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


8.5 Conclusion Case Study: Gap.4.4 Brand-Building Strategy 6.4 6.7.The 7Cs Framework 6.4 Brand-Building Strategy .6 6.5.3 Sources of Value .6 Conclusion Case Study: eBay 6.1 Company Overview 6.5 6.7 6.6.2 Value Proposition Sources of Value .8.8 Case Study: Boo.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .7.1 Company Overview 6.The 7Cs Framework 6.5 Conclusion Case Study: Yahoo! Company Overview 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework 6.5 Other Factors that Contribute to their Brand Leadership 6.com Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.The Failure of Boo.1 7.2 Value Proposition 6.7.4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.4 Brand-Building Strategy 6.6.4 Brand-Building Strategy Sources of Value .com 6.3 Sources of Value .com 6.The 7Cs Framework 6.5.Extensive Integration 6.6.2 Value Proposition 6.7.2 Value Proposition 6.5 Conclusion Case Study: CDnow 6.3 Sources of Value .2 Value Proposition Other Factors That Contribute to their Brand Leadership 6.1 Company Overview 6.

4 Figure 2.3 Figure 2.5 Figure 2.6 Figure 2.6 Figure 4.1 Figure 2.5 Figure 4.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .6 Figure 5.1 Figure 3.7 Figure 5.4 Figure 4.4 Figure 5.com's Website Overview of Boo.com's Associates Programme Overview of BarnesandNoble.5 Figure 6.4 Figure 6.3 Figure 4.2 Figure 5.3 Figure 5.2 Figure 3.2 Figure 2.4 Figure 4.1 Figure 1.8 Figure 6.com's Website Amazon.7 Figure 6.3 Figure 3.2 Figure 4.3 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 .8 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.7 Figure 5.2 Figure 2.1 Figure 4.7 Figure 2.6 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.2 Figure 6.1 Figure 6.9 Figure 6.5 Figure 5.1 Figure 5.8 Figure 3.

Timeline and Major Milestones Gap.6 Table 6.1 Table 6.7 The Emerging Brand-Building Environment Amazon.1 Table 6.4 Table 6.Timeline and Major Milestones eBay .com .Timeline and Major Milestones Yahoo! .2 Table 6.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .5 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.3 Table 6.com .Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones CDnow .Timeline and Major Milestones Boo.


the Internet is changing fundamentals about customers.9 2.1 3.g. In the midst of this. America Online (AOL) and eBay have been able to build powerful brands in a few years.1 OVERVIEW Over the past few years.mckinseyquarterly.9 3.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. creating strong brands that are putting established brands at risk. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com Source: Securities and Exchange Commission Filings. Internet companies such as Yahoo!.com1 Amazon. The Internet also represents a fundamental shift in how buyers and sellers interact. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. McKinsey Analysis (www.YEARS TO REACH $100 MILLION IN SALES 6 5.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. Figure 1. It is empowering customers with more options and more information to make informed decisions.0 1. aggressive Internet start-ups have emerged. service and brands. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. FIGURE 1. Supply chains are being rethought. customer affiliation and level of sales. As such. whereas it has taken decades for traditional companies to achieve the client base. Amazon.1 .com) 7 .2 3.an explosion that is also a harbinger of how business will operate in the future.com's range of 4. while providing new tools for promotion.com noble. that these Internet start-ups have achieved. and is triggering the need for new brand-building strategies and tools. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.com. there has been an explosion in the online world . relationships. and business models revamped. interaction and relationship building.5 million book titles).com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. products and services reconfigured.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. This is creating new challenges and opportunities. as they face each other through an electronic connection. Amazon.5 2.

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

and to identify new sources of value. tools and strategies to build brands on the Internet. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. FIGURE 1.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . 1. supported by secondary data related to aspects of online business from accredited and published sources.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. This is based on the outcome of the primary research (in-depth case studies). • To identify the key factors and characteristics that contribute to the development of successful Internet brands.2 .2.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. • To explore how the Internet is changing the brand-building environment. A review and analysis of leading academic thinking will be used to explore these issues.

