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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
62 62 62 62 64 66 69 70 71 71 72 72 73 75
Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
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 7.2 Value Proposition 6.4 Brand-Building Strategy 6.com 6.3 Sources of Value .1 Company Overview 6.6.7 6.The 7Cs Framework 6.6 6.The 7Cs Framework 6.The 7Cs Framework 6.5 Conclusion Case Study: Gap.4.8.1 Company Overview 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5 6.Extensive Integration 6.3 Sources of Value .4.7.4 Brand-Building Strategy 6.6 Conclusion Case Study: eBay 6.The Failure of Boo.6.1 7.com 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .4.5 Other Factors that Contribute to their Brand Leadership 6.4 22.214.171.124.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 126.96.36.199 Company Overview 6.5.1 Company Overview 6.3 Sources of Value .188.8.131.52 Sources of Value .4 Brand-Building Strategy 6.The 7Cs Framework 184.108.40.206 Conclusion Case Study: Yahoo! 6.5.5 Conclusion Case Study: CDnow 6.2 Value Proposition 6.4 Brand-Building Strategy 6.1 Company Overview 6.8.2 Value Proposition 6.2 Value Proposition 6.6.8 Case Study: Boo.5 Other Factors That Contribute to their Brand Leadership 6.4.com 6.3 Sources of Value .4 Brand-Building Strategy .220.127.116.11.7.6.2 Value Proposition 6.
5 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 4.7 Figure 5.8 Figure 5.3 Figure 5.7 Figure 6.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .5 Figure 2.2 Figure 2.8 Figure 3.5 Figure 5.2 Figure 2.com's Associates Programme Overview of BarnesandNoble.4 Figure 4.2 Figure 4.6 Figure 5.7 Figure 5.3 Figure 6.3 Figure 3.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 .2 Figure 3.1 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 5.3 Figure 2.7 Figure 2.8 Figure 6.6 Figure 2.1 Figure 2.2 Figure 6.6 Figure 4.4 Figure 4.4 Figure 5.5 Figure 4.6 Figure 6.4 Figure 6.9 Figure 6.com's Website Overview of Boo.1 Figure 3.4 Figure 2.3 Figure 4.com's Website Amazon.1 Figure 1.2 Figure 5.
5 Table 6.com .Timeline and Major Milestones CDnow .com .3 Table 6.com .Timeline and Major Milestones eBay .2 Table 6.1 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.6 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Boo.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .4 Table 6.com .1 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
It is empowering customers with more options and more information to make informed decisions.mckinseyquarterly. The Internet also represents a fundamental shift in how buyers and sellers interact. FIGURE 1.YEARS TO REACH $100 MILLION IN SALES 6 5. aggressive Internet start-ups have emerged. Figure 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. As such.9 3.com1 Amazon.com's range of 4. whereas it has taken decades for traditional companies to achieve the client base. Internet companies such as Yahoo!.g.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. while providing new tools for promotion.2 3. there has been an explosion in the online world . interaction and relationship building. and is triggering the need for new brand-building strategies and tools. customer affiliation and level of sales. America Online (AOL) and eBay have been able to build powerful brands in a few years. service and brands.1 .an explosion that is also a harbinger of how business will operate in the future.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. products and services reconfigured. Supply chains are being rethought. As such.5 million book titles). and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. relationships. that these Internet start-ups have achieved. Amazon.com. In the midst of this.com Source: Securities and Exchange Commission Filings.com) 7 . Amazon.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. and business models revamped.1 3. creating strong brands that are putting established brands at risk. the Internet is changing fundamentals about customers. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.9 2. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. McKinsey Analysis (www.5 2.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.1 OVERVIEW Over the past few years. as they face each other through an electronic connection.com noble.0 1. This is creating new challenges and opportunities.
For pure online players. 'Meeting the Challenge of Disruptive Change'. L. 66-76 Hoffman. 'How to Acquire Customers on the Web'. turning browsers into buyers. and Novak. that extends the brand-customer relationship beyond a single transaction. Volume 78 Issue 2. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important.... May-June 2000 Hof.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. as the need to build brand loyalty online is reaching a peak. S. 1997. Given the tremendous clutter in today's e-commerce marketplace. Harvard Business Review. and the high cost of acquiring online customers2. 1 2 3 Christensen.. May 5. R. found that 57% of Internet users go to the same sites over and over again.. Browder. who are essentially intangible. pp. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. A New Class of Netizen is Settling Right In' Business Week.66 8 . D. T. In light of this. building awareness.April 2000. & Overdorf. & Elstrom.. attracting traffic or 'eyeballs'. M. rather than drifting from site to site3. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. However. Therefore. March . 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. P. 'Internet Communities . brands are even more critical as customers have little to go on other than a recognised brand. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. companies lack a coherent framework and concrete methods to build an online brand. Harvard Business Review. A Business Week / Harris poll. P. C. As such.Forget Surfers. p.
2 . • To explore how the Internet is changing the brand-building environment. FIGURE 1. and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. 1. supported by secondary data related to aspects of online business from accredited and published sources. tools and strategies to build brands on the Internet. A review and analysis of leading academic thinking will be used to explore these issues.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 .3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built.2. This is based on the outcome of the primary research (in-depth case studies).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.
nor desire. Conclusion: Discusses the key findings and areas for further research. and is used to provide insight into some of the factors that contribute to the development of successful brands. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. While there is no attempt.com and Gap. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. Hypothesis (Framework): This is based on the literature review and secondary data. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com). certain key factors are highlighted in their relevance to the dissertation. strategy and economics. to provide an in-depth analysis of the psychological and social dimensions of brands. and factors that contribute to a brand's success. relationship management. eBay and Yahoo!). CDnow. however. marketing. The absence of academic literature on Internet branding posed a major obstacle.com. as well as a recent Internet failure (Boo. this also highlights the true value of the dissertation. These are further refined using the insight obtained through the case studies. Consequently. The combination of cases provides a useful and practical insight into brand-building issues and problems. there is more work in popular rather than academic literature. 10 . traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area.com). the literature review draws on leading academic thinking in more established areas such as brand management.
Chapter 4 provides an overview of the Internet and its defining characteristics. This chapter sets the context within which online brands must be built. Chapter 2. summarises the key findings. and outlines the opportunities for further research. Chapter 7. and introduces the core concepts that form the backbone of the dissertation. highlighting some key factors that have contributed to brand success. Chapter 6 examines the brand-building efforts of seven companies. their purpose and value are discussed. provides an analysis of leading academic literature in relation to branding. by outlining the impact of the Internet on the business and competitive environment. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. The final chapter.4 STRUCTURE The next chapter. 11 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. 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. The nature of brands. The limitations of the Internet in terms of brand-building are also discussed. as well as the interactive approach to attracting customers and building loyalty. Chapter 3 explores how brands have traditionally been built. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
vii 13 . but extends further to encompass added values derived from factors such as the brand-customer relationship.1.1 INTRODUCTION In this chapter. unravelled to reveal the nature of brands and their reason for existence.a brand is: "a mixture of tangible and intangible attributes. and to companies. both for customers. and they form the backbone of this dissertation. whether online or offline.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Branding is about creating 'value'. p. E. if properly managed. these layers are Brands are made up of many layers and dimensions. & Maughan. 1996. creates influence and generates value4" This definition truly captures the essence of a brand. 74 4 Clifton.2 WHAT IS A BRAND? According to Rita Clifton.see Figure 2.a leading specialist brand consultancy firm .). both to customers. R. the brand's emotional benefits and its self-expressive benefits . symbolised in a trademark. These concepts are central to brands and brand-building. CEO of Interbrand Newell and Sorrell .. 'Building Strong Brands'. 2000. p. This value stems from the products and services that companies create and bring to the market. and for the company. FIGURE 2. and highlights the importance of brand management. 'The Future of Brands'. explaining the value of brands. D. A. which. (London: Macmillan Press Ltd. The concept of brand equity is outlined. (New York: Free Press). 2. and the importance of customer satisfaction and brand loyalty. The chapter proceeds to describe the influence of brands on the buying process.1 .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.
and services to customers. The space a brand occupies inside a customer's head can create a 'mental' patent.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. a 'reputation'. the augmented brand and the potential brand . brands are their most valuable asset. which grows out of the cumulative memory and the experiences customers have of products or services. For some companies. the basic brand.2. Harvard Business Review.86 14 .3 THE LAYERS OF A BRAND Brands are made up of four layers .. January-February. T.of anything'. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. Brands are richly endowed entities. benefits. a 'set of expectations'. As such. and a 'promise'. FIGURE 2. 2. 1980. It is a company's promise to consistently deliver a specific set of features.Figure 2. They start life as ideas.2 . yet ultimately reside as consumer perceptions.the core product or service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . p. 'Marketing success through differentiation .a 'relationship'. making their way into planning and strategy documents.
or design. or a combination of them. Service Brands (intangible) are much less numerous than their product counter parts. Levi's). such as in retailing. this should support the offering's performance and differentiate the brand from those of competitors. with supplementary products and services (e. Certain service brands. Essentially. and because they most readily come to mind when consumers are asked to recall brands. information. 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. 8th Ed.g. However. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. most products and services cannot survive on functionality alone as this is usually matched in time. actually sell products. even when the alternatives are substantially cheaper or more readily available (e.. Coca-Cola. & Control'. Implementation. Kodak. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. term.g. The most common barrier to competition is building a brand. quick delivery) that enhance the customer’s total purchasing and use experience. customers buy products to meet certain functional needs. 5 Kotler. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. symbol. preferring things they can see and touch. 15 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. P. The Basic Brand The basic brand consists of the "name.The Gap stores. but the brand itself is the store. 'Marketing Management . 2. They are the historical core of branding because they are the most prevalent. (Europe: Prentice Hall) 1996. not the products it sells . In fact. Southwest Airlines and Amazon.Analysis. Planning. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.com are examples. sign.
This can be triggered by internal or external stimuli (advertisements). FIGURE 2. 1996. either through heightened attention or through an active information search. The buying process consists of five stages (Figure 2. Consumers develop a set of brand beliefs about the attributes of competing brands. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs.attitudes of others and unexpected situational factors (Figure 2. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.3 . Implementation.4). Planning. 'Marketing Management . and selective retention. However.194 The process starts when the buyer recognises a need. and the effect of selective perception. a consumer will be inclined to search for more information. Through gathering information. 16 . Consumers differ as to which product / service attributes they see as important. it is critical to understand what attributes consumers value. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Once aroused. and pay the most attention to the brands that will deliver the sought benefits.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. P. the consumer learns about competing brands.Analysis. and Control'.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler... two factors can intervene between the purchase intention and the purchase decision . selective distortion. These beliefs depend on their previous experiences with the brand. Therefore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. In the evaluation stage. it is important to clarify customers' underlying buying behaviour and the buying process. (Europe: Prentice-Hall) 8th Ed. p.3).
Customer satisfaction and loyalty are essential to creating successful brands. they will evaluate their level of satisfaction . even delighted. If performance falls below their expectations. and a preference for recognised brands they can trust. customers make decisions purely on the basis of their expectations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. as these services are intangible and therefore. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. advertising and communication. Customers' expectations are particularly important when dealing with services. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. somewhat satisfied. locking out potential competitors. their negative attitude may influence the consumer's purchase intent or vice versa.the customer will be highly satisfied. A consumer's decision to modify. 17 .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. or dissatisfied with the purchase decision. After a consumer has actually purchased the product or service. Expensive purchases involve some risk taking. A consumer tries to deal with this by gathering information from friends. If perceived performance and quality exceed their expectations then they are satisfied. postpone. These expectations are formed through a combination of past experiences. they will be dissatisfied and look for alternative brands in the future. or avoid a purchase decision is heavily influenced by perceived risk. and especially important when dealing with purchases made through the Internet. word-of-mouth.
Nov-Dec 1995. This satisfaction encompasses the whole experience and not just a company's products or services. FIGURE 2. Saturn. 'Growing the Trust Relationship'. Southwest Airlines and Xerox7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. T. Customers that are passionately or emotionally loyal are those that have built trust in a company. E..Figure 2.Harvard Business Review. Trust is critical for a brand's success.. D. p. 'Why Satisfied Customers Defect' . and believe that it will always act in their best interest.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. and Johnson. 91 Loyalty is derived when customers are continuously satisfied over time. C.. W. At the opposite end of the satisfaction spectrum are "apostles" . Hewlett-Packard.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. & Sasser. & Sasser. M. 6 7 Jones.Harvard Business Review. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. E. Federal Express. Spring 1999 18 . 'Why Satisfied Customers Defect' .customers who are satisfied and loyal and talk favourably about the brand . Marketing Management. T. Nov-Dec 1995 Hart... Johnson & Johnson.5. The customers at the bottom end of the scale are "terrorists" .those who actively attack the brand telling others not to buy from the company.
