1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


1 Company Overview 6.5 Conclusion Case Study: Gap.7 6.8.5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.2 Value Proposition 6.4 Brand-Building Strategy .6.7.The 7Cs Framework 6.5 Other Factors that Contribute to their Brand Leadership CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.2 Value Proposition 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.The 7Cs Framework 6.4 Brand-Building Strategy 6.5.5 6.6.1 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 .The 7Cs Framework 6.5 Conclusion Case Study: CDnow 6.6 6.1 Company Overview 6.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .8.1 Company Overview 6.2 Value Proposition 6.4 Brand-Building Strategy 6.8 Case Study: Boo.2 Value Proposition 6.7.3 Sources of Value .3 Sources of Value .com 6.3 Sources of Value .1 Company Overview 6.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.1 Conclusion Case Study: eBay 6.8.4 Brand-Building Strategy 6.com 6.com Integration Value Proposition Failure of Boo.4.The 7Cs Framework 6.

6 Figure 5.com's Associates Programme Overview of BarnesandNoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.2 Figure 5.4 Figure 2.com's Website Amazon.2 Figure 2.5 Figure 4.1 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 5.6 Figure 4.7 Figure 2.8 Figure 6.8 Figure 5.9 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 .3 Figure 2.6 Figure 6.6 Figure 2.7 Figure 6.4 Figure 6.2 Figure 6.5 Figure 6.2 Figure 4.2 Figure 3.1 Figure 3.2 Figure 2.3 Figure 3.com's Website Overview of Boo.9 Figure 6.1 Figure 6.3 Figure 4.4 Figure 4.1 Figure 2.5 Figure 2.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .4 Figure 4.4 Figure 5.1 Figure 1.3 Figure 6.8 Figure 3.5 Figure 5.1 Figure 5.7 Figure 5.3 Figure 5.

com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Gap.com .Timeline and Major Milestones BarnesandNoble.6 Table 6.com .5 Table 6.3 Table 6.4 Table 6.1 Table 6.Timeline and Major Milestones eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones Boo.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones CDnow .1 Table 6.2 Table 6.


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

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

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

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

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


creates influence and generates value4" This definition truly captures the essence of a brand. (New York: Free Press).a leading specialist brand consultancy firm . p.A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. The concept of brand equity is outlined. Branding is about creating 'value'. p. if properly managed. 2. The chapter proceeds to describe the influence of brands on the buying process. 2000.a brand is: "a mixture of tangible and intangible attributes. both to customers. which.1. and they form the backbone of this dissertation. 74 4 Clifton. the brand's emotional benefits and its self-expressive benefits . these layers are Brands are made up of many layers and dimensions. R.2 WHAT IS A BRAND? According to Rita Clifton. This value stems from the products and services that companies create and bring to the market. and to companies.). (London: Macmillan Press Ltd. explaining the value of brands. symbolised in a trademark. 1996.1 INTRODUCTION In this chapter. vii 13 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and the importance of customer satisfaction and brand loyalty. A. E. unravelled to reveal the nature of brands and their reason for existence. D. but extends further to encompass added values derived from factors such as the brand-customer relationship. & Maughan. 'Building Strong Brands'.see Figure 2. CEO of Interbrand Newell and Sorrell . These concepts are central to brands and brand-building.1 . 'The Future of Brands'.. FIGURE 2. both for customers. and for the company. whether online or offline. and highlights the importance of brand management.

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

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

the consumer learns about competing brands. Consumers develop a set of brand beliefs about the attributes of competing brands. Consumers differ as to which product / service attributes they see as important. selective distortion. either through heightened attention or through an active information search. Through gathering information. These beliefs depend on their previous experiences with the brand.. p. it is critical to understand what attributes consumers value. 16 . P. In the evaluation stage.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. (Europe: Prentice-Hall) 8th Ed. 'Marketing Management . 1996. This can be triggered by internal or external stimuli (advertisements). two factors can intervene between the purchase intention and the purchase decision .attitudes of others and unexpected situational factors (Figure 2. and selective retention. and the effect of selective perception. Planning. and pay the most attention to the brands that will deliver the sought benefits. FIGURE 2. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. Once aroused. Implementation.3). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. it is important to clarify customers' underlying buying behaviour and the buying process.Analysis.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. The buying process consists of five stages (Figure 2.194 The process starts when the buyer recognises a need. However. a consumer will be inclined to search for more information. and Control'.4).5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Therefore..

