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


3 Sources of Value .5.8 Case Study: Boo.3 Sources of Value .4.2 Value Proposition 6.5 Conclusion Case Study: CDnow 6.8.3 Sources of Value .Extensive Integration 6.5.5 6.8.5 Conclusion Case Study: Yahoo! 6.2 Value Proposition 6.6.4 Brand-Building Strategy .5 Other Factors that Contribute to their Brand Leadership 6.4.The 7Cs Framework Conclusion Case Study: Gap.The Failure of Boo.2 Value Proposition 6.3 Sources of Value .7.6.7 6.4.1 Company Overview 6.7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Other Factors That Contribute to their Brand Leadership 6.The 7Cs Framework 6.7.com Brand-Building Strategy 6.4.4 Brand-Building Strategy 6.7.The 7Cs Framework 6.4 Brand-Building Strategy 6.1 Company Overview 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 Company Overview 6.8.2 Value Proposition 6.4 Brand-Building Strategy 6.5.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5.The 7Cs Framework 6.2 Value Proposition 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.6 Conclusion Case Study: eBay 6.1 Company Overview 6.1.6 6.1 7.7.1 Company Overview 6.com 6.8.4 6.8.3 Sources of Value .

com's Associates Programme Overview of BarnesandNoble.3 Figure 3.3 Figure 2.5 Figure 4.1 Figure 3.4 Figure 5.com's Website Overview of Boo.7 Figure 5.4 Figure 6.1 Figure 6.2 Figure 6.7 Figure 6.9 Figure 6.7 Figure 2.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .5 Figure 5.4 Figure 2.8 Figure 3.2 Figure 3.com's Website Amazon.1 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.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 .3 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.6 Figure 6.3 Figure 6.8 Figure 6.6 Figure 4.6 Figure 5.1 Figure 1.4 Figure 4.8 Figure 5.3 Figure 4.2 Figure 2.4 Figure 4.2 Figure 2.1 Figure 4.2 Figure 5.2 Figure 4.1 Figure 2.7 Figure 5.6 Figure 2.5 Figure 6.5 Figure 2.

Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .5 Table 6.Timeline and Major Milestones Yahoo! .com .2 Table 6.1 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones CDnow .1 Table 6.com .Timeline and Major Milestones eBay .4 Table 6.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones Boo.3 Table 6.6 Table 6.Timeline and Major Milestones Gap.com .


while providing new tools for promotion.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. as they face each other through an electronic connection.an explosion that is also a harbinger of how business will operate in the future.1 OVERVIEW Over the past few years. there has been an explosion in the online world . As such.0 1.9 3.1 . Supply chains are being rethought.com1 Amazon. whereas it has taken decades for traditional companies to achieve the client base. products and services reconfigured.5 2. America Online (AOL) and eBay have been able to build powerful brands in a few years. aggressive Internet start-ups have emerged. As such.com noble. In the midst of this. Amazon. the Internet is changing fundamentals about customers.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.com Source: Securities and Exchange Commission Filings. FIGURE 1.com's range of 4.2 3. It is empowering customers with more options and more information to make informed decisions.YEARS TO REACH $100 MILLION IN SALES 6 5. This is creating new challenges and opportunities. and business models revamped. service and brands.1 3. that these Internet start-ups have achieved. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. interaction and relationship building. and is triggering the need for new brand-building strategies and tools.com) 7 .mckinseyquarterly. Internet companies such as Yahoo!. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. customer affiliation and level of sales. creating strong brands that are putting established brands at risk. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Figure 1. relationships.g.5 million book titles). McKinsey Analysis (www.9 2.com.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. The Internet also represents a fundamental shift in how buyers and sellers interact. Amazon.

