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


1 7.3 Sources of Value .6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.4 Brand-Building Strategy Value Proposition 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .8.5 Conclusion Case Study: Gap.The 7Cs Framework 6.Extensive Integration 6.5.4 6.7.5 6.5.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy Company Overview 6.The 7Cs Framework 6.5.6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.8.3 Sources of Value .4 Brand-Building Strategy .com Conclusion Case Study: Yahoo! 6.5 Other Factors That Contribute to their Brand Leadership 6.6.3 Sources of Value .4 Brand-Building Strategy 6.4.2 Value Proposition 6.5 Other Factors that Contribute to their Brand Leadership 6.7.The 7Cs Framework 6.1 Company Overview Case Study: Boo.3 Sources of Value .8.3 Sources of Value .4 Brand-Building Strategy 6.The 7Cs Framework Conclusion Case Study: CDnow 6.6.com 6.1 Company Overview 6.1 Company Overview 6.2 Value Proposition 6.2 Value Proposition 6.2 Value Proposition 6.4.The Failure of Boo.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.8.com 6.6 6.

6 Figure 4.1 Figure 6.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .4 Figure 6.4 Figure 5.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .2 Figure 2.1 Figure 1.1 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.com's Website Amazon.5 Figure 4.com's Website Overview of Boo.3 Figure 2.3 Figure 6.7 Figure 5.3 Figure 4.2 Figure 4.6 Figure 6.7 Figure 6.7 Figure 2.1 Figure 2.5 Figure 5.6 Figure 2.2 Figure 6.3 Figure 5.8 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.8 Figure 3.1 Figure 3.5 Figure 6.2 Figure 2.2 Figure 5.1 Figure 5.8 Figure 5.4 Figure 4.5 Figure 2.4 Figure 2.3 Figure 3.7 Figure 5.4 Figure 4.2 Figure 3.6 Figure 5.com's Associates Programme Overview of BarnesandNoble.9 Figure 6.

com .6 Table 6.Timeline and Major Milestones Gap.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.4 Table 6.2 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.Timeline and Major Milestones CDnow .1 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones Boo.3 Table 6.7 The Emerging Brand-Building Environment Amazon.com .Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones Yahoo! .5 Table 6.com .


and is triggering the need for new brand-building strategies and tools. Supply chains are being rethought. customer affiliation and level of sales.g. As such. Figure 1. interaction and relationship building.1 .1 shows the number of years it has taken some Internet brands to reach sales of $100 million.YEARS TO REACH $100 MILLION IN SALES 6 5. as they face each other through an electronic connection. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.com1 Amazon. aggressive Internet start-ups have emerged.9 2.an explosion that is also a harbinger of how business will operate in the future. the Internet is changing fundamentals about customers.com. and business models revamped. In the midst of this.com) 7 .com Source: Securities and Exchange Commission Filings.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. America Online (AOL) and eBay have been able to build powerful brands in a few years. McKinsey Analysis (www. there has been an explosion in the online world . the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com's range of 4. Internet companies such as Yahoo!.5 million book titles). It is empowering customers with more options and more information to make informed decisions.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. The Internet also represents a fundamental shift in how buyers and sellers interact.mckinseyquarterly. relationships. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com noble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Amazon. As such.2 3.9 3.0 1. whereas it has taken decades for traditional companies to achieve the client base.5 2.1 OVERVIEW Over the past few years. service and brands.1 3. Amazon. creating strong brands that are putting established brands at risk. products and services reconfigured. while providing new tools for promotion. that these Internet start-ups have achieved. FIGURE 1. This is creating new challenges and opportunities.

& Overdorf. May 5. As such. 1997.66 8 . March . T. Volume 78 Issue 2. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. 1 2 3 Christensen. 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. C. building awareness. and the high cost of acquiring online customers2..April 2000. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important.. L.. Therefore. Harvard Business Review. P. as the need to build brand loyalty online is reaching a peak. Harvard Business Review.. For pure online players. P. & Elstrom. p. pp. In light of this. that extends the brand-customer relationship beyond a single transaction. turning browsers into buyers. who are essentially intangible. rather than drifting from site to site3. May-June 2000 Hof. brands are even more critical as customers have little to go on other than a recognised brand. S... A Business Week / Harris poll. 'Internet Communities . 'How to Acquire Customers on the Web'. 66-76 Hoffman.Forget Surfers. A New Class of Netizen is Settling Right In' Business Week. companies lack a coherent framework and concrete methods to build an online brand. Given the tremendous clutter in today's e-commerce marketplace. Browder.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. attracting traffic or 'eyeballs'. D. M. 'Meeting the Challenge of Disruptive Change'. found that 57% of Internet users go to the same sites over and over again. R. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. However. and Novak.

