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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
62 62 62 62 64 66 69 70 71 71 72 72 73 75
Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
8.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.The 7Cs Framework 6.5 Conclusion Case Study: CDnow 6.2 Value Proposition 6.6 Conclusion Case Study: eBay 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition 6.6.com 6.com 6.4.The 7Cs Framework 6.1 Company Overview 6.7.The 7Cs Framework 6.5.1 Company Overview 6.8.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.6 188.8.131.52 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1.The Failure of Boo.5 6.6.1 Company Overview 184.108.40.206.4.4.7 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .8.3 Sources of Value .3 Sources of Value .Extensive Integration 6.1 7.5 Conclusion Case Study: Gap.5 Other Factors That Contribute to their Brand Leadership 6.2 Value Proposition 6.3 Sources of Value .220.127.116.11 Case Study: Boo.1 Company Overview 6.7.1 Company Overview 18.104.22.168.The 7Cs Framework 6.3 Sources of Value .6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 22.214.171.124 6.5 Other Factors that Contribute to their Brand Leadership 126.96.36.199.4 Brand-Building Strategy .4 Brand-Building Strategy 6.2 Value Proposition 6.com 6.2 Value Proposition 6.
4 Figure 4.8 Figure 6.com's Associates Programme Overview of BarnesandNoble.7 Figure 2.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .4 Figure 5.2 Figure 2.3 Figure 2.1 Figure 4.com's Website Overview of Boo.2 Figure 4.4 Figure 2.7 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.4 Figure 6.9 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .6 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.5 Figure 6.1 Figure 1.8 Figure 5.6 Figure 2.1 Figure 5.5 Figure 5.5 Figure 2.3 Figure 6.6 Figure 4.com's Website Amazon.7 Figure 6.7 Figure 5.4 Figure 4.2 Figure 3.3 Figure 5.2 Figure 6.8 Figure 3.5 Figure 4.3 Figure 4.3 Figure 3.2 Figure 2.1 Figure 3.1 Figure 2.1 Figure 6.2 Figure 5.6 Figure 5.
com .4 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.5 Table 6.7 The Emerging Brand-Building Environment Amazon.com .com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.com .6 Table 6.3 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones Gap.Timeline and Major Milestones eBay .Timeline and Major Milestones Boo.Timeline and Major Milestones BarnesandNoble.1 Table 6.2 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
com's range of 4. The Internet also represents a fundamental shift in how buyers and sellers interact. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com1 Amazon.g. This is creating new challenges and opportunities. and business models revamped.com noble.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. creating strong brands that are putting established brands at risk. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. As such. As such. McKinsey Analysis (www. It is empowering customers with more options and more information to make informed decisions. products and services reconfigured. that these Internet start-ups have achieved.5 million book titles).com Source: Securities and Exchange Commission Filings. as they face each other through an electronic connection.mckinseyquarterly.com) 7 . Supply chains are being rethought.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. In the midst of this. and is triggering the need for new brand-building strategies and tools.1 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.YEARS TO REACH $100 MILLION IN SALES 6 5. Figure 1.9 3. customer affiliation and level of sales.2 3.1 OVERVIEW Over the past few years. service and brands. relationships. aggressive Internet start-ups have emerged. whereas it has taken decades for traditional companies to achieve the client base. there has been an explosion in the online world .com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.an explosion that is also a harbinger of how business will operate in the future. Amazon. Amazon. while providing new tools for promotion. the Internet is changing fundamentals about customers.5 2. FIGURE 1. America Online (AOL) and eBay have been able to build powerful brands in a few years. interaction and relationship building.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.9 2. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.0 1.com. Internet companies such as Yahoo!.1 .
C. However.. A Business Week / Harris poll. building awareness.. 1 2 3 Christensen. T.66 8 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. P. In light of this. and the high cost of acquiring online customers2. 'How to Acquire Customers on the Web'. M. turning browsers into buyers. Given the tremendous clutter in today's e-commerce marketplace. companies lack a coherent framework and concrete methods to build an online brand. rather than drifting from site to site3. R. For pure online players. 'Meeting the Challenge of Disruptive Change'. brands are even more critical as customers have little to go on other than a recognised brand. who are essentially intangible. D.. Browder. as the need to build brand loyalty online is reaching a peak. Harvard Business Review. and Novak.April 2000. 1997. 66-76 Hoffman. attracting traffic or 'eyeballs'. L. & Overdorf. Harvard Business Review. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. As such.. Therefore. 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. & Elstrom. A New Class of Netizen is Settling Right In' Business Week. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. p. pp.Forget Surfers. that extends the brand-customer relationship beyond a single transaction.. May 5. P. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. May-June 2000 Hof. Volume 78 Issue 2. found that 57% of Internet users go to the same sites over and over again.. S. March . 'Internet Communities . there is a growing recognition that traditional methods are no longer suited to this new interactive environment.
3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2.2 . tools and strategies to build brands on the Internet. 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands.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. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. This is based on the outcome of the primary research (in-depth case studies). FIGURE 1.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 . and to identify new sources of value. • To explore how the Internet is changing the brand-building environment. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. A review and analysis of leading academic thinking will be used to explore these issues. supported by secondary data related to aspects of online business from accredited and published sources.
the literature review draws on leading academic thinking in more established areas such as brand management. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. The combination of cases provides a useful and practical insight into brand-building issues and problems.com and Gap.com). CDnow. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. this also highlights the true value of the dissertation. Hypothesis (Framework): This is based on the literature review and secondary data. to provide an in-depth analysis of the psychological and social dimensions of brands. nor desire. 10 . traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. certain key factors are highlighted in their relevance to the dissertation. relationship management. and is used to provide insight into some of the factors that contribute to the development of successful brands. The absence of academic literature on Internet branding posed a major obstacle. eBay and Yahoo!). and factors that contribute to a brand's success.com. however. strategy and economics. there is more work in popular rather than academic literature. These are further refined using the insight obtained through the case studies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. Consequently. marketing. While there is no attempt. Conclusion: Discusses the key findings and areas for further research. as well as a recent Internet failure (Boo. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com).
4 STRUCTURE The next chapter. Chapter 6 examines the brand-building efforts of seven companies. Chapter 3 explores how brands have traditionally been built. summarises the key findings. The final chapter. 11 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. This chapter sets the context within which online brands must be built. and outlines the opportunities for further research. The nature of brands. The limitations of the Internet in terms of brand-building are also discussed. Chapter 4 provides an overview of the Internet and its defining characteristics. Chapter 7. by outlining the impact of the Internet on the business and competitive environment. and introduces the core concepts that form the backbone of the dissertation. their purpose and value are discussed. as well as the interactive approach to attracting customers and building loyalty. 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. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. provides an analysis of leading academic literature in relation to branding. Chapter 2. highlighting some key factors that have contributed to brand success.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
these layers are Brands are made up of many layers and dimensions. and for the company. symbolised in a trademark.). 'The Future of Brands'.a leading specialist brand consultancy firm . but extends further to encompass added values derived from factors such as the brand-customer relationship. 2000. A. CEO of Interbrand Newell and Sorrell . and highlights the importance of brand management. (London: Macmillan Press Ltd.1 . E. 'Building Strong Brands'. 2. and the importance of customer satisfaction and brand loyalty. both for customers. which.2 WHAT IS A BRAND? According to Rita Clifton. & Maughan. vii 13 . creates influence and generates value4" This definition truly captures the essence of a brand. This value stems from the products and services that companies create and bring to the market. R. unravelled to reveal the nature of brands and their reason for existence.1 INTRODUCTION In this chapter. if properly managed. 74 4 Clifton. D. and to companies. explaining the value of brands.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.1. Branding is about creating 'value'. The chapter proceeds to describe the influence of brands on the buying process. p. (New York: Free Press). The concept of brand equity is outlined. p.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.. the brand's emotional benefits and its self-expressive benefits . whether online or offline. 1996.see Figure 2. These concepts are central to brands and brand-building. and they form the backbone of this dissertation.a brand is: "a mixture of tangible and intangible attributes. both to customers. FIGURE 2.
January-February.. and services to customers. Brands are richly endowed entities. which grows out of the cumulative memory and the experiences customers have of products or services. They start life as ideas. a 'reputation'. and a 'promise'. For some companies. FIGURE 2. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. yet ultimately reside as consumer perceptions. As such.2. T. 2. p.2 . the augmented brand and the potential brand . making their way into planning and strategy documents.the core product or service. brands are their most valuable asset. the basic brand.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.Figure 2. a 'set of expectations'.a 'relationship'.3 THE LAYERS OF A BRAND Brands are made up of four layers . It is a company's promise to consistently deliver a specific set of features. 'Marketing success through differentiation . benefits. 1980.86 14 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Harvard Business Review. The space a brand occupies inside a customer's head can create a 'mental' patent.of anything'.
not the products it sells . In fact. Service Brands (intangible) are much less numerous than their product counter parts.g. or design.. even when the alternatives are substantially cheaper or more readily available (e.com are examples. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. 15 . However. 'Marketing Management . actually sell products. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. Kodak. customers buy products to meet certain functional needs. information.g. Implementation. 2. The Basic Brand The basic brand consists of the "name.The Gap stores. but the brand itself is the store.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. 5 Kotler. & Control'. Planning. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. Certain service brands. quick delivery) that enhance the customer’s total purchasing and use experience. Essentially. Levi's). Coca-Cola. with supplementary products and services (e. preferring things they can see and touch. most products and services cannot survive on functionality alone as this is usually matched in time.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. P. this is the case with all Internet companies. symbol. sign. term. (Europe: Prentice Hall) 1996. These products and services add value and make the offering much more difficult for competitors to emulate. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. Southwest Airlines and Amazon. The most common barrier to competition is building a brand.Analysis. They are the historical core of branding because they are the most prevalent. this should support the offering's performance and differentiate the brand from those of competitors. 8th Ed. or a combination of them. such as in retailing. and because they most readily come to mind when consumers are asked to recall brands.
4). In the evaluation stage. 'Marketing Management . and selective retention. 16 . p. The buying process consists of five stages (Figure 2. Therefore. 1996. Once aroused.. selective distortion. Implementation.194 The process starts when the buyer recognises a need. a consumer will be inclined to search for more information. and pay the most attention to the brands that will deliver the sought benefits. However. Through gathering information.attitudes of others and unexpected situational factors (Figure 2. FIGURE 2. P.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. These beliefs depend on their previous experiences with the brand. This can be triggered by internal or external stimuli (advertisements). Consumers differ as to which product / service attributes they see as important. and the effect of selective perception. it is important to clarify customers' underlying buying behaviour and the buying process. it is critical to understand what attributes consumers value.Analysis. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Consumers develop a set of brand beliefs about the attributes of competing brands.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.. Planning. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. two factors can intervene between the purchase intention and the purchase decision . either through heightened attention or through an active information search. the consumer learns about competing brands.3). (Europe: Prentice-Hall) 8th Ed.3 . and Control'.
the customer will be highly satisfied. advertising and communication. locking out potential competitors. customers make decisions purely on the basis of their expectations. word-of-mouth. Expensive purchases involve some risk taking. and a preference for recognised brands they can trust.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. postpone. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. even delighted. Customers' expectations are particularly important when dealing with services. as these services are intangible and therefore. their negative attitude may influence the consumer's purchase intent or vice versa. These expectations are formed through a combination of past experiences. A consumer's decision to modify. If perceived performance and quality exceed their expectations then they are satisfied. and especially important when dealing with purchases made through the Internet. or dissatisfied with the purchase decision. somewhat satisfied. After a consumer has actually purchased the product or service. Customer satisfaction and loyalty are essential to creating successful brands. If performance falls below their expectations. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. 17 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. or avoid a purchase decision is heavily influenced by perceived risk. they will be dissatisfied and look for alternative brands in the future. they will evaluate their level of satisfaction . A consumer tries to deal with this by gathering information from friends.
