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


2 Value Proposition 6.7.3 Sources of Value .1 Company Overview Company Overview 6.3 Sources of Value .4.com 6.4.3 Sources of Value .1 Company Overview 6.com 6.6 Conclusion Case Study: eBay 6.3 Sources of Value .7.4.8 Case Study: Boo.7.6.5 Brand-Building Strategy 6.1.5 Other Factors That Contribute to their Brand Leadership Conclusion Case Study: CDnow 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.The 7Cs Framework 6.2 Value Proposition 6.7 6.3 Sources of Value .Extensive Integration 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Other Factors that Contribute to their Brand Leadership 6.4 Brand-Building Strategy .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 7.5 Conclusion Case Study: Gap.5.The 7Cs Framework Company Overview 6.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.2 Value Proposition 6.8.1 Company Overview 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.5.6 6.5 Conclusion Case Study: Yahoo! 6.8.The 7Cs Framework 6.5.com 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 7.5.The Failure of Boo.2 Value Proposition 6.2 Value Proposition 6.

8 Figure 6.3 Figure 2.1 Figure 5.1 Figure 3.4 Figure 6.4 Figure 4.4 Figure 2.2 Figure 3.3 Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .7 Figure 6.6 Figure 2.1 Figure 1.8 Figure 3.3 Figure 6.2 Figure 2.3 Figure 4.3 Figure 5.7 Figure 5.5 Figure 2.6 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.com's Website Overview of Boo.4 Figure 5.2 Figure 4.6 Figure 6.com's Associates Programme Overview of BarnesandNoble.2 Figure 2.9 Figure 6.5 Figure 5.6 Figure 5.2 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 .5 Figure 4.2 Figure 5.1 Figure 4.1 Figure 2.com's Website Amazon.8 Figure 5.7 Figure 5.7 Figure 2.1 Figure 6.5 Figure 6.4 Figure 4.

Timeline and Major Milestones Gap.Timeline and Major Milestones CDnow .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .1 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.4 Table 6.1 Table 6.6 Table 6.3 Table 6.Timeline and Major Milestones Boo.7 The Emerging Brand-Building Environment Amazon.com .5 Table 6.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones eBay .2 Table 6.


while providing new tools for promotion.com) 7 .1 shows the number of years it has taken some Internet brands to reach sales of $100 million.an explosion that is also a harbinger of how business will operate in the future.1 .5 million book titles). In the midst of this. customer affiliation and level of sales. Amazon. It is empowering customers with more options and more information to make informed decisions.com noble. As such.com1 Amazon.com's range of 4.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Figure 1. service and brands. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. America Online (AOL) and eBay have been able to build powerful brands in a few years.9 3.YEARS TO REACH $100 MILLION IN SALES 6 5. whereas it has taken decades for traditional companies to achieve the client base. FIGURE 1. there has been an explosion in the online world . that these Internet start-ups have achieved. Amazon. products and services reconfigured. the Internet is changing fundamentals about customers.mckinseyquarterly. as they face each other through an electronic connection. interaction and relationship building.2 3. and business models revamped. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.g. The Internet also represents a fundamental shift in how buyers and sellers interact.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com.1 3. aggressive Internet start-ups have emerged. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.0 1.1 OVERVIEW Over the past few years.com Source: Securities and Exchange Commission Filings.5 2. relationships. Internet companies such as Yahoo!. As such. Supply chains are being rethought.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. McKinsey Analysis (www.9 2. This is creating new challenges and opportunities. and is triggering the need for new brand-building strategies and tools. creating strong brands that are putting established brands at risk.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.3 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. supported by secondary data related to aspects of online business from accredited and published sources. A review and analysis of leading academic thinking will be used to explore these issues. FIGURE 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. and to identify new sources of value. 1. tools and strategies to build brands on the Internet.2 . Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. This is based on the outcome of the primary research (in-depth case studies).RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To identify the key factors and characteristics that contribute to the development of successful Internet brands.2. • To explore how the Internet is changing the brand-building environment.