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

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

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


p. unravelled to reveal the nature of brands and their reason for existence. and the importance of customer satisfaction and brand loyalty. R. and they form the backbone of this dissertation. E.1 . vii 13 .a leading specialist brand consultancy firm . if properly managed. but extends further to encompass added values derived from factors such as the brand-customer relationship. and for the company.a brand is: "a mixture of tangible and intangible attributes. The concept of brand equity is outlined. A. p. 2. explaining the value of brands. (London: Macmillan Press Ltd. 'The Future of Brands'.1. 1996. (New York: Free Press). both for customers.see Figure 2. these layers are Brands are made up of many layers and dimensions. 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.1 INTRODUCTION In this chapter..). 74 4 Clifton. These concepts are central to brands and brand-building. Branding is about creating 'value'. symbolised in a trademark. creates influence and generates value4" This definition truly captures the essence of a brand. & Maughan. both to customers. CEO of Interbrand Newell and Sorrell . and highlights the importance of brand management. 'Building Strong Brands'. The chapter proceeds to describe the influence of brands on the buying process. This value stems from the products and services that companies create and bring to the market.2 WHAT IS A BRAND? According to Rita Clifton. which. D. and to companies.A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. the brand's emotional benefits and its self-expressive benefits . FIGURE 2. whether online or offline.

FIGURE 2.3 THE LAYERS OF A BRAND Brands are made up of four layers . 'Marketing success through differentiation . yet ultimately reside as consumer perceptions. which grows out of the cumulative memory and the experiences customers have of products or services. making their way into planning and strategy documents. Harvard Business Review. As such. a 'set of expectations'. the basic brand.86 14 .. January-February. T. benefits.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . The space a brand occupies inside a customer's head can create a 'mental' patent. and services to customers.2 . It is a company's promise to consistently deliver a specific set of features. the augmented brand and the potential brand .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 core product or service. They start life as ideas. 1980.2. brands are their most valuable asset.Figure 2. and a 'promise'. 2. a 'reputation'. For some companies. Brands are richly endowed entities. p.a 'relationship'.of anything'. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.

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

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

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

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

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

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

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

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

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


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

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

• Brand Appearance . Hewlett-Packard.brands frequently acquire an image from the type of people who are seen as using them.. The large number of decisions. 'Marketing Management and Strategy'. • User Associations .1 Added Value Most buying decisions are Added value is at the heart of building successful brands. People use brands to express their lifestyles. cosmetics and high-tech products. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. it is more likely to work effectively for them. Kellogg's) attached to a new product will transfer positive associations. or to gain a sense of belonging. 1986 27 . Gillette. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. For pharmaceuticals. 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3. • Manufacturers' Name and Reputation . layout and appearance of the brand can clearly affect preference by offering cues to quality. 169 Jones.if a brand provides good service over time. Coca-Cola. pp. as they are to be about satisfying basic physical and economic needs14. these needs are as likely to be about satisfying self-actualisation or esteem needs. 2nd Ed. Customers choose brands. mean that buyers look for short cuts.the design. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. faith in brand generates satisfaction in use.g. 14 15 Doyle.In many situations a strong company name (e. the number of competing alternatives and the large variety of advertising and selling messages. the pace of technical change. which are additional to those based upon real performance. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs.in many cases. industry endorsements and newspaper editorials. • Belief in Efficacy . providing confidence and incentive to trial. which they perceive as meeting their needs. Lexington Books). MA. interests. if customers have faith that a brand will work. J. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. values or wealth. In today's affluent society. Sony. it acquires added values of familiarity and proven reliability. (Europe: Prentice-Hall).. influenced by brand values. Brand values derive from five major sources15: • Experience of Use . P. P.

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

29 . It also facilitates consistency in the message being transmitted through presentation (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. below-the-line activities. 1992 The brand prism enables management to understand the brand. its strengths and opportunities. understanding the brand's core and style helps set the perimeters of brand extensions .3 . structure and ease of use). advertising. 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. 'Strategic Brand Management'.g. (New York: Free Press).how far the brand can be meaningfully stretched to other products and market segments. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. and through line and brand extensions. Secondly.. Finally. website design.