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

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. Saturn. This satisfaction encompasses the whole experience and not just a company's products or services. E..those who actively attack the brand telling others not to buy from the company..Figure 2.Harvard Business Review. At the opposite end of the satisfaction spectrum are "apostles" . and believe that it will always act in their best interest. 'Why Satisfied Customers Defect' . Spring 1999 18 . D. W.Harvard Business Review. Hewlett-Packard. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Why Satisfied Customers Defect' . The customers at the bottom end of the scale are "terrorists" . Customers that are passionately or emotionally loyal are those that have built trust in a company. p. & Sasser. Nov-Dec 1995 Hart.. Southwest Airlines and Xerox7. E. Nov-Dec 1995. 91 Loyalty is derived when customers are continuously satisfied over time. Trust is critical for a brand's success. Johnson & Johnson..customers who are satisfied and loyal and talk favourably about the brand . M. C. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.. 'Growing the Trust Relationship'. T. & Sasser.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. and Johnson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. T. FIGURE 2.5. Marketing Management. Federal Express. 6 7 Jones.

This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. & Rogers.com. consistent orders Satisfied customers are the best advertisement . with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. D. 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). Firstly. G. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.g. 'Building Stronger Brands through Online Communities' . Spring 2000 19 . There is also clear evidence of this on the Internet.Sloan Management Review.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. emotional loyalty is born out of a consumer's personal relationship with a brand.they provide good word-of-mouth and are the best salespeople for the product / service 2. 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..BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 'The One to One Future'. 8 9 Peppers. Harley-Davidson motorcycle clubs). 1993 McWilliam. Emotional loyalty can be also created through the formation of a strong user community around the brand. In this way. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. M..

almost irreplaceable bond as well as potentially to the negative feelings of betrayal.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. Journal of Consumer Research. and understanding the needs and buying processes of the target market is essential. pp. However. March 1998.7 . A stronger brand enjoys a high degree of brand preference over competing brands. 343-373.6 .8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. there are brands that customers perceive as acceptable and would not resist buying. 20 ..7). Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). Beyond this. there are brands that are unknown by most buyers. 2. whereby customers would be unwilling to substitute it with competitors' offers. a 'powerbrand' tends to have a high degree of brand loyalty. S. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. which goes well beyond the satisfaction of a specific need. FIGURE 2. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. FIGURE 2.

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

The brand leader is the most profitable and all beyond number two are unprofitable13. in the following ways: • Brands. Journal of Marketing Research. J.To save time and energy through identical repurchasing and loyalty Guarantee .Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.8.. to quickly identify sought after products • • Practicality .To be clearly seen. 11 12 Kapferer.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. (London: McGraw Hill).. May 1993. (New York: Free Press). N. the best performer for a particular purpose • Characterisation . Premium pricing increases revenue. to its logo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.8.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. to its communication • Ethical . 1992 Worcester. G. R. 22 . and the number two twice the share of the number three12. production and marketing. pp. to make sense of the offer. 'Strategic Brand Management'..1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . P. 3rd Ed.. brands perform several functions that add value and customer benefits: • Identification .To have confirmation of your self-image or the image that you present to others • Continuity . 1986 13 Golder. market share and profits .. & Downham.Typically a brand leader obtains twice the market share of the number two brand.To be sure of buying the best product in the category. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. J.Satisfaction linked to the attractiveness of the brand. & Tellis. • Brand Leverage .Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 158-170. 'Consumer Market Research Handbook'.

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


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

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. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . a distinctive brand identity (I). In this way. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. unless differentiation and awareness can be developed. a company must develop a strong understanding of who their potential customers are. it will never attract a strong client base.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . As such. FIGURE 3. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.2 .each is essential. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. 26 . 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. Similarly. and added value (AV). In order to do this. the brand can elicit feelings of confidence that it is of higher quality than competitors'. Without a good product or service.2).

