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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
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
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
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
The Failure of Boo.The 7Cs Framework 6.7.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1 7.6 6.3 Sources of Value .2 Value Proposition 6.5 Conclusion Case Study: Yahoo! 220.127.116.11 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy .6.6.5 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 Company Overview 6.2 Value Proposition 18.104.22.168.3 Sources of Value .6.com 6.4 6.5 Conclusion Case Study: Gap.5 Conclusion Case Study: CDnow 6.6.6 Conclusion Case Study: eBay 22.214.171.124 Brand-Building Strategy 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition 6.1 Company Overview 6.com 6.8 Case Study: Boo.1 Company Overview 6.2 Value Proposition 6.8.com 6.The 7Cs Framework 6.Extensive Integration 126.96.36.199 Sources of Value .4 Brand-Building Strategy 6.7.5 Other Factors that Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.7 188.8.131.52.184.108.40.206 Sources of Value .4.6 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 7.5.1 Company Overview 6.6.2 Value Proposition 6.4 Brand-Building Strategy 6.7.3 Sources of Value .The 7Cs Framework 220.127.116.11 Company Overview 6.
5 Figure 2.6 Figure 4.9 Figure 6.1 Figure 1.8 Figure 3.4 Figure 6.2 Figure 2.4 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .1 Figure 4.5 Figure 5.4 Figure 5.8 Figure 6.1 Figure 5.3 Figure 5.8 Figure 5.7 Figure 6.1 Figure 6.2 Figure 6.1 Figure 3.6 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .1 Figure 2.5 Figure 6.7 Figure 2.com's Associates Programme Overview of BarnesandNoble.6 Figure 5.com's Website Amazon.3 Figure 3.7 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.4 Figure 4.2 Figure 3.3 Figure 2.5 Figure 4.6 Figure 2.2 Figure 5.4 Figure 2.7 Figure 5.2 Figure 2.com's Website Overview of Boo.3 Figure 6.3 Figure 4.2 Figure 4.
Timeline and Major Milestones Gap.com .5 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Boo.4 Table 6.6 Table 6.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones BarnesandNoble.1 Table 6.3 Table 6.com .com .Timeline and Major Milestones eBay .2 Table 6.Timeline and Major Milestones CDnow .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.com .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.0 1. as they face each other through an electronic connection. As such.com noble. while providing new tools for promotion. America Online (AOL) and eBay have been able to build powerful brands in a few years.an explosion that is also a harbinger of how business will operate in the future.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. whereas it has taken decades for traditional companies to achieve the client base.5 2.YEARS TO REACH $100 MILLION IN SALES 6 5.1 3. the Internet is changing fundamentals about customers. products and services reconfigured. It is empowering customers with more options and more information to make informed decisions.com Source: Securities and Exchange Commission Filings.com1 Amazon. aggressive Internet start-ups have emerged.1 OVERVIEW Over the past few years.5 million book titles). Supply chains are being rethought.com. customer affiliation and level of sales. service and brands. The Internet also represents a fundamental shift in how buyers and sellers interact. and business models revamped.1 . creating strong brands that are putting established brands at risk. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.9 3. interaction and relationship building. Amazon. there has been an explosion in the online world . McKinsey Analysis (www. In the midst of this. Amazon.g.com) 7 .com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.mckinseyquarterly. and is triggering the need for new brand-building strategies and tools. relationships. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. This is creating new challenges and opportunities.com's range of 4. that these Internet start-ups have achieved. Internet companies such as Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. FIGURE 1.9 2. As such.2 3. Figure 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.
1997. 'Internet Communities . C. P. A New Class of Netizen is Settling Right In' Business Week. Harvard Business Review. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. building awareness. & Overdorf.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result.. Therefore. attracting traffic or 'eyeballs'. and the high cost of acquiring online customers2. 66-76 Hoffman. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. & Elstrom. Given the tremendous clutter in today's e-commerce marketplace. 1 2 3 Christensen. May 5. that extends the brand-customer relationship beyond a single transaction.. D. as the need to build brand loyalty online is reaching a peak. For pure online players. and Novak.. March . Volume 78 Issue 2. 'Meeting the Challenge of Disruptive Change'. In light of this. turning browsers into buyers. p.. T. L. May-June 2000 Hof. A Business Week / Harris poll. Browder. who are essentially intangible. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. S. found that 57% of Internet users go to the same sites over and over again. R.April 2000. rather than drifting from site to site3.66 8 . companies lack a coherent framework and concrete methods to build an online brand. 'How to Acquire Customers on the Web'. Harvard Business Review. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important..Forget Surfers. 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. pp.. brands are even more critical as customers have little to go on other than a recognised brand. M. P. As such. However.
tools and strategies to build brands on the Internet. • To explore how the Internet is changing the brand-building environment. and to identify new sources of value. FIGURE 1. 1. supported by secondary data related to aspects of online business from accredited and published sources. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. A review and analysis of leading academic thinking will be used to explore these issues.2 .3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.2. This is based on the outcome of the primary research (in-depth case studies).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.
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. to provide an in-depth analysis of the psychological and social dimensions of brands. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. CDnow. The absence of academic literature on Internet branding posed a major obstacle. and is used to provide insight into some of the factors that contribute to the development of successful brands. certain key factors are highlighted in their relevance to the dissertation. Hypothesis (Framework): This is based on the literature review and secondary data. 10 . traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. the literature review draws on leading academic thinking in more established areas such as brand management. and factors that contribute to a brand's success. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. Conclusion: Discusses the key findings and areas for further research.com. however. relationship management. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.com). eBay and Yahoo!).com).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. The combination of cases provides a useful and practical insight into brand-building issues and problems. While there is no attempt. marketing.com and Gap. Consequently. there is more work in popular rather than academic literature. These are further refined using the insight obtained through the case studies. this also highlights the true value of the dissertation. nor desire. strategy and economics. as well as a recent Internet failure (Boo.
provides an analysis of leading academic literature in relation to branding. and outlines the opportunities for further research. Chapter 2. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. 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 7. summarises the key findings. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. 11 . The limitations of the Internet in terms of brand-building are also discussed. by outlining the impact of the Internet on the business and competitive environment. The final chapter. Chapter 3 explores how brands have traditionally been built.4 STRUCTURE The next chapter. highlighting some key factors that have contributed to brand success. as well as the interactive approach to attracting customers and building loyalty. Chapter 6 examines the brand-building efforts of seven companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. This chapter sets the context within which online brands must be built. Chapter 4 provides an overview of the Internet and its defining characteristics. and introduces the core concepts that form the backbone of the dissertation. their purpose and value are discussed. The nature of brands.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
unravelled to reveal the nature of brands and their reason for existence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. explaining the value of brands. R. & Maughan. E.). The chapter proceeds to describe the influence of brands on the buying process. if properly managed.2 WHAT IS A BRAND? According to Rita Clifton. Branding is about creating 'value'. and highlights the importance of brand management. These concepts are central to brands and brand-building. This value stems from the products and services that companies create and bring to the market. The concept of brand equity is outlined.1 .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. both for customers. symbolised in a trademark. both to customers. vii 13 . creates influence and generates value4" This definition truly captures the essence of a brand. 'Building Strong Brands'. 1996. (London: Macmillan Press Ltd. (New York: Free Press). FIGURE 2. A. 2. and they form the backbone of this dissertation. and for the company.1. p. which. and the importance of customer satisfaction and brand loyalty. the brand's emotional benefits and its self-expressive benefits . these layers are Brands are made up of many layers and dimensions. 74 4 Clifton. D. but extends further to encompass added values derived from factors such as the brand-customer relationship. 'The Future of Brands'.see Figure 2. CEO of Interbrand Newell and Sorrell . p..a brand is: "a mixture of tangible and intangible attributes. 2000.1 INTRODUCTION In this chapter.a leading specialist brand consultancy firm . and to companies. whether online or offline.
the basic brand. FIGURE 2.2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include .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.86 14 . As such. a 'set of expectations'. the augmented brand and the potential brand . Brands are richly endowed entities. yet ultimately reside as consumer perceptions.Figure 2. which grows out of the cumulative memory and the experiences customers have of products or services. 1980. and a 'promise'. January-February. T. making their way into planning and strategy documents.the core product or service. 'Marketing success through differentiation .2 . brands are their most valuable asset. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.a 'relationship'.of anything'. For some companies. benefits. a 'reputation'. The space a brand occupies inside a customer's head can create a 'mental' patent. and services to customers. They start life as ideas. 2. Harvard Business Review.. p.3 THE LAYERS OF A BRAND Brands are made up of four layers . It is a company's promise to consistently deliver a specific set of features.
2. actually sell products. and because they most readily come to mind when consumers are asked to recall brands.Analysis. The most common barrier to competition is building a brand.com are examples. Levi's). 8th Ed. They are the historical core of branding because they are the most prevalent. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.g. Service Brands (intangible) are much less numerous than their product counter parts. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. 5 Kotler. preferring things they can see and touch. Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. P. quick delivery) that enhance the customer’s total purchasing and use experience. this is the case with all Internet companies. Southwest Airlines and Amazon. term. but the brand itself is the store. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. this should support the offering's performance and differentiate the brand from those of competitors. most products and services cannot survive on functionality alone as this is usually matched in time. sign. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. information. & Control'. (Europe: Prentice Hall) 1996.g. However. These products and services add value and make the offering much more difficult for competitors to emulate. Certain service brands. 15 .. even when the alternatives are substantially cheaper or more readily available (e. Essentially. symbol. such as in retailing. Implementation. In fact. or design. 'Marketing Management . Coca-Cola.The Gap stores. customers buy products to meet certain functional needs.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Kodak. with supplementary products and services (e. not the products it sells . or a combination of them. The Basic Brand The basic brand consists of the "name.
Analysis. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. In the evaluation stage. either through heightened attention or through an active information search. The buying process consists of five stages (Figure 2.4).. 16 . These beliefs depend on their previous experiences with the brand.. two factors can intervene between the purchase intention and the purchase decision . it is important to clarify customers' underlying buying behaviour and the buying process. Therefore. (Europe: Prentice-Hall) 8th Ed. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. it is critical to understand what attributes consumers value. and pay the most attention to the brands that will deliver the sought benefits. Planning.3).FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. p.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Implementation.194 The process starts when the buyer recognises a need.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and selective retention. This can be triggered by internal or external stimuli (advertisements). and the effect of selective perception.3 . P. 1996. Consumers develop a set of brand beliefs about the attributes of competing brands. selective distortion. Consumers differ as to which product / service attributes they see as important. a consumer will be inclined to search for more information. and Control'. FIGURE 2. Through gathering information. However. 'Marketing Management .attitudes of others and unexpected situational factors (Figure 2. Once aroused. the consumer learns about competing brands.
After a consumer has actually purchased the product or service. Customers' expectations are particularly important when dealing with services. or avoid a purchase decision is heavily influenced by perceived risk. somewhat satisfied. as these services are intangible and therefore. 17 . or dissatisfied with the purchase decision. and a preference for recognised brands they can trust.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. they will evaluate their level of satisfaction . If perceived performance and quality exceed their expectations then they are satisfied. even delighted.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. locking out potential competitors. A consumer tries to deal with this by gathering information from friends. Customer satisfaction and loyalty are essential to creating successful brands. their negative attitude may influence the consumer's purchase intent or vice versa. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations.the customer will be highly satisfied. These expectations are formed through a combination of past experiences. advertising and communication. word-of-mouth. they will be dissatisfied and look for alternative brands in the future. If performance falls below their expectations. customers make decisions purely on the basis of their expectations. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. postpone. Expensive purchases involve some risk taking. and especially important when dealing with purchases made through the Internet. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. A consumer's decision to modify.
E.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and Johnson. The customers at the bottom end of the scale are "terrorists" .. Marketing Management. E. C.those who actively attack the brand telling others not to buy from the company. At the opposite end of the satisfaction spectrum are "apostles" . D. Hewlett-Packard. 6 7 Jones.. Federal Express.customers who are satisfied and loyal and talk favourably about the brand .Figure 2. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Growing the Trust Relationship'. Southwest Airlines and Xerox7. 'Why Satisfied Customers Defect' . FIGURE 2. This satisfaction encompasses the whole experience and not just a company's products or services. Customers that are passionately or emotionally loyal are those that have built trust in a company.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Saturn.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. T. and believe that it will always act in their best interest. T. p.Harvard Business Review. Trust is critical for a brand's success...5. & Sasser. & Sasser. Nov-Dec 1995 Hart. 'Why Satisfied Customers Defect' . W. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Spring 1999 18 . 91 Loyalty is derived when customers are continuously satisfied over time.. Johnson & Johnson.Harvard Business Review. Nov-Dec 1995. M.