(New York: Free Press). skills. they must learn about it. strategy (partnerships and alliances).79-86 The Innovation-Adoption Model consists of: • Awareness . and its products / services. 1962. colleagues and opinion leaders become important influences at this stage. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. E. pp. Advertising and PR are common tools for achieving awareness.79-86 30 . and the product / service's perceived performance. The value proposition must then be articulated in terms of the 'marketing mix' . Price. • Adoption . the company must ensure that it develops the appropriate structure.4.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. (New York: Free Press). • Trial . 'Diffusion of Innovations'. features and advantages. Personal sources such as word-of-mouth from friends. management style. FIGURE 3. it should lead to satisfaction and re-purchase.. This learning is called the adoption process17 . 17 Rogers.Customers consider whether the product / service will meet their particular needs. Promotion and Place (distribution strategy).The McKinsey 7-S Framework). systems. • Evaluation . culture and staff needed to support. If the offering is developed properly. 'Diffusion of Innovations'. Before potential customers can buy a product / service. E.Product and service features.often referred to as the '4Ps' . deliver and reinforce this value proposition (see Appendix B .INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.. 1962. The value proposition must be communicated to entice customers to try the product / service. • Interest .The customer is satisfied and decides to make regular use of the product / service.The company has to create awareness of the brand.Customers need to be stimulated to seek information about the brand's uses.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.4 .Figure 3.

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

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


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

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

2000 Internet / ARPAnet was created Dell.3 . as cited in 'E-Business Technology Forecast' . 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.com) 36 .000 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. 1996 (www. FIGURE 4. 1998.3.a PricewaterhouseCoopers Report.000.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.2 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 10. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .economist.000.000 1969: 10.000 1.Figure 4.000 100.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000.

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

chat rooms.g.eiu.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. FIGURE 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). entertainment) and purchasing (37%) .com) 38 .from communicating (90% use e-mail) and sourcing information. April 13. These activities highlight the adoption of the Internet as an interactive.5. 2000 (www. as cited in the Economist Intelligence Unit (EIU). communication and information tool.5 .Figure 4. to interacting (e. reveals the wide range of areas where people are embracing the Internet .

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

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

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

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

tools and opportunities.7 .THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. G. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. it is transforming the competitive landscape and brand-building environment. 43 . 4. while making the offering hard to duplicate off-line.dot.a Boston Consulting Group (BCG) Analysis. & Stirton. many online companies are blending together the products and services of a wide range of companies. This is the substance of the next chapter.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.6 CONCLUSION The Internet and its strategic impact are not technological issues . Partnering with portals and affiliate web sites is important in driving traffic to a web site. April 2000 In an attempt to provide a rich customer experience. while triggering the emergence of new brandbuilding strategies. As such. The Internet is transforming every business to some degree.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. This provides customers with added value.they are business issues. D. competition is intensifying. the pace of business is accelerating and power is shifting to the customer. S. 'Organising for e-Commerce' .. New opportunities for efficiency and co-ordination are emerging.


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

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

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

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

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

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

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

The customers' ability to access and display information rapidly is extremely important36. March 17.An A. FIGURE 5.3 . making customers 'click off' to another site. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Kearney White Paper. Promotion.An A.. S. Price.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. In essence. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. Chu..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. 2000 'The E-business Technology Forecast' .. 2000 37 Rigby. Zook. As 35 36 'Creating a High-Impact Digital Customer Experience' . Baveja. R. Place).A PricewaterhouseCoopers Report..com) 52 . 2000 (www.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . Rastogi. In fact.. and 66% of people who start a 'shopping basket' fail to complete the transaction37. . S. T.A Mainspring Communication Report in collaboration with Bain & Co. 30% of potential customers leave sites because they cannot find what they are looking for. & Hancock. T. Sites that are difficult to use can cause frustration. 'The Value of Online Customer Loyalty and How You Can Capture it'. Kearney White Paper.bain. C. D. J..3).

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

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

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

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

com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Evaluation.) to online tools. Magazines.Awareness. 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 ’ .. Learn and Relate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.mckinseyquarterly. and bring people to the site for the first time. Interest. McQuade..8. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. The mechanisms to communicate range from traditional media (TV. This model consists of five stages . FIGURE 5. e-mail notifications and banner advertisements. This is more difficult online than offline. pp. Therefore. Newspapers. Retain. 180-183 (www. links from directory searches (Connectivity).Attract. & Zeisser.7. visibility relies solely on Communication. Waitman. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Trial. because there is no physical presence.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..4 . 1996.. 'Marketing to the Digital Consumer'. Engage. M.2. billboards.7 . Figure 3. S. The company must build awareness and communicate its value proposition to its target customers. modified to take into account of the interactive dynamics of the Internet. R. McKinsey Quarterly. etc. Adoption). including affiliate programmes with other websites. No. A.