Johnson & Johnson. 'Why Satisfied Customers Defect' . Spring 1999 18 . Saturn. Federal Express... FIGURE 2. and Johnson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. D.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. E. Nov-Dec 1995.5. 'Why Satisfied Customers Defect' .Figure 2. M. 91 Loyalty is derived when customers are continuously satisfied over time. p. E.those who actively attack the brand telling others not to buy from the company. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Trust is critical for a brand's success. and believe that it will always act in their best interest. Nov-Dec 1995 Hart. T. This satisfaction encompasses the whole experience and not just a company's products or services. Hewlett-Packard.. 'Growing the Trust Relationship'. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. & Sasser.Harvard Business Review. Marketing Management. Customers that are passionately or emotionally loyal are those that have built trust in a company.. W. & Sasser. Southwest Airlines and Xerox7.5 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.customers who are satisfied and loyal and talk favourably about the brand . At the opposite end of the satisfaction spectrum are "apostles" .. The customers at the bottom end of the scale are "terrorists" . C. 6 7 Jones. T.Harvard Business Review.
with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. In this way. & Rogers.com. Emotional loyalty can be also created through the formation of a strong user community around the brand.they provide good word-of-mouth and are the best salespeople for the product / service 2. There is also clear evidence of this on the Internet. 'The One to One Future'. Spring 2000 19 . G. 8 9 Peppers.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. 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).. M. 1993 McWilliam. Harley-Davidson motorcycle clubs).Sloan Management Review. 'Building Stronger Brands through Online Communities' . The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. emotional loyalty is born out of a consumer's personal relationship with a brand.. consistent orders Satisfied customers are the best advertisement . 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. Firstly.g. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.
Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. pp.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. A stronger brand enjoys a high degree of brand preference over competing brands. 343-373. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. Journal of Consumer Research.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. 2. FIGURE 2.6 .7). 20 . Beyond this. S. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). a 'powerbrand' tends to have a high degree of brand loyalty. almost irreplaceable bond as well as potentially to the negative feelings of betrayal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. March 1998.. there are brands that customers perceive as acceptable and would not resist buying. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. However.7 . and understanding the needs and buying processes of the target market is essential. whereby customers would be unwilling to substitute it with competitors' offers. there are brands that are unknown by most buyers. FIGURE 2. which goes well beyond the satisfaction of a specific need.
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". (New York: Free Press). D. 1991 21 .Create Awareness .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. FIGURE 2.8. The major brand assets are brand loyalty. The benefits of each are outlined in Figure 2. perceived quality. (New York: Free Press).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. 1991 10 Aaker.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . and other assets such as patents. which is the value of the brand over and above its commodity value. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'..8 . According to David Aaker (1991). trademarks.. name awareness. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. D. and relationships with distributors and strategic partners. strong brand associations.
Premium pricing increases revenue. and the number two twice the share of the number three12. to quickly identify sought after products • • Practicality . 1992 Worcester. the best performer for a particular purpose • Characterisation . May 1993. 'Strategic Brand Management'.8. 1986 13 Golder.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . to make sense of the offer.. brands perform several functions that add value and customer benefits: • Identification .. production and marketing. 158-170.To save time and energy through identical repurchasing and loyalty Guarantee . N. to its logo.To be clearly seen.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.To be sure of buying the best product in the category.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.. 'Consumer Market Research Handbook'. to its communication • Ethical . The brand leader is the most profitable and all beyond number two are unprofitable13. in the following ways: • Brands.To have confirmation of your self-image or the image that you present to others • Continuity . J. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. market share and profits . R.. 11 12 Kapferer. 3rd Ed.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . (New York: Free Press). Journal of Marketing Research. & Downham. & Tellis. J. 22 . pp.8.Typically a brand leader obtains twice the market share of the number two brand. • Brand Leverage .. G. (London: McGraw Hill). P.Satisfaction linked to the attractiveness of the brand.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.
The brand can also be used to penetrate new markets.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. In addition.Companies with strong brands attract good recruits. 2. Coca-Cola “the real thing”). and the characteristics of successful brands. not brands. • Motivating Stakeholders .g. companies such as Interbrand (see Appendix A). Companies can maintain a brand while modifying the underlying product to account for new technology. and Young & Rubicam have created complex formulas. brand leaders can exploit their superiority in the market (e. the tools that are used.Strong brands are more attractive to investors. • The Brand Barrier . The next chapter describes the process of how brands are built. maintain good price levels and generate strong cash flows. 23 .Brand leaders usually have the financial strength to fend off competitors. it can build a strong market share.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .g. fashion or prevailing market conditions. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. but there remains an ongoing controversy about how accurate and meaningful these measures are. When a company creates this type of customer preference and loyalty.Dominating a niche market is usually more profitable than being fifth in a large market. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. in turn.The product life cycle applies to products. • Avenues for Growth . This. They also tend to elicit community and government support. • Brand Loyalty and Beliefs . In trying to estimate the monetary value of brands. drives up share price and provides the basis for future growth. Johnson & Johnson with Tylenol).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
Once this has been established. FIGURE 3. highlighting important factors that contribute to the success of each step along the way. promotion. This is illustrated in Figure 3. public relations.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. The major characteristics of successful brands are also reviewed. brand awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and direct marketing. This chapter spells out the traditional brandbuilding process. which are created through advertising. 3.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. confidence and brand equity are built. the next step is to get customers to try the brand.1. To entice trial and repeat purchase requires triggering mechanisms.1 INTRODUCTION Building a strong brand is a complex task.1 . selling. If the offering is developed properly. it should provide a satisfactory experience and lead to a willingness to buy again. and keep it turning. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.
In order to do this. it is impossible to build a successful brand. and added value (AV). The value proposition must be continuously re-evaluated to respond to changes in the marketplace. a distinctive brand identity (I). Without a good product or service. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. unless differentiation and awareness can be developed.DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. Similarly.2 . a compelling value proposition is the combination of an effective product or service (P).each is essential. In this way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. it will never attract a strong client base.2). As such. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . 26 . BRAND = P X I X AV These three characteristics are multiplicative rather than additive . FIGURE 3. a company must develop a strong understanding of who their potential customers are. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.a strong offer that a potential customer would find compelling and interesting. the brand can elicit feelings of confidence that it is of higher quality than competitors'.
In today's affluent society. providing confidence and incentive to trial. layout and appearance of the brand can clearly affect preference by offering cues to quality. P. these needs are as likely to be about satisfying self-actualisation or esteem needs. (Europe: Prentice-Hall). MA. 14 15 Doyle. which they perceive as meeting their needs. which are additional to those based upon real performance. • Belief in Efficacy .brands frequently acquire an image from the type of people who are seen as using them. if customers have faith that a brand will work. or to gain a sense of belonging. • User Associations . Coca-Cola.. J.the design. 2nd Ed.in many cases. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. Hewlett-Packard.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. faith in brand generates satisfaction in use. influenced by brand values. as they are to be about satisfying basic physical and economic needs14. mean that buyers look for short cuts.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. The large number of decisions.In many situations a strong company name (e. Sony. People use brands to express their lifestyles.3. values or wealth. P. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. the pace of technical change. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. industry endorsements and newspaper editorials. it is more likely to work effectively for them.g. • Manufacturers' Name and Reputation . Gillette. Kellogg's) attached to a new product will transfer positive associations. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. Customers choose brands. 'Marketing Management and Strategy'. it acquires added values of familiarity and proven reliability. pp. For pharmaceuticals. cosmetics and high-tech products. 169 Jones. Lexington Books). 1986 27 . • Brand Appearance . Brand values derive from five major sources15: • Experience of Use . interests. 1998..if a brand provides good service over time. the number of competing alternatives and the large variety of advertising and selling messages.
visual appearance.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.g. and visual appearance). colour scheme. its personality and its image or self-projection . prestige.3: • The Brand Core . • The Brand Style . type of spokesperson / customer image used to advertise the brand). style or cultural differences from one country to another. which depends on how the target market perceives the brand. 'Strategic Brand Management'. and advertising. its reflection (e. features. 1992 28 . friendly). J.the fundamental or genetic code of the brand.Figure 3. etc.. • The Brand Theme .3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name.g. This may be different from the brand image.the way the brand communicates through its advertising. glamour. press releases. A company should seek to differentiate its brand through developing a distinctive identity. however the brand style and core tend to be less flexible. (New York: The Free Press). Themes include the physical appearance (logo. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . which remains fixed over time. 16 Kapferer. packaging. Brand themes are the most flexible element and will tend to change with fashion. and the relationship expressed (e.articulates the brand core in terms of the culture it conveys.
how far the brand can be meaningfully stretched to other products and market segments.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. J.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. Secondly. It also facilitates consistency in the message being transmitted through presentation (e. website design. understanding the brand's core and style helps set the perimeters of brand extensions .g. and through line and brand extensions. advertising. structure and ease of use).. 29 . below-the-line activities. its strengths and opportunities. 1992 The brand prism enables management to understand the brand. Finally. (New York: Free Press). 'Strategic Brand Management'.
The value proposition must be communicated to entice customers to try the product / service. (New York: Free Press). they must learn about it. FIGURE 3. • Adoption . deliver and reinforce this value proposition (see Appendix B .Customers need to be stimulated to seek information about the brand's uses. culture and staff needed to support.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. and its products / services.4. strategy (partnerships and alliances).Customers consider whether the product / service will meet their particular needs.. 'Diffusion of Innovations'.. The value proposition must then be articulated in terms of the 'marketing mix' . and the product / service's perceived performance. pp. Advertising and PR are common tools for achieving awareness. • Trial .often referred to as the '4Ps' . (New York: Free Press).Product and service features. it should lead to satisfaction and re-purchase. E. If the offering is developed properly. skills. • Interest . Before potential customers can buy a product / service. • Evaluation .INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.The McKinsey 7-S Framework). features and advantages.The customer is satisfied and decides to make regular use of the product / service. Personal sources such as word-of-mouth from friends. 17 Rogers.79-86 30 . systems.4 . This learning is called the adoption process17 . the company must ensure that it develops the appropriate structure.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. pp.The company has to create awareness of the brand. E. management style.Figure 3. colleagues and opinion leaders become important influences at this stage. Price.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. 1962. 1962.79-86 The Innovation-Adoption Model consists of: • Awareness . 'Diffusion of Innovations'. Promotion and Place (distribution strategy).
the company may supply customers with special equipment or tools (e. This is often referred to as Customer Relationship Management (CRM). & loyalty / discount cards. 3. 'Marketing Services: Competing Through Quality'. pp. direct marketing. & Parasuraman. 18 Berry. software) to help customers interact with the company.for example. • Structural Ties . personal selling and public relations / publicity . but enhanced customer interaction through relationship building. allowing companies to communicate regularly with their customers and customise their interaction.g. Through building relationships with customers. Internet linkages. when each trusts the other to deal fairly and reliably. this process enables an exchange of information. 1991. while strengthening the position and value of the brand.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. L. Advertising and public relations can be effective in generating awareness and interest. Customer service is an important element of this relationship. providing insight into customers' needs and wants.to move customers through the adoption process.. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. (New York: Free Press). This focuses on establishing a longterm.advertising. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits .5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.such as airline frequent flyer programmes.136-142 31 . sales promotion. Social Benefits . Over time. companies have used the tools of the promotions mix . companies can increase the value of each customer. multi-transaction relationship. In this way. A. encouraging evaluation and trial. making them less likely to switch to a competitor. This information is a key competitive advantage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. companies can increase buyers' satisfaction.