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

which remains fixed over time.3. friendly). 1992 28 .the way the brand communicates through its advertising. • The Brand Theme .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. style or cultural differences from one country to another. its personality and its image or self-projection . press releases. features.g. glamour. which depends on how the target market perceives the brand. • The Brand Style .g. J. This may be different from the brand image. packaging. type of spokesperson / customer image used to advertise the brand). prestige.the fundamental or genetic code of the brand.Figure 3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. etc. colour scheme. A company should seek to differentiate its brand through developing a distinctive identity. 16 Kapferer.3: • The Brand Core . Brand themes are the most flexible element and will tend to change with fashion.. and advertising. 'Strategic Brand Management'. Themes include the physical appearance (logo.articulates the brand core in terms of the culture it conveys. however the brand style and core tend to be less flexible. and the relationship expressed (e. (New York: The Free Press). its reflection (e. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . visual appearance. and visual appearance).

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

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

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

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


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

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

largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000.com) 36 .3 .3. 2000 Internet / ARPAnet was created Dell.2 . FIGURE 4.000. 1998. 1996 (www.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 10.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 1.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 100.000 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. as cited in 'E-Business Technology Forecast' .000 1969: 10.economist.Figure 4.a PricewaterhouseCoopers Report.

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

com) 38 .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. to interacting (e. FIGURE 4. These activities highlight the adoption of the Internet as an interactive. 2000 (www.5. as cited in the Economist Intelligence Unit (EIU). communication and information tool.eiu.Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). April 13.5 .from communicating (90% use e-mail) and sourcing information.g. chat rooms. reveals the wide range of areas where people are embracing the Internet . entertainment) and purchasing (37%) .

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

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

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

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

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


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

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

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

and other features can be added or changed at low marginal cost. as illustrated in Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5..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. Similarly. As a result. increases disproportionately as more people join the network. G. (also referred to as 'viral economics'). Once the up-front investments are made (for research and development and technology infrastructure). FIGURE 5. and the value that each member realises. 1989.1 . customisation for individual customers. pp. 7th Ed. businesses and online communities that rely on connectivity can enjoy 'network effects'. R. 'Positive Economics'. However. 180-182 48 .1. as the benefits of scale are overwhelmed by the disadvantages of size31. where the value of the network. additional products.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. the costs approach zero32. each additional unit sold does not cost more than the last to deliver. (London: Harper & Row). Even more important. this is not the case on the Internet. and in the case of information-based products.. additional customers and transactions can be managed with limited fixed cost investment.

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

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

Hotmail. Today they are the largest e-mail provider in the world with over 40 million users.com. Hotmail acquired over 12 million subscribers.com was one of the first free web-based e-mail services.000 subscribers every day. where they have never carried out any promotional activities. In fact. friends to visit it. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. they tell all their 51 . and they created a subscriber base more rapidly than any company in history. they will have a powerful viral opportunity at their disposal.hotmail. Geocities enables people to create personal websites for free. Free Email at http://www. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. • Each new user becomes a company salesperson. but Hotmail signs up more than 150. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. and then propel the message even further to their own ever-increasing circles of friends and associates. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.1 The Case of Hotmail. A traditional print publication would hope to reach 100.5. In its first 1. sign up for their own free e-mail. and the message spreads organically. whether for communications or community. saying: • "Get Your Private. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. When a user builds a website.com The classic example of viral marketing is Hotmail. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging).000 subscribers within a few years of launch. seven days a week. a company now owned by Microsoft. eGroups and Geocities (both recently acquired by Yahoo!). and in doing so spread the word for Geocities.5 years.