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

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


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

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

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

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

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

W.customers who are satisfied and loyal and talk favourably about the brand . The customers at the bottom end of the scale are "terrorists" .Harvard Business Review. E..Figure 2. 'Why Satisfied Customers Defect' . T.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones..6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Nov-Dec 1995 Hart. and believe that it will always act in their best interest. Johnson & Johnson. D... Federal Express. At the opposite end of the satisfaction spectrum are "apostles" . & Sasser. p. 91 Loyalty is derived when customers are continuously satisfied over time. C. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and Johnson. Customers that are passionately or emotionally loyal are those that have built trust in a company.Harvard Business Review. Saturn. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. This satisfaction encompasses the whole experience and not just a company's products or services. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. FIGURE 2.those who actively attack the brand telling others not to buy from the company. T. Hewlett-Packard. 6 7 Jones. Marketing Management.5. Spring 1999 18 . Trust is critical for a brand's success.. 'Growing the Trust Relationship'. E. Southwest Airlines and Xerox7. 'Why Satisfied Customers Defect' . Nov-Dec 1995. & Sasser.

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

March 1998.8 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. pp.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. FIGURE 2. FIGURE 2. and understanding the needs and buying processes of the target market is essential. Journal of Consumer Research.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.6 . there are brands that customers perceive as acceptable and would not resist buying. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. whereby customers would be unwilling to substitute it with competitors' offers.. which goes well beyond the satisfaction of a specific need. S. 20 . Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.7 . A stronger brand enjoys a high degree of brand preference over competing brands. 2. 343-373. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.7). Emotionally loyal customers build a sense of trust and two-way commitment with the brand. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. However. Beyond this. there are brands that are unknown by most buyers.

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

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

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


brand awareness.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. confidence and brand equity are built. which are created through advertising. If the offering is developed properly. promotion. highlighting important factors that contribute to the success of each step along the way. Once this has been established. it should provide a satisfactory experience and lead to a willingness to buy again. This chapter spells out the traditional brandbuilding process. and keep it turning. To entice trial and repeat purchase requires triggering mechanisms.1 INTRODUCTION Building a strong brand is a complex task. public relations.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 . FIGURE 3. and direct marketing. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. selling.1. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. The major characteristics of successful brands are also reviewed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. the next step is to get customers to try the brand. This is illustrated in Figure 3. 3.1 .

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

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

colour scheme.g.. J. packaging. • The Brand Style . This may be different from the brand image. • The Brand Theme .the way the brand communicates through its advertising. features.Figure 3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. however the brand style and core tend to be less flexible. 'Strategic Brand Management'. Brand themes are the most flexible element and will tend to change with fashion. 16 Kapferer. prestige. friendly). etc. Themes include the physical appearance (logo.the fundamental or genetic code of the brand. 1992 28 .articulates the brand core in terms of the culture it conveys.3: • The Brand Core .3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and advertising. type of spokesperson / customer image used to advertise the brand). visual appearance. press releases. its personality and its image or self-projection . which depends on how the target market perceives the brand. style or cultural differences from one country to another. and visual appearance). which remains fixed over time.g. A company should seek to differentiate its brand through developing a distinctive identity. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . (New York: The Free Press). its reflection (e. and the relationship expressed (e. glamour.

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

The value proposition must then be articulated in terms of the 'marketing mix' . Promotion and Place (distribution strategy). Before potential customers can buy a product / service. 1962. management style.Customers consider whether the product / service will meet their particular needs. features and advantages.Product and service features. skills. and the product / service's perceived performance.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Price. • Interest . • Evaluation . systems.The McKinsey 7-S Framework). E. the company must ensure that it develops the appropriate structure. 1962. If the offering is developed properly.79-86 The Innovation-Adoption Model consists of: • Awareness .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. strategy (partnerships and alliances). it should lead to satisfaction and re-purchase.Customers need to be stimulated to seek information about the brand's uses.4. pp. 17 Rogers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.. FIGURE 3.4 . • Adoption . they must learn about it.often referred to as the '4Ps' .INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. 'Diffusion of Innovations'.. and its products / services.The company has to create awareness of the brand. This learning is called the adoption process17 .The customer is satisfied and decides to make regular use of the product / service. culture and staff needed to support. (New York: Free Press). E. Advertising and PR are common tools for achieving awareness. (New York: Free Press). Personal sources such as word-of-mouth from friends. 'Diffusion of Innovations'. deliver and reinforce this value proposition (see Appendix B . • Trial . pp.Figure 3.79-86 30 . The value proposition must be communicated to entice customers to try the product / service. colleagues and opinion leaders become important influences at this stage.