brands were not built quickly. P. 19 Doyle.A successful brand requires an effective selling. when the brand has no competitors to rival its position. 3. • Unique Positioning Concept .Satisfactory experience is the major determinant of brand values. pp.176-177 32 . 1998. • Time and Consistency . but it makes the task easier. comprehension and intention to buy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Without building awareness. then its position will be undermined. it must have a unique positioning concept . its function and psychological values. and making it more difficult for competitors to emulate. (Europe: Prentice-Hall). or if the brand is surpassed by superior offers from competitors. advertising or promotional campaign. companies have the opportunity to start building relationships with their customers. it has a profound impact on the traditional brand-building process.. companies must actively communicate it to the target audience to entice trial. which will add value and distinguish it from competition. value proposition or augmented brand. 'Marketing Management & Strategy'. • First-Mover Advantage . As such. • Strong Communications Programme . which will communicate the brand's existence.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19.Being first into the market does not necessarily bring success.Traditionally. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. As a result. strengthening the brand further. The Internet provides the opportunity for companies to create compelling value propositions never before possible. while providing new tools for promotion. If the quality of the experience deteriorates. trigger trial and reinforce commitment to it. It often takes years to build up the added values. and establish a trusting relationship. 2nd Ed. 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. Once the framework has been established and the organisation configured to provide this proposition.If the brand is not the innovator.a segmentation scheme. interaction and relationship building.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition.. the brand is meaningless. including: • A Quality Product / Service Experience .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
34 . E-MAIL Is the part of the Internet that most users use at present.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. it offers a number of alternative channels that enable businesses and people to communicate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. This chapter provides an overview of the Internet and its defining characteristics. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and a critical source of added value.1.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 4. but in practice not in real time. which contain hypertext and pictures. The three core channels include e-mail (the most common).1 INTRODUCTION The Internet is transforming the business environment. and provides the opportunity for dynamic interaction. FIGURE 4. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people.Figure 4. it is a common technology platform that allows computing devices to communicate with each other. In essence.1 . news groups and mailing lists. Information is becoming a major part of the products and services that people buy. In doing so. and the 'world wide web' (www) . Hypertext allows information to be organised in a user-friendly way that is easily accessible. creating new challenges and opportunities.
The Internet is a global network and can be reached from everywhere.2 (Note: 35 . the Internet lets individuals and companies build interactive relationships with customers and suppliers. ubiquitous links to anyone. These defining characteristics have fuelled its explosive growth.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).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 . 7 days a week. which was intended to link military networks together. • It Allows for Two-way Communication and Interactivity . The Internet can also be accessed at any time .3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.24 hours a day. • It Overcomes the Barriers of Time and Space .not previously available with mass medium forms of communication. when the United States Defence Department developed the 'ARPAnet'. The context of the Internet and certain key developments are highlighted in the Figure 4. regardless of where the computer or Internet access device is physically located. These characteristics combine to create a very powerful medium. Graph is not drawn to scale). allowing both parties to identify each other and build one-to-one relationships . By allowing for direct. and deliver new products and services at low cost. 4.2. anywhere.this radically alters the process of interaction between communicating parties.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. These qualities eliminate the barriers of time and space that exist in the physical world.
GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 1996 (www.000 1.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. as cited in 'E-Business Technology Forecast' . 1998. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. FIGURE 4.a PricewaterhouseCoopers Report. 2000 Internet / ARPAnet was created Dell.000 1.000.Figure 4.000 10.000 1969: 10.economist.000 100.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.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.3 .000.com) 36 .000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .3.2 .
Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .).4 . hosting. The growth in support services (e.g. 1996. billing. 2000 (http://cyberatlas. the momentum created by all these forces has created a virtuous cycle of growth. web design.internet. payment. FIGURE 4. and gateway services).Content Aggregators .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. L. etc. TCP/IP). G.Cheap bandwidth .E-Marketplaces . No.4. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. Multimedia development tools that can be used to create rich content.Cheap microprocessors & RAM . making it more cost effective for software developers and other technology providers to create interoperable products. Reed.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . there will be an estimated 375 million Internet users world-wide. The McKinsey Quarterly.g..2 20 'World Online Populations' . The emergence of open standards in development tools and at the network protocol level (e.High-powered servers . As shown in Figure 4. Easier access to these networks provided by point-and-click web browsers.com) 37 . increasing to 500 million users by 200220.Attractive infrastructure and middleware software .Higher PC penetration among consumers and companies .CyberAtlas Internet Statistics and Market Research. 'Electronic Commerce (finally) Comes of Age'. The development of critical processes (ordering..Low-cost networking alternatives . offering inexpensive bandwidth.
April 13. communication and information tool. FIGURE 4. reveals the wide range of areas where people are embracing the Internet .5.Figure 4. 2000 (www.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society.g.com) 38 . entertainment) and purchasing (37%) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).from communicating (90% use e-mail) and sourcing information.5 . as cited in the Economist Intelligence Unit (EIU).eiu. to interacting (e. chat rooms. These activities highlight the adoption of the Internet as an interactive.
WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4.6 . The main difference between the Internet and other electronic media (i. they all project the value e-commerce transactions to grow at unprecedented rates. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. April 2000 39 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. fax. software. and people. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. Instead there is a website. FIGURE 4.e. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. The buyer and seller 'face' each other through an electronic connection.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. web browsers. no order book.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. content. and no cash register. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. However. projected by Gartner Group. telephone) is that the Internet goes beyond just enabling transactions. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. There is no need to travel to a physical location.
For example.g. which are often disruptive to traditional business models21.. pp. operation (e.how companies operate.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . By allowing customers to talk knowledgeably and directly to suppliers. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Dell Computers). C. the Internet is sidelining the role of many traditional intermediaries.. suppliers. Harvard Business Review. 'Meeting the Challenge of Disruptive Change'. March . some of which look set to become the superbrands of the future (e. 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.April 2000. Although the particular impact will differ between industries. New brands and business models are emerging to seize this opportunity. and transforming traditional distribution channels. M. This is threatening to undermine many old established brands.g.and revolutionary new business models are emerging. 66-76 40 . 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. the explosion of information is placing a premium on skilled information management. Volume 78 Issue 2. a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. At the same time. The Internet also facilitates the development and co-ordination of global activities (e. partners and other corporate constituencies. through the use of extranets). Yahoo!). A 'virtual' presence can mitigate the cost of having to invest in physical facilities. & Overdorf. 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. Additionally.g. represents a level of efficiency and integration previously unattainable.
Now companies need to move at warp-speed. They can move from one supplier to another searching for the best prices. combined with the emergence of electronic intermediaries. collaborate more effectively and ultimately embed organisational intelligence within processes.com) 41 . commit and deploy resources. As a result. these new highly informed customers are "empowered fruit flies". has resulted in a fierce competitive environment. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. 'Empowered Fruit Flies' . quick evolution and all the power. This. and the 24 x 7 environment. switching costs are much lower. and reorganise as appropriate. as they are just one 'click' away. Customers have more options than ever before .they can choose between traditional 'bricks-and-mortar' companies. online stores. constantly innovate. The Pace of Business is Accelerating With the fast pace of technological change. respond to competitive and market dynamics. Internet technology can be used to exploit collective learning and knowledge. 2000 (www. the development of a knowledge economy. It also provides easy access to competitors' offers and allows customers to consider every available alternative. fierce competition. 22 Colony. the diminishing barriers-to-entry and the lower switching costs. This is forcing companies to become flexible and responsive to customer needs.Forrester Research. as they have access to more information leading to more informed decision-making. CEO of Forrester Research22. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. According to George Colony.forrester.. or catalogues. ensuring the delivery of a satisfying customer experience. the globalisation of business. their organisations must harness knowledge . products and services. improving processes. allowing employees to share knowledge.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. the typical clock-speed at which companies need to operate has accelerated. with no time. it also removes the geographical protection from competitors.in developing products.internally and externally . highest convenience and quickest satisfaction. getting closer to customers and ultimately staying ahead of competitors. little loyalty. G. empowered customers. to capture new opportunities.
variety. it provides the opportunity to reach customers where they want. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves.com) 42 . and most traditional partnerships were vertical.(www.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. most Internet and e-commerce partnerships extend beyond this. combined with intense competitive pressures. thus creating a 'value net23'.7. and multiple strategic alliances and partnerships. when they want. Increasingly. In this way. and the need for speed and flexibility have accelerated the unbundling of business systems. Examples of emerging information age business structures include flat versus hierarchical. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. extensive outsourcing. linking companies with suppliers and customers up and down a pre-defined value chain.teslagroup. supply chain cooperation. which highlights the typical structure and dynamics of an online company. As such. 23 'The Future of E-Business' . It allows companies to improve customer service. The opportunity of linking the complete supply chain 'virtually'. However. linking companies with competitors and players from entirely different industries and business sectors. how they want and with the levels of customer service they demand. The extent of this partnering is illustrated in Figure 4. alliances and partnerships have taken on a new level of strategic importance. companies can provide customers with a strong value proposition by offering them the best in quality. information. companies have looked upon alliances only as a means of filling gaps. and partnering up with the best for the remaining activities. Traditionally. 1999 . advice and convenience. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. achieve global reach and realise a new source of cost advantage. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon.
As such. tools and opportunities. 4. 'Organising for e-Commerce' . April 2000 In an attempt to provide a rich customer experience. it is transforming the competitive landscape and brand-building environment. competition is intensifying. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. Partnering with portals and affiliate web sites is important in driving traffic to a web site. 43 .6 CONCLUSION The Internet and its strategic impact are not technological issues . This provides customers with added value.a Boston Consulting Group (BCG) Analysis.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. & Stirton. D. while making the offering hard to duplicate off-line. This is the substance of the next chapter. while triggering the emergence of new brandbuilding strategies. New opportunities for efficiency and co-ordination are emerging.they are business issues. G. the pace of business is accelerating and power is shifting to the customer. The Internet is transforming every business to some degree.dot.7 . S. many online companies are blending together the products and services of a wide range of companies..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.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
the intangible nature of the Internet.durlacher. they have never handled or seen (except on-screen). credit card numbers.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. many unnamed customers develop a 'relationship' with the brand.com) 45 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. has placed greater importance on trust and security. 5. addresses. as well as on topics of interest related to the brand and product characteristics25. in most cases. and sites that understand the user's needs and preferences24. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. and the fact that customers are buying goods that. Traditionally. in addition to providing added value.sites that provide a wealth of information and make comparison shopping easy. people have concerns about sharing personal information. New strategies and tools for building brands on the Internet are identified.2 THE NEW DYNAMICS OF BRANDS Traditionally. Generally. The limitations of brand-building on the Internet are also discussed. the Internet makes search and comparison much easier. On the other hand. In response. 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. Customers derive added value through the provision of information on the products or services they buy.Durlacher Research. May 1999 (www. offers interactivity. The Internet. the logic of the Internet cuts another way. and projects it onto a third party intermediary (the media). where the user feels a part of. brands have been developed in an environment whereby a company creates a brand. J. whereby the company can establish a dialogue and 24 Marathe. 'Internet Portals' . In addition.. including the interactive approach to attracting customers and building loyalty. People only tend to transact with sites they know and trust . on the other hand. This threatens to undermine the value of brands. Transactions on the Internet require customers to provide detailed personal information . etc.names. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. However.
duke. this also poses a challenge as these relationships may take on a life and character of their own. January-February. 'Adding Product Value Through Information'. rather than simply speaking at customers. B. TABLE 5. Rogers. D.from the promises made in the value proposition. service approach Customised The Internet gives companies control over all their interactions with customers and therefore.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. January 28. In doing so. This creates the opportunity for companies to build stronger relationships than previously attainable.. 151-160 46 . understand and relate to customers.Harvard Business Review... Duke University. companies have to find innovative ways of leveraging the information and 25 McCann. 1997 (www. learn.edu) 26 Peppers. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. to its delivery to the customer. brand-building must focus on the end-to-end customer experience . 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.1.Fuqua School of Business. relationship building characteristics of the Internet. 1999. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. . However.. 'Is Your Company Ready for One-to-One Marketing?' . Prof. J. M. a company can listen. & Dorf.1 . In maximising the customer experience.
