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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
13 13 14 15 16 18 19 20 22 22 23
Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
62 62 62 62 64 66 69 70 71 71 72 72 73 75
Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
1 7.7 6.1 Company Overview 6.2 Value Proposition 6.1 Company Overview 6.5.4 Brand-Building Strategy 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 188.8.131.52.8.The 7Cs Framework 6.4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5.4 184.108.40.206.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 220.127.116.11.2 Value Proposition 6.7.5 Conclusion Case Study: CDnow 18.104.22.168.6.1 Company Overview 6.4.3 Sources of Value .The 7Cs Framework 6.1 Company Overview 6.6.The 7Cs Framework 6.Extensive Integration 6.8.com 6.3 Sources of Value .1 Company Overview 6.6.com 6.4.3 Sources of Value .6.The Failure of Boo.The 7Cs Framework 6.5 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 .5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .com 6.2 Value Proposition 6.3 Sources of Value .5 Conclusion Case Study: Gap.7.7.4 Brand-Building Strategy 6.2 Value Proposition 6.5 Other Factors that Contribute to their Brand Leadership 6.2 Value Proposition 6.4 Brand-Building Strategy .4 Brand-Building Strategy 6.6 Conclusion Case Study: eBay 6.8 Case Study: Boo.6 6.5 Other Factors That Contribute to their Brand Leadership 22.214.171.124.
6 Figure 4.2 Figure 5.1 Figure 6.2 Figure 2.4 Figure 4.2 Figure 6.com's Website Amazon.3 Figure 5.1 Figure 4.9 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 .7 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.4 Figure 6.7 Figure 5.8 Figure 6.2 Figure 2.2 Figure 3.6 Figure 5.1 Figure 1.5 Figure 4.7 Figure 2.8 Figure 5.3 Figure 4.7 Figure 6.1 Figure 5.4 Figure 5.4 Figure 4.6 Figure 6.com's Associates Programme Overview of BarnesandNoble.2 Figure 4.3 Figure 2.3 Figure 3.4 Figure 2.5 Figure 2.9 Figure 6.1 Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.5 Figure 5.3 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .6 Figure 2.5 Figure 6.8 Figure 3.1 Figure 3.com's Website Overview of Boo.
Timeline and Major Milestones Boo.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones BarnesandNoble.1 Table 6.5 Table 6.Timeline and Major Milestones Yahoo! .com .4 Table 6.2 Table 6.6 Table 6.com .1 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones eBay .3 Table 6.com .Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
The Internet also represents a fundamental shift in how buyers and sellers interact.com) 7 . Internet companies such as Yahoo!.com's range of 4.9 2. as they face each other through an electronic connection.mckinseyquarterly.1 3. McKinsey Analysis (www. Figure 1.2 3. It is empowering customers with more options and more information to make informed decisions. Supply chains are being rethought.an explosion that is also a harbinger of how business will operate in the future. and is triggering the need for new brand-building strategies and tools. Amazon. As such.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. aggressive Internet start-ups have emerged. FIGURE 1. and business models revamped.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. there has been an explosion in the online world . the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. As such. customer affiliation and level of sales. while providing new tools for promotion. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.com Source: Securities and Exchange Commission Filings.com.1 .com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. In the midst of this. relationships.YEARS TO REACH $100 MILLION IN SALES 6 5. that these Internet start-ups have achieved. service and brands.5 million book titles).5 2.com1 Amazon. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.1 OVERVIEW Over the past few years.com noble.g. creating strong brands that are putting established brands at risk. the Internet is changing fundamentals about customers.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. products and services reconfigured. whereas it has taken decades for traditional companies to achieve the client base. interaction and relationship building.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. This is creating new challenges and opportunities. Amazon.0 1. America Online (AOL) and eBay have been able to build powerful brands in a few years.9 3.
rather than drifting from site to site3. 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. & Overdorf. turning browsers into buyers. May-June 2000 Hof. May 5. 1997. P.66 8 . & Elstrom. 'Meeting the Challenge of Disruptive Change'. Browder.. However. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. pp. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. S. A New Class of Netizen is Settling Right In' Business Week. R.April 2000. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. For pure online players. as the need to build brand loyalty online is reaching a peak. M. brands are even more critical as customers have little to go on other than a recognised brand. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm.. Harvard Business Review. T. and Novak... A Business Week / Harris poll. As such.. March . 1 2 3 Christensen. and the high cost of acquiring online customers2. 'Internet Communities . Volume 78 Issue 2. that extends the brand-customer relationship beyond a single transaction. P. companies lack a coherent framework and concrete methods to build an online brand. p. Harvard Business Review. who are essentially intangible. Therefore. 'How to Acquire Customers on the Web'. building awareness. found that 57% of Internet users go to the same sites over and over again. Given the tremendous clutter in today's e-commerce marketplace.Forget Surfers. L. C. In light of this. attracting traffic or 'eyeballs'. 66-76 Hoffman..
• To explore how the Internet is changing the brand-building environment. tools and strategies to build brands on the Internet.3 METHODOLOGY The methodology used in this dissertation is illustrated in 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. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. A review and analysis of leading academic thinking will be used to explore these issues. 1. FIGURE 1. and to identify new sources of value. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. 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 . supported by secondary data related to aspects of online business from accredited and published sources.2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 .
com. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. While there is no attempt. The absence of academic literature on Internet branding posed a major obstacle. certain key factors are highlighted in their relevance to the dissertation. as well as a recent Internet failure (Boo.com). there is more work in popular rather than academic literature. this also highlights the true value of the dissertation. These are further refined using the insight obtained through the case studies. the literature review draws on leading academic thinking in more established areas such as brand management. relationship management. and is used to provide insight into some of the factors that contribute to the development of successful brands. and factors that contribute to a brand's success. marketing. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.com). to provide an in-depth analysis of the psychological and social dimensions of brands. however. 10 . Conclusion: Discusses the key findings and areas for further research. 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. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. CDnow. strategy and economics. Consequently.com and Gap. The combination of cases provides a useful and practical insight into brand-building issues and problems. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. Hypothesis (Framework): This is based on the literature review and secondary data.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. eBay and Yahoo!). nor desire.
4 STRUCTURE The next chapter. summarises the key findings. Chapter 7. The final chapter. Chapter 6 examines the brand-building efforts of seven companies. 11 . The nature of brands. provides an analysis of leading academic literature in relation to branding. by outlining the impact of the Internet on the business and competitive environment. and outlines the opportunities for further research. Chapter 3 explores how brands have traditionally been built. The limitations of the Internet in terms of brand-building are also discussed. Chapter 4 provides an overview of the Internet and its defining characteristics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Chapter 2. and introduces the core concepts that form the backbone of the dissertation. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. as well as the interactive approach to attracting customers and building loyalty. highlighting some key factors that have contributed to brand success. their purpose and value are discussed. 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. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. This chapter sets the context within which online brands must be built.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
74 4 Clifton. The concept of brand equity is outlined.1. and for the company. vii 13 .see Figure 2.1 INTRODUCTION In this chapter. and to companies. if properly managed. which.. The chapter proceeds to describe the influence of brands on the buying process. and they form the backbone of this dissertation. A. unravelled to reveal the nature of brands and their reason for existence. (New York: Free Press). (London: Macmillan Press Ltd. & Maughan. D.A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. 2. p. R. FIGURE 2. but extends further to encompass added values derived from factors such as the brand-customer relationship. Branding is about creating 'value'. 'The Future of Brands'. This value stems from the products and services that companies create and bring to the market.1 . whether online or offline. symbolised in a trademark. CEO of Interbrand Newell and Sorrell . and highlights the importance of brand management. 'Building Strong Brands'. the brand's emotional benefits and its self-expressive benefits . 2000. both to customers.a leading specialist brand consultancy firm . these layers are Brands are made up of many layers and dimensions.).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.2 WHAT IS A BRAND? According to Rita Clifton. These concepts are central to brands and brand-building. 1996. and the importance of customer satisfaction and brand loyalty.a brand is: "a mixture of tangible and intangible attributes. p. explaining the value of brands. both for customers. E. creates influence and generates value4" This definition truly captures the essence of a brand.
January-February.the core product or service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include .3 THE LAYERS OF A BRAND Brands are made up of four layers . the basic brand. For some companies. Brands are richly endowed entities. 'Marketing success through differentiation . They start life as ideas. FIGURE 2. Harvard Business Review. a 'set of expectations'. brands are their most valuable asset. As such. and a 'promise'. p.Figure 2. which grows out of the cumulative memory and the experiences customers have of products or services. T.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. benefits. the augmented brand and the potential brand .86 14 .a 'relationship'.2. a 'reputation'. yet ultimately reside as consumer perceptions. 1980. 2. It is a company's promise to consistently deliver a specific set of features. and services to customers. The space a brand occupies inside a customer's head can create a 'mental' patent..of anything'. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.2 . making their way into planning and strategy documents.
information. most products and services cannot survive on functionality alone as this is usually matched in time. Coca-Cola. or a combination of them. with supplementary products and services (e. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.g. The Basic Brand The basic brand consists of the "name. Certain service brands. sign. In fact. These products and services add value and make the offering much more difficult for competitors to emulate.g.com are examples. & Control'..BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. They are the historical core of branding because they are the most prevalent. but the brand itself is the store. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. 5 Kotler. P. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. 'Marketing Management . not the products it sells .4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Implementation. Service Brands (intangible) are much less numerous than their product counter parts. term. actually sell products. 15 .Analysis. The most common barrier to competition is building a brand. Essentially. Kodak. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. even when the alternatives are substantially cheaper or more readily available (e. this should support the offering's performance and differentiate the brand from those of competitors. customers buy products to meet certain functional needs. Planning. or design. such as in retailing. 2. this is the case with all Internet companies. and because they most readily come to mind when consumers are asked to recall brands. preferring things they can see and touch. symbol.The Gap stores. (Europe: Prentice Hall) 1996. quick delivery) that enhance the customer’s total purchasing and use experience. Southwest Airlines and Amazon. Levi's). 8th Ed. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. However.
either through heightened attention or through an active information search.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. two factors can intervene between the purchase intention and the purchase decision .3).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. Consumers develop a set of brand beliefs about the attributes of competing brands. 16 . and selective retention.4). P. p. In the evaluation stage. Consumers differ as to which product / service attributes they see as important. Through gathering information.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. This can be triggered by internal or external stimuli (advertisements). it is critical to understand what attributes consumers value. (Europe: Prentice-Hall) 8th Ed. it is important to clarify customers' underlying buying behaviour and the buying process.194 The process starts when the buyer recognises a need.. a consumer will be inclined to search for more information. These beliefs depend on their previous experiences with the brand. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Implementation. However. and pay the most attention to the brands that will deliver the sought benefits. Once aroused. 'Marketing Management .3 . 1996. and the effect of selective perception.. The buying process consists of five stages (Figure 2. selective distortion. the consumer learns about competing brands. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. FIGURE 2. Planning. and Control'. Therefore.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.Analysis.
These expectations are formed through a combination of past experiences. and especially important when dealing with purchases made through the Internet. A consumer's decision to modify. 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. even delighted.the customer will be highly satisfied. as these services are intangible and therefore. word-of-mouth. A consumer tries to deal with this by gathering information from friends. 17 . somewhat satisfied. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations.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. Customers' expectations are particularly important when dealing with services. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. their negative attitude may influence the consumer's purchase intent or vice versa. locking out potential competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. Customer satisfaction and loyalty are essential to creating successful brands. After a consumer has actually purchased the product or service. or dissatisfied with the purchase decision. If performance falls below their expectations. Expensive purchases involve some risk taking. customers make decisions purely on the basis of their expectations. or avoid a purchase decision is heavily influenced by perceived risk. they will be dissatisfied and look for alternative brands in the future. and a preference for recognised brands they can trust. If perceived performance and quality exceed their expectations then they are satisfied. postpone. they will evaluate their level of satisfaction .
customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. T. The customers at the bottom end of the scale are "terrorists" . Saturn. Customers that are passionately or emotionally loyal are those that have built trust in a company. E. and believe that it will always act in their best interest. 'Growing the Trust Relationship'. Southwest Airlines and Xerox7.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. 91 Loyalty is derived when customers are continuously satisfied over time. D. Trust is critical for a brand's success. & Sasser. 'Why Satisfied Customers Defect' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and Johnson. Hewlett-Packard.Figure 2. C. Federal Express. Johnson & Johnson... Marketing Management. Spring 1999 18 . E. & Sasser..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.customers who are satisfied and loyal and talk favourably about the brand .those who actively attack the brand telling others not to buy from the company. W. M... FIGURE 2. 'Why Satisfied Customers Defect' .5. This satisfaction encompasses the whole experience and not just a company's products or services.Harvard Business Review. Nov-Dec 1995. Nov-Dec 1995 Hart. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 6 7 Jones.Harvard Business Review. p. T. At the opposite end of the satisfaction spectrum are "apostles" .
