S U C C E S S F U L

ON

THE

INTERNET

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
AT THE

UNIVERSITY OF CAMBRIDGE

ROBIN S. CLELAND
SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CONTENTS
SUBJECT PAGE

CHAPTER 1
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure

INTRODUCTION

6
7 9 9 11

CHAPTER 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

THE NATURE OF BRANDS

12
13 13 14 15 16 18 19 20 22 22 23

2.9

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

CHAPTER 3
3.1 3.2 3.3

BUILDING BRANDS

24
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

1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CHAPTER 4
4.1 4.2 4.3 4.4 4.5 4.6

THE INTERNET

33
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

CHAPTER 5
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

BUILDING BRANDS ON THE INTERNET

44
45 45 47 48 50 51 52 57 59 60

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

CHAPTER 6
6.1 6.2

CASE STUDIES

61
62 62 62 62 64 66 69 70 71 71 72 72 73 75

6.3

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

2

1 Company Overview 6.2 Value Proposition 6.5 Conclusion Case Study: Gap.8.4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.The 7Cs Framework 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.4 Brand-Building Strategy 6.6.1 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 .8 Case Study: Boo.4.com 6.7.5.2 Value Proposition 6.5.1 Company Overview 6.4.1 7.4 6.Extensive Integration 6.6 6.3 Sources of Value .2 Value Proposition 6.7.The 7Cs Framework 6.6 Conclusion Case Study: eBay 6.8.8.2 Value Proposition 6.4.5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.5.com 6.7 6.3 Sources of Value .5.5.3 Sources of Value .2 Value Proposition 6.com 6.8.8.5 6.4 Brand-Building Strategy 6.1 Company Overview 6.4.5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .7.The 7Cs Framework 6.6.The 7Cs Framework 6.6.8.6.5 Other Factors that Contribute to their Brand Leadership 6.1.5 Conclusion Case Study: CDnow 6.1 Company Overview 6.6.5.4 Brand-Building Strategy .3 Sources of Value .7.7.The Failure of Boo.4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 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 6.2 Figure 3.1 Figure 1.com's Website Overview of Boo.4 Figure 4.com's Website Amazon.1 Figure 5.1 Figure 4.9 Figure 6.7 Figure 5.1 Figure 3.3 Figure 6.1 Figure 6.6 Figure 2.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .2 Figure 2.5 Figure 6.7 Figure 2.7 Figure 6.2 Figure 2.4 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 5.4 Figure 4.5 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.6 Figure 5.com's Associates Programme Overview of BarnesandNoble.4 Figure 6.2 Figure 5.2 Figure 4.3 Figure 4.4 Figure 5.1 Figure 2.6 Figure 4.3 Figure 5.8 Figure 3.5 Figure 4.8 Figure 5.5 Figure 2.8 Figure 6.2 Figure 6.3 Figure 3.3 Figure 2.

1 Table 6.5 Table 6.Timeline and Major Milestones Boo.Timeline and Major Milestones CDnow .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones eBay .com .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.3 Table 6.com .com .com .2 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .4 Table 6.1 Table 6.6 Table 6.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

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

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .

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

a 'reputation'. For some companies.of anything'. p. a 'set of expectations'. the augmented brand and the potential brand . which grows out of the cumulative memory and the experiences customers have of products or services.a 'relationship'..2.the core product or service. The space a brand occupies inside a customer's head can create a 'mental' patent.2 . It is a company's promise to consistently deliver a specific set of features.Figure 2. T. 'Marketing success through differentiation .LAYERS OF A BRAND POTENTIAL BRAND AUGMENTED BRAND BASIC BRAND Name Service Design PRODUCT OR SERVICE Quality Credit & Terms Features Packaging Delivery & Installation Guarantees Source: Adapted from Levitt. FIGURE 2.3 THE LAYERS OF A BRAND Brands are made up of four layers . and a 'promise'. They start life as ideas. January-February. the basic brand. yet ultimately reside as consumer perceptions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Harvard Business Review. As such.86 14 . 1980. and services to customers. benefits. brands are their most valuable asset. 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. Brands are richly endowed entities. making their way into planning and strategy documents.

