This. The company sends an automated order confirmation note via e-mail as soon as the order has been placed.75 85 . as cited in Carpenter. "your brand is not just what you say . to ensure quick delivery to customers. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. 6. 2000 p. 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. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. They also provide the customer with an order number and customer support contact information should they have questions. (Boston: Harvard Business School Press). P. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. 2000 p. It was able to create a strong value proposition and high quality customer experience.Building an Internet Business at Breakneck Speed". According to Jason Olim. 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 . P. and innovative.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim.it's what you do66". CEO of CDnow. combined with the high impact customer experience created . The development of an extensive affiliate network.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. "eBrands .89 67 Jason Olim.
Auctions make it fun. eBay effectively created a new business model never before possible .6 CASE STUDY: EBAY 6. Since its launch in September 1995.Company Overview' . from collectibles and antiques to electronics and toys. eBay is not about auctions.ebay. CEO of eBay. The buyer and the seller work out the logistics of the transport (e. and 450. the eBay community has grown to include more than 10 million registered users. shipping.eBay website (www. "at its core. Auctions are an enabler. Sellers pay a nominal fee for placing an item up for sale. transportation and other overhead costs. with the number of unique daily visitors setting a record of 1.com) 'eBay . This is a new market . extensive selection and geographical reach.300 categories. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.g.Company Overview' . collectable shows. 24 hour a day. payment) between themselves.6. 6. There are over half a million new auctions. garage sales.the closest thing in the offline world are trading forums such as classified ads. 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. and eBay provides added value through its convenience. global trading place for buying and selling personal items in an entertaining auction format. People perceive the auction format to offer better prices. and eBay receives a transaction fee that ranges from 1.A Harvard Business School Case Study. as cited in 'eBay .ebay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 new items joining the "for sale" list every 24 hours69.782 million in January 200068. or the payment for the item .efficient one-to-one trading in an auction format. Auctions represent a platform. 1st October 1999 86 .2 Value Proposition eBay offers consumers an efficient.com) 70 'Meg Whitman at eBay Inc.25% to 5% of the final sale price on any item sold.eBay website (www. and eBay never takes possession of the item being sold. flea markets and auctions. Individuals use eBay to buy and sell items in more than 4.removing the need for inventory. According to Meg Whitman. (A)' .6.
eBay goes live .com to provide automotive service for eBay Users .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .eBay acquires Butterfield & Butterfield. allowing users to create personal homepages .6. Seattle & Tacoma. and in terms of the '7Cs'. Dallas & Fort Worth.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 introduces eBay Magazine in collaboration with Krause Publications. Nashville. Providence. .eBay IPOed raising $58 million .eBay teams up with Carclub.eBay acquires alando. Since eBay cannot control how one person treats another. This raises challenges in how to control and influence the customer experience. Unlike the previous case studies discussed.eBay and First Auction sign a partnership agreement .eBay acquires Blackthorne Software GO.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 .Germany's leading online person-to-person trading site . So brand-building job No. Still the vast majority of our new users come from word-of-mouth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. the eBay customer experience is based on how their customers deal with each other.3 Sources of Value . 1 is have a great customer experience71". and Collecting Just About Anything and eBay for Dummies.eBay acquires Jump Inc. Milwaukee.eBay goes live in Australia . And you only get word-of-mouth if you have a great customer experience. they try to influence customer behaviour by encouraging them to adopt certain values. Norfolk & Virginia Beach.Business Week.eBay and AOL launch co-branded site . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . emphasis is placed on community development and customer care. "the first brand-building strategy that we have is to have a great customer experience.de . and two books -. Selling.eBay goes wireless with Palm VII connected organiser . and raises $700 million .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. and Salt Lake City .eBay expands strategic relationship with Netscape . Las Vegas. The Official eBay Guide to Buying.eBay acquires Kruse International . .S. 21st May 1999 (www.Compaq Computer Corporation and eBay form a strategic U.Launches "My eBay!" to customise the online auction experience . Boston.America Online and eBay announce strategic marketing alliance .businessweek.Com form alliance - 6. co-marketing relationship.The 7Cs Framework According to Meg Whitman.com) 87 .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay and Ultimatebid. and its online trading site (Up4Sale) . as they rarely deal directly with the company.eBay launches local websites in Baltimore & Washington DC.eBay launches 'About Me' feature.