8 9 Peppers. 'The One to One Future'. 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.they provide good word-of-mouth and are the best salespeople for the product / service 2. M. emotional loyalty is born out of a consumer's personal relationship with a brand. G. Spring 2000 19 . 1993 McWilliam. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.g. Firstly. D. Harley-Davidson motorcycle clubs). consistent orders Satisfied customers are the best advertisement .. & Rogers. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. In this way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Emotional loyalty can be also created through the formation of a strong user community around the brand. 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. 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).Sloan Management Review.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. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. There is also clear evidence of this on the Internet. 'Building Stronger Brands through Online Communities' .com. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself..
However. FIGURE 2. S.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. a 'powerbrand' tends to have a high degree of brand loyalty. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 2. March 1998. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. whereby customers would be unwilling to substitute it with competitors' offers. Journal of Consumer Research.7). 20 . Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. there are brands that customers perceive as acceptable and would not resist buying.7 . Beyond this. A stronger brand enjoys a high degree of brand preference over competing brands. and understanding the needs and buying processes of the target market is essential. FIGURE 2.. pp. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). 343-373.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. there are brands that are unknown by most buyers. which goes well beyond the satisfaction of a specific need.6 .
which is the value of the brand over and above its commodity value. name awareness. According to David Aaker (1991). 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".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. The benefits of each are outlined in Figure 2. D..BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . and other assets such as patents.8 . The major brand assets are brand loyalty. FIGURE 2. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. perceived quality. and relationships with distributors and strategic partners. 1991 21 . trademarks. strong brand associations.. (New York: Free Press).8.Create Awareness . 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. (New York: Free Press). 1991 10 Aaker. D.
8. G. production and marketing.To save time and energy through identical repurchasing and loyalty Guarantee . to make sense of the offer. pp. market share and profits . and the number two twice the share of the number three12.8.... the best performer for a particular purpose • Characterisation . The brand leader is the most profitable and all beyond number two are unprofitable13.To be sure of buying the best product in the category. brands perform several functions that add value and customer benefits: • Identification . • Brand Leverage . 158-170. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. 'Consumer Market Research Handbook'. & Downham.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .To have confirmation of your self-image or the image that you present to others • Continuity . P.Satisfaction linked to the attractiveness of the brand.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.. 3rd Ed.Typically a brand leader obtains twice the market share of the number two brand. 1986 13 Golder..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. May 1993. & Tellis. 'Strategic Brand Management'.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. R.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .To be clearly seen.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. to its communication • Ethical . 1992 Worcester.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. to quickly identify sought after products • • Practicality . N. J. to its logo. Premium pricing increases revenue. Journal of Marketing Research. (New York: Free Press). (London: McGraw Hill). J. 11 12 Kapferer. in the following ways: • Brands. 22 .
The product life cycle applies to products. Companies can maintain a brand while modifying the underlying product to account for new technology. not brands. and the characteristics of successful brands. Johnson & Johnson with Tylenol).Strong brands are more attractive to investors. companies such as Interbrand (see Appendix A). Coca-Cola “the real thing”). fashion or prevailing market conditions. but there remains an ongoing controversy about how accurate and meaningful these measures are. • Avenues for Growth . Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. drives up share price and provides the basis for future growth. the tools that are used. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. The next chapter describes the process of how brands are built. • Motivating Stakeholders . maintain good price levels and generate strong cash flows. it can build a strong market share.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .Companies with strong brands attract good recruits. They also tend to elicit community and government support.g. This. The brand can also be used to penetrate new markets. 23 .Brand leaders usually have the financial strength to fend off competitors. • Brand Loyalty and Beliefs . brand leaders can exploit their superiority in the market (e. In addition. In trying to estimate the monetary value of brands. in turn. • The Brand Barrier . and Young & Rubicam have created complex formulas. When a company creates this type of customer preference and loyalty. 2.Dominating a niche market is usually more profitable than being fifth in a large market.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.g.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
it should provide a satisfactory experience and lead to a willingness to buy again. promotion. the next step is to get customers to try the brand. which are created through advertising.1 INTRODUCTION Building a strong brand is a complex task. FIGURE 3. brand awareness. If the offering is developed properly. and direct marketing.1 .1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. The major characteristics of successful brands are also reviewed. Once this has been established. selling. highlighting important factors that contribute to the success of each step along the way. This is illustrated in Figure 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. public relations.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. and keep it turning.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . This chapter spells out the traditional brandbuilding process. 3. To entice trial and repeat purchase requires triggering mechanisms. confidence and brand equity are built.
a company must develop a strong understanding of who their potential customers are. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. it is impossible to build a successful brand. As such.DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. a distinctive brand identity (I). Similarly. In this way. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . the brand can elicit feelings of confidence that it is of higher quality than competitors'. and added value (AV).2 . what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. Without a good product or service. unless differentiation and awareness can be developed. it will never attract a strong client base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.a strong offer that a potential customer would find compelling and interesting. a compelling value proposition is the combination of an effective product or service (P).3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . FIGURE 3.each is essential. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. In order to do this. 26 . It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers.2).
• User Associations . Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. J. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. these needs are as likely to be about satisfying self-actualisation or esteem needs. cosmetics and high-tech products. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. layout and appearance of the brand can clearly affect preference by offering cues to quality. MA. 1998. values or wealth. 169 Jones. 14 15 Doyle. it is more likely to work effectively for them. For pharmaceuticals.in many cases. P. the number of competing alternatives and the large variety of advertising and selling messages. 1986 27 . P.. • Manufacturers' Name and Reputation . Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. influenced by brand values. the pace of technical change. Lexington Books).the design. if customers have faith that a brand will work. it acquires added values of familiarity and proven reliability.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Sony. In today's affluent society. which they perceive as meeting their needs. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. industry endorsements and newspaper editorials..3. Hewlett-Packard. 'Marketing Management and Strategy'. People use brands to express their lifestyles. providing confidence and incentive to trial. Coca-Cola. as they are to be about satisfying basic physical and economic needs14.In many situations a strong company name (e. which are additional to those based upon real performance. pp. mean that buyers look for short cuts. The large number of decisions.if a brand provides good service over time. (Europe: Prentice-Hall). Gillette. Customers choose brands. • Brand Appearance . faith in brand generates satisfaction in use.brands frequently acquire an image from the type of people who are seen as using them.g. interests.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. 2nd Ed. • Belief in Efficacy . or to gain a sense of belonging. Brand values derive from five major sources15: • Experience of Use . Kellogg's) attached to a new product will transfer positive associations.
Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . This may be different from the brand image. friendly). packaging. type of spokesperson / customer image used to advertise the brand). etc. features.g. and visual appearance). J.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. press releases. (New York: The Free Press). and advertising. prestige. which depends on how the target market perceives the brand. 1992 28 . glamour. • The Brand Style .2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. • The Brand Theme .3: • The Brand Core .3. and the relationship expressed (e. A company should seek to differentiate its brand through developing a distinctive identity. visual appearance. 16 Kapferer. style or cultural differences from one country to another.articulates the brand core in terms of the culture it conveys. Themes include the physical appearance (logo. its personality and its image or self-projection . which remains fixed over time. however the brand style and core tend to be less flexible. colour scheme.Figure 3. Brand themes are the most flexible element and will tend to change with fashion.g. 'Strategic Brand Management'..the fundamental or genetic code of the brand. its reflection (e.the way the brand communicates through its advertising.
structure and ease of use). it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. Finally. It also facilitates consistency in the message being transmitted through presentation (e. J. 29 . (New York: Free Press). advertising. its strengths and opportunities..3 .g.how far the brand can be meaningfully stretched to other products and market segments. and through line and brand extensions. 'Strategic Brand Management'. understanding the brand's core and style helps set the perimeters of brand extensions . Secondly. below-the-line activities. website design.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.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. 1992 The brand prism enables management to understand the brand.
it should lead to satisfaction and re-purchase.79-86 The Innovation-Adoption Model consists of: • Awareness .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3..The company has to create awareness of the brand. Advertising and PR are common tools for achieving awareness.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. they must learn about it. Price. The value proposition must then be articulated in terms of the 'marketing mix' .often referred to as the '4Ps' . culture and staff needed to support. E.79-86 30 . strategy (partnerships and alliances). If the offering is developed properly. colleagues and opinion leaders become important influences at this stage. 1962. the company must ensure that it develops the appropriate structure. • Trial .Customers consider whether the product / service will meet their particular needs. This learning is called the adoption process17 . E. Before potential customers can buy a product / service. • Adoption . • Evaluation . features and advantages. • Interest . (New York: Free Press). and the product / service's perceived performance. Personal sources such as word-of-mouth from friends. systems.4 .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.Customers need to be stimulated to seek information about the brand's uses.Figure 3. pp.. The value proposition must be communicated to entice customers to try the product / service. (New York: Free Press). 'Diffusion of Innovations'.4.The McKinsey 7-S Framework). Promotion and Place (distribution strategy). 17 Rogers. 1962. deliver and reinforce this value proposition (see Appendix B .The customer is satisfied and decides to make regular use of the product / service. and its products / services. 'Diffusion of Innovations'. pp. management style. FIGURE 3. skills.Product and service features.
sales promotion. This information is a key competitive advantage. providing insight into customers' needs and wants. Social Benefits . Internet linkages. personal selling and public relations / publicity .by learning customers' individual needs and wants and individualising and customising service and contact with the customer. software) to help customers interact with the company.advertising..to move customers through the adoption process. 18 Berry. making them less likely to switch to a competitor. this process enables an exchange of information. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. direct marketing. while strengthening the position and value of the brand. companies have used the tools of the promotions mix . Over time. but enhanced customer interaction through relationship building. Through building relationships with customers. companies can increase the value of each customer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. Customer service is an important element of this relationship. the company may supply customers with special equipment or tools (e. when each trusts the other to deal fairly and reliably. In this way. This focuses on establishing a longterm. 3. multi-transaction relationship.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.g. pp. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.for example. L. companies can increase buyers' satisfaction. Advertising and public relations can be effective in generating awareness and interest.such as airline frequent flyer programmes. & Parasuraman. This is often referred to as Customer Relationship Management (CRM).136-142 31 . A. 'Marketing Services: Competing Through Quality'. encouraging evaluation and trial. 1991. & loyalty / discount cards. allowing companies to communicate regularly with their customers and customise their interaction. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . • Structural Ties . (New York: Free Press).
which will add value and distinguish it from competition. 3.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19.Being first into the market does not necessarily bring success. and making it more difficult for competitors to emulate. It is easier to capture a share of the consumer's mind and build a customer base. • Strong Communications Programme .Satisfactory experience is the major determinant of brand values. it has a profound impact on the traditional brand-building process. while providing new tools for promotion.If the brand is not the innovator. the brand is meaningless. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.a segmentation scheme. 'Marketing Management & Strategy'. strengthening the brand further. it must have a unique positioning concept . As such. when the brand has no competitors to rival its position. P.Traditionally.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. interaction and relationship building. The Internet provides the opportunity for companies to create compelling value propositions never before possible. or if the brand is surpassed by superior offers from competitors. Once the framework has been established and the organisation configured to provide this proposition. 19 Doyle. its function and psychological values. and establish a trusting relationship. companies must actively communicate it to the target audience to entice trial. but it makes the task easier. It often takes years to build up the added values. including: • A Quality Product / Service Experience . brands were not built quickly.. • First-Mover Advantage . 1998. (Europe: Prentice-Hall). • Time and Consistency . companies have the opportunity to start building relationships with their customers. advertising or promotional campaign. 2nd Ed. • Unique Positioning Concept . As a result. If the quality of the experience deteriorates. which will communicate the brand's existence.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition.176-177 32 . pp. trigger trial and reinforce commitment to it. As customers build trust in the brand through satisfaction of use and experience. value proposition or augmented brand. then its position will be undermined.. comprehension and intention to buy. Without building awareness.A successful brand requires an effective selling.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
1. Hypertext allows information to be organised in a user-friendly way that is easily accessible. FIGURE 4. and a critical source of added value. and the 'world wide web' (www) . which contain hypertext and pictures. it offers a number of alternative channels that enable businesses and people to communicate.1 .1 INTRODUCTION The Internet is transforming the business environment. In essence.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. 34 . E-MAIL Is the part of the Internet that most users use at present.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. and provides the opportunity for dynamic interaction. 4. The three core channels include e-mail (the most common). it is a common technology platform that allows computing devices to communicate with each other. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. This chapter provides an overview of the Internet and its defining characteristics. Information is becoming a major part of the products and services that people buy. news groups and mailing lists. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. but in practice not in real time. creating new challenges and opportunities. In doing so.Figure 4. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people.
allowing both parties to identify each other and build one-to-one relationships . By allowing for direct. These qualities eliminate the barriers of time and space that exist in the physical world.2 (Note: 35 . The Internet can also be accessed at any time . ubiquitous links to anyone.24 hours a day. which was intended to link military networks together.The Internet is a global network and can be reached from everywhere.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 . • It Overcomes the Barriers of Time and Space . when the United States Defence Department developed the 'ARPAnet'. the Internet lets individuals and companies build interactive relationships with customers and suppliers.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. These defining characteristics have fuelled its explosive growth. These characteristics combine to create a very powerful medium. • It Allows for Two-way Communication and Interactivity . 4. anywhere. The context of the Internet and certain key developments are highlighted in the Figure 4.this radically alters the process of interaction between communicating parties.2.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). Graph is not drawn to scale). 7 days a week.not previously available with mass medium forms of communication. and deliver new products and services at low cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. regardless of where the computer or Internet access device is physically located.