2 4.4 3. multiplied by the expected rate of transactions.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 . 58 .Economist Intelligence Unit 2000 (www. discounted over the expected duration of the brand-customer relationship.com) The most effective methods are direct e-mail. it is important to quickly engage consumers' interest before they move on. affiliate programmes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 2. Companies then need to engage customers to obtain their interest and participation.4 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.8 . public relations and television advertising.ebusinessforum. Engage With the multitude of choice available on the Internet.WEBSITE PROMOTION METHODS .5 3. 3. as cited in 'Targeting Consumers via the Internet' .5) 2. 3. Fig.0 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.3 3. Attracting customers is only the first step in building online brands.3 Source: Forrester Research.3) is useful to ensure that a company develops a distinct and consistent brand identity.4 4.1 3.8 4. The key factors at this stage are Convenience combined with interesting Content. Kapferer's Brand Prism (Ch. Creativity is also an important factor in gaining attention in today's cluttered marketplace.7 4.6 3.

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

'Marketing to the Digital Consumer'.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. pp. The interactive brand-building process involves attracting. the experience is the brand.. M. McQuade. touch. However. engaging and retaining customers. The next chapter analyses the brand-building efforts of seven companies. especially in small quantities. it is critical for companies to build relationships and foster brand loyalty. • Brand-building favours products that can be sold online.2.. it is not economically feasible to sell certain products. and as the relationship develops. to its delivery to the customer. 1996.mckinseyquarterly. 5.9 CONCLUSION On the Internet. Waitman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. S. and the need to stimulate the other senses (taste.. Given the high acquisition costs of online customers. No. & Zeisser.9 . the interaction provides the ability for companies to learn from their customers and relate. McKinsey Quarterly. 180-183 (www. companies must provide a satisfying end-to-end customer experience . 60 .com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. These case studies provide a practical insight into how companies are building their online brands. In order to create "apostles"..from the promises made in the value proposition. R. due to high delivery and transaction costs (relative to the value of the product). providing further added value. A. smell).


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

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

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

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

and customers are also e-mailed when the items are shipped from the warehouse.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. In July 1996. As a result of all these factors (7Cs). The Associates Programme has been phenomenally successful. 6. In addition. In the second half of 1996. 66 . 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.a move that along with the novelty of its business model and the newness of the Internet. help maintain contact and build traffic by e-mailing customers when desired products or books become available. they are subsequently confirmed by e-mail. This enabled Amazon to reach more customer segments and niches (Figure 6. Eyes and Editors. Business Week. it began to advertise in print media and online . The Financial Times. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Once orders are placed.000 members. Newsweek. enticing them to return to the site and purchase repeatedly. New Yorker and The Economist.000 by August 2000. and by 1999 it had over 200. and not subsequent purchases. two personalised services. which only applied to sales that resulted from the initial click-through. Through the first half of 1996.2). Amazon offered Associates referral fees of up to 15%. attracting member sites of all sizes. Instead of paying directly for this exposure. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.2. increasing to over 500.com hot-link and offer specific books of interest to their visitors. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.

and primary button placement on web portal search engines.com About Me .com).com. including: America Online (AOL). and Geocities.de became the local provider for Yahoo! Germany and Amazon. spreading the word for Amazon. Yahoo!.com's website (www. Interesting viral initiatives include: • Amazon.COM'S ASSOCIATES PROGRAMME Source: Amazon.AMAZON. These multimillion-dollar. 67 . free eCards and gift certificates (which customers send to friends.com gift certificate (in your name). Therefore. Amazon closed deals with five of the six most visited Internet addresses.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. Prodigy and @home. was also linked to Amazon's entry into Europe Amazon. Excite. From July 1997 to December 1998.customers are encouraged to provide e-mail addresses of friends. thereby promoting Amazon. People tend to tell their friends about it.com Refer-A-Friend . In addition.co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.2 . multiyear deals involve exclusive book-selling rights. The Yahoo! agreement.uk the local provider for Yahoo! UK & Ireland. each friend is sent a $5 Amazon. and you are given a $5 gift certificate for each customer you provide. Amazon also established agreements with AltaVista. mutual links. Amazon has used viral marketing techniques through customer reviews.allows customers to create a personal profile (with pictures) on the site. the customer acquisition cost is only £10. In return. Netscape's Netcenter and NetSearch.amazon. • Amazon.