Sloan Management Review.com. 'Building Stronger Brands through Online Communities' .7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. Spring 2000 19 .. 8 9 Peppers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.g.. M. In this way. Firstly. Emotional loyalty can be also created through the formation of a strong user community around the brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. 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). 'The One to One Future'. Harley-Davidson motorcycle clubs). with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. emotional loyalty is born out of a consumer's personal relationship with a brand. There is also clear evidence of this on the Internet. & Rogers. consistent orders Satisfied customers are the best advertisement . This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. 1993 McWilliam.they provide good word-of-mouth and are the best salespeople for the product / service 2. G. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. D.
Emotionally loyal customers build a sense of trust and two-way commitment with the brand. whereby customers would be unwilling to substitute it with competitors' offers.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. which goes well beyond the satisfaction of a specific need.. there are brands that customers perceive as acceptable and would not resist buying. there are brands that are unknown by most buyers. pp. A stronger brand enjoys a high degree of brand preference over competing brands. a 'powerbrand' tends to have a high degree of brand loyalty. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. S. 343-373. 20 . However. FIGURE 2. March 1998. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand.7).8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.7 . Beyond this.6 . FIGURE 2. 2. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Journal of Consumer Research.
name awareness. 1991 10 Aaker. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 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". and other assets such as patents.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. (New York: Free Press). FIGURE 2. perceived quality.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. which is the value of the brand over and above its commodity value.Create Awareness . 1991 21 .8. The major brand assets are brand loyalty. According to David Aaker (1991). D. trademarks. strong brand associations.. D.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. The benefits of each are outlined in Figure 2..8 . (New York: Free Press). and relationships with distributors and strategic partners.
P. market share and profits . & Tellis.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. 1986 13 Golder. pp.8.. • Brand Leverage . 11 12 Kapferer. The brand leader is the most profitable and all beyond number two are unprofitable13. production and marketing. & Downham.8. to its logo. (New York: Free Press). 'Strategic Brand Management'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.Satisfaction linked to the attractiveness of the brand. 3rd Ed.To have confirmation of your self-image or the image that you present to others • Continuity . J. 'Consumer Market Research Handbook'.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.To be sure of buying the best product in the category..The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. May 1993. to quickly identify sought after products • • Practicality . Premium pricing increases revenue. N.To be clearly seen. brands perform several functions that add value and customer benefits: • Identification . to make sense of the offer. J. and the number two twice the share of the number three12.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . Journal of Marketing Research. (London: McGraw Hill).. 158-170. G. in the following ways: • Brands.To save time and energy through identical repurchasing and loyalty Guarantee . the best performer for a particular purpose • Characterisation .. 1992 Worcester.. to its communication • Ethical . R. 22 .Typically a brand leader obtains twice the market share of the number two brand.
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. maintain good price levels and generate strong cash flows. but there remains an ongoing controversy about how accurate and meaningful these measures are. drives up share price and provides the basis for future growth. companies such as Interbrand (see Appendix A). In trying to estimate the monetary value of brands.Dominating a niche market is usually more profitable than being fifth in a large market.g.Strong brands are more attractive to investors. 2. • The Brand Barrier . When a company creates this type of customer preference and loyalty. • Motivating Stakeholders . brand leaders can exploit their superiority in the market (e. fashion or prevailing market conditions. and the characteristics of successful brands. in turn. • Brand Loyalty and Beliefs .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .Brand leaders usually have the financial strength to fend off competitors.Companies with strong brands attract good recruits. the tools that are used. Johnson & Johnson with Tylenol). In addition. This. They also tend to elicit community and government support. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. 23 . not brands. The next chapter describes the process of how brands are built. • Avenues for Growth . it can build a strong market share. and Young & Rubicam have created complex formulas. Companies can maintain a brand while modifying the underlying product to account for new technology.The product life cycle applies to products.g. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. The brand can also be used to penetrate new markets. Coca-Cola “the real thing”).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
confidence and brand equity are built. brand awareness. This is illustrated in Figure 3.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 .2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. promotion.1 . highlighting important factors that contribute to the success of each step along the way. and direct marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. it should provide a satisfactory experience and lead to a willingness to buy again. and keep it turning. Once this has been established. This chapter spells out the traditional brandbuilding process. selling.1 INTRODUCTION Building a strong brand is a complex task. which are created through advertising. public relations. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. To entice trial and repeat purchase requires triggering mechanisms. the next step is to get customers to try the brand. The major characteristics of successful brands are also reviewed. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. FIGURE 3. If the offering is developed properly. 3.1.
it will never attract a strong client base. The value proposition must be continuously re-evaluated to respond to changes in the marketplace.each is essential.2).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. In order to do this.2 . 26 . it is impossible to build a successful brand. a distinctive brand identity (I). a compelling value proposition is the combination of an effective product or service (P). FIGURE 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . a company must develop a strong understanding of who their potential customers are.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. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . unless differentiation and awareness can be developed. Similarly. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. Without a good product or service. and added value (AV). As such. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. In this way. the brand can elicit feelings of confidence that it is of higher quality than competitors'.a strong offer that a potential customer would find compelling and interesting.
Gillette.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.in many cases. cosmetics and high-tech products. J. which they perceive as meeting their needs. Sony. mean that buyers look for short cuts. faith in brand generates satisfaction in use.the design. pp. • User Associations .In many situations a strong company name (e. • Belief in Efficacy . 'What's in a Name? Advertising and the Concept of Brands' (Lexington. which are additional to those based upon real performance. The large number of decisions. 169 Jones. Lexington Books). For pharmaceuticals. or to gain a sense of belonging. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. Customers choose brands. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. 14 15 Doyle.brands frequently acquire an image from the type of people who are seen as using them. Hewlett-Packard. the pace of technical change. industry endorsements and newspaper editorials. Coca-Cola. (Europe: Prentice-Hall). Kellogg's) attached to a new product will transfer positive associations. Brand values derive from five major sources15: • Experience of Use . the number of competing alternatives and the large variety of advertising and selling messages. 2nd Ed. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. it is more likely to work effectively for them. 1986 27 . if customers have faith that a brand will work. 1998. People use brands to express their lifestyles. it acquires added values of familiarity and proven reliability.g.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. P. MA. • Brand Appearance . • Manufacturers' Name and Reputation . values or wealth. P. 'Marketing Management and Strategy'. as they are to be about satisfying basic physical and economic needs14. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations.3. providing confidence and incentive to trial. layout and appearance of the brand can clearly affect preference by offering cues to quality. influenced by brand values. interests. In today's affluent society.if a brand provides good service over time... these needs are as likely to be about satisfying self-actualisation or esteem needs.
type of spokesperson / customer image used to advertise the brand). glamour. packaging. which depends on how the target market perceives the brand. and the relationship expressed (e. 'Strategic Brand Management'. • The Brand Style .3: • The Brand Core . This may be different from the brand image. etc.3. 1992 28 .. style or cultural differences from one country to another. features.Figure 3. prestige.articulates the brand core in terms of the culture it conveys. A company should seek to differentiate its brand through developing a distinctive identity. friendly).2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. press releases. and visual appearance). J. its personality and its image or self-projection .the way the brand communicates through its advertising. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . and advertising. Themes include the physical appearance (logo. (New York: The Free Press). Brand themes are the most flexible element and will tend to change with fashion.g. • The Brand Theme . visual appearance.g. its reflection (e. colour scheme. which remains fixed over time. 16 Kapferer. however the brand style and core tend to be less flexible.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.the fundamental or genetic code of the brand.
1992 The brand prism enables management to understand the brand. 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.how far the brand can be meaningfully stretched to other products and market segments.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.. structure and ease of use). Finally. (New York: Free Press). its strengths and opportunities. 29 . understanding the brand's core and style helps set the perimeters of brand extensions .g. and through line and brand extensions. Secondly.3 . 'Strategic Brand Management'. J. website design. It also facilitates consistency in the message being transmitted through presentation (e. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. advertising.
management style. and the product / service's perceived performance. • Interest . colleagues and opinion leaders become important influences at this stage. systems. 'Diffusion of Innovations'.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. skills.Product and service features.4 . The value proposition must then be articulated in terms of the 'marketing mix' . 17 Rogers.4..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Personal sources such as word-of-mouth from friends.often referred to as the '4Ps' . • Adoption . pp.. E. (New York: Free Press). Before potential customers can buy a product / service. it should lead to satisfaction and re-purchase.The McKinsey 7-S Framework). Price. strategy (partnerships and alliances).79-86 30 . the company must ensure that it develops the appropriate structure. features and advantages. This learning is called the adoption process17 .Customers consider whether the product / service will meet their particular needs.Figure 3.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Advertising and PR are common tools for achieving awareness. FIGURE 3. deliver and reinforce this value proposition (see Appendix B . (New York: Free Press). pp. 'Diffusion of Innovations'.The customer is satisfied and decides to make regular use of the product / service.Customers need to be stimulated to seek information about the brand's uses. they must learn about it. • Trial . E.The company has to create awareness of the brand. The value proposition must be communicated to entice customers to try the product / service.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. culture and staff needed to support. and its products / services. • Evaluation . 1962. If the offering is developed properly. 1962. Promotion and Place (distribution strategy).79-86 The Innovation-Adoption Model consists of: • Awareness .
encouraging evaluation and trial. Through building relationships with customers. This focuses on establishing a longterm.. 3.such as airline frequent flyer programmes.g.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. sales promotion. making them less likely to switch to a competitor.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. Over time. personal selling and public relations / publicity . software) to help customers interact with the company. A. 'Marketing Services: Competing Through Quality'. Internet linkages. L. companies have used the tools of the promotions mix . pp. • Structural Ties . This is often referred to as Customer Relationship Management (CRM). direct marketing. providing insight into customers' needs and wants. the company may supply customers with special equipment or tools (e. 18 Berry.to move customers through the adoption process. while strengthening the position and value of the brand. Customer service is an important element of this relationship. this process enables an exchange of information. but enhanced customer interaction through relationship building. 1991. & loyalty / discount cards.for example. when each trusts the other to deal fairly and reliably. This information is a key competitive advantage. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. In this way. & Parasuraman. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . (New York: Free Press). companies can increase buyers' satisfaction.advertising. Social Benefits . companies can increase the value of each customer.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.136-142 31 . multi-transaction relationship. Advertising and public relations can be effective in generating awareness and interest. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. allowing companies to communicate regularly with their customers and customise their interaction.
which will communicate the brand's existence. when the brand has no competitors to rival its position. or if the brand is surpassed by superior offers from competitors. 19 Doyle. 2nd Ed.. 'Marketing Management & Strategy'. companies have the opportunity to start building relationships with their customers.Traditionally. (Europe: Prentice-Hall).A successful brand requires an effective selling. interaction and relationship building.If the brand is not the innovator. 3. 1998. pp. It is easier to capture a share of the consumer's mind and build a customer base. • Time and Consistency . • Strong Communications Programme . If the quality of the experience deteriorates. companies must actively communicate it to the target audience to entice trial. while providing new tools for promotion. Once the framework has been established and the organisation configured to provide this proposition. then its position will be undermined. value proposition or augmented brand. strengthening the brand further.. As a result. Without building awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.176-177 32 . comprehension and intention to buy. The Internet provides the opportunity for companies to create compelling value propositions never before possible. As such. but it makes the task easier.Satisfactory experience is the major determinant of brand values. it must have a unique positioning concept .Being first into the market does not necessarily bring success. As customers build trust in the brand through satisfaction of use and experience. trigger trial and reinforce commitment to it. P.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. the brand is meaningless. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. its function and psychological values. It often takes years to build up the added values. and establish a trusting relationship. • First-Mover Advantage . it has a profound impact on the traditional brand-building process. brands were not built quickly. including: • A Quality Product / Service Experience .a segmentation scheme. which will add value and distinguish it from competition. and making it more difficult for competitors to emulate.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. advertising or promotional campaign. • Unique Positioning Concept .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
The three core channels include e-mail (the most common). FIGURE 4. and a critical source of added value. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. Hypertext allows information to be organised in a user-friendly way that is easily accessible. which contain hypertext and pictures.Figure 4. This chapter provides an overview of the Internet and its defining characteristics. 34 . 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.1. creating new challenges and opportunities. E-MAIL Is the part of the Internet that most users use at present. In essence.1 .THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. In doing so. and the 'world wide web' (www) . news groups and mailing lists. and provides the opportunity for dynamic interaction. Information is becoming a major part of the products and services that people buy. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. 4.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. it is a common technology platform that allows computing devices to communicate with each other.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. but in practice not in real time. it offers a number of alternative channels that enable businesses and people to communicate.1 INTRODUCTION The Internet is transforming the business environment.