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.000 100. FIGURE 4.000.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 10.3.economist.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.Figure 4. 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1. 1996 (www.a PricewaterhouseCoopers Report.2 .000 1.000 1969: 10. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .3 .com) 36 . as cited in 'E-Business Technology Forecast' .000.
FIGURE 4.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.E-Marketplaces . The emergence of open standards in development tools and at the network protocol level (e.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .4. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. etc. TCP/IP). web design.2 20 'World Online Populations' .Attractive infrastructure and middleware software . The development of critical processes (ordering. As shown in Figure 4. L. No. The growth in support services (e.Higher PC penetration among consumers and companies . the momentum created by all these forces has created a virtuous cycle of growth.Cheap bandwidth .High-powered servers . increasing to 500 million users by 200220.Low-cost networking alternatives .CyberAtlas Internet Statistics and Market Research. there will be an estimated 375 million Internet users world-wide. Easier access to these networks provided by point-and-click web browsers.Cheap microprocessors & RAM . Multimedia development tools that can be used to create rich content..Content Aggregators . G. payment. and gateway services). 1996. The McKinsey Quarterly.4 . Reed.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . making it more cost effective for software developers and other technology providers to create interoperable products.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. 2000 (http://cyberatlas.. hosting. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. 'Electronic Commerce (finally) Comes of Age'. billing.com) 37 .Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .g.internet. offering inexpensive bandwidth.g.).
chat rooms.from communicating (90% use e-mail) and sourcing information.com) 38 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). April 13. 2000 (www. FIGURE 4.Figure 4.g. communication and information tool.5.5 . entertainment) and purchasing (37%) .WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. These activities highlight the adoption of the Internet as an interactive.eiu. to interacting (e. reveals the wide range of areas where people are embracing the Internet . as cited in the Economist Intelligence Unit (EIU).
as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. web browsers.6 . and no cash register. The main difference between the Internet and other electronic media (i.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. content.e.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. However.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. projected by Gartner Group. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. software. There is no need to travel to a physical location. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. April 2000 39 . and people. Instead there is a website.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. fax. they all project the value e-commerce transactions to grow at unprecedented rates. FIGURE 4. no order book. The buyer and seller 'face' each other through an electronic connection. telephone) is that the Internet goes beyond just enabling transactions.
'Meeting the Challenge of Disruptive Change'. partners and other corporate constituencies. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. 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. At the same time.April 2000. operation (e.. The Internet also facilitates the development and co-ordination of global activities (e. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. C. how they compete and how they serve their customers . New brands and business models are emerging to seize this opportunity.and revolutionary new business models are emerging. Volume 78 Issue 2. This is threatening to undermine many old established brands. 66-76 40 . CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Although the particular impact will differ between industries. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. some of which look set to become the superbrands of the future (e. By allowing customers to talk knowledgeably and directly to suppliers. M. March . which are often disruptive to traditional business models21.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. the explosion of information is placing a premium on skilled information management. suppliers. For example. 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.how companies operate. Dell Computers).g. and transforming traditional distribution channels.g. pp.. & Overdorf. through the use of extranets).5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . A 'virtual' presence can mitigate the cost of having to invest in physical facilities. Yahoo!). the Internet is sidelining the role of many traditional intermediaries. Additionally. Harvard Business Review. represents a level of efficiency and integration previously unattainable.
the development of a knowledge economy. highest convenience and quickest satisfaction. This. and reorganise as appropriate. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. The Pace of Business is Accelerating With the fast pace of technological change. fierce competition. empowered customers. 22 Colony. and the 24 x 7 environment. respond to competitive and market dynamics. Internet technology can be used to exploit collective learning and knowledge. allowing employees to share knowledge. online stores. combined with the emergence of electronic intermediaries. it also removes the geographical protection from competitors. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. According to George Colony.Forrester Research. has resulted in a fierce competitive environment.com) 41 . products and services. 'Empowered Fruit Flies' . ensuring the delivery of a satisfying customer experience. with no time. the globalisation of business. as they are just one 'click' away. commit and deploy resources. the diminishing barriers-to-entry and the lower switching costs. to capture new opportunities. Now companies need to move at warp-speed. the typical clock-speed at which companies need to operate has accelerated. CEO of Forrester Research22.internally and externally . constantly innovate. collaborate more effectively and ultimately embed organisational intelligence within processes. G. improving processes. They can move from one supplier to another searching for the best prices. It also provides easy access to competitors' offers and allows customers to consider every available alternative. their organisations must harness knowledge . getting closer to customers and ultimately staying ahead of competitors.in developing products.. these new highly informed customers are "empowered fruit flies". This is forcing companies to become flexible and responsive to customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers.they can choose between traditional 'bricks-and-mortar' companies. little loyalty. as they have access to more information leading to more informed decision-making. Customers have more options than ever before . or catalogues.forrester. 2000 (www. switching costs are much lower. quick evolution and all the power. As a result.
achieve global reach and realise a new source of cost advantage. how they want and with the levels of customer service they demand. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves. it provides the opportunity to reach customers where they want. which highlights the typical structure and dynamics of an online company. companies have looked upon alliances only as a means of filling gaps. and most traditional partnerships were vertical. when they want. linking companies with suppliers and customers up and down a pre-defined value chain.com) 42 . thus creating a 'value net23'. Increasingly.A Research Report by TeslaGroup. The opportunity of linking the complete supply chain 'virtually'.7. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. alliances and partnerships have taken on a new level of strategic importance. extensive outsourcing. 1999 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Revolutionising Sales and Brand Management The Internet provides companies with a new channel to reach a new breed of customer. It allows companies to improve customer service. information. In this way.teslagroup. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. As such. 23 'The Future of E-Business' . and multiple strategic alliances and partnerships. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. combined with intense competitive pressures. Examples of emerging information age business structures include flat versus hierarchical. advice and convenience. supply chain cooperation. linking companies with competitors and players from entirely different industries and business sectors.(www. variety. and the need for speed and flexibility have accelerated the unbundling of business systems. However. and partnering up with the best for the remaining activities. Traditionally. most Internet and e-commerce partnerships extend beyond this. companies can provide customers with a strong value proposition by offering them the best in quality. The extent of this partnering is illustrated in Figure 4.
'Organising for e-Commerce' .a Boston Consulting Group (BCG) Analysis.they are business issues. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. & Stirton. 43 . S. the pace of business is accelerating and power is shifting to the customer.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. while triggering the emergence of new brandbuilding strategies. New opportunities for efficiency and co-ordination are emerging. Partnering with portals and affiliate web sites is important in driving traffic to a web site. G.7 . while making the offering hard to duplicate off-line. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. D. This provides customers with added value.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. many online companies are blending together the products and services of a wide range of companies. The Internet is transforming every business to some degree. 4. tools and opportunities.dot. This is the substance of the next chapter. it is transforming the competitive landscape and brand-building environment.6 CONCLUSION The Internet and its strategic impact are not technological issues .. April 2000 In an attempt to provide a rich customer experience. competition is intensifying.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
In addition. credit card numbers. The limitations of brand-building on the Internet are also discussed. addresses.durlacher. etc. in most cases. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. This threatens to undermine the value of brands. and projects it onto a third party intermediary (the media). Transactions on the Internet require customers to provide detailed personal information .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Customers derive added value through the provision of information on the products or services they buy. offers interactivity. whereby the company can establish a dialogue and 24 Marathe. the logic of the Internet cuts another way. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy.2 THE NEW DYNAMICS OF BRANDS Traditionally. People only tend to transact with sites they know and trust .sites that provide a wealth of information and make comparison shopping easy.Durlacher Research. In response. they have never handled or seen (except on-screen). May 1999 (www. New strategies and tools for building brands on the Internet are identified. J.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. the Internet makes search and comparison much easier. people have concerns about sharing personal information. many unnamed customers develop a 'relationship' with the brand. 'Internet Portals' . and sites that understand the user's needs and preferences24. including the interactive approach to attracting customers and building loyalty. On the other hand. and the fact that customers are buying goods that. The Internet. 5. However. on the other hand. Generally. 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. brands have been developed in an environment whereby a company creates a brand. where the user feels a part of.com) 45 . Traditionally. has placed greater importance on trust and security. in addition to providing added value.names. as well as on topics of interest related to the brand and product characteristics25. the intangible nature of the Internet..
learn. companies have to find innovative ways of leveraging the information and 25 McCann. M. to its delivery to the customer. this also poses a challenge as these relationships may take on a life and character of their own.. 1997 (www.Harvard Business Review.from the promises made in the value proposition. a company can listen. 'Adding Product Value Through Information'.1 . & Dorf.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. understand and relate to customers.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. B. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. This creates the opportunity for companies to build stronger relationships than previously attainable. In maximising the customer experience. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. relationship building characteristics of the Internet. rather than simply speaking at customers. pp. J. However. TABLE 5.duke.. 1999. Rogers.edu) 26 Peppers. January-February. brand-building must focus on the end-to-end customer experience .. D. Duke University. Prof. . 'Is Your Company Ready for One-to-One Marketing?' . 151-160 46 . In doing so.Fuqua School of Business. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. January 28..1.
it could be argued that customer loyalty is even more critical online.com and www. P. MayJune 2000 30 A Forrester Research Study. L.converence-board. T. companies must ensure that they provide a completely satisfying end-to-end customer experience. 'How to Acquire Customers on the Web'. unless they are selling high-price. - Repeat purchasers spend more and generate larger transactions . J. . D. D. Rastogi.Research by PricewaterhouseCoopers / The Conference Board.. For example.com) 29 Hoffman. 1999 (www.An A. as cited in 'Creating a High-Impact Digital Customer Experience' . Repeat purchasing not only binds trust. high-margin items. it is very unlikely that an online retailer can break even on a one-time shopper. companies need to retain customers so that they return to the site repeatedly.. In fact. but also provides more opportunities for cross-selling.often. 'The Value of Online Customer Loyalty and How You Can Capture it'.pwcglobal. Harvard Business Review.word-of-mouth is the single most effective and economical way online businesses grow their sites.due to more frequent shopping and larger purchases. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. and some are spending over $50029.. March 17. This view is reinforced by in-depth studies carried out by Bain & Co.org) 28 Rigby. and to recover their investment. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . - Repeat customers refer more people and bring in more business . This is further reinforced by the fact that. R. C. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. and with customers holding all the power. 2000 47 .. Kearney White Paper.. customer acquisition costs are high. These points stress the importance of online customer loyalty. and Novak. Zook.. & Hancock. 27 'Electronic Business Outlook'. . on average.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 2000 (www. a disgruntled online customer tells 10 people about a poor experience30. Baveja.A Mainspring Communication Report in collaboration with Bain & Co. Chu.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. - Loyal customers are more willing to buy other products from the company.. T.bain.. S. Therefore. S.
7th Ed. increases disproportionately as more people join the network. additional customers and transactions can be managed with limited fixed cost investment. However. As a result. R. additional products. as illustrated in Figure 5. 'Positive Economics'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. G. Once the up-front investments are made (for research and development and technology infrastructure). Even more important. each additional unit sold does not cost more than the last to deliver. as the benefits of scale are overwhelmed by the disadvantages of size31... where the value of the network. this is not the case on the Internet. and other features can be added or changed at low marginal cost. the costs approach zero32. and in the case of information-based products. Similarly. businesses and online communities that rely on connectivity can enjoy 'network effects'.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. 180-182 48 . FIGURE 5. customisation for individual customers. 1989. and the value that each member realises.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. pp. (London: Harper & Row).1 .1. (also referred to as 'viral economics').