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

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

with new products and value added content. This customer-centricity is a key hallmark of a successful Internet brand.2. but over time they become more and more associated with a particular thing and harder to stretch53". 6.. they have cultivated a reputation for excellence and fulfilment.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. 'Marketers of the Year: Jeff Bezos. October 12. Amazon's intense focus on customer needs and continual innovation. the drain on their cash resources will push them towards bankruptcy. Quality is only measurable in the minds of visitors to the site. however.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Amazon has continuously invested in customer service. Amazon is claiming to be making profits on its books and music categories. not necessarily a reality. and to sustain a positive image and satisfactory end-to-end experience. B. secure payment procedures. 53 Warner. stem from its compelling value proposition and high quality end-to-end customer experience. which is critical on the Internet. and investors lose confidence. speedy delivery and good value. In doing so. as the true value of a brand lies in its sustainability. have kept it ahead. 1998 70 . However. Amazon also recognised that service quality is a perception. perhaps trying to defend its view that losses taken to build market share can reap profits later. Volume Discounter' . Amazon has also benefited from a first-mover advantage giving it an edge over competitors. it has not recorded any profits to date. they're stretchable and pliant. This raises a critical issue. When they're young.Brandweek. The key factors driving its growth and high retention rates. Nevertheless. distribution centres and upgrading the site. if it continues to incur losses. Although Amazon has successfully built a strong brand and loyal customer base. Amazon delivers on its promises of a wide inventory of products.

Launches Affiliate Network December .Acquires minority stake in NotHarvard. Barnesandnoble.Acquires equity stake in Mightwords . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). However.com's timeline and major milestones is outlined in Figure 6.2.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July .Barnes & Noble went online at AOL May .Offers same day delivery in Manhatten .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.Launches BNTV .barnesandnoble.1 Company Overview Barnesandnoble. TABLE 6. Currently.com is the fourth largest e-commerce retailer54. Barnesandnoble. rare. and is the second largest online bookseller (after Amazon.com) .Announces distribution relationship with New York Times September .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March ..com and Microsoft announce that they will create an eBook superstore . Barnes & Noble Inc. and 20% owned by the public.Barnesandnoble.COM .com announces strategic relationship with Palm Computing .Launches Video Store 71 .2 1997 January BARNESANDNOBLE. is one of the best known traditional booksellers in the United States.3.com is approximately 40% owned by Barnes & Noble. 40% owned by Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. promotion) between the online store and the retail stores have been kept separate.Barnes & Noble. and 470 B.com was able to 'hit the ground running'.Launches Internet Radio . Besides books.COM 6. magazines. Dalton bookstores (located in shopping malls).com provides other online categories offering software.Barnesandnoble. etc.Barnes & Noble University opens registration for free online courses . Barnesandnoble. prints & posters and related products. Barnes & Noble Inc.) established by its parent company. music.com launched its website (www.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. book databases.TIMELINE AND MAJOR MILESTONES . Barnesandnoble.com). and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.3 CASE STUDY: BARNESANDNOBLE. as it could capitalise on the infrastructure and back-end operations (warehouses. contacts. Inc.com . Launched in 1997. all front-end operations (marketing.

software. edition.3 . author.3 Sources of Value .OVERVIEW OF BARNESANDNOBLE. music New Initiatives Barnesandnoble. FIGURE 6.3).barnesandnoble.3. as cited on Barnesandnoble.bn.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. including title. good prices. easy and secure ordering.com let customers sign up to receive email reviews and announcements of new titles. in terms of the 7Cs framework.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. etc.com's virtual storefront is graphically richer than Amazon. Both have expanded their convenience to offer 54 Media Metrix. logically structured. however. publisher. they offer customers fast delivery. Both Amazon.com offers customers an easy-to-search catalogue of virtually every book currently in print.com's and takes a bit longer to download. previously-owned and rare books. but instead of developing an outstanding interface to its inventory.2 Value Proposition Barnesandnoble. the features are practically identical.com's website (www.3. as well as an extended searchable catalogue of millions of out-of-print. Barnes & Noble planned to dominate online book-selling.com's (Figure 6.com) 72 .com and barnesandnoble. In addition. and easy-to-navigate site Categories focus on books. the company created a site very similar to Amazon.com or www.COM'S WEBSITE Simple. Both offer detailed bibliographic information. 6. rich editorial content and a community experience.

