1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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

2 Other Factors That Contribute to their Brand Leadership 6.6.1 Company Overview 7.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 Company Overview 6.2 Value Proposition Brand-Building Strategy 6.Extensive Integration Brand-Building Strategy 6.1 Company Overview 6.com 6.5 Conclusion Case Study: Gap.5 Other Factors that Contribute to their Brand Leadership 6.5.5 Conclusion Case Study: CDnow 6.2 Value Proposition 6.8.1 Company Overview 6.com 6.The 7Cs Framework 6.5.3 Sources of Value .5 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 7.8 Case Study: Boo.2 Value Proposition 6.The 7Cs Framework 6.The Failure of Boo.com 6.6.4 Brand-Building Strategy 6.1 Company Overview 6.3 Sources of Value .4 6.8.3 Sources of Value .4.3 Sources of Value .6 Conclusion Case Study: eBay 6.The 7Cs Framework 6.3 Sources of Value .7.4.2 Value Proposition 6.4 Brand-Building Strategy .7 6.2 Value Proposition 6.5.5 Conclusion Case Study: Yahoo! 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1.4 Brand-Building Strategy 6.The 7Cs Framework 6.4.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5.6.

4 Figure 6.7 Figure 5.3 Figure 5.3 Figure 2.com's Website Overview of Boo.1 Figure 4.4 Figure 4.7 Figure 5.2 Figure 2.5 Figure 5.6 Figure 5.5 Figure 2.3 Figure 4.8 Figure 5.1 Figure 5.6 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .7 Figure 6.3 Figure 6.7 Figure 2.9 Figure 6.6 Figure 4.1 Figure 3.8 Figure 3.2 Figure 3.5 Figure 6.4 Figure 4.2 Figure 2.6 Figure 2.8 Figure 6.5 Figure 4.1 Figure 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.2 Figure 5.2 Figure 4.4 Figure 5.1 Figure 6.1 Figure 2.3 Figure 3.2 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .4 Figure 2.com's Website Amazon.com's Associates Programme Overview of BarnesandNoble.

2 Table 6.com .1 Table 6.com .Timeline and Major Milestones Yahoo! .com .Timeline and Major Milestones CDnow .Timeline and Major Milestones BarnesandNoble.com .4 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones Gap.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .7 The Emerging Brand-Building Environment Amazon.1 Table 6.Timeline and Major Milestones Boo.5 Table 6.Timeline and Major Milestones eBay .6 Table 6.3 Table 6.


and is triggering the need for new brand-building strategies and tools. as they face each other through an electronic connection. service and brands. interaction and relationship building. The Internet also represents a fundamental shift in how buyers and sellers interact. products and services reconfigured.an explosion that is also a harbinger of how business will operate in the future. It is empowering customers with more options and more information to make informed decisions. while providing new tools for promotion.com. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.0 1. In the midst of this.1 .5 million book titles). This is creating new challenges and opportunities.2 3.1 3. America Online (AOL) and eBay have been able to build powerful brands in a few years.com Source: Securities and Exchange Commission Filings.9 3. there has been an explosion in the online world . As such. As such.com noble. Amazon. Internet companies such as Yahoo!.g. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. FIGURE 1.9 2.mckinseyquarterly. whereas it has taken decades for traditional companies to achieve the client base.com) 7 . the Internet is changing fundamentals about customers. aggressive Internet start-ups have emerged.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. customer affiliation and level of sales. Amazon. McKinsey Analysis (www. that these Internet start-ups have achieved. Supply chains are being rethought. Figure 1.5 2.1 OVERVIEW Over the past few years.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. creating strong brands that are putting established brands at risk.com1 Amazon.com's range of 4.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. relationships. and business models revamped.

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

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

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

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


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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . a 'set of expectations'. For some companies.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. which grows out of the cumulative memory and the experiences customers have of products or services. and a 'promise'.. January-February.2 . making their way into planning and strategy documents.2. p. 2.3 THE LAYERS OF A BRAND Brands are made up of four layers . The space a brand occupies inside a customer's head can create a 'mental' patent. FIGURE 2. T.of anything'. the augmented brand and the potential brand . benefits. Harvard Business Review. It is a company's promise to consistently deliver a specific set of features. yet ultimately reside as consumer perceptions. Brands are richly endowed entities. They start life as ideas. brands are their most valuable asset. a 'reputation'. and services to customers. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. 'Marketing success through differentiation .86 14 .a 'relationship'. As such. the basic brand. 1980.the core product or service.Figure 2.

