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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
THE NATURE OF BRANDS
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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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
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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
BUILDING BRANDS ON THE INTERNET
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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
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Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
2 Value Proposition 6.com 6.5.4 Brand-Building Strategy 6.4 6.4 Brand-Building Strategy 6.5 Other Factors That Contribute to their Brand Leadership 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .8.6.The 7Cs Framework 6.The Failure of Boo.1 Company Overview 184.108.40.206 7.4 Brand-Building Strategy .2 Value Proposition 6.5 Other Factors that Contribute to their Brand Leadership 6.5.1 Company Overview 6.6 6.5 Conclusion Case Study: CDnow 220.127.116.11 Sources of Value .The 7Cs Framework 6.3 Sources of Value .2 Value Proposition 6.6.com 6.8.3 Sources of Value .5 6.8 Case Study: Boo.1 Company Overview 6.1 Company Overview 18.104.22.168 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 7.2 Value Proposition 6.4 Brand-Building Strategy 6.5 Conclusion Case Study: Yahoo! 6.8.7 22.214.171.124.4 Brand-Building Strategy 6.2 Value Proposition 6.7.6.The 7Cs Framework 6.4.Extensive Integration 126.96.36.199 Sources of Value .3 Sources of Value .4.The 7Cs Framework 188.8.131.52 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 184.108.40.206.1 Company Overview 6.8.6 Conclusion Case Study: eBay 6.5 Conclusion Case Study: Gap.
6 Figure 5.8 Figure 5.7 Figure 5.7 Figure 2.5 Figure 5.8 Figure 6.7 Figure 6.8 Figure 3.3 Figure 6.1 Figure 1.4 Figure 6.3 Figure 2.5 Figure 2.1 Figure 2.1 Figure 4.3 Figure 3.6 Figure 6.2 Figure 6.4 Figure 4.com's Website Overview of Boo.1 Figure 5.6 Figure 2.com's Website Amazon.4 Figure 2.4 Figure 5.3 Figure 5.5 Figure 4.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .1 Figure 6.2 Figure 2.2 Figure 5.9 Figure 6.2 Figure 4.9 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 .6 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 3.2 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 4.com's Associates Programme Overview of BarnesandNoble.7 Figure 5.5 Figure 6.4 Figure 4.2 Figure 3.
Timeline and Major Milestones Gap.com .5 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones BarnesandNoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.7 The Emerging Brand-Building Environment Amazon.2 Table 6.3 Table 6.1 Table 6.1 Table 6.Timeline and Major Milestones Boo.Timeline and Major Milestones eBay .com .4 Table 6.com .Timeline and Major Milestones Yahoo! .com .6 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
an explosion that is also a harbinger of how business will operate in the future.2 3.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. Amazon. Amazon. As such.mckinseyquarterly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.YEARS TO REACH $100 MILLION IN SALES 6 5.com noble. customer affiliation and level of sales.1 3.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. Figure 1. Internet companies such as Yahoo!. aggressive Internet start-ups have emerged. The Internet also represents a fundamental shift in how buyers and sellers interact. service and brands. whereas it has taken decades for traditional companies to achieve the client base.5 2. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com) 7 .5 million book titles). relationships.g.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. FIGURE 1. as they face each other through an electronic connection. the Internet is changing fundamentals about customers. while providing new tools for promotion.com.com Source: Securities and Exchange Commission Filings. interaction and relationship building. This is creating new challenges and opportunities. In the midst of this. products and services reconfigured.9 3.1 OVERVIEW Over the past few years. and is triggering the need for new brand-building strategies and tools. that these Internet start-ups have achieved. It is empowering customers with more options and more information to make informed decisions. and business models revamped. Supply chains are being rethought.0 1.9 2.com's range of 4. McKinsey Analysis (www. As such.com1 Amazon.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. there has been an explosion in the online world . America Online (AOL) and eBay have been able to build powerful brands in a few years.1 . creating strong brands that are putting established brands at risk.
. companies lack a coherent framework and concrete methods to build an online brand. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. Browder. pp.66 8 . S. However. Harvard Business Review. brands are even more critical as customers have little to go on other than a recognised brand. D. and the high cost of acquiring online customers2. Therefore. 1 2 3 Christensen. turning browsers into buyers. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important.. Volume 78 Issue 2. As such. May-June 2000 Hof. & Elstrom. attracting traffic or 'eyeballs'. p. Given the tremendous clutter in today's e-commerce marketplace.. May 5. 66-76 Hoffman. this dissertation seeks to explore how companies should go about building a successful Internet brand and to identify the critical factors that must be considered. 'Meeting the Challenge of Disruptive Change'. In light of this. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. and Novak.April 2000. who are essentially intangible. C. & Overdorf. 'How to Acquire Customers on the Web'. P. Harvard Business Review. as the need to build brand loyalty online is reaching a peak. T. building awareness. rather than drifting from site to site3. For pure online players. A Business Week / Harris poll. M.. 'Internet Communities . March .BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. that extends the brand-customer relationship beyond a single transaction. L. found that 57% of Internet users go to the same sites over and over again.Forget Surfers. 1997.. A New Class of Netizen is Settling Right In' Business Week. P. R.. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies.
RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 .2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. • To explore how the Internet is changing the brand-building environment. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. This is based on the outcome of the primary research (in-depth case studies).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.2. A review and analysis of leading academic thinking will be used to explore these issues. and to identify new sources of value.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. FIGURE 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. tools and strategies to build brands on the Internet. supported by secondary data related to aspects of online business from accredited and published sources. 1.
nor desire. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. however. and factors that contribute to a brand's success. relationship management. Conclusion: Discusses the key findings and areas for further research. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. and is used to provide insight into some of the factors that contribute to the development of successful brands. These are further refined using the insight obtained through the case studies. Hypothesis (Framework): This is based on the literature review and secondary data. 10 . Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. certain key factors are highlighted in their relevance to the dissertation. The absence of academic literature on Internet branding posed a major obstacle. strategy and economics. there is more work in popular rather than academic literature. CDnow. While there is no attempt. 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. as well as a recent Internet failure (Boo. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. this also highlights the true value of the dissertation.com and Gap. Consequently. eBay and Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area.com). to provide an in-depth analysis of the psychological and social dimensions of brands. 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. marketing.com.com).
summarises the key findings.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. 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. by outlining the impact of the Internet on the business and competitive environment. The final chapter.4 STRUCTURE The next chapter. Chapter 6 examines the brand-building efforts of seven companies. The limitations of the Internet in terms of brand-building are also discussed. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. The nature of brands. as well as the interactive approach to attracting customers and building loyalty. 11 . Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. Chapter 2. Chapter 7. their purpose and value are discussed. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. This chapter sets the context within which online brands must be built. and introduces the core concepts that form the backbone of the dissertation. and outlines the opportunities for further research. Chapter 3 explores how brands have traditionally been built.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
D. if properly managed. p. 74 4 Clifton. the brand's emotional benefits and its self-expressive benefits .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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. both to customers. (London: Macmillan Press Ltd. The concept of brand equity is outlined. R.1 .a leading specialist brand consultancy firm . 1996. E. 'Building Strong Brands'.). and they form the backbone of this dissertation. explaining the value of brands. vii 13 . 2. and the importance of customer satisfaction and brand loyalty. creates influence and generates value4" This definition truly captures the essence of a brand.1 INTRODUCTION In this chapter.. This value stems from the products and services that companies create and bring to the market. symbolised in a trademark. and highlights the importance of brand management. CEO of Interbrand Newell and Sorrell . 2000.a brand is: "a mixture of tangible and intangible attributes. (New York: Free Press). these layers are Brands are made up of many layers and dimensions. unravelled to reveal the nature of brands and their reason for existence.1. but extends further to encompass added values derived from factors such as the brand-customer relationship. 'The Future of Brands'. both for customers.see Figure 2. The chapter proceeds to describe the influence of brands on the buying process. A. p. which. Branding is about creating 'value'. and to companies. These concepts are central to brands and brand-building.2 WHAT IS A BRAND? According to Rita Clifton. & Maughan. FIGURE 2. whether online or offline. and for the company.
3 THE LAYERS OF A BRAND Brands are made up of four layers . the augmented brand and the potential brand . T. benefits. and a 'promise'. It is a company's promise to consistently deliver a specific set of features.of anything'. and services to customers. As such.. 1980.2 . Brands are richly endowed entities.86 14 . a 'reputation'. January-February. the basic brand. 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. p. 'Marketing success through differentiation . 2. yet ultimately reside as consumer perceptions.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.a 'relationship'. brands are their most valuable asset. They start life as ideas.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Harvard Business Review.the core product or service. For some companies. which grows out of the cumulative memory and the experiences customers have of products or services.Figure 2.2. The space a brand occupies inside a customer's head can create a 'mental' patent. a 'set of expectations'. making their way into planning and strategy documents.
5 Kotler.g.Analysis. not the products it sells . Certain service brands. or a combination of them. 'Marketing Management . However. such as in retailing. most products and services cannot survive on functionality alone as this is usually matched in time. Levi's). The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. These products and services add value and make the offering much more difficult for competitors to emulate. sign. this should support the offering's performance and differentiate the brand from those of competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. information. 8th Ed. customers buy products to meet certain functional needs. Kodak. this is the case with all Internet companies. term. & Control'. Southwest Airlines and Amazon. (Europe: Prentice Hall) 1996. The Basic Brand The basic brand consists of the "name. 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.g. and because they most readily come to mind when consumers are asked to recall brands. or design. P. Implementation. In fact. 15 .com are examples. even when the alternatives are substantially cheaper or more readily available (e. actually sell products. preferring things they can see and touch. quick delivery) that enhance the customer’s total purchasing and use experience.. They are the historical core of branding because they are the most prevalent. 2. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. The most common barrier to competition is building a brand.The Gap stores.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Service Brands (intangible) are much less numerous than their product counter parts. with supplementary products and services (e. Essentially. but the brand itself is the store. Planning. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. symbol.
Analysis.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Planning. P. and the effect of selective perception. and Control'. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. However. and pay the most attention to the brands that will deliver the sought benefits. either through heightened attention or through an active information search. These beliefs depend on their previous experiences with the brand. 16 .3).4). it is important to clarify customers' underlying buying behaviour and the buying process. two factors can intervene between the purchase intention and the purchase decision . (Europe: Prentice-Hall) 8th Ed. The buying process consists of five stages (Figure 2. it is critical to understand what attributes consumers value.194 The process starts when the buyer recognises a need.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Consumers develop a set of brand beliefs about the attributes of competing brands. the consumer learns about competing brands. Once aroused. p.. This can be triggered by internal or external stimuli (advertisements). Through gathering information.attitudes of others and unexpected situational factors (Figure 2. 1996. Therefore. and selective retention.. In the evaluation stage. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. 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.3 . FIGURE 2. a consumer will be inclined to search for more information. 'Marketing Management . These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Implementation. selective distortion.
their negative attitude may influence the consumer's purchase intent or vice versa. even delighted. word-of-mouth. Expensive purchases involve some risk taking. If perceived performance and quality exceed their expectations then they are satisfied. somewhat satisfied. A consumer's decision to modify.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. After a consumer has actually purchased the product or service. they will be dissatisfied and look for alternative brands in the future.the customer will be highly satisfied. they will evaluate their level of satisfaction . and a preference for recognised brands they can trust. locking out potential competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. If performance falls below their expectations. Customer satisfaction and loyalty are essential to creating successful brands. advertising and communication. or avoid a purchase decision is heavily influenced by perceived risk. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. postpone. or dissatisfied with the purchase decision. 17 . as these services are intangible and therefore. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. A consumer tries to deal with this by gathering information from friends. These expectations are formed through a combination of past experiences. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. Customers' expectations are particularly important when dealing with services. customers make decisions purely on the basis of their expectations. and especially important when dealing with purchases made through the Internet.
Nov-Dec 1995.5. Marketing Management. Trust is critical for a brand's success. Customers that are passionately or emotionally loyal are those that have built trust in a company. D. Saturn. E. Federal Express.Figure 2. At the opposite end of the satisfaction spectrum are "apostles" . p.those who actively attack the brand telling others not to buy from the company. Spring 1999 18 . E. 'Why Satisfied Customers Defect' . M. The customers at the bottom end of the scale are "terrorists" . and believe that it will always act in their best interest.. FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. T. 6 7 Jones.Harvard Business Review. Johnson & Johnson. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. 'Growing the Trust Relationship'. & Sasser.customers who are satisfied and loyal and talk favourably about the brand .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. 91 Loyalty is derived when customers are continuously satisfied over time... Nov-Dec 1995 Hart..Harvard Business Review. 'Why Satisfied Customers Defect' . This satisfaction encompasses the whole experience and not just a company's products or services. C. Hewlett-Packard.. W. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Southwest Airlines and Xerox7. and Johnson. T. & Sasser.
