1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


5.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6.8 Case Study: Boo.8.2 Value Proposition 6.3 Sources of Value .6.7.1 Company Overview 6.3 Sources of Value .1 Company Overview 6.5 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Other Factors that Contribute to their Brand Leadership 6.4.5 Conclusion Case Study: CDnow 6.1 Company Overview 6.The 7Cs Framework 6.3 Sources of Value .2 Value Proposition Company Overview 6.1 7.5.4 Brand-Building Strategy 6.4.5 Conclusion Case Study: Yahoo! 6.4.com 6.5.5 Conclusion Case Study: Gap.The 7Cs Framework 6.com 6.5.4 Brand-Building Strategy .6 Conclusion Case Study: eBay Sources of Value .4 6.Extensive Integration 6.2 Value Proposition 6.The Failure of Boo.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.1.7 Value Proposition 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 .6.5 Other Factors That Contribute to their Brand Leadership 6.6 6.6.2 Value Proposition 6.4 Brand-Building Strategy 6.The 7Cs Framework 6.3 Sources of Value .The 7Cs Framework 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 Company Overview 6.com 6.

7 Figure 2.4 Figure 4.6 Figure 2.3 Figure 2.1 Figure 4.com's Associates Programme Overview of BarnesandNoble.1 Figure 1.5 Figure 6.4 Figure 5.6 Figure 5.4 Figure 2.1 Figure 3.4 Figure 6.8 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.5 Figure 4.2 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 6.1 Figure 6.9 Figure 6.3 Figure 4.8 Figure 3.2 Figure 5.2 Figure 2.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .com's Website Amazon.6 Figure 4.1 Figure 2.7 Figure 5.7 Figure 5.7 Figure 6.com's Website Overview of Boo.1 Figure 5.5 Figure 2.8 Figure 5.2 Figure 2.5 Figure 5.2 Figure 3.3 Figure 3.9 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 .4 Figure 4.2 Figure 4.3 Figure 5.6 Figure 6.

com .4 Table 6.Timeline and Major Milestones eBay .com .2 Table 6.com .1 Table 6.6 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .3 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Boo.7 The Emerging Brand-Building Environment Amazon.1 Table 6.Timeline and Major Milestones CDnow .5 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Gap.


1 shows the number of years it has taken some Internet brands to reach sales of $100 million. whereas it has taken decades for traditional companies to achieve the client base. Amazon.mckinseyquarterly. service and brands. In the midst of this. It is empowering customers with more options and more information to make informed decisions. products and services reconfigured. FIGURE 1.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. that these Internet start-ups have achieved. Internet companies such as Yahoo!.g.1 OVERVIEW Over the past few years. customer affiliation and level of sales.com's range of 4.com. there has been an explosion in the online world .9 2. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. Figure 1. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com noble.com1 Amazon.0 1. and business models revamped. interaction and relationship building. aggressive Internet start-ups have emerged.5 million book titles). and is triggering the need for new brand-building strategies and tools.YEARS TO REACH $100 MILLION IN SALES 6 5.2 3. As such. As such.9 3. McKinsey Analysis (www. The Internet also represents a fundamental shift in how buyers and sellers interact. Supply chains are being rethought.an explosion that is also a harbinger of how business will operate in the future.1 . creating strong brands that are putting established brands at risk.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.com) 7 . This is creating new challenges and opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.1 3. while providing new tools for promotion. relationships.5 2. as they face each other through an electronic connection. America Online (AOL) and eBay have been able to build powerful brands in a few years. Amazon. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. the Internet is changing fundamentals about customers.com Source: Securities and Exchange Commission Filings.