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

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


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

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

000 100.000. 1996 (www.000 1969: 10.economist.000 1. FIGURE 4. 1998. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 10.000 1.a PricewaterhouseCoopers Report.2 .3 . 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. as cited in 'E-Business Technology Forecast' .000.Figure 4.3.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.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.com) 36 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000.

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

to interacting (e.Figure 4.5 . These activities highlight the adoption of the Internet as an interactive.g. chat rooms. entertainment) and purchasing (37%) . communication and information tool. FIGURE 4.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.com) 38 .5. April 13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).from communicating (90% use e-mail) and sourcing information. as cited in the Economist Intelligence Unit (EIU). reveals the wide range of areas where people are embracing the Internet . 2000 (www.eiu.

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

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

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

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

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


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

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

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

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

cross-selling and up-selling33. R. M.A Publication by Andersen Consulting 'The State of Online Retailing' . direct marketing. including direct marketing.. delivering increased margin per customer . fulfilment • Defensible advantage against competitors SCALEABLE. '5 Rules of the eEconomy'.2 . being first into a market makes it easier to capture the consumer's share of mind.org Study in collaboration with The Boston Consulting Group. FIGURE 5. enhancing the interaction. Nov 1998 49 .Figure 5.2. 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. link revenues 32 33 Melnicoff. It also allows online companies to tap supplementary revenue streams. Outlook 1999. 21 . advertising and referrals. No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. its ability to track customer preferences and customise offerings improves. As the company builds a customer base and develops a relationship with customers. This makes it more efficient in improving product selection. With no competitors around.A Shop.

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

and the message spreads organically. whether for communications or community. Free Email at http://www.com was one of the first free web-based e-mail services.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. saying: • "Get Your Private.000 subscribers every day. Today they are the largest e-mail provider in the world with over 40 million users. eGroups and Geocities (both recently acquired by Yahoo!). and then propel the message even further to their own ever-increasing circles of friends and associates. • Each new user becomes a company salesperson. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. In its first 1. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging). A traditional print publication would hope to reach 100. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. where they have never carried out any promotional activities. When a user builds a website.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. sign up for their own free e-mail. Geocities enables people to create personal websites for free.000 subscribers within a few years of launch. they tell all their 51 . and in doing so spread the word for Geocities. friends to visit it. and they created a subscriber base more rapidly than any company in history. they will have a powerful viral opportunity at their disposal. Hotmail acquired over 12 million subscribers. Hotmail.5 years. but Hotmail signs up more than 150.1 The Case of Hotmail. seven days a week. In fact. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).com. a company now owned by Microsoft.com The classic example of viral marketing is Hotmail. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.hotmail.5.

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

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

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

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

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

R. The company must build awareness and communicate its value proposition to its target customers. McKinsey Quarterly. and bring people to the site for the first time. Evaluation. Engage.4 . M.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. modified to take into account of the interactive dynamics of the Internet. 180-183 (www. 'Marketing to the Digital Consumer'. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Adoption). Therefore. visibility relies solely on Communication.8. Trial.mckinseyquarterly.. Interest. including affiliate programmes with other websites.Attract. Retain. FIGURE 5.7. Newspapers. 1996.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. & Zeisser.. because there is no physical presence.Awareness.2. McQuade. The mechanisms to communicate range from traditional media (TV. This is more difficult online than offline. 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 ’ . Learn and Relate. A. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Figure 3. S.) to online tools.. e-mail notifications and banner advertisements. etc. No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. pp. links from directory searches (Connectivity). This model consists of five stages .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. billboards.7 . Waitman. Magazines..

Fig.2 4.3 3.5 3.Economist Intelligence Unit 2000 (www. affiliate programmes.1 3. public relations and television advertising. Companies then need to engage customers to obtain their interest and participation.4 4. The key factors at this stage are Convenience combined with interesting Content. Creativity is also an important factor in gaining attention in today's cluttered marketplace.WEBSITE PROMOTION METHODS .POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3 2.8 . as cited in 'Targeting Consumers via the Internet' . 3. Kapferer's Brand Prism (Ch.4 3.3) is useful to ensure that a company develops a distinct and consistent brand identity. discounted over the expected duration of the brand-customer relationship. 3.ebusinessforum.6 3. it is important to quickly engage consumers' interest before they move on.0 3. multiplied by the expected rate of transactions.8 4.com) The most effective methods are direct e-mail. 58 .5) 2. Engage With the multitude of choice available on the Internet. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.7 4. Attracting customers is only the first step in building online brands.4 3.3 Source: Forrester Research.