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

and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. In the evaluation stage. and Control'. However. P. and selective retention. FIGURE 2. (Europe: Prentice-Hall) 8th Ed. Therefore.. These beliefs depend on their previous experiences with the brand. Consumers differ as to which product / service attributes they see as important.3 .FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. 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.attitudes of others and unexpected situational factors (Figure 2. it is important to clarify customers' underlying buying behaviour and the buying process.. either through heightened attention or through an active information search. This can be triggered by internal or external stimuli (advertisements). Once aroused. a consumer will be inclined to search for more information. Through gathering information. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.Analysis.3).4). 1996.194 The process starts when the buyer recognises a need. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). selective distortion. Planning. The buying process consists of five stages (Figure 2. and pay the most attention to the brands that will deliver the sought benefits. it is critical to understand what attributes consumers value. two factors can intervene between the purchase intention and the purchase decision .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Implementation. 16 . p. 'Marketing Management . the consumer learns about competing brands. and the effect of selective perception.

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

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

. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. D.com. There is also clear evidence of this on the Internet.. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. Spring 2000 19 .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. Emotional loyalty can be also created through the formation of a strong user community around the brand. 1993 McWilliam.they provide good word-of-mouth and are the best salespeople for the product / service 2. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. M. 8 9 Peppers. 'The One to One Future'.g.Sloan Management Review. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. In this way. 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 . Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). & Rogers. emotional loyalty is born out of a consumer's personal relationship with a brand. 'Building Stronger Brands through Online Communities' . Firstly. Harley-Davidson motorcycle clubs).

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

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

in the following ways: • Brands. to quickly identify sought after products • • Practicality . & Tellis. production and marketing.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . (London: McGraw Hill). Journal of Marketing Research. to its communication • Ethical . 158-170..The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. pp. and the number two twice the share of the number three12. May 1993. brands perform several functions that add value and customer benefits: • Identification ..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.. J. 22 . • Brand Leverage . Premium pricing increases revenue. 3rd Ed.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . to make sense of the offer. to its logo.. market share and profits . P. 'Strategic Brand Management'. & Downham.To have confirmation of your self-image or the image that you present to others • Continuity .8.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. The brand leader is the most profitable and all beyond number two are unprofitable13.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. 11 12 Kapferer.Typically a brand leader obtains twice the market share of the number two brand. J. 1986 13 Golder. R.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.Satisfaction linked to the attractiveness of the brand. 1992 Worcester. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'..To be sure of buying the best product in the category.To save time and energy through identical repurchasing and loyalty Guarantee . G. 'Consumer Market Research Handbook'. N.To be clearly seen. the best performer for a particular purpose • Characterisation .8. (New York: Free Press).

Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. not brands. The brand can also be used to penetrate new markets. 23 . In addition.The product life cycle applies to products. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. 2. • The Brand Barrier . companies such as Interbrand (see Appendix A). brand leaders can exploit their superiority in the market (e.Dominating a niche market is usually more profitable than being fifth in a large market. Companies can maintain a brand while modifying the underlying product to account for new technology. drives up share price and provides the basis for future growth. Coca-Cola “the real thing”). and the characteristics of successful brands.Strong brands are more attractive to investors. This.g. but there remains an ongoing controversy about how accurate and meaningful these measures are.Brand leaders usually have the financial strength to fend off competitors. fashion or prevailing market conditions. • Brand Loyalty and Beliefs .9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. maintain good price levels and generate strong cash flows. In trying to estimate the monetary value of brands.g. the tools that are used. and Young & Rubicam have created complex formulas. The next chapter describes the process of how brands are built.Companies with strong brands attract good recruits. it can build a strong market share.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . When a company creates this type of customer preference and loyalty. Johnson & Johnson with Tylenol). • Motivating Stakeholders . They also tend to elicit community and government support. • Avenues for Growth . in turn.