increasing the risk of outages. and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content.6). 88 . Nevertheless. eBay's site has to process thousands of live bids simultaneously. and since.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. FIGURE 6. categorically arranged. Content Content is primarily user generated through the items listed for sale. easy-to-use online service (Figure 6. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. angering hundreds of thousands of eBay users. eBay had a 'wake up call' when the website crashed for 8 hours. eBay has also expanded to accommodate access through wireless devices for added convenience. and adds to the experience and the discovery of the auction process. which is much more demanding on the system. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. they have continually invested in system capacity.6 . Other content includes the banner ads. This contributes to the community feel. topically arranged.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated.
Community eBay attributes much of its success to a strong sense of community among its users. which is posted to the site. e-mail. which is then added to the partner's trading profile.as eBay users refer to themselves . for the people". and is considered by many users as one of the best features on the website.g. 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). To encourage this sense of community. and there are several reports of eBay users vacationing together. the culture has come under strain due to the company's rapid growth from a small community into a "big city". This has created a self-regulating mechanism that encourages good behaviour. and in doing so. has enabled eBay to foster a strong sense of community on its site. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. and share information. In addition. 89 . the community spirit and personal relationships also transcend the online experience.eBay represents more than just a place to buy and sell goods. a monthly newsletter. It is a place where people can meet with similar interests. each user is encouraged to submit feedback through eBay's 'Feedback Forum'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. eBay's community has a distinct culture based on trust. After a sale. bulletin boards. However. discuss topics they care about. working together and helping each other offline. by the people. autonomy. eBay Boston. respect. eBay Salt Lake City) have helped them restore that community feel. Recent initiatives such as the development of local websites in major US cities (e. a "giving-board" for charitable donations to user-identified causes. Whitman describes eBay's community culture as a site "of the people. For many 'eBayers' . empowerment and equality. eBay offers its users category-specific chat rooms.
eBay was able to cost-effectively offer 24x7 customer support early on. answering e-mails and responding to questions posted on the site's bulletin boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. in which the company hired active. but they have other partnerships with over 150 websites of varying scales. This also reinforced the company's respect for. and willingness to empower. which was dedicated to investigating misuses of the system (e.g. This was later expanded to include customer support representatives who worked out of eBay's headquarters. fraud. eBay's approach to customer care has evolved over time. which was dedicated to monitoring the site for illegal and infringing activities. These people worked from their homes. and the introduction of two specialised customer support groups . Customer Care eBay controls neither end of the transaction. links to high traffic sites. geographically dispersed users as customer support representatives. Customer support activities were constantly upgraded and expanded as the business developed.the Community Watch group. As such. During the first two years. 90 . By using its own enthusiastic. eBay employed a "remote" customer support model. the largest of which was with AOL. its user community. and respected members of its own user community to serve as customer support representatives. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. shill bidding) and helping to resolve user-to-user conflicts. Communication eBay maintains close communication with its members. knowledgeable. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. eBay also engaged in marketing partnerships. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. eBay has invested in customer care and support to ensure people conduct safe transactions. and the Safe Harbour group.
eBay has been able to attract a large customer base. The Official eBay Guide to Buying. eBay Magazine. eBay transformed from a pure online play into a 'clicks-and-mortar' company. The AOL partnership was one of the largest strategic partnerships on the Internet . Based on this. Doll Collector) and appearance in trade shows. eBay has since expanded its promotion efforts and engaged in marketing partnerships.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Selling.3 million in advertising. These new publications appeal to the collecting spirit. 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. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. but they have other partnerships with over 150 websites of varying scales. and highlight opportunities created by e-commerce. Through this combination of its advertising efforts and targeted promotions. and maintained the same ratio for 1999. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. representing about 40% of revenues. 91 . eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. they decided to target their marketing efforts on these heavy users. Mary Beth's Beanie World. eBay decided that it would not enter into major portal advertising deals in the short term. and Collecting Just About Anything and eBay for Dummies. Recent promotional initiatives include its new publication. $75 million joint marketing alliance and development deal. they spent $12.6. and facilitate the spread of positive wordof-mouth. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth.g. the largest of which was with AOL. In 1998. As a result. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Early on. who tended to be serious collectors. and two books. as a result of the high quality experience it provides. provide a wealth of information about the 'ins and outs' of trading on eBay.a four-year.