& Rogers.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. 1993 McWilliam.g..Sloan Management Review. 8 9 Peppers.com. There is also clear evidence of this on the Internet. Firstly. consistent orders Satisfied customers are the best advertisement . emotional loyalty is born out of a consumer's personal relationship with a brand. 'The One to One Future'. Spring 2000 19 . 'Building Stronger Brands through Online Communities' . the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. 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. Emotional loyalty can be also created through the formation of a strong user community around the brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. Harley-Davidson motorcycle clubs).they provide good word-of-mouth and are the best salespeople for the product / service 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. M.. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. G. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. In this way. 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). This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. D. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity.
pp. 2. March 1998. which goes well beyond the satisfaction of a specific need.6 .BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.. A stronger brand enjoys a high degree of brand preference over competing brands. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. whereby customers would be unwilling to substitute it with competitors' offers. Beyond this. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. FIGURE 2. a 'powerbrand' tends to have a high degree of brand loyalty. there are brands that are unknown by most buyers. and understanding the needs and buying processes of the target market is essential. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. there are brands that customers perceive as acceptable and would not resist buying.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. S.7 . FIGURE 2. 343-373. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). However. Journal of Consumer Research.7). 20 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.
According to David Aaker (1991). The major brand assets are brand loyalty. (New York: Free Press). strong brand associations..BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. D. and relationships with distributors and strategic partners. 1991 21 . '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..Create Awareness .8. trademarks. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. The benefits of each are outlined in Figure 2. 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". and other assets such as patents.8 . name awareness. FIGURE 2. 1991 10 Aaker.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . perceived quality. which is the value of the brand over and above its commodity value. (New York: Free Press). D.
Journal of Marketing Research. brands perform several functions that add value and customer benefits: • Identification . N. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'... J. pp. to make sense of the offer. to quickly identify sought after products • • Practicality . • Brand Leverage .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. market share and profits .To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . R. P. 22 .8. in the following ways: • Brands.To be clearly seen.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. 1986 13 Golder.Typically a brand leader obtains twice the market share of the number two brand. production and marketing. (London: McGraw Hill). to its logo.. & Tellis.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. 'Strategic Brand Management'. 11 12 Kapferer. & Downham.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development..To have confirmation of your self-image or the image that you present to others • Continuity . The brand leader is the most profitable and all beyond number two are unprofitable13.8. to its communication • Ethical . the best performer for a particular purpose • Characterisation . G. (New York: Free Press). 'Consumer Market Research Handbook'. Premium pricing increases revenue. 3rd Ed.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . and the number two twice the share of the number three12.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.To be sure of buying the best product in the category. 1992 Worcester.. May 1993.To save time and energy through identical repurchasing and loyalty Guarantee .Satisfaction linked to the attractiveness of the brand. 158-170. J.
the tools that are used. 2.The product life cycle applies to products.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. in turn. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. fashion or prevailing market conditions.g. In addition. Coca-Cola “the real thing”). companies such as Interbrand (see Appendix A). This. • Brand Loyalty and Beliefs .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . Johnson & Johnson with Tylenol). Companies can maintain a brand while modifying the underlying product to account for new technology. not brands. brand leaders can exploit their superiority in the market (e. and Young & Rubicam have created complex formulas.Companies with strong brands attract good recruits. it can build a strong market share. • Motivating Stakeholders .Brand leaders usually have the financial strength to fend off competitors. maintain good price levels and generate strong cash flows. They also tend to elicit community and government support. • Avenues for Growth . drives up share price and provides the basis for future growth. and the characteristics of successful brands. The brand can also be used to penetrate new markets. When a company creates this type of customer preference and loyalty. 23 . • The Brand Barrier .Strong brands are more attractive to investors.Dominating a niche market is usually more profitable than being fifth in a large market.g. but there remains an ongoing controversy about how accurate and meaningful these measures are. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. In trying to estimate the monetary value of brands. The next chapter describes the process of how brands are built.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
public relations. and direct marketing. brand awareness. FIGURE 3. selling. Once this has been established. it should provide a satisfactory experience and lead to a willingness to buy again. promotion. The major characteristics of successful brands are also reviewed. 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1 . which are created through advertising. highlighting important factors that contribute to the success of each step along the way. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. This is illustrated in Figure 3. confidence and brand equity are built.1 INTRODUCTION Building a strong brand is a complex task. the next step is to get customers to try the brand.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.1. If the offering is developed properly.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . To entice trial and repeat purchase requires triggering mechanisms. This chapter spells out the traditional brandbuilding process. and keep it turning. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.
3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . As such. a compelling value proposition is the combination of an effective product or service (P). In this way.2). FIGURE 3.2 . The value proposition must be continuously re-evaluated to respond to changes in the marketplace. the brand can elicit feelings of confidence that it is of higher quality than competitors'. it is impossible to build a successful brand. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. a distinctive brand identity (I). a company must develop a strong understanding of who their potential customers are. and added value (AV). unless differentiation and awareness can be developed. it will never attract a strong client base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 26 . Without a good product or service. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . In order to do this. Similarly.a strong offer that a potential customer would find compelling and interesting.each is essential. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers.
industry endorsements and newspaper editorials. • Belief in Efficacy . Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. if customers have faith that a brand will work. P. interests.. 'Marketing Management and Strategy'. Sony.In many situations a strong company name (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. these needs are as likely to be about satisfying self-actualisation or esteem needs. which they perceive as meeting their needs. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. Brand values derive from five major sources15: • Experience of Use . 14 15 Doyle. Kellogg's) attached to a new product will transfer positive associations. mean that buyers look for short cuts. 2nd Ed. J. (Europe: Prentice-Hall).1 Added Value Most buying decisions are Added value is at the heart of building successful brands. Gillette. cosmetics and high-tech products. it acquires added values of familiarity and proven reliability.in many cases. or to gain a sense of belonging. For pharmaceuticals. which are additional to those based upon real performance. Hewlett-Packard. P. 1998. Coca-Cola. the number of competing alternatives and the large variety of advertising and selling messages.brands frequently acquire an image from the type of people who are seen as using them.3. The large number of decisions. influenced by brand values. 'What's in a Name? Advertising and the Concept of Brands' (Lexington.the design. as they are to be about satisfying basic physical and economic needs14. Customers choose brands.. Lexington Books). providing confidence and incentive to trial. 1986 27 . MA. it is more likely to work effectively for them. values or wealth. pp. • Brand Appearance . People use brands to express their lifestyles. faith in brand generates satisfaction in use.g. • Manufacturers' Name and Reputation . Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. • User Associations . layout and appearance of the brand can clearly affect preference by offering cues to quality. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. the pace of technical change.if a brand provides good service over time. 169 Jones. In today's affluent society.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 'Strategic Brand Management'.3. its reflection (e. prestige..g. and advertising.3: • The Brand Core . which remains fixed over time. glamour. • The Brand Style . A company should seek to differentiate its brand through developing a distinctive identity. type of spokesperson / customer image used to advertise the brand). 16 Kapferer.the fundamental or genetic code of the brand. press releases. Brand themes are the most flexible element and will tend to change with fashion.g. visual appearance.Figure 3. 1992 28 .2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. however the brand style and core tend to be less flexible. packaging. etc. its personality and its image or self-projection .the way the brand communicates through its advertising. friendly). This may be different from the brand image. and the relationship expressed (e. J. and visual appearance). which depends on how the target market perceives the brand.articulates the brand core in terms of the culture it conveys. features. Themes include the physical appearance (logo. style or cultural differences from one country to another. (New York: The Free Press). colour scheme. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . • The Brand Theme .
(New York: Free Press). advertising.3 . structure and ease of use). its strengths and opportunities.. and through line and brand extensions. 1992 The brand prism enables management to understand the brand.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. J.how far the brand can be meaningfully stretched to other products and market segments. website design. below-the-line activities.g. understanding the brand's core and style helps set the perimeters of brand extensions .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. It also facilitates consistency in the message being transmitted through presentation (e. Finally. 29 . 'Strategic Brand Management'. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. Secondly.
they must learn about it. systems.79-86 The Innovation-Adoption Model consists of: • Awareness .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Price. colleagues and opinion leaders become important influences at this stage. strategy (partnerships and alliances). skills. • Adoption .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. pp. Promotion and Place (distribution strategy). 'Diffusion of Innovations'. deliver and reinforce this value proposition (see Appendix B .The company has to create awareness of the brand. 1962. (New York: Free Press). features and advantages. 'Diffusion of Innovations'.. • Evaluation .79-86 30 .Figure 3. and its products / services. (New York: Free Press).often referred to as the '4Ps' . E.Customers need to be stimulated to seek information about the brand's uses.The McKinsey 7-S Framework). 1962. The value proposition must be communicated to entice customers to try the product / service. pp. the company must ensure that it develops the appropriate structure.4 .Product and service features.. E. Advertising and PR are common tools for achieving awareness. Personal sources such as word-of-mouth from friends. This learning is called the adoption process17 . Before potential customers can buy a product / service.The customer is satisfied and decides to make regular use of the product / service. management style. 17 Rogers. • Trial . it should lead to satisfaction and re-purchase. and the product / service's perceived performance. culture and staff needed to support.4. The value proposition must then be articulated in terms of the 'marketing mix' . FIGURE 3. If the offering is developed properly.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. • Interest .Customers consider whether the product / service will meet their particular needs.
multi-transaction relationship. 3. encouraging evaluation and trial. A. when each trusts the other to deal fairly and reliably. • Structural Ties . Customer service is an important element of this relationship. companies have used the tools of the promotions mix . allowing companies to communicate regularly with their customers and customise their interaction. & loyalty / discount cards. while strengthening the position and value of the brand. this process enables an exchange of information.136-142 31 . (New York: Free Press). pp. providing insight into customers' needs and wants. Over time. L. Social Benefits .g. 1991. making them less likely to switch to a competitor. & Parasuraman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. software) to help customers interact with the company.by learning customers' individual needs and wants and individualising and customising service and contact with the customer.. Internet linkages. 18 Berry. 'Marketing Services: Competing Through Quality'. This is often referred to as Customer Relationship Management (CRM). the company may supply customers with special equipment or tools (e. Advertising and public relations can be effective in generating awareness and interest. companies can increase the value of each customer. This focuses on establishing a longterm. companies can increase buyers' satisfaction. This information is a key competitive advantage.advertising. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. but enhanced customer interaction through relationship building. direct marketing. personal selling and public relations / publicity . Enticing customers to purchase again and adopt the brand not only requires a successful trial experience.such as airline frequent flyer programmes. Through building relationships with customers.to move customers through the adoption process.for example.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. In this way. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . sales promotion.
6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. interaction and relationship building. Once the framework has been established and the organisation configured to provide this proposition.Satisfactory experience is the major determinant of brand values. companies have the opportunity to start building relationships with their customers. trigger trial and reinforce commitment to it. P. but it makes the task easier. As customers build trust in the brand through satisfaction of use and experience. 1998. 2nd Ed. comprehension and intention to buy. or if the brand is surpassed by superior offers from competitors. it must have a unique positioning concept .a segmentation scheme.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. which will communicate the brand's existence. and establish a trusting relationship. (Europe: Prentice-Hall). advertising or promotional campaign. • First-Mover Advantage . 'Marketing Management & Strategy'. when the brand has no competitors to rival its position. including: • A Quality Product / Service Experience . which will add value and distinguish it from competition. its function and psychological values. it has a profound impact on the traditional brand-building process.Being first into the market does not necessarily bring success.176-177 32 . • Unique Positioning Concept . • Strong Communications Programme . then its position will be undermined. It is easier to capture a share of the consumer's mind and build a customer base. 3. As such. 19 Doyle. strengthening the brand further. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. pp. the brand is meaningless. As a result. The Internet provides the opportunity for companies to create compelling value propositions never before possible.A successful brand requires an effective selling. value proposition or augmented brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. companies must actively communicate it to the target audience to entice trial.. while providing new tools for promotion.If the brand is not the innovator. brands were not built quickly.. It often takes years to build up the added values.Traditionally. and making it more difficult for competitors to emulate. • Time and Consistency . Without building awareness. If the quality of the experience deteriorates.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
This chapter provides an overview of the Internet and its defining characteristics. In doing so. which contain hypertext and pictures.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. it offers a number of alternative channels that enable businesses and people to communicate.1 INTRODUCTION The Internet is transforming the business environment. and the 'world wide web' (www) .THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.Figure 4. 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. Information is becoming a major part of the products and services that people buy. In essence. news groups and mailing lists. but in practice not in real time. and a critical source of added value. 4.1 . E-MAIL Is the part of the Internet that most users use at present. creating new challenges and opportunities. it is a common technology platform that allows computing devices to communicate with each other. Hypertext allows information to be organised in a user-friendly way that is easily accessible. The three core channels include e-mail (the most common). 34 . and provides the opportunity for dynamic interaction. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents.1. FIGURE 4.
