1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


The 7Cs Framework 6.6.4 Brand-Building Strategy 6.3 Sources of Value .4 Brand-Building Strategy 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6.2 Value Proposition 6.com 6.7.5 Conclusion Case Study: Gap.7.The Failure of Boo.8.3 Sources of Value .4.3 Sources of Value .4 Brand-Building Strategy 6.2 Value Proposition 6.2 Value Proposition 6.8.4 6.1 Company Overview Conclusion Case Study: Yahoo! Conclusion Case Study: eBay 6.5.1 Company Overview 6.4 Brand-Building Strategy .1 Company Overview 6.5 Other Factors That Contribute to their Brand Leadership 6.3 Sources of Value .5.5.The 7Cs Framework 6.4.com Case Study: Boo.7.7 6.1 Company Overview 6.2 Value Proposition 6.2 Value Proposition 6.8.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.4.1 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 .5 6.5 Other Factors that Contribute to their Brand Leadership 6.6 6.4.The 7Cs Framework 6.1 Company Overview 6.Extensive Integration 6.1 7.5 Conclusion Case Study: CDnow 6.4 Brand-Building Strategy 6.1.The 7Cs Framework Sources of Value .7.5.5.com 6.

4 Figure 2.9 Figure 6.1 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 .1 Figure 3.3 Figure 6.9 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 .8 Figure 5.com's Associates Programme Overview of BarnesandNoble.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.4 Figure 6.8 Figure 6.7 Figure 5.7 Figure 6.5 Figure 2.5 Figure 6.4 Figure 5.2 Figure 6.3 Figure 4.6 Figure 6.2 Figure 3.3 Figure 5.8 Figure 3.5 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 1.4 Figure 4.3 Figure 3.com's Website Amazon.7 Figure 5.2 Figure 4.3 Figure 2.1 Figure 2.2 Figure 2.1 Figure 5.4 Figure 4.6 Figure 5.6 Figure 4.com's Website Overview of Boo.2 Figure 5.2 Figure 2.5 Figure 4.7 Figure 2.6 Figure 2.1 Figure 4.

1 Table 6.6 Table 6.2 Table 6.com .1 Table 6.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Gap.3 Table 6.4 Table 6.7 The Emerging Brand-Building Environment Amazon.com .com .Timeline and Major Milestones Boo.Timeline and Major Milestones CDnow .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones eBay .Timeline and Major Milestones Yahoo! .5 Table 6.


g.9 3. relationships. that these Internet start-ups have achieved. customer affiliation and level of sales. whereas it has taken decades for traditional companies to achieve the client base. as they face each other through an electronic connection. there has been an explosion in the online world . products and services reconfigured.5 million book titles).com) 7 . Figure 1.mckinseyquarterly. In the midst of this. FIGURE 1.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com1 Amazon. Amazon.com's range of 4.com noble.1 3.com.com Source: Securities and Exchange Commission Filings.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.5 2.YEARS TO REACH $100 MILLION IN SALES 6 5.9 2. It is empowering customers with more options and more information to make informed decisions.2 3. Amazon.1 . and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. As such. This is creating new challenges and opportunities.1 OVERVIEW Over the past few years. and is triggering the need for new brand-building strategies and tools.0 1. the Internet is changing fundamentals about customers. creating strong brands that are putting established brands at risk.an explosion that is also a harbinger of how business will operate in the future. America Online (AOL) and eBay have been able to build powerful brands in a few years. service and brands. interaction and relationship building. McKinsey Analysis (www. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. and business models revamped. Supply chains are being rethought.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Internet companies such as Yahoo!.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. while providing new tools for promotion. The Internet also represents a fundamental shift in how buyers and sellers interact. aggressive Internet start-ups have emerged.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. As such.

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

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

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 and Gap. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. however. as well as a recent Internet failure (Boo. Hypothesis (Framework): This is based on the literature review and secondary data. relationship management. certain key factors are highlighted in their relevance to the dissertation. and factors that contribute to a brand's success. nor desire.com). These are further refined using the insight obtained through the case studies. Consequently.com). Conclusion: Discusses the key findings and areas for further research. CDnow. The combination of cases provides a useful and practical insight into brand-building issues and problems. 10 . strategy and economics. 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. there is more work in popular rather than academic literature. While there is no attempt. 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. and is used to provide insight into some of the factors that contribute to the development of successful brands. marketing. eBay and Yahoo!).com. the literature review draws on leading academic thinking in more established areas such as brand management. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble.