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

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

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

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


. p. creates influence and generates value4" This definition truly captures the essence of a brand. and they form the backbone of this dissertation. unravelled to reveal the nature of brands and their reason for existence. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. CEO of Interbrand Newell and Sorrell . These concepts are central to brands and brand-building.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. This value stems from the products and services that companies create and bring to the market. and for the company. explaining the value of brands. 74 4 Clifton. R.). the brand's emotional benefits and its self-expressive benefits . 1996.a brand is: "a mixture of tangible and intangible attributes. and highlights the importance of brand management. but extends further to encompass added values derived from factors such as the brand-customer relationship. and the importance of customer satisfaction and brand loyalty.1. which. both for customers. 'The Future of Brands'. if properly managed. The chapter proceeds to describe the influence of brands on the buying process. The concept of brand equity is outlined. these layers are Brands are made up of many layers and dimensions. whether online or offline. FIGURE 2. and to companies.1 . 2.2 WHAT IS A BRAND? According to Rita Clifton. & Maughan.1 INTRODUCTION In this chapter. vii 13 .see Figure 2. both to customers. E.a leading specialist brand consultancy firm . symbolised in a trademark. Branding is about creating 'value'. p. (New York: Free Press). 'Building Strong Brands'. 2000. (London: Macmillan Press Ltd. A.

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

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

either through heightened attention or through an active information search. p. the consumer learns about competing brands. These beliefs depend on their previous experiences with the brand. it is important to clarify customers' underlying buying behaviour and the buying process. and pay the most attention to the brands that will deliver the sought benefits.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. two factors can intervene between the purchase intention and the purchase decision . 'Marketing Management . 16 . Once aroused.Analysis. it is critical to understand what attributes consumers value.3). However. The buying process consists of five stages (Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Planning. Consumers develop a set of brand beliefs about the attributes of competing brands. and Control'. Through gathering information. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. P. and the effect of selective perception.194 The process starts when the buyer recognises a need. Implementation. (Europe: Prentice-Hall) 8th Ed.3 . These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).4)..attitudes of others and unexpected situational factors (Figure 2. Consumers differ as to which product / service attributes they see as important. This can be triggered by internal or external stimuli (advertisements). In the evaluation stage. selective distortion. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer..5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. and selective retention. Therefore. a consumer will be inclined to search for more information. FIGURE 2. 1996.

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

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

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

343-373.7). A stronger brand enjoys a high degree of brand preference over competing brands. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. FIGURE 2. 20 .. and understanding the needs and buying processes of the target market is essential.7 . However. pp.6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. S. 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. there are brands that are unknown by most buyers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. a 'powerbrand' tends to have a high degree of brand loyalty. Beyond this. there are brands that customers perceive as acceptable and would not resist buying. FIGURE 2. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Journal of Consumer Research. March 1998. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). which goes well beyond the satisfaction of a specific need. whereby customers would be unwilling to substitute it with competitors' offers.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.

trademarks. and other assets such as patents. and relationships with distributors and strategic partners. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. strong brand associations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. According to David Aaker (1991).. perceived quality. (New York: Free Press). (New York: Free Press).BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . name awareness. The benefits of each are outlined in Figure 2. FIGURE 2.Create Awareness . D. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". which is the value of the brand over and above its commodity value. D. 1991 10 Aaker.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..8. The major brand assets are brand loyalty. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 1991 21 .8 .

.Typically a brand leader obtains twice the market share of the number two brand. to quickly identify sought after products • • Practicality .To be sure of buying the best product in the category.8.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. & Tellis.To be clearly seen. 158-170. to make sense of the offer. 22 . 'Consumer Market Research Handbook'.To have confirmation of your self-image or the image that you present to others • Continuity . N. J. 1986 13 Golder. J.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. • Brand Leverage . 3rd Ed. & Downham. and the number two twice the share of the number three12.Satisfaction linked to the attractiveness of the brand. G. 11 12 Kapferer. to its logo.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . the best performer for a particular purpose • Characterisation . (New York: Free Press). 1992 Worcester. brands perform several functions that add value and customer benefits: • Identification . production and marketing.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. (London: McGraw Hill).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. pp.8. Premium pricing increases revenue. P. The brand leader is the most profitable and all beyond number two are unprofitable13.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. R. May 1993. 'Strategic Brand Management'... to its communication • Ethical .. Journal of Marketing Research.. market share and profits .To save time and energy through identical repurchasing and loyalty Guarantee . in the following ways: • Brands.