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

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

advertising and communication. and a preference for recognised brands they can trust. Customers' expectations are particularly important when dealing with services. or avoid a purchase decision is heavily influenced by perceived risk.the customer will be highly satisfied. word-of-mouth. These expectations are formed through a combination of past experiences. If perceived performance and quality exceed their expectations then they are satisfied. as these services are intangible and therefore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. postpone. they will be dissatisfied and look for alternative brands in the future. If performance falls below their expectations. their negative attitude may influence the consumer's purchase intent or vice versa. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. Customer satisfaction and loyalty are essential to creating successful brands. even delighted. 17 . customers make decisions purely on the basis of their expectations. and especially important when dealing with purchases made through the Internet. A consumer tries to deal with this by gathering information from friends. Expensive purchases involve some risk taking. locking out potential competitors. or dissatisfied with the purchase decision. they will evaluate their level of satisfaction . A consumer's decision to modify.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. After a consumer has actually purchased the product or service. somewhat satisfied.

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

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

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

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

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

• Brand Loyalty and Beliefs . This. In addition. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. maintain good price levels and generate strong cash flows.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. The next chapter describes the process of how brands are built. In trying to estimate the monetary value of brands. companies such as Interbrand (see Appendix A). and Young & Rubicam have created complex formulas. fashion or prevailing market conditions.Companies with strong brands attract good recruits.The product life cycle applies to products. the tools that are used. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Johnson & Johnson with Tylenol). • The Brand Barrier . brand leaders can exploit their superiority in the market (e. Companies can maintain a brand while modifying the underlying product to account for new technology. Coca-Cola “the real thing”).g.Strong brands are more attractive to investors. in turn. • Avenues for Growth .Dominating a niche market is usually more profitable than being fifth in a large market. 2. but there remains an ongoing controversy about how accurate and meaningful these measures are.Brand leaders usually have the financial strength to fend off competitors. 23 . When a company creates this type of customer preference and loyalty.g. • Motivating Stakeholders . The brand can also be used to penetrate new markets. drives up share price and provides the basis for future growth. and the characteristics of successful brands. not brands. They also tend to elicit community and government support. it can build a strong market share.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .

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

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

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

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

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

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

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

and making it more difficult for competitors to emulate. As such. advertising or promotional campaign.. it must have a unique positioning concept . If the quality of the experience deteriorates. As customers build trust in the brand through satisfaction of use and experience. and establish a trusting relationship. 'Marketing Management & Strategy'. The Internet provides the opportunity for companies to create compelling value propositions never before possible. 3. 2nd Ed. Once the framework has been established and the organisation configured to provide this proposition. when the brand has no competitors to rival its position. it has a profound impact on the traditional brand-building process.If the brand is not the innovator. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. • Strong Communications Programme . trigger trial and reinforce commitment to it.Satisfactory experience is the major determinant of brand values. As a result. value proposition or augmented brand.Traditionally. 1998. while providing new tools for promotion. • Unique Positioning Concept . the brand is meaningless.176-177 32 . Without building awareness. then its position will be undermined. companies have the opportunity to start building relationships with their customers. P. but it makes the task easier. interaction and relationship building.A successful brand requires an effective selling. pp. • Time and Consistency . which will communicate the brand's existence. its function and psychological values.a segmentation scheme. 19 Doyle. (Europe: Prentice-Hall). It often takes years to build up the added values.Being first into the market does not necessarily bring success. comprehension and intention to buy. or if the brand is surpassed by superior offers from competitors. which will add value and distinguish it from competition. companies must actively communicate it to the target audience to entice trial.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. It is easier to capture a share of the consumer's mind and build a customer base. including: • A Quality Product / Service Experience . strengthening the brand further..6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. • First-Mover Advantage . brands were not built quickly.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .

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

These defining characteristics have fuelled its explosive growth.2 (Note: 35 . 4.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.not previously available with mass medium forms of communication.The Internet is a global network and can be reached from everywhere. and deliver new products and services at low cost. • It Overcomes the Barriers of Time and Space . These characteristics combine to create a very powerful medium.24 hours a day. Graph is not drawn to scale). The context of the Internet and certain key developments are highlighted in the Figure 4. • It Allows for Two-way Communication and Interactivity . which was intended to link military networks together.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . the Internet lets individuals and companies build interactive relationships with customers and suppliers.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). By allowing for direct.this radically alters the process of interaction between communicating parties.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. allowing both parties to identify each other and build one-to-one relationships . 7 days a week. regardless of where the computer or Internet access device is physically located. The Internet can also be accessed at any time . ubiquitous links to anyone. when the United States Defence Department developed the 'ARPAnet'. anywhere. These qualities eliminate the barriers of time and space that exist in the physical world.2.