'Building Stronger Brands through Online Communities' .. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 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.com.g. Spring 2000 19 . 1993 McWilliam. M. consistent orders Satisfied customers are the best advertisement . In this way. There is also clear evidence of this on the Internet. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Emotional loyalty can be also created through the formation of a strong user community around the brand.Sloan Management Review. Firstly. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 8 9 Peppers. 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). The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. emotional loyalty is born out of a consumer's personal relationship with a brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. D..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. & Rogers.they provide good word-of-mouth and are the best salespeople for the product / service 2. 'The One to One Future'. Harley-Davidson motorcycle clubs). G.
and understanding the needs and buying processes of the target market is essential. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Journal of Consumer Research.6 . there are brands that customers perceive as acceptable and would not resist buying. S. 2..BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. FIGURE 2. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. March 1998. FIGURE 2. there are brands that are unknown by most buyers. which goes well beyond the satisfaction of a specific need. A stronger brand enjoys a high degree of brand preference over competing brands. Beyond this. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.7 .8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. However. 20 .7).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. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. whereby customers would be unwilling to substitute it with competitors' offers. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). 343-373. a 'powerbrand' tends to have a high degree of brand loyalty. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.
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. D. (New York: Free Press). 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". The major brand assets are brand loyalty..Create Awareness . According to David Aaker (1991). trademarks. FIGURE 2. 1991 21 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. name awareness.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . and other assets such as patents. D.8 .8. 1991 10 Aaker. which is the value of the brand over and above its commodity value. (New York: Free Press). The benefits of each are outlined in Figure 2. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. perceived quality.. strong brand associations. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. and relationships with distributors and strategic partners.
Typically a brand leader obtains twice the market share of the number two brand.To save time and energy through identical repurchasing and loyalty Guarantee . the best performer for a particular purpose • Characterisation . & Tellis.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . in the following ways: • Brands. (London: McGraw Hill). (New York: Free Press).. N. & Downham. to quickly identify sought after products • • Practicality . to its communication • Ethical . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. brands perform several functions that add value and customer benefits: • Identification .The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.8. Premium pricing increases revenue. to make sense of the offer. J. and the number two twice the share of the number three12.. to its logo. production and marketing.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. R.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 158-170. market share and profits ..To be clearly seen. 'Strategic Brand Management'. 22 ..Satisfaction linked to the attractiveness of the brand. The brand leader is the most profitable and all beyond number two are unprofitable13. Journal of Marketing Research. P. 'Consumer Market Research Handbook'.To be sure of buying the best product in the category. J. 3rd Ed. pp.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. G. • Brand Leverage .To have confirmation of your self-image or the image that you present to others • Continuity . 1986 13 Golder. May 1993. 1992 Worcester. 11 12 Kapferer.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2..
BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . • Motivating Stakeholders . 23 . They also tend to elicit community and government support. • The Brand Barrier . maintain good price levels and generate strong cash flows. Companies can maintain a brand while modifying the underlying product to account for new technology. it can build a strong market share.g.The product life cycle applies to products. fashion or prevailing market conditions. Coca-Cola “the real thing”).Brand leaders usually have the financial strength to fend off competitors. and the characteristics of successful brands. This. 2. In addition. Johnson & Johnson with Tylenol).Strong brands are more attractive to investors. The brand can also be used to penetrate new markets. not brands. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. In trying to estimate the monetary value of brands.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. The next chapter describes the process of how brands are built.g. companies such as Interbrand (see Appendix A). drives up share price and provides the basis for future growth. When a company creates this type of customer preference and loyalty. but there remains an ongoing controversy about how accurate and meaningful these measures are. in turn. • Avenues for Growth .Companies with strong brands attract good recruits.Dominating a niche market is usually more profitable than being fifth in a large market. brand leaders can exploit their superiority in the market (e. and Young & Rubicam have created complex formulas. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. • Brand Loyalty and Beliefs . the tools that are used.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
and keep it turning. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. highlighting important factors that contribute to the success of each step along the way.1 INTRODUCTION Building a strong brand is a complex task.1 . The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.1. it should provide a satisfactory experience and lead to a willingness to buy again. brand awareness.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. Once this has been established.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. FIGURE 3. promotion. If the offering is developed properly. the next step is to get customers to try the brand. 3. This chapter spells out the traditional brandbuilding process. selling. which are created through advertising. This is illustrated in Figure 3. and direct marketing. confidence and brand equity are built. public relations. The major characteristics of successful brands are also reviewed.
Without a good product or service. In this way. 26 . In order to do this.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . a company must develop a strong understanding of who their potential customers are. a distinctive brand identity (I). it will never attract a strong client base. unless differentiation and awareness can be developed.each is essential. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . FIGURE 3. Similarly. and added value (AV).2). As such. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. it is impossible to build a successful brand.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. a compelling value proposition is the combination of an effective product or service (P).a strong offer that a potential customer would find compelling and interesting. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. the brand can elicit feelings of confidence that it is of higher quality than competitors'.
169 Jones. J. interests. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice..g. faith in brand generates satisfaction in use. the number of competing alternatives and the large variety of advertising and selling messages. 2nd Ed. these needs are as likely to be about satisfying self-actualisation or esteem needs.the design. the pace of technical change. People use brands to express their lifestyles. The large number of decisions. Coca-Cola.3. industry endorsements and newspaper editorials. 1986 27 . • Manufacturers' Name and Reputation . P.1 Added Value Most buying decisions are Added value is at the heart of building successful brands..if a brand provides good service over time. • User Associations . pp.in many cases. 1998.brands frequently acquire an image from the type of people who are seen as using them. which they perceive as meeting their needs. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. • Brand Appearance . 14 15 Doyle. layout and appearance of the brand can clearly affect preference by offering cues to quality. Lexington Books). MA. influenced by brand values. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. • Belief in Efficacy . For pharmaceuticals. P. Kellogg's) attached to a new product will transfer positive associations. if customers have faith that a brand will work. as they are to be about satisfying basic physical and economic needs14. Gillette. cosmetics and high-tech products. or to gain a sense of belonging. In today's affluent society. mean that buyers look for short cuts. Brand values derive from five major sources15: • Experience of Use . values or wealth. Hewlett-Packard. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.In many situations a strong company name (e. Customers choose brands. it acquires added values of familiarity and proven reliability. providing confidence and incentive to trial. Sony. which are additional to those based upon real performance. 'Marketing Management and Strategy'. (Europe: Prentice-Hall). it is more likely to work effectively for them. 'What's in a Name? Advertising and the Concept of Brands' (Lexington.
which remains fixed over time. Themes include the physical appearance (logo.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. prestige. however the brand style and core tend to be less flexible.g.the way the brand communicates through its advertising. • The Brand Style .g. which depends on how the target market perceives the brand. 16 Kapferer. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . friendly).3. colour scheme. and the relationship expressed (e. (New York: The Free Press). and advertising. This may be different from the brand image..the fundamental or genetic code of the brand.articulates the brand core in terms of the culture it conveys. • The Brand Theme . style or cultural differences from one country to another.Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. visual appearance. J. type of spokesperson / customer image used to advertise the brand). glamour. 1992 28 . its reflection (e. A company should seek to differentiate its brand through developing a distinctive identity. 'Strategic Brand Management'. and visual appearance). etc. packaging. Brand themes are the most flexible element and will tend to change with fashion.3: • The Brand Core . press releases. features. its personality and its image or self-projection .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. Finally. website design. understanding the brand's core and style helps set the perimeters of brand extensions . 29 . (New York: Free Press). J. its strengths and opportunities. structure and ease of use). below-the-line activities.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.g.3 .how far the brand can be meaningfully stretched to other products and market segments. advertising. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. 'Strategic Brand Management'.. and through line and brand extensions. 1992 The brand prism enables management to understand the brand. Secondly. It also facilitates consistency in the message being transmitted through presentation (e.
Customers need to be stimulated to seek information about the brand's uses. deliver and reinforce this value proposition (see Appendix B .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. Before potential customers can buy a product / service.The company has to create awareness of the brand. The value proposition must then be articulated in terms of the 'marketing mix' .The McKinsey 7-S Framework). E. FIGURE 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. culture and staff needed to support. • Evaluation . the company must ensure that it develops the appropriate structure. If the offering is developed properly. 1962. Price. features and advantages. management style. they must learn about it. 17 Rogers. (New York: Free Press). • Interest . strategy (partnerships and alliances).Product and service features. 1962. E. systems. pp.79-86 The Innovation-Adoption Model consists of: • Awareness . • Adoption .The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.The customer is satisfied and decides to make regular use of the product / service.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.Figure 3. it should lead to satisfaction and re-purchase.4 .. and its products / services. Advertising and PR are common tools for achieving awareness.often referred to as the '4Ps' . colleagues and opinion leaders become important influences at this stage. 'Diffusion of Innovations'. This learning is called the adoption process17 .Customers consider whether the product / service will meet their particular needs. • Trial .. pp. skills. The value proposition must be communicated to entice customers to try the product / service. 'Diffusion of Innovations'. Personal sources such as word-of-mouth from friends. (New York: Free Press).4. Promotion and Place (distribution strategy). and the product / service's perceived performance.79-86 30 .
This information is a key competitive advantage. multi-transaction relationship. but enhanced customer interaction through relationship building. & loyalty / discount cards. In this way. (New York: Free Press). 3.for example. the company may supply customers with special equipment or tools (e.such as airline frequent flyer programmes.. companies have used the tools of the promotions mix . Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. personal selling and public relations / publicity . A. Social Benefits . 18 Berry.g.to move customers through the adoption process. software) to help customers interact with the company. This is often referred to as Customer Relationship Management (CRM). when each trusts the other to deal fairly and reliably.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. allowing companies to communicate regularly with their customers and customise their interaction. pp.136-142 31 . companies can increase the value of each customer. companies can increase buyers' satisfaction.advertising. making them less likely to switch to a competitor. 1991. Over time. • Structural Ties . Through building relationships with customers. This focuses on establishing a longterm.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. encouraging evaluation and trial. Advertising and public relations can be effective in generating awareness and interest. providing insight into customers' needs and wants. 'Marketing Services: Competing Through Quality'. this process enables an exchange of information. L. sales promotion. while strengthening the position and value of the brand. direct marketing. Customer service is an important element of this relationship.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. & Parasuraman. Internet linkages.
A successful brand requires an effective selling.If the brand is not the innovator. As a result. As customers build trust in the brand through satisfaction of use and experience. comprehension and intention to buy. then its position will be undermined. pp. P. It is easier to capture a share of the consumer's mind and build a customer base. interaction and relationship building. which will add value and distinguish it from competition. • First-Mover Advantage . The Internet provides the opportunity for companies to create compelling value propositions never before possible. 3. companies must actively communicate it to the target audience to entice trial. • Unique Positioning Concept . If the quality of the experience deteriorates. companies have the opportunity to start building relationships with their customers. or if the brand is surpassed by superior offers from competitors.Traditionally. while providing new tools for promotion. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. It often takes years to build up the added values. As such. trigger trial and reinforce commitment to it.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19.. brands were not built quickly. • Strong Communications Programme . but it makes the task easier. when the brand has no competitors to rival its position. which will communicate the brand's existence. 2nd Ed. 'Marketing Management & Strategy'. advertising or promotional campaign. Without building awareness.. it has a profound impact on the traditional brand-building process. Once the framework has been established and the organisation configured to provide this proposition. strengthening the brand further.176-177 32 . its function and psychological values. value proposition or augmented brand. it must have a unique positioning concept . (Europe: Prentice-Hall). the brand is meaningless. and establish a trusting relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and making it more difficult for competitors to emulate.Being first into the market does not necessarily bring success.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. 1998.a segmentation scheme.Satisfactory experience is the major determinant of brand values. including: • A Quality Product / Service Experience . 19 Doyle. • Time and Consistency .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
1 INTRODUCTION The Internet is transforming the business environment. FIGURE 4. 34 . news groups and mailing lists.Figure 4. but in practice not in real time. it is a common technology platform that allows computing devices to communicate with each other.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. In essence. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. it offers a number of alternative channels that enable businesses and people to communicate. Hypertext allows information to be organised in a user-friendly way that is easily accessible. E-MAIL Is the part of the Internet that most users use at present. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. This chapter provides an overview of the Internet and its defining characteristics. and the 'world wide web' (www) . and a critical source of added value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1 . and provides the opportunity for dynamic interaction. 4. In doing so. creating new challenges and opportunities. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. which contain hypertext and pictures. Information is becoming a major part of the products and services that people buy. The three core channels include e-mail (the most common).1.