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

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


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

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

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

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

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

6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Marketing Management. Federal Express.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. FIGURE 2..customers who are satisfied and loyal and talk favourably about the brand . At the opposite end of the satisfaction spectrum are "apostles" . T.those who actively attack the brand telling others not to buy from the company. 6 7 Jones. The customers at the bottom end of the scale are "terrorists" . and Johnson. W.5. Customers that are passionately or emotionally loyal are those that have built trust in a company. Johnson & Johnson. T. & Sasser. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Southwest Airlines and Xerox7.. 'Growing the Trust Relationship'. Hewlett-Packard. Nov-Dec 1995 Hart. Spring 1999 18 . E. Trust is critical for a brand's success. 'Why Satisfied Customers Defect' .. E..Figure 2. 'Why Satisfied Customers Defect' . D.. Nov-Dec 1995.Harvard Business Review. 91 Loyalty is derived when customers are continuously satisfied over time.Harvard Business Review. and believe that it will always act in their best interest. & Sasser. M. Saturn. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. This satisfaction encompasses the whole experience and not just a company's products or services. p. C.

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

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. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. there are brands that customers perceive as acceptable and would not resist buying. there are brands that are unknown by most buyers. which goes well beyond the satisfaction of a specific need.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. Journal of Consumer Research. 343-373.7 . 2. March 1998..7).6 . a 'powerbrand' tends to have a high degree of brand loyalty. However. FIGURE 2. Beyond this. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. A stronger brand enjoys a high degree of brand preference over competing brands. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). S. and understanding the needs and buying processes of the target market is essential. whereby customers would be unwilling to substitute it with competitors' offers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. FIGURE 2. 20 . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.

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

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

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


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

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

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

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

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

'Diffusion of Innovations'.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Before potential customers can buy a product / service.4 . pp. 'Diffusion of Innovations'. and its products / services. (New York: Free Press). Promotion and Place (distribution strategy).The company has to create awareness of the brand.often referred to as the '4Ps' . If the offering is developed properly.Figure 3.The customer is satisfied and decides to make regular use of the product / service.. Advertising and PR are common tools for achieving awareness.Customers consider whether the product / service will meet their particular needs. • Evaluation . • Interest . The value proposition must then be articulated in terms of the 'marketing mix' .Customers need to be stimulated to seek information about the brand's uses. pp. E. FIGURE 3.The McKinsey 7-S Framework).INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. colleagues and opinion leaders become important influences at this stage. they must learn about it.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 1962. it should lead to satisfaction and re-purchase. features and advantages.Product and service features. strategy (partnerships and alliances).4.79-86 30 . 17 Rogers. • Adoption .79-86 The Innovation-Adoption Model consists of: • Awareness . culture and staff needed to support. (New York: Free Press). systems. • Trial . management style. deliver and reinforce this value proposition (see Appendix B . Personal sources such as word-of-mouth from friends.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. The value proposition must be communicated to entice customers to try the product / service. skills. E. and the product / service's perceived performance. 1962. Price.. the company must ensure that it develops the appropriate structure. This learning is called the adoption process17 .

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

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


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

the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). 7 days a week.24 hours a day. These qualities eliminate the barriers of time and space that exist in the physical world. • It Overcomes the Barriers of Time and Space .2. when the United States Defence Department developed the 'ARPAnet'. The context of the Internet and certain key developments are highlighted in the Figure 4. regardless of where the computer or Internet access device is physically located. The Internet can also be accessed at any time . the Internet lets individuals and companies build interactive relationships with customers and suppliers. • It Allows for Two-way Communication and Interactivity . ubiquitous links to anyone.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.not previously available with mass medium forms of communication. and deliver new products and services at low cost.this radically alters the process of interaction between communicating parties.The Internet is a global network and can be reached from everywhere. Graph is not drawn to scale).3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. anywhere. 4.2 (Note: 35 . These characteristics combine to create a very powerful medium. By allowing for direct.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 . which was intended to link military networks together. allowing both parties to identify each other and build one-to-one relationships . These defining characteristics have fuelled its explosive growth.

com) 36 . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 1.a PricewaterhouseCoopers Report. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000. 1996 (www. as cited in 'E-Business Technology Forecast' .000 1969: 10. FIGURE 4.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.economist.000 10. 1998.000.3.000 1.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 100.Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. 2000 Internet / ARPAnet was created Dell.3 .000.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.2 .