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

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

Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. industry endorsements and newspaper editorials. pp. J. or to gain a sense of belonging. • User Associations . Hewlett-Packard. Coca-Cola. providing confidence and incentive to trial. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. People use brands to express their lifestyles. as they are to be about satisfying basic physical and economic needs14. values or wealth. 1986 27 . 1998.3.brands frequently acquire an image from the type of people who are seen as using them. For pharmaceuticals. MA. Brand values derive from five major sources15: • Experience of Use . layout and appearance of the brand can clearly affect preference by offering cues to quality. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. Customers choose brands. (Europe: Prentice-Hall).the design. 14 15 Doyle.in many cases. interests. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. the number of competing alternatives and the large variety of advertising and selling messages. P. 2nd Ed. P. the pace of technical change.. cosmetics and high-tech products. In today's affluent society. faith in brand generates satisfaction in use. if customers have faith that a brand will work. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. which are additional to those based upon real performance.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. mean that buyers look for short cuts. • Brand Appearance .g. Gillette.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. • Belief in Efficacy . influenced by brand values. • Manufacturers' Name and Reputation . 'Marketing Management and Strategy'.. these needs are as likely to be about satisfying self-actualisation or esteem needs. it is more likely to work effectively for them. which they perceive as meeting their needs. Lexington Books). it acquires added values of familiarity and proven reliability.if a brand provides good service over time.In many situations a strong company name (e. Kellogg's) attached to a new product will transfer positive associations. 169 Jones. Sony. The large number of decisions.

its personality and its image or self-projection .3. type of spokesperson / customer image used to advertise the brand). its reflection (e.. press releases. 16 Kapferer. and visual appearance).g.the fundamental or genetic code of the brand. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . colour scheme. This may be different from the brand image. • The Brand Style . • The Brand Theme . which remains fixed over time. glamour. and advertising. prestige.g.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. J.the way the brand communicates through its advertising. Brand themes are the most flexible element and will tend to change with fashion. 'Strategic Brand Management'. visual appearance. style or cultural differences from one country to another. however the brand style and core tend to be less flexible. which depends on how the target market perceives the brand. Themes include the physical appearance (logo. friendly). 1992 28 . packaging.Figure 3.3: • The Brand Core . etc. (New York: The Free Press). features. A company should seek to differentiate its brand through developing a distinctive identity.articulates the brand core in terms of the culture it conveys.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and the relationship expressed (e.

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

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

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

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


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

• It Overcomes the Barriers of Time and Space . • It Allows for Two-way Communication and Interactivity .2.The Internet is a global network and can be reached from everywhere. These defining characteristics have fuelled its explosive growth.not previously available with mass medium forms of communication. which was intended to link military networks together.2 (Note: 35 . and deliver new products and services at low cost.this radically alters the process of interaction between communicating parties. Graph is not drawn to scale). By allowing for direct. 7 days a week.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.24 hours a day.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).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 . 4. regardless of where the computer or Internet access device is physically located. The Internet can also be accessed at any time . These characteristics combine to create a very powerful medium. The context of the Internet and certain key developments are highlighted in the Figure 4. These qualities eliminate the barriers of time and space that exist in the physical world. when the United States Defence Department developed the 'ARPAnet'. anywhere.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. allowing both parties to identify each other and build one-to-one relationships . ubiquitous links to anyone. the Internet lets individuals and companies build interactive relationships with customers and suppliers.

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.economist. 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 1969: 10.2 .000 1.a PricewaterhouseCoopers Report.000. 1996 (www.com) 36 .000 1. 1998.000 10. FIGURE 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.3 .3. 2000 Internet / ARPAnet was created Dell.000 100.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.Figure 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. as cited in 'E-Business Technology Forecast' .000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

& Zeisser. S.. 180-183 (www..7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.Awareness. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ . Newspapers. Adoption).4 . Interest. McQuade. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. M.mckinseyquarterly. including affiliate programmes with other websites. Trial. Evaluation.7. Retain. e-mail notifications and banner advertisements.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'..Attract. visibility relies solely on Communication. because there is no physical presence. billboards.) to online tools. Engage. modified to take into account of the interactive dynamics of the Internet. McKinsey Quarterly. etc. Learn and Relate. No. and bring people to the site for the first time. R. This model consists of five stages . pp.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. This is more difficult online than offline. A.8. 'Marketing to the Digital Consumer'. Waitman. Therefore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Magazines. links from directory searches (Connectivity). The mechanisms to communicate range from traditional media (TV. Figure 3.7 .. 1996. The company must build awareness and communicate its value proposition to its target customers.2. FIGURE 5.