The objective is to increase the conversion rate (% of browsers converted into buyers). 5.9). This helps to create a customer base that spends more time and money at a site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. Certain product categories.g. Content is the basic driver of retaining customers on a site. Communities and Customisation are other sticky applications. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. and must be continuously updated due to the multiple visit nature of customers.who they are and why they shop online. 59 . attitudes and behaviour). such as groceries and convenience goods. Learn The Internet provides extensive opportunities to learn about consumers (demographics. can create value for the customer and help build the brand-customer relationship. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. and what additional products and services are they interested in provides companies with valuable information which. and forge closer relationships than any offline operator. The initial site registration provides an early opportunity to obtain useful information. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. 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. if used properly.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. Radio). Building up a knowledge database on each customer . • The Internet supports brand-building activities where there is a need to build a relationship. TV. a company can create value by providing a personalised online experience.

companies must provide a satisfying end-to-end customer experience .9 CONCLUSION On the Internet.from the promises made in the value proposition. it is not economically feasible to sell certain products. and the need to stimulate the other senses (taste.. These case studies provide a practical insight into how companies are building their online brands. and as the relationship develops. 1996.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. S. it is critical for companies to build relationships and foster brand loyalty. & Zeisser. No. smell). A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. pp. • Brand-building favours products that can be sold online. especially in small quantities.. 60 . to its delivery to the customer.2. M. However. engaging and retaining customers.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. due to high delivery and transaction costs (relative to the value of the product).9 .. McKinsey Quarterly. Given the high acquisition costs of online customers. McQuade.. In order to create "apostles". the interaction provides the ability for companies to learn from their customers and relate. Waitman. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. The interactive brand-building process involves attracting. The next chapter analyses the brand-building efforts of seven companies. the experience is the brand. 180-183 (www. touch. R. 'Marketing to the Digital Consumer'. 5.mckinseyquarterly. providing further added value.


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

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

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

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

increasing to over 500. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. In addition. and by 1999 it had over 200. Eyes and Editors. This enabled Amazon to reach more customer segments and niches (Figure 6. Newsweek.000 members.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. As a result of all these factors (7Cs). In July 1996. enticing them to return to the site and purchase repeatedly. helped generate publicity and stories about the company in publications such as The Wall Street Journal.2.2). attracting member sites of all sizes. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Once orders are placed. The Associates Programme has been phenomenally successful. it began to advertise in print media and online . Business Week. The Financial Times. Instead of paying directly for this exposure.com hot-link and offer specific books of interest to their visitors. help maintain contact and build traffic by e-mailing customers when desired products or books become available.a move that along with the novelty of its business model and the newness of the Internet. which only applied to sales that resulted from the initial click-through. New Yorker and The Economist. Through the first half of 1996. In the second half of 1996. 6.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways.000 by August 2000. they are subsequently confirmed by e-mail. 66 . Amazon inaugurated the Associates Programme under which other websites could display the Amazon. two personalised services. Amazon offered Associates referral fees of up to 15%. and customers are also e-mailed when the items are shipped from the warehouse. and not subsequent purchases.

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

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

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

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

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

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

64 billion. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).The Wall Street Journal. Lycos. 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.6 million. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Both try to foster a community of readers by letting customers post reviews online. prevent cannibalisation of its existing business.4 Brand-Building Strategy Barnesandnoble. while Amazon.com had over 17 million. however. These initiatives have generated traffic to the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com's $1. has yet to leverage its strong brand in cyberspace. Although. Both offer customisation that permits users to personalise the experience.com in return for a commission on any purchases that they originated .com's 1999 revenues were $202.3. Barnesandnoble.a replica of Amazon's Associates Programme. and both are expanding globally.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. They have developed an affiliate programme that links sites to Barnesandnoble. Barnesandnoble. Netscape and Microsoft Network. Barnesandnoble.com has created a high quality website and customer experience.com was valued at $21. 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 . Both offer 'associate programmes' that let other websites link to their sites. it lags behind first-mover Amazon. this programme had more than 300. December 17. As of February 2000. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and Barnes & Noble Inc. reasons for this are explained in the next section. Webcrawler.com. However. while Amazon.com's market capitalisation was $251 million. Instead. The 6. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com closed 1999 with 4 million customers. Barnesandnoble.000 affiliates in its referral network. Yahoo!. and avoid charging sales tax in states where it has stores56. compared to Amazon.1 billion.