These defining characteristics have fuelled its explosive growth.2 (Note: 35 . allowing both parties to identify each other and build one-to-one relationships . • It Overcomes the Barriers of Time and Space . The context of the Internet and certain key developments are highlighted in the Figure 4. Graph is not drawn to scale). These qualities eliminate the barriers of time and space that exist in the physical world. 7 days a week.not previously available with mass medium forms of communication. These characteristics combine to create a very powerful medium.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 . and deliver new products and services at low cost. By allowing for direct.2.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.this radically alters the process of interaction between communicating parties. 4. the Internet lets individuals and companies build interactive relationships with customers and suppliers.24 hours a day. The Internet can also be accessed at any time . anywhere.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. which was intended to link military networks together. ubiquitous links to anyone. regardless of where the computer or Internet access device is physically located. when the United States Defence Department developed the 'ARPAnet'. • It Allows for Two-way Communication and Interactivity .The Internet is a global network and can be reached from everywhere.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).
000 1.3.3 .000 1969: 10. 1996 (www.2 .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. 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.economist. as cited in 'E-Business Technology Forecast' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. FIGURE 4.000 10.com) 36 .000 1.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. 1998.000.a PricewaterhouseCoopers Report.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000. 2000 Internet / ARPAnet was created Dell.
TCP/IP). No.com) 37 .Higher PC penetration among consumers and companies . making it more cost effective for software developers and other technology providers to create interoperable products. L. billing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. payment. web design.Cheap bandwidth .4.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.Attractive infrastructure and middleware software .. there will be an estimated 375 million Internet users world-wide.Low-cost networking alternatives .CyberAtlas Internet Statistics and Market Research. offering inexpensive bandwidth. FIGURE 4. The McKinsey Quarterly.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . 'Electronic Commerce (finally) Comes of Age'.High-powered servers . Multimedia development tools that can be used to create rich content. etc. hosting. 2000 (http://cyberatlas. The growth in support services (e.2 20 'World Online Populations' .). the momentum created by all these forces has created a virtuous cycle of growth. Reed.4 . Easier access to these networks provided by point-and-click web browsers.Content Aggregators . The emergence of open standards in development tools and at the network protocol level (e. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.g.. As shown in Figure 4.internet.g. and gateway services).Cheap microprocessors & RAM .Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . The development of critical processes (ordering. 1996.E-Marketplaces . G.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. increasing to 500 million users by 200220.
Figure 4. April 13. 2000 (www. to interacting (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). reveals the wide range of areas where people are embracing the Internet .from communicating (90% use e-mail) and sourcing information. as cited in the Economist Intelligence Unit (EIU).com) 38 . chat rooms.g.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. communication and information tool. These activities highlight the adoption of the Internet as an interactive. FIGURE 4.5 . entertainment) and purchasing (37%) .5.eiu.
they all project the value e-commerce transactions to grow at unprecedented rates. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4.e. web browsers. There is no need to travel to a physical location. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. software. and no cash register. Instead there is a website. and people.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. projected by Gartner Group. FIGURE 4. content.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. The buyer and seller 'face' each other through an electronic connection. April 2000 39 .6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. fax. However. The main difference between the Internet and other electronic media (i. no order book. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. telephone) is that the Internet goes beyond just enabling transactions.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers. Yahoo!). For example. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. partners and other corporate constituencies. pp. 66-76 40 . the Internet is sidelining the role of many traditional intermediaries. Harvard Business Review. Dell Computers). through the use of extranets). The Internet also facilitates the development and co-ordination of global activities (e. how they compete and how they serve their customers . & Overdorf. represents a level of efficiency and integration previously unattainable.g.and revolutionary new business models are emerging.. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Although the particular impact will differ between industries. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen.g. By allowing customers to talk knowledgeably and directly to suppliers. and transforming traditional distribution channels. 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. Additionally. suppliers. At the same time. the explosion of information is placing a premium on skilled information management. New brands and business models are emerging to seize this opportunity. March . operation (e. which are often disruptive to traditional business models21. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. This is threatening to undermine many old established brands. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience.g. some of which look set to become the superbrands of the future (e. 'Meeting the Challenge of Disruptive Change'.how companies operate. M. Volume 78 Issue 2.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . C..April 2000.
they can choose between traditional 'bricks-and-mortar' companies. This is forcing companies to become flexible and responsive to customer needs. constantly innovate. 2000 (www. ensuring the delivery of a satisfying customer experience. According to George Colony. the typical clock-speed at which companies need to operate has accelerated. and the 24 x 7 environment.Forrester Research. It also provides easy access to competitors' offers and allows customers to consider every available alternative. As a result. 'Empowered Fruit Flies' . the globalisation of business. getting closer to customers and ultimately staying ahead of competitors. commit and deploy resources. as they are just one 'click' away. collaborate more effectively and ultimately embed organisational intelligence within processes. combined with the emergence of electronic intermediaries.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. these new highly informed customers are "empowered fruit flies".. 22 Colony. quick evolution and all the power. switching costs are much lower. CEO of Forrester Research22. Internet technology can be used to exploit collective learning and knowledge. online stores. G. The Pace of Business is Accelerating With the fast pace of technological change.internally and externally . with no time. This. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. fierce competition. has resulted in a fierce competitive environment. Now companies need to move at warp-speed. the development of a knowledge economy. empowered customers. to capture new opportunities. it also removes the geographical protection from competitors.in developing products. or catalogues. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. and reorganise as appropriate. improving processes.forrester. Customers have more options than ever before . highest convenience and quickest satisfaction. allowing employees to share knowledge. respond to competitive and market dynamics. little loyalty. as they have access to more information leading to more informed decision-making.com) 41 . products and services. their organisations must harness knowledge . They can move from one supplier to another searching for the best prices. the diminishing barriers-to-entry and the lower switching costs.
companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. linking companies with suppliers and customers up and down a pre-defined value chain. The extent of this partnering is illustrated in Figure 4. Increasingly. extensive outsourcing. supply chain cooperation. it provides the opportunity to reach customers where they want.(www.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.com) 42 . and the need for speed and flexibility have accelerated the unbundling of business systems. information. achieve global reach and realise a new source of cost advantage. thus creating a 'value net23'.7. 1999 . The opportunity of linking the complete supply chain 'virtually'. alliances and partnerships have taken on a new level of strategic importance. and multiple strategic alliances and partnerships. how they want and with the levels of customer service they demand. variety. As such. and partnering up with the best for the remaining activities. companies can provide customers with a strong value proposition by offering them the best in quality. 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. combined with intense competitive pressures.A Research Report by TeslaGroup. and most traditional partnerships were vertical.teslagroup. companies have looked upon alliances only as a means of filling gaps. Traditionally. Examples of emerging information age business structures include flat versus hierarchical. most Internet and e-commerce partnerships extend beyond this. It allows companies to improve customer service. which highlights the typical structure and dynamics of an online company. 23 'The Future of E-Business' . However. In this way. linking companies with competitors and players from entirely different industries and business sectors. when they want. advice and convenience.
the pace of business is accelerating and power is shifting to the customer. 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. it is transforming the competitive landscape and brand-building environment.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.. New opportunities for efficiency and co-ordination are emerging. 'Organising for e-Commerce' . tools and opportunities. while triggering the emergence of new brandbuilding strategies. many online companies are blending together the products and services of a wide range of companies.they are business issues.6 CONCLUSION The Internet and its strategic impact are not technological issues .dot. S. As such. Partnering with portals and affiliate web sites is important in driving traffic to a web site. 43 . D. This provides customers with added value. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. while making the offering hard to duplicate off-line.a Boston Consulting Group (BCG) Analysis. This is the substance of the next chapter. competition is intensifying. & Stirton. G.7 . The Internet is transforming every business to some degree. April 2000 In an attempt to provide a rich customer experience.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
In response. and projects it onto a third party intermediary (the media).Durlacher Research.names. Traditionally. in most cases. J. the Internet makes search and comparison much easier. The Internet. However. Customers derive added value through the provision of information on the products or services they buy. they have never handled or seen (except on-screen). has placed greater importance on trust and security. etc.. Transactions on the Internet require customers to provide detailed personal information . on the other hand. Generally. In addition.durlacher. brands have been developed in an environment whereby a company creates a brand. and sites that understand the user's needs and preferences24. 'Internet Portals' .1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. offers interactivity. whereby the company can establish a dialogue and 24 Marathe. the intangible nature of the Internet. 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. New strategies and tools for building brands on the Internet are identified. addresses. and the fact that customers are buying goods that.com) 45 . May 1999 (www. many unnamed customers develop a 'relationship' with the brand. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. in addition to providing added value. People only tend to transact with sites they know and trust . 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. people have concerns about sharing personal information.sites that provide a wealth of information and make comparison shopping easy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. including the interactive approach to attracting customers and building loyalty. 5. credit card numbers. where the user feels a part of. On the other hand.2 THE NEW DYNAMICS OF BRANDS Traditionally. the logic of the Internet cuts another way. This threatens to undermine the value of brands.
B.1. However. 1999. rather than simply speaking at customers. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. M. TABLE 5.. In doing so. 1997 (www. D. brand-building must focus on the end-to-end customer experience .from the promises made in the value proposition. to its delivery to the customer.edu) 26 Peppers. J. Rogers..Harvard Business Review. service approach Customised The Internet gives companies control over all their interactions with customers and therefore.duke. a company can listen. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. relationship building characteristics of the Internet. 'Adding Product Value Through Information'. January 28. pp. companies have to find innovative ways of leveraging the information and 25 McCann.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26.1 . This creates the opportunity for companies to build stronger relationships than previously attainable. 'Is Your Company Ready for One-to-One Marketing?' . January-February. In maximising the customer experience. .Fuqua School of Business.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. & Dorf. Duke University.. Prof. learn.. 151-160 46 . this also poses a challenge as these relationships may take on a life and character of their own. understand and relate to customers.
org) 28 Rigby. - Loyal customers are more willing to buy other products from the company. 'The Value of Online Customer Loyalty and How You Can Capture it'. high-margin items. but also provides more opportunities for cross-selling.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27.. Harvard Business Review.An A.. March 17. Baveja.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.due to more frequent shopping and larger purchases. 2000 (www. Repeat purchasing not only binds trust.. S..com) 29 Hoffman. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.word-of-mouth is the single most effective and economical way online businesses grow their sites. C. D. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap.converence-board. 2000 47 . Kearney White Paper. companies need to retain customers so that they return to the site repeatedly. - Repeat customers refer more people and bring in more business . . S. and Novak.com and www. P. T.A Mainspring Communication Report in collaboration with Bain & Co. 27 'Electronic Business Outlook'. These points stress the importance of online customer loyalty. For example. Zook. J. Rastogi. This is further reinforced by the fact that. it is very unlikely that an online retailer can break even on a one-time shopper. 1999 (www. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer.bain. Therefore. as cited in 'Creating a High-Impact Digital Customer Experience' . - Repeat purchasers spend more and generate larger transactions . R. In fact. it could be argued that customer loyalty is even more critical online.. This view is reinforced by in-depth studies carried out by Bain & Co. and to recover their investment. a disgruntled online customer tells 10 people about a poor experience30.. and with customers holding all the power..often.Research by PricewaterhouseCoopers / The Conference Board. customer acquisition costs are high. L. D.. Chu. MayJune 2000 30 A Forrester Research Study. on average.pwcglobal. unless they are selling high-price. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . and some are spending over $50029. companies must ensure that they provide a completely satisfying end-to-end customer experience. T. . 'How to Acquire Customers on the Web'. & Hancock.
4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. the costs approach zero32.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. R. increases disproportionately as more people join the network. 7th Ed. and in the case of information-based products. Even more important. (also referred to as 'viral economics'). Similarly. and the value that each member realises. customisation for individual customers.1. where the value of the network. additional products. as the benefits of scale are overwhelmed by the disadvantages of size31. pp. and other features can be added or changed at low marginal cost. As a result. FIGURE 5. Once the up-front investments are made (for research and development and technology infrastructure). 'Positive Economics'. businesses and online communities that rely on connectivity can enjoy 'network effects'. G. 180-182 48 .. However..1 . each additional unit sold does not cost more than the last to deliver. this is not the case on the Internet. (London: Harper & Row). 1989.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. additional customers and transactions can be managed with limited fixed cost investment. as illustrated in Figure 5.
direct marketing. link revenues 32 33 Melnicoff. advertising and referrals. M. including direct marketing. FIGURE 5. being first into a market makes it easier to capture the consumer's share of mind.2 .Figure 5. its ability to track customer preferences and customise offerings improves. cross-selling and up-selling33. Nov 1998 49 . As the company builds a customer base and develops a relationship with customers. Outlook 1999. With no competitors around.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. This makes it more efficient in improving product selection.. 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. R.A Publication by Andersen Consulting 'The State of Online Retailing' .THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.org Study in collaboration with The Boston Consulting Group.2. fulfilment • Defensible advantage against competitors SCALEABLE. It also allows online companies to tap supplementary revenue streams. enhancing the interaction. delivering increased margin per customer . 21 .A Shop. No. '5 Rules of the eEconomy'.