Nov 1998 49 . its ability to track customer preferences and customise offerings improves. No. enhancing the interaction. cross-selling and up-selling33. fulfilment • Defensible advantage against competitors SCALEABLE. 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. Outlook 1999. FIGURE 5. advertising and referrals. M. 21 . being first into a market makes it easier to capture the consumer's share of mind. delivering increased margin per customer .A Shop. With no competitors around. including direct marketing.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. As the company builds a customer base and develops a relationship with customers.org Study in collaboration with The Boston Consulting Group. R.Figure 5. direct marketing.A Publication by Andersen Consulting 'The State of Online Retailing' .2.2 . link revenues 32 33 Melnicoff. '5 Rules of the eEconomy'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. It also allows online companies to tap supplementary revenue streams. This makes it more efficient in improving product selection..
org Study in collaboration with The Boston Consulting Group. The Internet. This is the logic behind some of the extraordinary valuations of Internet companies.A Shop. as it carries the implied endorsement from a friend. 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. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. or until a competitor finds a way to change the game again. with a minimal budget and maximum effect. in turn. leading to the exponential expansion of the customer base. creating a potentially exponential growth (like a virus) in the message's visibility and effect.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. Word-of-mouth is a particularly powerful medium. Given the connectivity of the Internet among customers. and word-of-mouth even more effective. It is often referred to as "word-of-mouth". New marketing strategies. 5. 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 . and "network marketing". As a result. viral marketing is an effective tool in getting a message out fast. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. This snowball effect favours first-movers. "leveraging the media". chat rooms and bulletin boards. as once a strong lead is established. web sites. such as 'viral' marketing. larger sites can leverage more customer advocates to reduce customer acquisition costs. the value of the company rises exponentially with market share.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. Nov 1998 50 . with its e-mail lists. When a company reaches 'critical mass'. 34 'The State of Online Retailing' . makes communication tighter. its growth curve relative to a new entrant is somewhat daunting. As a result. By the time a company has reached critical mass. "creating a buzz". and the cost of switching to an alternative brand becomes quite high. This. the brand begins to take hold. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. commerce and distribution partners.unless the leader makes a serious mistake. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs.
Hotmail. and then propel the message even further to their own ever-increasing circles of friends and associates. a company now owned by Microsoft.com was one of the first free web-based e-mail services.hotmail. saying: • "Get Your Private. friends to visit it.1 The Case of Hotmail. In its first 1. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Geocities enables people to create personal websites for free. When a user builds a website.000 subscribers within a few years of launch.com. Today they are the largest e-mail provider in the world with over 40 million users. sign up for their own free e-mail. and the message spreads organically. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).5. Free Email at http://www.000 subscribers every day. whether for communications or community. where they have never carried out any promotional activities.5 years. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. seven days a week. and they created a subscriber base more rapidly than any company in history. In fact. and in doing so spread the word for Geocities. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. • Each new user becomes a company salesperson.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. A traditional print publication would hope to reach 100. but Hotmail signs up more than 150.com The classic example of viral marketing is Hotmail. they tell all their 51 . eGroups and Geocities (both recently acquired by Yahoo!). If a company can provide a strong enough incentive for customers to share their lists of personal contacts. 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). Hotmail acquired over 12 million subscribers. they will have a powerful viral opportunity at their disposal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.
As 35 36 'Creating a High-Impact Digital Customer Experience' . Chu. 2000 'The E-business Technology Forecast' . . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. T. Price. 2000 37 Rigby. R. Baveja. S. Kearney White Paper. making customers 'click off' to another site..An A. S. Kearney White Paper. D. In fact. The customers' ability to access and display information rapidly is extremely important36.An A.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. Zook. FIGURE 5.. 2000 (www.3 . C. J. March 17.A PricewaterhouseCoopers Report. T.3).com) 52 . & Hancock..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .. 30% of potential customers leave sites because they cannot find what they are looking for. Promotion. Sites that are difficult to use can cause frustration. Rastogi. and 66% of people who start a 'shopping basket' fail to complete the transaction37.bain. 'The Value of Online Customer Loyalty and How You Can Capture it'. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Place). In essence...A Mainspring Communication Report in collaboration with Bain & Co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5..
ease-of-use. whereas a slow response time and site downtime will have a significant negative impact. T.businessweek. expert insights. 38 39 Cognitiative Inc. as cited in Business Week.businessweek. online companies have the opportunity to provide rich. and fast response times are among the most important factors in establishing web brand loyalty38. February 2000 Issue 53 . which can enhance the company's value proposition. October 29.. FIGURE 5. CIO Magazine.4 . 29th October 1999 (www. With almost infinite display space and inventory capability.4.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. and a wide range of products. up-to-date information. as cited in Business Week Magazine. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.com) Davenport. 'Sticky Business'.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. ease-of-navigation. 1999 (www.
& Hagel. Often. 31% of online consumers use the Internet for obtaining product information. A..g.. and organise live events. or prior transactions. J. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. Spring 2000 42 Armstrong. W. 1999 (www. Other content includes community-generated content. On the other hand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. G. . share information and access a wide range of services.. Online sites can track a customer's purchase history and modify its service accordingly.forrester. 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).Sloan Management Review. Clemmer. based on profile information. According to Forrester Research40. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). For a community to work. 40 41 Morrisette. and nearly 20% use it for post-sales support. 3. as well as through loyalty programmes that provide targeted benefits.A Forrester Research Report. An online community offers a compelling way to entice customers back to a site. even if they purchase offline.5). and advertising (if it is relevant and useful). visitors should not be engulfed with too much information.. use bulletin boards. 'Building Stronger Brands through Online Communities' . iVillage and Geocities). No. S. 1995. & Bluestein. which is facilitated by a combination of factors (Figure 5. Community Online communities are emerging as new gathering places for consumers with similar interests (e. 54 .com) McWilliam. Customisation Customisation involves tailoring the presentation of a web-site to individuals. These sites allow members to interact with one another. 'Real Profits from Virtual Communities' . Customisation creates the feeling of a one-to-one relationship. It fosters a sense of belonging41 among the members.. An important contribution of these communities is that they provide members with a medium to communicate with each other. K. demographics. Members can interact in chat rooms. it needs a critical mass of members42.The McKinsey Quarterly. which enhances the user's online experience.
as well as attracting traffic from other sites. This is similar to placing offline stores in high traffic areas. March 1998. Journal of Consumer Research. Site-tosite connectivity focuses on connecting users to other relevant sites..6). 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 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. O'Donnell & Gupta. when membership in the brand's community becomes an end in itself43.. 55 .www. allowing customers to deepen their experience with a brand and build more personal connection. Once customers know of a site. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. Mulcahy. C. they opt to input the URL (Internet address . 343-373. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. A. S.brand-name. Companies can provide a selection of related links that complement the site's purpose and value proposition..5 . M. 43 Fournier. 1999 Communities enhance the speed and value of information sharing.A PricewaterhouseCoopers Study. and can create emotional loyalty. pp. 'Making Real Sense of Virtual Communities' .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.
45 MarketWatch. and online surveys. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. Therefore. Communication can be tailored to specific user interests and should allow for two-way interaction.com) 56 . as well as informing and reminding customers of special offers. customer care activities can involve providing a variety of payment. delivery and return options. customer support at all stages of the interaction is important.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. news up-dates. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. as well as features such as gift-wrapping. activities. events and subjects of interest to the customer. The development of loyalty programmes.6 . Customers share security and privacy concerns. and FAQ pages (Frequently Asked Questions) to solve problems. and can be provided through e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. toll-free telephone numbers. which provide targeted and unique (customised) benefits to the customer. Other tools such as bookmarking the page can also facilitate connectivity. (www. Customer Care Online customers often require assistance and reassurance. online chat. serves this purpose and helps to build customer loyalty. In addition. live chat. It is important in building relationships.marketwatch.
Therefore.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. and bring people to the site for the first time.2. McQuade. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.. Waitman. R.) to online tools. 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 ’ .Awareness. The mechanisms to communicate range from traditional media (TV. 1996. links from directory searches (Connectivity). This model consists of five stages . etc. Magazines. McKinsey Quarterly..com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. including affiliate programmes with other websites.8. Engage. A. e-mail notifications and banner advertisements. modified to take into account of the interactive dynamics of the Internet. No. FIGURE 5. & Zeisser. pp.Attract. The company must build awareness and communicate its value proposition to its target customers.. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. This is more difficult online than offline. billboards.7 . 180-183 (www. Retain. visibility relies solely on Communication. Newspapers. S. Interest. 'Marketing to the Digital Consumer'.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.. M.4 . because there is no physical presence. Adoption). Evaluation. Learn and Relate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.7. Figure 3. Trial.mckinseyquarterly.
5 3.Economist Intelligence Unit 2000 (www.7 4. multiplied by the expected rate of transactions. it is important to quickly engage consumers' interest before they move on. The key factors at this stage are Convenience combined with interesting Content.4 3. discounted over the expected duration of the brand-customer relationship.6 3.4 3.8 4.8 . as cited in 'Targeting Consumers via the Internet' . public relations and television advertising. affiliate programmes.ebusinessforum.4 4. Companies then need to engage customers to obtain their interest and participation. Kapferer's Brand Prism (Ch. 3.2 4.3) is useful to ensure that a company develops a distinct and consistent brand identity. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.3 2. Engage With the multitude of choice available on the Internet. Creativity is also an important factor in gaining attention in today's cluttered marketplace.WEBSITE PROMOTION METHODS . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.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 . Fig.3 Source: Forrester Research.0 3.5) 2. Attracting customers is only the first step in building online brands.1 3.com) The most effective methods are direct e-mail. 58 .3 3.
5. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Certain product categories.g. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications.9). can create value for the customer and help build the brand-customer relationship. This helps to create a customer base that spends more time and money at a site. such as groceries and convenience goods. Learn The Internet provides extensive opportunities to learn about consumers (demographics. and what additional products and services are they interested in provides companies with valuable information which. 59 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.who they are and why they shop online. attitudes and behaviour). and must be continuously updated due to the multiple visit nature of customers. The objective is to increase the conversion rate (% of browsers converted into buyers). Building up a knowledge database on each customer . Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. 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. a company can create value by providing a personalised online experience. Communities and Customisation are other sticky applications.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. TV. and forge closer relationships than any offline operator. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. • The Internet supports brand-building activities where there is a need to build a relationship. if used properly. Content is the basic driver of retaining customers on a site. Radio). The initial site registration provides an early opportunity to obtain useful information.
The interactive brand-building process involves attracting. In order to create "apostles". the interaction provides the ability for companies to learn from their customers and relate. Given the high acquisition costs of online customers. it is not economically feasible to sell certain products. pp. However. The next chapter analyses the brand-building efforts of seven companies. S. A. it is critical for companies to build relationships and foster brand loyalty. 1996. companies must provide a satisfying end-to-end customer experience . 180-183 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.mckinseyquarterly. providing further added value. and as the relationship develops. engaging and retaining customers. touch.2. smell)..from the promises made in the value proposition. No. McKinsey Quarterly. • Brand-building favours products that can be sold online. especially in small quantities. to its delivery to the customer... R.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.9 CONCLUSION On the Internet. & Zeisser. Waitman. McQuade.. the experience is the brand. 60 . M. These case studies provide a practical insight into how companies are building their online brands.9 . The 7Cs Framework outlines the key components of the brand experience and the sources of added value. 5.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. and the need to stimulate the other senses (taste. 'Marketing to the Digital Consumer'. due to high delivery and transaction costs (relative to the value of the product).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
1999 49 'Amazon's Amazing Ambition' . and is one of the few Internet brands that is recognised all over the world. In addition.com.com .see Appendix A.economist.Amazon.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. 2000 (www.It's an Ocean. including: increased selection. 6. combined with its levels of customisation and customer service.com has become synonymous with e-commerce. innovation and delivering on its promises. it is the most visited e-commerce website in America. Through its provision of a one-stop shopping experience. Each case is presented in the same format including.2 CASE STUDY: AMAZON. a company overview. Germany and Japan49.The Economist.com. Barnesandnoble. and other key factors that have contributed to its success (or failure). Amazon. more information. its brand-building strategy (how it generates traffic).1 INTRODUCTION This chapter provides an analysis of seven companies. discounted prices. its value proposition.interbrand.com) . and enjoyable experience. November 11.com and Yahoo!. and has equity investments in several e-tailers.1 Company Overview Amazon. Not a River' . Amazon has cultivated a reputation for excellence. 47 48 Interbrand (www. and higher levels of customisation and service than the traditional shopping experience allows. Amazon serves over 23 million customers from 160 countries. February 26. Gap. and has sales of over $2 billion.com's success stems from its compelling value proposition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).1 outlines Amazon's timeline and major milestones.com) 62 . eBay.COM 6. Amazon has been able to differentiate itself from other online competitors. France. 'Amazon. In addition.com launched with a mission to use the Internet to transform book buying into a fast. greater convenience. It is the 57th most valuable brand in the world47. In July 1995. Amazon. The cases are presented in the following sequence . and one of the top two or three in Britain. the sources of added value (using the 7Cs Framework). easy.2 Value Proposition Amazon.2. 6.com. Boo. Amazon provides increased added value on several dimensions. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Figure 6. CDnow.Goldman Sachs Report.2.