S.pwcglobal. R. & Hancock.often. Zook. 2000 (www. and with customers holding all the power. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. T.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. D.converence-board. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. T. Repeat purchasing not only binds trust. . 27 'Electronic Business Outlook'. J. - Loyal customers are more willing to buy other products from the company.. - Repeat purchasers spend more and generate larger transactions . March 17.. 2000 47 . Chu. on average. unless they are selling high-price. Harvard Business Review. For example. In fact. high-margin items. - Repeat customers refer more people and bring in more business . MayJune 2000 30 A Forrester Research Study. . Therefore. it is very unlikely that an online retailer can break even on a one-time shopper. companies must ensure that they provide a completely satisfying end-to-end customer experience.com) 29 Hoffman.An A..org) 28 Rigby. L. This is further reinforced by the fact that. companies need to retain customers so that they return to the site repeatedly. a disgruntled online customer tells 10 people about a poor experience30. Baveja.A Mainspring Communication Report in collaboration with Bain & Co.. 'How to Acquire Customers on the Web'. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. it could be argued that customer loyalty is even more critical online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. and to recover their investment.com and www.bain.. P. 1999 (www. but also provides more opportunities for cross-selling.word-of-mouth is the single most effective and economical way online businesses grow their sites.Research by PricewaterhouseCoopers / The Conference Board.. These points stress the importance of online customer loyalty. 'The Value of Online Customer Loyalty and How You Can Capture it'. C... S.due to more frequent shopping and larger purchases. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . Kearney White Paper. as cited in 'Creating a High-Impact Digital Customer Experience' . and Novak. This view is reinforced by in-depth studies carried out by Bain & Co. customer acquisition costs are high. and some are spending over $50029. D. Rastogi.
additional products.1 . and the value that each member realises. customisation for individual customers. as illustrated in Figure 5..4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. as the benefits of scale are overwhelmed by the disadvantages of size31. R. additional customers and transactions can be managed with limited fixed cost investment. and other features can be added or changed at low marginal cost. FIGURE 5. Similarly. (London: Harper & Row). where the value of the network. businesses and online communities that rely on connectivity can enjoy 'network effects'.. Once the up-front investments are made (for research and development and technology infrastructure). 1989. As a result. 180-182 48 .1. (also referred to as 'viral economics'). 'Positive Economics'. 7th Ed. and in the case of information-based products. increases disproportionately as more people join the network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. G. the costs approach zero32. However. pp. each additional unit sold does not cost more than the last to deliver.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. this is not the case on the Internet. Even more important.
'5 Rules of the eEconomy'. including direct marketing. No. 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. enhancing the interaction..org Study in collaboration with The Boston Consulting Group. direct marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. M. Nov 1998 49 . cross-selling and up-selling33. With no competitors around. link revenues 32 33 Melnicoff. being first into a market makes it easier to capture the consumer's share of mind. delivering increased margin per customer . fulfilment • Defensible advantage against competitors SCALEABLE. This makes it more efficient in improving product selection.A Shop.Figure 5. FIGURE 5. It also allows online companies to tap supplementary revenue streams. its ability to track customer preferences and customise offerings improves.2. advertising and referrals.A Publication by Andersen Consulting 'The State of Online Retailing' . R. Outlook 1999. As the company builds a customer base and develops a relationship with customers.2 .THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. 21 .
the brand begins to take hold.org Study in collaboration with The Boston Consulting Group. such as 'viral' marketing. When a company reaches 'critical mass'. This. and "network marketing".unless the leader makes a serious mistake. By the time a company has reached critical mass. New marketing strategies. Nov 1998 50 . the larger customer base provides online companies with more leverage in attracting and negotiating with key content. with its e-mail lists. "leveraging the media".A Shop. 5. with a minimal budget and maximum effect. Larger sites can also negotiate better supplier discounts or product placement fees. larger sites can leverage more customer advocates to reduce customer acquisition costs. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. the value of the company rises exponentially with market share. viral marketing is an effective tool in getting a message out fast. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. its growth curve relative to a new entrant is somewhat daunting. Given the connectivity of the Internet among customers. in turn. as it carries the implied endorsement from a friend. makes communication tighter. As a result. chat rooms and bulletin boards. This is the logic behind some of the extraordinary valuations of Internet companies. 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. It is often referred to as "word-of-mouth". As a result. commerce and distribution partners.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. Word-of-mouth is a particularly powerful medium. as once a strong lead is established. and the cost of switching to an alternative brand becomes quite high. and word-of-mouth even more effective. web sites. the leader will pick up momentum and will stand to gain an insurmountable advantage . or until a competitor finds a way to change the game again. The Internet. "creating a buzz".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. leading to the exponential expansion of the customer base. creating a potentially exponential growth (like a virus) in the message's visibility and effect. 34 'The State of Online Retailing' . An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. This snowball effect favours first-movers.
seven days a week. Today they are the largest e-mail provider in the world with over 40 million users. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. eGroups and Geocities (both recently acquired by Yahoo!). they will have a powerful viral opportunity at their disposal. and they created a subscriber base more rapidly than any company in history.com The classic example of viral marketing is Hotmail. In its first 1. 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). and the message spreads organically.com. saying: • "Get Your Private. Free Email at http://www. and then propel the message even further to their own ever-increasing circles of friends and associates.5 years. Hotmail acquired over 12 million subscribers. whether for communications or community. Hotmail. sign up for their own free e-mail.1 The Case of Hotmail. but Hotmail signs up more than 150.000 subscribers every day.000 subscribers within a few years of launch. Geocities enables people to create personal websites for free. where they have never carried out any promotional activities.hotmail.5. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. • Each new user becomes a company salesperson. they tell all their 51 . friends to visit it.com was one of the first free web-based e-mail services. When a user builds a website. a company now owned by Microsoft. A traditional print publication would hope to reach 100. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. In fact.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. and in doing so spread the word for Geocities. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.
A PricewaterhouseCoopers Report. Place). 2000 37 Rigby. Promotion. 'The Value of Online Customer Loyalty and How You Can Capture it'.3). The customers' ability to access and display information rapidly is extremely important36... Chu. and 66% of people who start a 'shopping basket' fail to complete the transaction37. C. Kearney White Paper. In fact. . Zook. March 17.. Price.com) 52 .THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . FIGURE 5. J.. S. Sites that are difficult to use can cause frustration. 30% of potential customers leave sites because they cannot find what they are looking for. 2000 (www. In essence.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.An A.An A. R. T. & Hancock.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 2000 'The E-business Technology Forecast' . Baveja. D. Kearney White Paper. S.bain. Rastogi....3 . making customers 'click off' to another site. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.A Mainspring Communication Report in collaboration with Bain & Co. As 35 36 'Creating a High-Impact Digital Customer Experience' . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. T.
T. expert insights. which can enhance the company's value proposition. whereas a slow response time and site downtime will have a significant negative impact. 1999 (www. FIGURE 5.. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. ease-of-navigation. online companies have the opportunity to provide rich. CIO Magazine.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.businessweek. 29th October 1999 (www. as cited in Business Week.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. October 29. up-to-date information. February 2000 Issue 53 . ease-of-use.com) Davenport.4. 'Sticky Business'.businessweek. as cited in Business Week Magazine.4 . and fast response times are among the most important factors in establishing web brand loyalty38.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. and a wide range of products. With almost infinite display space and inventory capability.
On the other hand.. Other content includes community-generated content.forrester. it needs a critical mass of members42. share information and access a wide range of services. Often.. 'Real Profits from Virtual Communities' .g. G. 31% of online consumers use the Internet for obtaining product information. These sites allow members to interact with one another. 1995. iVillage and Geocities). It fosters a sense of belonging41 among the members. Customisation creates the feeling of a one-to-one relationship. A. Online sites can track a customer's purchase history and modify its service accordingly. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. 'Building Stronger Brands through Online Communities' . which is facilitated by a combination of factors (Figure 5. Customisation Customisation involves tailoring the presentation of a web-site to individuals. & Hagel. 40 41 Morrisette. Community Online communities are emerging as new gathering places for consumers with similar interests (e. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. 3. & Bluestein. No. K. as well as through loyalty programmes that provide targeted benefits. An important contribution of these communities is that they provide members with a medium to communicate with each other.5). Members can interact in chat rooms. visitors should not be engulfed with too much information. W.A Forrester Research Report. and advertising (if it is relevant and useful). J. 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).com) McWilliam.. Spring 2000 42 Armstrong.. demographics. For a community to work. or prior transactions. which enhances the user's online experience. based on profile information. and organise live events. An online community offers a compelling way to entice customers back to a site. and nearly 20% use it for post-sales support. Clemmer.Sloan Management Review. S. use bulletin boards.. . 1999 (www. even if they purchase offline. According to Forrester Research40.The McKinsey Quarterly. 54 .
S. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Journal of Consumer Research. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity..5 . Site-tosite connectivity focuses on connecting users to other relevant sites. and can create emotional loyalty. when membership in the brand's community becomes an end in itself43. A.. pp. C..6). 55 . Mulcahy. they opt to input the URL (Internet address .. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.com) directly into the browser and access the site immediately.brand-name.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. Once customers know of a site. allowing customers to deepen their experience with a brand and build more personal connection. as well as attracting traffic from other sites. M. 43 Fournier.A PricewaterhouseCoopers Study.www. March 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. O'Donnell & Gupta. 'Making Real Sense of Virtual Communities' . 343-373. 1999 Communities enhance the speed and value of information sharing. This is similar to placing offline stores in high traffic areas. Companies can provide a selection of related links that complement the site's purpose and value proposition.
Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. events and subjects of interest to the customer. live chat. In addition. serves this purpose and helps to build customer loyalty. customer support at all stages of the interaction is important. as well as informing and reminding customers of special offers.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. news up-dates.com) 56 . customer care activities can involve providing a variety of payment. 45 MarketWatch. which provide targeted and unique (customised) benefits to the customer. and online surveys. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. Customer Care Online customers often require assistance and reassurance. delivery and return options. activities. (www.marketwatch. and FAQ pages (Frequently Asked Questions) to solve problems. as well as features such as gift-wrapping. Customers share security and privacy concerns. online chat. Therefore. The development of loyalty programmes. Other tools such as bookmarking the page can also facilitate connectivity. Communication can be tailored to specific user interests and should allow for two-way interaction. It is important in building relationships. toll-free telephone numbers.6 . and can be provided through e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.