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

FIGURE 4.com) 38 . entertainment) and purchasing (37%) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). communication and information tool.5.Figure 4. These activities highlight the adoption of the Internet as an interactive.eiu.g. as cited in the Economist Intelligence Unit (EIU).from communicating (90% use e-mail) and sourcing information. April 13.5 . to interacting (e. reveals the wide range of areas where people are embracing the Internet . 2000 (www. chat rooms.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.

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

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

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

companies can provide customers with a strong value proposition by offering them the best in quality. The extent of this partnering is illustrated in Figure 4.7.com) 42 . thus creating a 'value net23'. Traditionally. and partnering up with the best for the remaining activities. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. when they want. Increasingly. 23 'The Future of E-Business' . The opportunity of linking the complete supply chain 'virtually'. However. and multiple strategic alliances and partnerships. most Internet and e-commerce partnerships extend beyond this. and the need for speed and flexibility have accelerated the unbundling of business systems. linking companies with suppliers and customers up and down a pre-defined value chain. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. 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. which highlights the typical structure and dynamics of an online company. variety. 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. supply chain cooperation.A Research Report by TeslaGroup. information. how they want and with the levels of customer service they demand. companies have looked upon alliances only as a means of filling gaps.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. Examples of emerging information age business structures include flat versus hierarchical. As such.teslagroup. 1999 . alliances and partnerships have taken on a new level of strategic importance. achieve global reach and realise a new source of cost advantage. In this way. It allows companies to improve customer service. it provides the opportunity to reach customers where they want. linking companies with competitors and players from entirely different industries and business sectors. and most traditional partnerships were vertical. advice and convenience. combined with intense competitive pressures.(www.

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


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

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

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

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

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

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

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

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

online companies have the opportunity to provide rich. which can enhance the company's value proposition. 38 39 Cognitiative Inc. With almost infinite display space and inventory capability. and a wide range of products.businessweek.4 . ease-of-use. ease-of-navigation. expert insights. February 2000 Issue 53 . T..businessweek.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.com) Davenport. CIO Magazine. FIGURE 5. 29th October 1999 (www. as cited in Business Week Magazine. whereas a slow response time and site downtime will have a significant negative impact. up-to-date information.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. 1999 (www. October 29.4. 'Sticky Business'. as cited in Business Week. and fast response times are among the most important factors in establishing web brand loyalty38.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.

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

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

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

A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. & Zeisser. Learn and Relate. 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 ’ . The popularity and effectiveness of the different promotion methods are outlined in Figure 5..7 . R. Evaluation. The mechanisms to communicate range from traditional media (TV. Adoption).7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. etc. FIGURE 5. pp. Figure 3. modified to take into account of the interactive dynamics of the Internet. M. McKinsey Quarterly. Waitman. No. links from directory searches (Connectivity). The company must build awareness and communicate its value proposition to its target customers.7.8.. This model consists of five stages . visibility relies solely on Communication. Retain.Awareness. because there is no physical presence.2. e-mail notifications and banner advertisements. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3... This is more difficult online than offline. including affiliate programmes with other websites. 180-183 (www. McQuade. S. Engage. 1996. Therefore. 'Marketing to the Digital Consumer'.) to online tools. and bring people to the site for the first time. Trial.4 .mckinseyquarterly.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.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Magazines.Attract. Interest. billboards. Newspapers.