• It Allows for Two-way Communication and Interactivity . Graph is not drawn to scale). These characteristics combine to create a very powerful medium.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. when the United States Defence Department developed the 'ARPAnet'. and deliver new products and services at low cost. the Internet lets individuals and companies build interactive relationships with customers and suppliers. anywhere. 7 days a week. These qualities eliminate the barriers of time and space that exist in the physical world. allowing both parties to identify each other and build one-to-one relationships . ubiquitous links to anyone.24 hours a day.2 (Note: 35 . These defining characteristics have fuelled its explosive growth.not previously available with mass medium forms of communication. The context of the Internet and certain key developments are highlighted in the Figure 4. 4.The Internet is a global network and can be reached from everywhere.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. By allowing for direct.this radically alters the process of interaction between communicating parties.2. The Internet can also be accessed at any time . • It Overcomes the Barriers of Time and Space .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). which was intended to link military networks together. regardless of where the computer or Internet access device is physically located.
com) 36 .000 1.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.Figure 4. FIGURE 4. 1998. 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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 10.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000.3. 1996 (www.000 1.2 . as cited in 'E-Business Technology Forecast' .000 100.a PricewaterhouseCoopers Report.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.000 1969: 10.economist.000.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.
making it more cost effective for software developers and other technology providers to create interoperable products. Multimedia development tools that can be used to create rich content.2 20 'World Online Populations' . billing. FIGURE 4. increasing to 500 million users by 200220. and gateway services).Low-cost networking alternatives .4.E-Marketplaces . the momentum created by all these forces has created a virtuous cycle of growth.CyberAtlas Internet Statistics and Market Research.com) 37 .. L.g.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. etc. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . Easier access to these networks provided by point-and-click web browsers.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . 2000 (http://cyberatlas.internet. No.. TCP/IP). hosting. 1996. The development of critical processes (ordering. As shown in Figure 4. Reed.Attractive infrastructure and middleware software . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. there will be an estimated 375 million Internet users world-wide.Higher PC penetration among consumers and companies .High-powered servers . 'Electronic Commerce (finally) Comes of Age'.g. The emergence of open standards in development tools and at the network protocol level (e.). offering inexpensive bandwidth.Content Aggregators . The McKinsey Quarterly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. The growth in support services (e. payment. web design.4 . G.Cheap bandwidth .Cheap microprocessors & RAM .
eiu. These activities highlight the adoption of the Internet as an interactive. entertainment) and purchasing (37%) .5 .Figure 4. reveals the wide range of areas where people are embracing the Internet . chat rooms.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. April 13. FIGURE 4.5.com) 38 . as cited in the Economist Intelligence Unit (EIU). to interacting (e.from communicating (90% use e-mail) and sourcing information.g. 2000 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). communication and information tool.
as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. There is no need to travel to a physical location. content.e. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. and no cash register. web browsers. The main difference between the Internet and other electronic media (i. projected by Gartner Group. no order book. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. However. The buyer and seller 'face' each other through an electronic connection. they all project the value e-commerce transactions to grow at unprecedented rates. telephone) is that the Internet goes beyond just enabling transactions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.6 . software. FIGURE 4.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. and people. Instead there is a website. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. fax. April 2000 39 .
and transforming traditional distribution channels.how companies operate. some of which look set to become the superbrands of the future (e. Volume 78 Issue 2. partners and other corporate constituencies.. The Internet also facilitates the development and co-ordination of global activities (e. & Overdorf.April 2000. the Internet is sidelining the role of many traditional intermediaries. Although the particular impact will differ between industries. Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Dell Computers).. operation (e. through the use of extranets). the explosion of information is placing a premium on skilled information management. suppliers. March . 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. By allowing customers to talk knowledgeably and directly to suppliers. Additionally. New brands and business models are emerging to seize this opportunity.and revolutionary new business models are emerging.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. For example. M. 'Meeting the Challenge of Disruptive Change'. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. represents a level of efficiency and integration previously unattainable. 66-76 40 . Harvard Business Review. pp.g. which are often disruptive to traditional business models21. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. the Internet provides the opportunity for Improved business processes and 'virtual companies to integrate with their suppliers and customers in real-time and create previously unachievable synergies at a very low cost. C. At the same time. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen.g. This is threatening to undermine many old established brands. how they compete and how they serve their customers .g.
the development of a knowledge economy. their organisations must harness knowledge . as they are just one 'click' away. Internet technology can be used to exploit collective learning and knowledge. empowered customers. the globalisation of business. has resulted in a fierce competitive environment. getting closer to customers and ultimately staying ahead of competitors. it also removes the geographical protection from competitors. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. As a result. and the 24 x 7 environment. the diminishing barriers-to-entry and the lower switching costs. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. This is forcing companies to become flexible and responsive to customer needs. commit and deploy resources. 2000 (www. the typical clock-speed at which companies need to operate has accelerated. switching costs are much lower. constantly innovate. respond to competitive and market dynamics. According to George Colony. products and services.Forrester Research.com) 41 .they can choose between traditional 'bricks-and-mortar' companies.. little loyalty. as they have access to more information leading to more informed decision-making.in developing products. improving processes. ensuring the delivery of a satisfying customer experience. Now companies need to move at warp-speed. 'Empowered Fruit Flies' . fierce competition. It also provides easy access to competitors' offers and allows customers to consider every available alternative. quick evolution and all the power. They can move from one supplier to another searching for the best prices. with no time. or catalogues. allowing employees to share knowledge. Customers have more options than ever before . and reorganise as appropriate. The Pace of Business is Accelerating With the fast pace of technological change. collaborate more effectively and ultimately embed organisational intelligence within processes.internally and externally . these new highly informed customers are "empowered fruit flies".BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. to capture new opportunities.forrester. CEO of Forrester Research22. online stores. This. highest convenience and quickest satisfaction. combined with the emergence of electronic intermediaries. G. 22 Colony.
Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. information. most Internet and e-commerce partnerships extend beyond this. In this way. 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. 1999 . it provides the opportunity to reach customers where they want. Traditionally. As such. and the need for speed and flexibility have accelerated the unbundling of business systems. alliances and partnerships have taken on a new level of strategic importance. However. extensive outsourcing. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon.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. combined with intense competitive pressures.A Research Report by TeslaGroup. 23 'The Future of E-Business' . The extent of this partnering is illustrated in Figure 4. companies can provide customers with a strong value proposition by offering them the best in quality. and multiple strategic alliances and partnerships. achieve global reach and realise a new source of cost advantage.teslagroup. companies have looked upon alliances only as a means of filling gaps. advice and convenience.(www. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. The opportunity of linking the complete supply chain 'virtually'.com) 42 . which highlights the typical structure and dynamics of an online company. Increasingly. supply chain cooperation. when they want. Examples of emerging information age business structures include flat versus hierarchical. and partnering up with the best for the remaining activities.7. thus creating a 'value net23'. linking companies with suppliers and customers up and down a pre-defined value chain. and most traditional partnerships were vertical. 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. It allows companies to improve customer service. variety.
D. April 2000 In an attempt to provide a rich customer experience. This provides customers with added value. while making the offering hard to duplicate off-line.a Boston Consulting Group (BCG) Analysis. 'Organising for e-Commerce' . G.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.dot. 4.they are business issues. The Internet is transforming every business to some degree. S.7 . many online companies are blending together the products and services of a wide range of companies.. & Stirton. New opportunities for efficiency and co-ordination are emerging. 43 . the pace of business is accelerating and power is shifting to the customer.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. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. it is transforming the competitive landscape and brand-building environment. while triggering the emergence of new brandbuilding strategies. This is the substance of the next chapter. competition is intensifying. tools and opportunities. Partnering with portals and affiliate web sites is important in driving traffic to a web site.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.6 CONCLUSION The Internet and its strategic impact are not technological issues .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
people have concerns about sharing personal information. brands have been developed in an environment whereby a company creates a brand. many unnamed customers develop a 'relationship' with the brand. However. Transactions on the Internet require customers to provide detailed personal information .2 THE NEW DYNAMICS OF BRANDS Traditionally. addresses. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. New strategies and tools for building brands on the Internet are identified. they have never handled or seen (except on-screen). The limitations of brand-building on the Internet are also discussed.Durlacher Research. in most cases. the intangible nature of the Internet.sites that provide a wealth of information and make comparison shopping easy. has placed greater importance on trust and security. on the other hand. This threatens to undermine the value of brands. In addition. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. Customers derive added value through the provision of information on the products or services they buy. The Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. where the user feels a part of. including the interactive approach to attracting customers and building loyalty. etc. the Internet makes search and comparison much easier. May 1999 (www. whereby the company can establish a dialogue and 24 Marathe. On the other hand. People only tend to transact with sites they know and trust . the logic of the Internet cuts another way..com) 45 . offers interactivity. and projects it onto a third party intermediary (the media).names. 'Internet Portals' . and the fact that customers are buying goods that. in addition to providing added value. and sites that understand the user's needs and preferences24.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. 5. Traditionally. Generally. as well as on topics of interest related to the brand and product characteristics25. In response.durlacher. credit card numbers. J. 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.
service approach Customised The Internet gives companies control over all their interactions with customers and therefore. This creates the opportunity for companies to build stronger relationships than previously attainable.1 . relationship building characteristics of the Internet. Prof. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. a company can listen. brand-building must focus on the end-to-end customer experience . this also poses a challenge as these relationships may take on a life and character of their own. 1999. J. companies have to find innovative ways of leveraging the information and 25 McCann. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. B.Fuqua School of Business. January 28. Rogers. understand and relate to customers. However. 1997 (www.. to its delivery to the customer. rather than simply speaking at customers.duke. . M. & Dorf.Harvard Business Review. 'Adding Product Value Through Information'. 151-160 46 .. pp. In maximising the customer experience. learn. In doing so. TABLE 5.1. D.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative.. 'Is Your Company Ready for One-to-One Marketing?' .from the promises made in the value proposition. Duke University. January-February.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26.edu) 26 Peppers..
customer acquisition costs are high.org) 28 Rigby.pwcglobal. 1999 (www. T. Zook. D. Chu. J.bain.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. and with customers holding all the power. it could be argued that customer loyalty is even more critical online. and some are spending over $50029.com) 29 Hoffman. Therefore.. R. March 17. This is further reinforced by the fact that. C. as cited in 'Creating a High-Impact Digital Customer Experience' .. L. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. In fact. unless they are selling high-price. Harvard Business Review.com and www. - Repeat purchasers spend more and generate larger transactions . Rastogi. & Hancock. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . .A Mainspring Communication Report in collaboration with Bain & Co. D....3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. - Repeat customers refer more people and bring in more business .due to more frequent shopping and larger purchases. high-margin items.converence-board. . - Loyal customers are more willing to buy other products from the company. and Novak. but also provides more opportunities for cross-selling. companies need to retain customers so that they return to the site repeatedly. Baveja. 2000 47 .. T. P. S. For example. MayJune 2000 30 A Forrester Research Study. and to recover their investment.word-of-mouth is the single most effective and economical way online businesses grow their sites. 'How to Acquire Customers on the Web'. companies must ensure that they provide a completely satisfying end-to-end customer experience. on average. 27 'Electronic Business Outlook'.. Kearney White Paper. These points stress the importance of online customer loyalty. S. 2000 (www. Repeat purchasing not only binds trust.Research by PricewaterhouseCoopers / The Conference Board. it is very unlikely that an online retailer can break even on a one-time shopper. This view is reinforced by in-depth studies carried out by Bain & Co. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. 'The Value of Online Customer Loyalty and How You Can Capture it'. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.often.. a disgruntled online customer tells 10 people about a poor experience30.An A.
FIGURE 5. As a result. G. each additional unit sold does not cost more than the last to deliver. as illustrated in Figure 5. Similarly. customisation for individual customers. as the benefits of scale are overwhelmed by the disadvantages of size31. 7th Ed. and in the case of information-based products. additional products. However. R. increases disproportionately as more people join the network.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. and the value that each member realises. additional customers and transactions can be managed with limited fixed cost investment. Even more important. businesses and online communities that rely on connectivity can enjoy 'network effects'.. 1989.. 'Positive Economics'.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. 180-182 48 . this is not the case on the Internet.1 . (also referred to as 'viral economics'). Once the up-front investments are made (for research and development and technology infrastructure). and other features can be added or changed at low marginal cost.1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. where the value of the network. (London: Harper & Row). the costs approach zero32. pp.
