S U C C E S S F U L

ON

THE

INTERNET

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

UNIVERSITY OF CAMBRIDGE

ROBIN S. CLELAND
SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CONTENTS
SUBJECT PAGE

CHAPTER 1
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure

INTRODUCTION

6
7 9 9 11

CHAPTER 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

THE NATURE OF BRANDS

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

2.9

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

CHAPTER 3
3.1 3.2 3.3

BUILDING BRANDS

24
25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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

1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CHAPTER 4
4.1 4.2 4.3 4.4 4.5 4.6

THE INTERNET

33
34 34 35 35 39 40 43

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

CHAPTER 5
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

BUILDING BRANDS ON THE INTERNET

44
45 45 47 48 50 51 52 57 59 60

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

CHAPTER 6
6.1 6.2

CASE STUDIES

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

6.3

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

2

4 Brand-Building Strategy .The 7Cs Framework 6.7.1.2 Value Proposition 6.5.8 Case Study: Boo.4 Brand-Building Strategy 6.1 Company Overview 6.5.8.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 7.6.com 6.6.4 Brand-Building Strategy 6.5 6.5.5 Conclusion Case Study: Yahoo! 6.2 Value Proposition 6.The 7Cs Framework 6.3 Sources of Value .6.2 Value Proposition 6.Extensive Integration 6.7.5 Other Factors That Contribute to their Brand Leadership 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 Brand-Building Strategy 6.The Failure of Boo.5 Conclusion Case Study: Gap.4 Brand-Building Strategy 6.6.com 6.3 Sources of Value .4.5 Other Factors that Contribute to their Brand Leadership 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.1 Company Overview 6.4.2 Value Proposition 6.4 6.1 Company Overview 6.7 6.8.com 6.4.The 7Cs Framework 6.6.3 Sources of Value .1 Company Overview 6.2 Value Proposition 6.7.4.5 Conclusion Case Study: CDnow 6.7.The 7Cs Framework 6.8.4.6 Conclusion Case Study: eBay 6.3 Sources of Value .5.5.6 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.7.8.5.8.1 Company Overview 6.8.3 Sources of Value .

8 Figure 5.2 Figure 4.5 Figure 2.2 Figure 5.7 Figure 5.9 Figure 6.3 Figure 6.7 Figure 6.3 Figure 3.8 Figure 3.com's Associates Programme Overview of BarnesandNoble.com's Website Amazon.4 Figure 2.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 .5 Figure 6.4 Figure 4.2 Figure 2.6 Figure 5.6 Figure 6.4 Figure 4.5 Figure 5.2 Figure 6.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 2.com's Website Overview of Boo.2 Figure 3.3 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 2.4 Figure 5.5 Figure 4.1 Figure 5.1 Figure 6.7 Figure 5.1 Figure 1.7 Figure 2.4 Figure 6.2 Figure 2.1 Figure 4.6 Figure 4.3 Figure 4.1 Figure 3.6 Figure 2.8 Figure 6.

com .2 Table 6.com .Timeline and Major Milestones Gap.com .6 Table 6.Timeline and Major Milestones Boo.1 Table 6.Timeline and Major Milestones eBay .3 Table 6.5 Table 6.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones CDnow .4 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.Timeline and Major Milestones Yahoo! .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

creating strong brands that are putting established brands at risk. Figure 1.com. that these Internet start-ups have achieved. FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com) 7 . and business models revamped.2 3. America Online (AOL) and eBay have been able to build powerful brands in a few years. the Internet is changing fundamentals about customers. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.5 2. products and services reconfigured.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com Source: Securities and Exchange Commission Filings. As such. relationships. In the midst of this.YEARS TO REACH $100 MILLION IN SALES 6 5. Amazon.0 1. and is triggering the need for new brand-building strategies and tools.com noble.9 3. This is creating new challenges and opportunities. interaction and relationship building.com's range of 4.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. McKinsey Analysis (www. aggressive Internet start-ups have emerged. there has been an explosion in the online world .7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.9 2.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.an explosion that is also a harbinger of how business will operate in the future.mckinseyquarterly. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. whereas it has taken decades for traditional companies to achieve the client base.1 OVERVIEW Over the past few years. service and brands. Supply chains are being rethought.1 3. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. customer affiliation and level of sales. As such.com1 Amazon. It is empowering customers with more options and more information to make informed decisions. as they face each other through an electronic connection. Amazon.g. The Internet also represents a fundamental shift in how buyers and sellers interact.5 million book titles).1 . while providing new tools for promotion. Internet companies such as Yahoo!.