Fig.5) 2.5 3.2 4.Economist Intelligence Unit 2000 (www.3 2.ebusinessforum. 3. as cited in 'Targeting Consumers via the Internet' . Creativity is also an important factor in gaining attention in today's cluttered marketplace.3 3. Companies then need to engage customers to obtain their interest and participation.3) is useful to ensure that a company develops a distinct and consistent brand identity.4 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. Attracting customers is only the first step in building online brands. affiliate programmes.1 3.com) The most effective methods are direct e-mail. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. it is important to quickly engage consumers' interest before they move on. Engage With the multitude of choice available on the Internet. multiplied by the expected rate of transactions. 58 . public relations and television advertising. The key factors at this stage are Convenience combined with interesting Content.4 3.6 3.8 4. Kapferer's Brand Prism (Ch.7 4. discounted over the expected duration of the brand-customer relationship.3 Source: Forrester Research.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 .WEBSITE PROMOTION METHODS .0 3.4 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.8 .

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

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


Through its provision of a one-stop shopping experience. Germany and Japan49.com) 62 .Goldman Sachs Report. 'Amazon.1 outlines Amazon's timeline and major milestones. Each case is presented in the same format including. 1999 49 'Amazon's Amazing Ambition' .economist. France. and is one of the few Internet brands that is recognised all over the world.com.com. Amazon has cultivated a reputation for excellence. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products.2 Value Proposition Amazon. the sources of added value (using the 7Cs Framework).com) . and has sales of over $2 billion. Amazon. In addition. Amazon has been able to differentiate itself from other online competitors. its value proposition.interbrand. Gap.com launched with a mission to use the Internet to transform book buying into a fast.COM 6. more information. The cases are presented in the following sequence . and the most widely recognised e-commerce brand name in the US (with 60% awareness48). it is the most visited e-commerce website in America.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. greater convenience. November 11. February 26. Not a River' . Barnesandnoble. Amazon. and has equity investments in several e-tailers.com's success stems from its compelling value proposition.com and Yahoo!. and one of the top two or three in Britain. including: increased selection. its brand-building strategy (how it generates traffic). and enjoyable experience. and other key factors that have contributed to its success (or failure).com.com has become synonymous with e-commerce. 2000 (www.1 INTRODUCTION This chapter provides an analysis of seven companies.1 Company Overview Amazon.2.2. combined with its levels of customisation and customer service.2 CASE STUDY: AMAZON.The Economist. innovation and delivering on its promises. and higher levels of customisation and service than the traditional shopping experience allows. a company overview. 6. Amazon provides increased added value on several dimensions. discounted prices. In July 1995.Amazon. Amazon serves over 23 million customers from 160 countries. Boo. It is the 57th most valuable brand in the world47. 6. In addition.see Appendix A. easy.It's an Ocean. eBay. 47 48 Interbrand (www. CDnow.com . Figure 6.

universities.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.Amazon launches new kitchen store .Amazon launches lawn & patio store .com Amazon introduces "Purchase CirclesTM".000 members Amazon." providing shopping from wireless devices.com 63 .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. such as the Palm VII organiser.Amazon announces investment in kozmo. and minority investment in.TIMELINE AND MAJOR MILESTONES Amazon.com to create a "home living" store at amazon.com Anywhere.Amazon opens a customer service centre in Huntington. West Virginia.New home living store from living.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com .Amazon launches www.amazon.com Announce Strategic Investment and Promotional Agreement . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.amazon.toolcrib.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon.Amazon surpasses 20 million cumulative customer accounts .com . Software. to meet rapid growth .com announce investment and strategic alliance .Amazon opens customer service centre in The Hague . a tools and equipment store for professional tool users and woodworkers .com opens its virtual doors at amazon.com enters European book market Microsoft signs Amazon. and more Amazon launches "Amazon.Amazon launches health and beauty store .com Amazon announces further plans to expand distribution network to meet rapid growth.com. Video Games and Gift Ideas Amazon and Sotheby's launch www.sothebys.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Amazon enters strategic alliance with living.com via the new wireless pocket PC .Amazon and online car-buying service Greenlight.Amazon.com Amazon invests in Pets.Customers can shop at Amazon. Amazon.com . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon enters into a strategic partnership with Drugstore.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com invests in wineshopper.com Electronics and Amazon.com Amazon acquires Back to Basics Toys to add to Amazon.COM .com and NextCard launch co-branded credit card . provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com is founded by Jeff Bezos Amazon. 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. Ashford.com. workplaces.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon.com Auctions and zShops provide new tools to its merchant community .com . featuring thousands of bestseller lists for hometowns.Amazon and eziba.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.