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

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

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

The limitations of the Internet in terms of brand-building are also discussed.4 STRUCTURE The next chapter. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. 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. Chapter 4 provides an overview of the Internet and its defining characteristics. as well as the interactive approach to attracting customers and building loyalty. and introduces the core concepts that form the backbone of the dissertation. 11 . The final chapter. The nature of brands. and outlines the opportunities for further research. Chapter 3 explores how brands have traditionally been built. Chapter 7. Chapter 6 examines the brand-building efforts of seven companies. their purpose and value are discussed. highlighting some key factors that have contributed to brand success. by outlining the impact of the Internet on the business and competitive environment. provides an analysis of leading academic literature in relation to branding. 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. Chapter 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.


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

They start life as ideas.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. and services to customers. T. making their way into planning and strategy documents. The space a brand occupies inside a customer's head can create a 'mental' patent.the core product or service.3 THE LAYERS OF A BRAND Brands are made up of four layers .. p. 'Marketing success through differentiation . Brands are richly endowed entities. 1980. a 'reputation'. yet ultimately reside as consumer perceptions. FIGURE 2. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. and a 'promise'. 2. Harvard Business Review. January-February. benefits. the basic brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . For some companies. As such. the augmented brand and the potential brand . which grows out of the cumulative memory and the experiences customers have of products or services. brands are their most valuable asset.a 'relationship'. It is a company's promise to consistently deliver a specific set of features.of anything'. a 'set of expectations'.2 .86 14 .Figure 2.2.

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

The buying process consists of five stages (Figure 2.4).Analysis. p. either through heightened attention or through an active information search.. it is critical to understand what attributes consumers value. selective distortion. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. 1996. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs.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). 16 .3 .3). and the effect of selective perception. 'Marketing Management . (Europe: Prentice-Hall) 8th Ed.. In the evaluation stage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. it is important to clarify customers' underlying buying behaviour and the buying process. Consumers develop a set of brand beliefs about the attributes of competing brands. Therefore. FIGURE 2. Consumers differ as to which product / service attributes they see as important.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. and pay the most attention to the brands that will deliver the sought benefits. This can be triggered by internal or external stimuli (advertisements).attitudes of others and unexpected situational factors (Figure 2. and selective retention. Through gathering information. a consumer will be inclined to search for more information. P. Once aroused. Implementation. the consumer learns about competing brands. and Control'.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. two factors can intervene between the purchase intention and the purchase decision . However. These beliefs depend on their previous experiences with the brand. Planning.

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

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

Sloan Management Review.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.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. Harley-Davidson motorcycle clubs). 'Building Stronger Brands through Online Communities' . 'The One to One Future'. There is also clear evidence of this on the Internet. G.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. emotional loyalty is born out of a consumer's personal relationship with a brand. & Rogers.g. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. consistent orders Satisfied customers are the best advertisement . 8 9 Peppers. In this way. 1993 McWilliam. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. D. Spring 2000 19 . Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.. 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).. Emotional loyalty can be also created through the formation of a strong user community around the brand. M. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent.com. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Firstly.

Beyond this. FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. A stronger brand enjoys a high degree of brand preference over competing brands. which goes well beyond the satisfaction of a specific need. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. However. March 1998. 20 . FIGURE 2. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). pp. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.. whereby customers would be unwilling to substitute it with competitors' offers. a 'powerbrand' tends to have a high degree of brand loyalty.7 . 343-373. there are brands that customers perceive as acceptable and would not resist buying. S. and understanding the needs and buying processes of the target market is essential.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 2.6 .7).BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. Journal of Consumer Research.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. there are brands that are unknown by most buyers. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.

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

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

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


and keep it turning.1. it should provide a satisfactory experience and lead to a willingness to buy again. If the offering is developed properly. This chapter spells out the traditional brandbuilding process.1 INTRODUCTION Building a strong brand is a complex task. public relations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1 . promotion. This is illustrated in Figure 3. brand awareness. The major characteristics of successful brands are also reviewed. the next step is to get customers to try the brand. Once this has been established. FIGURE 3. selling. and direct marketing. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. highlighting important factors that contribute to the success of each step along the way. 3.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . To entice trial and repeat purchase requires triggering mechanisms. confidence and brand equity are built. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. which are created through advertising.