Figure 5.2 . FIGURE 5. 21 . fulfilment • Defensible advantage against competitors SCALEABLE. link revenues 32 33 Melnicoff.2.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. As the company builds a customer base and develops a relationship with customers. This makes it more efficient in improving product selection. '5 Rules of the eEconomy'. being first into a market makes it easier to capture the consumer's share of mind. It also allows online companies to tap supplementary revenue streams.A Shop. cross-selling and up-selling33. advertising and referrals. With no competitors around.A Publication by Andersen Consulting 'The State of Online Retailing' . its ability to track customer preferences and customise offerings improves. enhancing the interaction. delivering increased margin per customer . M. R..BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising. Outlook 1999. direct marketing.org Study in collaboration with The Boston Consulting Group. Nov 1998 49 . No. including direct marketing.
as it carries the implied endorsement from a friend. larger sites can leverage more customer advocates to reduce customer acquisition costs. with its e-mail lists. commerce and distribution partners.unless the leader makes a serious mistake.A Shop. "creating a buzz". This. its growth curve relative to a new entrant is somewhat daunting. web sites. the leader will pick up momentum and will stand to gain an insurmountable advantage . 5. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. creating a potentially exponential growth (like a virus) in the message's visibility and effect. as once a strong lead is established. 34 'The State of Online Retailing' . It is often referred to as "word-of-mouth". Word-of-mouth is a particularly powerful medium. As a result. with a minimal budget and maximum effect. New marketing strategies. Nov 1998 50 . When a company reaches 'critical mass'. This snowball effect favours first-movers. leading to the exponential expansion of the customer base. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. and the cost of switching to an alternative brand becomes quite high. viral marketing is an effective tool in getting a message out fast. in turn. By the time a company has reached critical mass. the larger customer base provides online companies with more leverage in attracting and negotiating with key content.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. This is the logic behind some of the extraordinary valuations of Internet companies. chat rooms and bulletin boards. "leveraging the media". the brand begins to take hold. the value of the company rises exponentially with market share. and "network marketing".org Study in collaboration with The Boston Consulting Group.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. The Internet. makes communication tighter. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. such as 'viral' marketing. or until a competitor finds a way to change the game again. and word-of-mouth even more effective. Given the connectivity of the Internet among customers. Larger sites can also negotiate better supplier discounts or product placement fees. As a result. 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.
sign up for their own free e-mail. • Each new user becomes a company salesperson. but Hotmail signs up more than 150.hotmail. and they created a subscriber base more rapidly than any company in history. seven days a week.000 subscribers within a few years of launch. saying: • "Get Your Private.com The classic example of viral marketing is Hotmail. Free Email at http://www.5. friends to visit it.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.1 The Case of Hotmail. and in doing so spread the word for Geocities. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. In fact. When a user builds a website.com. whether for communications or community. and then propel the message even further to their own ever-increasing circles of friends and associates. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. Hotmail. Today they are the largest e-mail provider in the world with over 40 million users. A traditional print publication would hope to reach 100. where they have never carried out any promotional activities. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.5 years. eGroups and Geocities (both recently acquired by Yahoo!). Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).000 subscribers every day.com was one of the first free web-based e-mail services.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. In its first 1. Geocities enables people to create personal websites for free. and the message spreads organically. 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). a company now owned by Microsoft. they tell all their 51 . they will have a powerful viral opportunity at their disposal. Hotmail acquired over 12 million subscribers. 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. 30% of potential customers leave sites because they cannot find what they are looking for. & Hancock.. Rastogi. The customers' ability to access and display information rapidly is extremely important36.3)... Baveja. T. . R. 'The Value of Online Customer Loyalty and How You Can Capture it'. Zook.. 2000 37 Rigby. J. As 35 36 'Creating a High-Impact Digital Customer Experience' .com) 52 . the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Promotion. making customers 'click off' to another site.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. and 66% of people who start a 'shopping basket' fail to complete the transaction37. In essence. Place).A Mainspring Communication Report in collaboration with Bain & Co. In fact. Sites that are difficult to use can cause frustration. 2000 'The E-business Technology Forecast' . T.An A..3 . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. C. Price. FIGURE 5.An A. Kearney White Paper. S.A PricewaterhouseCoopers Report.bain.. 2000 (www.. Kearney White Paper. March 17. S.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . D. Chu.
'Sticky Business'. which can enhance the company's value proposition. as cited in Business Week Magazine. CIO Magazine. as cited in Business Week. With almost infinite display space and inventory capability.com) Davenport.. and fast response times are among the most important factors in establishing web brand loyalty38.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. 29th October 1999 (www.businessweek.4 . February 2000 Issue 53 . FIGURE 5.businessweek. and a wide range of products. whereas a slow response time and site downtime will have a significant negative impact. October 29. up-to-date information. 1999 (www. 38 39 Cognitiative Inc. ease-of-use. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.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.4. expert insights. ease-of-navigation. online companies have the opportunity to provide rich. T.
share information and access a wide range of services.g.Sloan Management Review.. W. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. On the other hand. 'Real Profits from Virtual Communities' . Often. According to Forrester Research40.A Forrester Research Report. 1999 (www... even if they purchase offline. or prior transactions.5). 31% of online consumers use the Internet for obtaining product information. Community Online communities are emerging as new gathering places for consumers with similar interests (e. 40 41 Morrisette. & Hagel.. K. and nearly 20% use it for post-sales support. 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). Customisation Customisation involves tailoring the presentation of a web-site to individuals. and organise live events. Online sites can track a customer's purchase history and modify its service accordingly. Spring 2000 42 Armstrong. use bulletin boards.The McKinsey Quarterly. 1995. based on profile information. No. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. An online community offers a compelling way to entice customers back to a site. Clemmer. & Bluestein. J. visitors should not be engulfed with too much information. It fosters a sense of belonging41 among the members. and advertising (if it is relevant and useful).com) McWilliam. G. 'Building Stronger Brands through Online Communities' . 54 . Members can interact in chat rooms. as well as through loyalty programmes that provide targeted benefits. it needs a critical mass of members42. For a community to work. . These sites allow members to interact with one another. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). A. Customisation creates the feeling of a one-to-one relationship.forrester. S. which enhances the user's online experience. iVillage and Geocities). Other content includes community-generated content. An important contribution of these communities is that they provide members with a medium to communicate with each other.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. which is facilitated by a combination of factors (Figure 5.. demographics. 3.
C. 'Making Real Sense of Virtual Communities' . allowing customers to deepen their experience with a brand and build more personal connection. pp.. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.6). Site-tosite connectivity focuses on connecting users to other relevant sites.www.5 . 343-373. they opt to input the URL (Internet address . Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. as well as attracting traffic from other sites.. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.brand-name.. when membership in the brand's community becomes an end in itself43. M. S.. 55 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.com) directly into the browser and access the site immediately. Mulcahy. A. This is similar to placing offline stores in high traffic areas. Companies can provide a selection of related links that complement the site's purpose and value proposition. Journal of Consumer Research. and can create emotional loyalty. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. 1999 Communities enhance the speed and value of information sharing.A PricewaterhouseCoopers Study. O'Donnell & Gupta. Once customers know of a site. March 1998. 43 Fournier.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.
The development of loyalty programmes. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. and can be provided through e-mail. live chat. delivery and return options. In addition. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. Communication can be tailored to specific user interests and should allow for two-way interaction. Customers share security and privacy concerns.6 . and online surveys. Therefore. which provide targeted and unique (customised) benefits to the customer. and FAQ pages (Frequently Asked Questions) to solve problems.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. events and subjects of interest to the customer.marketwatch. 45 MarketWatch. online chat. toll-free telephone numbers.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. activities. Other tools such as bookmarking the page can also facilitate connectivity. serves this purpose and helps to build customer loyalty. (www.com) 56 . news up-dates. customer support at all stages of the interaction is important. Customer Care Online customers often require assistance and reassurance. as well as features such as gift-wrapping. as well as informing and reminding customers of special offers. It is important in building relationships. customer care activities can involve providing a variety of payment.
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 ’ .7. Figure 3. 'Marketing to the Digital Consumer'. Adoption).4 . billboards. visibility relies solely on Communication. The company must build awareness and communicate its value proposition to its target customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. FIGURE 5. Waitman. because there is no physical presence.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. McKinsey Quarterly. Therefore..Awareness. Interest. Magazines.8.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.) to online tools. The mechanisms to communicate range from traditional media (TV. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. e-mail notifications and banner advertisements. 180-183 (www. and bring people to the site for the first time. M. S. pp..Attract. Retain. This model consists of five stages . links from directory searches (Connectivity). including affiliate programmes with other websites. R.. McQuade. & Zeisser. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7 . No. Learn and Relate. Newspapers.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.2. modified to take into account of the interactive dynamics of the Internet. 1996. This is more difficult online than offline. A.mckinseyquarterly. etc. Trial. Engage. Evaluation..
Engage With the multitude of choice available on the Internet. affiliate programmes.Economist Intelligence Unit 2000 (www.3 2. it is important to quickly engage consumers' interest before they move on.2 4.4 4. Fig.4 3.com) The most effective methods are direct e-mail.1 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.6 3. 58 .WEBSITE PROMOTION METHODS . Companies then need to engage customers to obtain their interest and participation. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Kapferer's Brand Prism (Ch. as cited in 'Targeting Consumers via the Internet' .3 Source: Forrester Research. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.8 4.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .3 3.0 3.ebusinessforum.4 3. The key factors at this stage are Convenience combined with interesting Content. 3.3) is useful to ensure that a company develops a distinct and consistent brand identity. 3.5) 2.7 4.8 .5 3. discounted over the expected duration of the brand-customer relationship. public relations and television advertising. multiplied by the expected rate of transactions. Attracting customers is only the first step in building online brands.
Certain product categories.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. • The Internet supports brand-building activities where there is a need to build a relationship. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. and must be continuously updated due to the multiple visit nature of customers. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. attitudes and behaviour). do not lend themselves to a need for customers to build a relationship with the brand (Figure 5.g. Building up a knowledge database on each customer . TV. The initial site registration provides an early opportunity to obtain useful information. such as groceries and convenience goods. can create value for the customer and help build the brand-customer relationship. and forge closer relationships than any offline operator. Radio). a company can create value by providing a personalised online experience. 5. and what additional products and services are they interested in provides companies with valuable information which.who they are and why they shop online.9). This helps to create a customer base that spends more time and money at a site. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. if used properly. Learn The Internet provides extensive opportunities to learn about consumers (demographics. Content is the basic driver of retaining customers on a site. Communities and Customisation are other sticky applications. 59 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. The objective is to increase the conversion rate (% of browsers converted into buyers).
1996. A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. However. engaging and retaining customers.. & Zeisser. M. it is not economically feasible to sell certain products. the interaction provides the ability for companies to learn from their customers and relate. Waitman. companies must provide a satisfying end-to-end customer experience . Given the high acquisition costs of online customers. especially in small quantities.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.from the promises made in the value proposition. to its delivery to the customer. smell). • Brand-building favours products that can be sold online. R. The interactive brand-building process involves attracting. 'Marketing to the Digital Consumer'. 180-183 (www.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. No. it is critical for companies to build relationships and foster brand loyalty... McQuade. McKinsey Quarterly. The next chapter analyses the brand-building efforts of seven companies. providing further added value. touch.. 60 . pp. These case studies provide a practical insight into how companies are building their online brands. and as the relationship develops.9 . In order to create "apostles".9 CONCLUSION On the Internet.2. 5. S. the experience is the brand.mckinseyquarterly. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. due to high delivery and transaction costs (relative to the value of the product). and the need to stimulate the other senses (taste.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
and other key factors that have contributed to its success (or failure).2 Value Proposition Amazon.economist.com. easy.com) 62 . greater convenience. February 26. and enjoyable experience. and higher levels of customisation and service than the traditional shopping experience allows.com.com) .2. The cases are presented in the following sequence .com's success stems from its compelling value proposition.com has become synonymous with e-commerce. and has equity investments in several e-tailers. more information. its brand-building strategy (how it generates traffic). Gap.2 CASE STUDY: AMAZON.COM 6. the sources of added value (using the 7Cs Framework). eBay.1 INTRODUCTION This chapter provides an analysis of seven companies. CDnow. 1999 49 'Amazon's Amazing Ambition' . It is the 57th most valuable brand in the world47. Amazon provides increased added value on several dimensions. innovation and delivering on its promises. Figure 6. In July 1995. November 11. Barnesandnoble.1 outlines Amazon's timeline and major milestones.It's an Ocean.com launched with a mission to use the Internet to transform book buying into a fast. 'Amazon. discounted prices.2. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Each case is presented in the same format including.1 Company Overview Amazon.com. Amazon. and is one of the few Internet brands that is recognised all over the world.Goldman Sachs Report. In addition. 47 48 Interbrand (www. Amazon.com . 6. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).com and Yahoo!. Amazon has been able to differentiate itself from other online competitors. Amazon serves over 23 million customers from 160 countries. Germany and Japan49. Through its provision of a one-stop shopping experience.The Economist.Amazon. combined with its levels of customisation and customer service. Not a River' .interbrand.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. 2000 (www. Amazon has cultivated a reputation for excellence. including: increased selection. and has sales of over $2 billion. and one of the top two or three in Britain. a company overview. Boo.see Appendix A. it is the most visited e-commerce website in America. 6. its value proposition. France. In addition.
provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Announce Strategic Investment and Promotional Agreement .com 63 .com Amazon launches online Auction site Amazon agrees to purchase Live/bid. and more Amazon launches "Amazon." providing shopping from wireless devices.com announce investment and strategic alliance .Amazon launches health and beauty store .amazon.com Amazon acquires Back to Basics Toys to add to Amazon. and minority investment in.Amazon and online car-buying service Greenlight.com Amazon invests in Pets.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon and eziba.com Amazon introduces "Purchase CirclesTM".com opens its virtual doors at amazon.com .TIMELINE AND MAJOR MILESTONES Amazon.Amazon launches www.sothebys.com Electronics and Amazon.Amazon.com .toolcrib.Customers can shop at Amazon. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com enters European book market Microsoft signs Amazon.000 members Amazon.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.com and NextCard launch co-branded credit card . featuring thousands of bestseller lists for hometowns. such as the Palm VII organiser. Ashford.com is founded by Jeff Bezos Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.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 as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com via the new wireless pocket PC .Amazon.com Auctions and zShops provide new tools to its merchant community . West Virginia. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com Anywhere.Amazon opens customer service centre in The Hague .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.Amazon enters into a strategic partnership with Drugstore. universities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com.COM .com invests in wineshopper.Amazon enters strategic alliance with living.Amazon announces investment in kozmo.Amazon launches new kitchen store . Software.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.amazon.Amazon launches lawn & patio store .com to create a "home living" store at amazon.com. workplaces. to meet rapid growth . a tools and equipment store for professional tool users and woodworkers .com .com .Amazon surpasses 20 million cumulative customer accounts . Video Games and Gift Ideas Amazon and Sotheby's launch www.com Amazon announces further plans to expand distribution network to meet rapid growth.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.Amazon opens a customer service centre in Huntington.
the 1-ClickTM express checkout. discussion boards. gift reminders. mobile phones. book summaries. encourage repeat visits and drive higher conversion rates.3 Sources of Value . expert reviews. Content Amazon provides content on several levels. recommendations. wish lists. customer testimonials. Amazon has added other features for shopping convenience. and Amazon. such as the Amazon. live or study.2.1. downloads quickly and services visitors adequately .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. FIGURE 6.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple.1 . and customer Purchase CirclesTM. logically structured. and quick-to-load pages Over time.OVERVIEW OF AMAZON.com Anywhere to support access from wireless devices (i.Figure 6. interviews with authors. The site is easy-to-use.e. including book jacket images. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. offering multiple paths to a given book or product.com All Product search (searches the entire web). easy-to-use. This is an example of 64 . Palm VII PDA device). gift click.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping.
Amazon creates one-to-one relationships with its customers. linking it to a large number of other sites. In doing so. These are discussed in more detail in Section 6.thereby increasing conversion rates. therefore. and has developed an Associates Programme. from its shopping basket applications which lists the estimated time to delivery reliably. This customer-centricity is evident in all Amazon's activities. converting them into a storefront for Amazon. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. while driving up repeat purchases and cross-selling opportunities. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. and customer interaction. Amazon's content is not reproducible by competition.2. 65 . All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. real-time shipping and backorder notices.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers . More recently. By leveraging its vast customer base. which helps to build loyalty and create switching costs. to the proactive notification of new items of interest. Community Amazon has also added a community element to the purchasing process. Connectivity Amazon has built relationships with high traffic web portals and sites. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. from the customer recognition at the point of interface (Figure 6.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. creates a competitive advantage. and Customisation Amazon provides customised features and services. Amazon introduced Amazon.4.
attracting member sites of all sizes. two personalised services. Once orders are placed. Instead of paying directly for this exposure. and not subsequent purchases. which only applied to sales that resulted from the initial click-through.000 by August 2000. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. increasing to over 500. 66 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers.com hot-link and offer specific books of interest to their visitors. Business Week. Amazon offered Associates referral fees of up to 15%. New Yorker and The Economist.2. This enabled Amazon to reach more customer segments and niches (Figure 6. and customers are also e-mailed when the items are shipped from the warehouse. and by 1999 it had over 200. The Associates Programme has been phenomenally successful. enticing them to return to the site and purchase repeatedly.000 members. helped generate publicity and stories about the company in publications such as The Wall Street Journal. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Through the first half of 1996. The Financial Times. 6. Newsweek.a move that along with the novelty of its business model and the newness of the Internet. they are subsequently confirmed by e-mail. In July 1996. In addition. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. it began to advertise in print media and online . As a result of all these factors (7Cs).2). Eyes and Editors. In the second half of 1996. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.
spreading the word for Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. the customer acquisition cost is only £10.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.com Refer-A-Friend . and you are given a $5 gift certificate for each customer you provide. 67 . • Amazon.com's website (www.customers are encouraged to provide e-mail addresses of friends. Excite.uk the local provider for Yahoo! UK & Ireland. In return. mutual links.com gift certificate (in your name).amazon.de became the local provider for Yahoo! Germany and Amazon. The Yahoo! agreement. and primary button placement on web portal search engines.COM'S ASSOCIATES PROGRAMME Source: Amazon. Amazon also established agreements with AltaVista.allows customers to create a personal profile (with pictures) on the site. was also linked to Amazon's entry into Europe Amazon. Interesting viral initiatives include: • Amazon.2 . Therefore.com). Yahoo!. People tend to tell their friends about it. Amazon closed deals with five of the six most visited Internet addresses. multiyear deals involve exclusive book-selling rights.com About Me . From July 1997 to December 1998.com. thereby promoting Amazon. each friend is sent a $5 Amazon. In addition.co. including: America Online (AOL). These multimillion-dollar. Prodigy and @home. Netscape's Netcenter and NetSearch. Amazon has used viral marketing techniques through customer reviews. free eCards and gift certificates (which customers send to friends.AMAZON. and Geocities.
have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates.g. "we had a world-class site the day we launched . This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. With this combination of promotional methods. buying patterns and viewing habits. which accounts for 66% of Amazon's sales.significantly lower than other online companies. Amazon's proven online merchandise selling techniques including easy-to-use search options. Magazines. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. and improved customisation and recommendations (e. clear presentation. Purchase CirclesTM). resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. however. so we didn't have to do much advertising. 50 Willis.com Really Matter?' . April 6. 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. interesting content. community feel (as discussed previously). billboards. C. newspapers) to generate awareness.but it was only a tenth as good as the site we have now. According to Jeff Bezos. And we relied on word-of-mouth to build awareness. As the relationship develops. Once customers are attracted to the site. with the explosion of websites. 1998 68 . Amazon has been able to achieve average customer acquisition costs of less than $20 . Amazon has also incorporated traditional offline media (TV. 'Does Amazon.. Amazon maintains a database of customer preferences. By relating to customer needs. That's not possible anymore50".Forbes. Amazon is building customer loyalty and encouraging repeat business. 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.
which within six months propelled Amazon to one of the leading online music retailers.. According to Jeff Bezos. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. (Oxford: Capstone Publishing). memorable. Amazon was able to secure partnerships and alliances with key players. 'Business the Amazon. management realised that Amazon had become more associated with other core brand values . July 1998.a wide range of choice. "we're not a stationary target. According to Jeff Bezos. This has helped them attract customers and move up the learning curve quickly. "Online. due to the hype and coverage it was given. developing customer service centres and expanding its distribution network to support high levels of service. further enhancing their value proposition. in June 1998. Amazon is constantly seeking new ways of improving its offering.. We have been customer obsessed. and our goal is to increase that gap51". good value. However. establishing a reputation for excellence and fulfilment. Amazon received criticism for expanding its product line. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. Nevertheless. while our competitors have been Amazon.com Way'. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. 1999 69 . and its safe and secure delivery. Amazon unveiled a music store. L.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. In addition. establishing Amazon as the leading online bookseller with a large customer base. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. and according to Jeff Bezos. and to convey its vast size and offering. to capture the spirit of the site. Amazon's understanding of its brand identity has been a critical factor. because he wanted it to be short. the balance of power shifts away from the company and goes towards the customer. In addition. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). As such. As such.2. For example. Our secret is that we have not been competitor obsessed. Saunders.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 51 52 Hazleton. thereby diluting the value of its association with books. Amazon has been able to build a strong brand at relatively low cost. We were blessed with a two-year head start. Success. R.com obsessed52".
and to sustain a positive image and satisfactory end-to-end experience. When they're young. 1998 70 . 'Marketers of the Year: Jeff Bezos. 6. 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. if it continues to incur losses.2. it has not recorded any profits to date. Amazon also recognised that service quality is a perception. B. In doing so.Brandweek.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. Amazon is claiming to be making profits on its books and music categories. Amazon has continuously invested in customer service. as the true value of a brand lies in its sustainability. which is critical on the Internet. 53 Warner. Amazon's intense focus on customer needs and continual innovation. This raises a critical issue.. However. speedy delivery and good value. Amazon delivers on its promises of a wide inventory of products. Quality is only measurable in the minds of visitors to the site. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. the drain on their cash resources will push them towards bankruptcy. not necessarily a reality. Although Amazon has successfully built a strong brand and loyal customer base. but over time they become more and more associated with a particular thing and harder to stretch53". stem from its compelling value proposition and high quality end-to-end customer experience. October 12. This customer-centricity is a key hallmark of a successful Internet brand. however. Volume Discounter' . and investors lose confidence. distribution centres and upgrading the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. with new products and value added content. Nevertheless. secure payment procedures. they're stretchable and pliant. they have cultivated a reputation for excellence and fulfilment. have kept it ahead.
2 1997 January BARNESANDNOBLE.barnesandnoble.Barnesandnoble.Barnes & Noble went online at AOL May .Barnes & Noble.com announces strategic relationship with Palm Computing . and 470 B.Launches Video Store 71 . prints & posters and related products.com and Microsoft announce that they will create an eBook superstore . Barnesandnoble. rare.com was able to 'hit the ground running'. etc. music.Launches Affiliate Network December .Launches Internet Radio .TIMELINE AND MAJOR MILESTONES .Offers same day delivery in Manhatten . promotion) between the online store and the retail stores have been kept separate. Currently. Launched in 1997.3.com) .. book databases.com launched its website (www. Barnesandnoble.3 CASE STUDY: 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 .) established by its parent company. Dalton bookstores (located in shopping malls). Barnes & Noble Inc.Barnes & Noble University opens registration for free online courses . However. as it could capitalise on the infrastructure and back-end operations (warehouses.COM 6. Barnesandnoble. and 20% owned by the public. 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.Acquires equity stake in Mightwords .Acquires minority stake in NotHarvard. Barnesandnoble. Barnes & Noble Inc.1 Company Overview Barnesandnoble.com provides other online categories offering software. Inc.COM . Besides books. TABLE 6. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. magazines. 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. contacts.com).com . and is the second largest online bookseller (after Amazon.com is approximately 40% owned by Barnes & Noble.com's timeline and major milestones is outlined in Figure 6. 40% owned by Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .Announces distribution relationship with New York Times September .com is the fourth largest e-commerce retailer54. is one of the best known traditional booksellers in the United States.Launches BNTV . and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).2.
author.com and barnesandnoble. Both offer detailed bibliographic information. edition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. music New Initiatives Barnesandnoble.com's and takes a bit longer to download. but instead of developing an outstanding interface to its inventory. 6.3 Sources of Value .3). as well as an extended searchable catalogue of millions of out-of-print. logically structured. good prices. the features are practically identical.com's virtual storefront is graphically richer than Amazon. and easy-to-navigate site Categories focus on books. FIGURE 6.com let customers sign up to receive email reviews and announcements of new titles.OVERVIEW OF BARNESANDNOBLE. In addition.COM'S WEBSITE Simple. as cited on Barnesandnoble.com or www. Both Amazon. the company created a site very similar to Amazon.2 Value Proposition Barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print. however.com) 72 .The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. including title.bn. previously-owned and rare books.3 . in terms of the 7Cs framework. etc.com's (Figure 6. Both have expanded their convenience to offer 54 Media Metrix. software. easy and secure ordering. publisher.barnesandnoble. they offer customers fast delivery. rich editorial content and a community experience.com's website (www. Barnes & Noble planned to dominate online book-selling.3.3.