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

Amazon introduced Amazon. creates a competitive advantage. Community Amazon has also added a community element to the purchasing process. and customer interaction. Amazon creates one-to-one relationships with its customers. In doing so.thereby increasing conversion rates. which helps to build loyalty and create switching costs. By leveraging its vast customer base. from its shopping basket applications which lists the estimated time to delivery reliably.4.2. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. linking it to a large number of other sites.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. while driving up repeat purchases and cross-selling opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers . More recently. 65 .com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. and has developed an Associates Programme. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. and Customisation Amazon provides customised features and services. This customer-centricity is evident in all Amazon's activities. therefore. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. real-time shipping and backorder notices. from the customer recognition at the point of interface (Figure 6. to the proactive notification of new items of interest. These are discussed in more detail in Section 6. Connectivity Amazon has built relationships with high traffic web portals and sites. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. Amazon's content is not reproducible by competition. converting them into a storefront for Amazon.

enticing them to return to the site and purchase repeatedly. Newsweek. attracting member sites of all sizes.a move that along with the novelty of its business model and the newness of the Internet. The Financial Times. increasing to over 500. 66 .2). Eyes and Editors. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. it began to advertise in print media and online .4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. In addition. 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. This enabled Amazon to reach more customer segments and niches (Figure 6. In the second half of 1996. New Yorker and The Economist. 6.2.com hot-link and offer specific books of interest to their visitors. Instead of paying directly for this exposure. they are subsequently confirmed by e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.000 by August 2000. which only applied to sales that resulted from the initial click-through. and customers are also e-mailed when the items are shipped from the warehouse. The Associates Programme has been phenomenally successful. Through the first half of 1996. Amazon offered Associates referral fees of up to 15%. and not subsequent purchases.000 members. In July 1996. Business Week. helped generate publicity and stories about the company in publications such as The Wall Street Journal. and by 1999 it had over 200. Once orders are placed. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. help maintain contact and build traffic by e-mailing customers when desired products or books become available. As a result of all these factors (7Cs). two personalised services.

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

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

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

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

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

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

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

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

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

com.Announces it has only 500.com collapsed through lack of funds.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 1999 Mid year BOO.COM .com.000 unique visitors .Site goes live . due to its poor performance and inability to build a customer base. it's about range and convenience.Multi-million pound advertising campaign created by BMP DDB . England. "our marketing thrust is not based on prices. sack 20% of staff and sell stock at 40% discount .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".2 Value Proposition According to Kajsa Leander. it means all that brand's product line is available.they redesign site.4. as cited in 'Boo. and included high profile investors such as Bernard Arnault.TIMELINE AND MAJOR MILESTONES .com provided a range of 18 fashion and footwear brands including DKNY. Boo. Company is put up for sale. and was billed as one of Europe's hottest e-commerce ventures.Appeals for $30 million more funding . as well as create a kid's site. Boo. and the resulting loss of investors' confidence. arranged through J. P.com entered six markets: US. Boo.4. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). within six months Boo. Italy and Spain within a few months. November 2000 January February May 6. Germany and Denmark. Puma. CMO of Boo.com opens its virtual doors' . June 10. Everlast.Marketing Week. 58 Kajsa Leander.4 CASE STUDY: BOO.COM 6. not the limited range you might get at most London fashion shops58". Finland. and eventually debut in Asia.Raises funding of $125 million . They intended to add France.First sign of problems . If a clothing brand is on the Boo site. and Converse. TABLE 6. On going live. founder and Chief Marketing Officer of Boo. After a high profile launch. among others. Boo.com had set the record as Europe's best-funded European Internet Start-up.fails and appoints KPMG as liquidator. receiving $125 million of funding. Morgan. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). 1999 76 .1 Company Overview Founded in 1999. 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. However. Sweden.