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 .not previously available with mass medium forms of communication. The Internet can also be accessed at any time . anywhere. • It Overcomes the Barriers of Time and Space .this radically alters the process of interaction between communicating parties. when the United States Defence Department developed the 'ARPAnet'. • It Allows for Two-way Communication and Interactivity . allowing both parties to identify each other and build one-to-one relationships . ubiquitous links to anyone. regardless of where the computer or Internet access device is physically located. which was intended to link military networks together. By allowing for direct. 4. the Internet lets individuals and companies build interactive relationships with customers and suppliers. These defining characteristics have fuelled its explosive growth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.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.The Internet is a global network and can be reached from everywhere. These qualities eliminate the barriers of time and space that exist in the physical world.24 hours a day. These characteristics combine to create a very powerful medium. Graph is not drawn to scale).2. and deliver new products and services at low cost.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. The context of the Internet and certain key developments are highlighted in the Figure 4.2 (Note: 35 .
Figure 4.000.000.3 .2 .000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.a PricewaterhouseCoopers Report.com) 36 .economist. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 1.3. 1996 (www. 2000 Internet / ARPAnet was created Dell.000.000 1. 1998. FIGURE 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 10.000 1969: 10.000 100. as cited in 'E-Business Technology Forecast' .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. 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.
Low-cost networking alternatives .2 20 'World Online Populations' . and gateway services).BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. 'Electronic Commerce (finally) Comes of Age'. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. As shown in Figure 4. etc.). making it more cost effective for software developers and other technology providers to create interoperable products.internet. 1996. The development of critical processes (ordering. 2000 (http://cyberatlas. FIGURE 4. Multimedia development tools that can be used to create rich content. The emergence of open standards in development tools and at the network protocol level (e.. there will be an estimated 375 million Internet users world-wide. hosting.g. payment.Cheap bandwidth .4 .High-powered servers . offering inexpensive bandwidth. L. The growth in support services (e.. web design.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .Cheap microprocessors & RAM . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.com) 37 . TCP/IP).4. No. G. billing. increasing to 500 million users by 200220.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . Easier access to these networks provided by point-and-click web browsers.g. the momentum created by all these forces has created a virtuous cycle of growth. Reed.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .Higher PC penetration among consumers and companies .CyberAtlas Internet Statistics and Market Research.E-Marketplaces .Attractive infrastructure and middleware software .Content Aggregators . The McKinsey Quarterly.
These activities highlight the adoption of the Internet as an interactive.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. FIGURE 4.5. chat rooms. as cited in the Economist Intelligence Unit (EIU).com) 38 .eiu. 2000 (www. entertainment) and purchasing (37%) .5 . communication and information tool.g.Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). reveals the wide range of areas where people are embracing the Internet .from communicating (90% use e-mail) and sourcing information. April 13. to interacting (e.
telephone) is that the Internet goes beyond just enabling transactions. The buyer and seller 'face' each other through an electronic connection. Instead there is a website. web browsers. However. content.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. The main difference between the Internet and other electronic media (i. projected by Gartner Group.e. software. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact.6 . There is no need to travel to a physical location. no order book. fax.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. April 2000 39 .WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. and people. FIGURE 4. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. they all project the value e-commerce transactions to grow at unprecedented rates. and no cash register.
represents a level of efficiency and integration previously unattainable.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . 66-76 40 . Although the particular impact will differ between industries. operation (e. 'Meeting the Challenge of Disruptive Change'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.and revolutionary new business models are emerging. pp. partners and other corporate constituencies. the explosion of information is placing a premium on skilled information management. At the same time. how they compete and how they serve their customers . The Internet also facilitates the development and co-ordination of global activities (e.g. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. Dell Computers). some of which look set to become the superbrands of the future (e. For example. This is threatening to undermine many old established brands. and transforming traditional distribution channels.g. the Internet is sidelining the role of many traditional intermediaries. March . 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. Harvard Business Review. & Overdorf. Yahoo!). M. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day.how companies operate. By allowing customers to talk knowledgeably and directly to suppliers. New brands and business models are emerging to seize this opportunity. 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.. which are often disruptive to traditional business models21.April 2000. C. suppliers. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. Additionally..g. through the use of extranets). Volume 78 Issue 2. 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.
Now companies need to move at warp-speed. respond to competitive and market dynamics. products and services.in developing products. and the 24 x 7 environment. the globalisation of business. getting closer to customers and ultimately staying ahead of competitors.they can choose between traditional 'bricks-and-mortar' companies. to capture new opportunities. fierce competition. Internet technology can be used to exploit collective learning and knowledge. little loyalty. or catalogues. They can move from one supplier to another searching for the best prices. their organisations must harness knowledge .forrester. collaborate more effectively and ultimately embed organisational intelligence within processes. 22 Colony. as they have access to more information leading to more informed decision-making. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. G. The Pace of Business is Accelerating With the fast pace of technological change. the diminishing barriers-to-entry and the lower switching costs. allowing employees to share knowledge. combined with the emergence of electronic intermediaries.com) 41 . commit and deploy resources. switching costs are much lower. has resulted in a fierce competitive environment. As a result. as they are just one 'click' away. constantly innovate. This. the typical clock-speed at which companies need to operate has accelerated. ensuring the delivery of a satisfying customer experience. improving processes.Forrester Research. it also removes the geographical protection from competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. and reorganise as appropriate. empowered customers. This is forcing companies to become flexible and responsive to customer needs. 2000 (www. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. According to George Colony. the development of a knowledge economy. quick evolution and all the power. CEO of Forrester Research22. highest convenience and quickest satisfaction. It also provides easy access to competitors' offers and allows customers to consider every available alternative.internally and externally . online stores. Customers have more options than ever before .. these new highly informed customers are "empowered fruit flies". 'Empowered Fruit Flies' . with no time.
Examples of emerging information age business structures include flat versus hierarchical. variety. The opportunity of linking the complete supply chain 'virtually'. However. 1999 . companies can provide customers with a strong value proposition by offering them the best in quality. which highlights the typical structure and dynamics of an online company. The extent of this partnering is illustrated in Figure 4. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. alliances and partnerships have taken on a new level of strategic importance. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. combined with intense competitive pressures. extensive outsourcing. it provides the opportunity to reach customers where they want. Traditionally. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon.A Research Report by TeslaGroup. and multiple strategic alliances and partnerships. linking companies with competitors and players from entirely different industries and business sectors. 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. how they want and with the levels of customer service they demand.teslagroup. linking companies with suppliers and customers up and down a pre-defined value chain. information. when they want. companies have looked upon alliances only as a means of filling gaps. most Internet and e-commerce partnerships extend beyond this. thus creating a 'value net23'. achieve global reach and realise a new source of cost advantage. and partnering up with the best for the remaining activities. Increasingly. It allows companies to improve customer service.com) 42 .7. and the need for speed and flexibility have accelerated the unbundling of business systems. 23 'The Future of E-Business' . and most traditional partnerships were vertical. advice and convenience. As such.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. In this way. supply chain cooperation.(www.
competition is intensifying. The Internet is transforming every business to some degree. D. tools and opportunities. New opportunities for efficiency and co-ordination are emerging. Partnering with portals and affiliate web sites is important in driving traffic to a web site. 4. S. many online companies are blending together the products and services of a wide range of companies. G. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage.they are business issues.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.6 CONCLUSION The Internet and its strategic impact are not technological issues . the pace of business is accelerating and power is shifting to the customer. 'Organising for e-Commerce' . This is the substance of the next chapter.. April 2000 In an attempt to provide a rich customer experience.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. & Stirton. while making the offering hard to duplicate off-line. As such.dot.7 . 43 .a Boston Consulting Group (BCG) Analysis. it is transforming the competitive landscape and brand-building environment.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. while triggering the emergence of new brandbuilding strategies. This provides customers with added value.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
where the user feels a part of. and projects it onto a third party intermediary (the media). etc. New strategies and tools for building brands on the Internet are identified. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. May 1999 (www. the logic of the Internet cuts another way. Traditionally. In addition. the Internet makes search and comparison much easier. The Internet. The limitations of brand-building on the Internet are also discussed..Durlacher Research. 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. addresses. brands have been developed in an environment whereby a company creates a brand. credit card numbers. 5.durlacher. Customers derive added value through the provision of information on the products or services they buy. they have never handled or seen (except on-screen). whereby the company can establish a dialogue and 24 Marathe.2 THE NEW DYNAMICS OF BRANDS Traditionally. and the fact that customers are buying goods that. as well as on topics of interest related to the brand and product characteristics25. J.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. Generally.com) 45 .names. offers interactivity. on the other hand. People only tend to transact with sites they know and trust . in addition to providing added value. has placed greater importance on trust and security. and sites that understand the user's needs and preferences24. in most cases. the intangible nature of the Internet. However. In response. On the other hand. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online.sites that provide a wealth of information and make comparison shopping easy. Transactions on the Internet require customers to provide detailed personal information . people have concerns about sharing personal information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 'Internet Portals' . many unnamed customers develop a 'relationship' with the brand. This threatens to undermine the value of brands. including the interactive approach to attracting customers and building loyalty.
The differences between the traditional approach and the one-to-one approach are outlined in Table 5. 151-160 46 . . 1997 (www.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative.duke. 'Adding Product Value Through Information'. understand and relate to customers. In doing so. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. pp. This creates the opportunity for companies to build stronger relationships than previously attainable..BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26.1. 1999. M.. relationship building characteristics of the Internet.. B. Rogers. January-February. a company can listen. TABLE 5. However. D.edu) 26 Peppers. this also poses a challenge as these relationships may take on a life and character of their own. companies have to find innovative ways of leveraging the information and 25 McCann.Fuqua School of Business. brand-building must focus on the end-to-end customer experience . J. Prof.from the promises made in the value proposition. rather than simply speaking at customers.. In maximising the customer experience.1 . learn. to its delivery to the customer. January 28. Duke University. & Dorf. 'Is Your Company Ready for One-to-One Marketing?' . service approach Customised The Internet gives companies control over all their interactions with customers and therefore.Harvard Business Review.
This view is reinforced by in-depth studies carried out by Bain & Co.. and Novak.converence-board. and some are spending over $50029.org) 28 Rigby. This is further reinforced by the fact that. S. as cited in 'Creating a High-Impact Digital Customer Experience' .. Baveja. For example. L.. Kearney White Paper. 1999 (www. 2000 (www. These points stress the importance of online customer loyalty.com and www.A Mainspring Communication Report in collaboration with Bain & Co. 27 'Electronic Business Outlook'. but also provides more opportunities for cross-selling. S. P. & Hancock. - Loyal customers are more willing to buy other products from the company. In fact. unless they are selling high-price. Harvard Business Review.bain.due to more frequent shopping and larger purchases. Rastogi.word-of-mouth is the single most effective and economical way online businesses grow their sites.. T. D. - Repeat customers refer more people and bring in more business . - Repeat purchasers spend more and generate larger transactions . . it is very unlikely that an online retailer can break even on a one-time shopper.often. 'The Value of Online Customer Loyalty and How You Can Capture it'. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers .. Repeat purchasing not only binds trust.Research by PricewaterhouseCoopers / The Conference Board. Therefore. and with customers holding all the power. high-margin items. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer.pwcglobal. 'How to Acquire Customers on the Web'. companies must ensure that they provide a completely satisfying end-to-end customer experience.. a disgruntled online customer tells 10 people about a poor experience30. T.. March 17..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. C. MayJune 2000 30 A Forrester Research Study. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap.An A. . companies need to retain customers so that they return to the site repeatedly. J. Zook. R. 2000 47 . and to recover their investment.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. D. on average. Chu. it could be argued that customer loyalty is even more critical online. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.com) 29 Hoffman. customer acquisition costs are high.
1 . Once the up-front investments are made (for research and development and technology infrastructure). as illustrated in Figure 5. this is not the case on the Internet. customisation for individual customers. As a result. each additional unit sold does not cost more than the last to deliver. 180-182 48 .THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. the costs approach zero32.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. businesses and online communities that rely on connectivity can enjoy 'network effects'. 1989.. additional customers and transactions can be managed with limited fixed cost investment. additional products. Even more important.1. 'Positive Economics'.. Similarly. R. pp. and the value that each member realises. However. increases disproportionately as more people join the network. G. where the value of the network. (also referred to as 'viral economics'). as the benefits of scale are overwhelmed by the disadvantages of size31. and other features can be added or changed at low marginal cost. 7th Ed. (London: Harper & Row). FIGURE 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. and in the case of information-based products.
direct marketing.org Study in collaboration with The Boston Consulting Group.2. fulfilment • Defensible advantage against competitors SCALEABLE. '5 Rules of the eEconomy'. enhancing the interaction. It also allows online companies to tap supplementary revenue streams.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.. R. advertising and referrals. This makes it more efficient in improving product selection. 21 . M. As the company builds a customer base and develops a relationship with customers. With no competitors around. delivering increased margin per customer . Outlook 1999.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. 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.A Publication by Andersen Consulting 'The State of Online Retailing' . its ability to track customer preferences and customise offerings improves.A Shop. being first into a market makes it easier to capture the consumer's share of mind. cross-selling and up-selling33. including direct marketing. Nov 1998 49 . FIGURE 5.2 .Figure 5. link revenues 32 33 Melnicoff. No.