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

3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. 1. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. This is based on the outcome of the primary research (in-depth case studies). with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. FIGURE 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.2.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . and to identify new sources of value. • To explore how the Internet is changing the brand-building environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 . A review and analysis of leading academic thinking will be used to explore these issues.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.

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

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

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

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

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

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

FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. a consumer will be inclined to search for more information. The buying process consists of five stages (Figure 2. and selective retention. either through heightened attention or through an active information search.4).194 The process starts when the buyer recognises a need. Consumers develop a set of brand beliefs about the attributes of competing brands. Implementation. selective distortion. Consumers differ as to which product / service attributes they see as important. Planning. 16 . two factors can intervene between the purchase intention and the purchase decision . Therefore. it is critical to understand what attributes consumers value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. However. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. it is important to clarify customers' underlying buying behaviour and the buying process. (Europe: Prentice-Hall) 8th Ed. 'Marketing Management . This can be triggered by internal or external stimuli (advertisements). the consumer learns about competing brands. and the effect of selective perception. In the evaluation stage. 1996.Analysis. and pay the most attention to the brands that will deliver the sought benefits. P. Through gathering information.. These beliefs depend on their previous experiences with the brand.3). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Once aroused. p.3 .attitudes of others and unexpected situational factors (Figure 2.. FIGURE 2. and Control'. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands.

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

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

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

there are brands that are unknown by most buyers. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. there are brands that customers perceive as acceptable and would not resist buying. A stronger brand enjoys a high degree of brand preference over competing brands. pp. a 'powerbrand' tends to have a high degree of brand loyalty.6 . March 1998.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. Journal of Consumer Research. which goes well beyond the satisfaction of a specific need. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. 343-373. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. FIGURE 2. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). However.7 . and understanding the needs and buying processes of the target market is essential.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.7). 20 .. whereby customers would be unwilling to substitute it with competitors' offers.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. S. 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. FIGURE 2. Beyond this.

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

1992 Worcester. (London: McGraw Hill). 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. to its communication • Ethical . 'Strategic Brand Management'. The brand leader is the most profitable and all beyond number two are unprofitable13.To be clearly seen. to its logo.. to quickly identify sought after products • • Practicality . J.8. 11 12 Kapferer.8. P. 22 . 3rd Ed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.To have confirmation of your self-image or the image that you present to others • Continuity . market share and profits .The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development..Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .. & Downham.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. in the following ways: • Brands.. Premium pricing increases revenue. May 1993. to make sense of the offer.Satisfaction linked to the attractiveness of the brand.. (New York: Free Press). G. 158-170.Typically a brand leader obtains twice the market share of the number two brand.To save time and energy through identical repurchasing and loyalty Guarantee . and the number two twice the share of the number three12. N. the best performer for a particular purpose • Characterisation . 1986 13 Golder. Journal of Marketing Research.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . pp. • Brand Leverage . J. production and marketing. brands perform several functions that add value and customer benefits: • Identification . R.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.To be sure of buying the best product in the category. 'Consumer Market Research Handbook'. & Tellis.

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

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

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

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

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

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

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

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

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

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

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

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

3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . • It Overcomes the Barriers of Time and Space . 4.this radically alters the process of interaction between communicating parties. • It Allows for Two-way Communication and Interactivity . ubiquitous links to anyone. These defining characteristics have fuelled its explosive growth. The context of the Internet and certain key developments are highlighted in the Figure 4. which was intended to link military networks together. the Internet lets individuals and companies build interactive relationships with customers and suppliers. anywhere. when the United States Defence Department developed the 'ARPAnet'. 7 days a week. regardless of where the computer or Internet access device is physically located.2 (Note: 35 .not previously available with mass medium forms of communication. These qualities eliminate the barriers of time and space that exist in the physical world. The Internet can also be accessed at any time .24 hours a day.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). Graph is not drawn to scale). These characteristics combine to create a very powerful medium. allowing both parties to identify each other and build one-to-one relationships .The Internet is a global network and can be reached from everywhere.2. and deliver new products and services at low cost. By allowing for direct.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell. as cited in 'E-Business Technology Forecast' .000.3.000 100.2 .000 1.000 1969: 10. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 1.000.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. 1998. 1996 (www.000 10.com) 36 .a PricewaterhouseCoopers Report.3 .Figure 4. FIGURE 4.economist.000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .

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

5. These activities highlight the adoption of the Internet as an interactive. April 13.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 . as cited in the Economist Intelligence Unit (EIU).eiu.Figure 4. chat rooms. FIGURE 4.from communicating (90% use e-mail) and sourcing information. to interacting (e. 2000 (www.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.5 . communication and information tool.g. entertainment) and purchasing (37%) .com) 38 .