com closed 1999 with 4 million customers.com was valued at $21.com in return for a commission on any purchases that they originated . it lags behind first-mover Amazon. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. and Barnes & Noble Inc. reasons for this are explained in the next section.3. compared to Amazon.com's 1999 revenues were $202. Both offer customisation that permits users to personalise the experience. Both try to foster a community of readers by letting customers post reviews online. Lycos.64 billion.1 billion. has yet to leverage its strong brand in cyberspace. These initiatives have generated traffic to the site. Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.000 affiliates in its referral network. while Amazon. They have developed an affiliate programme that links sites to Barnesandnoble. this programme had more than 300.com's $1. while Amazon. Both offer 'associate programmes' that let other websites link to their sites. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). there is little mention of the online store in the traditional 'bricks-and-mortar' stores. December 17.com. Yahoo!. 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. prevent cannibalisation of its existing business. Although. Webcrawler. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . Barnesandnoble.a replica of Amazon's Associates Programme. However. Instead. however.6 million. Barnesandnoble. and both are expanding globally.com's market capitalisation was $251 million. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). The 6.com has created a high quality website and customer experience.The Wall Street Journal. As of February 2000.4 Brand-Building Strategy Barnesandnoble. Netscape and Microsoft Network.com had over 17 million. and avoid charging sales tax in states where it has stores56. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .

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

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

Boo. it means all that brand's product line is available. TABLE 6. arranged through J.com provided a range of 18 fashion and footwear brands including DKNY. Everlast.com opens its virtual doors' . it's about range and convenience.they redesign site. England.Announces it has only 500.000 unique visitors . Germany and Denmark. receiving $125 million of funding. Finland. 1999 76 . Italy and Spain within a few months. Puma.COM . founder and Chief Marketing Officer of Boo. 58 Kajsa Leander.com. November 2000 January February May 6.4 CASE STUDY: BOO.Appeals for $30 million more funding .fails and appoints KPMG as liquidator. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).com had set the record as Europe's best-funded European Internet Start-up. and was billed as one of Europe's hottest e-commerce ventures. as cited in 'Boo. due to its poor performance and inability to build a customer base. Morgan. Company is put up for sale.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".Raises funding of $125 million .com. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).1 Company Overview Founded in 1999. Boo.4. and the resulting loss of investors' confidence. and eventually debut in Asia. If a clothing brand is on the Boo site. Boo. among others. After a high profile launch.4. Sweden. CMO of Boo.com entered six markets: US.com collapsed through lack of funds. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Boo. and Converse.2 Value Proposition According to Kajsa Leander. However. On going live. sack 20% of staff and sell stock at 40% discount . "our marketing thrust is not based on prices. and included high profile investors such as Bernard Arnault. as well as create a kid's site.TIMELINE AND MAJOR MILESTONES .Site goes live . June 10.COM 6. P. within six months Boo. They intended to add France.Marketing Week.3 1999 Mid year BOO. not the limited range you might get at most London fashion shops58".Multi-million pound advertising campaign created by BMP DDB .First sign of problems .


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.


pp. D. It has a customer base of 4 million people. 'How to Acquire Customers on the Web' . This unprecedented degree of access to music and information is the core of CDnow's value proposition.ten times the selection of a conventional bricks-and-mortar music store).000 people.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. customisation and a wealth of information and content to help in the purchase decision. and they aim to "make every visit to the site.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . On 19th July 2000. cover art.000 music-related products and 650.179-188 63 CDnow website (www.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . and was the first site to offer the sale of music downloads and custom CDs. a valuable and rewarding experience"63.Harvard Business Review.Partnership program with Geffen Records . May-June 2000.Raises $10 million through private placement .5. and one of the most popular shopping sites on the Internet62. by twin brothers Jason and Matt Olim. CDnow provides access to over 500.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. CDnow is the leading online music store.cdnow. as well as music reviews. good prices.5. daily music news. former arch rival . guides to music genres. whether for browsing or buying. and an average daily audience of over 800.Merges with Columbia Records ..000 music related items .2 Value Proposition CDnow offers consumers a high degree of choice (over 500.com) 80 .Site goes live . TABLE 6.TIMELINE AND MAJOR MILESTONES .Forges distribution partnership with Yahoo! $65.5 million distribution deal with Lycos Signs three-year. $22. CDnow is also driving the digital distribution of music. 62 Hoffman. announce marketing alliance .CDnow and Time Inc. T. & Novak.1 Company Overview Founded in 1994.Merges with N2K.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Launches merged CDnow/N2K site . features. $18. CDnow was acquired by Bertelsmann AG.5 CASE STUDY: CDNOW 6. convenience. and exclusive interviews and reviews from CDnow's award-winning editorial staff.000 sound samples.