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. 5. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. web sites. as once a strong lead is established. the value of the company rises exponentially with market share. the leader will pick up momentum and will stand to gain an insurmountable advantage .org Study in collaboration with The Boston Consulting Group. This is the logic behind some of the extraordinary valuations of Internet companies. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. such as 'viral' marketing. "creating a buzz". When a company reaches 'critical mass'. Given the connectivity of the Internet among customers. or until a competitor finds a way to change the game again. It is often referred to as "word-of-mouth". and "network marketing". leading to the exponential expansion of the customer base. chat rooms and bulletin boards. Nov 1998 50 . The Internet. commerce and distribution partners. with a minimal budget and maximum effect. Word-of-mouth is a particularly powerful medium. This snowball effect favours first-movers. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. creating a potentially exponential growth (like a virus) in the message's visibility and effect. viral marketing is an effective tool in getting a message out fast. New marketing strategies. As a result. Larger sites can also negotiate better supplier discounts or product placement fees. This. 34 'The State of Online Retailing' . As a result. and word-of-mouth even more effective. as it carries the implied endorsement from a friend.unless the leader makes a serious mistake.A Shop. with its e-mail lists. its growth curve relative to a new entrant is somewhat daunting. By the time a company has reached critical mass. "leveraging the media". makes communication tighter. larger sites can leverage more customer advocates to reduce customer acquisition costs. 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. and the cost of switching to an alternative brand becomes quite high.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. in turn. the brand begins to take hold. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base.
Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. friends to visit it. sign up for their own free e-mail.1 The Case of Hotmail.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. 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. In fact.com. saying: • "Get Your Private. whether for communications or community.5. Hotmail acquired over 12 million subscribers. a company now owned by Microsoft. eGroups and Geocities (both recently acquired by Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. • Each new user becomes a company salesperson. In its first 1. and then propel the message even further to their own ever-increasing circles of friends and associates.5 years. seven days a week. but Hotmail signs up more than 150. Free Email at http://www. Today they are the largest e-mail provider in the world with over 40 million users. and the message spreads organically.hotmail.com was one of the first free web-based e-mail services.000 subscribers within a few years of launch. 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). Geocities enables people to create personal websites for free. 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. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.000 subscribers every day. where they have never carried out any promotional activities. Hotmail. and they created a subscriber base more rapidly than any company in history.com The classic example of viral marketing is Hotmail. they tell all their 51 . When a user builds a website. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). they will have a powerful viral opportunity at their disposal.
Place)..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . T. Chu. D. S. J.com) 52 .. Zook. FIGURE 5. 30% of potential customers leave sites because they cannot find what they are looking for.An A. Promotion. T.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. In fact. S.. Sites that are difficult to use can cause frustration. Rastogi.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. The customers' ability to access and display information rapidly is extremely important36.. Kearney White Paper.An A. 'The Value of Online Customer Loyalty and How You Can Capture it'. March 17. 2000 37 Rigby. making customers 'click off' to another site. C. and 66% of people who start a 'shopping basket' fail to complete the transaction37. Price.. R. Baveja. 2000 (www. .3 . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.A PricewaterhouseCoopers Report.A Mainspring Communication Report in collaboration with Bain & Co.. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. & Hancock.bain. 2000 'The E-business Technology Forecast' . In essence. As 35 36 'Creating a High-Impact Digital Customer Experience' .3). Kearney White Paper..
businessweek. T. and a wide range of products. FIGURE 5. February 2000 Issue 53 . With almost infinite display space and inventory capability.com) Davenport.. 1999 (www. October 29. as cited in Business Week. expert insights. up-to-date information.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.businessweek. as cited in Business Week Magazine. which can enhance the company's value proposition. ease-of-use.4 . 'Sticky Business'. 29th October 1999 (www.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. and fast response times are among the most important factors in establishing web brand loyalty38. CIO Magazine. 38 39 Cognitiative Inc. ease-of-navigation. whereas a slow response time and site downtime will have a significant negative impact. online companies have the opportunity to provide rich.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.4. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.
'Building Stronger Brands through Online Communities' . According to Forrester Research40. Online sites can track a customer's purchase history and modify its service accordingly.. 31% of online consumers use the Internet for obtaining product information. It fosters a sense of belonging41 among the members. An online community offers a compelling way to entice customers back to a site. For a community to work. 1995. as well as through loyalty programmes that provide targeted benefits. 1999 (www. and nearly 20% use it for post-sales support. 40 41 Morrisette. or prior transactions.5). . On the other hand. J. An important contribution of these communities is that they provide members with a medium to communicate with each other. Members can interact in chat rooms. 3. & Bluestein. demographics. 54 . and organise live events. iVillage and Geocities). it needs a critical mass of members42. 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). K. based on profile information.. even if they purchase offline. which enhances the user's online experience. 'Real Profits from Virtual Communities' . G. These sites allow members to interact with one another. which is facilitated by a combination of factors (Figure 5.forrester. & Hagel. share information and access a wide range of services. A. and advertising (if it is relevant and useful).Sloan Management Review.A Forrester Research Report. Other content includes community-generated content..com) McWilliam. visitors should not be engulfed with too much information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision..g. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.. use bulletin boards.The McKinsey Quarterly. No. S. Customisation creates the feeling of a one-to-one relationship. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). Often. Community Online communities are emerging as new gathering places for consumers with similar interests (e. Customisation Customisation involves tailoring the presentation of a web-site to individuals. Clemmer. Spring 2000 42 Armstrong. W.
Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. M. 43 Fournier. S.. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 55 .A PricewaterhouseCoopers Study. allowing customers to deepen their experience with a brand and build more personal connection. when membership in the brand's community becomes an end in itself43.. pp. March 1998. 'Making Real Sense of Virtual Communities' . 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. 343-373.. Companies can provide a selection of related links that complement the site's purpose and value proposition. This is similar to placing offline stores in high traffic areas. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. Once customers know of a site. Site-tosite connectivity focuses on connecting users to other relevant sites..brand-name. A. and can create emotional loyalty. O'Donnell & Gupta. Mulcahy. they opt to input the URL (Internet address .5 .www. as well as attracting traffic from other sites.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole.com) directly into the browser and access the site immediately. C.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Journal of Consumer Research.6). 1999 Communities enhance the speed and value of information sharing.
delivery and return options. Customers share security and privacy concerns.6 . 45 MarketWatch. activities. Therefore. as well as informing and reminding customers of special offers.com) 56 . live chat. Communication can be tailored to specific user interests and should allow for two-way interaction. which provide targeted and unique (customised) benefits to the customer. Other tools such as bookmarking the page can also facilitate connectivity. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. events and subjects of interest to the customer. (www.CUSTOMER ACCESS TO INFORMATION CUSTOMER INTERNET ACCESS DEVICE SOFTWARE AND BROWSER PORTAL VERTICAL PORTAL WEBSITE CUSTOMER SIDE INTERNET SIDE User-to-site connectivity focuses on providing incentives for users to connect back to the site. Customer Care Online customers often require assistance and reassurance. In addition. serves this purpose and helps to build customer loyalty. as well as features such as gift-wrapping.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.marketwatch. It is important in building relationships. toll-free telephone numbers. online chat. The development of loyalty programmes. customer support at all stages of the interaction is important. and online surveys. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. news up-dates. and can be provided through e-mail. and FAQ pages (Frequently Asked Questions) to solve problems. customer care activities can involve providing a variety of payment.
This model consists of five stages . The popularity and effectiveness of the different promotion methods are outlined in Figure 5.7.mckinseyquarterly. etc. S. Waitman. billboards. because there is no physical presence. 1996. This is more difficult online than offline.2. links from directory searches (Connectivity).. The mechanisms to communicate range from traditional media (TV. Learn and Relate.. and bring people to the site for the first time. M.Awareness. & Zeisser. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Newspapers. R. Trial. Figure 3.Attract. The company must build awareness and communicate its value proposition to its target customers. Adoption).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.7 . e-mail notifications and banner advertisements. Interest. modified to take into account of the interactive dynamics of the Internet. FIGURE 5. McKinsey Quarterly. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 180-183 (www. Engage. including affiliate programmes with other websites.. Retain.) to online tools. 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 ’ .4 . McQuade.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. visibility relies solely on Communication.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. 'Marketing to the Digital Consumer'. Magazines. No.. Evaluation. A. Therefore.8.
46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.5) 2. multiplied by the expected rate of transactions. 3.5 3. affiliate programmes.3 3. discounted over the expected duration of the brand-customer relationship. Fig.3 2.com) The most effective methods are direct e-mail. public relations and television advertising.4 3.2 4.7 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. as cited in 'Targeting Consumers via the Internet' .8 4.0 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.3) is useful to ensure that a company develops a distinct and consistent brand identity.WEBSITE PROMOTION METHODS .6 3. 3.4 4. Engage With the multitude of choice available on the Internet.3 Source: Forrester Research. Companies then need to engage customers to obtain their interest and participation. Creativity is also an important factor in gaining attention in today's cluttered marketplace.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 .Economist Intelligence Unit 2000 (www. Kapferer's Brand Prism (Ch.8 . The key factors at this stage are Convenience combined with interesting Content.ebusinessforum.4 3. 58 . it is important to quickly engage consumers' interest before they move on.1 3. Attracting customers is only the first step in building online brands.
attitudes and behaviour).9). Learn The Internet provides extensive opportunities to learn about consumers (demographics. can create value for the customer and help build the brand-customer relationship. This helps to create a customer base that spends more time and money at a site. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. a company can create value by providing a personalised online experience. • The Internet supports brand-building activities where there is a need to build a relationship.who they are and why they shop online. 59 . Certain product categories. Radio). TV.g. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. Communities and Customisation are other sticky applications. and must be continuously updated due to the multiple visit nature of customers. Content is the basic driver of retaining customers on a site. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. 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. if used properly. and forge closer relationships than any offline operator. The initial site registration provides an early opportunity to obtain useful information.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. 5. The objective is to increase the conversion rate (% of browsers converted into buyers). Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. and what additional products and services are they interested in provides companies with valuable information which. Building up a knowledge database on each customer . such as groceries and convenience goods.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.
from the promises made in the value proposition.. 60 .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. M. it is not economically feasible to sell certain products. Waitman. • Brand-building favours products that can be sold online.2. The next chapter analyses the brand-building efforts of seven companies. and the need to stimulate the other senses (taste. McQuade. The interactive brand-building process involves attracting. 1996. No.9 . & Zeisser.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. providing further added value. McKinsey Quarterly. the experience is the brand.mckinseyquarterly. the interaction provides the ability for companies to learn from their customers and relate. to its delivery to the customer. 'Marketing to the Digital Consumer'.. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.9 CONCLUSION On the Internet.. In order to create "apostles". A. and as the relationship develops. due to high delivery and transaction costs (relative to the value of the product). Given the high acquisition costs of online customers. 5. especially in small quantities. engaging and retaining customers. it is critical for companies to build relationships and foster brand loyalty. touch. S. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. companies must provide a satisfying end-to-end customer experience . 180-183 (www. smell). pp.. R. These case studies provide a practical insight into how companies are building their online brands.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
The Economist. and other key factors that have contributed to its success (or failure). 'Amazon.com. Boo. November 11. Amazon. 2000 (www.com's success stems from its compelling value proposition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Each case is presented in the same format including.see Appendix A. Barnesandnoble.com.com. discounted prices. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). and the most widely recognised e-commerce brand name in the US (with 60% awareness48). CDnow. In addition. Not a River' . 6. more information.com and Yahoo!.com) 62 . and enjoyable experience. innovation and delivering on its promises. February 26. greater convenience. easy. its value proposition. In July 1995. Amazon.interbrand. it is the most visited e-commerce website in America. Through its provision of a one-stop shopping experience. 6.com) .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. a company overview.2 CASE STUDY: AMAZON. and higher levels of customisation and service than the traditional shopping experience allows. and has sales of over $2 billion. and is one of the few Internet brands that is recognised all over the world.2. and one of the top two or three in Britain. its brand-building strategy (how it generates traffic). In addition. Germany and Japan49. 47 48 Interbrand (www. and has equity investments in several e-tailers. The cases are presented in the following sequence .com has become synonymous with e-commerce. Amazon has been able to differentiate itself from other online competitors. Figure 6.economist.2 Value Proposition Amazon. including: increased selection. It is the 57th most valuable brand in the world47.Goldman Sachs Report.It's an Ocean.com launched with a mission to use the Internet to transform book buying into a fast. combined with its levels of customisation and customer service. France. the sources of added value (using the 7Cs Framework).com . Amazon has cultivated a reputation for excellence.2. Gap.COM 6. eBay.1 Company Overview Amazon.Amazon.1 outlines Amazon's timeline and major milestones. Amazon serves over 23 million customers from 160 countries. Amazon provides increased added value on several dimensions.1 INTRODUCTION This chapter provides an analysis of seven companies. 1999 49 'Amazon's Amazing Ambition' .