1 3.WEBSITE PROMOTION METHODS . 58 . public relations and television advertising.3 2. The key factors at this stage are Convenience combined with interesting Content.6 3. Companies then need to engage customers to obtain their interest and participation. Attracting customers is only the first step in building online brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Creativity is also an important factor in gaining attention in today's cluttered marketplace.4 4. discounted over the expected duration of the brand-customer relationship.7 4.4 3.Economist Intelligence Unit 2000 (www. 3. Engage With the multitude of choice available on the Internet. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3 Source: Forrester Research. multiplied by the expected rate of transactions.8 4.3) is useful to ensure that a company develops a distinct and consistent brand identity. Fig. as cited in 'Targeting Consumers via the Internet' . it is important to quickly engage consumers' interest before they move on. 3.com) The most effective methods are direct e-mail.3 3.ebusinessforum.4 3.2 4.5 3.0 3. affiliate programmes. Kapferer's Brand Prism (Ch.5) 2.8 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.

and must be continuously updated due to the multiple visit nature of customers. attitudes and behaviour). and what additional products and services are they interested in provides companies with valuable information which. 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. The objective is to increase the conversion rate (% of browsers converted into buyers). and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. Learn The Internet provides extensive opportunities to learn about consumers (demographics. a company can create value by providing a personalised online experience. 59 . The initial site registration provides an early opportunity to obtain useful information. and forge closer relationships than any offline operator.9). • The Internet supports brand-building activities where there is a need to build a relationship. TV.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Building up a knowledge database on each customer . Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. if used properly.who they are and why they shop online. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Radio). such as groceries and convenience goods. Certain product categories. This helps to create a customer base that spends more time and money at a site. Communities and Customisation are other sticky applications. can create value for the customer and help build the brand-customer relationship.g. 5. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers.

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


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

com enters European book market Microsoft signs Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.Amazon launches www. universities.Amazon launches health and beauty store .com to create a "home living" store at amazon.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon. Ashford.com .com .com Anywhere.toolcrib.com Amazon announces further plans to expand distribution network to meet rapid growth.Amazon enters strategic alliance with living.com Amazon introduces "Purchase CirclesTM". Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.New home living store from living.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon announces investment in kozmo.com.amazon.Amazon opens customer service centre in The Hague .Amazon opens a customer service centre in Huntington.amazon.Amazon launches lawn & patio store .com. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.sothebys.com . featuring thousands of bestseller lists for hometowns.com and NextCard launch co-branded credit card ." providing shopping from wireless devices.com invests in wineshopper. a tools and equipment store for professional tool users and woodworkers .000 members Amazon. West Virginia. Video Games and Gift Ideas Amazon and Sotheby's launch www. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Announce Strategic Investment and Promotional Agreement .Amazon and eziba.Customers can shop at Amazon.Amazon launches new kitchen store .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com Amazon invests in Pets.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.Amazon.TIMELINE AND MAJOR MILESTONES Amazon. Amazon.Amazon. to meet rapid growth .com .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .Amazon surpasses 20 million cumulative customer accounts .Amazon and online car-buying service Greenlight.COM . and minority investment in.com announce investment and strategic alliance . Software. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com 63 .1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com via the new wireless pocket PC .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com opens its virtual doors at amazon.Amazon enters into a strategic partnership with Drugstore.com Electronics and Amazon. and more Amazon launches "Amazon. such as the Palm VII organiser. workplaces.com Auctions and zShops provide new tools to its merchant community .com is founded by Jeff Bezos Amazon.

This is an example of 64 . and customer Purchase CirclesTM.e. gift reminders. including book jacket images.com All Product search (searches the entire web). The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. the 1-ClickTM express checkout.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Amazon has added other features for shopping convenience. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. book summaries.com Anywhere to support access from wireless devices (i. recommendations. downloads quickly and services visitors adequately . encourage repeat visits and drive higher conversion rates. Content Amazon provides content on several levels.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. discussion boards.Figure 6. easy-to-use.OVERVIEW OF AMAZON. wish lists.2.1. and Amazon. The site is easy-to-use. mobile phones.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. interviews with authors. live or study. and quick-to-load pages Over time. FIGURE 6. expert reviews.3 Sources of Value . such as the Amazon. offering multiple paths to a given book or product.1 . Palm VII PDA device). customer testimonials. gift click. logically structured.