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

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

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

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

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

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

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

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

Even more important. Similarly. However. and other features can be added or changed at low marginal cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.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. this is not the case on the Internet. additional products. FIGURE 5.1 . pp. businesses and online communities that rely on connectivity can enjoy 'network effects'.. each additional unit sold does not cost more than the last to deliver. where the value of the network. increases disproportionately as more people join the network. (London: Harper & Row). the costs approach zero32. 1989. additional customers and transactions can be managed with limited fixed cost investment. and in the case of information-based products. as illustrated in Figure 5. 180-182 48 . Once the up-front investments are made (for research and development and technology infrastructure).1. As a result. customisation for individual customers. G. 'Positive Economics'. R..4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. 7th Ed. and the value that each member realises. as the benefits of scale are overwhelmed by the disadvantages of size31. (also referred to as 'viral economics').

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

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

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

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

'Sticky Business'. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. T. 38 39 Cognitiative Inc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. as cited in Business Week Magazine. FIGURE 5. 1999 (www. whereas a slow response time and site downtime will have a significant negative impact.businessweek. online companies have the opportunity to provide rich. October 29.4 . CIO Magazine.4. and fast response times are among the most important factors in establishing web brand loyalty38.businessweek.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. ease-of-navigation. February 2000 Issue 53 .com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. 29th October 1999 (www. which can enhance the company's value proposition.. With almost infinite display space and inventory capability. ease-of-use. expert insights. as cited in Business Week.com) Davenport. up-to-date information. and a wide range of products.

Clemmer. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). On the other hand. demographics. and nearly 20% use it for post-sales support. J. According to Forrester Research40.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. as well as through loyalty programmes that provide targeted benefits.. 3.5). share information and access a wide range of services. No. 31% of online consumers use the Internet for obtaining product information.A Forrester Research Report. even if they purchase offline.. Community Online communities are emerging as new gathering places for consumers with similar interests (e.forrester. W. An important contribution of these communities is that they provide members with a medium to communicate with each other. These sites allow members to interact with one another. which is facilitated by a combination of factors (Figure 5.g. An online community offers a compelling way to entice customers back to a site. 'Building Stronger Brands through Online Communities' . which enhances the user's online experience. Often. For a community to work. & Bluestein. 1995.. or prior transactions. G.. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.Sloan Management Review. 40 41 Morrisette. K. 'Real Profits from Virtual Communities' . based on profile information. iVillage and Geocities). A. Online sites can track a customer's purchase history and modify its service accordingly. 1999 (www.. Spring 2000 42 Armstrong. it needs a critical mass of members42. use bulletin boards. 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). . & Hagel. S. Members can interact in chat rooms. 54 .com) McWilliam. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.The McKinsey Quarterly. and organise live events. Other content includes community-generated content. Customisation Customisation involves tailoring the presentation of a web-site to individuals. and advertising (if it is relevant and useful). visitors should not be engulfed with too much information. It fosters a sense of belonging41 among the members. Customisation creates the feeling of a one-to-one relationship.

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

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

M. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. This model consists of five stages . Retain.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. This is more difficult online than offline. Newspapers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. including affiliate programmes with other websites. McQuade.mckinseyquarterly. modified to take into account of the interactive dynamics of the Internet. The company must build awareness and communicate its value proposition to its target customers. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. links from directory searches (Connectivity).2. billboards.Attract.8. S. 180-183 (www. R. Adoption). Evaluation. pp. Learn and Relate. and bring people to the site for the first time. 1996.7. Magazines.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. etc. Engage. A. The mechanisms to communicate range from traditional media (TV. Figure 3. visibility relies solely on Communication. & Zeisser. because there is no physical presence. e-mail notifications and banner advertisements. 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 ’ . FIGURE 5. Waitman.Awareness.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Interest. Trial.7 ... Therefore.4 .) to online tools. 'Marketing to the Digital Consumer'. No... McKinsey Quarterly.

4 4.WEBSITE PROMOTION METHODS .5 3.5) 2.2 4.7 4.3) is useful to ensure that a company develops a distinct and consistent brand identity. Kapferer's Brand Prism (Ch.0 3.8 4. Companies then need to engage customers to obtain their interest and participation.3 Source: Forrester Research. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.com) The most effective methods are direct e-mail. 3.8 . multiplied by the expected rate of transactions. Engage With the multitude of choice available on the Internet. Fig.6 3.3 2.4 3.3 3. it is important to quickly engage consumers' interest before they move on.Economist Intelligence Unit 2000 (www.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 . public relations and television advertising. Attracting customers is only the first step in building online brands.4 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 3. 58 . The key factors at this stage are Convenience combined with interesting Content.ebusinessforum. as cited in 'Targeting Consumers via the Internet' . affiliate programmes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. discounted over the expected duration of the brand-customer relationship.1 3.