such as the Feedback Form.com) 92 .6. and according to research carried out by eBay. and their first-mover advantage. 6.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'. I think you are not well served by moving incredibly rapidly and not doing things well72". eBay has also faced difficult challenges in scaling the organisation fast enough. This has become part of the eBay culture. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . And while we have to move very. which were all ideas of eBay users. very fast. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. eBay attracts a broader selection of buyers. "the devil in so much of this is in the detail. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. have been key factors that have contributed to the success of the brand.5 Conclusion eBay's compelling value proposition.Business Week. the Personal Shopper and the eBay Life Newsletter. which in turn attracts more sellers . However.the ultimate network effect . their ability to create a new market using Internet technology. as they could not opt for a 'go slow' strategy. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. which has established eBay above other online auction communities. 21st May 1999 (www. however. have been instrumental in building a 'quality' customer base. Their focus on heavy users and targeted promotions.businessweek. and according to Meg Whitman. This is achieved by listening to their community (learning) and developing new improved products and services (relating). As a result.contributing to its strong lead and competitive advantage.
gapkids. 1999 76 Jeanne Jackson. from jeans and T-shirts to khakis and jackets.Business Week. the growth prospects are enormous. standard styles are well suited to online shopping.1 Company Overview Gap opened its first store in San Francisco in 1969. Its reach extends across more than 1. as cited in Lee. Gap started selling items online .com' .com.800 stores in the US. head of Gap Online. Gap Inc. In late 1997. 73 74 Interbrand (www. Germany and Japan.gap. 'Clicks and Mortar at Gap. The Gap offers a balance of modern and seasonal styles of clothing. TABLE 6.com and www. "this is about being clicks-and-mortar. from shirts to accessories and hard-to-find sizes. letting customers access the Gap brands. to provide customers with greater convenience and options. service and value to everyone74". L. surpasses $9 billion in net sales and increase earnings by 54% over previous year. California GapKids opens its first store BabyGap is born Gap opens its online store at www. and BabyGap. America Online (AOL) and Gap Inc.$100 million. According to Jeanne Jackson. L.com is an example of successful crossover marketing. however. Canada.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap online exploits the accessibility and convenience of the Internet. UK.COM . and analysts estimate that sales in 1999 amounted to $50 . and are still relatively small compared to Gap's $9 billion in annual sales.com/about_us.gapinc.htm) 75 Jeanne Jackson. online sales are only available to US customers.interbrand. 6.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. 1999 93 . GapKids."to deliver style.Business Week. and today it is the 29th most valuable brand in the world73. Currently. as cited in Lee.7 CASE STUDY: GAP. up from $20 million in 199875. Inc. Gap. Gap's online sales tripled in 1998 alone. announce multi-year partnership. and Gap online provides access to the full range of items at Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. In addition.COM 6.2 Value Proposition Gap's simple.an early convert to the then-revolutionary idea of clothes retailing on the Internet. This success is largely due to their simple formula . whether in the store or online76".7.'s website (www.com' .TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.babygap.7. October 8. and provides useful insight into how traditional brands can leverage their strength online.see Appendix A Gap. 'Clicks and Mortar at Gap. October 8.com) .