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


public relations. 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. Once this has been established. it should provide a satisfactory experience and lead to a willingness to buy again. which are created through advertising. The major characteristics of successful brands are also reviewed. FIGURE 3. If the offering is developed properly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. selling.1 INTRODUCTION Building a strong brand is a complex task. highlighting important factors that contribute to the success of each step along the way.1.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. and direct marketing. 3.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . confidence and brand equity are built. brand awareness. This chapter spells out the traditional brandbuilding process. promotion.1 . and keep it turning. the next step is to get customers to try the brand. To entice trial and repeat purchase requires triggering mechanisms.

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

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

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

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

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

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

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


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

24 hours a day. These defining characteristics have fuelled its explosive growth. By allowing for direct.The Internet is a global network and can be reached from everywhere. • 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). allowing both parties to identify each other and build one-to-one relationships . which was intended to link military networks together. Graph is not drawn to scale). and deliver new products and services at low cost. ubiquitous links to anyone. These characteristics combine to create a very powerful medium.not previously available with mass medium forms of communication. anywhere. • It Allows for Two-way Communication and Interactivity . These qualities eliminate the barriers of time and space that exist in the physical world. 7 days a week.this radically alters the process of interaction between communicating parties. regardless of where the computer or Internet access device is physically located. 4.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs .2 (Note: 35 . The Internet can also be accessed at any time . the Internet lets individuals and companies build interactive relationships with customers and suppliers. when the United States Defence Department developed the 'ARPAnet'. The context of the Internet and certain key developments are highlighted in the Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.2.

1996 (www.2 .3. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 100. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.economist.000 1.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.com) 36 .000 10.000.000.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 1. 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. FIGURE 4. 2000 Internet / ARPAnet was created Dell.Figure 4.000.a PricewaterhouseCoopers Report.000 1969: 10. as cited in 'E-Business Technology Forecast' .3 .

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

reveals the wide range of areas where people are embracing the Internet .Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). to interacting (e.com) 38 . entertainment) and purchasing (37%) . communication and information tool. chat rooms. 2000 (www.g.5.5 . These activities highlight the adoption of the Internet as an interactive. April 13.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.from communicating (90% use e-mail) and sourcing information. as cited in the Economist Intelligence Unit (EIU). FIGURE 4.eiu.

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

some of which look set to become the superbrands of the future (e. through the use of extranets). represents a level of efficiency and integration previously unattainable.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow.g. 'Meeting the Challenge of Disruptive Change'. pp. 66-76 40 . Dell Computers). the Internet is sidelining the role of many traditional intermediaries. Yahoo!). For example. 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. This is threatening to undermine many old established brands. suppliers. New brands and business models are emerging to seize this opportunity. C. how they compete and how they serve their customers . Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. M.g. Volume 78 Issue 2. Harvard Business Review.g. and transforming traditional distribution channels. partners and other corporate constituencies. At the same time. the explosion of information is placing a premium on skilled information management. Although the particular impact will differ between industries. Additionally. operation (e. which are often disruptive to traditional business models21.how companies operate. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. By allowing customers to talk knowledgeably and directly to suppliers. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. March .. The Internet also facilitates the development and co-ordination of global activities (e.and revolutionary new business models are emerging.. & Overdorf. a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers.April 2000.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted .

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

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

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


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

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

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

However. and in the case of information-based products.1 . Once the up-front investments are made (for research and development and technology infrastructure). FIGURE 5.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. increases disproportionately as more people join the network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. the costs approach zero32.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. additional products. G. as illustrated in Figure 5. and the value that each member realises. (London: Harper & Row). pp. (also referred to as 'viral economics').1. As a result. R. Similarly. 180-182 48 . 1989. and other features can be added or changed at low marginal cost. each additional unit sold does not cost more than the last to deliver. businesses and online communities that rely on connectivity can enjoy 'network effects'. additional customers and transactions can be managed with limited fixed cost investment. this is not the case on the Internet. Even more important. as the benefits of scale are overwhelmed by the disadvantages of size31. customisation for individual customers.. where the value of the network. 7th Ed. 'Positive Economics'.

