1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


2 Value Proposition 6.6 Conclusion Case Study: eBay 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 7.6.5 Other Factors that Contribute to their Brand Leadership 6.5 Conclusion Case Study: Gap.8 Case Study: Boo.5 Conclusion Case Study: Yahoo! 6.1 Company Overview 6.5.com 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.3 Sources of Value .The 7Cs Framework 6.4 Brand-Building Strategy 6.3 Sources of Value .6.1.2 Value Proposition 6.4.3 Sources of Value .3 Sources of Value .4 Brand-Building Strategy 6.1 7.The Failure of Boo.5.1 Company Overview 6.5.com 6.8.7.The 7Cs Framework 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.5 Other Factors That Contribute to their Brand Leadership 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .7.Extensive Integration Value Proposition 6.8.2 Value Proposition 6.4.4 Brand-Building Strategy 6.1 Company Overview 6.1 Company Overview 6.The 7Cs Framework 6.4.com 6.8.4 Brand-Building Strategy .8.5 Conclusion Case Study: CDnow 6.7 6.6.The 7Cs Framework 6.3 Sources of Value . Brand-Building Strategy 6.2 Value Proposition 6.

6 Figure 4.7 Figure 2.3 Figure 3.3 Figure 5.5 Figure 4.4 Figure 2.4 Figure 4.5 Figure 6.1 Figure 2.3 Figure 2.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .7 Figure 5.2 Figure 4.6 Figure 6.5 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.8 Figure 3.8 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.7 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .1 Figure 4.4 Figure 4.4 Figure 6.com's Associates Programme Overview of BarnesandNoble.1 Figure 5.7 Figure 5.3 Figure 6.com's Website Overview of Boo.2 Figure 5.com's Website Amazon.6 Figure 5.2 Figure 6.8 Figure 5.3 Figure 4.1 Figure 1.1 Figure 3.5 Figure 2.4 Figure 5.2 Figure 2.1 Figure 6.9 Figure 6.6 Figure 2.2 Figure 2.2 Figure 3.

3 Table 6.Timeline and Major Milestones Yahoo! .1 Table 6.6 Table 6.com .Timeline and Major Milestones Gap.com .Timeline and Major Milestones eBay .Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.5 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .4 Table 6.com .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones CDnow .2 Table 6.


aggressive Internet start-ups have emerged.9 2.0 1. and business models revamped. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.com.1 OVERVIEW Over the past few years.9 3. as they face each other through an electronic connection. while providing new tools for promotion. McKinsey Analysis (www.1 . relationships.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com) 7 . The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. FIGURE 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Amazon.5 2. whereas it has taken decades for traditional companies to achieve the client base. Amazon.com Source: Securities and Exchange Commission Filings. The Internet also represents a fundamental shift in how buyers and sellers interact. Figure 1. there has been an explosion in the online world . customer affiliation and level of sales.com noble.5 million book titles).7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. Supply chains are being rethought.mckinseyquarterly. service and brands. As such. the Internet is changing fundamentals about customers. It is empowering customers with more options and more information to make informed decisions.2 3. America Online (AOL) and eBay have been able to build powerful brands in a few years. and is triggering the need for new brand-building strategies and tools.g.1 3. As such. creating strong brands that are putting established brands at risk.an explosion that is also a harbinger of how business will operate in the future.com1 Amazon. that these Internet start-ups have achieved.com's range of 4. In the midst of this. Internet companies such as Yahoo!. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. products and services reconfigured.YEARS TO REACH $100 MILLION IN SALES 6 5. This is creating new challenges and opportunities. interaction and relationship building.