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


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

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

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

16 .4).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Through gathering information.. Implementation. Consumers develop a set of brand beliefs about the attributes of competing brands. Planning.. Consumers differ as to which product / service attributes they see as important. P.3). This can be triggered by internal or external stimuli (advertisements). and pay the most attention to the brands that will deliver the sought benefits. The buying process consists of five stages (Figure 2. 1996.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. it is important to clarify customers' underlying buying behaviour and the buying process. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. and the effect of selective perception. and selective retention. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). and Control'. either through heightened attention or through an active information search. two factors can intervene between the purchase intention and the purchase decision . However. (Europe: Prentice-Hall) 8th Ed.Analysis. Once aroused. the consumer learns about competing brands.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. 'Marketing Management . p. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.194 The process starts when the buyer recognises a need. selective distortion. it is critical to understand what attributes consumers value. FIGURE 2. Therefore. a consumer will be inclined to search for more information.3 .attitudes of others and unexpected situational factors (Figure 2. These beliefs depend on their previous experiences with the brand. In the evaluation stage.

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

.Figure 2. 'Why Satisfied Customers Defect' ..customers who are satisfied and loyal and talk favourably about the brand . Marketing Management. W.. M. Saturn.. Southwest Airlines and Xerox7. T.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6..Harvard Business Review. Customers that are passionately or emotionally loyal are those that have built trust in a company. E. Nov-Dec 1995.Harvard Business Review. Spring 1999 18 . 91 Loyalty is derived when customers are continuously satisfied over time. E. At the opposite end of the satisfaction spectrum are "apostles" . Nov-Dec 1995 Hart.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.5 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. & Sasser. FIGURE 2. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. 'Why Satisfied Customers Defect' . Johnson & Johnson. Hewlett-Packard. & Sasser. 6 7 Jones.those who actively attack the brand telling others not to buy from the company. The customers at the bottom end of the scale are "terrorists" . Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. and Johnson. D. C. p. Federal Express. 'Growing the Trust Relationship'. This satisfaction encompasses the whole experience and not just a company's products or services. and believe that it will always act in their best interest. T. Trust is critical for a brand's success.5.

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

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

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

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

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


1 INTRODUCTION Building a strong brand is a complex task.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . which are created through advertising. promotion. FIGURE 3. public relations. If the offering is developed properly. This is illustrated in Figure 3. This chapter spells out the traditional brandbuilding process. selling.1. the next step is to get customers to try the brand. The major characteristics of successful brands are also reviewed.1 . To entice trial and repeat purchase requires triggering mechanisms. brand awareness. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. confidence and brand equity are built. and keep it turning.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. highlighting important factors that contribute to the success of each step along the way. 3. Once this has been established. and direct marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. it should provide a satisfactory experience and lead to a willingness to buy again.

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

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

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

Finally. structure and ease of use). Secondly. advertising. 'Strategic Brand Management'. (New York: Free Press). 29 . it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. J.how far the brand can be meaningfully stretched to other products and market segments.3 . its strengths and opportunities..g. and through line and brand extensions. 1992 The brand prism enables management to understand the brand. 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. website design. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.