3 .000 100. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. as cited in 'E-Business Technology Forecast' . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000. FIGURE 4.a PricewaterhouseCoopers Report.000 10.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000.com) 36 .000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 1.Figure 4.000 1.economist. 1998. 1996 (www.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.3.000 1969: 10.2 .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.

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

2000 (www. reveals the wide range of areas where people are embracing the Internet . entertainment) and purchasing (37%) . April 13.5 .com) 38 . FIGURE 4. These activities highlight the adoption of the Internet as an interactive.eiu. communication and information tool.g.Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). as cited in the Economist Intelligence Unit (EIU). to interacting (e. chat rooms.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.5.from communicating (90% use e-mail) and sourcing information.

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

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

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

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

a Boston Consulting Group (BCG) Analysis.dot. As such. April 2000 In an attempt to provide a rich customer experience. G. tools and opportunities. many online companies are blending together the products and services of a wide range of companies. D. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage.7 . 4.6 CONCLUSION The Internet and its strategic impact are not technological issues . 'Organising for e-Commerce' . while triggering the emergence of new brandbuilding strategies.they are business issues. New opportunities for efficiency and co-ordination are emerging. The Internet is transforming every business to some degree. This is the substance of the next chapter. S.. it is transforming the competitive landscape and brand-building environment. while making the offering hard to duplicate off-line.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. 43 . This provides customers with added value. Partnering with portals and affiliate web sites is important in driving traffic to a web site. & Stirton.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. competition is intensifying. the pace of business is accelerating and power is shifting to the customer.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .

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

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

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

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

A Publication by Andersen Consulting 'The State of Online Retailing' .. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising.org Study in collaboration with The Boston Consulting Group. being first into a market makes it easier to capture the consumer's share of mind. It also allows online companies to tap supplementary revenue streams. FIGURE 5. Outlook 1999.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. 21 . With no competitors around. This makes it more efficient in improving product selection.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions.2 . cross-selling and up-selling33. delivering increased margin per customer .A Shop. advertising and referrals. M. R.2. enhancing the interaction. direct marketing. including direct marketing. Nov 1998 49 .Figure 5. fulfilment • Defensible advantage against competitors SCALEABLE. As the company builds a customer base and develops a relationship with customers. its ability to track customer preferences and customise offerings improves. No. '5 Rules of the eEconomy'. link revenues 32 33 Melnicoff.

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

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

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

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

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

1999 Communities enhance the speed and value of information sharing. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. 'Making Real Sense of Virtual Communities' . C.com) directly into the browser and access the site immediately. Site-tosite connectivity focuses on connecting users to other relevant sites. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.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. Once customers know of a site. A. Journal of Consumer Research. S. 43 Fournier. 343-373.. Companies can provide a selection of related links that complement the site's purpose and value proposition. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.www.brand-name..BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.6). they opt to input the URL (Internet address . 55 . M.5 . when membership in the brand's community becomes an end in itself43. This is similar to placing offline stores in high traffic areas. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. pp..A PricewaterhouseCoopers Study. and can create emotional loyalty. as well as attracting traffic from other sites. March 1998. O'Donnell & Gupta. allowing customers to deepen their experience with a brand and build more personal connection. Mulcahy..

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

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

4 3. Engage With the multitude of choice available on the Internet.3 Source: Forrester Research.6 3. 3. 3.5 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.8 4.WEBSITE PROMOTION METHODS . discounted over the expected duration of the brand-customer relationship.8 . multiplied by the expected rate of transactions. The key factors at this stage are Convenience combined with interesting Content.4 3. Fig. Kapferer's Brand Prism (Ch. as cited in 'Targeting Consumers via the Internet' .Economist Intelligence Unit 2000 (www.2 4.ebusinessforum.1 3.5) 2. Attracting customers is only the first step in building online brands.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.com) The most effective methods are direct e-mail. Creativity is also an important factor in gaining attention in today's cluttered marketplace. 58 .POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3 3.0 3. public relations and television advertising.4 4. Companies then need to engage customers to obtain their interest and participation.3 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.7 4. affiliate programmes. it is important to quickly engage consumers' interest before they move on.