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

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

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

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

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

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

'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. O'Donnell & Gupta.www. A. 343-373. Site-tosite connectivity focuses on connecting users to other relevant sites. 55 . S.com) directly into the browser and access the site immediately. Companies can provide a selection of related links that complement the site's purpose and value proposition. March 1998.6). M..BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. as well as attracting traffic from other sites. they opt to input the URL (Internet address . Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.. 'Making Real Sense of Virtual Communities' . allowing customers to deepen their experience with a brand and build more personal connection.5 . and can create emotional loyalty.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. This is similar to placing offline stores in high traffic areas. Journal of Consumer Research.. pp. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. 43 Fournier. when membership in the brand's community becomes an end in itself43. Mulcahy..A PricewaterhouseCoopers Study. 1999 Communities enhance the speed and value of information sharing. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. C. Once customers know of a site.brand-name.

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

7 .7. including affiliate programmes with other websites.Attract. M. e-mail notifications and banner advertisements.2.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. 180-183 (www. Magazines. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. because there is no physical presence. S.8..4 . visibility relies solely on Communication. No.) to online tools.. A. modified to take into account of the interactive dynamics of the Internet. 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 ’ .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. Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. R. links from directory searches (Connectivity). Newspapers. and bring people to the site for the first time. Retain. pp. This is more difficult online than offline. The mechanisms to communicate range from traditional media (TV. McQuade. 1996. Evaluation. Learn and Relate. Interest. The company must build awareness and communicate its value proposition to its target customers. billboards. 'Marketing to the Digital Consumer'. etc. Therefore.. Trial. & Zeisser. FIGURE 5.Awareness. McKinsey Quarterly. This model consists of five stages . Waitman. Engage.mckinseyquarterly. Adoption).. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.

Creativity is also an important factor in gaining attention in today's cluttered marketplace.1 3.8 4. Fig. 3. The key factors at this stage are Convenience combined with interesting Content.ebusinessforum.com) The most effective methods are direct e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 58 .4 4.3 2. Engage With the multitude of choice available on the Internet. affiliate programmes.2 4. discounted over the expected duration of the brand-customer relationship.Economist Intelligence Unit 2000 (www.5 3.5) 2.3 3. 3. it is important to quickly engage consumers' interest before they move on. multiplied by the expected rate of transactions.4 3.3 Source: Forrester Research.WEBSITE PROMOTION METHODS .0 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. Kapferer's Brand Prism (Ch.6 3.4 3. Attracting customers is only the first step in building online brands. as cited in 'Targeting Consumers via the Internet' . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.7 4.8 .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 . Companies then need to engage customers to obtain their interest and participation.3) is useful to ensure that a company develops a distinct and consistent brand identity. public relations and television advertising.

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

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


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

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

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

creates a competitive advantage.thereby increasing conversion rates. 65 . while driving up repeat purchases and cross-selling opportunities. More recently. to the proactive notification of new items of interest. Connectivity Amazon has built relationships with high traffic web portals and sites. Amazon's content is not reproducible by competition. Community Amazon has also added a community element to the purchasing process.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 . converting them into a storefront for Amazon. and has developed an Associates Programme.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. real-time shipping and backorder notices.4. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. By leveraging its vast customer base. from its shopping basket applications which lists the estimated time to delivery reliably. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. This customer-centricity is evident in all Amazon's activities. Amazon introduced Amazon. Amazon creates one-to-one relationships with its customers. linking it to a large number of other sites. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. In doing so. and Customisation Amazon provides customised features and services. and customer interaction. These are discussed in more detail in Section 6. therefore.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. from the customer recognition at the point of interface (Figure 6.2. which helps to build loyalty and create switching costs.