(New York: Free Press). management style. The value proposition must then be articulated in terms of the 'marketing mix' . • Adoption . Advertising and PR are common tools for achieving awareness. pp. features and advantages. 1962. systems. The value proposition must be communicated to entice customers to try the product / service. deliver and reinforce this value proposition (see Appendix B .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.79-86 30 .The company has to create awareness of the brand. it should lead to satisfaction and re-purchase.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.Customers need to be stimulated to seek information about the brand's uses. the company must ensure that it develops the appropriate structure.79-86 The Innovation-Adoption Model consists of: • Awareness .The customer is satisfied and decides to make regular use of the product / service. skills. and the product / service's perceived performance.4 .Figure 3. culture and staff needed to support. • Trial . • Evaluation . E. they must learn about it. Personal sources such as word-of-mouth from friends. colleagues and opinion leaders become important influences at this stage. E. pp. strategy (partnerships and alliances).often referred to as the '4Ps' . and its products / services.Product and service features. Before potential customers can buy a product / service..Customers consider whether the product / service will meet their particular needs.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. Promotion and Place (distribution strategy).4. If the offering is developed properly. 'Diffusion of Innovations'. (New York: Free Press). This learning is called the adoption process17 .The McKinsey 7-S Framework). FIGURE 3. 1962.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 'Diffusion of Innovations'.. Price. • Interest . 17 Rogers.

• Structural Ties . encouraging evaluation and trial. 18 Berry.for example. & loyalty / discount cards. providing insight into customers' needs and wants. In this way. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . 1991. & Parasuraman. 3.136-142 31 . Customer service is an important element of this relationship.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. while strengthening the position and value of the brand. (New York: Free Press). multi-transaction relationship. but enhanced customer interaction through relationship building. this process enables an exchange of information. This information is a key competitive advantage. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. This focuses on establishing a longterm. 'Marketing Services: Competing Through Quality'. A.g.advertising. L. direct marketing. companies can increase the value of each customer.such as airline frequent flyer programmes. personal selling and public relations / publicity . Internet linkages. companies have used the tools of the promotions mix .. software) to help customers interact with the company. sales promotion.to move customers through the adoption process. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. making them less likely to switch to a competitor. Social Benefits .5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. Over time. Through building relationships with customers. This is often referred to as Customer Relationship Management (CRM). companies can increase buyers' satisfaction. when each trusts the other to deal fairly and reliably. allowing companies to communicate regularly with their customers and customise their interaction. pp. Advertising and public relations can be effective in generating awareness and interest. the company may supply customers with special equipment or tools (e.

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


news groups and mailing lists. creating new challenges and opportunities. 4.1 INTRODUCTION The Internet is transforming the business environment. and the 'world wide web' (www) . E-MAIL Is the part of the Internet that most users use at present. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.Figure 4. and a critical source of added value. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. Hypertext allows information to be organised in a user-friendly way that is easily accessible.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.1.1 . In essence. it offers a number of alternative channels that enable businesses and people to communicate. Information is becoming a major part of the products and services that people buy. This chapter provides an overview of the Internet and its defining characteristics. which contain hypertext and pictures. 34 . and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. The three core channels include e-mail (the most common). FIGURE 4. and provides the opportunity for dynamic interaction. but in practice not in real time. In doing so. it is a common technology platform that allows computing devices to communicate with each other.

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

1996 (www. 1998.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.2 .a PricewaterhouseCoopers Report.000 1969: 10. as cited in 'E-Business Technology Forecast' .000 1.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000.3.000 100.000.economist. 2000 Internet / ARPAnet was created Dell. FIGURE 4.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.com) 36 .000.000 10. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. 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.Figure 4.000 1.

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

reveals the wide range of areas where people are embracing the Internet .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. chat rooms. These activities highlight the adoption of the Internet as an interactive.from communicating (90% use e-mail) and sourcing information.com) 38 .Figure 4.5 . 2000 (www. April 13. as cited in the Economist Intelligence Unit (EIU). FIGURE 4.5.g. entertainment) and purchasing (37%) .eiu. communication and information tool.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). to interacting (e.

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

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

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

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

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


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

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

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

as illustrated in Figure 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. businesses and online communities that rely on connectivity can enjoy 'network effects'. R. As a result. where the value of the network. each additional unit sold does not cost more than the last to deliver. FIGURE 5. 'Positive Economics'. additional products.. Similarly. Even more important. as the benefits of scale are overwhelmed by the disadvantages of size31. this is not the case on the Internet.1.. However. (London: Harper & Row). pp. additional customers and transactions can be managed with limited fixed cost investment. 180-182 48 . increases disproportionately as more people join the network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Once the up-front investments are made (for research and development and technology infrastructure).1 . and other features can be added or changed at low marginal cost. and in the case of information-based products. 1989. the costs approach zero32. 7th Ed. G.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. and the value that each member realises. (also referred to as 'viral economics'). customisation for individual customers.