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

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

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

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

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

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

Barnesandnoble.Barnes & Noble went online at AOL May . and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). Barnes & Noble Inc.Launches Internet Radio .com).Barnes & Noble University opens registration for free online courses .com announces strategic relationship with Palm Computing .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.Barnesandnoble.com's timeline and major milestones is outlined in Figure 6.Barnes & Noble.Launches Video Store 71 .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.com provides other online categories offering software.barnesandnoble. Barnesandnoble.com is the fourth largest e-commerce retailer54. promotion) between the online store and the retail stores have been kept separate. 40% owned by Bertelsmann AG.COM .Acquires minority stake in NotHarvard. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. Inc. Currently. all front-end operations (marketing. contacts.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com and Microsoft announce that they will create an eBook superstore . as it could capitalise on the infrastructure and back-end operations (warehouses.Acquires equity stake in Mightwords .com .com launched its website (www. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.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. Besides books.) established by its parent company. is one of the best known traditional booksellers in the United States.Announces distribution relationship with New York Times September . and 20% owned by the public. book databases. and is the second largest online bookseller (after Amazon.3.COM 6.Launches BNTV . Barnes & Noble Inc. magazines. Barnesandnoble. Dalton bookstores (located in shopping malls).com is approximately 40% owned by Barnes & Noble.3 CASE STUDY: BARNESANDNOBLE.1 Company Overview Barnesandnoble.TIMELINE AND MAJOR MILESTONES .com was able to 'hit the ground running'.. music.Barnesandnoble.Launches Affiliate Network December .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Launched in 1997.2. However.Offers same day delivery in Manhatten .2 1997 January BARNESANDNOBLE. rare. TABLE 6. etc. prints & posters and related products. and 470 B.com) .

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

64 billion. however. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. and both are expanding globally.com. and avoid charging sales tax in states where it has stores56. Both try to foster a community of readers by letting customers post reviews online. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com's market capitalisation was $251 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.4 Brand-Building Strategy Barnesandnoble. Webcrawler.6 million. These initiatives have generated traffic to the site. Lycos.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. December 17. has yet to leverage its strong brand in cyberspace.3. Instead. this programme had more than 300. 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 .com's 1999 revenues were $202. Both offer 'associate programmes' that let other websites link to their sites. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Netscape and Microsoft Network.000 affiliates in its referral network. Both offer customisation that permits users to personalise the experience. The 6. it lags behind first-mover Amazon. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). As of February 2000.com had over 17 million. reasons for this are explained in the next section. while Amazon.com closed 1999 with 4 million customers. Barnesandnoble. Barnesandnoble. compared to Amazon. Barnesandnoble. They have developed an affiliate programme that links sites to Barnesandnoble.com in return for a commission on any purchases that they originated .The Wall Street Journal. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. prevent cannibalisation of its existing business. Barnesandnoble. while Amazon.com was valued at $21.1 billion.com's $1. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com has created a high quality website and customer experience.a replica of Amazon's Associates Programme. However. and Barnes & Noble Inc. Although. Yahoo!.

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

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

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


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


Miss Boo

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



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

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

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



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

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


Forges distribution partnership with Yahoo! $65.Launches merged CDnow/N2K site .Raises $10 million through private placement .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .cdnow.5 million distribution deal with Lycos Signs three-year. former arch rival .Merges with N2K.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. and was the first site to offer the sale of music downloads and custom CDs. and they aim to "make every visit to the site. 'How to Acquire Customers on the Web' .Site goes live .TIMELINE AND MAJOR MILESTONES .ten times the selection of a conventional bricks-and-mortar music store). customisation and a wealth of information and content to help in the purchase decision.Merges with Columbia Records . May-June 2000. whether for browsing or buying.CDnow and Time Inc. features. It has a customer base of 4 million people.1 Company Overview Founded in 1994. announce marketing alliance .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . and an average daily audience of over 800. & Novak.Partnership program with Geffen Records . and one of the most popular shopping sites on the Internet62. pp.000 music related items .000 sound samples. CDnow is the leading online music store. as well as music reviews. 62 Hoffman..179-188 63 CDnow website (www. by twin brothers Jason and Matt Olim. cover art.Harvard Business Review. CDnow is also driving the digital distribution of music. daily music news. T.com) 80 . CDnow was acquired by Bertelsmann AG.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. $22. and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow provides access to over 500.000 music-related products and 650. $18. convenience.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.5. This unprecedented degree of access to music and information is the core of CDnow's value proposition. D. On 19th July 2000.5. a valuable and rewarding experience"63. TABLE 6.5 CASE STUDY: CDNOW 6. guides to music genres.000 people. good prices.