Amazon launches lawn & patio store .com Announce Strategic Investment and Promotional Agreement .000 members Amazon.com.Amazon announces investment in kozmo.toolcrib.com opens its virtual doors at amazon.Amazon launches new kitchen store .com Auctions and zShops provide new tools to its merchant community .Amazon opens customer service centre in The Hague .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . a tools and equipment store for professional tool users and woodworkers .com enters European book market Microsoft signs Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com Amazon introduces "Purchase CirclesTM".New home living store from living. West Virginia.com .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com is founded by Jeff Bezos Amazon.Amazon enters strategic alliance with living.com . and more Amazon launches "Amazon. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.Amazon surpasses 20 million cumulative customer accounts .Customers can shop at Amazon.Amazon. Amazon.Amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.amazon. and minority investment in.sothebys.Amazon launches www. Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon and eziba.com announce investment and strategic alliance .COM .com .com 63 .Amazon and online car-buying service Greenlight. such as the Palm VII organiser.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com Amazon announces further plans to expand distribution network to meet rapid growth." providing shopping from wireless devices.com to create a "home living" store at amazon.Amazon launches health and beauty store .com Anywhere. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. Ashford.com via the new wireless pocket PC . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com Electronics and Amazon.com.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon enters into a strategic partnership with Drugstore.com and NextCard launch co-branded credit card .com .TIMELINE AND MAJOR MILESTONES Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.amazon.com Amazon invests in Pets. workplaces.Amazon opens a customer service centre in Huntington. featuring thousands of bestseller lists for hometowns. universities.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. to meet rapid growth .com invests in wineshopper. 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.Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.
downloads quickly and services visitors adequately . offering multiple paths to a given book or product. the 1-ClickTM express checkout. interviews with authors. gift reminders. encourage repeat visits and drive higher conversion rates. Content Amazon provides content on several levels.1. logically structured.e.1 . including book jacket images. recommendations. gift click.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The site is easy-to-use. and Amazon. easy-to-use. and quick-to-load pages Over time. Palm VII PDA device).2.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. customer testimonials. mobile phones.com Anywhere to support access from wireless devices (i.3 Sources of Value . live or study. FIGURE 6. expert reviews. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. discussion boards. wish lists.OVERVIEW OF AMAZON.Figure 6. and customer Purchase CirclesTM. This is an example of 64 .The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. book summaries.com All Product search (searches the entire web). Amazon has added other features for shopping convenience. such as the Amazon. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic.
and Customisation Amazon provides customised features and services. from the customer recognition at the point of interface (Figure 6. Connectivity Amazon has built relationships with high traffic web portals and sites.2. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. This customer-centricity is evident in all Amazon's activities. and has developed an Associates Programme. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. By leveraging its vast customer base. 65 . Amazon introduced Amazon. which helps to build loyalty and create switching costs. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. while driving up repeat purchases and cross-selling opportunities. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. to the proactive notification of new items of interest. Amazon creates one-to-one relationships with its customers. and customer interaction. linking it to a large number of other sites. real-time shipping and backorder notices. from its shopping basket applications which lists the estimated time to delivery reliably. Amazon's content is not reproducible by competition. converting them into a storefront for Amazon.4.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. creates a competitive advantage.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 . In doing so. Community Amazon has also added a community element to the purchasing process. therefore.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.thereby increasing conversion rates. More recently. These are discussed in more detail in Section 6.
increasing to over 500. 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. The Financial Times. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. 6. help maintain contact and build traffic by e-mailing customers when desired products or books become available. it began to advertise in print media and online . enticing them to return to the site and purchase repeatedly. In the second half of 1996. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.2). and by 1999 it had over 200. Newsweek. Business Week. Instead of paying directly for this exposure. New Yorker and The Economist. In July 1996. attracting member sites of all sizes. helped generate publicity and stories about the company in publications such as The Wall Street Journal. and not subsequent purchases.000 members. As a result of all these factors (7Cs). This enabled Amazon to reach more customer segments and niches (Figure 6.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways.000 by August 2000. two personalised services.a move that along with the novelty of its business model and the newness of the Internet. they are subsequently confirmed by e-mail. Through the first half of 1996.com hot-link and offer specific books of interest to their visitors. In addition. Eyes and Editors. Once orders are placed. which only applied to sales that resulted from the initial click-through. The Associates Programme has been phenomenally successful.2. 66 . Amazon offered Associates referral fees of up to 15%. and customers are also e-mailed when the items are shipped from the warehouse.
Interesting viral initiatives include: • Amazon.com's website (www. was also linked to Amazon's entry into Europe Amazon. 67 . thereby promoting Amazon. Excite. • Amazon. The Yahoo! agreement.de became the local provider for Yahoo! Germany and Amazon. In addition.uk the local provider for Yahoo! UK & Ireland. Therefore. In return. multiyear deals involve exclusive book-selling rights.customers are encouraged to provide e-mail addresses of friends.2 .allows customers to create a personal profile (with pictures) on the site.AMAZON. the customer acquisition cost is only £10. spreading the word for Amazon.com gift certificate (in your name).co.COM'S ASSOCIATES PROGRAMME Source: Amazon. Amazon closed deals with five of the six most visited Internet addresses.com. People tend to tell their friends about it.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.com).BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Amazon has used viral marketing techniques through customer reviews. From July 1997 to December 1998.com About Me . including: America Online (AOL). These multimillion-dollar. each friend is sent a $5 Amazon. Yahoo!. mutual links. free eCards and gift certificates (which customers send to friends. and primary button placement on web portal search engines. Amazon also established agreements with AltaVista. and you are given a $5 gift certificate for each customer you provide. Prodigy and @home. Netscape's Netcenter and NetSearch.com Refer-A-Friend . and Geocities.amazon.
50 Willis. community feel (as discussed previously). 'Does Amazon. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon's proven online merchandise selling techniques including easy-to-use search options. By relating to customer needs. 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.significantly lower than other online companies.but it was only a tenth as good as the site we have now. 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.Forbes. and improved customisation and recommendations (e. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. Amazon has also incorporated traditional offline media (TV. And we relied on word-of-mouth to build awareness. so we didn't have to do much advertising. As the relationship develops.. however. billboards. With this combination of promotional methods. Magazines. April 6. "we had a world-class site the day we launched . buying patterns and viewing habits. clear presentation.g. with the explosion of websites. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. C. 1998 68 . newspapers) to generate awareness.com Really Matter?' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. Amazon maintains a database of customer preferences. Purchase CirclesTM). According to Jeff Bezos. interesting content. Once customers are attracted to the site. Amazon has been able to achieve average customer acquisition costs of less than $20 . That's not possible anymore50". This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. Amazon is building customer loyalty and encouraging repeat business. which accounts for 66% of Amazon's sales.
and our goal is to increase that gap51". Saunders. Nevertheless. R.com obsessed52". In addition. management realised that Amazon had become more associated with other core brand values . We were blessed with a two-year head start. For example. Amazon was able to secure partnerships and alliances with key players.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. which within six months propelled Amazon to one of the leading online music retailers. In addition. (Oxford: Capstone Publishing). further enhancing their value proposition. memorable. "we're not a stationary target. Amazon is constantly seeking new ways of improving its offering. the balance of power shifts away from the company and goes towards the customer. Amazon has been able to build a strong brand at relatively low cost. establishing a reputation for excellence and fulfilment. 1999 69 . he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. "Online. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). 51 52 Hazleton. Amazon unveiled a music store. According to Jeff Bezos.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. Amazon received criticism for expanding its product line. due to the hype and coverage it was given.com Way'. We have been customer obsessed.. developing customer service centres and expanding its distribution network to support high levels of service. According to Jeff Bezos. while our competitors have been Amazon. July 1998. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. in June 1998. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. 'Business the Amazon. Our secret is that we have not been competitor obsessed. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. thereby diluting the value of its association with books. and its safe and secure delivery. Amazon's understanding of its brand identity has been a critical factor. and according to Jeff Bezos. and to convey its vast size and offering. because he wanted it to be short. to capture the spirit of the site. establishing Amazon as the leading online bookseller with a large customer base. good value. This has helped them attract customers and move up the learning curve quickly. L. As such.2.a wide range of choice. However.. As such. Success.
1998 70 . speedy delivery and good value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. October 12. perhaps trying to defend its view that losses taken to build market share can reap profits later.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.. Quality is only measurable in the minds of visitors to the site. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. The key factors driving its growth and high retention rates. In doing so.2.Brandweek. distribution centres and upgrading the site. Volume Discounter' . 'Marketers of the Year: Jeff Bezos. This customer-centricity is a key hallmark of a successful Internet brand. B. it has not recorded any profits to date. However. the drain on their cash resources will push them towards bankruptcy. secure payment procedures. but over time they become more and more associated with a particular thing and harder to stretch53". they have cultivated a reputation for excellence and fulfilment. stem from its compelling value proposition and high quality end-to-end customer experience. with new products and value added content. which is critical on the Internet. 53 Warner. This raises a critical issue. have kept it ahead. Amazon also recognised that service quality is a perception. not necessarily a reality. and to sustain a positive image and satisfactory end-to-end experience. Amazon has continuously invested in customer service. as the true value of a brand lies in its sustainability. however. Amazon delivers on its promises of a wide inventory of products. Amazon is claiming to be making profits on its books and music categories. 6. Although Amazon has successfully built a strong brand and loyal customer base. Amazon's intense focus on customer needs and continual innovation. When they're young. Nevertheless. and investors lose confidence. if it continues to incur losses. they're stretchable and pliant.
com is approximately 40% owned by Barnes & Noble.Barnes & Noble went online at AOL May .barnesandnoble. as it could capitalise on the infrastructure and back-end operations (warehouses.Barnesandnoble. Inc. Barnesandnoble.Launches Internet Radio .Acquires minority stake in NotHarvard. Barnes & Noble Inc.com announces strategic relationship with Palm Computing . magazines.3. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.3 CASE STUDY: BARNESANDNOBLE.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .1 Company Overview Barnesandnoble.COM .Barnesandnoble. Barnesandnoble. book databases.com's timeline and major milestones is outlined in Figure 6. Launched in 1997.. is one of the best known traditional booksellers in the United States. However.com launched its website (www. music.com . Barnes & Noble Inc.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.com) . etc. Barnesandnoble. contacts.Offers same day delivery in Manhatten .Announces distribution relationship with New York Times September . 40% owned by Bertelsmann AG. and is the second largest online bookseller (after Amazon. promotion) between the online store and the retail stores have been kept separate. and 20% owned by the public. prints & posters and related products.Acquires equity stake in Mightwords .Barnes & Noble. Currently.com was able to 'hit the ground running'. Barnesandnoble.Barnes & Noble University opens registration for free online courses .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.COM 6. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).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 . TABLE 6.2.com and Microsoft announce that they will create an eBook superstore . Besides books.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com).com is the fourth largest e-commerce retailer54. Dalton bookstores (located in shopping malls). rare.2 1997 January BARNESANDNOBLE.) established by its parent company.Launches BNTV .Launches Affiliate Network December . and 470 B.TIMELINE AND MAJOR MILESTONES .Launches Video Store 71 . all front-end operations (marketing.com provides other online categories offering software.
3 Sources of Value . Both offer detailed bibliographic information.com's virtual storefront is graphically richer than Amazon.com) 72 .bn. Both Amazon.com let customers sign up to receive email reviews and announcements of new titles. however.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as well as an extended searchable catalogue of millions of out-of-print. etc. rich editorial content and a community experience. Barnes & Noble planned to dominate online book-selling. author.com or www. music New Initiatives Barnesandnoble. previously-owned and rare books. but instead of developing an outstanding interface to its inventory. including title.3). and easy-to-navigate site Categories focus on books. logically structured. publisher. software.com offers customers an easy-to-search catalogue of virtually every book currently in print. 6. Both have expanded their convenience to offer 54 Media Metrix. FIGURE 6.2 Value Proposition Barnesandnoble.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.OVERVIEW OF BARNESANDNOBLE. easy and secure ordering.barnesandnoble. In addition. as cited on Barnesandnoble. in terms of the 7Cs framework.COM'S WEBSITE Simple.com's and takes a bit longer to download. the company created a site very similar to Amazon.3. good prices. they offer customers fast delivery.3 .com's website (www.com's (Figure 6.com and barnesandnoble.3. the features are practically identical. edition.
com's market capitalisation was $251 million. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.a replica of Amazon's Associates Programme. Barnesandnoble.6 million.64 billion.com had over 17 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. They have developed an affiliate programme that links sites to Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. As of February 2000.3.com was valued at $21. Webcrawler. Both offer customisation that permits users to personalise the experience. However.com closed 1999 with 4 million customers. prevent cannibalisation of its existing business. 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 . and both are expanding globally. this programme had more than 300.com. These initiatives have generated traffic to the site. The 6. December 17.1 billion.com's $1. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). and avoid charging sales tax in states where it has stores56. 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. Barnesandnoble. Instead. while Amazon. Both try to foster a community of readers by letting customers post reviews online.com's 1999 revenues were $202. Barnesandnoble. while Amazon.4 Brand-Building Strategy Barnesandnoble. Lycos.The Wall Street Journal. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com has created a high quality website and customer experience. compared to Amazon. has yet to leverage its strong brand in cyberspace. however. and Barnes & Noble Inc. reasons for this are explained in the next section. Although.000 affiliates in its referral network. it lags behind first-mover Amazon. Yahoo!. Both offer 'associate programmes' that let other websites link to their sites. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com in return for a commission on any purchases that they originated . Netscape and Microsoft Network.