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

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

forrester. Customisation creates the feeling of a one-to-one relationship. 31% of online consumers use the Internet for obtaining product information. 'Building Stronger Brands through Online Communities' . & Hagel. Online sites can track a customer's purchase history and modify its service accordingly. According to Forrester Research40.5). 1995. K. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. and organise live events. Spring 2000 42 Armstrong. 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). Other content includes community-generated content. On the other hand.A Forrester Research Report. An important contribution of these communities is that they provide members with a medium to communicate with each other. These sites allow members to interact with one another. S. Clemmer. A. No. 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. and advertising (if it is relevant and useful). Community Online communities are emerging as new gathering places for consumers with similar interests (e. and nearly 20% use it for post-sales support.. demographics.. which is facilitated by a combination of factors (Figure 5. 'Real Profits from Virtual Communities' . it needs a critical mass of members42. as well as through loyalty programmes that provide targeted benefits. even if they purchase offline. G. 1999 (www. J. 54 . Customisation Customisation involves tailoring the presentation of a web-site to individuals. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). & Bluestein.. which enhances the user's online experience.. 3. .g. share information and access a wide range of services. Often. An online community offers a compelling way to entice customers back to a site. It fosters a sense of belonging41 among the members.The McKinsey Quarterly. iVillage and Geocities).Sloan Management Review. or prior transactions. W. use bulletin boards. based on profile information. 40 41 Morrisette.com) McWilliam. For a community to work. Members can interact in chat rooms.

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

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

McQuade. and bring people to the site for the first time. S.. 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 ’ . 180-183 (www. visibility relies solely on Communication.4 . Learn and Relate. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. R.7 . Therefore. including affiliate programmes with other websites. Adoption). which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. etc.8. Waitman. Trial.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. 'Marketing to the Digital Consumer'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.2. A.7.mckinseyquarterly. billboards. The mechanisms to communicate range from traditional media (TV. Interest.. Evaluation. McKinsey Quarterly. FIGURE 5.Attract. Retain. 1996. modified to take into account of the interactive dynamics of the Internet.. Engage. & Zeisser. The company must build awareness and communicate its value proposition to its target customers.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. links from directory searches (Connectivity). e-mail notifications and banner advertisements. M. Magazines. Newspapers.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. This model consists of five stages . No. pp.Awareness.) to online tools.. Figure 3. This is more difficult online than offline. because there is no physical presence.

Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .4 4.3 Source: Forrester Research.Economist Intelligence Unit 2000 (www. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.0 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.2 4. The key factors at this stage are Convenience combined with interesting Content. Companies then need to engage customers to obtain their interest and participation. Kapferer's Brand Prism (Ch.1 3.WEBSITE PROMOTION METHODS . discounted over the expected duration of the brand-customer relationship. multiplied by the expected rate of transactions.ebusinessforum.4 3.3) is useful to ensure that a company develops a distinct and consistent brand identity. Attracting customers is only the first step in building online brands.8 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.4 3.3 2. 3.7 4. 58 .6 3. it is important to quickly engage consumers' interest before they move on.8 4. 3. affiliate programmes. public relations and television advertising.com) The most effective methods are direct e-mail. Fig.5) 2.3 3. as cited in 'Targeting Consumers via the Internet' . Engage With the multitude of choice available on the Internet.5 3.

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. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. The initial site registration provides an early opportunity to obtain useful information. and must be continuously updated due to the multiple visit nature of customers. • The Internet supports brand-building activities where there is a need to build a relationship. TV. Learn The Internet provides extensive opportunities to learn about consumers (demographics. if used properly.g. Certain product categories. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. and what additional products and services are they interested in provides companies with valuable information which. This helps to create a customer base that spends more time and money at a site. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. Content is the basic driver of retaining customers on a site. and forge closer relationships than any offline operator. 59 .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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.who they are and why they shop online. Communities and Customisation are other sticky applications. 5.9). Radio). attitudes and behaviour). Building up a knowledge database on each customer . such as groceries and convenience goods. can create value for the customer and help build the brand-customer relationship. The objective is to increase the conversion rate (% of browsers converted into buyers).

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


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

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

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

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

6. As a result of all these factors (7Cs).2. which only applied to sales that resulted from the initial click-through. and not subsequent purchases. it began to advertise in print media and online . In addition. helped generate publicity and stories about the company in publications such as The Wall Street Journal. Amazon offered Associates referral fees of up to 15%.2). This enabled Amazon to reach more customer segments and niches (Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. attracting member sites of all sizes.000 members.a move that along with the novelty of its business model and the newness of the Internet. two personalised services. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. In the second half of 1996. Eyes and Editors. The Financial Times. they are subsequently confirmed by e-mail. Instead of paying directly for this exposure. 66 . The Associates Programme has been phenomenally successful. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Once orders are placed.com hot-link and offer specific books of interest to their visitors. In July 1996.000 by August 2000. and customers are also e-mailed when the items are shipped from the warehouse.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. enticing them to return to the site and purchase repeatedly. increasing to over 500. and by 1999 it had over 200. New Yorker and The Economist. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Through the first half of 1996. Business Week. 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. Newsweek.