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

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

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

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

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

1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. eBay is not about auctions. transportation and other overhead costs. payment) between themselves.the closest thing in the offline world are trading forums such as classified ads. and eBay receives a transaction fee that ranges from 1. flea markets and auctions. (A)' . Auctions are an enabler.25% to 5% of the final sale price on any item sold.ebay. 1st October 1999 86 .removing the need for inventory.300 categories. global trading place for buying and selling personal items in an entertaining auction format. the eBay community has grown to include more than 10 million registered users. or the payment for the item . According to Meg Whitman. garage sales.com) 70 'Meg Whitman at eBay Inc. with emphasis being placed on its unique community feel and culture. shipping. The buyer and the seller work out the logistics of the transport (e. Individuals use eBay to buy and sell items in more than 4.6. with the number of unique daily visitors setting a record of 1. Auctions represent a platform. eBay effectively created a new business model never before possible . extensive selection and geographical reach.000 new items joining the "for sale" list every 24 hours69. Sellers pay a nominal fee for placing an item up for sale. and eBay never takes possession of the item being sold.g. "at its core. Since its launch in September 1995.Company Overview' . and 450.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 CASE STUDY: EBAY 6. as cited in 'eBay . 24 hour a day.eBay website (www. Auctions make it fun. People perceive the auction format to offer better prices.Company Overview' .782 million in January 200068. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. CEO of eBay. This is a new market . 6. collectable shows.ebay.A Harvard Business School Case Study.com) 'eBay .efficient one-to-one trading in an auction format. from collectibles and antiques to electronics and toys. and eBay provides added value through its convenience.6.eBay website (www.2 Value Proposition eBay offers consumers an efficient. There are over half a million new auctions.

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

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

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

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

As a result. and two books. The AOL partnership was one of the largest strategic partnerships on the Internet .4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. $75 million joint marketing alliance and development deal. they spent $12. eBay Magazine. but they have other partnerships with over 150 websites of varying scales. and facilitate the spread of positive wordof-mouth. as a result of the high quality experience it provides. The Official eBay Guide to Buying. eBay decided that it would not enter into major portal advertising deals in the short term. 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. Doll Collector) and appearance in trade shows.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. These new publications appeal to the collecting spirit. Recent promotional initiatives include its new publication. and highlight opportunities created by e-commerce.a four-year. Through this combination of its advertising efforts and targeted promotions. and maintained the same ratio for 1999. eBay has been able to attract a large customer base. In 1998.6.g. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. Early on. eBay has since expanded its promotion efforts and engaged in marketing partnerships. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). and Collecting Just About Anything and eBay for Dummies. Based on this. Mary Beth's Beanie World. the largest of which was with AOL. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Selling. representing about 40% of revenues. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins.3 million in advertising. eBay transformed from a pure online play into a 'clicks-and-mortar' company. who tended to be serious collectors. they decided to target their marketing efforts on these heavy users. 91 . and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. provide a wealth of information about the 'ins and outs' of trading on eBay.

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

and Gap online provides access to the full range of items at Gap. L. TABLE 6.gapinc. and provides useful insight into how traditional brands can leverage their strength online. head of Gap Online. as cited in Lee. surpasses $9 billion in net sales and increase earnings by 54% over previous year.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 73 74 Interbrand (www.com' . and BabyGap. Inc. In late 1997.800 stores in the US.babygap. up from $20 million in 199875. service and value to everyone74".com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. 6. however. online sales are only available to US customers. letting customers access the Gap brands.Business Week. from shirts to accessories and hard-to-find sizes. Gap online exploits the accessibility and convenience of the Internet. Gap started selling items online .7.Business Week. and are still relatively small compared to Gap's $9 billion in annual sales. UK.com) .COM 6.com and www. America Online (AOL) and Gap Inc. Germany and Japan. The Gap offers a balance of modern and seasonal styles of clothing. October 8. as cited in Lee. California GapKids opens its first store BabyGap is born Gap opens its online store at www.2 Value Proposition Gap's simple. to provide customers with greater convenience and options. "this is about being clicks-and-mortar. Currently.see Appendix A Gap.COM . standard styles are well suited to online shopping.'s website (www.htm) 75 Jeanne Jackson.7.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.interbrand.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. GapKids.com is an example of successful crossover marketing. In addition. 1999 76 Jeanne Jackson. announce multi-year partnership.1 Company Overview Gap opened its first store in San Francisco in 1969. from jeans and T-shirts to khakis and jackets.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com/about_us. 'Clicks and Mortar at Gap. This success is largely due to their simple formula . whether in the store or online76". Its reach extends across more than 1. Gap Inc. October 8.7 CASE STUDY: GAP. and analysts estimate that sales in 1999 amounted to $50 . Gap's online sales tripled in 1998 alone."to deliver style. L.com.gapkids. 'Clicks and Mortar at Gap. Gap. Canada.gap.$100 million. the growth prospects are enormous. 1999 93 .com' . and today it is the 29th most valuable brand in the world73. According to Jeanne Jackson.