Barnesandnoble. and leverage its real-world presence.com's link to Bertelsmann AG. and the tangibility that this provides.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. • Barnesandnoble.com has lost access to valuable customers.com.com is its association with Barnes & Noble Inc.com and VitaminShoppe. Barnesandnoble. in the attempt to gain traction and build momentum. To signal its intentions.com. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. Barnesandnoble.com.. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com.com offers links to each partner's site and a discount for visitors who click-through. and a same-day delivery option in Manhattan.com.com should have aggressively cross-promoted their stores through advertising. with a similar discount. Petsmart. provides access to valuable resources. At any given point there are hundreds of customers browsing their aisles looking for something to read. and its BMG Entertainment division includes music giants Arista Records and RCA Records. as Bertelsmann's book division includes partners such as Random House. and Internet terminals in the bookstores. • Barnesandnoble. each partner offers a similar link to Barnesandnoble.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. Barnes & Noble University (a free online education resource). people began using their stores as a physical showcase for online rivals such as Amazon. 74 .com has changed its name to Barnes & Noble. By failing to leverage it. In return. content and distribution opportunities.com created a new cross-marketing genre in February 2000. Jcrew. Barnesandnoble. • In addition.com's key differentiator from Amazon.com has begun to acknowledge some of these mistakes. Under the seven separate agreements. LLbean. Barnesandnoble.com.com. in-store displays. Unfortunately. 1-800Flowers.com. Planetrx. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com. when it struck reciprocal marketing deals with Expedia. and in recent months has aggressively sought new ways to differentiate itself. Recent Initiatives Barnesandnoble. or deliver books directly from the retailers.com.
2000 (www. meant that Amazon.com) 75 . In addition.6 Conclusion Although Barnesandnoble. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. otherwise they risk losing out to other online competitors.com has been able to create a high impact and high-quality customer experience.com's late start in 1997. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. feature for feature) has failed to differentiate Barnesandnoble. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".com's experience is instructive. 57 'Bn.its key differentiating factors. even if that means eating into their existing sales. Barnesandnoble. a wellestablished Internet brand.com.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and allowed them to offer stock options as compensation and achieve a high market capitalisation. it also caused a major setback. The Press have also contributed.3. and was further up the growth curve. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.com and has given them the image of a second rate 'me too' brand. and its lack of innovation (by copying Amazon. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.forbes. Barnesandnoble. it has not been able to establish itself as the leading online bookseller. August 4. The company failed to leverage its established brand.Not a Best Seller' . customer relationships and offline presence . significant market momentum.Forbes. by portraying them as slow and clumsy in comparison to the more nimble Amazon.
2 Value Proposition According to Kajsa Leander.com. If a clothing brand is on the Boo site. and eventually debut in Asia. Puma. TABLE 6. Company is put up for sale. They intended to add France.First sign of problems . England.4 CASE STUDY: BOO. among others. sack 20% of staff and sell stock at 40% discount .COM . "our marketing thrust is not based on prices. Germany and Denmark. due to its poor performance and inability to build a customer base. June 10. arranged through J. Boo.they redesign site. Everlast. founder and Chief Marketing Officer of Boo.Announces it has only 500. 58 Kajsa Leander.com entered six markets: US.Multi-million pound advertising campaign created by BMP DDB . P.com provided a range of 18 fashion and footwear brands including DKNY.Site goes live .4. as cited in 'Boo.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".3 1999 Mid year BOO. 1999 76 . receiving $125 million of funding. and included high profile investors such as Bernard Arnault. Morgan.com opens its virtual doors' . 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.Raises funding of $125 million .com.Appeals for $30 million more funding . On going live. not the limited range you might get at most London fashion shops58". Boo. November 2000 January February May 6.COM 6.com had set the record as Europe's best-funded European Internet Start-up.TIMELINE AND MAJOR MILESTONES . and Converse. and the resulting loss of investors' confidence. as well as create a kid's site. Italy and Spain within a few months. it means all that brand's product line is available. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).000 unique visitors . Sweden. within six months Boo. However.4. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). and was billed as one of Europe's hottest e-commerce ventures.fails and appoints KPMG as liquidator. it's about range and convenience.1 Company Overview Founded in 1999. Finland.Marketing Week. CMO of Boo. After a high profile launch.com collapsed through lack of funds. Boo. Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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.
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.
and they aim to "make every visit to the site.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. 'How to Acquire Customers on the Web' .Launches merged CDnow/N2K site . pp.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .000 people. good prices. and was the first site to offer the sale of music downloads and custom CDs.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Site goes live . by twin brothers Jason and Matt Olim.000 music related items . whether for browsing or buying. CDnow is also driving the digital distribution of music. daily music news.5.5. customisation and a wealth of information and content to help in the purchase decision. & Novak. CDnow was acquired by Bertelsmann AG.179-188 63 CDnow website (www. CDnow provides access to over 500.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Raises $10 million through private placement .Harvard Business Review.TIMELINE AND MAJOR MILESTONES . cover art. CDnow is the leading online music store.Forges distribution partnership with Yahoo! $65.000 sound samples.1 Company Overview Founded in 1994. as well as music reviews.com) 80 .Merges with Columbia Records . TABLE 6. former arch rival .5 million distribution deal with Lycos Signs three-year. announce marketing alliance . and one of the most popular shopping sites on the Internet62.Merges with N2K. On 19th July 2000. convenience. guides to music genres. and an average daily audience of over 800. features. D.Partnership program with Geffen Records . T. $22. This unprecedented degree of access to music and information is the core of CDnow's value proposition. and exclusive interviews and reviews from CDnow's award-winning editorial staff.5 CASE STUDY: CDNOW 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. 62 Hoffman.CDnow and Time Inc. It has a customer base of 4 million people.000 music-related products and 650.. a valuable and rewarding experience"63.ten times the selection of a conventional bricks-and-mortar music store). May-June 2000.cdnow. $18.
The whole process of searching for albums or music titles to the actual purchase is simple . easy-tonavigate.5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. FIGURE 6. to make it easier for customers to explore new music and make informed purchasing decisions.5. By partnering with well-known content providers. etc. CDnow has leveraged the reputation of their brands to reinforce its own.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. and has secured rights to music reviews.Figure 6. artists biographies.. CDnow has cultivated similar relationships with MTV. cover art. For example.5.3 Sources of Value .The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). 81 .
Excite. In addition. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. which accumulate and can be spent on a variety of music-related products. Spanish.such as AOL. Yahoo!. By customising the store to meets customers' needs. it gives them a sense of ownership and a compelling reason for them to return. allowing them to respond to detailed customer queries. Customer Care CDnow's site can be viewed in English. Italian. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. French. Due to International interest. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . Dutch and Japanese.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). CDnow developed the Fast Forward Rewards programme. Portuguese. and Geocities as well as more focused specialist sites. they will be reluctant to visit another online store and enter the information again. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. Other features such as My CDnow's Wish List. Internet access providers. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Whenever a customer makes a purchase they earn Fast Forward Reward points. an incentive programme that rewards customers and encourages them to connect back to the site. 82 . It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. and key news and entertainment sites . CDnow hired a group of multilingual customer service representatives to handle questions. It also creates switching costs. Community CDnow has not exploited the potential of creating a community feel.search engines. allow customers to keep track of albums to buy in the future. German. and could consider introducing customer reviews or set-up communities around different music genres such as a Jazz Club or Classical Club offering members relevant content and the option to chat with other club members.
Excite and other powerful Internet content and service providers. By keeping the brand in front of the customer in this way. 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. Yahoo!. It is a revenue-sharing arrangement. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. as well as more-targeted music-related sites like Billboard. CDnow's initiatives include: • Banner Ads .CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. customers buy music.000 small. this is their "most successful customer building programme64".5. and spot radio to build reach. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. • Affiliate Programme . 83 . including national television commercials during the Grammy's and American Music Awards and on MTV and VH1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account.CDnow's advertisements are targeted to some degree. music-oriented websites.Through the Cosmic Credit Programme. and Variety. According to Jason Olim. print advertising is music-related publications such as Rolling Stone. CDnow extended its distribution reach to include more than 250. • Alliances and Partnerships .4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted.They have also stuck exclusive alliances with AOL. CDnow is doing everything it can to ensure that the next time that 6. and radio spots on the Howard Stern Show to build a cult following among radio listeners. they buy from CDnow. Spin. covering the entire music spectrum. • Traditional offline Media .
It is a powerful source of acquiring new customers at low cost. It is constantly adding new functionality to the site and has been innovative in its offering .As for many successful online retailers. with 44% of sales coming from new customers65.com/cdnow.Press Release. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . by two twin brothers with little money reflects the 'American dream' and was quickly picked up. as a way to fuel very lucrative word of mouth. word-of-mouth accounts for the lion's share of CDnow's customers. April 28. resulting in increased conversion rates.5.htm) 84 .CDnow made public relations a high priority brand-building tool. The company continually pushed for new distribution partnerships to widen its sphere of influence. 6.(www. In fact. both in the online and offline worlds. The story of how CDnow was founded in a basement. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.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. • Word-of-Mouth .com) 65 'Pioneering in Cyberspace' . and scaled it awareness-building efforts.hsny. with repeat customers accounting for more than 50% of sales.4 million. This has contributed to a 225% increase in sales (1997: $17. and to increases in the customer base of more than 30% quarter-to-quarter.cdnow. it is in this context that the large investments in advertising and partnerships make sense. 1998: $56.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . Public relations efforts helped to generate word of mouth and influence sales.they were the first site to offer the sale of music downloads and custom CDs. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.4 million). CDnow's promotion strategies have attracted high levels of traffic.Hampel & Stefanides (www. 1998 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. 2000 p. 66 Jason Olim. This gives the customer the impression that the order is being handled quickly. as cited in Carpenter. P. CDnow has developed a relationship with Valley Records. It was able to create a strong value proposition and high quality customer experience. a record distributor that handles the majority of CDnow's fulfilment logistics. 2000 p. The development of an extensive affiliate network.Building an Internet Business at Breakneck Speed". P. They also provide the customer with an order number and customer support contact information should they have questions. to ensure quick delivery to customers. This.5. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. CEO of CDnow.89 67 Jason Olim. (Boston: Harvard Business School Press).it's what you do66". "eBrands .6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. "eBrands . and ensure that it exploits its early-mover advantage and keeps ahead of competition. and innovative. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. According to Jason Olim.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.75 85 . 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. 6. (Boston: Harvard Business School Press). "your brand is not just what you say .from how CDnow has personalised its product offering to its capable customer service team .Building an Internet Business at Breakneck Speed". combined with the high impact customer experience created . as cited in Carpenter. CEO of CDnow.