New marketing strategies.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. It is often referred to as "word-of-mouth". viral marketing is an effective tool in getting a message out fast. the brand begins to take hold. as once a strong lead is established. in turn. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. leading to the exponential expansion of the customer base. 5. and word-of-mouth even more effective. Nov 1998 50 . "leveraging the media". such as 'viral' marketing. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. This snowball effect favours first-movers. As a result. the value of the company rises exponentially with market share.unless the leader makes a serious mistake. This is the logic behind some of the extraordinary valuations of Internet companies. and "network marketing". creating a potentially exponential growth (like a virus) in the message's visibility and effect. 34 'The State of Online Retailing' . chat rooms and bulletin boards. As a result. 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. Given the connectivity of the Internet among customers. The Internet. its growth curve relative to a new entrant is somewhat daunting. and the cost of switching to an alternative brand becomes quite high. "creating a buzz". or until a competitor finds a way to change the game again. Larger sites can also negotiate better supplier discounts or product placement fees. When a company reaches 'critical mass'. web sites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. the leader will pick up momentum and will stand to gain an insurmountable advantage . This. By the time a company has reached critical mass.A Shop. with a minimal budget and maximum effect.org Study in collaboration with The Boston Consulting Group. makes communication tighter. with its e-mail lists. commerce and distribution partners. Word-of-mouth is a particularly powerful medium. as it carries the implied endorsement from a friend. larger sites can leverage more customer advocates to reduce customer acquisition costs.
5 years.1 The Case of Hotmail.com was one of the first free web-based e-mail services. where they have never carried out any promotional activities. Today they are the largest e-mail provider in the world with over 40 million users. seven days a week. whether for communications or community.com The classic example of viral marketing is Hotmail. a company now owned by Microsoft.5.com. saying: • "Get Your Private. and then propel the message even further to their own ever-increasing circles of friends and associates. In fact. 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" • Then stand back while people e-mail their network of friends and associates • These people then see the message.hotmail. Hotmail acquired over 12 million subscribers. 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). friends to visit it. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. • Each new user becomes a company salesperson. eGroups and Geocities (both recently acquired by Yahoo!). Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. but Hotmail signs up more than 150.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Free Email at http://www. and they created a subscriber base more rapidly than any company in history. they tell all their 51 . they will have a powerful viral opportunity at their disposal. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. In its first 1. When a user builds a website. sign up for their own free e-mail. Geocities enables people to create personal websites for free. and in doing so spread the word for Geocities.000 subscribers every day. and the message spreads organically. A traditional print publication would hope to reach 100. Hotmail. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).000 subscribers within a few years of launch.
2000 (www. S. 2000 'The E-business Technology Forecast' .A Mainspring Communication Report in collaboration with Bain & Co. T. S.com) 52 . . In essence. Chu.. As 35 36 'Creating a High-Impact Digital Customer Experience' ..An A.. FIGURE 5.3 . 2000 37 Rigby. and 66% of people who start a 'shopping basket' fail to complete the transaction37. 30% of potential customers leave sites because they cannot find what they are looking for.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . R.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.. D. T.3). Place). & Hancock. March 17.. Kearney White Paper. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. J. Kearney White Paper. C. Baveja. Rastogi.bain.. The customers' ability to access and display information rapidly is extremely important36.An A. Zook. making customers 'click off' to another site.. Promotion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.A PricewaterhouseCoopers Report. Sites that are difficult to use can cause frustration. 'The Value of Online Customer Loyalty and How You Can Capture it'. In fact. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.
businessweek.4 . With almost infinite display space and inventory capability. online companies have the opportunity to provide rich.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. expert insights. ease-of-use. as cited in Business Week.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. whereas a slow response time and site downtime will have a significant negative impact. CIO Magazine. up-to-date information. October 29. ease-of-navigation.businessweek. 29th October 1999 (www.4. T. which can enhance the company's value proposition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. FIGURE 5. 'Sticky Business'. 38 39 Cognitiative Inc. and a wide range of products. as cited in Business Week Magazine.com) Davenport. 1999 (www. February 2000 Issue 53 . and fast response times are among the most important factors in establishing web brand loyalty38.
even if they purchase offline. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. No. 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). S. Members can interact in chat rooms.. 'Real Profits from Virtual Communities' .forrester. iVillage and Geocities). 40 41 Morrisette. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).. For a community to work. On the other hand. A. share information and access a wide range of services. or prior transactions. According to Forrester Research40.5).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. K. & Hagel. demographics. 31% of online consumers use the Internet for obtaining product information. An online community offers a compelling way to entice customers back to a site. Spring 2000 42 Armstrong.g. 3. and organise live events. visitors should not be engulfed with too much information. 54 . Other content includes community-generated content. These sites allow members to interact with one another. Community Online communities are emerging as new gathering places for consumers with similar interests (e. Customisation Customisation involves tailoring the presentation of a web-site to individuals. An important contribution of these communities is that they provide members with a medium to communicate with each other. Clemmer..The McKinsey Quarterly.A Forrester Research Report. 1995. and advertising (if it is relevant and useful). Customisation creates the feeling of a one-to-one relationship. use bulletin boards.Sloan Management Review. Online sites can track a customer's purchase history and modify its service accordingly. it needs a critical mass of members42. W. which is facilitated by a combination of factors (Figure 5. as well as through loyalty programmes that provide targeted benefits. It fosters a sense of belonging41 among the members. and nearly 20% use it for post-sales support. based on profile information.. . J. 1999 (www.com) McWilliam. Often. G. & Bluestein. 'Building Stronger Brands through Online Communities' . Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.. which enhances the user's online experience.
5 . when membership in the brand's community becomes an end in itself43. 43 Fournier.A PricewaterhouseCoopers Study. Journal of Consumer Research.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. Once customers know of a site. they opt to input the URL (Internet address . March 1998. Site-tosite connectivity focuses on connecting users to other relevant sites.. M. as well as attracting traffic from other sites.brand-name.. O'Donnell & Gupta. This is similar to placing offline stores in high traffic areas..BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 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. and can create emotional loyalty. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. Mulcahy. allowing customers to deepen their experience with a brand and build more personal connection. S.6). pp. C. A. 'Making Real Sense of Virtual Communities' . 343-373. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. Companies can provide a selection of related links that complement the site's purpose and value proposition. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.www.. 55 .com) directly into the browser and access the site immediately.
com) 56 .marketwatch. events and subjects of interest to the customer. Customers share security and privacy concerns. In addition. (www. and FAQ pages (Frequently Asked Questions) to solve problems. customer support at all stages of the interaction is important. and can be provided through e-mail.6 .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. as well as informing and reminding customers of special offers. Other tools such as bookmarking the page can also facilitate connectivity. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. news up-dates. It is important in building relationships. which provide targeted and unique (customised) benefits to the customer. 45 MarketWatch. customer care activities can involve providing a variety of payment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. activities. delivery and return options. The development of loyalty programmes. live chat. and online surveys. serves this purpose and helps to build customer loyalty. Customer Care Online customers often require assistance and reassurance. as well as features such as gift-wrapping. toll-free telephone numbers. Therefore. online chat. Communication can be tailored to specific user interests and should allow for two-way interaction.
7.Awareness. Trial.7 .) to online tools. This is more difficult online than offline.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.. Engage. 'Marketing to the Digital Consumer'. M. McKinsey Quarterly. including affiliate programmes with other websites. Adoption). The company must build awareness and communicate its value proposition to its target customers. 180-183 (www. R. modified to take into account of the interactive dynamics of the Internet. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.8. Learn and Relate.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. A. visibility relies solely on Communication. Interest.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. links from directory searches (Connectivity).2. Evaluation. because there is no physical presence. Figure 3. FIGURE 5. Retain. e-mail notifications and banner advertisements. Waitman.Attract.. billboards.4 .. pp.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. S. No. This model consists of five stages . 1996. 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 ’ . Newspapers.. & Zeisser. and bring people to the site for the first time. The mechanisms to communicate range from traditional media (TV. Magazines. McQuade.mckinseyquarterly. Therefore. etc.
3 2.3 3. 58 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.WEBSITE PROMOTION METHODS . Creativity is also an important factor in gaining attention in today's cluttered marketplace.1 3. 3.com) The most effective methods are direct e-mail.7 4. it is important to quickly engage consumers' interest before they move on. discounted over the expected duration of the brand-customer relationship. as cited in 'Targeting Consumers via the Internet' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. The key factors at this stage are Convenience combined with interesting Content.3 Source: Forrester Research.2 4.4 3. 3.0 3. Attracting customers is only the first step in building online brands. Kapferer's Brand Prism (Ch.8 4.6 3.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) is useful to ensure that a company develops a distinct and consistent brand identity. Companies then need to engage customers to obtain their interest and participation.5 3. public relations and television advertising. Engage With the multitude of choice available on the Internet.Economist Intelligence Unit 2000 (www. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. multiplied by the expected rate of transactions.4 3. affiliate programmes.4 4.5) 2.ebusinessforum.8 . Fig.
and must be continuously updated due to the multiple visit nature of customers. Content is the basic driver of retaining customers on a site. 59 .who they are and why they shop online. 5. Radio). Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers.g. Certain product categories. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Building up a knowledge database on each customer . TV.9). can create value for the customer and help build the brand-customer relationship. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. The objective is to increase the conversion rate (% of browsers converted into buyers). such as groceries and convenience goods. and what additional products and services are they interested in provides companies with valuable information which. This helps to create a customer base that spends more time and money at a site. 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. The initial site registration provides an early opportunity to obtain useful information.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. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Communities and Customisation are other sticky applications. attitudes and behaviour). if used properly. and forge closer relationships than any offline operator. Learn The Internet provides extensive opportunities to learn about consumers (demographics. a company can create value by providing a personalised online experience. • The Internet supports brand-building activities where there is a need to build a relationship.
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. McQuade.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. and the need to stimulate the other senses (taste. it is critical for companies to build relationships and foster brand loyalty. The next chapter analyses the brand-building efforts of seven companies. companies must provide a satisfying end-to-end customer experience . to its delivery to the customer.. 1996. the interaction provides the ability for companies to learn from their customers and relate. providing further added value. especially in small quantities. the experience is the brand. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Waitman.9 . M.9 CONCLUSION On the Internet. Given the high acquisition costs of online customers. The interactive brand-building process involves attracting.. and as the relationship develops. McKinsey Quarterly. it is not economically feasible to sell certain products. due to high delivery and transaction costs (relative to the value of the product). & Zeisser.. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. touch. 'Marketing to the Digital Consumer'. pp. S.from the promises made in the value proposition.2. In order to create "apostles". 5. smell). These case studies provide a practical insight into how companies are building their online brands. A. • Brand-building favours products that can be sold online. 180-183 (www. engaging and retaining customers. However.. No. 60 .mckinseyquarterly.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
In addition.com.com. combined with its levels of customisation and customer service.com has become synonymous with e-commerce.com launched with a mission to use the Internet to transform book buying into a fast.com and Yahoo!. 'Amazon. more information. and has sales of over $2 billion. Figure 6.COM 6. and is one of the few Internet brands that is recognised all over the world. its value proposition. February 26. Barnesandnoble. greater convenience. The cases are presented in the following sequence . and enjoyable experience.interbrand. and one of the top two or three in Britain.2.1 INTRODUCTION This chapter provides an analysis of seven companies. and higher levels of customisation and service than the traditional shopping experience allows.1 Company Overview Amazon. a company overview.com) 62 . innovation and delivering on its promises. 6.The Economist. France. discounted prices. and has equity investments in several e-tailers. including: increased selection. Not a River' . 2000 (www.com.see Appendix A.Goldman Sachs Report.com . Each case is presented in the same format including.2 Value Proposition Amazon. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). 6. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Through its provision of a one-stop shopping experience. Amazon has been able to differentiate itself from other online competitors. Germany and Japan49. Amazon provides increased added value on several dimensions.com's success stems from its compelling value proposition. Boo. CDnow. In addition. It is the 57th most valuable brand in the world47. eBay. Gap.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. its brand-building strategy (how it generates traffic).economist. 47 48 Interbrand (www. November 11. Amazon.Amazon. In July 1995. 1999 49 'Amazon's Amazing Ambition' . the sources of added value (using the 7Cs Framework).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 outlines Amazon's timeline and major milestones.2 CASE STUDY: AMAZON. easy. it is the most visited e-commerce website in America. Amazon. Amazon serves over 23 million customers from 160 countries. and other key factors that have contributed to its success (or failure).2.com) . Amazon has cultivated a reputation for excellence.It's an Ocean.