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

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

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

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

CEO of CDnow. P. They also provide the customer with an order number and customer support contact information should they have questions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. 6.89 67 Jason Olim. "eBrands . It was able to create a strong value proposition and high quality customer experience. "eBrands . According to Jason Olim. 2000 p. "your brand is not just what you say . (Boston: Harvard Business School Press). P. The development of an extensive affiliate network. 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 ensure that it exploits its early-mover advantage and keeps ahead of competition.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this.from how CDnow has personalised its product offering to its capable customer service team . as cited in Carpenter. 66 Jason Olim. and innovative. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. combined with the high impact customer experience created . CEO of CDnow. a record distributor that handles the majority of CDnow's fulfilment logistics.Building an Internet Business at Breakneck Speed". (Boston: Harvard Business School Press). to ensure quick delivery to customers. as cited in Carpenter.it's what you do66". well-targeted marketing programmes both online and offline have driven large volumes of traffic to the site and have exposed the brand to millions of potential customers.Building an Internet Business at Breakneck Speed". 2000 p. The company sends an automated order confirmation note via e-mail as soon as the order has been placed.75 85 . CDnow has developed a relationship with Valley Records. This.5.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. This gives the customer the impression that the order is being handled quickly.

According to Meg Whitman.efficient one-to-one trading in an auction format. CEO of eBay.6. Auctions are an enabler.ebay. from collectibles and antiques to electronics and toys. and 450. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. transportation and other overhead costs.6 CASE STUDY: EBAY 6. Auctions make it fun. and eBay receives a transaction fee that ranges from 1. or the payment for the item .25% to 5% of the final sale price on any item sold.eBay website (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.g.ebay. Individuals use eBay to buy and sell items in more than 4. There are over half a million new auctions. and eBay provides added value through its convenience.Company Overview' . 24 hour a day. flea markets and auctions.2 Value Proposition eBay offers consumers an efficient. 1st October 1999 86 .300 categories.6. (A)' . Auctions represent a platform.eBay website (www. and eBay never takes possession of the item being sold. The buyer and the seller work out the logistics of the transport (e.A Harvard Business School Case Study.Company Overview' . Since its launch in September 1995. garage sales. with the number of unique daily visitors setting a record of 1.000 new items joining the "for sale" list every 24 hours69. This is a new market . as cited in 'eBay . People perceive the auction format to offer better prices. with emphasis being placed on its unique community feel and culture.removing the need for inventory. collectable shows. global trading place for buying and selling personal items in an entertaining auction format. 6. the eBay community has grown to include more than 10 million registered users. Sellers pay a nominal fee for placing an item up for sale. "at its core. eBay is not about auctions.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.the closest thing in the offline world are trading forums such as classified ads.782 million in January 200068. eBay effectively created a new business model never before possible .com) 'eBay . extensive selection and geographical reach. shipping.com) 70 'Meg Whitman at eBay Inc. payment) between themselves.

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

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

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

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

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

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

however.7 CASE STUDY: GAP.an early convert to the then-revolutionary idea of clothes retailing on the Internet. Gap's online sales tripled in 1998 alone. announce multi-year partnership.com' .interbrand. October 8. In addition.$100 million.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.COM 6.see Appendix A Gap. 'Clicks and Mortar at Gap.'s website (www. to provide customers with greater convenience and options. from shirts to accessories and hard-to-find sizes. L. and provides useful insight into how traditional brands can leverage their strength online.gap.800 stores in the US. 73 74 Interbrand (www.1 Company Overview Gap opened its first store in San Francisco in 1969. as cited in Lee.htm) 75 Jeanne Jackson. 6.babygap. from jeans and T-shirts to khakis and jackets.gapkids. Currently. According to Jeanne Jackson. TABLE 6.2 Value Proposition Gap's simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. California GapKids opens its first store BabyGap is born Gap opens its online store at www. 1999 93 .COM .com and www. and BabyGap. GapKids. Germany and Japan. letting customers access the Gap brands. surpasses $9 billion in net sales and increase earnings by 54% over previous year. and analysts estimate that sales in 1999 amounted to $50 . and are still relatively small compared to Gap's $9 billion in annual sales. Gap online exploits the accessibility and convenience of the Internet.com) .com/about_us. 'Clicks and Mortar at Gap. America Online (AOL) and Gap Inc. Gap Inc. Gap. Inc. UK. 1999 76 Jeanne Jackson.7. This success is largely due to their simple formula . service and value to everyone74". whether in the store or online76". standard styles are well suited to online shopping."to deliver style. Its reach extends across more than 1.7. online sales are only available to US customers. Gap started selling items online . October 8.com.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. and today it is the 29th most valuable brand in the world73. The Gap offers a balance of modern and seasonal styles of clothing.gapinc. the growth prospects are enormous. In late 1997. up from $20 million in 199875.Business Week.com is an example of successful crossover marketing. and Gap online provides access to the full range of items at Gap. "this is about being clicks-and-mortar.com' . as cited in Lee. Canada.Business Week.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. head of Gap Online. L.