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

3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2 .RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . supported by secondary data related to aspects of online business from accredited and published sources. • To explore how the Internet is changing the brand-building environment. A review and analysis of leading academic thinking will be used to explore these issues. tools and strategies to build brands on the Internet. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. 1.2. This is based on the outcome of the primary research (in-depth case studies).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. FIGURE 1.

to provide an in-depth analysis of the psychological and social dimensions of brands.com. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. While there is no attempt. strategy and economics.com and Gap. as well as a recent Internet failure (Boo. there is more work in popular rather than academic literature. eBay and Yahoo!). relationship management. and factors that contribute to a brand's success. Consequently. certain key factors are highlighted in their relevance to the dissertation.com). The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand. and is used to provide insight into some of the factors that contribute to the development of successful brands. however. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. Hypothesis (Framework): This is based on the literature review and secondary data. The combination of cases provides a useful and practical insight into brand-building issues and problems. 10 . marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area.com). the literature review draws on leading academic thinking in more established areas such as brand management. this also highlights the true value of the dissertation. The absence of academic literature on Internet branding posed a major obstacle. nor desire. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. These are further refined using the insight obtained through the case studies. Conclusion: Discusses the key findings and areas for further research. CDnow.

summarises the key findings. and introduces the core concepts that form the backbone of the dissertation. Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. and outlines the opportunities for further research. their purpose and value are discussed. This chapter sets the context within which online brands must be built.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. The limitations of the Internet in terms of brand-building are also discussed. provides an analysis of leading academic literature in relation to branding. Chapter 3 explores how brands have traditionally been built. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. by outlining the impact of the Internet on the business and competitive environment. The nature of brands. 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. The final chapter. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. 11 . Chapter 7. as well as the interactive approach to attracting customers and building loyalty. Chapter 2.4 STRUCTURE The next chapter.


which. these layers are Brands are made up of many layers and dimensions.). and for the company.1 . 2. and they form the backbone of this dissertation. 1996.1 INTRODUCTION In this chapter. CEO of Interbrand Newell and Sorrell . creates influence and generates value4" This definition truly captures the essence of a brand.a brand is: "a mixture of tangible and intangible attributes. the brand's emotional benefits and its self-expressive benefits .see Figure 2. symbolised in a trademark. A. both to customers. R. p. E. but extends further to encompass added values derived from factors such as the brand-customer relationship. (London: Macmillan Press Ltd.1. and to companies. FIGURE 2. and highlights the importance of brand management. vii 13 . The chapter proceeds to describe the influence of brands on the buying process. Branding is about creating 'value'.a leading specialist brand consultancy firm . 'The Future of Brands'. 74 4 Clifton. if properly managed. unravelled to reveal the nature of brands and their reason for existence. (New York: Free Press). whether online or offline. p.. 'Building Strong Brands'. and the importance of customer satisfaction and brand loyalty.2 WHAT IS A BRAND? According to Rita Clifton. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. This value stems from the products and services that companies create and bring to the market.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. & Maughan. 2000. The concept of brand equity is outlined. explaining the value of brands. These concepts are central to brands and brand-building. both for customers.

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

'Marketing Management .The Gap stores.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. 8th Ed. Kodak. 15 . Implementation. symbol. and because they most readily come to mind when consumers are asked to recall brands. not the products it sells . or a combination of them. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. P. or design. such as in retailing. most products and services cannot survive on functionality alone as this is usually matched in time. but the brand itself is the store. Southwest Airlines and Amazon. with supplementary products and services (e. These products and services add value and make the offering much more difficult for competitors to emulate. Essentially. Certain service brands. Coca-Cola.g. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. (Europe: Prentice Hall) 1996.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. In fact. However. 5 Kotler. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. this is the case with all Internet companies.com are examples. 2. even when the alternatives are substantially cheaper or more readily available (e. quick delivery) that enhance the customer’s total purchasing and use experience. information.g. The most common barrier to competition is building a brand. preferring things they can see and touch. The Basic Brand The basic brand consists of the "name. customers buy products to meet certain functional needs. actually sell products.Analysis. & Control'.. Service Brands (intangible) are much less numerous than their product counter parts. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. this should support the offering's performance and differentiate the brand from those of competitors. term. Planning. They are the historical core of branding because they are the most prevalent. Levi's). sign.

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

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

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

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). In this way. Firstly. M. 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. 'The One to One Future'. D.they provide good word-of-mouth and are the best salespeople for the product / service 2. & Rogers. Harley-Davidson motorcycle clubs). This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Emotional loyalty can be also created through the formation of a strong user community around the brand. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 1993 McWilliam. emotional loyalty is born out of a consumer's personal relationship with a brand.Sloan Management Review. 8 9 Peppers..com. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. G.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Spring 2000 19 . There is also clear evidence of this on the Internet. consistent orders Satisfied customers are the best advertisement . 'Building Stronger Brands through Online Communities' .7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways..g. 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.

BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.. March 1998. FIGURE 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 2. there are brands that customers perceive as acceptable and would not resist buying.6 .7 . Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand.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. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). a 'powerbrand' tends to have a high degree of brand loyalty. whereby customers would be unwilling to substitute it with competitors' offers. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. there are brands that are unknown by most buyers. Journal of Consumer Research. and understanding the needs and buying processes of the target market is essential.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 20 . S. FIGURE 2. which goes well beyond the satisfaction of a specific need.7). However. 343-373. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Beyond this. A stronger brand enjoys a high degree of brand preference over competing brands. pp.

D.8 .Create Awareness . which is the value of the brand over and above its commodity value. 1991 10 Aaker. FIGURE 2. trademarks. (New York: Free Press). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. (New York: Free Press). perceived quality.. and relationships with distributors and strategic partners. D. name awareness. According to David Aaker (1991).BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .. and other assets such as patents.8. The major brand assets are brand loyalty.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'. 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". strong brand associations. The benefits of each are outlined in Figure 2.Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. 1991 21 .

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

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


promotion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 .1. This chapter spells out the traditional brandbuilding process. If the offering is developed properly. public relations. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. the next step is to get customers to try the brand. To entice trial and repeat purchase requires triggering mechanisms. FIGURE 3. brand awareness. which are created through advertising. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.1 .2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. This is illustrated in Figure 3. The major characteristics of successful brands are also reviewed. 3. and keep it turning. it should provide a satisfactory experience and lead to a willingness to buy again. Once this has been established.1 INTRODUCTION Building a strong brand is a complex task. and direct marketing. selling. confidence and brand equity are built. highlighting important factors that contribute to the success of each step along the way.

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

J. 1986 27 . mean that buyers look for short cuts. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. • Brand Appearance . 'Marketing Management and Strategy'. values or wealth. faith in brand generates satisfaction in use.the design. cosmetics and high-tech products.if a brand provides good service over time. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. influenced by brand values. 1998. In today's affluent society. Coca-Cola. it is more likely to work effectively for them. it acquires added values of familiarity and proven reliability.g. as they are to be about satisfying basic physical and economic needs14. • Belief in Efficacy . Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. Lexington Books). or to gain a sense of belonging. P. Gillette. the number of competing alternatives and the large variety of advertising and selling messages.. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. interests. Sony. pp. Kellogg's) attached to a new product will transfer positive associations..3.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. Customers choose brands. which they perceive as meeting their needs. • Manufacturers' Name and Reputation . P. • User Associations . Brand values derive from five major sources15: • Experience of Use . the pace of technical change. 2nd Ed.in many cases. these needs are as likely to be about satisfying self-actualisation or esteem needs. People use brands to express their lifestyles. The large number of decisions. For pharmaceuticals. providing confidence and incentive to trial.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. layout and appearance of the brand can clearly affect preference by offering cues to quality.brands frequently acquire an image from the type of people who are seen as using them. if customers have faith that a brand will work. Hewlett-Packard. 'What's in a Name? Advertising and the Concept of Brands' (Lexington.In many situations a strong company name (e. industry endorsements and newspaper editorials. which are additional to those based upon real performance. 14 15 Doyle. MA. 169 Jones. (Europe: Prentice-Hall).

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

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

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

advertising. 18 Berry. This focuses on establishing a longterm. Customer service is an important element of this relationship. providing insight into customers' needs and wants. In this way. Over time. 'Marketing Services: Competing Through Quality'. L. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally.for example.g.to move customers through the adoption process. 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. Advertising and public relations can be effective in generating awareness and interest. Social Benefits . A. (New York: Free Press). this process enables an exchange of information. encouraging evaluation and trial. personal selling and public relations / publicity .such as airline frequent flyer programmes. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . when each trusts the other to deal fairly and reliably. pp. the company may supply customers with special equipment or tools (e. Internet linkages. This is often referred to as Customer Relationship Management (CRM). • Structural Ties . software) to help customers interact with the company.. while strengthening the position and value of the brand. allowing companies to communicate regularly with their customers and customise their interaction. 1991. Through building relationships with customers. companies can increase the value of each customer. sales promotion. 3. direct marketing. multi-transaction relationship. companies have used the tools of the promotions mix . companies can increase buyers' satisfaction. & Parasuraman. This information is a key competitive advantage. & loyalty / discount cards.by learning customers' individual needs and wants and individualising and customising service and contact with the customer.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.136-142 31 . but enhanced customer interaction through relationship building.