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

it is critical for companies to build relationships and foster brand loyalty. and the need to stimulate the other senses (taste. R. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. Given the high acquisition costs of online customers. engaging and retaining customers.. 5. smell). the experience is the brand. M.9 . & Zeisser. No.from the promises made in the value proposition. especially in small quantities.9 CONCLUSION On the Internet.mckinseyquarterly. S. 180-183 (www. due to high delivery and transaction costs (relative to the value of the product). 1996.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. The interactive brand-building process involves attracting. • Brand-building favours products that can be sold online.. McQuade.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. A. companies must provide a satisfying end-to-end customer experience . 60 .2. Waitman. to its delivery to the customer. providing further added value. In order to create "apostles". McKinsey Quarterly. it is not economically feasible to sell certain products. These case studies provide a practical insight into how companies are building their online brands. and as the relationship develops.. The next chapter analyses the brand-building efforts of seven companies.. 'Marketing to the Digital Consumer'. However. the interaction provides the ability for companies to learn from their customers and relate. pp. touch.

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

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

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

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

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

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

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

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

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

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

com and Microsoft announce that they will create an eBook superstore . However. Barnes & Noble Inc. Currently. Besides books. as it could capitalise on the infrastructure and back-end operations (warehouses.2. contacts.com .com) . and 470 B. Barnesandnoble.com).Barnes & Noble went online at AOL May . book databases.Barnes & Noble University opens registration for free online courses .com announces strategic relationship with Palm Computing . TABLE 6. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Barnes & Noble.Launches Video Store 71 . and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. and 20% owned by the public.TIMELINE AND MAJOR MILESTONES . promotion) between the online store and the retail stores have been kept separate.com launched its website (www. Barnesandnoble.barnesandnoble. magazines. Launched in 1997.Launches Affiliate Network December .com was able to 'hit the ground running'.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.1 Company Overview Barnesandnoble.Barnesandnoble. etc. rare.2 1997 January BARNESANDNOBLE.COM . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. is one of the best known traditional booksellers in the United States.3 CASE STUDY: BARNESANDNOBLE.Launches BNTV .com is the fourth largest e-commerce retailer54.com's timeline and major milestones is outlined in Figure 6.com provides other online categories offering software.Acquires equity stake in Mightwords . Barnes & Noble Inc. music. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com is approximately 40% owned by Barnes & Noble.Announces distribution relationship with New York Times September .Barnesandnoble.COM 6.3. Inc. all front-end operations (marketing.Acquires minority stake in NotHarvard. and is the second largest online bookseller (after Amazon.Offers same day delivery in Manhatten .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.) established by its parent company. Dalton bookstores (located in shopping malls). Barnesandnoble. 40% owned by Bertelsmann AG.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 .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .Launches Internet Radio . prints & posters and related products..

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

and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). and Barnes & Noble Inc.3.6 million.com in return for a commission on any purchases that they originated .com closed 1999 with 4 million customers. and avoid charging sales tax in states where it has stores56. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . it lags behind first-mover Amazon. Barnesandnoble. compared to Amazon. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. while Amazon. Both offer customisation that permits users to personalise the experience. this programme had more than 300. Barnesandnoble. and both are expanding globally. Lycos. reasons for this are explained in the next section.64 billion.com's 1999 revenues were $202.The Wall Street Journal.com has created a high quality website and customer experience.4 Brand-Building Strategy Barnesandnoble. has yet to leverage its strong brand in cyberspace.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . Barnesandnoble. Netscape and Microsoft Network.000 affiliates in its referral network.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Barnesandnoble.com. December 17. They have developed an affiliate programme that links sites to Barnesandnoble.1 billion. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Both try to foster a community of readers by letting customers post reviews online. These initiatives have generated traffic to the site.a replica of Amazon's Associates Programme. however. 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. Instead. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Both offer 'associate programmes' that let other websites link to their sites.com's market capitalisation was $251 million. Webcrawler.com was valued at $21. while Amazon.com had over 17 million. Yahoo!. As of February 2000.com's $1. However. prevent cannibalisation of its existing business. The 6. Although.