TIMELINE AND MAJOR MILESTONES Amazon. Ashford. featuring thousands of bestseller lists for hometowns.COM . provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Amazon surpasses 20 million cumulative customer accounts .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with." providing shopping from wireless devices.amazon.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon.com . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.Amazon launches health and beauty store .toolcrib. universities.Amazon launches www.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com to create a "home living" store at amazon.com invests in wineshopper.com and NextCard launch co-branded credit card . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. Software. and more Amazon launches "Amazon.Amazon opens a customer service centre in Huntington.Customers can shop at Amazon.com 63 .com Amazon acquires Back to Basics Toys to add to Amazon.Amazon launches new kitchen store .000 members Amazon. West Virginia.com Amazon introduces "Purchase CirclesTM".com Announce Strategic Investment and Promotional Agreement .com announce investment and strategic alliance .Amazon enters strategic alliance with living.com Anywhere.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . to meet rapid growth . Video Games and Gift Ideas Amazon and Sotheby's launch www.com . workplaces.Amazon.Amazon launches lawn & patio store .com is founded by Jeff Bezos Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.amazon.com Amazon announces further plans to expand distribution network to meet rapid growth.Amazon and eziba.Amazon enters into a strategic partnership with Drugstore. Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.sothebys. and minority investment in.com Auctions and zShops provide new tools to its merchant community . such as the Palm VII organiser.Amazon and online car-buying service Greenlight.com .com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.New home living store from living. a tools and equipment store for professional tool users and woodworkers .com via the new wireless pocket PC .Amazon.com Electronics and Amazon.Amazon announces investment in kozmo.com opens its virtual doors at amazon.com.com Amazon invests in Pets.Amazon opens customer service centre in The Hague .com enters European book market Microsoft signs Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com .
2. and customer Purchase CirclesTM. offering multiple paths to a given book or product. mobile phones. gift reminders. wish lists. discussion boards.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. interviews with authors.1.e.1 . The site is easy-to-use. Palm VII PDA device). Content Amazon provides content on several levels. logically structured.Figure 6. such as the Amazon. This is an example of 64 . live or study. including book jacket images. expert reviews.3 Sources of Value .com All Product search (searches the entire web). downloads quickly and services visitors adequately . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. customer testimonials. gift click. encourage repeat visits and drive higher conversion rates. Amazon has added other features for shopping convenience. easy-to-use. recommendations. book summaries.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and quick-to-load pages Over time.com Anywhere to support access from wireless devices (i.OVERVIEW OF AMAZON. and Amazon. FIGURE 6. the 1-ClickTM express checkout. Customer purchase circles allow shoppers to cross-reference similarities such as where people work.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping.
creates a competitive advantage. therefore. to the proactive notification of new items of interest. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. Amazon introduced Amazon. Amazon's content is not reproducible by competition. By leveraging its vast customer base.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 . Community Amazon has also added a community element to the purchasing process. This customer-centricity is evident in all Amazon's activities. which helps to build loyalty and create switching costs. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. 65 . and customer interaction. from the customer recognition at the point of interface (Figure 6.4. while driving up repeat purchases and cross-selling opportunities. Connectivity Amazon has built relationships with high traffic web portals and sites.2. real-time shipping and backorder notices. More recently. These are discussed in more detail in Section 6. converting them into a storefront for Amazon. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. linking it to a large number of other sites. and Customisation Amazon provides customised features and services.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. and has developed an Associates Programme. In doing so.thereby increasing conversion rates.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. from its shopping basket applications which lists the estimated time to delivery reliably. Amazon creates one-to-one relationships with its customers.
Through the first half of 1996. This enabled Amazon to reach more customer segments and niches (Figure 6. enticing them to return to the site and purchase repeatedly. Instead of paying directly for this exposure. 66 . help maintain contact and build traffic by e-mailing customers when desired products or books become available. which only applied to sales that resulted from the initial click-through. and not subsequent purchases. increasing to over 500. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. 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.2. Once orders are placed. The Associates Programme has been phenomenally successful.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. As a result of all these factors (7Cs). and customers are also e-mailed when the items are shipped from the warehouse.000 by August 2000. 6. Newsweek.a move that along with the novelty of its business model and the newness of the Internet. two personalised services. The Financial Times. In July 1996. Eyes and Editors. attracting member sites of all sizes. Amazon offered Associates referral fees of up to 15%. and by 1999 it had over 200.com hot-link and offer specific books of interest to their visitors. Business Week. helped generate publicity and stories about the company in publications such as The Wall Street Journal. In addition. it began to advertise in print media and online .000 members. they are subsequently confirmed by e-mail. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. New Yorker and The Economist.2). In the second half of 1996.
and Geocities. Amazon has used viral marketing techniques through customer reviews.com's website (www.com gift certificate (in your name).BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. mutual links. including: America Online (AOL).com.amazon. spreading the word for Amazon. free eCards and gift certificates (which customers send to friends. These multimillion-dollar.AMAZON.co. was also linked to Amazon's entry into Europe Amazon. Interesting viral initiatives include: • Amazon.COM'S ASSOCIATES PROGRAMME Source: Amazon. Therefore. In return.com About Me . The Yahoo! agreement. thereby promoting Amazon. 67 . Netscape's Netcenter and NetSearch. and you are given a $5 gift certificate for each customer you provide.de became the local provider for Yahoo! Germany and Amazon. multiyear deals involve exclusive book-selling rights.customers are encouraged to provide e-mail addresses of friends. each friend is sent a $5 Amazon. Prodigy and @home. From July 1997 to December 1998. and primary button placement on web portal search engines.uk the local provider for Yahoo! UK & Ireland. • Amazon. Yahoo!. People tend to tell their friends about it.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. Excite. the customer acquisition cost is only £10. Amazon also established agreements with AltaVista.allows customers to create a personal profile (with pictures) on the site. In addition.com). Amazon closed deals with five of the six most visited Internet addresses.com Refer-A-Friend .2 .
50 Willis. April 6.. so we didn't have to do much advertising. which accounts for 66% of Amazon's sales. interesting content. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. buying patterns and viewing habits. 1998 68 . 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. Purchase CirclesTM). According to Jeff Bezos. 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. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon is building customer loyalty and encouraging repeat business. clear presentation. and improved customisation and recommendations (e. however. Once customers are attracted to the site. with the explosion of websites. That's not possible anymore50". community feel (as discussed previously). This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. "we had a world-class site the day we launched . By relating to customer needs. Amazon maintains a database of customer preferences. billboards. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. Amazon has also incorporated traditional offline media (TV. With this combination of promotional methods. C. As the relationship develops.com Really Matter?' . Amazon's proven online merchandise selling techniques including easy-to-use search options. Amazon has been able to achieve average customer acquisition costs of less than $20 .Forbes.but it was only a tenth as good as the site we have now. 'Does Amazon.g. And we relied on word-of-mouth to build awareness. Magazines.significantly lower than other online companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. newspapers) to generate awareness.
establishing Amazon as the leading online bookseller with a large customer base. "we're not a stationary target. Saunders. further enhancing their value proposition. and our goal is to increase that gap51". the balance of power shifts away from the company and goes towards the customer. As such. Success. and its safe and secure delivery.com Way'. July 1998. For example. Amazon unveiled a music store. to capture the spirit of the site. and to convey its vast size and offering. good value.a wide range of choice. Amazon received criticism for expanding its product line. "Online. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Amazon has been able to build a strong brand at relatively low cost. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Amazon is constantly seeking new ways of improving its offering. R. Our secret is that we have not been competitor obsessed. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities..com obsessed52". We were blessed with a two-year head start. Amazon was able to secure partnerships and alliances with key players. This has helped them attract customers and move up the learning curve quickly. Amazon's understanding of its brand identity has been a critical factor. In addition.. thereby diluting the value of its association with books.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. 51 52 Hazleton.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. which within six months propelled Amazon to one of the leading online music retailers. because he wanted it to be short. developing customer service centres and expanding its distribution network to support high levels of service. in June 1998. According to Jeff Bezos. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. and according to Jeff Bezos. (Oxford: Capstone Publishing). We have been customer obsessed. 1999 69 . In addition. management realised that Amazon had become more associated with other core brand values . As such. 'Business the Amazon. due to the hype and coverage it was given. L. memorable.2. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). establishing a reputation for excellence and fulfilment. However. According to Jeff Bezos. while our competitors have been Amazon. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. Nevertheless.
they have cultivated a reputation for excellence and fulfilment.2. 53 Warner. Amazon is claiming to be making profits on its books and music categories. secure payment procedures. and to sustain a positive image and satisfactory end-to-end experience. This raises a critical issue. have kept it ahead. perhaps trying to defend its view that losses taken to build market share can reap profits later. Amazon has continuously invested in customer service. it has not recorded any profits to date. Amazon also recognised that service quality is a perception.. 6. if it continues to incur losses. Although Amazon has successfully built a strong brand and loyal customer base. with new products and value added content. however. as the true value of a brand lies in its sustainability. the drain on their cash resources will push them towards bankruptcy. Amazon's intense focus on customer needs and continual innovation. stem from its compelling value proposition and high quality end-to-end customer experience. not necessarily a reality. speedy delivery and good value. Nevertheless. Quality is only measurable in the minds of visitors to the site. This customer-centricity is a key hallmark of a successful Internet brand. Amazon delivers on its promises of a wide inventory of products.Brandweek. 'Marketers of the Year: Jeff Bezos. When they're young. B. distribution centres and upgrading the site. October 12.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. which is critical on the Internet. but over time they become more and more associated with a particular thing and harder to stretch53". they're stretchable and pliant. 1998 70 . and investors lose confidence. In doing so.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. However. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. The key factors driving its growth and high retention rates. Volume Discounter' .
and is the second largest online bookseller (after Amazon. all front-end operations (marketing.COM 6. magazines. Dalton bookstores (located in shopping malls). Barnesandnoble. Inc. is one of the best known traditional booksellers in the United States.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . as it could capitalise on the infrastructure and back-end operations (warehouses.) established by its parent company.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .3.3 CASE STUDY: BARNESANDNOBLE. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.Barnesandnoble. Barnes & Noble Inc. 40% owned by Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Barnes & Noble.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.com launched its website (www. Besides books. prints & posters and related products.Offers same day delivery in Manhatten .com and Microsoft announce that they will create an eBook superstore .Launches Internet Radio .Launches Affiliate Network December .com's timeline and major milestones is outlined in Figure 6.com announces strategic relationship with Palm Computing . contacts.Announces distribution relationship with New York Times September . Barnes & Noble Inc.Launches BNTV .COM .com was able to 'hit the ground running'.Acquires minority stake in NotHarvard.com) .Barnesandnoble.barnesandnoble.com provides other online categories offering software. promotion) between the online store and the retail stores have been kept separate. etc. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Barnes & Noble went online at AOL May . music.2 1997 January BARNESANDNOBLE.com). Launched in 1997. book databases. TABLE 6.Acquires equity stake in Mightwords . Barnesandnoble. However.com . rare.TIMELINE AND MAJOR MILESTONES .. Currently.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.1 Company Overview Barnesandnoble. Barnesandnoble.com is approximately 40% owned by Barnes & Noble. Barnesandnoble.Barnes & Noble University opens registration for free online courses .com is the fourth largest e-commerce retailer54. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Launches Video Store 71 .2. and 20% owned by the public. and 470 B.
but instead of developing an outstanding interface to its inventory.com or www.2 Value Proposition Barnesandnoble.com let customers sign up to receive email reviews and announcements of new titles. the features are practically identical. Both offer detailed bibliographic information. good prices.com's and takes a bit longer to download. in terms of the 7Cs framework. they offer customers fast delivery.com's website (www.3. music New Initiatives Barnesandnoble. as cited on Barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. rich editorial content and a community experience. Both have expanded their convenience to offer 54 Media Metrix. previously-owned and rare books. Both Amazon. publisher.com's virtual storefront is graphically richer than Amazon.com and barnesandnoble.3).3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. FIGURE 6. including title. however. software. as well as an extended searchable catalogue of millions of out-of-print.3 . and easy-to-navigate site Categories focus on books.OVERVIEW OF BARNESANDNOBLE. the company created a site very similar to Amazon.bn. etc. easy and secure ordering.3 Sources of Value . logically structured.com) 72 . author. Barnes & Noble planned to dominate online book-selling.com's (Figure 6.barnesandnoble. 6. edition. In addition.COM'S WEBSITE Simple.