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

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

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

they have cultivated a reputation for excellence and fulfilment. When they're young. the drain on their cash resources will push them towards bankruptcy.Brandweek. if it continues to incur losses. distribution centres and upgrading the site. Amazon also recognised that service quality is a perception. B. as the true value of a brand lies in its sustainability. secure payment procedures. it has not recorded any profits to date. Although Amazon has successfully built a strong brand and loyal customer base. not necessarily a reality. This raises a critical issue. speedy delivery and good value. However. 53 Warner. 6.6 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. with new products and value added content. perhaps trying to defend its view that losses taken to build market share can reap profits later. The key factors driving its growth and high retention rates. Amazon delivers on its promises of a wide inventory of products. they're stretchable and pliant. but over time they become more and more associated with a particular thing and harder to stretch53". which is critical on the Internet. have kept it ahead. This customer-centricity is a key hallmark of a successful Internet brand. Amazon's intense focus on customer needs and continual innovation. and investors lose confidence. Nevertheless.. Amazon has continuously invested in customer service. 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.2. stem from its compelling value proposition and high quality end-to-end customer experience. Amazon is claiming to be making profits on its books and music categories.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. 'Marketers of the Year: Jeff Bezos. and to sustain a positive image and satisfactory end-to-end experience. however. In doing so. 1998 70 . Volume Discounter' . October 12.

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

in terms of the 7Cs framework. music New Initiatives Barnesandnoble.com or www.2 Value Proposition Barnesandnoble. logically structured. and easy-to-navigate site Categories focus on books. the features are practically identical. as cited on Barnesandnoble.COM'S WEBSITE Simple.com's and takes a bit longer to download.com's website (www.3.3).The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.bn.OVERVIEW OF BARNESANDNOBLE.com's virtual storefront is graphically richer than Amazon. but instead of developing an outstanding interface to its inventory. publisher. software.3 . good prices. they offer customers fast delivery.com and barnesandnoble.barnesandnoble. Both offer detailed bibliographic information.com let customers sign up to receive email reviews and announcements of new titles. the company created a site very similar to Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Both have expanded their convenience to offer 54 Media Metrix. including title.com) 72 .3 Sources of Value . as well as an extended searchable catalogue of millions of out-of-print. Both Amazon. FIGURE 6. In addition. however. rich editorial content and a community experience. etc.com's (Figure 6.3. easy and secure ordering. 6. edition. Barnes & Noble planned to dominate online book-selling.com offers customers an easy-to-search catalogue of virtually every book currently in print. previously-owned and rare books. author.

Barnesandnoble. this programme had more than 300.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. However. prevent cannibalisation of its existing business. Instead. however. has yet to leverage its strong brand in cyberspace.com has created a high quality website and customer experience. Both offer customisation that permits users to personalise the experience. and both are expanding globally. reasons for this are explained in the next section. while Amazon.6 million. December 17. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). The 6.000 affiliates in its referral network. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. They have developed an affiliate programme that links sites to Barnesandnoble.64 billion. Barnesandnoble. Webcrawler.1 billion. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .The Wall Street Journal.com. while Amazon. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. compared to Amazon. Although.com's 1999 revenues were $202.com in return for a commission on any purchases that they originated .com was valued at $21.com closed 1999 with 4 million customers. Lycos. Barnesandnoble. Both try to foster a community of readers by letting customers post reviews online. Both offer 'associate programmes' that let other websites link to their sites.com's $1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. These initiatives have generated traffic to the site. As of February 2000. and Barnes & Noble Inc. Yahoo!.3. and avoid charging sales tax in states where it has stores56. it lags behind first-mover Amazon. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. 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 .a replica of Amazon's Associates Programme.com had over 17 million. Netscape and Microsoft Network.com's market capitalisation was $251 million.4 Brand-Building Strategy Barnesandnoble.