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

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

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

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

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

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

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

while Amazon. Barnesandnoble.com's $1.com in return for a commission on any purchases that they originated . prevent cannibalisation of its existing business. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . The 6. Webcrawler. this programme had more than 300.com.The Wall Street Journal.3.com's market capitalisation was $251 million. However. Instead. Both try to foster a community of readers by letting customers post reviews online. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). As of February 2000.000 affiliates in its referral network. Both offer customisation that permits users to personalise the experience.com had over 17 million. Barnesandnoble. They have developed an affiliate programme that links sites to Barnesandnoble.com closed 1999 with 4 million customers.a replica of Amazon's Associates Programme. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. and avoid charging sales tax in states where it has stores56.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com has created a high quality website and customer experience.4 Brand-Building Strategy Barnesandnoble. and both are expanding globally. 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 . Barnesandnoble. it lags behind first-mover Amazon. These initiatives have generated traffic to the site. has yet to leverage its strong brand in cyberspace. Both offer 'associate programmes' that let other websites link to their sites.6 million. Lycos. Yahoo!.com was valued at $21.1 billion. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Netscape and Microsoft Network. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. reasons for this are explained in the next section.com's 1999 revenues were $202.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. however. Barnesandnoble. compared to Amazon. and Barnes & Noble Inc. while Amazon.64 billion. Although. December 17.

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

it has not been able to establish itself as the leading online bookseller. otherwise they risk losing out to other online competitors. 57 'Bn. and was further up the growth curve.Not a Best Seller' .com) 75 . and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". Barnesandnoble. The company failed to leverage its established brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 Conclusion Although Barnesandnoble. significant market momentum. August 4. Barnesandnoble.3. The Press have also contributed.com . customer relationships and offline presence .forbes. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. 2000 (www. meant that Amazon. it also caused a major setback. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and allowed them to offer stock options as compensation and achieve a high market capitalisation.Forbes. In addition.com.com and has given them the image of a second rate 'me too' brand. by portraying them as slow and clumsy in comparison to the more nimble Amazon. feature for feature) has failed to differentiate Barnesandnoble.com's late start in 1997. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.com's experience is instructive. even if that means eating into their existing sales. a wellestablished Internet brand.its key differentiating factors.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. and its lack of innovation (by copying Amazon. 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 has been able to create a high impact and high-quality customer experience.

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


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


Miss Boo

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



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

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

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



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

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


by twin brothers Jason and Matt Olim.5 CASE STUDY: CDNOW 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.1 Company Overview Founded in 1994.Harvard Business Review. and exclusive interviews and reviews from CDnow's award-winning editorial staff.Merges with Columbia Records .Merges with N2K. announce marketing alliance .ten times the selection of a conventional bricks-and-mortar music store).CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.5. a valuable and rewarding experience"63. CDnow provides access to over 500.Site goes live . daily music news. D. as well as music reviews. This unprecedented degree of access to music and information is the core of CDnow's value proposition. features. On 19th July 2000.179-188 63 CDnow website (www.000 sound samples. cover art.. guides to music genres. CDnow was acquired by Bertelsmann AG. good prices. former arch rival . T.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.TIMELINE AND MAJOR MILESTONES . & Novak.000 people.000 music-related products and 650. and an average daily audience of over 800.5 million distribution deal with Lycos Signs three-year. and they aim to "make every visit to the site.com) 80 .Forges distribution partnership with Yahoo! $65. convenience. whether for browsing or buying. and one of the most popular shopping sites on the Internet62. and was the first site to offer the sale of music downloads and custom CDs.000 music related items .Partnership program with Geffen Records .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . $22.Launches merged CDnow/N2K site . $18. CDnow is also driving the digital distribution of music. pp.Raises $10 million through private placement . TABLE 6. 'How to Acquire Customers on the Web' . 62 Hoffman. It has a customer base of 4 million people.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . May-June 2000. CDnow is the leading online music store.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.CDnow and Time Inc.5.cdnow. customisation and a wealth of information and content to help in the purchase decision.

The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.5 . easy-tonavigate. to make it easier for customers to explore new music and make informed purchasing decisions. 81 .5.5. etc. CDnow has leveraged the reputation of their brands to reinforce its own.Figure 6. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. artists biographies. cover art. The whole process of searching for albums or music titles to the actual purchase is simple . By partnering with well-known content providers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 Sources of Value .. CDnow has cultivated similar relationships with MTV. FIGURE 6. For example. and has secured rights to music reviews.