. This personality is reinforced online through the simple structure and layout.com. and easy-to-use.7. making navigation even faster. describes the company's brand personality as "direct and straightforward. 1998 94 . Unlike Barnesandnoble.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. from the blue and white colour scheme to the easy-toshop format . Content.. The Observer..making visual references to its offline roots... Visiting the gap.The 7Cs Framework In terms of the 7Cs framework. April 18. FIGURE 6. feel and design of the site is consistent with the bricks-and-mortar stores. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Michael McCadden.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. reinforcing its brand identity. The site also offers sharp graphics.. Executive Vice President of Global Marketing.com store one immediately notices the consistency between the online and retail stores. very efficient"77.3 Sources of Value . but provides customers with the option of viewing text-only. the extensive integration of Gap's online and offline activities are clearly evident. Gap Online primarily focuses on Convenience. Simple.7 ..very easy. 'Mind the Gap'. making it convenient. and Customer Care.
GapKids. once customers are registered online. Gap. Gap. Unlike the case of Boo. Gap's simple.com also provides a Gift Central feature which offers gift suggestion from Gap.com allows customers to track the status of online purchases and provides contact information on the nearest store. which would not be possible in the store. By doing so. Gap has also developed an affiliate programme. customers can return goods purchased online to their neighbourhood store.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. In addition. twice a month. 95 . Gap made a decision to charge sales tax on online sales.as most Gap online shoppers have a good idea of how Gap clothes fit. Gap communicates with customers through customised e-mails. and BabyGap.com. as well as sample all of the latest shades of fingernail polish on a virtual hand. The Gap site connects to other Gap online stores including GapKids and BabyGap. allowing shoppers to contrast different cuts and styles. promoting its specials and including links directly to items on Gap's website. and had recently established marketing deals with AOL and CDnow. and customers can view their latest TV adverts for buying inspiration. and customers can register to get e-mail reminders of upcoming holidays and birthdays. without causing complications. and goods bought online get returned at the same rate as store purchases . In order to integrate its offline and online operations and logistics. However. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Gap does not provide any community features on its site.com's content consists of detailed information on its full range of products. standard styles are well suited to online clothes shopping.
shop. either online or in stores. • Gap. billboards. providing a useful way to directly reach customers.com has also created an affiliate programme encouraging sites to establish links to gap. on shopping bags and even on the cash register.7. In certain high traffic Gap and GapKids stores.ship". by offering a 10% discount and free shipping on their first online purchase. Gap secured a 3-year commerce and marketing agreement with AOL.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. or to refer shoppers to Gap's website. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. Gap has also supplemented this with online promotions: • In August 1999. they send the customer a $20 Gap ShopCard.Extensive Integration Gap. To convert walk-in shoppers to cybershoppers.com has been able to piggy-back on The Gap's offline advertisements (in TV. • Gap. which can be used towards future purchases. however. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.gap.gap. etc. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.) that also promote the online store. Gap has held in-store campaigns to get customers to submit their e-mail addresses. which displays "Shop online at www. In addition. by displaying the URL (www.com" on the display screens between transactions. • They offer Online discounts and promotions such as the ShopCard.com has links with CDnow to cross promote websites.com) in store windows with the slogan "surf. on counter cards. it is fully leveraging its offline presence to build awareness.4 Brand-Building Strategy .com. These efforts doubled the size of Gap's e-mail database. 96 . Most of Gap's online traffic is generated by leveraging its physical presence. whereby for every $100 a customer spends at Gap Online.com in return for a 5% commission on every sale referred through the site. Magazines.
A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. Gap had a significant advantage over pure online players in attracting customers and building critical mass. whereas established companies. and can also provide access to different customer segments who may not usually buy the products at all .7. By aggressively marketing both the stores and the website. and allowing each to leverage the strengths of the other. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. provides existing customers with added value through the convenience of purchasing online.thereby increasing the company's reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. thereby reinforcing its brand identity. Pure online players have to invest heavily in logistics. 97 .com is an example of successful crossover marketing. such as Gap. on the other hand. Gap has been able to significantly strengthen their brand-customer relationship. have already established the back-end operations and can use them as the cornerstone of their online business. The Internet. while reaping the benefits of low customer acquisition costs and extended reach.5 Conclusion Gap. With their brand awareness and network of retail outlets.