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE

Miss Boo

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

77

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
59
60

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

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

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$22. daily music news.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . features.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.1 Company Overview Founded in 1994.Partnership program with Geffen Records .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and they aim to "make every visit to the site.Harvard Business Review. pp. T. May-June 2000.com) 80 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. by twin brothers Jason and Matt Olim.CDnow and Time Inc.Forges distribution partnership with Yahoo! $65.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . guides to music genres. and one of the most popular shopping sites on the Internet62. good prices. former arch rival . 62 Hoffman..Merges with Columbia Records .5. customisation and a wealth of information and content to help in the purchase decision. TABLE 6. announce marketing alliance . 'How to Acquire Customers on the Web' . $18.5 million distribution deal with Lycos Signs three-year.000 people.179-188 63 CDnow website (www.5 CASE STUDY: CDNOW 6.Launches merged CDnow/N2K site . CDnow is also driving the digital distribution of music. as well as music reviews.000 music-related products and 650.000 sound samples.000 music related items .Site goes live . & Novak.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow was acquired by Bertelsmann AG.cdnow. It has a customer base of 4 million people. cover art. This unprecedented degree of access to music and information is the core of CDnow's value proposition.Raises $10 million through private placement . On 19th July 2000. convenience.5.TIMELINE AND MAJOR MILESTONES . CDnow is the leading online music store. and an average daily audience of over 800. whether for browsing or buying.ten times the selection of a conventional bricks-and-mortar music store). a valuable and rewarding experience"63. and exclusive interviews and reviews from CDnow's award-winning editorial staff. and was the first site to offer the sale of music downloads and custom CDs.Merges with N2K. CDnow provides access to over 500. D.

81 .OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.Figure 6.5.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.3 Sources of Value .5 .. By partnering with well-known content providers. artists biographies. For example. to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has leveraged the reputation of their brands to reinforce its own. The whole process of searching for albums or music titles to the actual purchase is simple . and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. FIGURE 6. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). easy-tonavigate. cover art. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. etc. and has secured rights to music reviews. CDnow has cultivated similar relationships with MTV.

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

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

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

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

25% to 5% of the final sale price on any item sold. Individuals use eBay to buy and sell items in more than 4. Sellers pay a nominal fee for placing an item up for sale.efficient one-to-one trading in an auction format.2 Value Proposition eBay offers consumers an efficient. extensive selection and geographical reach.ebay.6. or the payment for the item . garage sales.removing the need for inventory. and 450. from collectibles and antiques to electronics and toys. transportation and other overhead costs.eBay website (www. with emphasis being placed on its unique community feel and culture. global trading place for buying and selling personal items in an entertaining auction format. 24 hour a day.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. According to Meg Whitman. Since its launch in September 1995. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. eBay is not about auctions. 6.com) 70 'Meg Whitman at eBay Inc. and eBay receives a transaction fee that ranges from 1. People perceive the auction format to offer better prices.000 new items joining the "for sale" list every 24 hours69.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The buyer and the seller work out the logistics of the transport (e. There are over half a million new auctions. collectable shows. payment) between themselves.6 CASE STUDY: EBAY 6.ebay. 1st October 1999 86 . flea markets and auctions.A Harvard Business School Case Study.com) 'eBay . and eBay provides added value through its convenience. as cited in 'eBay .782 million in January 200068. eBay effectively created a new business model never before possible . This is a new market . with the number of unique daily visitors setting a record of 1.Company Overview' . "at its core.6.300 categories.Company Overview' . shipping.g. and eBay never takes possession of the item being sold. the eBay community has grown to include more than 10 million registered users.eBay website (www. Auctions make it fun. Auctions represent a platform. (A)' .the closest thing in the offline world are trading forums such as classified ads. Auctions are an enabler. CEO of eBay.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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CHAPTER 7

CONCLUSION

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7.1

CONCLUSION & DISCUSSION OF KEY FINDINGS

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

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7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

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

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

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

275 30.894 14.225 11.527 3.648 1.909 7.985 2.422 1.281 11.interbrand.781 33.132 15.830 14.550 12.766 14.262 1.464 3.602 4.101 9.319 1.184 1.329 4.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.313 2.181 21.231 24.681 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .806 11.595 17.361 1.895 2.076 3.596 3.932 4.643 3.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) 83.404 4.603 5.193 112 .052 6.502 33.143 2.423 2.048 20.197 32.043 8.Interbrand's Ranking of the Top 60 Brands (www.147 9.694 17.654 43.155 7.510 8.804 2.283 4.231 12.845 56.021 26.310 11.761 1.806 2.781 17.634 1.792 3.568 3.

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

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BIBLIOGRAPHY

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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