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

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

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


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


Miss Boo

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



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

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

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



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

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


com) 80 . CDnow provides access to over 500.000 music-related products and 650. T. features.000 sound samples.000 people.CDnow and Time Inc.Harvard Business Review. pp. CDnow is the leading online music store.000 music related items .179-188 63 CDnow website (www. cover art.5.5 CASE STUDY: CDNOW 6. $22.5 million distribution deal with Lycos Signs three-year.1 Company Overview Founded in 1994.cdnow. a valuable and rewarding experience"63. D.ten times the selection of a conventional bricks-and-mortar music store).Site goes live . daily music news. CDnow is also driving the digital distribution of music. announce marketing alliance . On 19th July 2000. and exclusive interviews and reviews from CDnow's award-winning editorial staff.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . TABLE 6.TIMELINE AND MAJOR MILESTONES . and they aim to "make every visit to the site.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.Launches merged CDnow/N2K site . convenience. by twin brothers Jason and Matt Olim. and an average daily audience of over 800. This unprecedented degree of access to music and information is the core of CDnow's value proposition. as well as music reviews. $18.Partnership program with Geffen Records . CDnow was acquired by Bertelsmann AG.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.5. guides to music genres. 62 Hoffman.Merges with Columbia Records . & Novak. and was the first site to offer the sale of music downloads and custom CDs. 'How to Acquire Customers on the Web' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. former arch rival . May-June 2000. good prices.. It has a customer base of 4 million people.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . whether for browsing or buying. and one of the most popular shopping sites on the Internet62.Merges with N2K. customisation and a wealth of information and content to help in the purchase decision.Raises $10 million through private placement .Forges distribution partnership with Yahoo! $65.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.

3 Sources of Value .Figure 6. FIGURE 6. The whole process of searching for albums or music titles to the actual purchase is simple . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.5.5 . CDnow has leveraged the reputation of their brands to reinforce its own.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. artists biographies. By partnering with well-known content providers.. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. 81 . easy-tonavigate.5. CDnow has cultivated similar relationships with MTV. etc. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. For example. and has secured rights to music reviews. to make it easier for customers to explore new music and make informed purchasing decisions. cover art.

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

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

by two twin brothers with little money reflects the 'American dream' and was quickly picked up. This has contributed to a 225% increase in sales (1997: $17. It is a powerful source of acquiring new customers at low cost. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . Public relations efforts helped to generate word of mouth and influence sales. • Word-of-Mouth .they were the first site to offer the sale of music downloads and custom CDs.com) 65 'Pioneering in Cyberspace' . word-of-mouth accounts for the lion's share of CDnow's customers. In fact. 1998 .As for many successful online retailers. April 28.Press Release. both in the online and offline worlds. and to increases in the customer base of more than 30% quarter-to-quarter.com/cdnow.hsny. 1998: $56.htm) 84 .cdnow. The story of how CDnow was founded in a basement. as a way to fuel very lucrative word of mouth.(www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .5. with 44% of sales coming from new customers65.4 million. and scaled it awareness-building efforts.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum. with repeat customers accounting for more than 50% of sales. It is constantly adding new functionality to the site and has been innovative in its offering .4 million). The company continually pushed for new distribution partnerships to widen its sphere of influence. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.CDnow made public relations a high priority brand-building tool. it is in this context that the large investments in advertising and partnerships make sense. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. CDnow's promotion strategies have attracted high levels of traffic. resulting in increased conversion rates. 6.Hampel & Stefanides (www.

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

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

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

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

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

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

The Official eBay Guide to Buying. Doll Collector) and appearance in trade shows. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Selling. Mary Beth's Beanie World.6. but they have other partnerships with over 150 websites of varying scales. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. and facilitate the spread of positive wordof-mouth. eBay has been able to attract a large customer base. the largest of which was with AOL. representing about 40% of revenues. 91 . They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. The AOL partnership was one of the largest strategic partnerships on the Internet . eBay transformed from a pure online play into a 'clicks-and-mortar' company. they decided to target their marketing efforts on these heavy users. provide a wealth of information about the 'ins and outs' of trading on eBay. Early on. 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. and maintained the same ratio for 1999. and Collecting Just About Anything and eBay for Dummies. $75 million joint marketing alliance and development deal. Through this combination of its advertising efforts and targeted promotions. These new publications appeal to the collecting spirit. as a result of the high quality experience it provides. eBay decided that it would not enter into major portal advertising deals in the short term. they spent $12. eBay Magazine. and highlight opportunities created by e-commerce.3 million in advertising. Recent promotional initiatives include its new publication.g. eBay has since expanded its promotion efforts and engaged in marketing partnerships. In 1998.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth.a four-year. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). As a result. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Based on this. who tended to be serious collectors. and two books.