Learn and Relate. 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 ’ . modified to take into account of the interactive dynamics of the Internet. 'Marketing to the Digital Consumer'. FIGURE 5. links from directory searches (Connectivity).. because there is no physical presence. Adoption).4 . Therefore.7. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.Awareness. 1996. The mechanisms to communicate range from traditional media (TV. Engage.. McQuade. Evaluation. Newspapers.Attract. R.mckinseyquarterly. Waitman.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. McKinsey Quarterly.8.. billboards. & Zeisser. This model consists of five stages . Interest. visibility relies solely on Communication. including affiliate programmes with other websites. Trial. No. Magazines. etc. Figure 3.7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. The company must build awareness and communicate its value proposition to its target customers. 180-183 (www. e-mail notifications and banner advertisements. and bring people to the site for the first time. This is more difficult online than offline.) to online tools. Retain.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..2. pp. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. S. M. A.
3 2.WEBSITE PROMOTION METHODS .4 4.3 Source: Forrester Research.3 3.4 3. The key factors at this stage are Convenience combined with interesting Content.4 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace. 3.6 3.1 3. multiplied by the expected rate of transactions. affiliate programmes.3) is useful to ensure that a company develops a distinct and consistent brand identity.com) The most effective methods are direct e-mail.8 . Engage With the multitude of choice available on the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.5 3. Attracting customers is only the first step in building online brands. it is important to quickly engage consumers' interest before they move on.Economist Intelligence Unit 2000 (www. 58 . public relations and television advertising.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 . 3.7 4. Companies then need to engage customers to obtain their interest and participation. discounted over the expected duration of the brand-customer relationship.ebusinessforum. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. as cited in 'Targeting Consumers via the Internet' .5) 2. Fig.0 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.2 4.8 4. Kapferer's Brand Prism (Ch.
Content is the basic driver of retaining customers on a site. • The Internet supports brand-building activities where there is a need to build a relationship. a company can create value by providing a personalised online experience.who they are and why they shop online. Certain product categories. Building up a knowledge database on each customer . and must be continuously updated due to the multiple visit nature of customers.g. 59 . do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. such as groceries and convenience goods. The objective is to increase the conversion rate (% of browsers converted into buyers). TV.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. and forge closer relationships than any offline operator. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. attitudes and behaviour). Communities and Customisation are other sticky applications. Learn The Internet provides extensive opportunities to learn about consumers (demographics. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. 5. can create value for the customer and help build the brand-customer relationship. if used properly. This helps to create a customer base that spends more time and money at a site. The initial site registration provides an early opportunity to obtain useful information.9). and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. Radio). and what additional products and services are they interested in provides companies with valuable information which.
A.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.2. the experience is the brand. 60 . smell).from the promises made in the value proposition..mckinseyquarterly. In order to create "apostles". due to high delivery and transaction costs (relative to the value of the product). it is critical for companies to build relationships and foster brand loyalty.. companies must provide a satisfying end-to-end customer experience . 1996. The interactive brand-building process involves attracting.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.9 . Waitman. pp. These case studies provide a practical insight into how companies are building their online brands.9 CONCLUSION On the Internet... it is not economically feasible to sell certain products. 5. touch. M. providing further added value. The next chapter analyses the brand-building efforts of seven companies. and the need to stimulate the other senses (taste. However. McKinsey Quarterly. R. McQuade. No.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. • Brand-building favours products that can be sold online. to its delivery to the customer. 180-183 (www. engaging and retaining customers. and as the relationship develops. & Zeisser. S. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. Given the high acquisition costs of online customers. the interaction provides the ability for companies to learn from their customers and relate. 'Marketing to the Digital Consumer'. especially in small quantities.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
greater convenience. 6.Amazon.com) . ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). and the most widely recognised e-commerce brand name in the US (with 60% awareness48). France. 47 48 Interbrand (www.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. including: increased selection. Amazon has been able to differentiate itself from other online competitors. and is one of the few Internet brands that is recognised all over the world. combined with its levels of customisation and customer service. Amazon provides increased added value on several dimensions. innovation and delivering on its promises.com's success stems from its compelling value proposition.interbrand. it is the most visited e-commerce website in America.COM 6. 1999 49 'Amazon's Amazing Ambition' . more information.com has become synonymous with e-commerce. In addition. 2000 (www. and has sales of over $2 billion.com and Yahoo!. CDnow. Germany and Japan49.2 Value Proposition Amazon.1 INTRODUCTION This chapter provides an analysis of seven companies. Amazon serves over 23 million customers from 160 countries. Figure 6. and other key factors that have contributed to its success (or failure).2. Barnesandnoble.com. Boo. February 26. Amazon.com . Amazon. Not a River' . Amazon has cultivated a reputation for excellence.com. and higher levels of customisation and service than the traditional shopping experience allows. discounted prices.com launched with a mission to use the Internet to transform book buying into a fast. and enjoyable experience. and one of the top two or three in Britain. the sources of added value (using the 7Cs Framework). Each case is presented in the same format including. easy. and has equity investments in several e-tailers. In July 1995. The cases are presented in the following sequence . its brand-building strategy (how it generates traffic). a company overview.economist.1 Company Overview Amazon. 6.Goldman Sachs Report.1 outlines Amazon's timeline and major milestones. Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. It is the 57th most valuable brand in the world47. its value proposition. In addition. eBay.com.com) 62 .2. November 11.2 CASE STUDY: AMAZON.It's an Ocean.The Economist. 'Amazon. Through its provision of a one-stop shopping experience.see Appendix A.
workplaces.Amazon launches lawn & patio store .com 63 . Software.com Amazon announces further plans to expand distribution network to meet rapid growth. universities. a tools and equipment store for professional tool users and woodworkers .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. featuring thousands of bestseller lists for hometowns.Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. 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.toolcrib.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.Amazon enters into a strategic partnership with Drugstore.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .New home living store from living.com enters European book market Microsoft signs Amazon.com and NextCard launch co-branded credit card . such as the Palm VII organiser. and minority investment in.com invests in wineshopper.000 members Amazon.com announce investment and strategic alliance .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. West Virginia.Amazon and eziba.Amazon announces investment in kozmo.com Amazon acquires Back to Basics Toys to add to Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com opens its virtual doors at amazon.Amazon launches www. and more Amazon launches "Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.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 is founded by Jeff Bezos Amazon.com.com Anywhere. to meet rapid growth .com via the new wireless pocket PC . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.Amazon opens a customer service centre in Huntington." providing shopping from wireless devices.com to create a "home living" store at amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.amazon. Amazon.Amazon and online car-buying service Greenlight.com Announce Strategic Investment and Promotional Agreement .Customers can shop at Amazon.Amazon launches new kitchen store . Ashford.com .Amazon opens customer service centre in The Hague .COM .com .Amazon enters strategic alliance with living.sothebys.com Auctions and zShops provide new tools to its merchant community .com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com .amazon.Amazon.com Electronics and Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.TIMELINE AND MAJOR MILESTONES Amazon.Amazon surpasses 20 million cumulative customer accounts .com Amazon introduces "Purchase CirclesTM". Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon.Amazon launches health and beauty store .com Amazon invests in Pets.com .
com Anywhere to support access from wireless devices (i. Amazon has added other features for shopping convenience. interviews with authors.2.1.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. logically structured. discussion boards. expert reviews. encourage repeat visits and drive higher conversion rates.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. recommendations. customer testimonials. The site is easy-to-use. live or study.Figure 6. offering multiple paths to a given book or product.e. gift reminders. such as the Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and quick-to-load pages Over time. Content Amazon provides content on several levels. including book jacket images.3 Sources of Value .OVERVIEW OF AMAZON. easy-to-use. and Amazon. This is an example of 64 . Palm VII PDA device). and customer Purchase CirclesTM. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. wish lists.com All Product search (searches the entire web). gift click. FIGURE 6. book summaries.1 . downloads quickly and services visitors adequately . Customer purchase circles allow shoppers to cross-reference similarities such as where people work. the 1-ClickTM express checkout. mobile phones.
Amazon introduced Amazon. while driving up repeat purchases and cross-selling opportunities. from the customer recognition at the point of interface (Figure 6. More recently. and has developed an Associates Programme. converting them into a storefront for Amazon. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. and customer interaction. to the proactive notification of new items of interest. and Customisation Amazon provides customised features and services. creates a competitive advantage. These are discussed in more detail in Section 6. linking it to a large number of other sites. By leveraging its vast customer base. This customer-centricity is evident in all Amazon's activities. Amazon creates one-to-one relationships with its customers. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.2. Amazon's content is not reproducible by competition.4.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. real-time shipping and backorder notices. Connectivity Amazon has built relationships with high traffic web portals and sites.thereby increasing conversion rates.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 . and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. which helps to build loyalty and create switching costs. In doing so. 65 . therefore.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. from its shopping basket applications which lists the estimated time to delivery reliably. Community Amazon has also added a community element to the purchasing process.
000 by August 2000. and customers are also e-mailed when the items are shipped from the warehouse. they are subsequently confirmed by e-mail. 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. Amazon offered Associates referral fees of up to 15%. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. helped generate publicity and stories about the company in publications such as The Wall Street Journal. it began to advertise in print media and online . 66 .4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. attracting member sites of all sizes. Business Week. enticing them to return to the site and purchase repeatedly. Instead of paying directly for this exposure. The Financial Times.2. which only applied to sales that resulted from the initial click-through.000 members. 6. In the second half of 1996. In July 1996. Eyes and Editors. Once orders are placed. New Yorker and The Economist. In addition. increasing to over 500. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.a move that along with the novelty of its business model and the newness of the Internet.2). Newsweek. This enabled Amazon to reach more customer segments and niches (Figure 6. and by 1999 it had over 200.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Through the first half of 1996. two personalised services.com hot-link and offer specific books of interest to their visitors. As a result of all these factors (7Cs). The Associates Programme has been phenomenally successful. and not subsequent purchases.