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

2nd Ed. People use brands to express their lifestyles. providing confidence and incentive to trial.3. Coca-Cola.. Gillette. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice.in many cases. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. In today's affluent society. cosmetics and high-tech products. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. (Europe: Prentice-Hall). if customers have faith that a brand will work. • Belief in Efficacy . P.the design. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. as they are to be about satisfying basic physical and economic needs14. 14 15 Doyle. the number of competing alternatives and the large variety of advertising and selling messages.brands frequently acquire an image from the type of people who are seen as using them. it is more likely to work effectively for them. 1986 27 . The large number of decisions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. values or wealth. • Manufacturers' Name and Reputation . • User Associations . Kellogg's) attached to a new product will transfer positive associations..g. these needs are as likely to be about satisfying self-actualisation or esteem needs. industry endorsements and newspaper editorials. layout and appearance of the brand can clearly affect preference by offering cues to quality. 'Marketing Management and Strategy'. Lexington Books). 1998.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. which are additional to those based upon real performance. the pace of technical change. it acquires added values of familiarity and proven reliability. Hewlett-Packard. which they perceive as meeting their needs. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. P.In many situations a strong company name (e. J. For pharmaceuticals. or to gain a sense of belonging. pp. Brand values derive from five major sources15: • Experience of Use . mean that buyers look for short cuts. faith in brand generates satisfaction in use. Customers choose brands. • Brand Appearance . Sony. 169 Jones.if a brand provides good service over time. MA. interests. influenced by brand values.

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

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

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

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

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


In essence.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. and a critical source of added value. This chapter provides an overview of the Internet and its defining characteristics. Hypertext allows information to be organised in a user-friendly way that is easily accessible. The three core channels include e-mail (the most common). and provides the opportunity for dynamic interaction. Information is becoming a major part of the products and services that people buy. 34 .Figure 4.1 INTRODUCTION The Internet is transforming the business environment. creating new challenges and opportunities.1.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. which contain hypertext and pictures. 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. but in practice not in real time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. E-MAIL Is the part of the Internet that most users use at present. it is a common technology platform that allows computing devices to communicate with each other. it offers a number of alternative channels that enable businesses and people to communicate.1 . In doing so. news groups and mailing lists. FIGURE 4. and the 'world wide web' (www) . highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. 4.

regardless of where the computer or Internet access device is physically located. anywhere.this radically alters the process of interaction between communicating parties.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. ubiquitous links to anyone. which was intended to link military networks together. These qualities eliminate the barriers of time and space that exist in the physical world. These defining characteristics have fuelled its explosive growth.2. The context of the Internet and certain key developments are highlighted in the Figure 4. These characteristics combine to create a very powerful medium.The Internet is a global network and can be reached from everywhere. when the United States Defence Department developed the 'ARPAnet'. 4. allowing both parties to identify each other and build one-to-one relationships . By allowing for direct.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . • It Overcomes the Barriers of Time and Space . The Internet can also be accessed at any time .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). 7 days a week.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.2 (Note: 35 . Graph is not drawn to scale). the Internet lets individuals and companies build interactive relationships with customers and suppliers.24 hours a day. • It Allows for Two-way Communication and Interactivity . and deliver new products and services at low cost.not previously available with mass medium forms of communication.

2 . 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.3. FIGURE 4.000.a PricewaterhouseCoopers Report.000 10.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.economist.000.000.000 1.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 1998.000 100.000 1969: 10.Figure 4. 2000 Internet / ARPAnet was created Dell. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . as cited in 'E-Business Technology Forecast' .000 1.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.com) 36 .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. 1996 (www.