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

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

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

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

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

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

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

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

. McKinsey Quarterly. McQuade. Trial.Attract. e-mail notifications and banner advertisements. This model consists of five stages . Adoption). The popularity and effectiveness of the different promotion methods are outlined in Figure 5. pp. Newspapers.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski. billboards.. because there is no physical presence. 180-183 (www.8. This is more difficult online than offline. Magazines. No.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.4 . & Zeisser. FIGURE 5.. modified to take into account of the interactive dynamics of the Internet. The company must build awareness and communicate its value proposition to its target customers. etc. Figure 3. Evaluation. including affiliate programmes with other websites. The mechanisms to communicate range from traditional media (TV.) to online tools. visibility relies solely on Communication.Awareness. links from directory searches (Connectivity). Waitman. Retain. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. 'Marketing to the Digital Consumer'.2.7 .. S. M. Learn and Relate.7. Engage.mckinseyquarterly. Interest. A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 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 ’ . 1996. and bring people to the site for the first time. R. Therefore.

1 3. Fig.5 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 Source: Forrester Research.com) The most effective methods are direct e-mail. Creativity is also an important factor in gaining attention in today's cluttered marketplace.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .4 4. 58 .6 3. 3. public relations and television advertising.3 3.2 4.3 2.3) is useful to ensure that a company develops a distinct and consistent brand identity. Companies then need to engage customers to obtain their interest and participation.WEBSITE PROMOTION METHODS . discounted over the expected duration of the brand-customer relationship. Attracting customers is only the first step in building online brands. Engage With the multitude of choice available on the Internet.4 3.7 4. as cited in 'Targeting Consumers via the Internet' .8 4.Economist Intelligence Unit 2000 (www. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. Kapferer's Brand Prism (Ch.8 . 3.5) 2. multiplied by the expected rate of transactions. it is important to quickly engage consumers' interest before they move on.0 3. affiliate programmes.4 3.ebusinessforum. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. The key factors at this stage are Convenience combined with interesting Content.

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

• Brand-building favours products that can be sold online.. However. The interactive brand-building process involves attracting. smell). pp.. M. it is not economically feasible to sell certain products. providing further added value. to its delivery to the customer.. These case studies provide a practical insight into how companies are building their online brands.mckinseyquarterly. & Zeisser.9 . it is critical for companies to build relationships and foster brand loyalty. 5.2. touch.. McQuade. 180-183 (www. S.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. especially in small quantities. No. engaging and retaining customers. 1996. companies must provide a satisfying end-to-end customer experience . due to high delivery and transaction costs (relative to the value of the product). McKinsey Quarterly. and the need to stimulate the other senses (taste. The next chapter analyses the brand-building efforts of seven companies.9 CONCLUSION On the Internet. the experience is the brand.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Given the high acquisition costs of online customers. R. and as the relationship develops. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. 'Marketing to the Digital Consumer'.from the promises made in the value proposition. the interaction provides the ability for companies to learn from their customers and relate. Waitman. In order to create "apostles". 60 . A.


com. Amazon has cultivated a reputation for excellence. Amazon serves over 23 million customers from 160 countries.see Appendix A. including: increased selection.It's an Ocean. 1999 49 'Amazon's Amazing Ambition' . 6. and one of the top two or three in Britain. In addition. and higher levels of customisation and service than the traditional shopping experience allows.1 Company Overview Amazon. 2000 (www. Gap. Not a River' .2. Each case is presented in the same format including. Amazon.Amazon. Amazon. It is the 57th most valuable brand in the world47. Amazon provides increased added value on several dimensions. In addition.com launched with a mission to use the Internet to transform book buying into a fast. Boo.com) 62 .2.1 outlines Amazon's timeline and major milestones.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Amazon has been able to differentiate itself from other online competitors. it is the most visited e-commerce website in America.interbrand.2 Value Proposition Amazon.com and Yahoo!. its brand-building strategy (how it generates traffic). The cases are presented in the following sequence .The Economist. November 11.2 CASE STUDY: AMAZON. Barnesandnoble. combined with its levels of customisation and customer service. easy. and other key factors that have contributed to its success (or failure). its value proposition.com's success stems from its compelling value proposition.1 INTRODUCTION This chapter provides an analysis of seven companies.com . the sources of added value (using the 7Cs Framework). greater convenience. Through its provision of a one-stop shopping experience. Figure 6. 'Amazon. innovation and delivering on its promises.com has become synonymous with e-commerce.Goldman Sachs Report. a company overview.economist.com. 6. France. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). more information. and enjoyable experience. In July 1995.com) . February 26.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. and has equity investments in several e-tailers. Germany and Japan49.COM 6.com. CDnow. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). and has sales of over $2 billion. eBay. and is one of the few Internet brands that is recognised all over the world. discounted prices. 47 48 Interbrand (www.