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

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

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

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

As such.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. The concept exploded (through word-of-mouth) and in less than six months. advertising. the amount of information. Yahoo! is a leading guide in terms of traffic.com) .8.2 Value Proposition At the core of Yahoo!'s value proposition. September 7.Business Week. 78 79 Interbrand (www.The Company. all in a single location. As the first online navigational guide to the web. The Stock' . The company's global web network includes 23 world properties outside the US. Yahoo! has since morphed from an ordinary search service into a global Internet communications.8.D students at Stanford University. and the number of websites continues to explode.com) 98 . CEO of Yahoo!. The Strategy. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. 1998 (www. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. According to Timothy Koogle. two Ph. 6.interbrand.8 CASE STUDY: YAHOO! 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview In April 1994. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! was founded by David Filo and Jerry Yang. household and business user reach.businessweek.see Appendix A 'Yahoo! . and is one of the few Internet companies to turn a profit early in the development of the Internet. who started an online guide as a way to keep track of their personal interests on the Internet. There's nothing in the real world to compare to that79". lies the directory . the site was receiving 1 million hits per day. Yahoo! offers a range of supporting services that add value. from e-mail services to stock quotes and much more.

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.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. to provide web-based services to PalmTM handheld computers .7 YAHOO! .3 Sources of Value .Yahoo! Launches Business-to-Business Marketplace . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.com allowing them to offer person-person payment solutions .Yahoo! Shopping launches personalised shopping service 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.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 .e. and unveils Yahoo! Digital Introduces Bill Payment services . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! acquires eGroups .8). Their goal is not to list everything under the sun.Yahoo! forms agreements with Palm Inc.Yahoo! acquires Arthas. to allow access. TVs. regardless of platform (i.Site goes live September .8 million IPO (2.600. is the way it has structured and displayed information. More recently.The 7Cs Framework Convenience Central to Yahoo!'s success. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! unveils Yahoo! Finance Vision .Receives $1 million in venture capital funding from Sequoia Capital $33. mobiles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.000 shares at $13. 99 .. Palm computers).TIMELINE AND MAJOR MILESTONES 1994 April . .com.

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

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

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

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

As the first online navigational guide to the web. May 3. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . that have set it apart from the pack. their innovative promotional and guerrilla marketing techniques. 6. p. In addition. VPBrand Marketing of Yahoo!. In addition. its excellent customer service. while attracting new customers. Yahoo! has benefited from a first-mover advantage. GoTo. while also associating Yahoo! with well known brands. Yahoo! has invested relentlessly in new services and marketing programmes. with a large customer base and high levels of customer loyalty.com.8.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. These relationships have provided end-users with added-value. Yahoo! points them to its competitors by including links to AltaVista. Yahoo! has built a strong brand. 1999. They have maintained that lead through the creation of a high quality end-to-end customer experience. and first to go mainstream by advertising its name using traditional media. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. and other search engines at the bottom of its search results page). To maintain its lead.Advertising Age.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and has cultivated a reputation for excellence. its choice of partners. first to go public. As a result of all these factors. to its simple design. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. from its convenient and logical structure and display of information. have created a distinct brand identity that differentiates the brand and appeals to its target market. s4 104 . Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". first to turn around an annual profit. they have carried out extensive partnering.6 Conclusion Yahoo! is one of the most successful brands on the Internet. alliances and acquisitions to provide added value services to their customers. HotBot. and its openness (for example. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. if a user cannot find what it is searching for.8.








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

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

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

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


781 33.595 17.830 14.132 15.197 32.048 20.193 112 .262 1.155 7.596 3.806 11.603 5.143 2.681 2.634 1.845 56.181 21.052 6.766 14.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .313 2.076 3.804 2.654 43.275 30.361 1.894 14.985 2.909 7.550 12.423 2.225 11.648 1.932 4.231 12.043 8.761 1.281 11.792 3.147 9.319 1.Interbrand's Ranking of the Top 60 Brands (www.329 4.643 3.184 1.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.602 4.283 4.404 4.422 1.231 24.310 11.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) 83.101 9.021 26.510 8.464 3.694 17.568 3.interbrand.895 2.781 17.502 33.806 2.527 3.

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





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