Amazon closed deals with five of the six most visited Internet addresses. These multimillion-dollar.2 .de became the local provider for Yahoo! Germany and Amazon.co. Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. free eCards and gift certificates (which customers send to friends. In addition. People tend to tell their friends about it.amazon. multiyear deals involve exclusive book-selling rights. was also linked to Amazon's entry into Europe Amazon.customers are encouraged to provide e-mail addresses of friends. each friend is sent a $5 Amazon. Excite.com's website (www.com. thereby promoting Amazon. including: America Online (AOL).allows customers to create a personal profile (with pictures) on the site. mutual links. Netscape's Netcenter and NetSearch. 67 .com About Me . spreading the word for Amazon.com Refer-A-Friend .AMAZON. In return. and Geocities. Prodigy and @home.COM'S ASSOCIATES PROGRAMME Source: Amazon. the customer acquisition cost is only £10.com gift certificate (in your name).com). The Yahoo! agreement. Amazon also established agreements with AltaVista. From July 1997 to December 1998. • Amazon. Therefore. Amazon has used viral marketing techniques through customer reviews.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. and primary button placement on web portal search engines. and you are given a $5 gift certificate for each customer you provide.uk the local provider for Yahoo! UK & Ireland. Interesting viral initiatives include: • Amazon.
interesting content. with the explosion of websites. which accounts for 66% of Amazon's sales.com Really Matter?' . Magazines. C. so we didn't have to do much advertising. 'Does Amazon. Amazon is building customer loyalty and encouraging repeat business. "we had a world-class site the day we launched . 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. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. That's not possible anymore50". buying patterns and viewing habits. Amazon has been able to achieve average customer acquisition costs of less than $20 . By relating to customer needs. As the relationship develops. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. Purchase CirclesTM). According to Jeff Bezos. billboards.g. Amazon maintains a database of customer preferences.. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories.Forbes. And we relied on word-of-mouth to build awareness. newspapers) to generate awareness.but it was only a tenth as good as the site we have now. With this combination of promotional methods. clear presentation. 50 Willis. community feel (as discussed previously). Amazon's proven online merchandise selling techniques including easy-to-use search options. Amazon has also incorporated traditional offline media (TV. 1998 68 .significantly lower than other online companies. however. 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. Once customers are attracted to the site. April 6. and improved customisation and recommendations (e.
further enhancing their value proposition.com Way'. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Amazon is constantly seeking new ways of improving its offering. and according to Jeff Bezos. 51 52 Hazleton. Our secret is that we have not been competitor obsessed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.. Amazon has been able to build a strong brand at relatively low cost. We have been customer obsessed.2. thereby diluting the value of its association with books. and our goal is to increase that gap51".. 'Business the Amazon. We were blessed with a two-year head start. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. and its safe and secure delivery. "Online. which within six months propelled Amazon to one of the leading online music retailers.com obsessed52". Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). management realised that Amazon had become more associated with other core brand values .a wide range of choice. developing customer service centres and expanding its distribution network to support high levels of service.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. 1999 69 . As such. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. As such. However. because he wanted it to be short. to capture the spirit of the site. In addition. (Oxford: Capstone Publishing). In addition. "we're not a stationary target. Nevertheless. memorable. Amazon unveiled a music store. Saunders. good value. R. establishing Amazon as the leading online bookseller with a large customer base. This has helped them attract customers and move up the learning curve quickly. the balance of power shifts away from the company and goes towards the customer. According to Jeff Bezos. Amazon was able to secure partnerships and alliances with key players. Amazon received criticism for expanding its product line. July 1998. Amazon's understanding of its brand identity has been a critical factor. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. According to Jeff Bezos. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. Success. establishing a reputation for excellence and fulfilment. while our competitors have been Amazon. and to convey its vast size and offering. due to the hype and coverage it was given. L. in June 1998. For example.
the drain on their cash resources will push them towards bankruptcy. However. they have cultivated a reputation for excellence and fulfilment. stem from its compelling value proposition and high quality end-to-end customer experience. Amazon is claiming to be making profits on its books and music categories. perhaps trying to defend its view that losses taken to build market share can reap profits later. Amazon delivers on its promises of a wide inventory of products. which is critical on the Internet. and to sustain a positive image and satisfactory end-to-end experience. In doing so. 53 Warner.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement.Brandweek. but over time they become more and more associated with a particular thing and harder to stretch53". Amazon's intense focus on customer needs and continual innovation. and investors lose confidence. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. have kept it ahead. if it continues to incur losses. October 12. Volume Discounter' . Amazon has continuously invested in customer service. This customer-centricity is a key hallmark of a successful Internet brand. however. as the true value of a brand lies in its sustainability. Nevertheless. This raises a critical issue. distribution centres and upgrading the site. The key factors driving its growth and high retention rates. speedy delivery and good value.2. 6. they're stretchable and pliant.. not necessarily a reality. When they're young. with new products and value added content.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. Although Amazon has successfully built a strong brand and loyal customer base. 'Marketers of the Year: Jeff Bezos. Quality is only measurable in the minds of visitors to the site. 1998 70 . it has not recorded any profits to date. Amazon also recognised that service quality is a perception. secure payment procedures. B.
COM .com) . magazines..Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.TIMELINE AND MAJOR MILESTONES . etc.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . 40% owned by Bertelsmann AG. is one of the best known traditional booksellers in the United States.Barnesandnoble.3 CASE STUDY: BARNESANDNOBLE. prints & posters and related products. Barnesandnoble. contacts.) established by its parent company. TABLE 6.2 1997 January BARNESANDNOBLE.com was able to 'hit the ground running'.Announces distribution relationship with New York Times September .com).com and Microsoft announce that they will create an eBook superstore .Acquires minority stake in NotHarvard. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. and is the second largest online bookseller (after Amazon.2. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). Inc. Barnes & Noble Inc.com is approximately 40% owned by Barnes & Noble. Barnes & Noble Inc. and 20% owned by the public.3. Dalton bookstores (located in shopping malls). rare. Barnesandnoble. Barnesandnoble. book databases.com . as it could capitalise on the infrastructure and back-end operations (warehouses.Barnesandnoble.com launched its website (www.com's timeline and major milestones is outlined in Figure 6.Barnes & Noble.1 Company Overview Barnesandnoble.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . Barnesandnoble. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. Besides books.Offers same day delivery in Manhatten . However.Barnes & Noble went online at AOL May .Launches Internet Radio .com announces strategic relationship with Palm Computing .COM 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. music. Launched in 1997. Currently.barnesandnoble. all front-end operations (marketing.Launches Affiliate Network December .Launches Video Store 71 .Acquires equity stake in Mightwords .com is the fourth largest e-commerce retailer54.Barnes & Noble University opens registration for free online courses .com provides other online categories offering software.Launches BNTV . promotion) between the online store and the retail stores have been kept separate.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. and 470 B.
and easy-to-navigate site Categories focus on books. etc.com or www. good prices.OVERVIEW OF BARNESANDNOBLE.com) 72 . publisher.com let customers sign up to receive email reviews and announcements of new titles.com and barnesandnoble. the features are practically identical.com's and takes a bit longer to download.3 Sources of Value . Both offer detailed bibliographic information. FIGURE 6. easy and secure ordering. In addition. including title. in terms of the 7Cs framework.com's virtual storefront is graphically richer than Amazon.2 Value Proposition Barnesandnoble.com's website (www. however.bn. edition. as well as an extended searchable catalogue of millions of out-of-print.3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. previously-owned and rare books. Barnes & Noble planned to dominate online book-selling. the company created a site very similar to Amazon.barnesandnoble. Both Amazon. music New Initiatives Barnesandnoble.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.com offers customers an easy-to-search catalogue of virtually every book currently in print. rich editorial content and a community experience. Both have expanded their convenience to offer 54 Media Metrix. 6. they offer customers fast delivery. as cited on Barnesandnoble.com's (Figure 6.COM'S WEBSITE Simple. author. but instead of developing an outstanding interface to its inventory.3 . software.3). logically structured.3.
com in return for a commission on any purchases that they originated . Both offer 'associate programmes' that let other websites link to their sites.com's $1. December 17. prevent cannibalisation of its existing business. 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 . 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . while Amazon. Lycos. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). it lags behind first-mover Amazon. however. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Both try to foster a community of readers by letting customers post reviews online. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. Barnesandnoble. and avoid charging sales tax in states where it has stores56.com's 1999 revenues were $202.com had over 17 million.com has created a high quality website and customer experience. while Amazon.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.64 billion. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. They have developed an affiliate programme that links sites to Barnesandnoble. Barnesandnoble.com closed 1999 with 4 million customers. has yet to leverage its strong brand in cyberspace.4 Brand-Building Strategy Barnesandnoble.The Wall Street Journal. Yahoo!. Although. However. Barnesandnoble. As of February 2000. These initiatives have generated traffic to the site.3. Webcrawler. compared to Amazon.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.000 affiliates in its referral network. and both are expanding globally.com's market capitalisation was $251 million.6 million. and Barnes & Noble Inc.1 billion. reasons for this are explained in the next section. this programme had more than 300.com was valued at $21. The 6.a replica of Amazon's Associates Programme. Both offer customisation that permits users to personalise the experience. Barnesandnoble. Netscape and Microsoft Network. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Instead.
and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.. Barnesandnoble.com.com. In return. and Internet terminals in the bookstores. as Bertelsmann's book division includes partners such as Random House. Barnesandnoble.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet).com.com has lost access to valuable customers.com. when it struck reciprocal marketing deals with Expedia. To signal its intentions.com has begun to acknowledge some of these mistakes. At any given point there are hundreds of customers browsing their aisles looking for something to read. and leverage its real-world presence.com. or deliver books directly from the retailers. Recent Initiatives Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through. Under the seven separate agreements. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com. • In addition. Barnesandnoble.com. By failing to leverage it. Planetrx. and in recent months has aggressively sought new ways to differentiate itself. in-store displays. content and distribution opportunities.com should have aggressively cross-promoted their stores through advertising.com. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. each partner offers a similar link to Barnesandnoble. • Barnesandnoble.com created a new cross-marketing genre in February 2000. and a same-day delivery option in Manhattan.com is its association with Barnes & Noble Inc.com and VitaminShoppe. 74 . LLbean. in the attempt to gain traction and build momentum.com. Jcrew. • Barnesandnoble. Petsmart. 1-800Flowers. Barnesandnoble. Unfortunately. and the tangibility that this provides. people began using their stores as a physical showcase for online rivals such as Amazon.com.com has changed its name to Barnes & Noble. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. provides access to valuable resources.com's link to Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble.com's key differentiator from Amazon. and its BMG Entertainment division includes music giants Arista Records and RCA Records. with a similar discount. Barnesandnoble. Barnes & Noble University (a free online education resource).
a wellestablished Internet brand. customer relationships and offline presence . and its lack of innovation (by copying Amazon.Forbes. feature for feature) has failed to differentiate Barnesandnoble. by portraying them as slow and clumsy in comparison to the more nimble Amazon.Not a Best Seller' . The company failed to leverage its established brand.6 Conclusion Although Barnesandnoble. it also caused a major setback. and allowed them to offer stock options as compensation and achieve a high market capitalisation. The Press have also contributed. significant market momentum. it has not been able to establish itself as the leading online bookseller. 57 'Bn.3. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. even if that means eating into their existing sales. Barnesandnoble. 2000 (www. August 4.its key differentiating factors. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.com. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com's experience is instructive.com's late start in 1997.com . Barnesandnoble. meant that Amazon.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.com and has given them the image of a second rate 'me too' brand. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. otherwise they risk losing out to other online competitors. In addition.forbes.com) 75 .com has been able to create a high impact and high-quality customer experience. and was further up the growth curve.