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


In essence. 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. news groups and mailing lists. it offers a number of alternative channels that enable businesses and people to communicate. Information is becoming a major part of the products and services that people buy.Figure 4. and the 'world wide web' (www) . Hypertext allows information to be organised in a user-friendly way that is easily accessible. it is a common technology platform that allows computing devices to communicate with each other. but in practice not in real time. and provides the opportunity for dynamic interaction. which contain hypertext and pictures.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 34 . This chapter provides an overview of the Internet and its defining characteristics.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. 4.1. E-MAIL Is the part of the Internet that most users use at present.1 . and a critical source of added value. creating new challenges and opportunities. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. FIGURE 4. The three core channels include e-mail (the most common).1 INTRODUCTION The Internet is transforming the business environment. In doing so.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment.

3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.this radically alters the process of interaction between communicating parties.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). the Internet lets individuals and companies build interactive relationships with customers and suppliers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.The Internet is a global network and can be reached from everywhere. ubiquitous links to anyone.2. regardless of where the computer or Internet access device is physically located.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 .2 (Note: 35 . The Internet can also be accessed at any time . which was intended to link military networks together. 4. allowing both parties to identify each other and build one-to-one relationships . These characteristics combine to create a very powerful medium. The context of the Internet and certain key developments are highlighted in the Figure 4.24 hours a day. These qualities eliminate the barriers of time and space that exist in the physical world.not previously available with mass medium forms of communication. These defining characteristics have fuelled its explosive growth. and deliver new products and services at low cost. Graph is not drawn to scale). anywhere. • It Overcomes the Barriers of Time and Space . when the United States Defence Department developed the 'ARPAnet'. 7 days a week. • It Allows for Two-way Communication and Interactivity . By allowing for direct.

000 1.000 1969: 10.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000. 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.000 100.000. 1998.3 .000 1.2 . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .3.a PricewaterhouseCoopers Report. 1996 (www. 2000 Internet / ARPAnet was created Dell.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. as cited in 'E-Business Technology Forecast' .000 10.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. FIGURE 4.Figure 4.economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000.com) 36 .

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

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

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

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

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

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

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


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

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

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

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

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

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

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

T.. Chu. & Hancock. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. R. Zook.An A. J. The customers' ability to access and display information rapidly is extremely important36.. Baveja.3 .. March 17. Place). In essence.bain. D. FIGURE 5. 'The Value of Online Customer Loyalty and How You Can Capture it'. 30% of potential customers leave sites because they cannot find what they are looking for. 2000 'The E-business Technology Forecast' . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. C.An A..6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. 2000 37 Rigby. and 66% of people who start a 'shopping basket' fail to complete the transaction37. Promotion.. S. Kearney White Paper. .A PricewaterhouseCoopers Report.A Mainspring Communication Report in collaboration with Bain & Co. Rastogi.3).. S.com) 52 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. 2000 (www. Kearney White Paper. Price. Sites that are difficult to use can cause frustration. T. making customers 'click off' to another site. As 35 36 'Creating a High-Impact Digital Customer Experience' .THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . In fact.

com) Davenport. February 2000 Issue 53 . up-to-date information. ease-of-navigation. 1999 (www. October 29. FIGURE 5.4. which can enhance the company's value proposition.businessweek. expert insights. 29th October 1999 (www.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. whereas a slow response time and site downtime will have a significant negative impact.businessweek..BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. and fast response times are among the most important factors in establishing web brand loyalty38. 38 39 Cognitiative Inc. With almost infinite display space and inventory capability.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. as cited in Business Week. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. and a wide range of products. 'Sticky Business'. as cited in Business Week Magazine. ease-of-use. CIO Magazine. online companies have the opportunity to provide rich.4 . T.