can create value for the customer and help build the brand-customer relationship.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. 59 . Certain product categories. Learn The Internet provides extensive opportunities to learn about consumers (demographics.9). and what additional products and services are they interested in provides companies with valuable information which. • The Internet supports brand-building activities where there is a need to build a relationship. Content is the basic driver of retaining customers on a site. if used properly. 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. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. such as groceries and convenience goods.g. This helps to create a customer base that spends more time and money at a site. The initial site registration provides an early opportunity to obtain useful information. The objective is to increase the conversion rate (% of browsers converted into buyers). Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. Building up a knowledge database on each customer . a company can create value by providing a personalised online experience. TV. 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. and forge closer relationships than any offline operator. and must be continuously updated due to the multiple visit nature of customers. Radio).who they are and why they shop online. attitudes and behaviour). do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Communities and Customisation are other sticky applications.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .

France. a company overview. CDnow. 47 48 Interbrand (www. the sources of added value (using the 7Cs Framework).com) .2 Value Proposition Amazon. In addition.see Appendix A. It is the 57th most valuable brand in the world47. and has sales of over $2 billion. including: increased selection. easy. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).It's an Ocean. 2000 (www. Gap.interbrand.com's success stems from its compelling value proposition.com) 62 . Barnesandnoble. Amazon provides increased added value on several dimensions. Not a River' . eBay.COM 6. its value proposition.2.economist.Goldman Sachs Report. Amazon. Germany and Japan49.The Economist.1 INTRODUCTION This chapter provides an analysis of seven companies. Each case is presented in the same format including. and has equity investments in several e-tailers. and is one of the few Internet brands that is recognised all over the world. Figure 6. combined with its levels of customisation and customer service. 1999 49 'Amazon's Amazing Ambition' . innovation and delivering on its promises.com and Yahoo!. 6. The cases are presented in the following sequence . 'Amazon. February 26.com . Through its provision of a one-stop shopping experience. more information.2.1 Company Overview Amazon. and one of the top two or three in Britain.com launched with a mission to use the Internet to transform book buying into a fast. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). and enjoyable experience.1 outlines Amazon's timeline and major milestones. and higher levels of customisation and service than the traditional shopping experience allows.Amazon. Amazon serves over 23 million customers from 160 countries. and other key factors that have contributed to its success (or failure). Amazon has cultivated a reputation for excellence.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.2 CASE STUDY: AMAZON. In addition. its brand-building strategy (how it generates traffic). 6.com.com. In July 1995. it is the most visited e-commerce website in America.com.com has become synonymous with e-commerce. Amazon. Amazon has been able to differentiate itself from other online competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Boo. November 11. discounted prices. greater convenience.

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

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

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

and by 1999 it had over 200.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. two personalised services. 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. Instead of paying directly for this exposure. Amazon offered Associates referral fees of up to 15%. In the second half of 1996.a move that along with the novelty of its business model and the newness of the Internet. 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. increasing to over 500. 66 . 6. they are subsequently confirmed by e-mail. Newsweek.000 members. enticing them to return to the site and purchase repeatedly.2. helped generate publicity and stories about the company in publications such as The Wall Street Journal. and not subsequent purchases. which only applied to sales that resulted from the initial click-through. Once orders are placed. Through the first half of 1996.000 by August 2000. This enabled Amazon to reach more customer segments and niches (Figure 6. it began to advertise in print media and online .4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Business Week. The Financial Times. In July 1996. help maintain contact and build traffic by e-mailing customers when desired products or books become available.2). Amazon inaugurated the Associates Programme under which other websites could display the Amazon. The Associates Programme has been phenomenally successful. attracting member sites of all sizes. and customers are also e-mailed when the items are shipped from the warehouse. Eyes and Editors.com hot-link and offer specific books of interest to their visitors. In addition. New Yorker and The Economist.