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

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

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

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

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

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

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


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

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

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

(London: Harper & Row). As a result. businesses and online communities that rely on connectivity can enjoy 'network effects'. pp. R.1. this is not the case on the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. Even more important. customisation for individual customers. as illustrated in Figure 5. However. FIGURE 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. 'Positive Economics'. Similarly. Once the up-front investments are made (for research and development and technology infrastructure). where the value of the network. 7th Ed. and other features can be added or changed at low marginal cost. and the value that each member realises.. increases disproportionately as more people join the network.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. 1989. as the benefits of scale are overwhelmed by the disadvantages of size31. 180-182 48 . each additional unit sold does not cost more than the last to deliver. the costs approach zero32. G. (also referred to as 'viral economics'). additional products.1 . additional customers and transactions can be managed with limited fixed cost investment. and in the case of information-based products.

21 . cross-selling and up-selling33. being first into a market makes it easier to capture the consumer's share of mind. '5 Rules of the eEconomy'. It also allows online companies to tap supplementary revenue streams. R.2 . No. Outlook 1999. 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.org Study in collaboration with The Boston Consulting Group. fulfilment • Defensible advantage against competitors SCALEABLE.A Publication by Andersen Consulting 'The State of Online Retailing' .A Shop. M. delivering increased margin per customer .2.. direct marketing. advertising and referrals. This makes it more efficient in improving product selection. enhancing the interaction. With no competitors around.Figure 5. As the company builds a customer base and develops a relationship with customers. link revenues 32 33 Melnicoff.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. Nov 1998 49 . including direct marketing. FIGURE 5. its ability to track customer preferences and customise offerings improves.

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

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

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

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

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

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

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

com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. pp. Therefore.mckinseyquarterly. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.2. e-mail notifications and banner advertisements. The company must build awareness and communicate its value proposition to its target customers.. FIGURE 5. No. S. R. Retain. modified to take into account of the interactive dynamics of the Internet. Learn and Relate.. 'Marketing to the Digital Consumer'. etc. Newspapers. McKinsey Quarterly. links from directory searches (Connectivity).THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski.4 .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. because there is no physical presence. Magazines. This model consists of five stages . 1996. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. including affiliate programmes with other websites.Attract.. This is more difficult online than offline.8. M.) to online tools. visibility relies solely on Communication. McQuade. 180-183 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Evaluation. billboards.. Adoption). The mechanisms to communicate range from traditional media (TV. Trial. & Zeisser. Engage.7 . A. Waitman. Figure 3.7. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ .Awareness. and bring people to the site for the first time. Interest.

Kapferer's Brand Prism (Ch.3 3. public relations and television advertising.4 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. multiplied by the expected rate of transactions.3) is useful to ensure that a company develops a distinct and consistent brand identity. 58 .3 2.8 .5) 2.ebusinessforum.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 Source: Forrester Research. Creativity is also an important factor in gaining attention in today's cluttered marketplace.6 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. affiliate programmes. it is important to quickly engage consumers' interest before they move on. Engage With the multitude of choice available on the Internet. discounted over the expected duration of the brand-customer relationship.4 3.WEBSITE PROMOTION METHODS .com) The most effective methods are direct e-mail.Economist Intelligence Unit 2000 (www.0 3. as cited in 'Targeting Consumers via the Internet' .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 .1 3. The key factors at this stage are Convenience combined with interesting Content. Attracting customers is only the first step in building online brands.5 3. 3. 3. Fig.8 4.7 4.2 4.4 4. Companies then need to engage customers to obtain their interest and participation.