Software.com Auctions and zShops provide new tools to its merchant community .com Electronics and Amazon. universities.Amazon launches lawn & patio store .Amazon announces investment in kozmo.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Amazon launches health and beauty store .com . Ashford. West Virginia.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .Customers can shop at Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Amazon announces further plans to expand distribution network to meet rapid growth.Amazon.toolcrib. and more Amazon launches "Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.New home living store from living.com is founded by Jeff Bezos Amazon.Amazon and eziba.amazon. to meet rapid growth . provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Anywhere.Amazon and online car-buying service Greenlight.com .com. workplaces.TIMELINE AND MAJOR MILESTONES Amazon.sothebys.Amazon.com.Amazon launches www.Amazon. a tools and equipment store for professional tool users and woodworkers .com Amazon acquires Back to Basics Toys to add to Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com enters European book market Microsoft signs Amazon.com via the new wireless pocket PC .com to create a "home living" store at amazon.com announce investment and strategic alliance .com invests in wineshopper.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.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 goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon enters into a strategic partnership with Drugstore.Amazon enters strategic alliance with living.com Amazon invests in Pets.com opens its virtual doors at amazon. and minority investment in.Amazon launches new kitchen store .com Amazon introduces "Purchase CirclesTM". such as the Palm VII organiser. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon surpasses 20 million cumulative customer accounts .Amazon opens a customer service centre in Huntington." providing shopping from wireless devices. Amazon.com and NextCard launch co-branded credit card . featuring thousands of bestseller lists for hometowns.000 members Amazon.COM .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. Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon opens customer service centre in The Hague .com Announce Strategic Investment and Promotional Agreement .com 63 .com .
Palm VII PDA device). the 1-ClickTM express checkout.com Anywhere to support access from wireless devices (i. gift click.1. expert reviews. wish lists. gift reminders. Amazon has added other features for shopping convenience. such as the Amazon.3 Sources of Value . offering multiple paths to a given book or product.e.OVERVIEW OF AMAZON. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. and customer Purchase CirclesTM. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. interviews with authors. The site is easy-to-use. This is an example of 64 .The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. discussion boards. downloads quickly and services visitors adequately . including book jacket images. logically structured. customer testimonials.com All Product search (searches the entire web). FIGURE 6.Figure 6. Content Amazon provides content on several levels.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2. encourage repeat visits and drive higher conversion rates.1 . recommendations. and Amazon. book summaries. mobile phones. and quick-to-load pages Over time.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. live or study. easy-to-use.
creates a competitive advantage. and customer interaction. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. linking it to a large number of other sites. More recently. Connectivity Amazon has built relationships with high traffic web portals and sites. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.thereby increasing conversion rates.2. real-time shipping and backorder notices. and Customisation Amazon provides customised features and services.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. converting them into a storefront for Amazon. therefore. while driving up repeat purchases and cross-selling opportunities.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 . to the proactive notification of new items of interest. In doing so. 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. These are discussed in more detail in Section 6. from the customer recognition at the point of interface (Figure 6. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. Amazon introduced Amazon. which helps to build loyalty and create switching costs. and has developed an Associates Programme. Amazon's content is not reproducible by competition.4. from its shopping basket applications which lists the estimated time to delivery reliably. Community Amazon has also added a community element to the purchasing process. Amazon creates one-to-one relationships with its customers. This customer-centricity is evident in all Amazon's activities.
Business Week. In July 1996. and customers are also e-mailed when the items are shipped from the warehouse.com hot-link and offer specific books of interest to their visitors. This enabled Amazon to reach more customer segments and niches (Figure 6. it began to advertise in print media and online . As a result of all these factors (7Cs). Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Eyes and Editors. In the second half of 1996. Through the first half of 1996. Once orders are placed. New Yorker and The Economist. 6. helped generate publicity and stories about the company in publications such as The Wall Street Journal.a move that along with the novelty of its business model and the newness of the Internet. The Financial Times. help maintain contact and build traffic by e-mailing customers when desired products or books become available. increasing to over 500.2).000 members. Amazon offered Associates referral fees of up to 15%. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. and by 1999 it had over 200. The Associates Programme has been phenomenally successful. Instead of paying directly for this exposure.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. 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. which only applied to sales that resulted from the initial click-through.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.000 by August 2000. Newsweek. In addition. two personalised services.2. enticing them to return to the site and purchase repeatedly. 66 . they are subsequently confirmed by e-mail. attracting member sites of all sizes. and not subsequent purchases.
and you are given a $5 gift certificate for each customer you provide. The Yahoo! agreement. Netscape's Netcenter and NetSearch. In addition. 67 . thereby promoting Amazon.allows customers to create a personal profile (with pictures) on the site.com's website (www.com Refer-A-Friend .2 .com About Me .com gift certificate (in your name). Therefore. Excite. was also linked to Amazon's entry into Europe Amazon.uk the local provider for Yahoo! UK & Ireland. Amazon closed deals with five of the six most visited Internet addresses. free eCards and gift certificates (which customers send to friends.COM'S ASSOCIATES PROGRAMME Source: Amazon. These multimillion-dollar.amazon. each friend is sent a $5 Amazon. and primary button placement on web portal search engines.co.customers are encouraged to provide e-mail addresses of friends. Prodigy and @home. People tend to tell their friends about it. Yahoo!.com).com) Amazon has developed alliances and partnerships with high traffic web portals and sites. the customer acquisition cost is only £10. Amazon also established agreements with AltaVista. Interesting viral initiatives include: • Amazon. and Geocities. spreading the word for Amazon. • Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. In return.de became the local provider for Yahoo! Germany and Amazon. multiyear deals involve exclusive book-selling rights.AMAZON. From July 1997 to December 1998. Amazon has used viral marketing techniques through customer reviews. including: America Online (AOL). mutual links.com.
g.com Really Matter?' . have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. Amazon is building customer loyalty and encouraging repeat business. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon's proven online merchandise selling techniques including easy-to-use search options. 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. community feel (as discussed previously). With this combination of promotional methods. with the explosion of websites. 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. "we had a world-class site the day we launched .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. billboards. Amazon maintains a database of customer preferences. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. and improved customisation and recommendations (e. interesting content. buying patterns and viewing habits. C. And we relied on word-of-mouth to build awareness. 50 Willis. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. 1998 68 . April 6. As the relationship develops.significantly lower than other online companies. Magazines. which accounts for 66% of Amazon's sales.but it was only a tenth as good as the site we have now. 'Does Amazon. so we didn't have to do much advertising. Once customers are attracted to the site. Purchase CirclesTM). Amazon has also incorporated traditional offline media (TV. newspapers) to generate awareness.Forbes. According to Jeff Bezos. That's not possible anymore50". however. clear presentation. By relating to customer needs.. Amazon has been able to achieve average customer acquisition costs of less than $20 .
In addition. According to Jeff Bezos. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'.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're not a stationary target.com Way'. Nevertheless. L. "Online. further enhancing their value proposition. Amazon unveiled a music store. to capture the spirit of the site. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon is constantly seeking new ways of improving its offering. management realised that Amazon had become more associated with other core brand values . Our secret is that we have not been competitor obsessed. and according to Jeff Bezos. and its safe and secure delivery. due to the hype and coverage it was given. As such. We were blessed with a two-year head start. However. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). and to convey its vast size and offering. Saunders. because he wanted it to be short.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 51 52 Hazleton. which within six months propelled Amazon to one of the leading online music retailers. Amazon received criticism for expanding its product line. Amazon was able to secure partnerships and alliances with key players. For example. developing customer service centres and expanding its distribution network to support high levels of service.a wide range of choice. while our competitors have been Amazon. establishing a reputation for excellence and fulfilment. establishing Amazon as the leading online bookseller with a large customer base. Amazon's understanding of its brand identity has been a critical factor. July 1998.. According to Jeff Bezos. This has helped them attract customers and move up the learning curve quickly. R. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. We have been customer obsessed. memorable. In addition. in June 1998. Amazon has been able to build a strong brand at relatively low cost.2. Success. and our goal is to increase that gap51". thereby diluting the value of its association with books. (Oxford: Capstone Publishing). the balance of power shifts away from the company and goes towards the customer. 1999 69 .com obsessed52". 'Business the Amazon. As such. good value..
53 Warner. The key factors driving its growth and high retention rates. however.2. Amazon is claiming to be making profits on its books and music categories. 'Marketers of the Year: Jeff Bezos. 1998 70 . the drain on their cash resources will push them towards bankruptcy. 6. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. B. and to sustain a positive image and satisfactory end-to-end experience. with new products and value added content. speedy delivery and good value. perhaps trying to defend its view that losses taken to build market share can reap profits later. they're stretchable and pliant.. stem from its compelling value proposition and high quality end-to-end customer experience. it has not recorded any profits to date. Amazon delivers on its promises of a wide inventory of products. This raises a critical issue. they have cultivated a reputation for excellence and fulfilment. distribution centres and upgrading the site. However. and investors lose confidence. Volume Discounter' . but over time they become more and more associated with a particular thing and harder to stretch53".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. Although Amazon has successfully built a strong brand and loyal customer base. In doing so.Brandweek. if it continues to incur losses. not necessarily a reality. Quality is only measurable in the minds of visitors to the site. Amazon's intense focus on customer needs and continual innovation. secure payment procedures. Nevertheless. This customer-centricity is a key hallmark of a successful Internet brand. Amazon has continuously invested in customer service. which is critical on the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Amazon also recognised that service quality is a perception. have kept it ahead. October 12. When they're young. as the true value of a brand lies in its sustainability.
COM . Barnesandnoble.com) .com launched its website (www.Barnes & Noble went online at AOL May .Acquires minority stake in NotHarvard.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 . However.com and Microsoft announce that they will create an eBook superstore .Barnes & Noble.com was able to 'hit the ground running'.Barnesandnoble. and 20% owned by the public.Barnes & Noble University opens registration for free online courses .. Dalton bookstores (located in shopping malls). Currently. TABLE 6. is one of the best known traditional booksellers in the United States. music.Launches Affiliate Network December .com is approximately 40% owned by Barnes & Noble. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Offers same day delivery in Manhatten .Launches BNTV .TIMELINE AND MAJOR MILESTONES .Announces distribution relationship with New York Times September . Launched in 1997.com is the fourth largest e-commerce retailer54. prints & posters and related products.2.com provides other online categories offering software. Barnesandnoble. etc. rare.Barnesandnoble.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com).Launches Internet Radio . promotion) between the online store and the retail stores have been kept separate. and is the second largest online bookseller (after Amazon. and 470 B. all front-end operations (marketing.COM 6. 40% owned by Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.com .com's timeline and major milestones is outlined in Figure 6. book databases. as it could capitalise on the infrastructure and back-end operations (warehouses.3. Inc.1 Company Overview Barnesandnoble.Launches Video Store 71 . Barnesandnoble.Acquires equity stake in Mightwords . Barnesandnoble. Barnes & Noble Inc.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com announces strategic relationship with Palm Computing . Besides books. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.barnesandnoble.3 CASE STUDY: BARNESANDNOBLE.) established by its parent company. Barnes & Noble Inc. magazines.2 1997 January BARNESANDNOBLE. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. contacts.
FIGURE 6.com let customers sign up to receive email reviews and announcements of new titles.3 .com and barnesandnoble. In addition.com or www. easy and secure ordering. Both offer detailed bibliographic information. previously-owned and rare books. edition. publisher. however.com's website (www. as cited on Barnesandnoble.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.barnesandnoble.com's (Figure 6.com's virtual storefront is graphically richer than Amazon. rich editorial content and a community experience. etc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Both Amazon.2 Value Proposition Barnesandnoble.com) 72 . 6. the company created a site very similar to Amazon.bn. the features are practically identical.com's and takes a bit longer to download.3.com offers customers an easy-to-search catalogue of virtually every book currently in print. as well as an extended searchable catalogue of millions of out-of-print.3.3). they offer customers fast delivery. Barnes & Noble planned to dominate online book-selling. but instead of developing an outstanding interface to its inventory. in terms of the 7Cs framework. logically structured. including title. music New Initiatives Barnesandnoble. good prices.COM'S WEBSITE Simple. Both have expanded their convenience to offer 54 Media Metrix. software.3 Sources of Value . and easy-to-navigate site Categories focus on books. author.OVERVIEW OF BARNESANDNOBLE.