55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . However.com closed 1999 with 4 million customers. They have developed an affiliate programme that links sites to Barnesandnoble. Barnesandnoble. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Although. while Amazon. and both are expanding globally. Barnesandnoble. Barnesandnoble.1 billion.com had over 17 million. The 6.The Wall Street Journal. These initiatives have generated traffic to the site. reasons for this are explained in the next section.com in return for a commission on any purchases that they originated . 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 . 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. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.a replica of Amazon's Associates Programme.com's 1999 revenues were $202. Yahoo!. while Amazon. Both offer 'associate programmes' that let other websites link to their sites. and avoid charging sales tax in states where it has stores56.000 affiliates in its referral network. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble.4 Brand-Building Strategy Barnesandnoble. compared to Amazon.3. As of February 2000. Both try to foster a community of readers by letting customers post reviews online.com has created a high quality website and customer experience. this programme had more than 300.com. Netscape and Microsoft Network. December 17. Instead.com's market capitalisation was $251 million. prevent cannibalisation of its existing business. however. Webcrawler.com's $1.6 million. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). it lags behind first-mover Amazon.64 billion. Lycos. and Barnes & Noble Inc. has yet to leverage its strong brand in cyberspace.com was valued at $21.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both offer customisation that permits users to personalise the experience.
com.com. • Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through. Barnesandnoble. 74 . in-store displays. and in recent months has aggressively sought new ways to differentiate itself. Barnesandnoble.com. or deliver books directly from the retailers. By failing to leverage it.. and a same-day delivery option in Manhattan. when it struck reciprocal marketing deals with Expedia. and Internet terminals in the bookstores. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). Jcrew. To signal its intentions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble.com. with a similar discount. Recent Initiatives Barnesandnoble.com has changed its name to Barnes & Noble. Barnes & Noble University (a free online education resource).com. provides access to valuable resources.com should have aggressively cross-promoted their stores through advertising.com is its association with Barnes & Noble Inc. LLbean.com's key differentiator from Amazon. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. as Bertelsmann's book division includes partners such as Random House.com's link to Bertelsmann AG. • In addition. and the tangibility that this provides. 1-800Flowers. • Barnesandnoble. Barnesandnoble.com. content and distribution opportunities.com. In return. Petsmart. At any given point there are hundreds of customers browsing their aisles looking for something to read. in the attempt to gain traction and build momentum. Under the seven separate agreements. Planetrx. Unfortunately.com and VitaminShoppe.com. and its BMG Entertainment division includes music giants Arista Records and RCA Records.com created a new cross-marketing genre in February 2000. each partner offers a similar link to Barnesandnoble. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. Barnesandnoble. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com has lost access to valuable customers. and leverage its real-world presence. people began using their stores as a physical showcase for online rivals such as Amazon.com.com. Barnesandnoble.com has begun to acknowledge some of these mistakes.
Forbes.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. significant market momentum. by portraying them as slow and clumsy in comparison to the more nimble Amazon.com . feature for feature) has failed to differentiate Barnesandnoble. In addition. August 4. even if that means eating into their existing sales.com has been able to create a high impact and high-quality customer experience.its key differentiating factors.com. 57 'Bn. it also caused a major setback. a wellestablished Internet brand.6 Conclusion Although Barnesandnoble. Barnesandnoble. it has not been able to establish itself as the leading online bookseller.com) 75 .Not a Best Seller' . Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. and allowed them to offer stock options as compensation and achieve a high market capitalisation. The company failed to leverage its established brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com's late start in 1997.forbes. otherwise they risk losing out to other online competitors. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". 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 experience is instructive. and its lack of innovation (by copying Amazon. 2000 (www. meant that Amazon.com and has given them the image of a second rate 'me too' brand. Barnesandnoble.3. customer relationships and offline presence . The Press have also contributed. and was further up the growth curve. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.
com collapsed through lack of funds. within six months Boo.com entered six markets: US. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).com. and Converse. it means all that brand's product line is available. England. Boo.000 unique visitors .Raises funding of $125 million . November 2000 January February May 6. and eventually debut in Asia.Site goes live .4.com opens its virtual doors' .2 Value Proposition According to Kajsa Leander. June 10. among others. and included high profile investors such as Bernard Arnault. sack 20% of staff and sell stock at 40% discount . Morgan. P.Announces it has only 500. On going live.Multi-million pound advertising campaign created by BMP DDB .Marketing Week. and was billed as one of Europe's hottest e-commerce ventures. arranged through J.they redesign site. Sweden. Boo. 1999 76 .com had set the record as Europe's best-funded European Internet Start-up. due to its poor performance and inability to build a customer base. and the resulting loss of investors' confidence. not the limited range you might get at most London fashion shops58".Appeals for $30 million more funding .fails and appoints KPMG as liquidator.3 1999 Mid year BOO. Boo. "our marketing thrust is not based on prices. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).First sign of problems . it's about range and convenience. founder and Chief Marketing Officer of Boo. as cited in 'Boo.1 Company Overview Founded in 1999. Boo. Germany and Denmark. If a clothing brand is on the Boo site. TABLE 6. Everlast. Italy and Spain within a few months. After a high profile launch. CMO of Boo. 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. Puma.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com. as well as create a kid's site. Finland. 58 Kajsa Leander.4. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com provided a range of 18 fashion and footwear brands including DKNY.4 CASE STUDY: BOO.TIMELINE AND MAJOR MILESTONES .COM .COM 6. Company is put up for sale. receiving $125 million of funding. They intended to add France.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
by twin brothers Jason and Matt Olim.000 people. $18.Harvard Business Review. convenience. and was the first site to offer the sale of music downloads and custom CDs.Raises $10 million through private placement .5. 62 Hoffman.5 CASE STUDY: CDNOW 6.179-188 63 CDnow website (www.Partnership program with Geffen Records .000 music-related products and 650.000 sound samples.Merges with Columbia Records . features. CDnow is the leading online music store.TIMELINE AND MAJOR MILESTONES . and they aim to "make every visit to the site. a valuable and rewarding experience"63. It has a customer base of 4 million people.com) 80 .5.5 million distribution deal with Lycos Signs three-year. $22.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .Launches merged CDnow/N2K site . cover art. & Novak..2 Value Proposition CDnow offers consumers a high degree of choice (over 500. and one of the most popular shopping sites on the Internet62.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . good prices. and an average daily audience of over 800. 'How to Acquire Customers on the Web' .Site goes live . This unprecedented degree of access to music and information is the core of CDnow's value proposition. CDnow provides access to over 500.Forges distribution partnership with Yahoo! $65. announce marketing alliance . whether for browsing or buying.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. TABLE 6.ten times the selection of a conventional bricks-and-mortar music store).Merges with N2K.1 Company Overview Founded in 1994.CDnow and Time Inc. pp. daily music news. On 19th July 2000. former arch rival . D. CDnow is also driving the digital distribution of music.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow was acquired by Bertelsmann AG. and exclusive interviews and reviews from CDnow's award-winning editorial staff.cdnow. T. guides to music genres. May-June 2000. customisation and a wealth of information and content to help in the purchase decision.000 music related items . as well as music reviews.
and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. cover art. CDnow has cultivated similar relationships with MTV.5.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. For example. By partnering with well-known content providers. The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has leveraged the reputation of their brands to reinforce its own. 81 . VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).Figure 6..5.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. to make it easier for customers to explore new music and make informed purchasing decisions. etc. artists biographies. FIGURE 6.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. and has secured rights to music reviews.5 . easy-tonavigate.
Internet access providers. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Portuguese. Excite. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. they will be reluctant to visit another online store and enter the information again. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Italian.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). allow customers to keep track of albums to buy in the future. Dutch and Japanese. It also creates switching costs. allowing them to respond to detailed customer queries.such as AOL.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. Due to International interest. which accumulate and can be spent on a variety of music-related products.search engines. and Geocities as well as more focused specialist sites. Customer Care CDnow's site can be viewed in English. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. German. Yahoo!. an incentive programme that rewards customers and encourages them to connect back to the site. 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. it gives them a sense of ownership and a compelling reason for them to return. Community CDnow has not exploited the potential of creating a community feel. CDnow developed the Fast Forward Rewards programme. Whenever a customer makes a purchase they earn Fast Forward Reward points. and key news and entertainment sites . French. By customising the store to meets customers' needs. Other features such as My CDnow's Wish List. Spanish. 82 . CDnow hired a group of multilingual customer service representatives to handle questions. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. In addition.
000 small. By keeping the brand in front of the customer in this way. as well as more-targeted music-related sites like Billboard. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. Spin. Excite and other powerful Internet content and service providers. this is their "most successful customer building programme64". 83 .CDnow's advertisements are targeted to some degree. and radio spots on the Howard Stern Show to build a cult following among radio listeners.They have also stuck exclusive alliances with AOL. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. they buy from CDnow. Yahoo!. print advertising is music-related publications such as Rolling Stone. customers buy music. It is a revenue-sharing arrangement. CDnow's initiatives include: • Banner Ads .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. • Traditional offline Media .5. 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. • Affiliate Programme . • Alliances and Partnerships . music-oriented websites. CDnow is doing everything it can to ensure that the next time that 6. and Variety. and spot radio to build reach.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.Through the Cosmic Credit Programme. CDnow extended its distribution reach to include more than 250. According to Jason Olim. covering the entire music spectrum.
as a way to fuel very lucrative word of mouth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . 6. April 28.(www. The company continually pushed for new distribution partnerships to widen its sphere of influence. Public relations efforts helped to generate word of mouth and influence sales. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . and to increases in the customer base of more than 30% quarter-to-quarter. This has contributed to a 225% increase in sales (1997: $17. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. and scaled it awareness-building efforts. It is a powerful source of acquiring new customers at low cost. CDnow's promotion strategies have attracted high levels of traffic.com/cdnow. 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 .com) 65 'Pioneering in Cyberspace' .hsny. both in the online and offline worlds. In fact. with 44% of sales coming from new customers65.CDnow made public relations a high priority brand-building tool. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. The story of how CDnow was founded in a basement.htm) 84 . 1998 . • Word-of-Mouth .5.Hampel & Stefanides (www.4 million. 1998: $56.As for many successful online retailers.they were the first site to offer the sale of music downloads and custom CDs. resulting in increased conversion rates. it is in this context that the large investments in advertising and partnerships make sense.Press Release. word-of-mouth accounts for the lion's share of CDnow's customers. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.4 million).cdnow.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum.
as cited in Carpenter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. They also provide the customer with an order number and customer support contact information should they have questions. It was able to create a strong value proposition and high quality customer experience.it's what you do66". This gives the customer the impression that the order is being handled quickly. a record distributor that handles the majority of CDnow's fulfilment logistics. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. According to Jason Olim. 66 Jason Olim. This. "eBrands . 2000 p.from how CDnow has personalised its product offering to its capable customer service team . CEO of CDnow. P.Building an Internet Business at Breakneck Speed".89 67 Jason Olim. CEO of CDnow. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises.75 85 . 6. and innovative. 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. 2000 p. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. (Boston: Harvard Business School Press).5. (Boston: Harvard Business School Press). "eBrands . The development of an extensive affiliate network. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. CDnow has developed a relationship with Valley Records. combined with the high impact customer experience created .6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. and ensure that it exploits its early-mover advantage and keeps ahead of competition. to ensure quick delivery to customers.Building an Internet Business at Breakneck Speed".have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. as cited in Carpenter. P. "your brand is not just what you say .
garage sales. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. This is a new market .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.efficient one-to-one trading in an auction format.25% to 5% of the final sale price on any item sold.ebay. eBay effectively created a new business model never before possible . According to Meg Whitman. and 450. "at its core. or the payment for the item . global trading place for buying and selling personal items in an entertaining auction format.com) 'eBay . payment) between themselves.g.6 CASE STUDY: EBAY 6.removing the need for inventory.Company Overview' .A Harvard Business School Case Study.000 new items joining the "for sale" list every 24 hours69. transportation and other overhead costs. collectable shows. and eBay receives a transaction fee that ranges from 1. Individuals use eBay to buy and sell items in more than 4. (A)' . shipping. Auctions are an enabler.eBay website (www. flea markets and auctions. as cited in 'eBay .300 categories. with the number of unique daily visitors setting a record of 1.2 Value Proposition eBay offers consumers an efficient. 1st October 1999 86 . with emphasis being placed on its unique community feel and culture. 24 hour a day.ebay. Auctions make it fun.6. the eBay community has grown to include more than 10 million registered users.eBay website (www. Sellers pay a nominal fee for placing an item up for sale.6. CEO of eBay. extensive selection and geographical reach. and eBay never takes possession of the item being sold.782 million in January 200068. The buyer and the seller work out the logistics of the transport (e. Auctions represent a platform. eBay is not about auctions. People perceive the auction format to offer better prices.the closest thing in the offline world are trading forums such as classified ads. Since its launch in September 1995.com) 70 'Meg Whitman at eBay Inc. 6. and eBay provides added value through its convenience. from collectibles and antiques to electronics and toys.Company Overview' . There are over half a million new auctions.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable.