two Ph. The company's global web network includes 23 world properties outside the US.8 CASE STUDY: YAHOO! 6. The concept exploded (through word-of-mouth) and in less than six months.businessweek.com) .8. who started an online guide as a way to keep track of their personal interests on the Internet. the amount of information. household and business user reach. advertising.interbrand.Business Week.see Appendix A 'Yahoo! . According to Timothy Koogle. 1998 (www. and the number of websites continues to explode. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.1 Company Overview In April 1994. Yahoo! was founded by David Filo and Jerry Yang. and is one of the few Internet companies to turn a profit early in the development of the Internet.8.The Company. The Strategy. There's nothing in the real world to compare to that79". The Stock' . Yahoo! is a leading guide in terms of traffic. 78 79 Interbrand (www. lies the directory .a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.2 Value Proposition At the core of Yahoo!'s value proposition. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. As such. Yahoo! offers a range of supporting services that add value. from e-mail services to stock quotes and much more. the site was receiving 1 million hits per day. Yahoo! has since morphed from an ordinary search service into a global Internet communications. all in a single location.com) 98 . 6. September 7. As the first online navigational guide to the web. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. CEO of Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.D students at Stanford University.
.com allowing them to offer person-person payment solutions .The 7Cs Framework Convenience Central to Yahoo!'s success.Receives $1 million in venture capital funding from Sequoia Capital $33. Their goal is not to list everything under the sun. mobiles.000 shares at $13.Site goes live September . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.e.600. to allow access. Yahoo! extended its convenience through its Yahoo! Everywhere service.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Yahoo! forms agreements with Palm Inc. More recently. regardless of platform (i. Palm computers).8. 99 . is the way it has structured and displayed information. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.7 YAHOO! . and unveils Yahoo! Digital Introduces Bill Payment services .com.3 Sources of Value .8).TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! acquires eGroups .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 . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! Shopping launches personalised shopping service 6.8 million IPO (2.Yahoo! Launches Business-to-Business Marketplace .Yahoo! unveils Yahoo! Finance Vision . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. TVs.Yahoo! acquires Arthas. . to provide web-based services to PalmTM handheld computers .
Their thrust has been to provide valuable content to customers. 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 . easy-touse. and more importantly. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. By tailoring the information to users' preferences. and is similar to a custom tailored newspaper (Figure 6. This creates a win-win situation as its satisfies Yahoo!. ranging from daily news and weather reports to road maps and books. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and has been at the heart of Yahoo!'s growth and development. from stocks and sports results to weather and air fares.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. 100 . the partner. well structured. the end-user. while providing partners access to a large customer base. Yahoo! has increased customer loyalty and retention rates.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9). They have formed multiple alliances and partnerships with leading online companies such as Amazon.com and CDnow.
fax. It keeps customers on the site for longer periods.9 . one-to-many. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. message boards. and is driving Yahoo!'s multiple partnerships and alliances.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Connectivity Connectivity is Yahoo!'s core product. to provide its customer base with access to useful links and content. and plans to incorporate other features such as online chat to facilitate communications. or to make it their home page. and many-to-many. telephone and even traditional mail. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and contributing to their reputation as a quality service provider. and encourages them to return frequently. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. Yahoo! spends more on customer support than most companies. Yahoo! acquired GeoCities. In 1999. where groups of people with shared interests can communicate through chat. reinforcing the brandcustomer relationship. In addition. 101 . Customer Care Yahoo! responds to customer inquiries via e-mail. and the nature of the navigation business.