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

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

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

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

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

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

However.000 affiliates in its referral network. Barnesandnoble. As of February 2000. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Netscape and Microsoft Network. it lags behind first-mover Amazon.The Wall Street Journal. December 17.com. and avoid charging sales tax in states where it has stores56.com closed 1999 with 4 million customers. and both are expanding globally.com has created a high quality website and customer experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Both try to foster a community of readers by letting customers post reviews online. 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 . These initiatives have generated traffic to the site.4 Brand-Building Strategy Barnesandnoble.com's $1. Although. however.com had over 17 million. this programme had more than 300. prevent cannibalisation of its existing business.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. while Amazon.com's market capitalisation was $251 million. reasons for this are explained in the next section. Barnesandnoble. Both offer 'associate programmes' that let other websites link to their sites. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Barnesandnoble.com was valued at $21.6 million. has yet to leverage its strong brand in cyberspace. 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!. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . while Amazon.com's 1999 revenues were $202.64 billion.a replica of Amazon's Associates Programme.3. They have developed an affiliate programme that links sites to Barnesandnoble.com in return for a commission on any purchases that they originated . Both offer customisation that permits users to personalise the experience. Instead. The 6. Barnesandnoble. compared to Amazon.1 billion. Webcrawler. Lycos. and Barnes & Noble Inc. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.

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

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

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

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

Miss Boo

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

77

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
59
60

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

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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.

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

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It has a customer base of 4 million people.Site goes live . guides to music genres. T.1 Company Overview Founded in 1994.TIMELINE AND MAJOR MILESTONES . and one of the most popular shopping sites on the Internet62. CDnow is the leading online music store. customisation and a wealth of information and content to help in the purchase decision.5 million distribution deal with Lycos Signs three-year.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.cdnow.000 people. On 19th July 2000. as well as music reviews.Raises $10 million through private placement . whether for browsing or buying.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.ten times the selection of a conventional bricks-and-mortar music store).179-188 63 CDnow website (www. and an average daily audience of over 800.Partnership program with Geffen Records .5.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . TABLE 6. by twin brothers Jason and Matt Olim. and was the first site to offer the sale of music downloads and custom CDs. $22.Merges with Columbia Records . CDnow is also driving the digital distribution of music. former arch rival .000 music related items . and exclusive interviews and reviews from CDnow's award-winning editorial staff. convenience..000 sound samples.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . good prices.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Forges distribution partnership with Yahoo! $65.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. pp. This unprecedented degree of access to music and information is the core of CDnow's value proposition.com) 80 . 62 Hoffman.CDnow and Time Inc.Launches merged CDnow/N2K site . cover art.Merges with N2K.5 CASE STUDY: CDNOW 6.000 music-related products and 650. daily music news. & Novak. $18.Harvard Business Review. 'How to Acquire Customers on the Web' . CDnow provides access to over 500. announce marketing alliance . May-June 2000. D. and they aim to "make every visit to the site.5. a valuable and rewarding experience"63. CDnow was acquired by Bertelsmann AG. features.

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

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

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

It is constantly adding new functionality to the site and has been innovative in its offering . In fact. This has contributed to a 225% increase in sales (1997: $17. it is in this context that the large investments in advertising and partnerships make sense.4 million).hsny.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998: $56. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.As for many successful online retailers. with 44% of sales coming from new customers65.htm) 84 . and scaled it awareness-building efforts. The company continually pushed for new distribution partnerships to widen its sphere of influence.they were the first site to offer the sale of music downloads and custom CDs.5.Hampel & Stefanides (www. 6. resulting in increased conversion rates.cdnow.CDnow made public relations a high priority brand-building tool. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. 1998 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . word-of-mouth accounts for the lion's share of CDnow's customers.com/cdnow.4 million. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. CDnow's promotion strategies have attracted high levels of traffic. It is a powerful source of acquiring new customers at low cost. and to increases in the customer base of more than 30% quarter-to-quarter. • Word-of-Mouth . with repeat customers accounting for more than 50% of sales. Public relations efforts helped to generate word of mouth and influence sales.com) 65 'Pioneering in Cyberspace' .(www.Press Release. both in the online and offline worlds. The story of how CDnow was founded in a basement. as a way to fuel very lucrative word of mouth. April 28.