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.


4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . $22.000 people.179-188 63 CDnow website (www. May-June 2000.1 Company Overview Founded in 1994. guides to music genres. and an average daily audience of over 800. It has a customer base of 4 million people.5 CASE STUDY: CDNOW 6.000 music-related products and 650. as well as music reviews. CDnow provides access to over 500. by twin brothers Jason and Matt Olim. and they aim to "make every visit to the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. pp.cdnow.5 million distribution deal with Lycos Signs three-year.Launches merged CDnow/N2K site . convenience.Raises $10 million through private placement .Merges with Columbia Records . announce marketing alliance .Harvard Business Review.com) 80 . CDnow is also driving the digital distribution of music. features. and was the first site to offer the sale of music downloads and custom CDs.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.000 music related items .CDnow and Time Inc.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . T.Site goes live . CDnow was acquired by Bertelsmann AG. & Novak. CDnow is the leading online music store.Forges distribution partnership with Yahoo! $65. $18. 62 Hoffman. This unprecedented degree of access to music and information is the core of CDnow's value proposition. former arch rival .Partnership program with Geffen Records . good prices. whether for browsing or buying. 'How to Acquire Customers on the Web' .5. and one of the most popular shopping sites on the Internet62.TIMELINE AND MAJOR MILESTONES .. cover art. TABLE 6. On 19th July 2000. daily music news. a valuable and rewarding experience"63.ten times the selection of a conventional bricks-and-mortar music store). and exclusive interviews and reviews from CDnow's award-winning editorial staff.5.000 sound samples. D.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. customisation and a wealth of information and content to help in the purchase decision.Merges with N2K.

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

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

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

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

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

(A)' . and eBay never takes possession of the item being sold.com) 70 'Meg Whitman at eBay Inc.g. and eBay provides added value through its convenience. transportation and other overhead costs.efficient one-to-one trading in an auction format. According to Meg Whitman.eBay website (www. garage sales. Auctions represent a platform. and eBay receives a transaction fee that ranges from 1. Auctions make it fun. Since its launch in September 1995. Individuals use eBay to buy and sell items in more than 4. 6. shipping. and 450. collectable shows. flea markets and auctions.782 million in January 200068.2 Value Proposition eBay offers consumers an efficient. the eBay community has grown to include more than 10 million registered users.ebay.eBay website (www. This is a new market .removing the need for inventory. eBay is not about auctions. payment) between themselves. with emphasis being placed on its unique community feel and culture.6. 24 hour a day. extensive selection and geographical reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6. There are over half a million new auctions.Company Overview' . from collectibles and antiques to electronics and toys.ebay. "at its core.25% to 5% of the final sale price on any item sold. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.6 CASE STUDY: EBAY 6. Auctions are an enabler.Company Overview' . The buyer and the seller work out the logistics of the transport (e. or the payment for the item .300 categories. as cited in 'eBay .000 new items joining the "for sale" list every 24 hours69.com) 'eBay . 1st October 1999 86 . global trading place for buying and selling personal items in an entertaining auction format.the closest thing in the offline world are trading forums such as classified ads. Sellers pay a nominal fee for placing an item up for sale. eBay effectively created a new business model never before possible . with the number of unique daily visitors setting a record of 1.A Harvard Business School Case Study.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. CEO of eBay. People perceive the auction format to offer better prices.