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

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

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

Waitman. This is more difficult online than offline. S. visibility relies solely on Communication. e-mail notifications and banner advertisements. etc.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.. A. Figure 3. links from directory searches (Connectivity). This model consists of five stages .. McKinsey Quarterly. modified to take into account of the interactive dynamics of the Internet. & Zeisser. 'Marketing to the Digital Consumer'. Learn and Relate..7. and bring people to the site for the first time. 1996. 180-183 (www. pp. McQuade.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Evaluation. Engage. Therefore. Magazines. The mechanisms to communicate range from traditional media (TV.. Trial.2.4 .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. billboards. No. Retain. The company must build awareness and communicate its value proposition to its target customers.8. Newspapers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. because there is no physical presence.Attract. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ .Awareness. FIGURE 5. including affiliate programmes with other websites.7 . Interest.mckinseyquarterly. Adoption).) to online tools. R. M. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.

The key factors at this stage are Convenience combined with interesting Content. Fig. public relations and television advertising.Economist Intelligence Unit 2000 (www. 3. discounted over the expected duration of the brand-customer relationship.4 4. Creativity is also an important factor in gaining attention in today's cluttered marketplace.6 3. multiplied by the expected rate of transactions.8 . as cited in 'Targeting Consumers via the Internet' .3 3.3) is useful to ensure that a company develops a distinct and consistent brand identity.com) The most effective methods are direct e-mail.8 4.5) 2.0 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 58 . affiliate programmes.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3 2. it is important to quickly engage consumers' interest before they move on.3 Source: Forrester Research.4 3.ebusinessforum.WEBSITE PROMOTION METHODS .2 4. Attracting customers is only the first step in building online brands. Companies then need to engage customers to obtain their interest and participation.7 4.5 3. Kapferer's Brand Prism (Ch.4 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. Engage With the multitude of choice available on the Internet. 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.1 3.

a company can create value by providing a personalised online experience. TV. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. This helps to create a customer base that spends more time and money at a site. and what additional products and services are they interested in provides companies with valuable information which.g. 5. Certain product categories. • The Internet supports brand-building activities where there is a need to build a relationship. and must be continuously updated due to the multiple visit nature of customers. can create value for the customer and help build the brand-customer relationship. such as groceries and convenience goods. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. 59 . and forge closer relationships than any offline operator. Content is the basic driver of retaining customers on a site. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. Radio). Communities and Customisation are other sticky applications. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. if used properly. The initial site registration provides an early opportunity to obtain useful information. The objective is to increase the conversion rate (% of browsers converted into buyers). Learn The Internet provides extensive opportunities to learn about consumers (demographics.9).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. attitudes and behaviour). Building up a knowledge database on each customer . do not lend themselves to a need for customers to build a relationship with the brand (Figure 5.8 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.who they are and why they shop online.

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


and is one of the few Internet brands that is recognised all over the world.Goldman Sachs Report.2. Amazon provides increased added value on several dimensions. 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. It is the 57th most valuable brand in the world47.2 CASE STUDY: AMAZON. eBay. Amazon serves over 23 million customers from 160 countries. and enjoyable experience.It's an Ocean. Figure 6. including: increased selection. a company overview. greater convenience. In July 1995.2 Value Proposition Amazon. it is the most visited e-commerce website in America. Amazon has been able to differentiate itself from other online competitors.com launched with a mission to use the Internet to transform book buying into a fast. Amazon. Gap. and higher levels of customisation and service than the traditional shopping experience allows. 1999 49 'Amazon's Amazing Ambition' . 6. Each case is presented in the same format including.1 Company Overview Amazon. Boo. 'Amazon.see Appendix A.com's success stems from its compelling value proposition.com has become synonymous with e-commerce. Amazon has cultivated a reputation for excellence.2. Through its provision of a one-stop shopping experience.COM 6. Germany and Japan49. Barnesandnoble.com) 62 . discounted prices. CDnow. easy. In addition. and has equity investments in several e-tailers. combined with its levels of customisation and customer service. the sources of added value (using the 7Cs Framework).com. and one of the top two or three in Britain.com.Amazon. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).interbrand. 6.economist. Not a River' . France.1 outlines Amazon's timeline and major milestones. innovation and delivering on its promises.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. November 11. its brand-building strategy (how it generates traffic). 47 48 Interbrand (www. and other key factors that have contributed to its success (or failure). more information. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). Amazon. 2000 (www. February 26.com) . In addition. and has sales of over $2 billion.com and Yahoo!.com.com .1 INTRODUCTION This chapter provides an analysis of seven companies. its value proposition.The Economist.