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

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

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

With their brand awareness and network of retail outlets. while reaping the benefits of low customer acquisition costs and extended reach. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. 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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap had a significant advantage over pure online players in attracting customers and building critical mass. whereas established companies. 97 . 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. Pure online players have to invest heavily in logistics. provides existing customers with added value through the convenience of purchasing online. Gap has been able to significantly strengthen their brand-customer relationship. such as Gap. and allowing each to leverage the strengths of the other. on the other hand.com is an example of successful crossover marketing.5 Conclusion Gap. The Internet. By aggressively marketing both the stores and the website.7.thereby increasing the company's reach.

from e-mail services to stock quotes and much more. As the first online navigational guide to the web.see Appendix A 'Yahoo! . Yahoo! was founded by David Filo and Jerry Yang.Business Week.com) . The company's global web network includes 23 world properties outside the US. 6.1 Company Overview In April 1994. According to Timothy Koogle. two Ph. lies the directory .a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.com) 98 . September 7. There's nothing in the real world to compare to that79". all in a single location.8 CASE STUDY: YAHOO! 6.interbrand. household and business user reach. CEO of Yahoo!. the site was receiving 1 million hits per day. 78 79 Interbrand (www. the amount of information.businessweek. Yahoo! is a leading guide in terms of traffic.The Company. As such. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.2 Value Proposition At the core of Yahoo!'s value proposition. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. 1998 (www.D students at Stanford University. who started an online guide as a way to keep track of their personal interests on the Internet.8. advertising. The Strategy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8. and the number of websites continues to explode. The concept exploded (through word-of-mouth) and in less than six months. The Stock' . Yahoo! has since morphed from an ordinary search service into a global Internet communications. Yahoo! offers a range of supporting services that add value. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. and is one of the few Internet companies to turn a profit early in the development of the Internet.

600. and unveils Yahoo! Digital Introduces Bill Payment services . More recently. 99 . . is the way it has structured and displayed information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.e. regardless of platform (i.com. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.8). to allow access. mobiles.com allowing them to offer person-person payment solutions .3 Sources of Value .8.Yahoo! Launches Business-to-Business Marketplace .7 YAHOO! .Yahoo! acquires eGroups .000 shares at $13.TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! Shopping launches personalised shopping service 6.Yahoo! unveils Yahoo! Finance Vision .. Palm computers). but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! forms agreements with Palm Inc.Receives $1 million in venture capital funding from Sequoia Capital $33. Their goal is not to list everything under the sun.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.8 million IPO (2. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! acquires Arthas.The 7Cs Framework Convenience Central to Yahoo!'s success. Yahoo! extended its convenience through its Yahoo! Everywhere service.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. TVs.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.Site goes live September . to provide web-based services to PalmTM handheld computers .

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

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

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

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

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








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

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

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

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


361 1.602 4.Interbrand's Ranking of the Top 60 Brands (www.043 8.275 30.interbrand.132 15.225 11.806 11.510 8.076 3.262 1.021 26.527 3.313 2.193 112 .643 3.792 3.648 1.464 3.766 14.181 21.830 14.895 2.048 20.231 12.694 17.310 11.283 4.595 17.985 2.894 14.231 24.909 7.184 1.101 9.568 3.781 17.197 32.147 9.932 4.761 1.781 33.550 12.329 4.423 2.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) 83.806 2.319 1.422 1.143 2.603 5.845 56.804 2.681 2.155 7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .654 43.596 3.404 4.634 1.502 33.052 6.281 11.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.

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





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