At the time this was considered a breakthrough. In 1996. Yahoo! would be one of the first sites that they visited. This was especially important. As a result. Yahoo! extended beyond this to use traditional offline media. and it formed a critical link in Yahoo!'s brandbuilding strategy. and its implications of a good time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. and through communications via email. While Internet companies were targeting existing Internet users through the use of online promotion methods. (www. Yahoo!'s brand-building success starts with its name. 82% of Internet users and 23% of people intending to go online. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . an approachable nature. TV commercials and radio spots during drive time. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?".8. which conveyed the brand's irreverent personality. 6.people who are not yet online but are likely to use the Internet in the near future. and according to Intelliquest80. Intelliquest. Yahoo! avoided characterising itself as a technology-oriented company. by building a recognised brand name. as experience surfers tend to be loyal to their search engine. Yahoo! aggressively promoted the site through public relations. 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. Given the unease with which the average consumer approaches technology.com) 102 . Yahoo! also encourages customers to e-mail ideas and feedback.4 Brand-Building Strategy Yahoo! is a marketing machine. Their strategy was to target "near surfers" . These near surfers represented (and still do) a large and fast growing group and. Yahoo! maintains close contact with customers. and an inherent friendliness.intelliquest. therefore.a sense of irreverence. recognise the name Yahoo!. 80 'Web Survey Shows Yahoo! Tops'.
services and contests with well known brands such as Ben & Jerry's. and yo-yos. and 76% turned to Yahoo! before visiting another search engine or navigational site. According to a recent study.Yahoo! Press Release. VP-Brand Marketing. it's too late. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . In addition. Their innovation. breath mints. a monthly magazine guide to what's new on the web and it has co-branded products.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. organisers. Yahoo! has paid little for this exposure.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . new services and customised features highlight their ability to relate to customers' needs. They even have a barter deal with the San Francisco 49ers.it must reinforce the image of the company as 'a service that is fun. T-shirts. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. According to Karen Edwards. Yahoo! has managed to cultivate high brand loyalty. stating that "if we wait to hear about it in the news.higher than all other services81. Visa and MCI. including backpacks. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test .Advertising Age. which has been instrumental in establishing Yahoo! as a household name. May 3. parachutes. sailboats. Yahoo! adopted 'guerrilla marketing' techniques . p. They also teamed up with publisher Ziff-Davis Co. ER) and Hollywood movies. the research shows that 73% of Yahoo! users bookmark the service . to create Yahoo! Internet Life. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. 1999. a little wacky and inviting'. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. customers quickly discover its value and through a high quality experience (7Cs). We need to be one step ahead in order to have a better service than our competition82". Once customers access the site. 1997 (www.with its name being plastered on everything.yahoo. August 26. Although this seems like a shotgun approach. s4 103 . snowboards. as well as TV shows (Ally McBeal.
6 Conclusion Yahoo! is one of the most successful brands on the Internet. In addition. first to go public. its excellent customer service. In addition. As the first online navigational guide to the web. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. To maintain its lead. to its simple design. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! has invested relentlessly in new services and marketing programmes. Yahoo! has benefited from a first-mover advantage. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. they have carried out extensive partnering. GoTo. its choice of partners. 6. and other search engines at the bottom of its search results page).Advertising Age. and its openness (for example. VPBrand Marketing of Yahoo!.8. and has cultivated a reputation for excellence. May 3. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. have created a distinct brand identity that differentiates the brand and appeals to its target market.8. and first to go mainstream by advertising its name using traditional media. Yahoo! has built a strong brand. while also associating Yahoo! with well known brands. their innovative promotional and guerrilla marketing techniques. These relationships have provided end-users with added-value. that have set it apart from the pack. Yahoo! points them to its competitors by including links to AltaVista. alliances and acquisitions to provide added value services to their customers. They have maintained that lead through the creation of a high quality end-to-end customer experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com. p. As a result of all these factors. 1999. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". first to turn around an annual profit. HotBot. with a large customer base and high levels of customer loyalty. from its convenient and logical structure and display of information. s4 104 . while attracting new customers.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. if a user cannot find what it is searching for.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
In addition. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. and convenience. a company can leverage the partner's brand and reputation to reinforce its own. particularly to secure content and widen reach to new customer segments and niches. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. these companies must have an inherent understanding of their brand identity and core values. but also provide added value to the brand community. to maintain consistency. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. content. whereby each party benefits from the other's expertise or skills. ranging from online methods to traditional offline media. variety. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. integrated customer acquisition strategies. The most successful partnerships are symbiotic matches. and exclusive alliances can lock out competitors from valuable content or online real estate. leading brands have focused on building strong partnerships and alliances. Alliances and partnerships play an important role in achieving speed and momentum. 108 . to distinguish themselves from competitors. By distinguishing their offering and focusing on unique sources of value-added. these companies are creating even stronger value propositions. offering customers the best in quality. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. before it fractures. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. As a result. and by partnering with well-known brands. as well as determine how far the brand can be meaningfully stretched to other products and market segments. while ultimately benefiting the end-customers. brands are harder for competitors to emulate.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.