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

But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. (A)' . and eBay never takes possession of the item being sold. with emphasis being placed on its unique community feel and culture.ebay. The buyer and the seller work out the logistics of the transport (e. Since its launch in September 1995.com) 70 'Meg Whitman at eBay Inc.6. from collectibles and antiques to electronics and toys. Auctions make it fun. garage sales. eBay effectively created a new business model never before possible .g. flea markets and auctions. 6.782 million in January 200068. This is a new market . "at its core. and eBay provides added value through its convenience.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. 1st October 1999 86 . According to Meg Whitman.efficient one-to-one trading in an auction format.com) 'eBay . 24 hour a day.Company Overview' .300 categories. CEO of eBay.6. as cited in 'eBay . Auctions are an enabler.removing the need for inventory.A Harvard Business School Case Study. shipping.eBay website (www. extensive selection and geographical reach. the eBay community has grown to include more than 10 million registered users.6 CASE STUDY: EBAY 6. There are over half a million new auctions.the closest thing in the offline world are trading forums such as classified ads.ebay.25% to 5% of the final sale price on any item sold.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition eBay offers consumers an efficient. Sellers pay a nominal fee for placing an item up for sale. collectable shows.Company Overview' . global trading place for buying and selling personal items in an entertaining auction format. and 450. Individuals use eBay to buy and sell items in more than 4. with the number of unique daily visitors setting a record of 1. transportation and other overhead costs. and eBay receives a transaction fee that ranges from 1. or the payment for the item . People perceive the auction format to offer better prices.000 new items joining the "for sale" list every 24 hours69.eBay website (www. eBay is not about auctions. Auctions represent a platform. payment) between themselves.

eBay goes live .eBay acquires alando.eBay introduces eBay Magazine in collaboration with Krause Publications.6. Since eBay cannot control how one person treats another.Germany's leading online person-to-person trading site . . allowing users to create personal homepages .Compaq Computer Corporation and eBay form a strategic U. and raises $700 million .businessweek. co-marketing relationship.eBay and AOL launch co-branded site . they try to influence customer behaviour by encouraging them to adopt certain values.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay launches 'About Me' feature. Las Vegas.eBay acquires Blackthorne Software GO. the eBay customer experience is based on how their customers deal with each other. and Salt Lake City . Selling.Launches "My eBay!" to customise the online auction experience .eBay expands strategic relationship with Netscape .eBay acquires Jump Inc.3 Sources of Value . .com to provide automotive service for eBay Users .eBay and Ultimatebid.eBay and First Auction sign a partnership agreement . and two books -. Norfolk & Virginia Beach. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .com) 87 .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. Milwaukee. Providence. And you only get word-of-mouth if you have a great customer experience.America Online and eBay announce strategic marketing alliance . Boston. and in terms of the '7Cs'. Unlike the previous case studies discussed. Dallas & Fort Worth. "the first brand-building strategy that we have is to have a great customer experience. and its online trading site (Up4Sale) .eBay acquires Butterfield & Butterfield.eBay acquires Kruse International .S. Seattle & Tacoma. The Official eBay Guide to Buying. and Collecting Just About Anything and eBay for Dummies.eBay teams up with Carclub.eBay launches local websites in Baltimore & Washington DC.eBay IPOed raising $58 million . as they rarely deal directly with the company.Com form alliance - 6.eBay goes live in Australia . So brand-building job No. Still the vast majority of our new users come from word-of-mouth.de .5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. This raises challenges in how to control and influence the customer experience. Nashville.Business Week. 21st May 1999 (www.The 7Cs Framework According to Meg Whitman.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. 1 is have a great customer experience71". emphasis is placed on community development and customer care.eBay goes wireless with Palm VII connected organiser .