it's about range and convenience. Boo. as cited in 'Boo. due to its poor performance and inability to build a customer base.COM . sack 20% of staff and sell stock at 40% discount .First sign of problems .com provided a range of 18 fashion and footwear brands including DKNY. and included high profile investors such as Bernard Arnault.Appeals for $30 million more funding .com opens its virtual doors' .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". TABLE 6.4 CASE STUDY: BOO.Announces it has only 500. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).fails and appoints KPMG as liquidator.Marketing Week. as well as create a kid's site.2 Value Proposition According to Kajsa Leander. and was billed as one of Europe's hottest e-commerce ventures. Company is put up for sale.they redesign site. Morgan. Boo.com entered six markets: US. Puma. founder and Chief Marketing Officer of Boo. "our marketing thrust is not based on prices.Raises funding of $125 million .TIMELINE AND MAJOR MILESTONES . and eventually debut in Asia.1 Company Overview Founded in 1999. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Boo. arranged through J. Italy and Spain within a few months. They intended to add France.COM 6. England.com. not the limited range you might get at most London fashion shops58". However. 58 Kajsa Leander.com had set the record as Europe's best-funded European Internet Start-up.3 1999 Mid year BOO. P. CMO of Boo. June 10.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. receiving $125 million of funding.Site goes live . Everlast.Multi-million pound advertising campaign created by BMP DDB .000 unique visitors .com. If a clothing brand is on the Boo site. Sweden. Germany and Denmark. 1999 76 . November 2000 January February May 6. and the resulting loss of investors' confidence.4. 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. among others. it means all that brand's product line is available.4. On going live.com collapsed through lack of funds. Finland. and Converse. within six months Boo. After a high profile launch.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
com) 80 .CDnow and Time Inc. announce marketing alliance .000 sound samples. as well as music reviews.5 CASE STUDY: CDNOW 6.Launches merged CDnow/N2K site .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and was the first site to offer the sale of music downloads and custom CDs. and they aim to "make every visit to the site. by twin brothers Jason and Matt Olim. It has a customer base of 4 million people. T. This unprecedented degree of access to music and information is the core of CDnow's value proposition. 62 Hoffman. pp.Merges with Columbia Records .Partnership program with Geffen Records . customisation and a wealth of information and content to help in the purchase decision.TIMELINE AND MAJOR MILESTONES . convenience.000 people.Harvard Business Review. good prices. former arch rival . and an average daily audience of over 800. & Novak.000 music-related products and 650. cover art.ten times the selection of a conventional bricks-and-mortar music store). and exclusive interviews and reviews from CDnow's award-winning editorial staff.Merges with N2K. CDnow was acquired by Bertelsmann AG. whether for browsing or buying. $18. On 19th July 2000.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. and one of the most popular shopping sites on the Internet62. $22.179-188 63 CDnow website (www. CDnow is also driving the digital distribution of music.Site goes live .. a valuable and rewarding experience"63. CDnow provides access to over 500. daily music news.5.Raises $10 million through private placement . guides to music genres. TABLE 6.1 Company Overview Founded in 1994.5.cdnow. CDnow is the leading online music store. features.000 music related items .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. 'How to Acquire Customers on the Web' . May-June 2000.5 million distribution deal with Lycos Signs three-year. D.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .2 Value Proposition CDnow offers consumers a high degree of choice (over 500.Forges distribution partnership with Yahoo! $65.
5. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). FIGURE 6. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. and has secured rights to music reviews. to make it easier for customers to explore new music and make informed purchasing decisions. artists biographies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.3 Sources of Value . The whole process of searching for albums or music titles to the actual purchase is simple . easy-tonavigate. CDnow has leveraged the reputation of their brands to reinforce its own.5 . CDnow has cultivated similar relationships with MTV.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. cover art. 81 .. For example.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. etc. By partnering with well-known content providers.Figure 6.
Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. and Geocities as well as more focused specialist sites. Community CDnow has not exploited the potential of creating a community feel. 82 . Customer Care CDnow's site can be viewed in English. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site .such as AOL. they will be reluctant to visit another online store and enter the information again. By customising the store to meets customers' needs. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. It also creates switching costs.search engines. and key news and entertainment sites . for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. allowing them to respond to detailed customer queries. Other features such as My CDnow's Wish List. French. CDnow developed the Fast Forward Rewards programme. CDnow hired a group of multilingual customer service representatives to handle questions. 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. an incentive programme that rewards customers and encourages them to connect back to the site. it gives them a sense of ownership and a compelling reason for them to return. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . Due to International interest. allow customers to keep track of albums to buy in the future. Spanish. Whenever a customer makes a purchase they earn Fast Forward Reward points. Excite. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). German. Italian.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Internet access providers. Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. Portuguese. Dutch and Japanese. In addition. which accumulate and can be spent on a variety of music-related products.
covering the entire music spectrum. • Traditional offline Media . CDnow is doing everything it can to ensure that the next time that 6. It is a revenue-sharing arrangement. • Alliances and Partnerships . These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. CDnow extended its distribution reach to include more than 250.5. music-oriented websites. as well as more-targeted music-related sites like Billboard. and radio spots on the Howard Stern Show to build a cult following among radio listeners. and spot radio to build reach. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce.CDnow's advertisements are targeted to some degree. Spin.000 small.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. 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. By keeping the brand in front of the customer in this way. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account.They have also stuck exclusive alliances with AOL. Yahoo!. customers buy music. this is their "most successful customer building programme64". and Variety. According to Jason Olim. 83 . CDnow's initiatives include: • Banner Ads . • Affiliate Programme . Excite and other powerful Internet content and service providers. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. they buy from CDnow.Through the Cosmic Credit Programme. print advertising is music-related publications such as Rolling Stone.
1998: $56.hsny.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . It is constantly adding new functionality to the site and has been innovative in its offering . 6. April 28.CDnow made public relations a high priority brand-building tool. The company continually pushed for new distribution partnerships to widen its sphere of influence. as a way to fuel very lucrative word of mouth.Hampel & Stefanides (www. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998 . word-of-mouth accounts for the lion's share of CDnow's customers.com/cdnow. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.they were the first site to offer the sale of music downloads and custom CDs. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. Public relations efforts helped to generate word of mouth and influence sales. This has contributed to a 225% increase in sales (1997: $17.Press Release. The story of how CDnow was founded in a basement. with repeat customers accounting for more than 50% of sales. resulting in increased conversion rates. it is in this context that the large investments in advertising and partnerships make sense.5.cdnow.(www. and scaled it awareness-building efforts. CDnow's promotion strategies have attracted high levels of traffic. and to increases in the customer base of more than 30% quarter-to-quarter.4 million.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.4 million).com) 65 'Pioneering in Cyberspace' . both in the online and offline worlds. It is a powerful source of acquiring new customers at low cost. with 44% of sales coming from new customers65.As for many successful online retailers.htm) 84 . • Word-of-Mouth . In fact. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.
Building an Internet Business at Breakneck Speed". According to Jason Olim. They also provide the customer with an order number and customer support contact information should they have questions. 66 Jason Olim. CDnow has developed a relationship with Valley Records. P.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. to ensure quick delivery to customers. This.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. The development of an extensive affiliate network.5. 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. (Boston: Harvard Business School Press). It was able to create a strong value proposition and high quality customer experience. CEO of CDnow. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. P. and ensure that it exploits its early-mover advantage and keeps ahead of competition. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. "your brand is not just what you say . as cited in Carpenter. combined with the high impact customer experience created . This gives the customer the impression that the order is being handled quickly. "eBrands . as cited in Carpenter. (Boston: Harvard Business School Press). a record distributor that handles the majority of CDnow's fulfilment logistics.89 67 Jason Olim. "eBrands . 2000 p. 2000 p. 6. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns.Building an Internet Business at Breakneck Speed".BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. and innovative.from how CDnow has personalised its product offering to its capable customer service team .75 85 .it's what you do66". CEO of CDnow.
300 categories.6. eBay is not about auctions. and eBay receives a transaction fee that ranges from 1. or the payment for the item . transportation and other overhead costs. collectable shows. 1st October 1999 86 .removing the need for inventory. as cited in 'eBay . This is a new market .A Harvard Business School Case Study. "at its core.the closest thing in the offline world are trading forums such as classified ads. (A)' . 24 hour a day.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay effectively created a new business model never before possible . According to Meg Whitman. the eBay community has grown to include more than 10 million registered users.Company Overview' . with emphasis being placed on its unique community feel and culture. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. extensive selection and geographical reach.com) 70 'Meg Whitman at eBay Inc. Auctions make it fun. shipping.com) 'eBay . CEO of eBay. payment) between themselves.eBay website (www. from collectibles and antiques to electronics and toys.Company Overview' . Auctions represent a platform. Individuals use eBay to buy and sell items in more than 4.2 Value Proposition eBay offers consumers an efficient. There are over half a million new auctions. flea markets and auctions. garage sales.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.6.000 new items joining the "for sale" list every 24 hours69. 6.ebay. The buyer and the seller work out the logistics of the transport (e.eBay website (www.g.25% to 5% of the final sale price on any item sold. Since its launch in September 1995. global trading place for buying and selling personal items in an entertaining auction format.efficient one-to-one trading in an auction format. and eBay never takes possession of the item being sold. with the number of unique daily visitors setting a record of 1. People perceive the auction format to offer better prices. and eBay provides added value through its convenience. and 450.782 million in January 200068. Sellers pay a nominal fee for placing an item up for sale. Auctions are an enabler.6 CASE STUDY: EBAY 6.
This raises challenges in how to control and influence the customer experience.eBay launches local websites in Baltimore & Washington DC.com to provide automotive service for eBay Users .eBay and First Auction sign a partnership agreement . .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. Nashville.6. Las Vegas.eBay launches 'About Me' feature.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. they try to influence customer behaviour by encouraging them to adopt certain values.eBay IPOed raising $58 million .businessweek. . and Salt Lake City .eBay acquires Butterfield & Butterfield. Unlike the previous case studies discussed. Since eBay cannot control how one person treats another.eBay and Ultimatebid.The 7Cs Framework According to Meg Whitman. So brand-building job No.eBay introduces eBay Magazine in collaboration with Krause Publications. and Collecting Just About Anything and eBay for Dummies. Boston.com) 87 .Com form alliance - 6. emphasis is placed on community development and customer care. And you only get word-of-mouth if you have a great customer experience. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . and raises $700 million .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Compaq Computer Corporation and eBay form a strategic U.eBay teams up with Carclub. as they rarely deal directly with the company. and its online trading site (Up4Sale) .eBay acquires alando. Providence. Norfolk & Virginia Beach.de .America Online and eBay announce strategic marketing alliance . allowing users to create personal homepages . and in terms of the '7Cs'.eBay expands strategic relationship with Netscape . 21st May 1999 (www.eBay goes wireless with Palm VII connected organiser . the eBay customer experience is based on how their customers deal with each other.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . co-marketing relationship.eBay acquires Blackthorne Software GO. Dallas & Fort Worth. and two books -. Seattle & Tacoma.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 .3 Sources of Value .eBay goes live . The Official eBay Guide to Buying. Milwaukee.eBay acquires Jump Inc.Germany's leading online person-to-person trading site . "the first brand-building strategy that we have is to have a great customer experience.S. 1 is have a great customer experience71". Selling. Still the vast majority of our new users come from word-of-mouth.eBay and AOL launch co-branded 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 acquires Kruse International .eBay goes live in Australia .Launches "My eBay!" to customise the online auction experience .Business Week.