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

Content Amazon provides content on several levels. gift reminders. FIGURE 6. offering multiple paths to a given book or product. wish lists. and quick-to-load pages Over time. This is an example of 64 . interviews with authors.1 . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. customer testimonials.com Anywhere to support access from wireless devices (i. such as the Amazon. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. recommendations.1.2. encourage repeat visits and drive higher conversion rates.Figure 6. and Amazon. gift click.OVERVIEW OF AMAZON.com All Product search (searches the entire web).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. the 1-ClickTM express checkout. expert reviews.3 Sources of Value . mobile phones.e. downloads quickly and services visitors adequately . and customer Purchase CirclesTM. logically structured. discussion boards.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. live or study. Palm VII PDA device).The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. including book jacket images. The site is easy-to-use. easy-to-use. Amazon has added other features for shopping convenience. book summaries.

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

As a result of all these factors (7Cs). Instead of paying directly for this exposure. attracting member sites of all sizes. enticing them to return to the site and purchase repeatedly. and not subsequent purchases. This enabled Amazon to reach more customer segments and niches (Figure 6. increasing to over 500.000 members. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Through the first half of 1996. and by 1999 it had over 200. Once orders are placed. In July 1996. Newsweek. they are subsequently confirmed by e-mail. Business Week. The Associates Programme has been phenomenally successful. The Financial Times.000 by August 2000. 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.2. 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. Eyes and Editors. 6. which only applied to sales that resulted from the initial click-through. New Yorker and The Economist. help maintain contact and build traffic by e-mailing customers when desired products or books become available. it began to advertise in print media and online . and customers are also e-mailed when the items are shipped from the warehouse. In the second half of 1996.com hot-link and offer specific books of interest to their visitors.2). Amazon offered Associates referral fees of up to 15%. 66 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. two personalised services. In addition.a move that along with the novelty of its business model and the newness of the Internet.

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

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

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

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

com is the fourth largest e-commerce retailer54.2. Besides books.Barnes & Noble University opens registration for free online courses .Launches Internet Radio . and 470 B. rare.Acquires minority stake in NotHarvard.com) .com provides other online categories offering software.Barnes & Noble. However. Barnes & Noble Inc.3.Barnesandnoble. all front-end operations (marketing. etc. Dalton bookstores (located in shopping malls).TIMELINE AND MAJOR MILESTONES .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. Inc.com launched its website (www. magazines. prints & posters and related products.Acquires equity stake in Mightwords . music.Barnes & Noble went online at AOL May .com announces strategic relationship with Palm Computing .com is approximately 40% owned by Barnes & Noble.Launches Video Store 71 . promotion) between the online store and the retail stores have been kept separate.com's timeline and major milestones is outlined in Figure 6.Launches Affiliate Network December .barnesandnoble. Barnesandnoble. as it could capitalise on the infrastructure and back-end operations (warehouses.com and Microsoft announce that they will create an eBook superstore . and is the second largest online bookseller (after Amazon. Barnesandnoble. 40% owned by Bertelsmann AG.Launches BNTV . Barnesandnoble. contacts.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.) established by its parent company.com was able to 'hit the ground running'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. Barnes & Noble Inc. book databases.2 1997 January BARNESANDNOBLE. Launched in 1997.Barnesandnoble.COM 6.Offers same day delivery in Manhatten . TABLE 6. is one of the best known traditional booksellers in the United States.Announces distribution relationship with New York Times September .com .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . and 20% owned by the public.3 CASE STUDY: BARNESANDNOBLE. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).COM . Currently.com). Barnesandnoble.1 Company Overview Barnesandnoble.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon..