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

discussion boards. The site is easy-to-use. and Amazon. offering multiple paths to a given book or product. customer testimonials. Content Amazon provides content on several levels. the 1-ClickTM express checkout. mobile phones. book summaries. FIGURE 6.Figure 6. expert reviews. interviews with authors. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. encourage repeat visits and drive higher conversion rates.2.OVERVIEW OF AMAZON. and customer Purchase CirclesTM.1. Amazon has added other features for shopping convenience. downloads quickly and services visitors adequately . such as the Amazon. Palm VII PDA device).e. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. easy-to-use.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. gift click. and quick-to-load pages Over time.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 . wish lists. This is an example of 64 . gift reminders. recommendations. live or study.com All Product search (searches the entire web).com Anywhere to support access from wireless devices (i. including book jacket images.3 Sources of Value . logically structured.

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

increasing to over 500.com hot-link and offer specific books of interest to their visitors. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Newsweek. attracting member sites of all sizes. In the second half of 1996. two personalised services. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility.2. New Yorker and The Economist. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. 6. Eyes and Editors. and not subsequent purchases. which only applied to sales that resulted from the initial click-through.2). Instead of paying directly for this exposure.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Through the first half of 1996. As a result of all these factors (7Cs). 66 . Once orders are placed.000 members. and by 1999 it had over 200. In July 1996.000 by August 2000. The Financial Times. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Amazon offered Associates referral fees of up to 15%. enticing them to return to the site and purchase repeatedly. Business Week. they are subsequently confirmed by e-mail.a move that along with the novelty of its business model and the newness of the Internet. In addition. it began to advertise in print media and online . help maintain contact and build traffic by e-mailing customers when desired products or books become available.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. This enabled Amazon to reach more customer segments and niches (Figure 6. The Associates Programme has been phenomenally successful. and customers are also e-mailed when the items are shipped from the warehouse.

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

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

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

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

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

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

4 Brand-Building Strategy Barnesandnoble.com in return for a commission on any purchases that they originated . Netscape and Microsoft Network.64 billion.6 million. however. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.000 affiliates in its referral network. Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com's 1999 revenues were $202. while Amazon.com closed 1999 with 4 million customers. Both try to foster a community of readers by letting customers post reviews online. Barnesandnoble. compared to Amazon. and Barnes & Noble Inc. However. Barnesandnoble.com. and both are expanding globally. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). They have developed an affiliate programme that links sites to Barnesandnoble. and avoid charging sales tax in states where it has stores56.3. this programme had more than 300.a replica of Amazon's Associates Programme.com's market capitalisation was $251 million.com was valued at $21.com had over 17 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Although. Barnesandnoble. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . has yet to leverage its strong brand in cyberspace. it lags behind first-mover Amazon.com has created a high quality website and customer experience. prevent cannibalisation of its existing business. Lycos. These initiatives have generated traffic to the site.The Wall Street Journal.1 billion. reasons for this are explained in the next section.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. As of February 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Webcrawler. Instead. Both offer 'associate programmes' that let other websites link to their sites.com's $1. while Amazon. December 17. The 6. 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. Both offer customisation that permits users to personalise the experience. Yahoo!. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.