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

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


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

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

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

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

two personalised services. New Yorker and The Economist. which only applied to sales that resulted from the initial click-through. Once orders are placed. and not subsequent purchases. attracting member sites of all sizes. Business Week.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. help maintain contact and build traffic by e-mailing customers when desired products or books become available.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.000 by August 2000. and by 1999 it had over 200. enticing them to return to the site and purchase repeatedly. The Financial Times. In the second half of 1996.2. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.2). 6.000 members. Through the first half of 1996. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. In addition. The Associates Programme has been phenomenally successful. In July 1996. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. and customers are also e-mailed when the items are shipped from the warehouse. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Eyes and Editors. Instead of paying directly for this exposure. This enabled Amazon to reach more customer segments and niches (Figure 6. it began to advertise in print media and online . Newsweek. As a result of all these factors (7Cs).com hot-link and offer specific books of interest to their visitors. they are subsequently confirmed by e-mail. 66 . increasing to over 500. Amazon offered Associates referral fees of up to 15%.a move that along with the novelty of its business model and the newness of the Internet.

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

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

establishing Amazon as the leading online bookseller with a large customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. This has helped them attract customers and move up the learning curve quickly. July 1998.2. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). We have been customer obsessed. and to convey its vast size and offering. As such. L. According to Jeff Bezos. thereby diluting the value of its association with books.com obsessed52"..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. In addition. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists.. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. management realised that Amazon had become more associated with other core brand values . According to Jeff Bezos. while our competitors have been Amazon. the balance of power shifts away from the company and goes towards the customer. Amazon is constantly seeking new ways of improving its offering. R. and its safe and secure delivery. memorable. which within six months propelled Amazon to one of the leading online music retailers. and our goal is to increase that gap51". (Oxford: Capstone Publishing). In addition. to capture the spirit of the site. Amazon unveiled a music store. Saunders. 1999 69 .a wide range of choice. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. developing customer service centres and expanding its distribution network to support high levels of service. 51 52 Hazleton. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. We were blessed with a two-year head start. "we're not a stationary target. and according to Jeff Bezos. establishing a reputation for excellence and fulfilment. As such. "Online. due to the hype and coverage it was given.com Way'. Amazon has been able to build a strong brand at relatively low cost. Amazon's understanding of its brand identity has been a critical factor. Amazon received criticism for expanding its product line. Our secret is that we have not been competitor obsessed. good value. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. 'Business the Amazon. in June 1998. further enhancing their value proposition. For example. However. because he wanted it to be short. Success. Nevertheless. Amazon was able to secure partnerships and alliances with key players.

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

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

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

compared to Amazon. Netscape and Microsoft Network.a replica of Amazon's Associates Programme. Both try to foster a community of readers by letting customers post reviews online. prevent cannibalisation of its existing business.com has created a high quality website and customer experience.com had over 17 million.com's market capitalisation was $251 million. it lags behind first-mover Amazon.com in return for a commission on any purchases that they originated .000 affiliates in its referral network. Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 .4 Brand-Building Strategy Barnesandnoble. These initiatives have generated traffic to the site. 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. Yahoo!. Lycos.com's $1. and both are expanding globally. Barnesandnoble. reasons for this are explained in the next section. Although. however. this programme had more than 300. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. December 17.64 billion. As of February 2000. Both offer 'associate programmes' that let other websites link to their sites. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Instead.6 million. Barnesandnoble. and Barnes & Noble Inc. Both offer customisation that permits users to personalise the experience. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.The Wall Street Journal.com's 1999 revenues were $202.com was valued at $21. while Amazon. while Amazon. The 6. Webcrawler. has yet to leverage its strong brand in cyberspace. They have developed an affiliate programme that links sites to Barnesandnoble. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). However.1 billion.3.com closed 1999 with 4 million customers. and avoid charging sales tax in states where it has stores56.