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

1 billion.com had over 17 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . 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. Barnesandnoble.com.4 Brand-Building Strategy Barnesandnoble. December 17. it lags behind first-mover Amazon. and Barnes & Noble Inc. Webcrawler. this programme had more than 300. Barnesandnoble.com in return for a commission on any purchases that they originated .6 million. Both offer customisation that permits users to personalise the experience. As of February 2000.com closed 1999 with 4 million customers.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Both try to foster a community of readers by letting customers post reviews online. They have developed an affiliate programme that links sites to Barnesandnoble. has yet to leverage its strong brand in cyberspace. Netscape and Microsoft Network.com's $1.a replica of Amazon's Associates Programme. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com was valued at $21. and both are expanding globally.The Wall Street Journal. Lycos. Both offer 'associate programmes' that let other websites link to their sites.000 affiliates in its referral network. Barnesandnoble. while Amazon. reasons for this are explained in the next section. Although. However. and avoid charging sales tax in states where it has stores56. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . Barnesandnoble. prevent cannibalisation of its existing business.3. The 6. however. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. compared to Amazon. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). while Amazon.64 billion. Instead. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com has created a high quality website and customer experience.com's market capitalisation was $251 million.com's 1999 revenues were $202. These initiatives have generated traffic to the site. Yahoo!.

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

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

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


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


Miss Boo

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



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

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

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



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

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


a valuable and rewarding experience"63.Raises $10 million through private placement . CDnow is the leading online music store. 'How to Acquire Customers on the Web' . pp. features. and they aim to "make every visit to the site. whether for browsing or buying..179-188 63 CDnow website (www.000 music related items . TABLE 6. & Novak. $18. former arch rival .000 music-related products and 650.TIMELINE AND MAJOR MILESTONES . CDnow is also driving the digital distribution of music.Site goes live .Merges with N2K. On 19th July 2000. CDnow provides access to over 500.1 Company Overview Founded in 1994.Harvard Business Review. guides to music genres.5 million distribution deal with Lycos Signs three-year.ten times the selection of a conventional bricks-and-mortar music store).5 CASE STUDY: CDNOW 6. D.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. $22. It has a customer base of 4 million people. daily music news.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as well as music reviews.com) 80 .Partnership program with Geffen Records .5. May-June 2000. convenience.CDnow and Time Inc. by twin brothers Jason and Matt Olim.cdnow. and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow was acquired by Bertelsmann AG. announce marketing alliance .5.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . cover art.000 people.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. 62 Hoffman.Launches merged CDnow/N2K site .Merges with Columbia Records .Forges distribution partnership with Yahoo! $65. and one of the most popular shopping sites on the Internet62.000 sound samples.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. and was the first site to offer the sale of music downloads and custom CDs. good prices. T.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . This unprecedented degree of access to music and information is the core of CDnow's value proposition. customisation and a wealth of information and content to help in the purchase decision. and an average daily audience of over 800.

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

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

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

word-of-mouth accounts for the lion's share of CDnow's customers.com/cdnow.they were the first site to offer the sale of music downloads and custom CDs. In fact. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . and to increases in the customer base of more than 30% quarter-to-quarter. both in the online and offline worlds.As for many successful online retailers. and scaled it awareness-building efforts.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . Public relations efforts helped to generate word of mouth and influence sales.Hampel & Stefanides (www. 6. as a way to fuel very lucrative word of mouth. with 44% of sales coming from new customers65.Press Release. • Word-of-Mouth . 1998 .4 million).CDnow made public relations a high priority brand-building tool. CDnow's promotion strategies have attracted high levels of traffic. The company continually pushed for new distribution partnerships to widen its sphere of influence. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.hsny. resulting in increased conversion rates.com) 65 'Pioneering in Cyberspace' .htm) 84 . and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. It is constantly adding new functionality to the site and has been innovative in its offering . This has contributed to a 225% increase in sales (1997: $17. It is a powerful source of acquiring new customers at low cost. April 28.4 million. 1998: $56.5.(www. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.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. The story of how CDnow was founded in a basement. with repeat customers accounting for more than 50% of sales.cdnow. it is in this context that the large investments in advertising and partnerships make sense.