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

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

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

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

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

"this is about being clicks-and-mortar.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.7. GapKids.com' . TABLE 6. Gap's online sales tripled in 1998 alone.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. letting customers access the Gap brands. 1999 93 .Business Week. Gap. service and value to everyone74".Business Week. In late 1997. online sales are only available to US customers. and are still relatively small compared to Gap's $9 billion in annual sales. 1999 76 Jeanne Jackson.gapinc. and analysts estimate that sales in 1999 amounted to $50 .gap.htm) 75 Jeanne Jackson. from jeans and T-shirts to khakis and jackets. Canada.COM .gapkids. head of Gap Online. L. Gap started selling items online . October 8. from shirts to accessories and hard-to-find sizes.COM 6. surpasses $9 billion in net sales and increase earnings by 54% over previous year.2 Value Proposition Gap's simple. and today it is the 29th most valuable brand in the world73. and provides useful insight into how traditional brands can leverage their strength online. California GapKids opens its first store BabyGap is born Gap opens its online store at www. whether in the store or online76".com. announce multi-year partnership. however.an early convert to the then-revolutionary idea of clothes retailing on the Internet.7.800 stores in the US.com/about_us. 'Clicks and Mortar at Gap. UK. and Gap online provides access to the full range of items at Gap.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.$100 million. the growth prospects are enormous.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 'Clicks and Mortar at Gap. According to Jeanne Jackson. and BabyGap."to deliver style. Gap online exploits the accessibility and convenience of the Internet. Gap Inc. standard styles are well suited to online shopping. as cited in Lee. The Gap offers a balance of modern and seasonal styles of clothing.'s website (www. Inc.com' .see Appendix A Gap. up from $20 million in 199875. This success is largely due to their simple formula . In addition.com is an example of successful crossover marketing. 73 74 Interbrand (www. 6. Its reach extends across more than 1.interbrand. Currently. to provide customers with greater convenience and options.babygap. America Online (AOL) and Gap Inc. October 8.com and www.com) .7 CASE STUDY: GAP. Germany and Japan.1 Company Overview Gap opened its first store in San Francisco in 1969. L. as cited in Lee.

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

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

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

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

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

TIMELINE AND MAJOR MILESTONES 1994 April .7 YAHOO! .8 million IPO (2. . is the way it has structured and displayed information.Yahoo! acquires Arthas.8. Their goal is not to list everything under the sun.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com allowing them to offer person-person payment solutions . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Receives $1 million in venture capital funding from Sequoia Capital $33.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 .com. mobiles.600.000 shares at $13. and unveils Yahoo! Digital Introduces Bill Payment services . regardless of platform (i.Yahoo! acquires eGroups .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. Palm computers). to provide web-based services to PalmTM handheld computers .8). but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. 99 .Yahoo! Shopping launches personalised shopping service 6. TVs.Yahoo! unveils Yahoo! Finance Vision . to allow access. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! forms agreements with Palm Inc.e. Yahoo! extended its convenience through its Yahoo! Everywhere service..Site goes live September . 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! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.3 Sources of Value .The 7Cs Framework Convenience Central to Yahoo!'s success. More recently.Yahoo! Launches Business-to-Business Marketplace .

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

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

which conveyed the brand's irreverent personality. Yahoo! also encourages customers to e-mail ideas and feedback. TV commercials and radio spots during drive time. Yahoo! would be one of the first sites that they visited. and it formed a critical link in Yahoo!'s brandbuilding strategy. 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.people who are not yet online but are likely to use the Internet in the near future. and according to Intelliquest80. Yahoo!'s brand-building success starts with its name.a sense of irreverence. As a result. Given the unease with which the average consumer approaches technology. recognise the name Yahoo!. therefore. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . and an inherent friendliness. an approachable nature. At the time this was considered a breakthrough. 80 'Web Survey Shows Yahoo! Tops'. Yahoo! extended beyond this to use traditional offline media.com) 102 . 82% of Internet users and 23% of people intending to go online. Intelliquest. Yahoo! avoided characterising itself as a technology-oriented company. 6.4 Brand-Building Strategy Yahoo! is a marketing machine. These near surfers represented (and still do) a large and fast growing group and. This was especially important. by building a recognised brand name.8. 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. In 1996.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. While Internet companies were targeting existing Internet users through the use of online promotion methods. Yahoo! aggressively promoted the site through public relations. Yahoo! maintains close contact with customers. as experience surfers tend to be loyal to their search engine. and its implications of a good time. Their strategy was to target "near surfers" .intelliquest. (www.

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

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

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CHAPTER 7

CONCLUSION

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7.1

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

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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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

interbrand.262 1.894 14.596 3.845 56.048 20.527 3.231 12.Interbrand's Ranking of the Top 60 Brands (www.310 11.909 7.283 4.329 4.281 11.766 14.361 1.147 9.225 11.155 7.602 4.806 11.464 3.781 17.181 21.792 3.510 8.422 1.132 15.654 43.830 14.681 2.648 1.781 33.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) 83.423 2.932 4.761 1.052 6.193 112 .985 2.550 12.643 3.143 2.502 33.231 24.404 4.568 3.043 8.275 30.197 32.595 17.603 5.313 2.076 3.021 26.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.804 2.319 1.101 9.634 1.694 17.184 1.895 2.806 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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