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

com's late start in 1997. meant that Amazon. even if that means eating into their existing sales. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com. and its lack of innovation (by copying Amazon. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. customer relationships and offline presence .com has been able to create a high impact and high-quality customer experience. otherwise they risk losing out to other online competitors. and was further up the growth curve.forbes. it has not been able to establish itself as the leading online bookseller. a wellestablished Internet brand. 2000 (www.com and has given them the image of a second rate 'me too' brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 Conclusion Although Barnesandnoble.com's experience is instructive.its key differentiating factors. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. The Press have also contributed. August 4. In addition.Not a Best Seller' .Forbes.com . The company failed to leverage its established brand. Barnesandnoble. feature for feature) has failed to differentiate Barnesandnoble. by portraying them as slow and clumsy in comparison to the more nimble Amazon. it also caused a major setback. Barnesandnoble. significant market momentum.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. and allowed them to offer stock options as compensation and achieve a high market capitalisation. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".com) 75 . 57 'Bn.3.

Boo. and Converse. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Boo.Appeals for $30 million more funding .Raises funding of $125 million . Everlast. They intended to add France. it's about range and convenience. After a high profile launch.4. as cited in 'Boo. If a clothing brand is on the Boo site.COM . 58 Kajsa Leander.Site goes live . Finland. Italy and Spain within a few months. Boo. as well as create a kid's site. June 10.Announces it has only 500.com opens its virtual doors' . However. Morgan.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". "our marketing thrust is not based on prices.com had set the record as Europe's best-funded European Internet Start-up.2 Value Proposition According to Kajsa Leander. November 2000 January February May 6.com entered six markets: US.000 unique visitors .3 1999 Mid year BOO. TABLE 6. On going live.Multi-million pound advertising campaign created by BMP DDB . England. not the limited range you might get at most London fashion shops58".1 Company Overview Founded in 1999. Sweden.Marketing Week. arranged through J. sack 20% of staff and sell stock at 40% discount . Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).com provided a range of 18 fashion and footwear brands including DKNY. and included high profile investors such as Bernard Arnault.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and eventually debut in Asia. Company is put up for sale. Boo.TIMELINE AND MAJOR MILESTONES . due to its poor performance and inability to build a customer base. CMO of Boo. Puma. and the resulting loss of investors' confidence.they redesign site. receiving $125 million of funding.com. 1999 76 .COM 6. it means all that brand's product line is available. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket. founder and Chief Marketing Officer of Boo. and was billed as one of Europe's hottest e-commerce ventures.com.First sign of problems . among others. within six months Boo. P. Germany and Denmark.fails and appoints KPMG as liquidator.com collapsed through lack of funds.4.4 CASE STUDY: BOO.


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


Miss Boo

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



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

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

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



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

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


by twin brothers Jason and Matt Olim..000 sound samples.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. It has a customer base of 4 million people. D. pp. and an average daily audience of over 800.Harvard Business Review. guides to music genres. 62 Hoffman.5 million distribution deal with Lycos Signs three-year. This unprecedented degree of access to music and information is the core of CDnow's value proposition. CDnow is the leading online music store. CDnow was acquired by Bertelsmann AG. features. and was the first site to offer the sale of music downloads and custom CDs. 'How to Acquire Customers on the Web' .5.179-188 63 CDnow website (www. CDnow is also driving the digital distribution of music. cover art.TIMELINE AND MAJOR MILESTONES . $18.Merges with N2K. customisation and a wealth of information and content to help in the purchase decision.000 music-related products and 650. convenience. announce marketing alliance . and they aim to "make every visit to the site.ten times the selection of a conventional bricks-and-mortar music store).5 CASE STUDY: CDNOW 6. a valuable and rewarding experience"63. and one of the most popular shopping sites on the Internet62. TABLE 6.com) 80 .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . as well as music reviews. CDnow provides access to over 500. whether for browsing or buying.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.000 music related items . former arch rival . and exclusive interviews and reviews from CDnow's award-winning editorial staff. On 19th July 2000.Raises $10 million through private placement . May-June 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview Founded in 1994. good prices.Partnership program with Geffen Records .Site goes live . daily music news.000 people.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5.cdnow. T. & Novak.CDnow and Time Inc.Forges distribution partnership with Yahoo! $65. $22.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Launches merged CDnow/N2K site .Merges with Columbia Records .