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

eBay website (www. and eBay provides added value through its convenience. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. 6. Individuals use eBay to buy and sell items in more than 4.the closest thing in the offline world are trading forums such as classified ads.com) 70 'Meg Whitman at eBay Inc. "at its core. the eBay community has grown to include more than 10 million registered users. global trading place for buying and selling personal items in an entertaining auction format. flea markets and auctions. collectable shows.g. There are over half a million new auctions. 24 hour a day.6. (A)' . Auctions are an enabler. and eBay never takes possession of the item being sold. with the number of unique daily visitors setting a record of 1.Company Overview' .25% to 5% of the final sale price on any item sold.removing the need for inventory. extensive selection and geographical reach.2 Value Proposition eBay offers consumers an efficient.com) 'eBay .efficient one-to-one trading in an auction format. Since its launch in September 1995.Company Overview' .ebay.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. from collectibles and antiques to electronics and toys.782 million in January 200068.000 new items joining the "for sale" list every 24 hours69.300 categories. garage sales. According to Meg Whitman.ebay.6. and 450. This is a new market . 1st October 1999 86 . and eBay receives a transaction fee that ranges from 1. CEO of eBay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Auctions represent a platform. Sellers pay a nominal fee for placing an item up for sale. People perceive the auction format to offer better prices.eBay website (www. payment) between themselves. with emphasis being placed on its unique community feel and culture. eBay is not about auctions.6 CASE STUDY: EBAY 6. transportation and other overhead costs.A Harvard Business School Case Study. eBay effectively created a new business model never before possible . shipping. Auctions make it fun. The buyer and the seller work out the logistics of the transport (e. or the payment for the item . as cited in 'eBay .

Dallas & Fort Worth.eBay acquires Jump Inc.3 Sources of Value .America Online and eBay announce strategic marketing alliance .eBay and First Auction sign a partnership agreement . and in terms of the '7Cs'. the eBay customer experience is based on how their customers deal with each other.eBay launches local websites in Baltimore & Washington DC.Com form alliance - 6.6.eBay acquires alando.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 . Las Vegas.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. And you only get word-of-mouth if you have a great customer experience. Nashville.The 7Cs Framework According to Meg Whitman.eBay acquires Butterfield & Butterfield. 1 is have a great customer experience71".eBay expands strategic relationship with Netscape . allowing users to create personal homepages .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .com to provide automotive service for eBay Users . emphasis is placed on community development and customer care. The Official eBay Guide to Buying.Launches "My eBay!" to customise the online auction experience . and two books -. as they rarely deal directly with the company.Business Week.Compaq Computer Corporation and eBay form a strategic U. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . 21st May 1999 (www.Germany's leading online person-to-person trading site . Since eBay cannot control how one person treats another. This raises challenges in how to control and influence the customer experience. and raises $700 million . .businessweek. and its online trading site (Up4Sale) .eBay introduces eBay Magazine in collaboration with Krause Publications.eBay and AOL launch co-branded site .S. and Salt Lake City .eBay teams up with Carclub. Norfolk & Virginia Beach. . Selling. Unlike the previous case studies discussed.eBay goes wireless with Palm VII connected organiser . Still the vast majority of our new users come from word-of-mouth.eBay goes live . they try to influence customer behaviour by encouraging them to adopt certain values. Seattle & Tacoma. Providence. So brand-building job No.eBay IPOed raising $58 million .eBay acquires Blackthorne Software GO. "the first brand-building strategy that we have is to have a great customer experience. and Collecting Just About Anything and eBay for Dummies.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.de . Boston.eBay launches 'About Me' feature.eBay acquires Kruse International .com) 87 . Milwaukee. co-marketing relationship.eBay goes live in Australia .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .com and eBay announce multi-year strategic marketing agreement eBay and NEC form a joint venture in Japan eBay launches in Japan eBay and Autotrader.eBay and Ultimatebid.