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

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

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

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

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

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

Gap. Gap Inc.7 CASE STUDY: GAP. surpasses $9 billion in net sales and increase earnings by 54% over previous year. The Gap offers a balance of modern and seasonal styles of clothing.gapinc. California GapKids opens its first store BabyGap is born Gap opens its online store at www. service and value to everyone74".an early convert to the then-revolutionary idea of clothes retailing on the Internet. UK. to provide customers with greater convenience and options.com. Its reach extends across more than 1.gapkids.com' . the growth prospects are enormous. Germany and Japan.htm) 75 Jeanne Jackson. up from $20 million in 199875. however.COM .com' .com and www. 6. online sales are only available to US customers.Business Week. and today it is the 29th most valuable brand in the world73. and analysts estimate that sales in 1999 amounted to $50 . 'Clicks and Mortar at Gap. "this is about being clicks-and-mortar. 'Clicks and Mortar at Gap. Gap's online sales tripled in 1998 alone. and BabyGap. as cited in Lee.babygap. and Gap online provides access to the full range of items at Gap.gap. and provides useful insight into how traditional brands can leverage their strength online.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. According to Jeanne Jackson. head of Gap Online."to deliver style. and are still relatively small compared to Gap's $9 billion in annual sales.com/about_us. Canada.COM 6. TABLE 6. America Online (AOL) and Gap Inc.com is an example of successful crossover marketing. October 8.1 Company Overview Gap opened its first store in San Francisco in 1969. This success is largely due to their simple formula . Inc. from jeans and T-shirts to khakis and jackets. L. as cited in Lee. Gap started selling items online . Gap online exploits the accessibility and convenience of the Internet. In addition. letting customers access the Gap brands.interbrand.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.'s website (www. Currently.2 Value Proposition Gap's simple. October 8. standard styles are well suited to online shopping. In late 1997. whether in the store or online76".7. GapKids.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. L.$100 million.Business Week. 1999 76 Jeanne Jackson. 1999 93 .800 stores in the US. announce multi-year partnership.see Appendix A Gap. 73 74 Interbrand (www.7.com) . from shirts to accessories and hard-to-find sizes.

easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. 'Mind the Gap'.. but provides customers with the option of viewing text-only.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and easy-to-use. The site also offers sharp graphics. and Customer Care.making visual references to its offline roots.7.3 Sources of Value . The Observer.. Simple.The 7Cs Framework In terms of the 7Cs framework. Unlike Barnesandnoble. Content. 1998 94 . making it convenient. from the blue and white colour scheme to the easy-toshop format .com store one immediately notices the consistency between the online and retail stores.. D. Michael McCadden. the extensive integration of Gap's online and offline activities are clearly evident. This personality is reinforced online through the simple structure and layout.com. Executive Vice President of Global Marketing. making navigation even faster. April 18. reinforcing its brand identity.7 .. describes the company's brand personality as "direct and straightforward.. feel and design of the site is consistent with the bricks-and-mortar stores. Gap Online primarily focuses on Convenience. FIGURE 6... very efficient"77.. Visiting the gap.very easy.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.

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

) that also promote the online store. In certain high traffic Gap and GapKids stores. however.Extensive Integration Gap.com in return for a 5% commission on every sale referred through the site. • Gap. they send the customer a $20 Gap ShopCard.gap.com has links with CDnow to cross promote websites. by offering a 10% discount and free shipping on their first online purchase.com" on the display screens between transactions. etc. 96 . Magazines. Gap has held in-store campaigns to get customers to submit their e-mail addresses. 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.4 Brand-Building Strategy . or to refer shoppers to Gap's website. by displaying the URL (www. In addition. on counter cards. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. providing a useful way to directly reach customers. on shopping bags and even on the cash register. which displays "Shop online at www.com) in store windows with the slogan "surf. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.7. whereby for every $100 a customer spends at Gap Online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com has also created an affiliate programme encouraging sites to establish links to gap. Gap has also supplemented this with online promotions: • In August 1999.shop. • They offer Online discounts and promotions such as the ShopCard. which can be used towards future purchases.com has been able to piggy-back on The Gap's offline advertisements (in TV. To convert walk-in shoppers to cybershoppers. Gap secured a 3-year commerce and marketing agreement with AOL. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap.ship". either online or in stores.com. billboards. it is fully leveraging its offline presence to build awareness.gap. • Gap. These efforts doubled the size of Gap's e-mail database.