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

5. By keeping the brand in front of the customer in this way. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. CDnow's initiatives include: • Banner Ads . Yahoo!. CDnow is doing everything it can to ensure that the next time that 6.000 small. • Traditional offline Media . and Variety. customers buy music. as well as more-targeted music-related sites like Billboard. Excite and other powerful Internet content and service providers.They have also stuck exclusive alliances with AOL. this is their "most successful customer building programme64". CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences.CDnow's advertisements are targeted to some degree. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. • Affiliate Programme . music-oriented websites. According to Jason Olim.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. they buy from CDnow. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1.4 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. and radio spots on the Howard Stern Show to build a cult following among radio listeners. print advertising is music-related publications such as Rolling Stone.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. and spot radio to build reach. 83 . • Alliances and Partnerships . Spin.Through the Cosmic Credit Programme. covering the entire music spectrum. It is a revenue-sharing arrangement. CDnow extended its distribution reach to include more than 250.

Hampel & Stefanides (www. The story of how CDnow was founded in a basement.Press Release. word-of-mouth accounts for the lion's share of CDnow's customers.As for many successful online retailers. 1998 . Public relations efforts helped to generate word of mouth and influence sales. It is a powerful source of acquiring new customers at low cost. it is in this context that the large investments in advertising and partnerships make sense. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .5. 6.CDnow made public relations a high priority brand-building tool. It is constantly adding new functionality to the site and has been innovative in its offering . CDnow's promotion strategies have attracted high levels of traffic. April 28.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .cdnow. This has contributed to a 225% increase in sales (1997: $17.4 million.4 million). and scaled it awareness-building efforts. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. both in the online and offline worlds.they were the first site to offer the sale of music downloads and custom CDs.(www. resulting in increased conversion rates.com/cdnow.com) 65 'Pioneering in Cyberspace' . with 44% of sales coming from new customers65. The company continually pushed for new distribution partnerships to widen its sphere of influence.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.htm) 84 .hsny. with repeat customers accounting for more than 50% of sales. • Word-of-Mouth . and to increases in the customer base of more than 30% quarter-to-quarter. 1998: $56. as a way to fuel very lucrative word of mouth. In fact.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TVs.3 Sources of Value .Yahoo! acquires Arthas.Site goes live September . regardless of platform (i. Palm computers).The 7Cs Framework Convenience Central to Yahoo!'s success.000 shares at $13.00 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.7 YAHOO! . and unveils Yahoo! Digital Introduces Bill Payment services .Yahoo! Shopping launches personalised shopping service 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.8.Yahoo! unveils Yahoo! Finance Vision .Yahoo! Launches Business-to-Business Marketplace .8 million IPO (2.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .Receives $1 million in venture capital funding from Sequoia Capital $33. More recently. 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.com. 99 .8). but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. mobiles. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.com allowing them to offer person-person payment solutions . to provide web-based services to PalmTM handheld computers . to allow access.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. is the way it has structured and displayed information. Their goal is not to list everything under the sun.600.e..Yahoo! acquires eGroups . .Yahoo! forms agreements with Palm Inc.

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

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

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

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

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








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



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

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

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

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

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

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

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


806 11.909 7.643 3.985 2.231 12.766 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.076 3.792 3.681 2.422 1.231 24.527 3.502 33.804 2.283 4.845 56.894 14.932 4.319 1.021 26.761 1.596 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .101 9.568 3.648 1.052 6.404 4.225 11.895 2.361 1.Interbrand's Ranking of the Top 60 Brands (www.313 2.197 32.423 2.654 43.281 11.781 17.interbrand.550 12.275 30.602 4.634 1.603 5.262 1.310 11.193 112 .143 2.464 3.043 8.806 2.048 20.155 7.181 21.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) 83.510 8.595 17.132 15.329 4.830 14.694 17.147 9.184 1.781 33.

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





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