55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . The 6. They have developed an affiliate programme that links sites to Barnesandnoble. 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 .com's market capitalisation was $251 million. and avoid charging sales tax in states where it has stores56.a replica of Amazon's Associates Programme. compared to Amazon.000 affiliates in its referral network.com.com closed 1999 with 4 million customers. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).64 billion.com in return for a commission on any purchases that they originated .3. and both are expanding globally.com's 1999 revenues were $202. while Amazon. Both offer customisation that permits users to personalise the experience. this programme had more than 300. it lags behind first-mover Amazon. has yet to leverage its strong brand in cyberspace. Netscape and Microsoft Network. however.com was valued at $21. reasons for this are explained in the next section. Lycos. These initiatives have generated traffic to the site.6 million. Webcrawler. Barnesandnoble.4 Brand-Building Strategy Barnesandnoble. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Both offer 'associate programmes' that let other websites link to their sites.com had over 17 million. Barnesandnoble.1 billion. As of February 2000.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. However. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.The Wall Street Journal. Instead. December 17. Both try to foster a community of readers by letting customers post reviews online. 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. Yahoo!. Although. Barnesandnoble. prevent cannibalisation of its existing business.com has created a high quality website and customer experience. and Barnes & Noble Inc. while Amazon.com's $1. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble.
These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. Barnes & Noble University (a free online education resource).com's key differentiator from Amazon.com and VitaminShoppe. By failing to leverage it.com. when it struck reciprocal marketing deals with Expedia. as Bertelsmann's book division includes partners such as Random House. In return.com has lost access to valuable customers.com should have aggressively cross-promoted their stores through advertising. in the attempt to gain traction and build momentum. and a same-day delivery option in Manhattan. with a similar discount. Barnesandnoble. in-store displays.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). and in recent months has aggressively sought new ways to differentiate itself. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. Petsmart. Barnesandnoble. Barnesandnoble. Under the seven separate agreements. Unfortunately. Planetrx. • Barnesandnoble. and leverage its real-world presence. LLbean.com.com. and the tangibility that this provides.com has changed its name to Barnes & Noble. Recent Initiatives Barnesandnoble.com created a new cross-marketing genre in February 2000.com. • In addition.com. or deliver books directly from the retailers.com. each partner offers a similar link to Barnesandnoble.com. content and distribution opportunities.com offers links to each partner's site and a discount for visitors who click-through. • Barnesandnoble. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. To signal its intentions. provides access to valuable resources. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com. 74 .com's link to Bertelsmann AG.com. people began using their stores as a physical showcase for online rivals such as Amazon. and its BMG Entertainment division includes music giants Arista Records and RCA Records. At any given point there are hundreds of customers browsing their aisles looking for something to read. 1-800Flowers.. and Internet terminals in the bookstores.com has begun to acknowledge some of these mistakes.com. Jcrew.com is its association with Barnes & Noble Inc. Barnesandnoble. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble.
by portraying them as slow and clumsy in comparison to the more nimble Amazon.com's experience is instructive.com has been able to create a high impact and high-quality customer experience. Barnesandnoble. and was further up the growth curve. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. In addition. Barnesandnoble. 57 'Bn. August 4. a wellestablished Internet brand. meant that Amazon.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.Not a Best Seller' . The company failed to leverage its established brand. and its lack of innovation (by copying Amazon. and allowed them to offer stock options as compensation and achieve a high market capitalisation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3. customer relationships and offline presence .6 Conclusion Although Barnesandnoble.com and has given them the image of a second rate 'me too' brand.com. even if that means eating into their existing sales.com's late start in 1997. significant market momentum. The Press have also contributed. 2000 (www.Forbes. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. it also caused a major setback. otherwise they risk losing out to other online competitors.com) 75 . 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 has not been able to establish itself as the leading online bookseller.its key differentiating factors. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". feature for feature) has failed to differentiate Barnesandnoble.forbes.com . its failure to leverage its bricks-and-mortar stores to drive traffic to its site.
Finland. Italy and Spain within a few months. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).000 unique visitors . November 2000 January February May 6. sack 20% of staff and sell stock at 40% discount . arranged through J.they redesign site.com had set the record as Europe's best-funded European Internet Start-up. They intended to add France. due to its poor performance and inability to build a customer base. Boo.4. within six months Boo.Raises funding of $125 million .com entered six markets: US.4 CASE STUDY: BOO.com opens its virtual doors' . among others.COM 6. Boo. Boo.com.com provided a range of 18 fashion and footwear brands including DKNY.com collapsed through lack of funds.4.com. If a clothing brand is on the Boo site. Everlast. TABLE 6. and included high profile investors such as Bernard Arnault. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". Puma.Multi-million pound advertising campaign created by BMP DDB . as well as create a kid's site. it means all that brand's product line is available. and Converse. England. On going live.Marketing Week. After a high profile launch. CMO of Boo. founder and Chief Marketing Officer of Boo. 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. 58 Kajsa Leander.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. "our marketing thrust is not based on prices. June 10.Site goes live .2 Value Proposition According to Kajsa Leander.Announces it has only 500. and was billed as one of Europe's hottest e-commerce ventures. Company is put up for sale. Morgan. 1999 76 .1 Company Overview Founded in 1999. Sweden.fails and appoints KPMG as liquidator.COM . as cited in 'Boo.3 1999 Mid year BOO.First sign of problems . Boo. it's about range and convenience. not the limited range you might get at most London fashion shops58". However. Germany and Denmark.Appeals for $30 million more funding . P. and the resulting loss of investors' confidence. and eventually debut in Asia. receiving $125 million of funding.TIMELINE AND MAJOR MILESTONES .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
and they aim to "make every visit to the site.. On 19th July 2000. & Novak. former arch rival . and an average daily audience of over 800. $22.Launches merged CDnow/N2K site .1 Company Overview Founded in 1994.5 million distribution deal with Lycos Signs three-year.000 music-related products and 650. CDnow provides access to over 500.179-188 63 CDnow website (www.Site goes live .com) 80 .Raises $10 million through private placement .000 sound samples. customisation and a wealth of information and content to help in the purchase decision. a valuable and rewarding experience"63.5. pp. whether for browsing or buying. 'How to Acquire Customers on the Web' . $18.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Harvard Business Review. D. announce marketing alliance . good prices.TIMELINE AND MAJOR MILESTONES .5.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.5 CASE STUDY: CDNOW 6. and exclusive interviews and reviews from CDnow's award-winning editorial staff.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .Forges distribution partnership with Yahoo! $65. CDnow is the leading online music store. 62 Hoffman. by twin brothers Jason and Matt Olim. daily music news. CDnow was acquired by Bertelsmann AG. CDnow is also driving the digital distribution of music.000 music related items .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. It has a customer base of 4 million people. cover art. T.cdnow. convenience.Merges with Columbia Records . as well as music reviews.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. TABLE 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .000 people. This unprecedented degree of access to music and information is the core of CDnow's value proposition.Partnership program with Geffen Records . and one of the most popular shopping sites on the Internet62. guides to music genres. features. and was the first site to offer the sale of music downloads and custom CDs.CDnow and Time Inc.Merges with N2K. May-June 2000.ten times the selection of a conventional bricks-and-mortar music store).
OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. For example. and has secured rights to music reviews. easy-tonavigate.3 Sources of Value . CDnow has cultivated similar relationships with MTV. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.5.Figure 6. to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has leveraged the reputation of their brands to reinforce its own.. artists biographies. FIGURE 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 . etc. By partnering with well-known content providers.5. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). cover art.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. 81 . The whole process of searching for albums or music titles to the actual purchase is simple .
they will be reluctant to visit another online store and enter the information again. By customising the store to meets customers' needs. Internet access providers. Whenever a customer makes a purchase they earn Fast Forward Reward points.such as AOL. allowing them to respond to detailed customer queries. CDnow developed the Fast Forward Rewards programme. Excite. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. which accumulate and can be spent on a variety of music-related products.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content).search engines. Other features such as My CDnow's Wish List. Spanish. Customer Care CDnow's site can be viewed in English. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . In addition. it gives them a sense of ownership and a compelling reason for them to return. and key news and entertainment sites . Community CDnow has not exploited the potential of creating a community feel. 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. Dutch and Japanese. Due to International interest. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. German. Yahoo!. and Geocities as well as more focused specialist sites. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Portuguese. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . an incentive programme that rewards customers and encourages them to connect back to the site. 82 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. CDnow hired a group of multilingual customer service representatives to handle questions. It also creates switching costs. allow customers to keep track of albums to buy in the future. Italian. French.
They have also stuck exclusive alliances with AOL. CDnow's initiatives include: • Banner Ads . they buy from CDnow. print advertising is music-related publications such as Rolling Stone. According to Jason Olim. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.5. By keeping the brand in front of the customer in this way. Yahoo!. CDnow is doing everything it can to ensure that the next time that 6. CDnow extended its distribution reach to include more than 250. • Affiliate Programme . this is their "most successful customer building programme64". These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. customers buy music. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. music-oriented websites. Spin. 83 . Excite and other powerful Internet content and service providers.CDnow's advertisements are targeted to some degree. • Traditional offline Media .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.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. It is a revenue-sharing arrangement. covering the entire music spectrum. and spot radio to build reach.Through the Cosmic Credit Programme. and Variety.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL.000 small. • Alliances and Partnerships . and radio spots on the Howard Stern Show to build a cult following among radio listeners. as well as more-targeted music-related sites like Billboard.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .htm) 84 . resulting in increased conversion rates. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. as a way to fuel very lucrative word of mouth. with repeat customers accounting for more than 50% of sales.hsny.com/cdnow.4 million. it is in this context that the large investments in advertising and partnerships make sense. and scaled it awareness-building efforts. both in the online and offline worlds. In fact. • Word-of-Mouth .5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum.4 million). 1998 . with 44% of sales coming from new customers65.5. word-of-mouth accounts for the lion's share of CDnow's customers. April 28.CDnow made public relations a high priority brand-building tool. 6. Public relations efforts helped to generate word of mouth and influence sales. The company continually pushed for new distribution partnerships to widen its sphere of influence. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .As for many successful online retailers.(www.Press Release.cdnow. CDnow's promotion strategies have attracted high levels of traffic.com) 65 'Pioneering in Cyberspace' .they were the first site to offer the sale of music downloads and custom CDs. This has contributed to a 225% increase in sales (1997: $17. 1998: $56. The story of how CDnow was founded in a basement. It is constantly adding new functionality to the site and has been innovative in its offering . and to increases in the customer base of more than 30% quarter-to-quarter. It is a powerful source of acquiring new customers at low cost.Hampel & Stefanides (www.
5. combined with the high impact customer experience created . and innovative. "eBrands .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. 2000 p. The development of an extensive affiliate network. P. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. 6. "eBrands . This gives the customer the impression that the order is being handled quickly. CEO of CDnow. 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 . to ensure quick delivery to customers. P. CDnow has developed a relationship with Valley Records. According to Jason Olim. 2000 p. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. as cited in Carpenter.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.it's what you do66". This. It was able to create a strong value proposition and high quality customer experience. 66 Jason Olim. a record distributor that handles the majority of CDnow's fulfilment logistics.Building an Internet Business at Breakneck Speed". (Boston: Harvard Business School Press). and ensure that it exploits its early-mover advantage and keeps ahead of competition.75 85 .6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw.Building an Internet Business at Breakneck Speed". CEO of CDnow. 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. "your brand is not just what you say . (Boston: Harvard Business School Press). "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this.89 67 Jason Olim. They also provide the customer with an order number and customer support contact information should they have questions. as cited in Carpenter.
com) 'eBay . 24 hour a day. as cited in 'eBay .Company Overview' .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 website (www. and eBay never takes possession of the item being sold.6. with emphasis being placed on its unique community feel and culture. 6. shipping. eBay is not about auctions. (A)' .A Harvard Business School Case Study. global trading place for buying and selling personal items in an entertaining auction format. Since its launch in September 1995. 1st October 1999 86 .the closest thing in the offline world are trading forums such as classified ads. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. and eBay receives a transaction fee that ranges from 1.removing the need for inventory. transportation and other overhead costs. payment) between themselves. Sellers pay a nominal fee for placing an item up for sale.efficient one-to-one trading in an auction format. or the payment for the item .ebay.com) 70 'Meg Whitman at eBay Inc.782 million in January 200068.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Company Overview' . Auctions are an enabler.000 new items joining the "for sale" list every 24 hours69. The buyer and the seller work out the logistics of the transport (e. "at its core.25% to 5% of the final sale price on any item sold.6. This is a new market . flea markets and auctions.2 Value Proposition eBay offers consumers an efficient. garage sales.g. and eBay provides added value through its convenience. There are over half a million new auctions. from collectibles and antiques to electronics and toys. Auctions represent a platform.eBay website (www. extensive selection and geographical reach. with the number of unique daily visitors setting a record of 1.6 CASE STUDY: EBAY 6. the eBay community has grown to include more than 10 million registered users. and 450. People perceive the auction format to offer better prices.ebay. According to Meg Whitman. CEO of eBay. Auctions make it fun. Individuals use eBay to buy and sell items in more than 4.300 categories. collectable shows. eBay effectively created a new business model never before possible .