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

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

P. 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 had set the record as Europe's best-funded European Internet Start-up. However. Italy and Spain within a few months.com.Appeals for $30 million more funding . sack 20% of staff and sell stock at 40% discount . Puma.TIMELINE AND MAJOR MILESTONES . Boo. and the resulting loss of investors' confidence. as well as create a kid's site.com provided a range of 18 fashion and footwear brands including DKNY.4. Company is put up for sale. and Converse. Germany and Denmark.Multi-million pound advertising campaign created by BMP DDB .com. among others. Finland.Site goes live .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 unique visitors . within six months Boo. On going live. Boo.fails and appoints KPMG as liquidator. it means all that brand's product line is available.3 1999 Mid year BOO. "our marketing thrust is not based on prices.Raises funding of $125 million . and was billed as one of Europe's hottest e-commerce ventures.COM 6.Marketing Week. After a high profile launch. CMO of Boo. Boo. and included high profile investors such as Bernard Arnault. England. Everlast. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). receiving $125 million of funding.com opens its virtual doors' . Sweden.2 Value Proposition According to Kajsa Leander.Announces it has only 500.4 CASE STUDY: BOO. Boo. 58 Kajsa Leander.com entered six markets: US. as cited in 'Boo. TABLE 6. not the limited range you might get at most London fashion shops58". Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). it's about range and convenience.COM . Morgan. They intended to add France.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". founder and Chief Marketing Officer of Boo. 1999 76 .First sign of problems . November 2000 January February May 6.they redesign site. arranged through J.4. due to its poor performance and inability to build a customer base.com collapsed through lack of funds. June 10. If a clothing brand is on the Boo site.1 Company Overview Founded in 1999.


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


Miss Boo

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



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

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

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



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

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


features.ten times the selection of a conventional bricks-and-mortar music store).Raises $10 million through private placement .Harvard Business Review. good prices. and they aim to "make every visit to the site. as well as music reviews.cdnow. announce marketing alliance . This unprecedented degree of access to music and information is the core of CDnow's value proposition. cover art. whether for browsing or buying. It has a customer base of 4 million people.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. T. former arch rival . customisation and a wealth of information and content to help in the purchase decision.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and an average daily audience of over 800.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5. On 19th July 2000.5. TABLE 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. 'How to Acquire Customers on the Web' .000 people.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .Merges with Columbia Records . $18.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . convenience. guides to music genres. CDnow provides access to over 500. D. CDnow is also driving the digital distribution of music.179-188 63 CDnow website (www.1 Company Overview Founded in 1994. daily music news.000 sound samples. May-June 2000. 62 Hoffman.CDnow and Time Inc.Merges with N2K. $22. and one of the most popular shopping sites on the Internet62. CDnow was acquired by Bertelsmann AG. and was the first site to offer the sale of music downloads and custom CDs.Site goes live .000 music-related products and 650..com) 80 . and exclusive interviews and reviews from CDnow's award-winning editorial staff.Forges distribution partnership with Yahoo! $65.5 million distribution deal with Lycos Signs three-year.5 CASE STUDY: CDNOW 6. by twin brothers Jason and Matt Olim.TIMELINE AND MAJOR MILESTONES . a valuable and rewarding experience"63.000 music related items . & Novak. pp.Partnership program with Geffen Records . CDnow is the leading online music store.Launches merged CDnow/N2K site .