Nashville.6.eBay acquires Kruse International . Milwaukee. co-marketing relationship. .eBay and Ultimatebid. the eBay customer experience is based on how their customers deal with each other.Compaq Computer Corporation and eBay form a strategic U.3 Sources of Value . Still the vast majority of our new users come from word-of-mouth. as they rarely deal directly with the company.eBay teams up with Carclub.Launches "My eBay!" to customise the online auction experience .com to provide automotive service for eBay Users .eBay goes wireless with Palm VII connected organiser . emphasis is placed on community development and customer care. and in terms of the '7Cs'.S.America Online and eBay announce strategic marketing alliance . Seattle & Tacoma.eBay acquires Butterfield & Butterfield. This raises challenges in how to control and influence the customer experience.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .com) 87 .eBay launches local websites in Baltimore & Washington DC. allowing users to create personal homepages .eBay launches 'About Me' feature.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . The Official eBay Guide to Buying. So brand-building job No. and two books -.eBay IPOed raising $58 million . 1 is have a great customer experience71".5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES . and its online trading site (Up4Sale) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay goes live .businessweek.Germany's leading online person-to-person trading site .Com form alliance - 6. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . and Collecting Just About Anything and eBay for Dummies.eBay acquires Blackthorne Software GO.The 7Cs Framework According to Meg Whitman.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. And you only get word-of-mouth if you have a great customer experience.Business Week.eBay and First Auction sign a partnership agreement . Providence.eBay and AOL launch co-branded site . Selling.eBay introduces eBay Magazine in collaboration with Krause Publications. Boston.eBay acquires alando.eBay acquires Jump Inc. Las Vegas. they try to influence customer behaviour by encouraging them to adopt certain values.eBay goes live in Australia . and raises $700 million .eBay expands strategic relationship with Netscape .de . Since eBay cannot control how one person treats another. 21st May 1999 (www. Norfolk & Virginia Beach. Dallas & Fort Worth.com and eBay announce multi-year strategic marketing agreement eBay and NEC form a joint venture in Japan eBay launches in Japan eBay and Autotrader. and Salt Lake City . "the first brand-building strategy that we have is to have a great customer experience. . Unlike the previous case studies discussed.
Content Content is primarily user generated through the items listed for sale. and adds to the experience and the discovery of the auction process.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. categorically arranged.6 . Other content includes the banner ads. and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content. and since. eBay's site has to process thousands of live bids simultaneously. This contributes to the community feel. angering hundreds of thousands of eBay users. which is much more demanding on the system. topically arranged.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. FIGURE 6. Nevertheless. they have continually invested in system capacity. easy-to-use online service (Figure 6. eBay had a 'wake up call' when the website crashed for 8 hours. increasing the risk of outages. 88 .6). they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. eBay has also expanded to accommodate access through wireless devices for added convenience. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users.
and in doing so. Recent initiatives such as the development of local websites in major US cities (e. for the people". eBay Salt Lake City) have helped them restore that community feel. each user is encouraged to submit feedback through eBay's 'Feedback Forum'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. by the people. However.eBay represents more than just a place to buy and sell goods. autonomy. eBay's community has a distinct culture based on trust. e-mail. eBay Boston. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). In addition. a "giving-board" for charitable donations to user-identified causes. 89 .g.as eBay users refer to themselves . eBay offers its users category-specific chat rooms. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. To encourage this sense of community. empowerment and equality. the community spirit and personal relationships also transcend the online experience. It is a place where people can meet with similar interests. After a sale. bulletin boards. working together and helping each other offline. discuss topics they care about. has enabled eBay to foster a strong sense of community on its site. respect. and share information. a monthly newsletter. and is considered by many users as one of the best features on the website. Whitman describes eBay's community culture as a site "of the people. Community eBay attributes much of its success to a strong sense of community among its users. This has created a self-regulating mechanism that encourages good behaviour. For many 'eBayers' . which is posted to the site. the culture has come under strain due to the company's rapid growth from a small community into a "big city". while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. which is then added to the partner's trading profile. and there are several reports of eBay users vacationing together.
and the Safe Harbour group. answering e-mails and responding to questions posted on the site's bulletin boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. fraud. eBay employed a "remote" customer support model. This was later expanded to include customer support representatives who worked out of eBay's headquarters. the largest of which was with AOL. and respected members of its own user community to serve as customer support representatives. but they have other partnerships with over 150 websites of varying scales. and willingness to empower. Customer Care eBay controls neither end of the transaction.g. During the first two years.the Community Watch group. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. which was dedicated to monitoring the site for illegal and infringing activities. These people worked from their homes. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Customer support activities were constantly upgraded and expanded as the business developed. Communication eBay maintains close communication with its members. By using its own enthusiastic. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. eBay has invested in customer care and support to ensure people conduct safe transactions. links to high traffic sites. which was dedicated to investigating misuses of the system (e. shill bidding) and helping to resolve user-to-user conflicts. eBay's approach to customer care has evolved over time. knowledgeable. geographically dispersed users as customer support representatives. 90 . eBay also engaged in marketing partnerships. As such. in which the company hired active. its user community. and the introduction of two specialised customer support groups . eBay was able to cost-effectively offer 24x7 customer support early on. This also reinforced the company's respect for. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum.
$75 million joint marketing alliance and development deal. Based on this. Early on. and two books. Through this combination of its advertising efforts and targeted promotions. In 1998. they decided to target their marketing efforts on these heavy users. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e.3 million in advertising. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. and facilitate the spread of positive wordof-mouth. These new publications appeal to the collecting spirit. The AOL partnership was one of the largest strategic partnerships on the Internet .6. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. Doll Collector) and appearance in trade shows. eBay has been able to attract a large customer base.a four-year. Mary Beth's Beanie World. representing about 40% of revenues. eBay transformed from a pure online play into a 'clicks-and-mortar' company. Recent promotional initiatives include its new publication. they spent $12. Selling. The Official eBay Guide to Buying.g. and highlight opportunities created by e-commerce. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). eBay Magazine. who tended to be serious collectors. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. as a result of the high quality experience it provides. eBay has since expanded its promotion efforts and engaged in marketing partnerships. As a result. 91 . 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. but they have other partnerships with over 150 websites of varying scales.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. the largest of which was with AOL. and Collecting Just About Anything and eBay for Dummies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. provide a wealth of information about the 'ins and outs' of trading on eBay. and maintained the same ratio for 1999. eBay decided that it would not enter into major portal advertising deals in the short term.
21st May 1999 (www.contributing to its strong lead and competitive advantage. This is achieved by listening to their community (learning) and developing new improved products and services (relating). eBay attracts a broader selection of buyers.5 Conclusion eBay's compelling value proposition.Business Week. eBay has also faced difficult challenges in scaling the organisation fast enough. and their first-mover advantage. which has established eBay above other online auction communities. have been key factors that have contributed to the success of the brand. which in turn attracts more sellers . the Personal Shopper and the eBay Life Newsletter. their ability to create a new market using Internet technology. very fast. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. and according to research carried out by eBay. Their focus on heavy users and targeted promotions. which were all ideas of eBay users. This has become part of the eBay culture.the ultimate network effect . However. and according to Meg Whitman. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. "the devil in so much of this is in the detail. have been instrumental in building a 'quality' customer base. I think you are not well served by moving incredibly rapidly and not doing things well72". As a result.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'. as they could not opt for a 'go slow' strategy. such as the Feedback Form.businessweek. And while we have to move very. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.6. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. however. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . 6.com) 92 .
Business Week.an early convert to the then-revolutionary idea of clothes retailing on the Internet. 'Clicks and Mortar at Gap. as cited in Lee. and provides useful insight into how traditional brands can leverage their strength online. Gap started selling items online . 'Clicks and Mortar at Gap. standard styles are well suited to online shopping.gapinc. In late 1997. to provide customers with greater convenience and options. Gap online exploits the accessibility and convenience of the Internet.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. TABLE 6.com/about_us.gap.com is an example of successful crossover marketing. 6.2 Value Proposition Gap's simple.babygap. This success is largely due to their simple formula . According to Jeanne Jackson.com' . Inc.$100 million. announce multi-year partnership. 73 74 Interbrand (www. and today it is the 29th most valuable brand in the world73.7. In addition. L. The Gap offers a balance of modern and seasonal styles of clothing.gapkids.com and www. 1999 76 Jeanne Jackson.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. GapKids. the growth prospects are enormous. surpasses $9 billion in net sales and increase earnings by 54% over previous year. letting customers access the Gap brands. and Gap online provides access to the full range of items at Gap. America Online (AOL) and Gap Inc.'s website (www. up from $20 million in 199875. however. Canada. October 8.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.1 Company Overview Gap opened its first store in San Francisco in 1969.COM 6."to deliver style. head of Gap Online.htm) 75 Jeanne Jackson.7 CASE STUDY: GAP. "this is about being clicks-and-mortar.Business Week. Gap. UK. Currently.COM . 1999 93 . L. October 8. and are still relatively small compared to Gap's $9 billion in annual sales. and BabyGap. online sales are only available to US customers. from shirts to accessories and hard-to-find sizes.com. as cited in Lee. from jeans and T-shirts to khakis and jackets.800 stores in the US.com) . California GapKids opens its first store BabyGap is born Gap opens its online store at www. Its reach extends across more than 1.interbrand. Gap's online sales tripled in 1998 alone.7. Gap Inc. and analysts estimate that sales in 1999 amounted to $50 .see Appendix A Gap. whether in the store or online76".com' . Germany and Japan. service and value to everyone74".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
Unlike Barnesandnoble. describes the company's brand personality as "direct and straightforward. Content.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.making visual references to its offline roots. 'Mind the Gap'... Visiting the gap. the extensive integration of Gap's online and offline activities are clearly evident.. but provides customers with the option of viewing text-only.7 . reinforcing its brand identity.com store one immediately notices the consistency between the online and retail stores.3 Sources of Value . Gap Online primarily focuses on Convenience. Simple. The site also offers sharp graphics.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.very easy. from the blue and white colour scheme to the easy-toshop format .. This personality is reinforced online through the simple structure and layout. feel and design of the site is consistent with the bricks-and-mortar stores. FIGURE 6. The Observer. making navigation even faster..com. making it convenient.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and Customer Care. 1998 94 ..7.. and easy-to-use. D. Michael McCadden. Executive Vice President of Global Marketing. very efficient"77.The 7Cs Framework In terms of the 7Cs framework. April 18.
However. Gap. as well as sample all of the latest shades of fingernail polish on a virtual hand. Gap communicates with customers through customised e-mails.com allows customers to track the status of online purchases and provides contact information on the nearest store. and goods bought online get returned at the same rate as store purchases . once customers are registered online.as most Gap online shoppers have a good idea of how Gap clothes fit.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. standard styles are well suited to online clothes shopping. customers can return goods purchased online to their neighbourhood store. Gap does not provide any community features on its site. allowing shoppers to contrast different cuts and styles. Gap's simple. By doing so. promoting its specials and including links directly to items on Gap's website.com also provides a Gift Central feature which offers gift suggestion from Gap.com's content consists of detailed information on its full range of products. which would not be possible in the store. The Gap site connects to other Gap online stores including GapKids and BabyGap. In addition. Gap. 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. and customers can view their latest TV adverts for buying inspiration. Gap made a decision to charge sales tax on online sales. Unlike the case of Boo. Gap has also developed an affiliate programme. twice a month. and BabyGap. without causing complications. In order to integrate its offline and online operations and logistics. and had recently established marketing deals with AOL and CDnow. GapKids. 95 . The site's virtual style feature also allows customers to mix-and-match combinations of clothing.com.
The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials. These efforts doubled the size of Gap's e-mail database. which can be used towards future purchases.shop.com) in store windows with the slogan "surf. it is fully leveraging its offline presence to build awareness. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. on counter cards. In addition. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. providing a useful way to directly reach customers. on shopping bags and even on the cash register.gap.com has been able to piggy-back on The Gap's offline advertisements (in TV. • They offer Online discounts and promotions such as the ShopCard.Extensive Integration Gap. whereby for every $100 a customer spends at Gap Online. which displays "Shop online at www.7.) that also promote the online store.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap secured a 3-year commerce and marketing agreement with AOL. Magazines. etc. • Gap. by offering a 10% discount and free shipping on their first online purchase. or to refer shoppers to Gap's website. however. • Gap.gap.com has links with CDnow to cross promote websites. 96 . either online or in stores. Gap has held in-store campaigns to get customers to submit their e-mail addresses.ship". by displaying the URL (www. billboards.com in return for a 5% commission on every sale referred through the site.com.com has also created an affiliate programme encouraging sites to establish links to gap.com" on the display screens between transactions. Most of Gap's online traffic is generated by leveraging its physical presence. Gap has also supplemented this with online promotions: • In August 1999.4 Brand-Building Strategy . To convert walk-in shoppers to cybershoppers. they send the customer a $20 Gap ShopCard. In certain high traffic Gap and GapKids stores.