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

by portraying them as slow and clumsy in comparison to the more nimble Amazon. Barnesandnoble.3.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and its lack of innovation (by copying Amazon.com's late start in 1997.6 Conclusion Although Barnesandnoble. otherwise they risk losing out to other online competitors. August 4. and allowed them to offer stock options as compensation and achieve a high market capitalisation. and was further up the growth curve.com has been able to create a high impact and high-quality customer experience. feature for feature) has failed to differentiate Barnesandnoble.com. meant that Amazon.forbes. The Press have also contributed. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. even if that means eating into their existing sales. customer relationships and offline presence . Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. 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.its key differentiating factors.com's experience is instructive. The company failed to leverage its established brand. it also caused a major setback. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".com and has given them the image of a second rate 'me too' brand. In addition.com) 75 . it has not been able to establish itself as the leading online bookseller. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. a wellestablished Internet brand.com . 57 'Bn.Forbes. Barnesandnoble.Not a Best Seller' . 2000 (www.

Boo. and Converse. After a high profile launch. If a clothing brand is on the Boo site. and included high profile investors such as Bernard Arnault.Marketing Week.COM 6. 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. They intended to add France. 1999 76 .Announces it has only 500. and the resulting loss of investors' confidence. due to its poor performance and inability to build a customer base. November 2000 January February May 6.com. it's about range and convenience. Puma. within six months Boo. However.Multi-million pound advertising campaign created by BMP DDB . Germany and Denmark.Site goes live .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 CASE STUDY: BOO. Boo. England.Raises funding of $125 million . P. not the limited range you might get at most London fashion shops58".2 Value Proposition According to Kajsa Leander. Company is put up for sale. Boo.COM .com provided a range of 18 fashion and footwear brands including DKNY. and eventually debut in Asia. On going live. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).com collapsed through lack of funds.First sign of problems . CMO of Boo.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". as well as create a kid's site. among others. Everlast. and was billed as one of Europe's hottest e-commerce ventures.000 unique visitors .Appeals for $30 million more funding . "our marketing thrust is not based on prices. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). TABLE 6. Italy and Spain within a few months. arranged through J. founder and Chief Marketing Officer of Boo.4. it means all that brand's product line is available.3 1999 Mid year BOO.com. receiving $125 million of funding. as cited in 'Boo. Finland.com entered six markets: US.fails and appoints KPMG as liquidator. Boo.4.1 Company Overview Founded in 1999. June 10.they redesign site. sack 20% of staff and sell stock at 40% discount .TIMELINE AND MAJOR MILESTONES . Morgan.com had set the record as Europe's best-funded European Internet Start-up. Sweden.com opens its virtual doors' . 58 Kajsa Leander.


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.


2 Value Proposition CDnow offers consumers a high degree of choice (over 500. D. & Novak.179-188 63 CDnow website (www.Merges with N2K. CDnow provides access to over 500. good prices. CDnow is also driving the digital distribution of music. 62 Hoffman. whether for browsing or buying.000 music related items . pp.000 sound samples.5. daily music news.Harvard Business Review. guides to music genres.5 million distribution deal with Lycos Signs three-year.000 people. customisation and a wealth of information and content to help in the purchase decision.Raises $10 million through private placement . and was the first site to offer the sale of music downloads and custom CDs. announce marketing alliance .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. by twin brothers Jason and Matt Olim. $18.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. former arch rival .com) 80 .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . convenience. It has a customer base of 4 million people. This unprecedented degree of access to music and information is the core of CDnow's value proposition. 'How to Acquire Customers on the Web' . features.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .ten times the selection of a conventional bricks-and-mortar music store).Partnership program with Geffen Records . TABLE 6. CDnow was acquired by Bertelsmann AG. cover art. On 19th July 2000.CDnow and Time Inc. May-June 2000. and exclusive interviews and reviews from CDnow's award-winning editorial staff.Launches merged CDnow/N2K site .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.000 music-related products and 650. and one of the most popular shopping sites on the Internet62. T.TIMELINE AND MAJOR MILESTONES .5 CASE STUDY: CDNOW 6.Site goes live . CDnow is the leading online music store. $22.5.Merges with Columbia Records .. as well as music reviews.cdnow. and an average daily audience of over 800. and they aim to "make every visit to the site.Forges distribution partnership with Yahoo! $65. a valuable and rewarding experience"63.1 Company Overview Founded in 1994.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