1 is have a great customer experience71".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 .Launches "My eBay!" to customise the online auction experience . and in terms of the '7Cs'. Unlike the previous case studies discussed.eBay acquires Kruse International . they try to influence customer behaviour by encouraging them to adopt certain values.eBay and First Auction sign a partnership agreement . and two books -.eBay acquires alando. the eBay customer experience is based on how their customers deal with each other. Selling.eBay and AOL launch co-branded site . and raises $700 million .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 you only get word-of-mouth if you have a great customer experience. So brand-building job No. allowing users to create personal homepages .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. . The Official eBay Guide to Buying. Norfolk & Virginia Beach. Dallas & Fort Worth.eBay acquires Butterfield & Butterfield. 21st May 1999 (www. "the first brand-building strategy that we have is to have a great customer experience. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay launches 'About Me' feature. Providence.com to provide automotive service for eBay Users .eBay goes wireless with Palm VII connected organiser .Business Week. as they rarely deal directly with the company.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .S.Compaq Computer Corporation and eBay form a strategic U. .3 Sources of Value .eBay introduces eBay Magazine in collaboration with Krause Publications.eBay and Ultimatebid.eBay acquires Jump Inc. Seattle & Tacoma.eBay expands strategic relationship with Netscape . and Collecting Just About Anything and eBay for Dummies.eBay IPOed raising $58 million . Boston. Nashville.de .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .businessweek. Las Vegas. Still the vast majority of our new users come from word-of-mouth.The 7Cs Framework According to Meg Whitman. emphasis is placed on community development and customer care. Milwaukee.Germany's leading online person-to-person trading site .America Online and eBay announce strategic marketing alliance .com) 87 .eBay acquires Blackthorne Software GO.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. co-marketing relationship. and Salt Lake City . This raises challenges in how to control and influence the customer experience. and its online trading site (Up4Sale) .eBay teams up with Carclub. Since eBay cannot control how one person treats another.6.Com form alliance - 6.eBay goes live in Australia .eBay goes live .eBay launches local websites in Baltimore & Washington DC.
6 . angering hundreds of thousands of eBay users. Other content includes the banner ads. 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. easy-to-use online service (Figure 6. Nevertheless. which is much more demanding on the system. Content Content is primarily user generated through the items listed for sale. increasing the risk of outages. eBay has also expanded to accommodate access through wireless devices for added convenience. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. and adds to the experience and the discovery of the auction process. eBay's site has to process thousands of live bids simultaneously.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. eBay had a 'wake up call' when the website crashed for 8 hours. they have continually invested in system capacity. This contributes to the community feel. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. and since. categorically arranged. topically arranged.6). FIGURE 6.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. 88 .
each user is encouraged to submit feedback through eBay's 'Feedback Forum'. It is a place where people can meet with similar interests. and in doing so. For many 'eBayers' . eBay's community has a distinct culture based on trust. and there are several reports of eBay users vacationing together.eBay represents more than just a place to buy and sell goods. To encourage this sense of community. has enabled eBay to foster a strong sense of community on its site. discuss topics they care about. Recent initiatives such as the development of local websites in major US cities (e. After a sale. and share information. for the people". autonomy. a monthly newsletter. and is considered by many users as one of the best features on the website. empowerment and equality. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. which is then added to the partner's trading profile. 89 . eBay Boston.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. eBay offers its users category-specific chat rooms. the community spirit and personal relationships also transcend the online experience. by the people. which is posted to the site.as eBay users refer to themselves . respect. This has created a self-regulating mechanism that encourages good behaviour. In addition. e-mail. the culture has come under strain due to the company's rapid growth from a small community into a "big city".g. 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. However. eBay Salt Lake City) have helped them restore that community feel. working together and helping each other offline. Whitman describes eBay's community culture as a site "of the people. 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). bulletin boards.
in which the company hired active. which was dedicated to monitoring the site for illegal and infringing activities. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. but they have other partnerships with over 150 websites of varying scales. eBay has invested in customer care and support to ensure people conduct safe transactions. its user community. This was later expanded to include customer support representatives who worked out of eBay's headquarters. shill bidding) and helping to resolve user-to-user conflicts.the Community Watch group. the largest of which was with AOL. fraud. links to high traffic sites. Customer support activities were constantly upgraded and expanded as the business developed. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. and the Safe Harbour group. 90 . which was dedicated to investigating misuses of the system (e. eBay employed a "remote" customer support model. answering e-mails and responding to questions posted on the site's bulletin boards. Communication eBay maintains close communication with its members.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. and willingness to empower. As such. eBay's approach to customer care has evolved over time. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. and the introduction of two specialised customer support groups . and respected members of its own user community to serve as customer support representatives. eBay was able to cost-effectively offer 24x7 customer support early on. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. These people worked from their homes. This also reinforced the company's respect for. eBay also engaged in marketing partnerships. geographically dispersed users as customer support representatives.g. knowledgeable. By using its own enthusiastic. Customer Care eBay controls neither end of the transaction. During the first two years.
and Collecting Just About Anything and eBay for Dummies. Based on this.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. eBay decided that it would not enter into major portal advertising deals in the short term. Early on. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). The AOL partnership was one of the largest strategic partnerships on the Internet . Doll Collector) and appearance in trade shows. Through this combination of its advertising efforts and targeted promotions. who tended to be serious collectors.3 million in advertising. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Selling. they spent $12. In 1998. eBay Magazine.a four-year. eBay transformed from a pure online play into a 'clicks-and-mortar' company. 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. the largest of which was with AOL. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. but they have other partnerships with over 150 websites of varying scales. they decided to target their marketing efforts on these heavy users. 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.6. These new publications appeal to the collecting spirit. As a result. and two books. as a result of the high quality experience it provides. and highlight opportunities created by e-commerce. representing about 40% of revenues. and facilitate the spread of positive wordof-mouth. provide a wealth of information about the 'ins and outs' of trading on eBay.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. eBay has been able to attract a large customer base. The Official eBay Guide to Buying. and maintained the same ratio for 1999. eBay has since expanded its promotion efforts and engaged in marketing partnerships. $75 million joint marketing alliance and development deal.g. 91 . Mary Beth's Beanie World. Recent promotional initiatives include its new publication. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.
As a result.the ultimate network effect . eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. 6.5 Conclusion eBay's compelling value proposition. However.businessweek. as they could not opt for a 'go slow' strategy. eBay attracts a broader selection of buyers. This is achieved by listening to their community (learning) and developing new improved products and services (relating). This has become part of the eBay culture. have been key factors that have contributed to the success of the brand. the Personal Shopper and the eBay Life Newsletter.Business Week. 21st May 1999 (www. have been instrumental in building a 'quality' customer base. such as the Feedback Form. their ability to create a new market using Internet technology. which were all ideas of eBay users. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. eBay has also faced difficult challenges in scaling the organisation fast enough. and according to Meg Whitman. Their focus on heavy users and targeted promotions.6. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. however.com) 92 . eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . "the devil in so much of this is in the detail. and their first-mover advantage.contributing to its strong lead and competitive advantage. which in turn attracts more sellers . which has established eBay above other online auction communities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET eBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer 'lock-in'. and according to research carried out by eBay. And while we have to move very. very fast. I think you are not well served by moving incredibly rapidly and not doing things well72".
Business Week.2 Value Proposition Gap's simple.gapinc.1 Company Overview Gap opened its first store in San Francisco in 1969. up from $20 million in 199875.COM 6. as cited in Lee. and provides useful insight into how traditional brands can leverage their strength online. This success is largely due to their simple formula . Inc. L. from jeans and T-shirts to khakis and jackets.com' .'s website (www. Gap. whether in the store or online76". and analysts estimate that sales in 1999 amounted to $50 . The Gap offers a balance of modern and seasonal styles of clothing.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. L. In addition.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. In late 1997. October 8.com' .com. standard styles are well suited to online shopping. letting customers access the Gap brands. Gap online exploits the accessibility and convenience of the Internet.7.htm) 75 Jeanne Jackson.$100 million. announce multi-year partnership. October 8. 73 74 Interbrand (www. Gap Inc. as cited in Lee. and Gap online provides access to the full range of items at Gap.com is an example of successful crossover marketing. however.800 stores in the US. surpasses $9 billion in net sales and increase earnings by 54% over previous year.com/about_us.7 CASE STUDY: GAP. and today it is the 29th most valuable brand in the world73.babygap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and BabyGap.see Appendix A Gap. from shirts to accessories and hard-to-find sizes. TABLE 6. Germany and Japan. 1999 76 Jeanne Jackson. online sales are only available to US customers. Currently. head of Gap Online.7. 'Clicks and Mortar at Gap.com) . the growth prospects are enormous. America Online (AOL) and Gap Inc. California GapKids opens its first store BabyGap is born Gap opens its online store at www. Its reach extends across more than 1.interbrand.COM .an early convert to the then-revolutionary idea of clothes retailing on the Internet. UK.gap. "this is about being clicks-and-mortar. service and value to everyone74". Gap's online sales tripled in 1998 alone. Canada. 1999 93 .gapkids. and are still relatively small compared to Gap's $9 billion in annual sales. Gap started selling items online .Business Week.com and www. According to Jeanne Jackson. GapKids."to deliver style. 6. 'Clicks and Mortar at Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. to provide customers with greater convenience and options.
Simple. making it convenient.The 7Cs Framework In terms of the 7Cs framework. Executive Vice President of Global Marketing... from the blue and white colour scheme to the easy-toshop format . and Customer Care. feel and design of the site is consistent with the bricks-and-mortar stores.7.. very efficient"77. but provides customers with the option of viewing text-only. describes the company's brand personality as "direct and straightforward.7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Michael McCadden... Visiting the gap. Content. reinforcing its brand identity.very easy.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.. 'Mind the Gap'.com store one immediately notices the consistency between the online and retail stores. 1998 94 . April 18.. FIGURE 6.com.3 Sources of Value .. making navigation even faster. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.making visual references to its offline roots. and easy-to-use. the extensive integration of Gap's online and offline activities are clearly evident. The site also offers sharp graphics. Gap Online primarily focuses on Convenience. This personality is reinforced online through the simple structure and layout. Unlike Barnesandnoble. The Observer. D.
95 .as most Gap online shoppers have a good idea of how Gap clothes fit. The Gap site connects to other Gap online stores including GapKids and BabyGap.com. and BabyGap. Unlike the case of Boo. Gap made a decision to charge sales tax on online sales. promoting its specials and including links directly to items on Gap's website. which would not be possible in the store. twice a month. Gap communicates with customers through customised e-mails. Gap's simple. customers can return goods purchased online to their neighbourhood store.com also provides a Gift Central feature which offers gift suggestion from Gap. and customers can view their latest TV adverts for buying inspiration.com's content consists of detailed information on its full range of products. In addition. Gap has also developed an affiliate programme.com allows customers to track the status of online purchases and provides contact information on the nearest store. In order to integrate its offline and online operations and logistics. and had recently established marketing deals with AOL and CDnow. GapKids. Gap. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. standard styles are well suited to online clothes shopping. allowing shoppers to contrast different cuts and styles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. without causing complications. and customers can register to get e-mail reminders of upcoming holidays and birthdays. and goods bought online get returned at the same rate as store purchases . once customers are registered online. Gap does not provide any community features on its site. as well as sample all of the latest shades of fingernail polish on a virtual hand. By doing so. However. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Gap.