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

businessweek.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Business Week.interbrand. As such. two Ph. advertising. and is one of the few Internet companies to turn a profit early in the development of the Internet. The Strategy. According to Timothy Koogle. 1998 (www.The Company. The company's global web network includes 23 world properties outside the US. Yahoo! offers a range of supporting services that add value. 6. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. The Stock' .8.8 CASE STUDY: YAHOO! 6. 78 79 Interbrand (www. Yahoo! is a leading guide in terms of traffic. There's nothing in the real world to compare to that79".8. who started an online guide as a way to keep track of their personal interests on the Internet.com) . lies the directory . commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. the amount of information. CEO of Yahoo!. and the number of websites continues to explode. the site was receiving 1 million hits per day. Yahoo! has since morphed from an ordinary search service into a global Internet communications.D students at Stanford University. all in a single location. September 7. Yahoo! was founded by David Filo and Jerry Yang. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. The concept exploded (through word-of-mouth) and in less than six months.com) 98 .see Appendix A 'Yahoo! . As the first online navigational guide to the web.2 Value Proposition At the core of Yahoo!'s value proposition.1 Company Overview In April 1994. from e-mail services to stock quotes and much more.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. household and business user reach.

TVs.e.com.Site goes live September . .Yahoo! unveils Yahoo! Finance Vision . regardless of platform (i. mobiles. Their goal is not to list everything under the sun. 99 .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.8.Yahoo! acquires Arthas.000 shares at $13..Yahoo! Launches Business-to-Business Marketplace .Yahoo! acquires eGroups . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.The 7Cs Framework Convenience Central to Yahoo!'s success.Yahoo! forms agreements with Palm Inc.TIMELINE AND MAJOR MILESTONES 1994 April .3 Sources of Value .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.600. Yahoo! extended its convenience through its Yahoo! Everywhere service. More recently. to allow access.8). Palm computers). is the way it has structured and displayed information. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. 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.7 YAHOO! .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 . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.8 million IPO (2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Receives $1 million in venture capital funding from Sequoia Capital $33.Yahoo! Shopping launches personalised shopping service 6.com allowing them to offer person-person payment solutions . and unveils Yahoo! Digital Introduces Bill Payment services . to provide web-based services to PalmTM handheld computers .

the end-user. and is similar to a custom tailored newspaper (Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9). By tailoring the information to users' preferences. easy-touse. from stocks and sports results to weather and air fares. Their thrust has been to provide valuable content to customers. 100 .8 . ranging from daily news and weather reports to road maps and books.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. They have formed multiple alliances and partnerships with leading online companies such as Amazon. Yahoo! has increased customer loyalty and retention rates. This creates a win-win situation as its satisfies Yahoo!. and more importantly.com and CDnow. 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. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. and has been at the heart of Yahoo!'s growth and development. well structured. the partner. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. while providing partners access to a large customer base.

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

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

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

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








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

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

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

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


147 9.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) 83.231 24.550 12.909 7.527 3.422 1.101 9.634 1.132 15.048 20.985 2.275 30.193 112 .502 33.781 17.510 8.184 1.603 5.197 32.319 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.845 56.313 2.Interbrand's Ranking of the Top 60 Brands (www.143 2.052 6.231 12.423 2.329 4.281 11.181 21.694 17.648 1.021 26.806 11.interbrand.310 11.464 3.076 3.643 3.895 2.404 4.283 4.225 11.602 4.262 1.766 14.761 1.830 14.804 2.361 1.792 3.595 17.932 4.654 43.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .043 8.894 14.568 3.806 2.781 33.155 7.596 3.681 2.

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





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