and by focusing on customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. customisation and customer care. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. As Internet penetration exploded. A first-mover advantage is an important asset for an online brand. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and are continuously adding new services and functionality to their sites. By getting to market early. that comes with innovation. by providing better services. through past transactions and solicited input. and it aligns itself with the most influential venture capital sources. and benefited from additional hype. and traffic. and develop a detailed understanding of their customers' needs. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. Many strong online brands were also early-movers on the Internet. The challenge then lies in keeping up the momentum. 109 . are leveraging this customer knowledge (learning) to nurture relationships (relate). these well-publicised brands also took off. and extensive word-of-mouth due to its novelty. These brands are accumulating knowledge about customers. giving the brand an edge. to create new services and content that satisfy customer needs. the innovations are the result of the company's ability to data mine its vast database of customer information. these innovations are difficult for competitors to reproduce. the company benefits from the buzz. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. By leveraging unique customer information. It locks up important content and distribution partnerships. and it can acquire customers while it is still inexpensive to do so. and differentiating it from other brands. In many cases.
ongoing research would be necessary to build on the findings of this dissertation. but at the same time. They possess critical assets that give them an advantage over pure online start-ups. drawing on several case studies from business markets. They have an established brand. would represent an exciting opportunity for further research. clicks-andmortar brands are providing customers with true added-value. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers.value remains (and always will) the basic building block for every successful brand. while reaping the benefits of lower customer acquisition costs and extended reach. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. In doing so.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. one component remains unchanged . Through extensive and seamless integration. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour.factors that clearly differentiate them from pure players. Therefore. Having established a strategic perspective on building online brands. Nevertheless. however. with the emergence of wireless access and new platforms. building relationships and satisfying needs. The Internet has radically changed the business and competitive environments. In addition.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. an in-depth analysis. there has been a limited time horizon to evaluate the durability of Internet brands. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. Yet while everything is being turned upside down. established fulfilment systems and infrastructure. Nevertheless. the concepts. and a physical presence (tangibility) . tools and key factors outlined in this dissertation are also applicable to business markets. established customer relationships. they are equally important in business markets. Brands and brand-building tools tend to be associated with consumer markets. 110 . expand the brand experience to meet customers' expectations in the online world. 7. As such.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
595 17.423 2.781 33.197 32.275 30.319 1.132 15.283 4.643 3.262 1.568 3.694 17.602 4.603 5.792 3.654 43.143 2.101 9.Interbrand's Ranking of the Top 60 Brands (www.310 11.184 1.766 14.761 1.681 2.464 3.909 7.225 11.502 33.076 3.155 7.231 12.550 12.interbrand.329 4.313 2.781 17.281 11.985 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.231 24.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .048 20.422 1.648 1.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) 83.804 2.806 11.806 2.021 26.181 21.147 9.596 3.404 4.894 14.895 2.527 3.932 4.510 8.634 1.043 8.845 56.361 1.193 112 .830 14.052 6.
customer empowerment. the informal management style and the constant strategy re-calibration. commit and deploy resources. activities. all their operations. However. As such.. It is critical that all these dimensions come together and are re-enforcing. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. T. R. constantly innovate. Internet companies must be able to move at warp-speed. As a result. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. and reorganise as appropriate. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. global competition. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . 1982 113 . whereas entrepreneurial Internet companies must focus on 'managing for change'. respond to competitive and market dynamics. and structures are aligned differently. & Waterman. showing how they are interrelated. and the emergence of a knowledgebased economy. and as the business environment changes. 'In Search of Excellence'. with the fast pace of technological change. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. all these dimensions must change accordingly. They must move quickly to capture new opportunities.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. * Peters. (Harper & Row).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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