Both offer customisation that permits users to personalise the experience. has yet to leverage its strong brand in cyberspace.The Wall Street Journal. 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. December 17.4 Brand-Building Strategy Barnesandnoble.com has created a high quality website and customer experience.com's market capitalisation was $251 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Both try to foster a community of readers by letting customers post reviews online. The 6. Barnesandnoble. and both are expanding globally.com's 1999 revenues were $202. They have developed an affiliate programme that links sites to Barnesandnoble.com in return for a commission on any purchases that they originated .a replica of Amazon's Associates Programme.com. 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 . Netscape and Microsoft Network.3.com was valued at $21.000 affiliates in its referral network. Although.6 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Barnesandnoble. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Yahoo!. As of February 2000. this programme had more than 300.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Webcrawler.com's $1. however. and avoid charging sales tax in states where it has stores56. and Barnes & Noble Inc.com had over 17 million. reasons for this are explained in the next section. Barnesandnoble.com closed 1999 with 4 million customers. while Amazon. Barnesandnoble.1 billion. Instead. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). prevent cannibalisation of its existing business. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). However. it lags behind first-mover Amazon. Lycos. while Amazon.64 billion. Both offer 'associate programmes' that let other websites link to their sites. compared to Amazon. These initiatives have generated traffic to the site.
• Barnesandnoble.com. By failing to leverage it.. At any given point there are hundreds of customers browsing their aisles looking for something to read.com's key differentiator from Amazon. or deliver books directly from the retailers. Planetrx.com created a new cross-marketing genre in February 2000. provides access to valuable resources.com.com should have aggressively cross-promoted their stores through advertising.com and VitaminShoppe. Barnesandnoble. and the tangibility that this provides. Recent Initiatives Barnesandnoble. in the attempt to gain traction and build momentum. Barnesandnoble. and a same-day delivery option in Manhattan. when it struck reciprocal marketing deals with Expedia. To signal its intentions. in-store displays. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com.com has lost access to valuable customers. content and distribution opportunities. Under the seven separate agreements. In return. • Barnesandnoble. and Internet terminals in the bookstores. Unfortunately. Barnes & Noble University (a free online education resource). This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved.com has begun to acknowledge some of these mistakes.com is its association with Barnes & Noble Inc.com offers links to each partner's site and a discount for visitors who click-through. people began using their stores as a physical showcase for online rivals such as Amazon. with a similar discount.com. Jcrew. as Bertelsmann's book division includes partners such as Random House. Barnesandnoble. 74 . and in recent months has aggressively sought new ways to differentiate itself.com. 1-800Flowers.com.com's link to Bertelsmann AG. and its BMG Entertainment division includes music giants Arista Records and RCA Records.com. and leverage its real-world presence.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). Barnesandnoble.com. LLbean. • In addition. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com.com. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com has changed its name to Barnes & Noble. each partner offers a similar link to Barnesandnoble. Petsmart.
it has not been able to establish itself as the leading online bookseller.com) 75 . its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". 57 'Bn.6 Conclusion Although Barnesandnoble.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. customer relationships and offline presence .com.com has been able to create a high impact and high-quality customer experience. and its lack of innovation (by copying Amazon.3. even if that means eating into their existing sales. it also caused a major setback.Not a Best Seller' . The Press have also contributed.its key differentiating factors. In addition. 2000 (www. otherwise they risk losing out to other online competitors. significant market momentum. The company failed to leverage its established brand. Barnesandnoble.Forbes. feature for feature) has failed to differentiate Barnesandnoble. meant that Amazon. by portraying them as slow and clumsy in comparison to the more nimble Amazon.forbes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. August 4.com's experience is instructive. a wellestablished Internet brand. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.com . Barnesandnoble.com and has given them the image of a second rate 'me too' brand.com's late start in 1997. and allowed them to offer stock options as compensation and achieve a high market capitalisation. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. and was further up the growth curve.
Morgan.4. They intended to add France.TIMELINE AND MAJOR MILESTONES . as cited in 'Boo. Puma. However. it's about range and convenience.COM 6. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).com provided a range of 18 fashion and footwear brands including DKNY. TABLE 6. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).1 Company Overview Founded in 1999. P. Germany and Denmark. November 2000 January February May 6. and the resulting loss of investors' confidence. Company is put up for sale.Multi-million pound advertising campaign created by BMP DDB . Boo. CMO of Boo.4 CASE STUDY: BOO. arranged through J. and eventually debut in Asia.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 unique visitors . and included high profile investors such as Bernard Arnault. Boo.com opens its virtual doors' . June 10. On going live.Announces it has only 500.4.3 1999 Mid year BOO. Everlast.First sign of problems . Finland. it means all that brand's product line is available. within six months Boo. due to its poor performance and inability to build a customer base. and was billed as one of Europe's hottest e-commerce ventures. If a clothing brand is on the Boo site. receiving $125 million of funding.com. After a high profile launch. not the limited range you might get at most London fashion shops58".com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com had set the record as Europe's best-funded European Internet Start-up.fails and appoints KPMG as liquidator. Boo. sack 20% of staff and sell stock at 40% discount .Marketing Week.com collapsed through lack of funds.Raises funding of $125 million .com entered six markets: US.2 Value Proposition According to Kajsa Leander. England. Boo.com. 58 Kajsa Leander. 1999 76 . Italy and Spain within a few months.they redesign site. founder and Chief Marketing Officer of Boo.COM . among others. "our marketing thrust is not based on prices.Appeals for $30 million more funding . 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. Sweden. and Converse.Site goes live . as well as create a kid's site.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
former arch rival .com) 80 .Raises $10 million through private placement . whether for browsing or buying. and one of the most popular shopping sites on the Internet62. CDnow was acquired by Bertelsmann AG. On 19th July 2000. by twin brothers Jason and Matt Olim. cover art.Merges with N2K. & Novak. D.000 music-related products and 650. as well as music reviews. May-June 2000. features.5 million distribution deal with Lycos Signs three-year.000 sound samples. $22. convenience. and was the first site to offer the sale of music downloads and custom CDs. guides to music genres. 'How to Acquire Customers on the Web' .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .ten times the selection of a conventional bricks-and-mortar music store).5 CASE STUDY: CDNOW 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. good prices. announce marketing alliance .cdnow.Harvard Business Review.CDnow and Time Inc. customisation and a wealth of information and content to help in the purchase decision. and exclusive interviews and reviews from CDnow's award-winning editorial staff.TIMELINE AND MAJOR MILESTONES . daily music news. pp. CDnow is the leading online music store. $18.Site goes live ..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. It has a customer base of 4 million people. This unprecedented degree of access to music and information is the core of CDnow's value proposition.Launches merged CDnow/N2K site .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and an average daily audience of over 800.5. 62 Hoffman.000 music related items .Partnership program with Geffen Records .179-188 63 CDnow website (www. and they aim to "make every visit to the site. TABLE 6. CDnow provides access to over 500.5. T. CDnow is also driving the digital distribution of music.Forges distribution partnership with Yahoo! $65.000 people.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .Merges with Columbia Records . a valuable and rewarding experience"63.1 Company Overview Founded in 1994.
easy-tonavigate.3 Sources of Value . FIGURE 6. The whole process of searching for albums or music titles to the actual purchase is simple . For example. 81 . CDnow has leveraged the reputation of their brands to reinforce its own. and has secured rights to music reviews. etc.5 .5. By partnering with well-known content providers. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. to make it easier for customers to explore new music and make informed purchasing decisions.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. cover art. artists biographies. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.5.. CDnow has cultivated similar relationships with MTV. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.
In addition. German. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. an incentive programme that rewards customers and encourages them to connect back to the site. By customising the store to meets customers' needs. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . allowing them to respond to detailed customer queries. Italian. 82 . It also creates switching costs. Dutch and Japanese. French.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Spanish. allow customers to keep track of albums to buy in the future.search engines. Internet access providers. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. Excite. they will be reluctant to visit another online store and enter the information again. which accumulate and can be spent on a variety of music-related products. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. Whenever a customer makes a purchase they earn Fast Forward Reward points. Yahoo!.such as AOL. and key news and entertainment sites . Customer Care CDnow's site can be viewed in English. and Geocities as well as more focused specialist sites. CDnow hired a group of multilingual customer service representatives to handle questions. CDnow developed the Fast Forward Rewards programme. Community CDnow has not exploited the potential of creating a community feel. it gives them a sense of ownership and a compelling reason for them to return. Other features such as My CDnow's Wish List. Portuguese. Due to International interest. 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.
Yahoo!. It is a revenue-sharing arrangement.Through the Cosmic Credit Programme. customers buy music. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. print advertising is music-related publications such as Rolling Stone. this is their "most successful customer building programme64".They have also stuck exclusive alliances with AOL. CDnow is doing everything it can to ensure that the next time that 6. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1.5. Spin. CDnow extended its distribution reach to include more than 250. • Affiliate Programme . and Variety. and spot radio to build reach. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. 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.000 small. • Alliances and Partnerships . 83 . Excite and other powerful Internet content and service providers. • Traditional offline Media . According to Jason Olim.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. CDnow's initiatives include: • Banner Ads . and radio spots on the Howard Stern Show to build a cult following among radio listeners.CDnow's advertisements are targeted to some degree.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. music-oriented websites. as well as more-targeted music-related sites like Billboard. covering the entire music spectrum. By keeping the brand in front of the customer in this way. they buy from CDnow.
Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. April 28. with repeat customers accounting for more than 50% of sales. • Word-of-Mouth .4 million). The story of how CDnow was founded in a basement. with 44% of sales coming from new customers65.5. both in the online and offline worlds. as a way to fuel very lucrative word of mouth. and to increases in the customer base of more than 30% quarter-to-quarter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .com) 65 'Pioneering in Cyberspace' .htm) 84 . word-of-mouth accounts for the lion's share of CDnow's customers.Hampel & Stefanides (www.4 million. It is a powerful source of acquiring new customers at low cost.CDnow made public relations a high priority brand-building tool.they were the first site to offer the sale of music downloads and custom CDs. resulting in increased conversion rates.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. 1998 . and scaled it awareness-building efforts.Press Release. It is constantly adding new functionality to the site and has been innovative in its offering .As for many successful online retailers. The company continually pushed for new distribution partnerships to widen its sphere of influence.com/cdnow. This has contributed to a 225% increase in sales (1997: $17. Public relations efforts helped to generate word of mouth and influence sales. it is in this context that the large investments in advertising and partnerships make sense. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .(www. In fact. 1998: $56.cdnow.hsny. 6. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. CDnow's promotion strategies have attracted high levels of traffic. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.
It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. (Boston: Harvard Business School Press). a record distributor that handles the majority of CDnow's fulfilment logistics. 2000 p. as cited in Carpenter. 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. to ensure quick delivery to customers. "eBrands . They also provide the customer with an order number and customer support contact information should they have questions.Building an Internet Business at Breakneck Speed". "eBrands .have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. 6.it's what you do66". This.75 85 . (Boston: Harvard Business School Press).89 67 Jason Olim.5. combined with the high impact customer experience created . CEO of CDnow. P.Building an Internet Business at Breakneck Speed". and ensure that it exploits its early-mover advantage and keeps ahead of competition. This gives the customer the impression that the order is being handled quickly. CEO of CDnow. The development of an extensive affiliate network. as cited in Carpenter. 2000 p. According to Jason Olim. P. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. "your brand is not just what you say .from how CDnow has personalised its product offering to its capable customer service team . "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. CDnow has developed a relationship with Valley Records. It was able to create a strong value proposition and high quality customer experience. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. and innovative. 66 Jason Olim.
collectable shows. eBay effectively created a new business model never before possible . Auctions represent a platform.com) 70 'Meg Whitman at eBay Inc. Auctions make it fun. (A)' . shipping.g.Company Overview' . the eBay community has grown to include more than 10 million registered users. 6.2 Value Proposition eBay offers consumers an efficient.eBay website (www. and eBay never takes possession of the item being sold.A Harvard Business School Case Study. and 450.removing the need for inventory. According to Meg Whitman. from collectibles and antiques to electronics and toys.6. Sellers pay a nominal fee for placing an item up for sale. The buyer and the seller work out the logistics of the transport (e.000 new items joining the "for sale" list every 24 hours69.25% to 5% of the final sale price on any item sold. eBay is not about auctions.ebay. payment) between themselves. 24 hour a day.Company Overview' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and eBay provides added value through its convenience. extensive selection and geographical reach.6 CASE STUDY: EBAY 6.efficient one-to-one trading in an auction format. transportation and other overhead costs.6. Since its launch in September 1995. flea markets and auctions. global trading place for buying and selling personal items in an entertaining auction format.the closest thing in the offline world are trading forums such as classified ads. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. 1st October 1999 86 . Individuals use eBay to buy and sell items in more than 4.1 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. or the payment for the item . CEO of eBay. with emphasis being placed on its unique community feel and culture.300 categories. Auctions are an enabler. and eBay receives a transaction fee that ranges from 1.com) 'eBay .eBay website (www. garage sales. There are over half a million new auctions. "at its core.ebay. with the number of unique daily visitors setting a record of 1. This is a new market . People perceive the auction format to offer better prices. as cited in 'eBay .782 million in January 200068.