thereby increasing the company's reach. while reaping the benefits of low customer acquisition costs and extended reach. Gap has been able to significantly strengthen their brand-customer relationship. whereas established companies. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. Gap had a significant advantage over pure online players in attracting customers and building critical mass. 97 . A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand.com is an example of successful crossover marketing. such as Gap.7.5 Conclusion Gap. With their brand awareness and network of retail outlets. Pure online players have to invest heavily in logistics. The Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and allowing each to leverage the strengths of the other. thereby reinforcing its brand identity. on the other hand. have already established the back-end operations and can use them as the cornerstone of their online business. provides existing customers with added value through the convenience of purchasing online. By aggressively marketing both the stores and the website. and can also provide access to different customer segments who may not usually buy the products at all .

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

.8 million IPO (2.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 . mobiles. and unveils Yahoo! Digital Introduces Bill Payment services . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.8).Yahoo! forms agreements with Palm Inc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.8. More recently. TVs. Yahoo! extended its convenience through its Yahoo! Everywhere service. regardless of platform (i. to allow access. Their goal is not to list everything under the sun. is the way it has structured and displayed information.TIMELINE AND MAJOR MILESTONES 1994 April .7 YAHOO! .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. 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! unveils Yahoo! Finance Vision .600..com allowing them to offer person-person payment solutions .Site goes live September .Yahoo! Launches Business-to-Business Marketplace . to provide web-based services to PalmTM handheld computers .The 7Cs Framework Convenience Central to Yahoo!'s success. 99 .e.Receives $1 million in venture capital funding from Sequoia Capital $33. 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. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! acquires Arthas.com.000 shares at $13.3 Sources of Value .Yahoo! Shopping launches personalised shopping service 6.Yahoo! acquires eGroups .

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

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

(www. Yahoo! maintains close contact with customers. as experience surfers tend to be loyal to their search engine. While Internet companies were targeting existing Internet users through the use of online promotion methods. As a result. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". These near surfers represented (and still do) a large and fast growing group and. therefore. which conveyed the brand's irreverent personality. Intelliquest. This was especially important. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often.8.4 Brand-Building Strategy Yahoo! is a marketing machine. an approachable nature. and an inherent friendliness. Yahoo! extended beyond this to use traditional offline media.people who are not yet online but are likely to use the Internet in the near future. and according to Intelliquest80. 82% of Internet users and 23% of people intending to go online. Yahoo! avoided characterising itself as a technology-oriented company. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . TV commercials and radio spots during drive time. and it formed a critical link in Yahoo!'s brandbuilding strategy.a sense of irreverence. recognise the name Yahoo!. Given the unease with which the average consumer approaches technology.intelliquest. Yahoo! also encourages customers to e-mail ideas and feedback. and its implications of a good time. Their strategy was to target "near surfers" . Yahoo!'s brand-building success starts with its name. In 1996. and through communications via email. Yahoo! would be one of the first sites that they visited.com) 102 . Yahoo! aggressively promoted the site through public relations. 80 'Web Survey Shows Yahoo! Tops'. 6. by building a recognised brand name. At the time this was considered a breakthrough.

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

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








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

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

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

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


101 9.423 2.048 20.932 4.193 112 .527 3.275 30.510 8.761 1.781 33.052 6.262 1.231 12.319 1.550 12.694 17.147 9.361 1.643 3.596 3.634 1.225 11.681 2.231 24.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) 83.132 15.568 3.895 2.329 4.310 11.281 11.648 1.interbrand.602 4.021 26.502 33.804 2.283 4.806 11.603 5.043 8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .181 21.909 7.985 2.830 14.894 14.766 14.595 17.197 32.792 3.404 4.654 43.806 2.Interbrand's Ranking of the Top 60 Brands (www.313 2.845 56.422 1.464 3.143 2.076 3.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.155 7.781 17.184 1.

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





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