The Internet.5 Conclusion Gap. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. Pure online players have to invest heavily in logistics. on the other hand. while reaping the benefits of low customer acquisition costs and extended reach. thereby reinforcing its brand identity. By aggressively marketing both the stores and the website.com is an example of successful crossover marketing.thereby increasing the company's reach. 97 . and can also provide access to different customer segments who may not usually buy the products at all . have already established the back-end operations and can use them as the cornerstone of their online business. and allowing each to leverage the strengths of the other. provides existing customers with added value through the convenience of purchasing online. With their brand awareness and network of retail outlets. whereas established companies. Gap has been able to significantly strengthen their brand-customer relationship. Gap had a significant advantage over pure online players in attracting customers and building critical mass. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands.7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. such as Gap.
The Strategy. CEO of Yahoo!.1 Company Overview In April 1994. There's nothing in the real world to compare to that79". two Ph. Yahoo! has since morphed from an ordinary search service into a global Internet communications. 6. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. who started an online guide as a way to keep track of their personal interests on the Internet.The Company. As such. from e-mail services to stock quotes and much more.8. According to Timothy Koogle.com) 98 . all in a single location. the amount of information. 78 79 Interbrand (www. lies the directory . The concept exploded (through word-of-mouth) and in less than six months. As the first online navigational guide to the web.interbrand.D students at Stanford University. Yahoo! is a leading guide in terms of traffic. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. The Stock' . September 7. household and business user reach. 1998 (www. The company's global web network includes 23 world properties outside the US.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.8.Business Week. Yahoo! was founded by David Filo and Jerry Yang. and is one of the few Internet companies to turn a profit early in the development of the Internet. and the number of websites continues to explode. the site was receiving 1 million hits per day.see Appendix A 'Yahoo! . Yahoo! offers a range of supporting services that add value.8 CASE STUDY: YAHOO! 6.businessweek.2 Value Proposition At the core of Yahoo!'s value proposition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com) . advertising.
600.Yahoo! forms agreements with Palm Inc.e. Their goal is not to list everything under the sun.8 million IPO (2..Site goes live September .The 7Cs Framework Convenience Central to Yahoo!'s success. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. More recently. Yahoo! extended its convenience through its Yahoo! Everywhere service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. mobiles.Yahoo! acquires Arthas. to allow access.Yahoo! acquires eGroups .8). to provide web-based services to PalmTM handheld computers . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.com allowing them to offer person-person payment solutions .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.com.TIMELINE AND MAJOR MILESTONES 1994 April .Receives $1 million in venture capital funding from Sequoia Capital $33. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. .000 shares at $13. TVs. 99 . is the way it has structured and displayed information. 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! Shopping launches personalised shopping service 6.7 YAHOO! . and unveils Yahoo! Digital Introduces Bill Payment services .3 Sources of Value .Yahoo! Launches Business-to-Business Marketplace . regardless of platform (i.Yahoo! unveils Yahoo! Finance Vision .8.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb. Palm computers).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 .
This creates a win-win situation as its satisfies Yahoo!.9). Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. ranging from daily news and weather reports to road maps and books. the partner. 100 . from stocks and sports results to weather and air fares.8 . the end-user.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. and quick-toload webpages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. while providing partners access to a large customer base. and more importantly. and is similar to a custom tailored newspaper (Figure 6. Their thrust has been to provide valuable content to customers. well structured. Yahoo! has increased customer loyalty and retention rates.com and CDnow. and has been at the heart of Yahoo!'s growth and development. easy-touse. By tailoring the information to users' preferences. They have formed multiple alliances and partnerships with leading online companies such as Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.
101 . and is driving Yahoo!'s multiple partnerships and alliances. and encourages them to return frequently. message boards. one-to-many. Yahoo! acquired GeoCities. Community Yahoo! has developed customisable web communities called Yahoo! Clubs.9 . Yahoo! has also implemented campaigns to persuade users to bookmark the site. and e-mail. or to make it their home page. reinforcing the brandcustomer relationship. fax. and many-to-many. Connectivity Connectivity is Yahoo!'s core product. Customer Care Yahoo! responds to customer inquiries via e-mail. and the nature of the navigation business. telephone and even traditional mail.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. and plans to incorporate other features such as online chat to facilitate communications. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. where groups of people with shared interests can communicate through chat.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. In 1999. and contributing to their reputation as a quality service provider. to provide its customer base with access to useful links and content. In addition. Yahoo! spends more on customer support than most companies.
TV commercials and radio spots during drive time. Given the unease with which the average consumer approaches technology. This was especially important. As a result.com) 102 . 82% of Internet users and 23% of people intending to go online. therefore. Their strategy was to target "near surfers" .people who are not yet online but are likely to use the Internet in the near future. Yahoo! also encourages customers to e-mail ideas and feedback. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. which conveyed the brand's irreverent personality. In 1996.a sense of irreverence. and an inherent friendliness. Yahoo! maintains close contact with customers. by building a recognised brand name. Yahoo! extended beyond this to use traditional offline media. Intelliquest. recognise the name Yahoo!. These near surfers represented (and still do) a large and fast growing group and. At the time this was considered a breakthrough. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". Yahoo! aggressively promoted the site through public relations.intelliquest. While Internet companies were targeting existing Internet users through the use of online promotion methods. Yahoo! avoided characterising itself as a technology-oriented company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. and its implications of a good time. and according to Intelliquest80. 80 'Web Survey Shows Yahoo! Tops'. (www. and it formed a critical link in Yahoo!'s brandbuilding strategy. Yahoo! would be one of the first sites that they visited.8. Yahoo!'s brand-building success starts with its name. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . an approachable nature. 6. as experience surfers tend to be loyal to their search engine. and through communications via email.4 Brand-Building Strategy Yahoo! is a marketing machine.
a monthly magazine guide to what's new on the web and it has co-branded products. to create Yahoo! Internet Life. services and contests with well known brands such as Ben & Jerry's. as well as TV shows (Ally McBeal. including backpacks.Advertising Age.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. August 26. a little wacky and inviting'. new services and customised features highlight their ability to relate to customers' needs.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' .higher than all other services81. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. Visa and MCI. Once customers access the site. T-shirts. p. parachutes. Yahoo! adopted 'guerrilla marketing' techniques . from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. snowboards. stating that "if we wait to hear about it in the news. ER) and Hollywood movies. VP-Brand Marketing. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. 1999. May 3. it's too late. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . which has been instrumental in establishing Yahoo! as a household name. Their innovation. According to a recent study. They even have a barter deal with the San Francisco 49ers.it must reinforce the image of the company as 'a service that is fun.yahoo. They also teamed up with publisher Ziff-Davis Co. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. sailboats. s4 103 . organisers. breath mints.with its name being plastered on everything. According to Karen Edwards. Yahoo! has paid little for this exposure.Yahoo! Press Release. and yo-yos. 1997 (www. In addition. We need to be one step ahead in order to have a better service than our competition82". and 76% turned to Yahoo! before visiting another search engine or navigational site. Yahoo! has managed to cultivate high brand loyalty. customers quickly discover its value and through a high quality experience (7Cs). Although this seems like a shotgun approach. the research shows that 73% of Yahoo! users bookmark the service .
As a result of all these factors. and first to go mainstream by advertising its name using traditional media. Yahoo! has built a strong brand. They have maintained that lead through the creation of a high quality end-to-end customer experience. Yahoo! points them to its competitors by including links to AltaVista. while also associating Yahoo! with well known brands. have created a distinct brand identity that differentiates the brand and appeals to its target market.8. that have set it apart from the pack. GoTo. first to go public. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. and its openness (for example. they have carried out extensive partnering. and has cultivated a reputation for excellence. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. its choice of partners. 6. 1999. Yahoo! has benefited from a first-mover advantage.com. To maintain its lead. These relationships have provided end-users with added-value. p. while attracting new customers. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence.Advertising Age. their innovative promotional and guerrilla marketing techniques. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . 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". if a user cannot find what it is searching for. its excellent customer service. HotBot. first to turn around an annual profit. As the first online navigational guide to the web. s4 104 . 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. In addition. VPBrand Marketing of Yahoo!. and other search engines at the bottom of its search results page). alliances and acquisitions to provide added value services to their customers. from its convenient and logical structure and display of information. to its simple design. Yahoo! has invested relentlessly in new services and marketing programmes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8. May 3. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers.6 Conclusion Yahoo! is one of the most successful brands on the Internet.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
• Strong Partnerships and Strategic Alliances Rather than doing everything on their own. and exclusive alliances can lock out competitors from valuable content or online real estate. to maintain consistency. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. whereby each party benefits from the other's expertise or skills. as well as determine how far the brand can be meaningfully stretched to other products and market segments. variety. these companies must have an inherent understanding of their brand identity and core values. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. 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. and convenience. By distinguishing their offering and focusing on unique sources of value-added. In addition. The most successful partnerships are symbiotic matches. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. to distinguish themselves from competitors. before it fractures. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. brands are harder for competitors to emulate. ranging from online methods to traditional offline media. integrated customer acquisition strategies. Alliances and partnerships play an important role in achieving speed and momentum. content. offering customers the best in quality. these companies are creating even stronger value propositions. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. while ultimately benefiting the end-customers. As a result. but also provide added value to the brand community. leading brands have focused on building strong partnerships and alliances. particularly to secure content and widen reach to new customer segments and niches. and by partnering with well-known brands. a company can leverage the partner's brand and reputation to reinforce its own.
these well-publicised brands also took off. Many strong online brands were also early-movers on the Internet. and it aligns itself with the most influential venture capital sources. giving the brand an edge. As Internet penetration exploded. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. and differentiating it from other brands. these innovations are difficult for competitors to reproduce. and it can acquire customers while it is still inexpensive to do so. are leveraging this customer knowledge (learning) to nurture relationships (relate). and develop a detailed understanding of their customers' needs. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. The challenge then lies in keeping up the momentum. and by focusing on customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. and extensive word-of-mouth due to its novelty. In many cases. By getting to market early. It locks up important content and distribution partnerships. through past transactions and solicited input. and benefited from additional hype. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. the company benefits from the buzz. by providing better services. that comes with innovation. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. By leveraging unique customer information. and are continuously adding new services and functionality to their sites. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and traffic. customisation and customer care. the innovations are the result of the company's ability to data mine its vast database of customer information. These brands are accumulating knowledge about customers. to create new services and content that satisfy customer needs. 109 . A first-mover advantage is an important asset for an online brand.
Therefore. would represent an exciting opportunity for further research. Through extensive and seamless integration. 110 . expand the brand experience to meet customers' expectations in the online world. Yet while everything is being turned upside down. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. Nevertheless. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. Nevertheless.value remains (and always will) the basic building block for every successful brand. They possess critical assets that give them an advantage over pure online start-ups. The Internet has radically changed the business and competitive environments. an in-depth analysis. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. tools and key factors outlined in this dissertation are also applicable to business markets.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. established fulfilment systems and infrastructure. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. ongoing research would be necessary to build on the findings of this dissertation. Brands and brand-building tools tend to be associated with consumer markets. the concepts. clicks-andmortar brands are providing customers with true added-value. while reaping the benefits of lower customer acquisition costs and extended reach. one component remains unchanged . In doing so.factors that clearly differentiate them from pure players. they are equally important in business markets. Having established a strategic perspective on building online brands. They have an established brand. established customer relationships. however. 7. drawing on several case studies from business markets. with the emergence of wireless access and new platforms. but at the same time. In addition. building relationships and satisfying needs.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. As such. there has been a limited time horizon to evaluate the durability of Internet brands. and a physical presence (tangibility) . the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
Interbrand's Ranking of the Top 60 Brands (www.275 30.464 3.792 3.197 32.231 24.781 17.132 15.830 14.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 1.283 4.761 1.281 11.681 2.225 11.052 6.527 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .329 4.602 4.806 2.510 8.550 12.interbrand.048 20.806 11.894 14.076 3.422 1.313 2.654 43.181 21.155 7.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) 83.648 1.423 2.404 4.361 1.845 56.184 1.694 17.909 7.596 3.262 1.043 8.595 17.985 2.310 11.932 4.766 14.804 2.101 9.568 3.603 5.143 2.502 33.319 1.643 3.781 33.231 12.147 9.193 112 .895 2.021 26.
1982 113 . and as the business environment changes. and structures are aligned differently. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. As a result. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. commit and deploy resources. 'In Search of Excellence'. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. the informal management style and the constant strategy re-calibration. all their operations. with the fast pace of technological change. T. R. customer empowerment. and the emergence of a knowledgebased economy. and reorganise as appropriate. * Peters.. However.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. & Waterman. Internet companies must be able to move at warp-speed. (Harper & Row). showing how they are interrelated. As such. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. global competition. whereas entrepreneurial Internet companies must focus on 'managing for change'. activities. respond to competitive and market dynamics. They must move quickly to capture new opportunities. It is critical that all these dimensions come together and are re-enforcing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . constantly innovate. all these dimensions must change accordingly. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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