FIGURE 6.3 Sources of Value .Figure 6. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has leveraged the reputation of their brands to reinforce its own. For example.5. 81 . CDnow has cultivated similar relationships with MTV..OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. By partnering with well-known content providers. easy-tonavigate.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. etc. and has secured rights to music reviews. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. artists biographies. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). cover art.5 . to make it easier for customers to explore new music and make informed purchasing decisions.

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

• Affiliate Programme . CDnow extended its distribution reach to include more than 250. Spin. Yahoo!. • Traditional offline Media . By keeping the brand in front of the customer in this way. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate.5.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted.CDnow's advertisements are targeted to some degree.They have also stuck exclusive alliances with AOL. covering the entire music spectrum. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. as well as more-targeted music-related sites like Billboard. customers buy music.Through the Cosmic Credit Programme. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. CDnow's initiatives include: • Banner Ads . this is their "most successful customer building programme64".BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account.000 small. It is a revenue-sharing arrangement. music-oriented websites. CDnow is doing everything it can to ensure that the next time that 6.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. and spot radio to build reach. and Variety. print advertising is music-related publications such as Rolling Stone. 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. • Alliances and Partnerships . According to Jason Olim. they buy from CDnow. and radio spots on the Howard Stern Show to build a cult following among radio listeners. Excite and other powerful Internet content and service providers. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. 83 .

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

000 shares at $13.com allowing them to offer person-person payment solutions .Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July . 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. to allow access. regardless of platform (i.Yahoo! acquires eGroups .TIMELINE AND MAJOR MILESTONES 1994 April .7 YAHOO! .600.8 million IPO (2.Yahoo! Shopping launches personalised shopping service 6.Site goes live September .com. . mobiles.Yahoo! Launches Business-to-Business Marketplace ..Receives $1 million in venture capital funding from Sequoia Capital $33. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.The 7Cs Framework Convenience Central to Yahoo!'s success.e. Their goal is not to list everything under the sun. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. 99 . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. is the way it has structured and displayed information.3 Sources of Value .8).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. to provide web-based services to PalmTM handheld computers .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. TVs. Palm computers).8. Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! forms agreements with Palm Inc.Yahoo! unveils Yahoo! Finance Vision .Yahoo! acquires Arthas. More recently. and unveils Yahoo! Digital Introduces Bill Payment services .

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

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

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

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

first to go public. with a large customer base and high levels of customer loyalty. HotBot. Yahoo! has invested relentlessly in new services and marketing programmes. their innovative promotional and guerrilla marketing techniques. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". s4 104 . In addition. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. GoTo. and other search engines at the bottom of its search results page). they have carried out extensive partnering. its excellent customer service. and has cultivated a reputation for excellence. Yahoo! has built a strong brand. its choice of partners. from its convenient and logical structure and display of information. and first to go mainstream by advertising its name using traditional media. if a user cannot find what it is searching for. VPBrand Marketing of Yahoo!.com. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. 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. As a result of all these factors. In addition.6 Conclusion Yahoo! is one of the most successful brands on the Internet. Yahoo! has benefited from a first-mover advantage. May 3. As the first online navigational guide to the web. to its simple design.Advertising Age. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! points them to its competitors by including links to AltaVista.8. and its openness (for example. 1999. that have set it apart from the pack. while also associating Yahoo! with well known brands. first to turn around an annual profit. p. while attracting new customers.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. To maintain its lead. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. 6. have created a distinct brand identity that differentiates the brand and appeals to its target market. These relationships have provided end-users with added-value.








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



There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

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

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

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

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

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

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


654 43.830 14.101 9.792 3.806 2.550 12.761 1.527 3.932 4.281 11.283 4.895 2.568 3.681 2.648 1.043 8.643 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .231 12.147 9.262 1.048 20.634 1.143 2.603 5.181 21.Interbrand's Ranking of the Top 60 Brands (www.193 112 .464 3.806 11.985 2.076 3.694 17.781 33.845 56.interbrand.602 4.361 1.319 1.132 15.313 2.804 2.781 17.422 1.225 11.275 30.021 26.502 33.184 1.052 6.909 7.595 17.766 14.329 4.596 3.197 32.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.155 7.423 2.231 24.894 14.310 11.404 4.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) 83.510 8.

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





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