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

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

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

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

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

73 74 Interbrand (www. Gap online exploits the accessibility and convenience of the Internet. however. standard styles are well suited to online shopping. California GapKids opens its first store BabyGap is born Gap opens its online store at www. up from $20 million in 199875.7. Its reach extends across more than 1. Gap started selling items online . and Gap online provides access to the full range of items at Gap. UK. GapKids. as cited in Lee. Gap Inc. 'Clicks and Mortar at Gap.com and www.800 stores in the US. October 8. L. This success is largely due to their simple formula . announce multi-year partnership.$100 million. head of Gap Online. and provides useful insight into how traditional brands can leverage their strength online. Gap's online sales tripled in 1998 alone."to deliver style.'s website (www. 1999 93 .Business Week.COM .com is an example of successful crossover marketing.com/about_us.com' .babygap. as cited in Lee. TABLE 6.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.2 Value Proposition Gap's simple.interbrand. the growth prospects are enormous. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Canada. In addition. from jeans and T-shirts to khakis and jackets. Gap. and are still relatively small compared to Gap's $9 billion in annual sales.gapkids.see Appendix A Gap. October 8. 'Clicks and Mortar at Gap.htm) 75 Jeanne Jackson. letting customers access the Gap brands. online sales are only available to US customers. 1999 76 Jeanne Jackson. to provide customers with greater convenience and options. from shirts to accessories and hard-to-find sizes. surpasses $9 billion in net sales and increase earnings by 54% over previous year. The Gap offers a balance of modern and seasonal styles of clothing.an early convert to the then-revolutionary idea of clothes retailing on the Internet. and today it is the 29th most valuable brand in the world73.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.1 Company Overview Gap opened its first store in San Francisco in 1969.Business Week.gapinc. "this is about being clicks-and-mortar. In late 1997. whether in the store or online76".COM 6.com' . L. and BabyGap. and analysts estimate that sales in 1999 amounted to $50 . Inc.7 CASE STUDY: GAP. Germany and Japan.gap.com) .com. According to Jeanne Jackson. service and value to everyone74". Currently.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. America Online (AOL) and Gap Inc.7.

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

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

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

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

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

They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.e. mobiles. .000 shares at $13.TIMELINE AND MAJOR MILESTONES 1994 April . Palm computers). and unveils Yahoo! Digital Introduces Bill Payment services . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.The 7Cs Framework Convenience Central to Yahoo!'s success.Yahoo! Launches Business-to-Business Marketplace .600. Yahoo! extended its convenience through its Yahoo! Everywhere service. Their goal is not to list everything under the sun.. regardless of platform (i.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.Site goes live September .com allowing them to offer person-person payment solutions .Yahoo! forms agreements with Palm Inc.3 Sources of Value .Yahoo! acquires Arthas.com.Yahoo! unveils Yahoo! Finance Vision . is the way it has structured and displayed information. to provide web-based services to PalmTM handheld computers . 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.8.Yahoo! Shopping launches personalised shopping service 6.7 YAHOO! . More recently. to allow access.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .8 million IPO (2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.8).Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.Yahoo! acquires eGroups . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. TVs.Receives $1 million in venture capital funding from Sequoia Capital $33. 99 .

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

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

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

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

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








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



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

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

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

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

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

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

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


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) 83.766 14.048 20.550 12.895 2.643 3.132 15.143 2.197 32.761 1.568 3.interbrand.422 1.781 33.502 33.792 3.781 17.602 4.231 12.231 24.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.648 1.527 3.806 11.225 11.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .147 9.184 1.909 7.804 2.193 112 .076 3.Interbrand's Ranking of the Top 60 Brands (www.313 2.275 30.310 11.694 17.262 1.021 26.830 14.361 1.101 9.281 11.806 2.464 3.985 2.181 21.634 1.510 8.654 43.595 17.043 8.404 4.845 56.052 6.596 3.932 4.329 4.155 7.603 5.283 4.423 2.681 2.894 14.319 1.

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





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