extensive selection and geographical reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition eBay offers consumers an efficient. flea markets and auctions. Individuals use eBay to buy and sell items in more than 4. from collectibles and antiques to electronics and toys. According to Meg Whitman.g. payment) between themselves. the eBay community has grown to include more than 10 million registered users. with the number of unique daily visitors setting a record of 1. Since its launch in September 1995. (A)' . Auctions make it fun. This is a new market . Auctions represent a platform. transportation and other overhead costs.6 CASE STUDY: EBAY 6. CEO of eBay. There are over half a million new auctions. and eBay receives a transaction fee that ranges from 1. 24 hour a day.eBay website (www. collectable shows.com) 70 'Meg Whitman at eBay Inc.25% to 5% of the final sale price on any item sold.782 million in January 200068.the closest thing in the offline world are trading forums such as classified ads. global trading place for buying and selling personal items in an entertaining auction format. 6. 1st October 1999 86 .300 categories. Auctions are an enabler.com) 'eBay . eBay effectively created a new business model never before possible .6.ebay. shipping.ebay. and eBay provides added value through its convenience. or the payment for the item .000 new items joining the "for sale" list every 24 hours69. garage sales.eBay website (www. "at its core. People perceive the auction format to offer better prices. eBay is not about auctions. and eBay never takes possession of the item being sold.Company Overview' . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.Company Overview' .efficient one-to-one trading in an auction format. and 450. The buyer and the seller work out the logistics of the transport (e.A Harvard Business School Case Study. with emphasis being placed on its unique community feel and culture. Sellers pay a nominal fee for placing an item up for sale. as cited in 'eBay .removing the need for inventory.6.1 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 acquires alando.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .The 7Cs Framework According to Meg Whitman. Nashville.eBay goes live in Australia .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.Launches "My eBay!" to customise the online auction experience . So brand-building job No.com) 87 .S. This raises challenges in how to control and influence the customer experience. Unlike the previous case studies discussed.eBay launches 'About Me' feature. co-marketing relationship.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay acquires Kruse International . Milwaukee. emphasis is placed on community development and customer care.6.de . And you only get word-of-mouth if you have a great customer experience. Providence.com to provide automotive service for eBay Users .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 . they try to influence customer behaviour by encouraging them to adopt certain values.eBay acquires Jump Inc. Dallas & Fort Worth. as they rarely deal directly with the company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and two books -.eBay goes wireless with Palm VII connected organiser .3 Sources of Value .eBay expands strategic relationship with Netscape .eBay and First Auction sign a partnership agreement . and raises $700 million .Business Week. Boston.Compaq Computer Corporation and eBay form a strategic U.eBay introduces eBay Magazine in collaboration with Krause Publications. Las Vegas. . allowing users to create personal homepages . and Collecting Just About Anything and eBay for Dummies.Germany's leading online person-to-person trading site .eBay launches local websites in Baltimore & Washington DC. Selling.eBay IPOed raising $58 million .eBay acquires Butterfield & Butterfield. Seattle & Tacoma. Norfolk & Virginia Beach.eBay goes live .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . The Official eBay Guide to Buying. Since eBay cannot control how one person treats another. 21st May 1999 (www.businessweek.eBay acquires Blackthorne Software GO. 1 is have a great customer experience71".eBay and Ultimatebid. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .Com form alliance - 6. . "the first brand-building strategy that we have is to have a great customer experience. and in terms of the '7Cs'. Still the vast majority of our new users come from word-of-mouth.America Online and eBay announce strategic marketing alliance . and Salt Lake City . and its online trading site (Up4Sale) .eBay teams up with Carclub. the eBay customer experience is based on how their customers deal with each other.eBay and AOL launch co-branded site .
angering hundreds of thousands of eBay users. they have continually invested in system capacity. and adds to the experience and the discovery of the auction process. and since. eBay has also expanded to accommodate access through wireless devices for added convenience. which is much more demanding on the system. Other content includes the banner ads. Nevertheless. topically arranged. 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.6 . This contributes to the community feel.6). 88 . eBay's site has to process thousands of live bids simultaneously.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. categorically arranged. easy-to-use online service (Figure 6. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. Content Content is primarily user generated through the items listed for sale. FIGURE 6. eBay had a 'wake up call' when the website crashed for 8 hours. increasing the risk of outages.OVERVIEW OF EBAY'S WEBSITE Customisation Simple.
for the people". Recent initiatives such as the development of local websites in major US cities (e. eBay Salt Lake City) have helped them restore that community feel. eBay Boston. Community eBay attributes much of its success to a strong sense of community among its users. and there are several reports of eBay users vacationing together. eBay offers its users category-specific chat rooms. a monthly newsletter. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. the culture has come under strain due to the company's rapid growth from a small community into a "big city".g. working together and helping each other offline. and share information. However. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. autonomy. To encourage this sense of community. After a sale. This has created a self-regulating mechanism that encourages good behaviour.as eBay users refer to themselves . eBay's community has a distinct culture based on trust. For many 'eBayers' . In addition. has enabled eBay to foster a strong sense of community on its site. a "giving-board" for charitable donations to user-identified causes. e-mail. by the people. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. and in doing so. respect. 89 . bulletin boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. It is a place where people can meet with similar interests. the community spirit and personal relationships also transcend the online experience. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). 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. discuss topics they care about. Whitman describes eBay's community culture as a site "of the people. empowerment and equality. which is then added to the partner's trading profile. which is posted to the site.
eBay was able to cost-effectively offer 24x7 customer support early on. which was dedicated to investigating misuses of the system (e. its user community. These people worked from their homes. This also reinforced the company's respect for. During the first two years. eBay's approach to customer care has evolved over time. in which the company hired active. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. Customer support activities were constantly upgraded and expanded as the business developed. geographically dispersed users as customer support representatives. 90 . They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. and respected members of its own user community to serve as customer support representatives. eBay employed a "remote" customer support model. shill bidding) and helping to resolve user-to-user conflicts. Customer Care eBay controls neither end of the transaction. and the introduction of two specialised customer support groups . knowledgeable. eBay also engaged in marketing partnerships. and the Safe Harbour group. answering e-mails and responding to questions posted on the site's bulletin boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. Communication eBay maintains close communication with its members. the largest of which was with AOL. and willingness to empower. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. fraud.g. This was later expanded to include customer support representatives who worked out of eBay's headquarters.the Community Watch group. By using its own enthusiastic. As such. eBay has invested in customer care and support to ensure people conduct safe transactions. but they have other partnerships with over 150 websites of varying scales. links to high traffic sites. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. which was dedicated to monitoring the site for illegal and infringing activities.
As a result. 91 . eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. they spent $12. and highlight opportunities created by e-commerce. eBay decided that it would not enter into major portal advertising deals in the short term. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e.a four-year.3 million in advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay has been able to attract a large customer base. The AOL partnership was one of the largest strategic partnerships on the Internet .g. 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. provide a wealth of information about the 'ins and outs' of trading on eBay. Mary Beth's Beanie World. The Official eBay Guide to Buying. Recent promotional initiatives include its new publication. and facilitate the spread of positive wordof-mouth.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. representing about 40% of revenues. 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. In 1998. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Through this combination of its advertising efforts and targeted promotions. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). and maintained the same ratio for 1999.6. Based on this. Doll Collector) and appearance in trade shows. These new publications appeal to the collecting spirit. Early on. and two books. but they have other partnerships with over 150 websites of varying scales. as a result of the high quality experience it provides. eBay has since expanded its promotion efforts and engaged in marketing partnerships. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. who tended to be serious collectors. Selling. $75 million joint marketing alliance and development deal. and Collecting Just About Anything and eBay for Dummies. the largest of which was with AOL. eBay transformed from a pure online play into a 'clicks-and-mortar' company. they decided to target their marketing efforts on these heavy users. eBay Magazine.
which were all ideas of eBay users. however. and according to research carried out by eBay. which in turn attracts more sellers .Business Week. and their first-mover advantage. have been key factors that have contributed to the success of the brand.contributing to its strong lead and competitive advantage. Their focus on heavy users and targeted promotions. This is achieved by listening to their community (learning) and developing new improved products and services (relating). such as the Feedback Form. and according to Meg Whitman. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . 6. their ability to create a new market using Internet technology. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. As a result. eBay has also faced difficult challenges in scaling the organisation fast enough. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. However.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'. have been instrumental in building a 'quality' customer base. 21st May 1999 (www. "the devil in so much of this is in the detail.com) 92 . eBay attracts a broader selection of buyers. as they could not opt for a 'go slow' strategy.5 Conclusion eBay's compelling value proposition. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers.6. I think you are not well served by moving incredibly rapidly and not doing things well72". is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.the ultimate network effect . which has established eBay above other online auction communities. the Personal Shopper and the eBay Life Newsletter. And while we have to move very. very fast.businessweek. This has become part of the eBay culture.
standard styles are well suited to online shopping. This success is largely due to their simple formula .1 Company Overview Gap opened its first store in San Francisco in 1969. Gap online exploits the accessibility and convenience of the Internet. service and value to everyone74". L. In late 1997. Germany and Japan.7.com is an example of successful crossover marketing. 6. According to Jeanne Jackson.'s website (www.com/about_us.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. Inc.com) .see Appendix A Gap. head of Gap Online. Gap started selling items online . GapKids. Currently. Gap's online sales tripled in 1998 alone. Canada.7.Business Week.htm) 75 Jeanne Jackson.COM 6. surpasses $9 billion in net sales and increase earnings by 54% over previous year.2 Value Proposition Gap's simple. up from $20 million in 199875. 1999 76 Jeanne Jackson. online sales are only available to US customers.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com. from shirts to accessories and hard-to-find sizes. and are still relatively small compared to Gap's $9 billion in annual sales. October 8. and analysts estimate that sales in 1999 amounted to $50 . Gap Inc.interbrand. letting customers access the Gap brands.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.800 stores in the US. California GapKids opens its first store BabyGap is born Gap opens its online store at www. announce multi-year partnership. "this is about being clicks-and-mortar.7 CASE STUDY: GAP. and today it is the 29th most valuable brand in the world73. October 8."to deliver style.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.gapinc. 73 74 Interbrand (www. the growth prospects are enormous.gap. Gap. as cited in Lee.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.COM . UK. and Gap online provides access to the full range of items at Gap. 'Clicks and Mortar at Gap. and provides useful insight into how traditional brands can leverage their strength online. L. from jeans and T-shirts to khakis and jackets. In addition.$100 million. The Gap offers a balance of modern and seasonal styles of clothing.gapkids. as cited in Lee. to provide customers with greater convenience and options. America Online (AOL) and Gap Inc. Its reach extends across more than 1. 1999 93 .babygap.com' .com and www.com' .Business Week. 'Clicks and Mortar at Gap. whether in the store or online76". and BabyGap. TABLE 6. however.
the extensive integration of Gap's online and offline activities are clearly evident. making navigation even faster..com store one immediately notices the consistency between the online and retail stores.. describes the company's brand personality as "direct and straightforward. This personality is reinforced online through the simple structure and layout.7. Gap Online primarily focuses on Convenience.. Unlike Barnesandnoble. very efficient"77. feel and design of the site is consistent with the bricks-and-mortar stores. 1998 94 . April 18. Michael McCadden.7 . Executive Vice President of Global Marketing. Content. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. The Observer. Simple. reinforcing its brand identity.very easy...BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The site also offers sharp graphics. and Customer Care. Visiting the gap.. but provides customers with the option of viewing text-only.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.making visual references to its offline roots. from the blue and white colour scheme to the easy-toshop format .com. 'Mind the Gap'.3 Sources of Value .. D.The 7Cs Framework In terms of the 7Cs framework. FIGURE 6. and easy-to-use.. making it convenient.
GapKids. without causing complications.com allows customers to track the status of online purchases and provides contact information on the nearest store. In addition. The Gap site connects to other Gap online stores including GapKids and BabyGap. and BabyGap. Gap does not provide any community features on its site. Gap communicates with customers through customised e-mails. twice a month.com also provides a Gift Central feature which offers gift suggestion from Gap. This level of customer care is an important factor in making customers feel more comfortable with online purchasing.com. Gap. once customers are registered online. By doing so. However. standard styles are well suited to online clothes shopping. In order to integrate its offline and online operations and logistics. Gap's simple. and goods bought online get returned at the same rate as store purchases . Gap made a decision to charge sales tax on online sales.com's content consists of detailed information on its full range of products. customers can return goods purchased online to their neighbourhood store. which would not be possible in the store. Gap. Gap has also developed an affiliate programme.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. promoting its specials and including links directly to items on Gap's website. Unlike the case of Boo. and customers can view their latest TV adverts for buying inspiration. allowing shoppers to contrast different cuts and styles.as most Gap online shoppers have a good idea of how Gap clothes fit. and customers can register to get e-mail reminders of upcoming holidays and birthdays. 95 . The site's virtual style feature also allows customers to mix-and-match combinations of clothing. and had recently established marketing deals with AOL and CDnow. as well as sample all of the latest shades of fingernail polish on a virtual hand.
on shopping bags and even on the cash register. billboards. In addition. In certain high traffic Gap and GapKids stores.) that also promote the online store. providing a useful way to directly reach customers.7.gap. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. • Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Most of Gap's online traffic is generated by leveraging its physical presence.ship". which displays "Shop online at www.Extensive Integration Gap. Gap has held in-store campaigns to get customers to submit their e-mail addresses.com has been able to piggy-back on The Gap's offline advertisements (in TV.shop. either online or in stores.com) in store windows with the slogan "surf. • Gap. whereby for every $100 a customer spends at Gap Online. or to refer shoppers to Gap's website. which can be used towards future purchases.com" on the display screens between transactions.com. etc.gap.4 Brand-Building Strategy . by offering a 10% discount and free shipping on their first online purchase. These efforts doubled the size of Gap's e-mail database. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. 96 . 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. however. by displaying the URL (www. • They offer Online discounts and promotions such as the ShopCard. Gap has also supplemented this with online promotions: • In August 1999. Magazines. it is fully leveraging its offline presence to build awareness. Gap secured a 3-year commerce and marketing agreement with AOL.com has also created an affiliate programme encouraging sites to establish links to gap. To convert walk-in shoppers to cybershoppers. they send the customer a $20 Gap ShopCard. on counter cards.com has links with CDnow to cross promote websites. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com in return for a 5% commission on every sale referred through the site.
thereby reinforcing its brand identity. whereas established companies. 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. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands.5 Conclusion Gap. The Internet. while reaping the benefits of low customer acquisition costs and extended reach. and can also provide access to different customer segments who may not usually buy the products at all .7.thereby increasing the company's reach. Gap had a significant advantage over pure online players in attracting customers and building critical mass. have already established the back-end operations and can use them as the cornerstone of their online business. 97 . Gap has been able to significantly strengthen their brand-customer relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and allowing each to leverage the strengths of the other. provides existing customers with added value through the convenience of purchasing online. With their brand awareness and network of retail outlets. on the other hand. Pure online players have to invest heavily in logistics. such as Gap. By aggressively marketing both the stores and the website.
all in a single location.com) 98 . The Stock' . As such. The Strategy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. 6. The company's global web network includes 23 world properties outside the US. lies the directory . the site was receiving 1 million hits per day.8 CASE STUDY: YAHOO! 6.The Company. Yahoo! is a leading guide in terms of traffic. The concept exploded (through word-of-mouth) and in less than six months. According to Timothy Koogle. Yahoo! was founded by David Filo and Jerry Yang.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.8. There's nothing in the real world to compare to that79".see Appendix A 'Yahoo! . Yahoo! has since morphed from an ordinary search service into a global Internet communications.interbrand. 78 79 Interbrand (www. As the first online navigational guide to the web. two Ph. Yahoo! offers a range of supporting services that add value. and is one of the few Internet companies to turn a profit early in the development of the Internet. who started an online guide as a way to keep track of their personal interests on the Internet.com) .Business Week. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.businessweek. 1998 (www. advertising. CEO of Yahoo!. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.8.1 Company Overview In April 1994. and the number of websites continues to explode. from e-mail services to stock quotes and much more.2 Value Proposition At the core of Yahoo!'s value proposition. September 7. the amount of information.D students at Stanford University. household and business user reach.