eBay acquires Kruse International .eBay goes live .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.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 . and Collecting Just About Anything and eBay for Dummies.eBay acquires Butterfield & Butterfield.de . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .Business Week.eBay expands strategic relationship with Netscape . emphasis is placed on community development and customer care. Norfolk & Virginia Beach.America Online and eBay announce strategic marketing alliance .eBay and AOL launch co-branded site . and raises $700 million . Nashville. Milwaukee. and Salt Lake City .eBay teams up with Carclub.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay goes live in Australia . So brand-building job No.Compaq Computer Corporation and eBay form a strategic U.eBay goes wireless with Palm VII connected organiser .6.eBay and First Auction sign a partnership agreement . Since eBay cannot control how one person treats another. they try to influence customer behaviour by encouraging them to adopt certain values. Las Vegas. 21st May 1999 (www.Germany's leading online person-to-person trading site . Dallas & Fort Worth. "the first brand-building strategy that we have is to have a great customer experience.Launches "My eBay!" to customise the online auction experience . Providence.eBay introduces eBay Magazine in collaboration with Krause Publications.S. Selling. The Official eBay Guide to Buying. Still the vast majority of our new users come from word-of-mouth. and in terms of the '7Cs'.eBay launches 'About Me' feature.3 Sources of Value .eBay acquires Jump Inc.The 7Cs Framework According to Meg Whitman. co-marketing relationship. 1 is have a great customer experience71".eBay acquires Blackthorne Software GO. and two books -. allowing users to create personal homepages .businessweek.eBay acquires alando. the eBay customer experience is based on how their customers deal with each other.eBay and Ultimatebid. This raises challenges in how to control and influence the customer experience. Unlike the previous case studies discussed. and its online trading site (Up4Sale) . as they rarely deal directly with the company. .eBay launches local websites in Baltimore & Washington DC.eBay IPOed raising $58 million .Com form alliance - 6. Seattle & Tacoma.com to provide automotive service for eBay Users . Boston.com and eBay announce multi-year strategic marketing agreement eBay and NEC form a joint venture in Japan eBay launches in Japan eBay and Autotrader. .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . And you only get word-of-mouth if you have a great customer experience.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .com) 87 .
eBay's site has to process thousands of live bids simultaneously.6 . which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. categorically arranged. topically arranged. and since. 88 . which is much more demanding on the system. eBay has also expanded to accommodate access through wireless devices for added convenience.6). Content Content is primarily user generated through the items listed for sale. easy-to-use online service (Figure 6. eBay had a 'wake up call' when the website crashed for 8 hours. FIGURE 6. they have continually invested in system capacity. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. angering hundreds of thousands of eBay users. and adds to the experience and the discovery of the auction process.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. increasing the risk of outages. Nevertheless. This contributes to the community feel. Other content includes the banner ads. and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content.OVERVIEW OF EBAY'S WEBSITE Customisation Simple.
e-mail. eBay Salt Lake City) have helped them restore that community feel. bulletin boards. the culture has come under strain due to the company's rapid growth from a small community into a "big city". a "giving-board" for charitable donations to user-identified causes.g. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. working together and helping each other offline.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. 89 . Whitman describes eBay's community culture as a site "of the people. which is then added to the partner's trading profile. and in doing so. In addition. This has created a self-regulating mechanism that encourages good behaviour. and there are several reports of eBay users vacationing together. by the people. which is posted to the site. Recent initiatives such as the development of local websites in major US cities (e. discuss topics they care about. eBay Boston. It is a place where people can meet with similar interests. After a sale. eBay's community has a distinct culture based on trust. eBay offers its users category-specific chat rooms.eBay represents more than just a place to buy and sell goods. and is considered by many users as one of the best features on the website. a monthly newsletter. To encourage this sense of community. has enabled eBay to foster a strong sense of community on its site. empowerment and equality. However. Community eBay attributes much of its success to a strong sense of community among its users. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest.as eBay users refer to themselves . respect. 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). for the people". For many 'eBayers' . autonomy. and share information. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. the community spirit and personal relationships also transcend the online experience.
which was dedicated to monitoring the site for illegal and infringing activities. This also reinforced the company's respect for. but they have other partnerships with over 150 websites of varying scales. eBay's approach to customer care has evolved over time. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Customer Care eBay controls neither end of the transaction. knowledgeable. As such. By using its own enthusiastic. which was dedicated to investigating misuses of the system (e. fraud. its user community. geographically dispersed users as customer support representatives. shill bidding) and helping to resolve user-to-user conflicts. eBay has invested in customer care and support to ensure people conduct safe transactions. Customer support activities were constantly upgraded and expanded as the business developed. the largest of which was with AOL. in which the company hired active. This was later expanded to include customer support representatives who worked out of eBay's headquarters. and the introduction of two specialised customer support groups . and respected members of its own user community to serve as customer support representatives. and willingness to empower.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. eBay employed a "remote" customer support model. Communication eBay maintains close communication with its members. 90 . They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. During the first two years. answering e-mails and responding to questions posted on the site's bulletin boards. links to high traffic sites. eBay was able to cost-effectively offer 24x7 customer support early on. These people worked from their homes.g.the Community Watch group. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. eBay also engaged in marketing partnerships. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. and the Safe Harbour group.
eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.6. provide a wealth of information about the 'ins and outs' of trading on eBay. Early on. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. who tended to be serious collectors.g. 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. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.a four-year. and Collecting Just About Anything and eBay for Dummies.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Through this combination of its advertising efforts and targeted promotions. as a result of the high quality experience it provides. $75 million joint marketing alliance and development deal. 91 . Recent promotional initiatives include its new publication. and maintained the same ratio for 1999. The AOL partnership was one of the largest strategic partnerships on the Internet . These new publications appeal to the collecting spirit. they spent $12. Selling. eBay transformed from a pure online play into a 'clicks-and-mortar' company. The Official eBay Guide to Buying. 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. eBay has since expanded its promotion efforts and engaged in marketing partnerships.3 million in advertising. but they have other partnerships with over 150 websites of varying scales. eBay Magazine.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay has been able to attract a large customer base. In 1998. Mary Beth's Beanie World. the largest of which was with AOL. eBay decided that it would not enter into major portal advertising deals in the short term. and highlight opportunities created by e-commerce. Based on this. As a result. Doll Collector) and appearance in trade shows. and two books. and facilitate the spread of positive wordof-mouth. representing about 40% of revenues. they decided to target their marketing efforts on these heavy users.
com) 92 . 21st May 1999 (www. and according to research carried out by eBay. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions.Business Week. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . I think you are not well served by moving incredibly rapidly and not doing things well72". the Personal Shopper and the eBay Life Newsletter. as they could not opt for a 'go slow' strategy. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.6. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested.the ultimate network effect . such as the Feedback Form. This is achieved by listening to their community (learning) and developing new improved products and services (relating). This has become part of the eBay culture. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. As a result. And while we have to move very. eBay has also faced difficult challenges in scaling the organisation fast enough. which were all ideas of eBay users. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. and their first-mover advantage. 6. their ability to create a new market using Internet technology.businessweek. and according to Meg Whitman.contributing to its strong lead and competitive advantage. "the devil in so much of this is in the detail. have been key factors that have contributed to the success of the brand. Their focus on heavy users and targeted promotions. which in turn attracts more sellers . which has established eBay above other online auction communities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET eBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer 'lock-in'. eBay attracts a broader selection of buyers.5 Conclusion eBay's compelling value proposition. very fast. However. however. have been instrumental in building a 'quality' customer base.
800 stores in the US. however. In addition. Inc. head of Gap Online. from jeans and T-shirts to khakis and jackets.com) ."to deliver style. Gap.$100 million. GapKids.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. announce multi-year partnership. 6.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. 73 74 Interbrand (www.com' .7. October 8. 1999 93 . as cited in Lee. 'Clicks and Mortar at Gap. and BabyGap.gap. In late 1997. letting customers access the Gap brands.1 Company Overview Gap opened its first store in San Francisco in 1969. 'Clicks and Mortar at Gap.com and www. online sales are only available to US customers. the growth prospects are enormous. Its reach extends across more than 1. Gap's online sales tripled in 1998 alone. TABLE 6. Gap started selling items online . and analysts estimate that sales in 1999 amounted to $50 . America Online (AOL) and Gap Inc. as cited in Lee. up from $20 million in 199875.babygap.com' . whether in the store or online76".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7 CASE STUDY: GAP. and provides useful insight into how traditional brands can leverage their strength online.com. UK. 1999 76 Jeanne Jackson. from shirts to accessories and hard-to-find sizes. According to Jeanne Jackson. October 8.gapkids. This success is largely due to their simple formula .gapinc. California GapKids opens its first store BabyGap is born Gap opens its online store at www. Canada. Gap online exploits the accessibility and convenience of the Internet. L. The Gap offers a balance of modern and seasonal styles of clothing.2 Value Proposition Gap's simple.7.'s website (www. and are still relatively small compared to Gap's $9 billion in annual sales. L. service and value to everyone74". "this is about being clicks-and-mortar.an early convert to the then-revolutionary idea of clothes retailing on the Internet. and today it is the 29th most valuable brand in the world73. Germany and Japan.Business Week. standard styles are well suited to online shopping.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.Business Week.htm) 75 Jeanne Jackson.COM .com is an example of successful crossover marketing. and Gap online provides access to the full range of items at Gap. Currently.interbrand. Gap Inc.COM 6. to provide customers with greater convenience and options.com/about_us.see Appendix A Gap. surpasses $9 billion in net sales and increase earnings by 54% over previous year.
. Unlike Barnesandnoble.very easy. making it convenient.. D. reinforcing its brand identity. and easy-to-use.. making navigation even faster.7. This personality is reinforced online through the simple structure and layout. very efficient"77. 1998 94 . FIGURE 6.. 'Mind the Gap'. Michael McCadden. The Observer. and Customer Care. Content..7 .3 Sources of Value ... Simple.com store one immediately notices the consistency between the online and retail stores.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework In terms of the 7Cs framework. Executive Vice President of Global Marketing.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.com. from the blue and white colour scheme to the easy-toshop format . Gap Online primarily focuses on Convenience. Visiting the gap. describes the company's brand personality as "direct and straightforward. The site also offers sharp graphics. but provides customers with the option of viewing text-only. feel and design of the site is consistent with the bricks-and-mortar stores. the extensive integration of Gap's online and offline activities are clearly evident. April 18..making visual references to its offline roots.
com's content consists of detailed information on its full range of products. standard styles are well suited to online clothes shopping. customers can return goods purchased online to their neighbourhood store. and customers can register to get e-mail reminders of upcoming holidays and birthdays. Unlike the case of Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap.com allows customers to track the status of online purchases and provides contact information on the nearest store. Gap communicates with customers through customised e-mails. Gap made a decision to charge sales tax on online sales. However. Gap does not provide any community features on its site. 95 . without causing complications. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. In order to integrate its offline and online operations and logistics.as most Gap online shoppers have a good idea of how Gap clothes fit. as well as sample all of the latest shades of fingernail polish on a virtual hand. which would not be possible in the store. Gap. Gap.com. By doing so. and BabyGap. and goods bought online get returned at the same rate as store purchases . and had recently established marketing deals with AOL and CDnow. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. and customers can view their latest TV adverts for buying inspiration. Gap's simple. allowing shoppers to contrast different cuts and styles.com also provides a Gift Central feature which offers gift suggestion from Gap. In addition. The Gap site connects to other Gap online stores including GapKids and BabyGap. GapKids. once customers are registered online. Gap has also developed an affiliate programme. promoting its specials and including links directly to items on Gap's website. twice a month.
• Gap. on shopping bags and even on the cash register.Extensive Integration Gap. These efforts doubled the size of Gap's e-mail database. which displays "Shop online at www. providing a useful way to directly reach customers. it is fully leveraging its offline presence to build awareness. Most of Gap's online traffic is generated by leveraging its physical presence. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. In certain high traffic Gap and GapKids stores.4 Brand-Building Strategy .7. on counter cards. either online or in stores.com has been able to piggy-back on The Gap's offline advertisements (in TV. they send the customer a $20 Gap ShopCard.com) in store windows with the slogan "surf. or to refer shoppers to Gap's website.gap.) that also promote the online store. • Gap. To convert walk-in shoppers to cybershoppers. etc.shop. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. Gap has held in-store campaigns to get customers to submit their e-mail addresses.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com has links with CDnow to cross promote websites. which can be used towards future purchases. Gap secured a 3-year commerce and marketing agreement with AOL.com" on the display screens between transactions. by displaying the URL (www. • They offer Online discounts and promotions such as the ShopCard.com. Gap has also supplemented this with online promotions: • In August 1999. 96 .gap. 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. whereby for every $100 a customer spends at Gap Online. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. Magazines. by offering a 10% discount and free shipping on their first online purchase. billboards. however.com has also created an affiliate programme encouraging sites to establish links to gap. In addition.ship".com in return for a 5% commission on every sale referred through the site.