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

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

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

and scaled it awareness-building efforts. and to increases in the customer base of more than 30% quarter-to-quarter. It is constantly adding new functionality to the site and has been innovative in its offering . The story of how CDnow was founded in a basement.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.Hampel & Stefanides (www. 1998: $56.4 million.(www.4 million).BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . This has contributed to a 225% increase in sales (1997: $17. 6. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .com/cdnow. Public relations efforts helped to generate word of mouth and influence sales.cdnow. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. • Word-of-Mouth . both in the online and offline worlds.CDnow made public relations a high priority brand-building tool. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. CDnow's promotion strategies have attracted high levels of traffic.5.they were the first site to offer the sale of music downloads and custom CDs. with 44% of sales coming from new customers65. It is a powerful source of acquiring new customers at low cost.com) 65 'Pioneering in Cyberspace' . it is in this context that the large investments in advertising and partnerships make sense. resulting in increased conversion rates.htm) 84 . 1998 . April 28. with repeat customers accounting for more than 50% of sales.As for many successful online retailers.hsny. word-of-mouth accounts for the lion's share of CDnow's customers.Press Release. In fact. The company continually pushed for new distribution partnerships to widen its sphere of influence. as a way to fuel very lucrative word of mouth.

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

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

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

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

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

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

representing about 40% of revenues.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and highlight opportunities created by e-commerce. These new publications appeal to the collecting spirit. Mary Beth's Beanie World. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.3 million in advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. provide a wealth of information about the 'ins and outs' of trading on eBay. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Based on this. they decided to target their marketing efforts on these heavy users. eBay Magazine. and Collecting Just About Anything and eBay for Dummies. 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). the largest of which was with AOL.g. eBay has since expanded its promotion efforts and engaged in marketing partnerships. $75 million joint marketing alliance and development deal. Doll Collector) and appearance in trade shows. The AOL partnership was one of the largest strategic partnerships on the Internet . 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. In 1998. 91 . eBay transformed from a pure online play into a 'clicks-and-mortar' company.6. and two books. The Official eBay Guide to Buying. Recent promotional initiatives include its new publication. Selling. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. and maintained the same ratio for 1999. and facilitate the spread of positive wordof-mouth. eBay has been able to attract a large customer base. Early on. they spent $12. but they have other partnerships with over 150 websites of varying scales.a four-year. As a result. eBay decided that it would not enter into major portal advertising deals in the short term. who tended to be serious collectors. 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. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. as a result of the high quality experience it provides.

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

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

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

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

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

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

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

Yahoo! acquires eGroups . mobiles.8). TVs.3 Sources of Value .com allowing them to offer person-person payment solutions . Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Palm computers).Receives $1 million in venture capital funding from Sequoia Capital $33. Their goal is not to list everything under the sun.e.8 million IPO (2. and unveils Yahoo! Digital Introduces Bill Payment services .Yahoo! unveils Yahoo! Finance Vision . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! Launches Business-to-Business Marketplace .Yahoo! forms agreements with Palm Inc. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. to allow access. to provide web-based services to PalmTM handheld computers . . is the way it has structured and displayed information.com.TIMELINE AND MAJOR MILESTONES 1994 April .8. regardless of platform (i.Yahoo! Shopping launches personalised shopping service 6.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 . 99 .7 YAHOO! . 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.000 shares at $13. More recently.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Site goes live September .. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! acquires Arthas.The 7Cs Framework Convenience Central to Yahoo!'s success.600.

By tailoring the information to users' preferences. while providing partners access to a large customer base. from stocks and sports results to weather and air fares. Yahoo! has increased customer loyalty and retention rates. This creates a win-win situation as its satisfies Yahoo!. easy-touse. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.8 . well structured. and has been at the heart of Yahoo!'s growth and development. 100 . and more importantly. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. Their thrust has been to provide valuable content to customers.com and CDnow. the partner. They have formed multiple alliances and partnerships with leading online companies such as Amazon.9). ranging from daily news and weather reports to road maps and books. the end-user.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. and quick-toload webpages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies. and is similar to a custom tailored newspaper (Figure 6.

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

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

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

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








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

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

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

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


845 56.643 3.184 1.048 20.193 112 .423 2.766 14.329 4.interbrand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .043 8.281 11.806 2.262 1.155 7.181 21.Interbrand's Ranking of the Top 60 Brands (www.895 2.310 11.830 14.464 3.806 11.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) 83.550 12.319 1.021 26.147 9.361 1.143 2.932 4.781 33.231 24.648 1.527 3.654 43.804 2.985 2.909 7.568 3.422 1.595 17.231 12.076 3.510 8.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.761 1.225 11.602 4.275 30.052 6.132 15.404 4.634 1.681 2.781 17.792 3.894 14.313 2.603 5.197 32.283 4.502 33.596 3.101 9.694 17.

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





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