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

7.800 stores in the US. Inc. Currently.com) .com/about_us. California GapKids opens its first store BabyGap is born Gap opens its online store at www. 73 74 Interbrand (www.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. America Online (AOL) and Gap Inc.com is an example of successful crossover marketing. 'Clicks and Mortar at Gap.7 CASE STUDY: GAP. October 8. TABLE 6. announce multi-year partnership.htm) 75 Jeanne Jackson. from shirts to accessories and hard-to-find sizes. L.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com' . 6. 1999 93 .com' . UK. The Gap offers a balance of modern and seasonal styles of clothing. head of Gap Online. whether in the store or online76".2 Value Proposition Gap's simple. service and value to everyone74". Gap Inc. This success is largely due to their simple formula . GapKids.Business Week. According to Jeanne Jackson. and today it is the 29th most valuable brand in the world73.see Appendix A Gap.gapinc. and are still relatively small compared to Gap's $9 billion in annual sales. and provides useful insight into how traditional brands can leverage their strength online.gapkids.babygap. 1999 76 Jeanne Jackson. to provide customers with greater convenience and options.'s website (www.Business Week. Canada. and analysts estimate that sales in 1999 amounted to $50 . In late 1997.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. letting customers access the Gap brands. "this is about being clicks-and-mortar.COM 6. and Gap online provides access to the full range of items at Gap. online sales are only available to US customers. from jeans and T-shirts to khakis and jackets.7. surpasses $9 billion in net sales and increase earnings by 54% over previous year. Germany and Japan. as cited in Lee. Gap started selling items online . October 8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. up from $20 million in 199875.gap. as cited in Lee. the growth prospects are enormous. Gap. Gap's online sales tripled in 1998 alone. however. L.1 Company Overview Gap opened its first store in San Francisco in 1969. Its reach extends across more than 1. In addition.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Gap online exploits the accessibility and convenience of the Internet.$100 million."to deliver style. standard styles are well suited to online shopping.COM . and BabyGap.com and www. 'Clicks and Mortar at Gap.com.interbrand.

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

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

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

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

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

. regardless of platform (i.Yahoo! acquires eGroups . to provide web-based services to PalmTM handheld computers .8 million IPO (2.3 Sources of Value .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 .com allowing them to offer person-person payment solutions .The 7Cs Framework Convenience Central to Yahoo!'s success. Palm computers). to allow access.Yahoo! unveils Yahoo! Finance Vision .8.7 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.Yahoo! acquires Arthas.Yahoo! forms agreements with Palm Inc.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. is the way it has structured and displayed information.e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and unveils Yahoo! Digital Introduces Bill Payment services . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! Shopping launches personalised shopping service 6. mobiles.8). Their goal is not to list everything under the sun. More recently.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. Yahoo! extended its convenience through its Yahoo! Everywhere service. TVs.Yahoo! Launches Business-to-Business Marketplace .com.000 shares at $13.. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Site goes live September .Receives $1 million in venture capital funding from Sequoia Capital $33.600. 99 .

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

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

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

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

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








This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This



There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.

A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.

A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107

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

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

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


781 33.262 1.985 2.147 9.603 5.361 1.654 43.781 17.602 4.766 14.275 30.225 11.313 2.681 2.184 1.197 32.845 56.932 4.132 15.830 14.interbrand.510 8.143 2.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.634 1.181 21.527 3.021 26.423 2.894 14.101 9.806 2.596 3.648 1.643 3.155 7.895 2.310 11.550 12.792 3.422 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .568 3.Interbrand's Ranking of the Top 60 Brands (www.329 4.804 2.048 20.595 17.052 6.502 33.404 4.283 4.281 11.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.806 11.231 12.319 1.076 3.231 24.909 7.193 112 .464 3.043 8.694 17.761 1.

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





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