By aggressively marketing both the stores and the website. provides existing customers with added value through the convenience of purchasing online. whereas established companies. 97 . Gap has been able to significantly strengthen their brand-customer relationship. have already established the back-end operations and can use them as the cornerstone of their online business. Gap had a significant advantage over pure online players in attracting customers and building critical mass. such as Gap. while reaping the benefits of low customer acquisition costs and extended reach. With their brand awareness and network of retail outlets.com is an example of successful crossover marketing. Pure online players have to invest heavily in logistics. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. thereby reinforcing its brand identity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. on the other hand.7. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. and allowing each to leverage the strengths of the other. The Internet.5 Conclusion Gap.thereby increasing the company's reach. and can also provide access to different customer segments who may not usually buy the products at all .
1998 (www.8.Business Week. CEO of Yahoo!. advertising. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! offers a range of supporting services that add value. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.businessweek.The Company. Yahoo! is a leading guide in terms of traffic. household and business user reach. the site was receiving 1 million hits per day.8. the amount of information. According to Timothy Koogle. from e-mail services to stock quotes and much more. all in a single location. two Ph. As such. and is one of the few Internet companies to turn a profit early in the development of the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.see Appendix A 'Yahoo! . lies the directory . The concept exploded (through word-of-mouth) and in less than six months. The Stock' . 78 79 Interbrand (www. The Strategy. The company's global web network includes 23 world properties outside the US. Yahoo! has since morphed from an ordinary search service into a global Internet communications. There's nothing in the real world to compare to that79". who started an online guide as a way to keep track of their personal interests on the Internet. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.1 Company Overview In April 1994.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. As the first online navigational guide to the web. Yahoo! was founded by David Filo and Jerry Yang.com) .interbrand.2 Value Proposition At the core of Yahoo!'s value proposition. 6.com) 98 . September 7. and the number of websites continues to explode.D students at Stanford University.8 CASE STUDY: YAHOO! 6.
to provide web-based services to PalmTM handheld computers .8.TIMELINE AND MAJOR MILESTONES 1994 April . mobiles.Site goes live September . TVs.Yahoo! Launches Business-to-Business Marketplace . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.7 YAHOO! .e. .Yahoo! Shopping launches personalised shopping service 6.com.8). and unveils Yahoo! Digital Introduces Bill Payment services .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! acquires Arthas.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. More recently.600. regardless of platform (i.3 Sources of Value .Yahoo! acquires eGroups . 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. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. to allow access.com allowing them to offer person-person payment solutions . Palm computers).8 million IPO (2..The 7Cs Framework Convenience Central to Yahoo!'s success. is the way it has structured and displayed information.000 shares at $13. 99 .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 . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! unveils Yahoo! Finance Vision .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.Yahoo! forms agreements with Palm Inc. Their goal is not to list everything under the sun.
and has been at the heart of Yahoo!'s growth and development.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. the partner. and more importantly.8 . Yahoo! has increased customer loyalty and retention rates. while providing partners access to a large customer base. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. Their thrust has been to provide valuable content to customers. By tailoring the information to users' preferences. 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. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. well structured. 100 .com and CDnow. the end-user. and is similar to a custom tailored newspaper (Figure 6. from stocks and sports results to weather and air fares. They have formed multiple alliances and partnerships with leading online companies such as Amazon. ranging from daily news and weather reports to road maps and books.9). easy-touse. This creates a win-win situation as its satisfies Yahoo!.
Yahoo! acquired GeoCities. and contributing to their reputation as a quality service provider. In addition. and many-to-many. message boards. and is driving Yahoo!'s multiple partnerships and alliances. and the nature of the navigation business. 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. Yahoo! has also implemented campaigns to persuade users to bookmark the site. to provide its customer base with access to useful links and content.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. In 1999. one-to-many. Yahoo! spends more on customer support than most companies. and e-mail.9 . It keeps customers on the site for longer periods. 101 . fax. where groups of people with shared interests can communicate through chat. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. or to make it their home page. reinforcing the brandcustomer relationship. Connectivity Connectivity is Yahoo!'s core product. and encourages them to return frequently. and plans to incorporate other features such as online chat to facilitate communications. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. telephone and even traditional mail.
and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . Yahoo! avoided characterising itself as a technology-oriented company. Given the unease with which the average consumer approaches technology. This was especially important. In 1996. 80 'Web Survey Shows Yahoo! Tops'.people who are not yet online but are likely to use the Internet in the near future. TV commercials and radio spots during drive time. While Internet companies were targeting existing Internet users through the use of online promotion methods. and according to Intelliquest80. an approachable nature. by building a recognised brand name. These near surfers represented (and still do) a large and fast growing group and. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. as experience surfers tend to be loyal to their search engine. (www. and its implications of a good time. Yahoo!'s brand-building success starts with its name. Yahoo! extended beyond this to use traditional offline media. Yahoo! maintains close contact with customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often.8. therefore. and it formed a critical link in Yahoo!'s brandbuilding strategy. Yahoo! aggressively promoted the site through public relations.com) 102 . they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?".intelliquest. Yahoo! would be one of the first sites that they visited. 6.a sense of irreverence. and an inherent friendliness. 82% of Internet users and 23% of people intending to go online.4 Brand-Building Strategy Yahoo! is a marketing machine. Yahoo! also encourages customers to e-mail ideas and feedback. which conveyed the brand's irreverent personality. Intelliquest. and through communications via email. Their strategy was to target "near surfers" . As a result. At the time this was considered a breakthrough. recognise the name Yahoo!.
it's too late. They even have a barter deal with the San Francisco 49ers.with its name being plastered on everything. 1999. and 76% turned to Yahoo! before visiting another search engine or navigational site. organisers. They also teamed up with publisher Ziff-Davis Co. stating that "if we wait to hear about it in the news. snowboards.higher than all other services81. a monthly magazine guide to what's new on the web and it has co-branded products. Yahoo! adopted 'guerrilla marketing' techniques .yahoo. Yahoo! has managed to cultivate high brand loyalty. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . the research shows that 73% of Yahoo! users bookmark the service . breath mints.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Visa and MCI. May 3. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. and yo-yos.it must reinforce the image of the company as 'a service that is fun. VP-Brand Marketing. services and contests with well known brands such as Ben & Jerry's. s4 103 . In addition. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. Although this seems like a shotgun approach. T-shirts. Yahoo! has paid little for this exposure. p. as well as TV shows (Ally McBeal. August 26. parachutes. customers quickly discover its value and through a high quality experience (7Cs). sailboats.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. 1997 (www. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' .Yahoo! Press Release. According to a recent study. new services and customised features highlight their ability to relate to customers' needs. a little wacky and inviting'. We need to be one step ahead in order to have a better service than our competition82". including backpacks. Their innovation. to create Yahoo! Internet Life. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. Once customers access the site.Advertising Age. According to Karen Edwards. ER) and Hollywood movies. which has been instrumental in establishing Yahoo! as a household name.
com. from its convenient and logical structure and display of information. have created a distinct brand identity that differentiates the brand and appeals to its target market. and first to go mainstream by advertising its name using traditional media.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. VPBrand Marketing of Yahoo!. In addition. to its simple design. alliances and acquisitions to provide added value services to their customers. HotBot. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". To maintain its lead. and has cultivated a reputation for excellence. Yahoo! points them to its competitors by including links to AltaVista. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. GoTo. with a large customer base and high levels of customer loyalty. p. their innovative promotional and guerrilla marketing techniques. if a user cannot find what it is searching for. Yahoo! has built a strong brand.8. while also associating Yahoo! with well known brands. its excellent customer service. They have maintained that lead through the creation of a high quality end-to-end customer experience. its choice of partners. May 3.Advertising Age.8. first to go public. Yahoo! has benefited from a first-mover advantage. s4 104 . As a result of all these factors.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine.6 Conclusion Yahoo! is one of the most successful brands on the Internet. 1999. These relationships have provided end-users with added-value. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. In addition. Yahoo! has invested relentlessly in new services and marketing programmes. they have carried out extensive partnering. while attracting new customers. that have set it apart from the pack. As the first online navigational guide to the web. and other search engines at the bottom of its search results page). 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . first to turn around an annual profit. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. 6. and its openness (for example.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
offering customers the best in quality. leading brands have focused on building strong partnerships and alliances. variety. In addition. content. whereby each party benefits from the other's expertise or skills. Alliances and partnerships play an important role in achieving speed and momentum. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. while ultimately benefiting the end-customers. and by partnering with well-known brands. integrated customer acquisition strategies. but also provide added value to the brand community.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and have developed multifaceted. and convenience. As a result. these companies are creating even stronger value propositions. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. to distinguish themselves from competitors. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. these companies must have an inherent understanding of their brand identity and core values. 108 . brands are harder for competitors to emulate. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. ranging from online methods to traditional offline media. particularly to secure content and widen reach to new customer segments and niches. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. as well as determine how far the brand can be meaningfully stretched to other products and market segments. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. to maintain consistency. By distinguishing their offering and focusing on unique sources of value-added. and exclusive alliances can lock out competitors from valuable content or online real estate. before it fractures. a company can leverage the partner's brand and reputation to reinforce its own. The most successful partnerships are symbiotic matches.
these well-publicised brands also took off. and traffic. by providing better services. to create new services and content that satisfy customer needs. and are continuously adding new services and functionality to their sites. the company benefits from the buzz. and it aligns itself with the most influential venture capital sources. A first-mover advantage is an important asset for an online brand. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. These brands are accumulating knowledge about customers. are leveraging this customer knowledge (learning) to nurture relationships (relate). 109 . and differentiating it from other brands. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. By getting to market early. As Internet penetration exploded. Many strong online brands were also early-movers on the Internet. By leveraging unique customer information. In many cases. The challenge then lies in keeping up the momentum. and extensive word-of-mouth due to its novelty. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. and it can acquire customers while it is still inexpensive to do so. and benefited from additional hype.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. giving the brand an edge. • 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. the innovations are the result of the company's ability to data mine its vast database of customer information. It locks up important content and distribution partnerships. and by focusing on customer needs. and develop a detailed understanding of their customers' needs. customisation and customer care. through past transactions and solicited input. these innovations are difficult for competitors to reproduce. that comes with innovation.
Through extensive and seamless integration. one component remains unchanged .value remains (and always will) the basic building block for every successful brand. they are equally important in business markets. established fulfilment systems and infrastructure. with the emergence of wireless access and new platforms. 110 . ongoing research would be necessary to build on the findings of this dissertation. while reaping the benefits of lower customer acquisition costs and extended reach. In addition. Nevertheless.factors that clearly differentiate them from pure players. an in-depth analysis. and a physical presence (tangibility) . Brands and brand-building tools tend to be associated with consumer markets. drawing on several case studies from business markets. established customer relationships. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. building relationships and satisfying needs. The Internet has radically changed the business and competitive environments.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. Yet while everything is being turned upside down. expand the brand experience to meet customers' expectations in the online world.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. Nevertheless. They have an established brand. 7. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. the concepts. tools and key factors outlined in this dissertation are also applicable to business markets. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. Therefore. They possess critical assets that give them an advantage over pure online start-ups. clicks-andmortar brands are providing customers with true added-value. there has been a limited time horizon to evaluate the durability of Internet brands. would represent an exciting opportunity for further research. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. In doing so. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. As such. Having established a strategic perspective on building online brands. however. but at the same time.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
596 3.281 11.643 3.184 1.932 4.909 7.231 12.361 1.527 3.052 6.781 17.804 2.193 112 .225 11.806 11.985 2.155 7.654 43.101 9.464 3.404 4.181 21.568 3.694 17.602 4.806 2.197 32.830 14.422 1.761 1.283 4.231 24.845 56.021 26.634 1.329 4.147 9.550 12.143 2.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.681 2.319 1.595 17.Interbrand's Ranking of the Top 60 Brands (www.792 3.interbrand.262 1.510 8.275 30.132 15.502 33.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .048 20.076 3.781 33.603 5.310 11.423 2.648 1.894 14.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.766 14.043 8.313 2.895 2.
global competition. 1982 113 . commit and deploy resources. all these dimensions must change accordingly.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. T. showing how they are interrelated. and reorganise as appropriate. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. respond to competitive and market dynamics. (Harper & Row).BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . whereas entrepreneurial Internet companies must focus on 'managing for change'. and the emergence of a knowledgebased economy. As a result. activities. customer empowerment. As such. * Peters. constantly innovate. and structures are aligned differently. However. They must move quickly to capture new opportunities. R. It is critical that all these dimensions come together and are re-enforcing. 'In Search of Excellence'. and as the business environment changes. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. all their operations. with the fast pace of technological change. the informal management style and the constant strategy re-calibration. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure.. Internet companies must be able to move at warp-speed. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. & Waterman.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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