Yahoo! acquires Arthas. to allow access. is the way it has structured and displayed information. Palm computers).Yahoo! Launches Business-to-Business Marketplace .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.com.Yahoo! Shopping launches personalised shopping service 6.000 shares at $13. regardless of platform (i. .Receives $1 million in venture capital funding from Sequoia Capital $33. TVs. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.The 7Cs Framework Convenience Central to Yahoo!'s success.8. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.8).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 . Their goal is not to list everything under the sun.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.8 million IPO (2.Yahoo! unveils Yahoo! Finance Vision . 99 .com allowing them to offer person-person payment solutions . and unveils Yahoo! Digital Introduces Bill Payment services .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. More recently.Yahoo! acquires eGroups . to provide web-based services to PalmTM handheld computers . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Site goes live September . Yahoo! extended its convenience through its Yahoo! Everywhere service.600..Yahoo! forms agreements with Palm Inc.7 YAHOO! .TIMELINE AND MAJOR MILESTONES 1994 April . 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. mobiles.3 Sources of Value .e.
Their thrust has been to provide valuable content to customers.com and CDnow. the partner. the end-user. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. 100 .8 . and more importantly.9). ranging from daily news and weather reports to road maps and books. well structured. and has been at the heart of Yahoo!'s growth and development. This creates a win-win situation as its satisfies Yahoo!. from stocks and sports results to weather and air fares. 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.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. Yahoo! has increased customer loyalty and retention rates. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. while providing partners access to a large customer base. and is similar to a custom tailored newspaper (Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. They have formed multiple alliances and partnerships with leading online companies such as Amazon. easy-touse. By tailoring the information to users' preferences.
OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and encourages them to return frequently. It keeps customers on the site for longer periods. and the nature of the navigation business. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. where groups of people with shared interests can communicate through chat. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. and many-to-many.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. and is driving Yahoo!'s multiple partnerships and alliances. reinforcing the brandcustomer relationship. In addition. Customer Care Yahoo! responds to customer inquiries via e-mail. 101 . Connectivity Connectivity is Yahoo!'s core product. In 1999. and e-mail.9 . Yahoo! has also implemented campaigns to persuade users to bookmark the site. to provide its customer base with access to useful links and content. Yahoo! spends more on customer support than most companies. or to make it their home page. telephone and even traditional mail. and plans to incorporate other features such as online chat to facilitate communications. Yahoo! acquired GeoCities. and contributing to their reputation as a quality service provider. fax. one-to-many. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. message boards.
Given the unease with which the average consumer approaches technology. Yahoo!'s brand-building success starts with its name. therefore. As a result. In 1996. This was especially important.4 Brand-Building Strategy Yahoo! is a marketing machine. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". These near surfers represented (and still do) a large and fast growing group and. which conveyed the brand's irreverent personality.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. At the time this was considered a breakthrough. 80 'Web Survey Shows Yahoo! Tops'. and its implications of a good time. and it formed a critical link in Yahoo!'s brandbuilding strategy.people who are not yet online but are likely to use the Internet in the near future. Yahoo! extended beyond this to use traditional offline media. Yahoo! aggressively promoted the site through public relations. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes .com) 102 . 6. Yahoo! would be one of the first sites that they visited. TV commercials and radio spots during drive time. While Internet companies were targeting existing Internet users through the use of online promotion methods. an approachable nature. and an inherent friendliness. Yahoo! also encourages customers to e-mail ideas and feedback. 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. by building a recognised brand name. Intelliquest.8.intelliquest. recognise the name Yahoo!. and through communications via email. as experience surfers tend to be loyal to their search engine. Yahoo! maintains close contact with customers.a sense of irreverence. 82% of Internet users and 23% of people intending to go online. and according to Intelliquest80. Their strategy was to target "near surfers" . Yahoo! avoided characterising itself as a technology-oriented company. (www.
yahoo. breath mints. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. a little wacky and inviting'.it must reinforce the image of the company as 'a service that is fun. snowboards. VP-Brand Marketing. May 3. to create Yahoo! Internet Life. ER) and Hollywood movies. Yahoo! adopted 'guerrilla marketing' techniques .Yahoo! Press Release. customers quickly discover its value and through a high quality experience (7Cs).BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. organisers. 1999.Advertising Age. August 26. In addition. and 76% turned to Yahoo! before visiting another search engine or navigational site. Although this seems like a shotgun approach. the research shows that 73% of Yahoo! users bookmark the service . as well as TV shows (Ally McBeal. Visa and MCI. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. a monthly magazine guide to what's new on the web and it has co-branded products. s4 103 . Yahoo! has paid little for this exposure. p.higher than all other services81. and yo-yos. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. T-shirts. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . it's too late.with its name being plastered on everything. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. Yahoo! has managed to cultivate high brand loyalty. According to a recent study. Their innovation. They even have a barter deal with the San Francisco 49ers. We need to be one step ahead in order to have a better service than our competition82". They also teamed up with publisher Ziff-Davis Co.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . According to Karen Edwards. stating that "if we wait to hear about it in the news. which has been instrumental in establishing Yahoo! as a household name. sailboats. parachutes. including backpacks. services and contests with well known brands such as Ben & Jerry's. new services and customised features highlight their ability to relate to customers' needs. 1997 (www. Once customers access the site.
with a large customer base and high levels of customer loyalty. they have carried out extensive partnering.Advertising Age. to its simple design. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. and other search engines at the bottom of its search results page). s4 104 . first to turn around an annual profit.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and its openness (for example. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". their innovative promotional and guerrilla marketing techniques.8. HotBot. 6. They have maintained that lead through the creation of a high quality end-to-end customer experience. and first to go mainstream by advertising its name using traditional media.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine.com. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' .6 Conclusion Yahoo! is one of the most successful brands on the Internet.8. 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. As a result of all these factors. In addition. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. while also associating Yahoo! with well known brands. Yahoo! points them to its competitors by including links to AltaVista. its excellent customer service. Yahoo! has built a strong brand. In addition. p. alliances and acquisitions to provide added value services to their customers. To maintain its lead. 1999. Yahoo! has invested relentlessly in new services and marketing programmes. from its convenient and logical structure and display of information. As the first online navigational guide to the web. May 3. if a user cannot find what it is searching for. and has cultivated a reputation for excellence. that have set it apart from the pack. Yahoo! has benefited from a first-mover advantage. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. VPBrand Marketing of Yahoo!. GoTo. These relationships have provided end-users with added-value. its choice of partners. first to go public. have created a distinct brand identity that differentiates the brand and appeals to its target market.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
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
They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. brands are harder for competitors to emulate. In addition. By distinguishing their offering and focusing on unique sources of value-added. to maintain consistency. and convenience. these companies are creating even stronger value propositions. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. whereby each party benefits from the other's expertise or skills. a company can leverage the partner's brand and reputation to reinforce its own. Alliances and partnerships play an important role in achieving speed and momentum. to distinguish themselves from competitors. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. these companies must have an inherent understanding of their brand identity and core values. integrated customer acquisition strategies. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts.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. The most successful partnerships are symbiotic matches. as well as determine how far the brand can be meaningfully stretched to other products and market segments. before it fractures. 108 . and exclusive alliances can lock out competitors from valuable content or online real estate. content. ranging from online methods to traditional offline media. and by partnering with well-known brands. offering customers the best in quality. but also provide added value to the brand community. while ultimately benefiting the end-customers. As a result. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. leading brands have focused on building strong partnerships and alliances. variety. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. particularly to secure content and widen reach to new customer segments and niches.
and differentiating it from other brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. and it aligns itself with the most influential venture capital sources. giving the brand an edge. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. By getting to market early. It locks up important content and distribution partnerships. 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. A first-mover advantage is an important asset for an online brand. The challenge then lies in keeping up the momentum. are leveraging this customer knowledge (learning) to nurture relationships (relate). Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. As Internet penetration exploded. Many strong online brands were also early-movers on the Internet. By leveraging unique customer information. the company benefits from the buzz. and it can acquire customers while it is still inexpensive to do so. and are continuously adding new services and functionality to their sites. 109 . these well-publicised brands also took off. to create new services and content that satisfy customer needs. through past transactions and solicited input. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. and by focusing on customer needs. by providing better services. and traffic. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and extensive word-of-mouth due to its novelty. customisation and customer care. these innovations are difficult for competitors to reproduce. the innovations are the result of the company's ability to data mine its vast database of customer information. that comes with innovation. These brands are accumulating knowledge about customers. and benefited from additional hype. In many cases.
ongoing research would be necessary to build on the findings of this dissertation. the concepts. They have an established brand. there has been a limited time horizon to evaluate the durability of Internet brands. The Internet has radically changed the business and competitive environments. In doing so. As such. however. established customer relationships. Through extensive and seamless integration. Nevertheless. established fulfilment systems and infrastructure. 7. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. In addition. building relationships and satisfying needs.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. but at the same time. one component remains unchanged .factors that clearly differentiate them from pure players. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. tools and key factors outlined in this dissertation are also applicable to business markets. while reaping the benefits of lower customer acquisition costs and extended reach. They possess critical assets that give them an advantage over pure online start-ups. an in-depth analysis. expand the brand experience to meet customers' expectations in the online world. Yet while everything is being turned upside down. Having established a strategic perspective on building online brands.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. Brands and brand-building tools tend to be associated with consumer markets. and a physical presence (tangibility) . clicks-andmortar brands are providing customers with true added-value. drawing on several case studies from business markets. Therefore. Nevertheless.value remains (and always will) the basic building block for every successful brand. would represent an exciting opportunity for further research. they are equally important in business markets. 110 . with the emergence of wireless access and new platforms.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
895 2.806 11.804 2.361 1.694 17.422 1.464 3.550 12.225 11.909 7.147 9.603 5.313 2.423 2.602 4.792 3.052 6.654 43.634 1.681 2.761 1.404 4.643 3.231 12.143 2.502 33.048 20.231 24.310 11.132 15.766 14.181 21.262 1.806 2.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.985 2.281 11.021 26.197 32.076 3.275 30.568 3.155 7.595 17.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .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.596 3.Interbrand's Ranking of the Top 60 Brands (www.184 1.319 1.781 33.932 4.interbrand.894 14.510 8.101 9.830 14.527 3.781 17.648 1.043 8.845 56.283 4.329 4.193 112 .
T. As such. (Harper & Row). 1982 113 . the informal management style and the constant strategy re-calibration. constantly innovate. They must move quickly to capture new opportunities. and structures are aligned differently. showing how they are interrelated. activities. and the emergence of a knowledgebased economy. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. respond to competitive and market dynamics. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. * Peters. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. and reorganise as appropriate. As a result. customer empowerment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . Internet companies must be able to move at warp-speed. However. all these dimensions must change accordingly. all their operations. whereas entrepreneurial Internet companies must focus on 'managing for change'. It is critical that all these dimensions come together and are re-enforcing. commit and deploy resources.. 'In Search of Excellence'. with the fast pace of technological change. & Waterman. R. and as the business environment changes.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. global competition.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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