Most of Gap's online traffic is generated by leveraging its physical presence. by displaying the URL (www.gap. by offering a 10% discount and free shipping on their first online purchase. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.ship". they send the customer a $20 Gap ShopCard.7. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.com. which can be used towards future purchases. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.4 Brand-Building Strategy .gap. providing a useful way to directly reach customers.com in return for a 5% commission on every sale referred through the site. In certain high traffic Gap and GapKids stores. • Gap. on counter cards. on shopping bags and even on the cash register. either online or in stores.com has links with CDnow to cross promote websites.com" on the display screens between transactions.com has been able to piggy-back on The Gap's offline advertisements (in TV.Extensive Integration Gap. it is fully leveraging its offline presence to build awareness. Gap secured a 3-year commerce and marketing agreement with AOL. billboards. Gap has held in-store campaigns to get customers to submit their e-mail addresses.shop. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. To convert walk-in shoppers to cybershoppers.) that also promote the online store. In addition. or to refer shoppers to Gap's website. These efforts doubled the size of Gap's e-mail database. Magazines.com) in store windows with the slogan "surf. which displays "Shop online at www. etc. Gap has also supplemented this with online promotions: • In August 1999. however. • Gap.com has also created an affiliate programme encouraging sites to establish links to gap. whereby for every $100 a customer spends at Gap Online. • They offer Online discounts and promotions such as the ShopCard. 96 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
97 . and allowing each to leverage the strengths of the other. and can also provide access to different customer segments who may not usually buy the products at all .7.com is an example of successful crossover marketing. Pure online players have to invest heavily in logistics. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. Gap had a significant advantage over pure online players in attracting customers and building critical mass. By aggressively marketing both the stores and the website. provides existing customers with added value through the convenience of purchasing online. whereas established companies. such as Gap. The Internet. With their brand awareness and network of retail outlets. have already established the back-end operations and can use them as the cornerstone of their online business.thereby increasing the company's reach. while reaping the benefits of low customer acquisition costs and extended reach.5 Conclusion Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. on the other hand. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. thereby reinforcing its brand identity. Gap has been able to significantly strengthen their brand-customer relationship.
businessweek. The Stock' . and the number of websites continues to explode. two Ph. lies the directory . 78 79 Interbrand (www.com) 98 .1 Company Overview In April 1994.interbrand. the site was receiving 1 million hits per day. According to Timothy Koogle. The concept exploded (through word-of-mouth) and in less than six months.8. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. The Strategy.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. 6. household and business user reach. There's nothing in the real world to compare to that79". CEO of Yahoo!. the amount of information. who started an online guide as a way to keep track of their personal interests on the Internet.2 Value Proposition At the core of Yahoo!'s value proposition.8 CASE STUDY: YAHOO! 6. Yahoo! is a leading guide in terms of traffic.see Appendix A 'Yahoo! . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. 1998 (www.The Company. As such. Yahoo! has since morphed from an ordinary search service into a global Internet communications. from e-mail services to stock quotes and much more. As the first online navigational guide to the web. advertising. and is one of the few Internet companies to turn a profit early in the development of the Internet. all in a single location. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. Yahoo! offers a range of supporting services that add value.Business Week.D students at Stanford University.8. The company's global web network includes 23 world properties outside the US. Yahoo! was founded by David Filo and Jerry Yang.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com) . September 7.
Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! forms agreements with Palm Inc. 99 . . to provide web-based services to PalmTM handheld computers . and unveils Yahoo! Digital Introduces Bill Payment services .Receives $1 million in venture capital funding from Sequoia Capital $33.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.The 7Cs Framework Convenience Central to Yahoo!'s success.com allowing them to offer person-person payment solutions .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 .600. Yahoo! extended its convenience through its Yahoo! Everywhere service. regardless of platform (i. mobiles.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.Yahoo! unveils Yahoo! Finance Vision . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.000 shares at $13. More recently.Yahoo! Shopping launches personalised shopping service 6. is the way it has structured and displayed information.8).TIMELINE AND MAJOR MILESTONES 1994 April . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Site goes live September .Yahoo! acquires eGroups . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! acquires Arthas.com.8 million IPO (2.3 Sources of Value . TVs. to allow access.7 YAHOO! .Yahoo! Launches Business-to-Business Marketplace .8.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.e. Palm computers). Their goal is not to list everything under the sun..
while providing partners access to a large customer base. and has been at the heart of Yahoo!'s growth and development.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. Their thrust has been to provide valuable content to customers. the partner.com and CDnow. This creates a win-win situation as its satisfies Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. the end-user. and more importantly. By tailoring the information to users' preferences. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and is similar to a custom tailored newspaper (Figure 6. easy-touse. They have formed multiple alliances and partnerships with leading online companies such as Amazon.8 . 100 . ranging from daily news and weather reports to road maps and books.9). Yahoo! has increased customer loyalty and retention rates. from stocks and sports results to weather and air fares. 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. well structured.
fax. message boards. to provide its customer base with access to useful links and content. Yahoo! spends more on customer support than most companies. Yahoo! acquired GeoCities. Yahoo! has also implemented campaigns to persuade users to bookmark the site. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. reinforcing the brandcustomer relationship. and is driving Yahoo!'s multiple partnerships and alliances. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Connectivity Connectivity is Yahoo!'s core product. and contributing to their reputation as a quality service provider. Customer Care Yahoo! responds to customer inquiries via e-mail. telephone and even traditional mail.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and the nature of the navigation business. 101 . one-to-many. and e-mail. and many-to-many. It keeps customers on the site for longer periods. and encourages them to return frequently. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. and plans to incorporate other features such as online chat to facilitate communications.9 . where groups of people with shared interests can communicate through chat. or to make it their home page. In 1999.
TV commercials and radio spots during drive time.people who are not yet online but are likely to use the Internet in the near future. Yahoo!'s brand-building success starts with its name. and it formed a critical link in Yahoo!'s brandbuilding strategy.8. as experience surfers tend to be loyal to their search engine. This was especially important. Yahoo! avoided characterising itself as a technology-oriented company. therefore.4 Brand-Building Strategy Yahoo! is a marketing machine. Yahoo! also encourages customers to e-mail ideas and feedback. recognise the name Yahoo!. which conveyed the brand's irreverent personality.intelliquest.com) 102 . and according to Intelliquest80. 6. and an inherent friendliness. These near surfers represented (and still do) a large and fast growing group and. In 1996. Yahoo! would be one of the first sites that they visited. 80 'Web Survey Shows Yahoo! Tops'. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". and through communications via email.a sense of irreverence. Yahoo! maintains close contact with customers. and its implications of a good time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. 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. (www. As a result. At the time this was considered a breakthrough. Yahoo! extended beyond this to use traditional offline media. While Internet companies were targeting existing Internet users through the use of online promotion methods. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . Their strategy was to target "near surfers" . Yahoo! aggressively promoted the site through public relations. by building a recognised brand name. Given the unease with which the average consumer approaches technology. an approachable nature. 82% of Internet users and 23% of people intending to go online. Intelliquest.
August 26. which has been instrumental in establishing Yahoo! as a household name. s4 103 . Yahoo! adopted 'guerrilla marketing' techniques .Yahoo! Press Release. breath mints. VP-Brand Marketing. We need to be one step ahead in order to have a better service than our competition82". May 3. a monthly magazine guide to what's new on the web and it has co-branded products. Yahoo! has paid little for this exposure. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . organisers. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. According to a recent study. services and contests with well known brands such as Ben & Jerry's. 1999. They also teamed up with publisher Ziff-Davis Co. T-shirts. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. p.with its name being plastered on everything. According to Karen Edwards. and 76% turned to Yahoo! before visiting another search engine or navigational site. ER) and Hollywood movies. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . Yahoo! has managed to cultivate high brand loyalty.higher than all other services81. it's too late. new services and customised features highlight their ability to relate to customers' needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. including backpacks.it must reinforce the image of the company as 'a service that is fun. a little wacky and inviting'.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . They even have a barter deal with the San Francisco 49ers. 1997 (www. the research shows that 73% of Yahoo! users bookmark the service . customers quickly discover its value and through a high quality experience (7Cs). as well as TV shows (Ally McBeal.yahoo. In addition. parachutes. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites.Advertising Age. Once customers access the site. sailboats. Visa and MCI. and yo-yos. snowboards. stating that "if we wait to hear about it in the news. Although this seems like a shotgun approach. Their innovation. to create Yahoo! Internet Life. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen.
while attracting new customers. Yahoo! has built a strong brand. GoTo. HotBot. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands.Advertising Age. alliances and acquisitions to provide added value services to their customers. As the first online navigational guide to the web. As a result of all these factors. 6. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. In addition. they have carried out extensive partnering. and its openness (for example. To maintain its lead. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. its choice of partners.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. VPBrand Marketing of Yahoo!. Yahoo! has invested relentlessly in new services and marketing programmes. that have set it apart from the pack. its excellent customer service. These relationships have provided end-users with added-value. They have maintained that lead through the creation of a high quality end-to-end customer experience. from its convenient and logical structure and display of information. Yahoo! has benefited from a first-mover advantage. first to go public. to its simple design. p. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". if a user cannot find what it is searching for. and first to go mainstream by advertising its name using traditional media. with a large customer base and high levels of customer loyalty. May 3. In addition. 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. s4 104 .8. first to turn around an annual profit.8. and has cultivated a reputation for excellence. have created a distinct brand identity that differentiates the brand and appeals to its target market. their innovative promotional and guerrilla marketing techniques. 1999.6 Conclusion Yahoo! is one of the most successful brands on the Internet. while also associating Yahoo! with well known brands.com. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' .5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. Yahoo! points them to its competitors by including links to AltaVista.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
particularly to secure content and widen reach to new customer segments and niches. By distinguishing their offering and focusing on unique sources of value-added. Alliances and partnerships play an important role in achieving speed and momentum. and by partnering with well-known brands. a company can leverage the partner's brand and reputation to reinforce its own. to distinguish themselves from competitors. 108 . As a result. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. content. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. but also provide added value to the brand community. as well as determine how far the brand can be meaningfully stretched to other products and market segments. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. these companies must have an inherent understanding of their brand identity and core values. In addition. brands are harder for competitors to emulate. variety. leading brands have focused on building strong partnerships and alliances. The most successful partnerships are symbiotic matches. whereby each party benefits from the other's expertise or skills. while ultimately benefiting the end-customers. integrated customer acquisition strategies. before it fractures. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. to maintain consistency.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. these companies are creating even stronger value propositions. and exclusive alliances can lock out competitors from valuable content or online real estate. offering customers the best in quality. and convenience. ranging from online methods to traditional offline media. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition.
customisation and customer care. and are continuously adding new services and functionality to their sites. through past transactions and solicited input. and benefited from additional hype. The challenge then lies in keeping up the momentum. By getting to market early. It locks up important content and distribution partnerships. and extensive word-of-mouth due to its novelty. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. and develop a detailed understanding of their customers' needs. Many strong online brands were also early-movers on the Internet. giving the brand an edge. 109 . and it aligns itself with the most influential venture capital sources. • 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. As Internet penetration exploded. and by focusing on customer needs. and differentiating it from other brands. These brands are accumulating knowledge about customers. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. In many cases. to create new services and content that satisfy customer needs. A first-mover advantage is an important asset for an online brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. the company benefits from the buzz. and traffic. these well-publicised brands also took off. are leveraging this customer knowledge (learning) to nurture relationships (relate). Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. 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. that comes with innovation. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. these innovations are difficult for competitors to reproduce. By leveraging unique customer information. by providing better services.
but at the same time. however. the concepts.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. They possess critical assets that give them an advantage over pure online start-ups. 110 . while reaping the benefits of lower customer acquisition costs and extended reach. They have an established brand. Nevertheless. there has been a limited time horizon to evaluate the durability of Internet brands. building relationships and satisfying needs.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. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. and a physical presence (tangibility) . In addition. tools and key factors outlined in this dissertation are also applicable to business markets. established fulfilment systems and infrastructure. Having established a strategic perspective on building online brands. The Internet has radically changed the business and competitive environments. would represent an exciting opportunity for further research. drawing on several case studies from business markets. ongoing research would be necessary to build on the findings of this dissertation. 7. clicks-andmortar brands are providing customers with true added-value. with the emergence of wireless access and new platforms. an in-depth analysis.value remains (and always will) the basic building block for every successful brand. Brands and brand-building tools tend to be associated with consumer markets.factors that clearly differentiate them from pure players. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. established customer relationships. Through extensive and seamless integration. they are equally important in business markets. expand the brand experience to meet customers' expectations in the online world. Therefore. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Nevertheless. In doing so. Yet while everything is being turned upside down. one component remains unchanged . this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. As such.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
845 56.985 2.804 2.281 11.interbrand.830 14.806 11.766 14.319 1.423 2.595 17.043 8.052 6.231 12.781 33.527 3.422 1.275 30.464 3.101 9.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .909 7.155 7.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) 83.761 1.310 11.361 1.781 17.648 1.894 14.147 9.654 43.510 8.792 3.681 2.193 112 .806 2.550 12.Interbrand's Ranking of the Top 60 Brands (www.132 15.262 1.197 32.602 4.404 4.502 33.048 20.643 3.231 24.021 26.568 3.329 4.694 17.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.932 4.283 4.076 3.603 5.225 11.596 3.181 21.895 2.634 1.313 2.184 1.143 2.
As such.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. activities. It is critical that all these dimensions come together and are re-enforcing. 1982 113 . As a result. (Harper & Row). the informal management style and the constant strategy re-calibration. & Waterman. and as the business environment changes. showing how they are interrelated. all these dimensions must change accordingly. constantly innovate. and reorganise as appropriate. However. commit and deploy resources.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . T. with the fast pace of technological change. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. * Peters. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. Internet companies must be able to move at warp-speed. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities.. R. They must move quickly to capture new opportunities. whereas entrepreneurial Internet companies must focus on 'managing for change'. 'In Search of Excellence'. customer empowerment. respond to competitive and market dynamics. and structures are aligned differently. all their operations. global competition. and the emergence of a knowledgebased economy.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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