Content Content is primarily user generated through the items listed for sale. easy-to-use online service (Figure 6. they have continually invested in system capacity. eBay's site has to process thousands of live bids simultaneously. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. increasing the risk of outages. eBay had a 'wake up call' when the website crashed for 8 hours. 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 has also expanded to accommodate access through wireless devices for added convenience. and since.6). and adds to the experience and the discovery of the auction process. Nevertheless.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. which is much more demanding on the system. angering hundreds of thousands of eBay users. 88 . This contributes to the community feel.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. topically arranged. FIGURE 6. Other content includes the banner ads.6 . which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. categorically arranged.
for the people". which is posted to the site. and is considered by many users as one of the best features on the website. eBay Salt Lake City) have helped them restore that community feel. has enabled eBay to foster a strong sense of community on its site. the culture has come under strain due to the company's rapid growth from a small community into a "big city". a "giving-board" for charitable donations to user-identified causes. After a sale. by the people. Community eBay attributes much of its success to a strong sense of community among its users. working together and helping each other offline. Whitman describes eBay's community culture as a site "of the people. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. For many 'eBayers' . and in doing so. eBay's community has a distinct culture based on trust. and share information. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. It is a place where people can meet with similar interests. eBay offers its users category-specific chat rooms. which is then added to the partner's trading profile. a monthly newsletter. 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). discuss topics they care about. eBay Boston.g.eBay represents more than just a place to buy and sell goods. respect.as eBay users refer to themselves . and there are several reports of eBay users vacationing together. autonomy. In addition. However. 89 . the community spirit and personal relationships also transcend the online experience. This has created a self-regulating mechanism that encourages good behaviour. To encourage this sense of community. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. empowerment and equality. Recent initiatives such as the development of local websites in major US cities (e. e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. bulletin boards.
eBay employed a "remote" customer support model. geographically dispersed users as customer support representatives. These people worked from their homes.g. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. and the Safe Harbour group. the largest of which was with AOL. 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. in which the company hired active. fraud. During the first two years. its user community. 90 . Communication eBay maintains close communication with its members. and willingness to empower.the Community Watch group. shill bidding) and helping to resolve user-to-user conflicts. eBay also engaged in marketing partnerships. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. which was dedicated to monitoring the site for illegal and infringing activities. This was later expanded to include customer support representatives who worked out of eBay's headquarters. eBay's approach to customer care has evolved over time. eBay has invested in customer care and support to ensure people conduct safe transactions. but they have other partnerships with over 150 websites of varying scales. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. links to high traffic sites. eBay was able to cost-effectively offer 24x7 customer support early on. This also reinforced the company's respect for. and respected members of its own user community to serve as customer support representatives. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. and the introduction of two specialised customer support groups . As such. By using its own enthusiastic. which was dedicated to investigating misuses of the system (e. answering e-mails and responding to questions posted on the site's bulletin boards. Customer Care eBay controls neither end of the transaction. knowledgeable.
The AOL partnership was one of the largest strategic partnerships on the Internet . Through this combination of its advertising efforts and targeted promotions. Doll Collector) and appearance in trade shows. Recent promotional initiatives include its new publication. In 1998.3 million in advertising. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. $75 million joint marketing alliance and development deal.g. who tended to be serious collectors. As a result. eBay decided that it would not enter into major portal advertising deals in the short term. and highlight opportunities created by e-commerce. eBay transformed from a pure online play into a 'clicks-and-mortar' company. Based on this. These new publications appeal to the collecting spirit. they spent $12. The Official eBay Guide to Buying. Mary Beth's Beanie World. as a result of the high quality experience it provides.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.6.a four-year. representing about 40% of revenues. 91 . eBay Magazine. Early on. but they have other partnerships with over 150 websites of varying scales. and Collecting Just About Anything and eBay for Dummies. and facilitate the spread of positive wordof-mouth. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). they decided to target their marketing efforts on these heavy users. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. eBay has been able to attract a large customer base. Selling. provide a wealth of information about the 'ins and outs' of trading on eBay. and maintained the same ratio for 1999. eBay has since expanded its promotion efforts and engaged in marketing partnerships. the largest of which was with AOL. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. 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. 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.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and two books.
6. which has established eBay above other online auction communities. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.contributing to its strong lead and competitive advantage. And while we have to move very. their ability to create a new market using Internet technology. This has become part of the eBay culture. the Personal Shopper and the eBay Life Newsletter.Business Week. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. such as the Feedback Form.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'.com) 92 . and according to research carried out by eBay. very fast. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. and their first-mover advantage. which in turn attracts more sellers . however. "the devil in so much of this is in the detail.the ultimate network effect . have been instrumental in building a 'quality' customer base.businessweek. and according to Meg Whitman.5 Conclusion eBay's compelling value proposition. 21st May 1999 (www. I think you are not well served by moving incredibly rapidly and not doing things well72". This is achieved by listening to their community (learning) and developing new improved products and services (relating). Their focus on heavy users and targeted promotions. which were all ideas of eBay users. have been key factors that have contributed to the success of the brand. eBay has also faced difficult challenges in scaling the organisation fast enough. as they could not opt for a 'go slow' strategy. However. As a result. eBay attracts a broader selection of buyers. 6.
gapinc. GapKids. 6.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com) .$100 million. In late 1997. and provides useful insight into how traditional brands can leverage their strength online. and are still relatively small compared to Gap's $9 billion in annual sales.gap. Gap's online sales tripled in 1998 alone.1 Company Overview Gap opened its first store in San Francisco in 1969.see Appendix A Gap. 1999 76 Jeanne Jackson. Gap started selling items online . announce multi-year partnership.COM . from shirts to accessories and hard-to-find sizes. This success is largely due to their simple formula . from jeans and T-shirts to khakis and jackets. According to Jeanne Jackson. to provide customers with greater convenience and options. head of Gap Online.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. October 8. 'Clicks and Mortar at Gap.com' ."to deliver style.com' .7 CASE STUDY: GAP. and analysts estimate that sales in 1999 amounted to $50 . Currently.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. surpasses $9 billion in net sales and increase earnings by 54% over previous year. letting customers access the Gap brands.800 stores in the US. America Online (AOL) and Gap Inc.7.com. Gap. TABLE 6. Canada. "this is about being clicks-and-mortar. In addition. however. Inc.babygap. the growth prospects are enormous.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.com and www. 1999 93 . October 8. Gap online exploits the accessibility and convenience of the Internet. service and value to everyone74". as cited in Lee.interbrand. The Gap offers a balance of modern and seasonal styles of clothing. 73 74 Interbrand (www. Gap Inc.Business Week.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. and today it is the 29th most valuable brand in the world73.7. and BabyGap.'s website (www.Business Week. standard styles are well suited to online shopping. as cited in Lee. 'Clicks and Mortar at Gap. Its reach extends across more than 1. L. up from $20 million in 199875. whether in the store or online76". UK.com is an example of successful crossover marketing. L. California GapKids opens its first store BabyGap is born Gap opens its online store at www.com/about_us. online sales are only available to US customers.gapkids.htm) 75 Jeanne Jackson. and Gap online provides access to the full range of items at Gap. Germany and Japan.COM 6.2 Value Proposition Gap's simple.
Executive Vice President of Global Marketing. The site also offers sharp graphics. April 18. reinforcing its brand identity. Visiting the gap. from the blue and white colour scheme to the easy-toshop format .. Michael McCadden.7 . Gap Online primarily focuses on Convenience.The 7Cs Framework In terms of the 7Cs framework.very easy...com.making visual references to its offline roots... The Observer. making navigation even faster. and Customer Care.com store one immediately notices the consistency between the online and retail stores.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. feel and design of the site is consistent with the bricks-and-mortar stores. the extensive integration of Gap's online and offline activities are clearly evident. 1998 94 . Content.3 Sources of Value . very efficient"77.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 'Mind the Gap'. Unlike Barnesandnoble..7. D. making it convenient. This personality is reinforced online through the simple structure and layout. Simple. FIGURE 6.. describes the company's brand personality as "direct and straightforward. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. but provides customers with the option of viewing text-only. and easy-to-use..
Gap. and customers can view their latest TV adverts for buying inspiration. standard styles are well suited to online clothes shopping.com's content consists of detailed information on its full range of products. as well as sample all of the latest shades of fingernail polish on a virtual hand. The Gap site connects to other Gap online stores including GapKids and BabyGap. customers can return goods purchased online to their neighbourhood store. Gap's simple. which would not be possible in the store. twice a month.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Gap communicates with customers through customised e-mails. and customers can register to get e-mail reminders of upcoming holidays and birthdays. Gap has also developed an affiliate programme. Gap made a decision to charge sales tax on online sales. In addition. However. and had recently established marketing deals with AOL and CDnow. Unlike the case of Boo. promoting its specials and including links directly to items on Gap's website. 95 . The site's virtual style feature also allows customers to mix-and-match combinations of clothing. and BabyGap. and goods bought online get returned at the same rate as store purchases . without causing complications. once customers are registered online.com allows customers to track the status of online purchases and provides contact information on the nearest store. allowing shoppers to contrast different cuts and styles. In order to integrate its offline and online operations and logistics. By doing so. Gap. GapKids. Gap does not provide any community features on its site.com also provides a Gift Central feature which offers gift suggestion from Gap.as most Gap online shoppers have a good idea of how Gap clothes fit.com.
however. Gap has also supplemented this with online promotions: • In August 1999. Most of Gap's online traffic is generated by leveraging its physical presence. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap.7.com has been able to piggy-back on The Gap's offline advertisements (in TV.Extensive Integration Gap.com has also created an affiliate programme encouraging sites to establish links to gap. These efforts doubled the size of Gap's e-mail database. Gap secured a 3-year commerce and marketing agreement with AOL. In addition. • They offer Online discounts and promotions such as the ShopCard. • Gap.com.com has links with CDnow to cross promote websites. on counter cards. In certain high traffic Gap and GapKids stores. they send the customer a $20 Gap ShopCard. which can be used towards future purchases. billboards. • Gap.ship".gap. by displaying the URL (www. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Magazines.com) in store windows with the slogan "surf. which displays "Shop online at www. providing a useful way to directly reach customers. either online or in stores. Gap has held in-store campaigns to get customers to submit their e-mail addresses. on shopping bags and even on the cash register. 96 . it is fully leveraging its offline presence to build awareness. or to refer shoppers to Gap's website. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. whereby for every $100 a customer spends at Gap Online. To convert walk-in shoppers to cybershoppers. etc.com in return for a 5% commission on every sale referred through the site.4 Brand-Building Strategy .com" on the display screens between transactions.shop.gap. by offering a 10% discount and free shipping on their first online purchase.) that also promote the online store.
The Internet.7. Gap had a significant advantage over pure online players in attracting customers and building critical mass. and can also provide access to different customer segments who may not usually buy the products at all . Gap has been able to significantly strengthen their brand-customer relationship. provides existing customers with added value through the convenience of purchasing online. By aggressively marketing both the stores and the website. while reaping the benefits of low customer acquisition costs and extended reach. With their brand awareness and network of retail outlets.com is an example of successful crossover marketing.thereby increasing the company's reach.5 Conclusion Gap. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. 97 . on the other hand. whereas established companies. thereby reinforcing its brand identity. and allowing each to leverage the strengths of the other. Pure online players have to invest heavily in logistics. have already established the back-end operations and can use them as the cornerstone of their online business. such as Gap.
CEO of Yahoo!.8.com) 98 .com) .2 Value Proposition At the core of Yahoo!'s value proposition. Yahoo! offers a range of supporting services that add value. and the number of websites continues to explode. lies the directory . The Stock' .Business Week. 6. As the first online navigational guide to the web.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The Strategy. As such. advertising. According to Timothy Koogle. 78 79 Interbrand (www. The company's global web network includes 23 world properties outside the US. all in a single location. The concept exploded (through word-of-mouth) and in less than six months.interbrand. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.8.D students at Stanford University.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.see Appendix A 'Yahoo! . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. two Ph. 1998 (www.The Company. September 7.1 Company Overview In April 1994. from e-mail services to stock quotes and much more. and is one of the few Internet companies to turn a profit early in the development of the Internet.businessweek. There's nothing in the real world to compare to that79".8 CASE STUDY: YAHOO! 6. the amount of information. the site was receiving 1 million hits per day. who started an online guide as a way to keep track of their personal interests on the Internet. household and business user reach. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. Yahoo! has since morphed from an ordinary search service into a global Internet communications. Yahoo! was founded by David Filo and Jerry Yang. Yahoo! is a leading guide in terms of traffic.
to allow access. mobiles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. More recently.The 7Cs Framework Convenience Central to Yahoo!'s success.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. . 99 .Yahoo! acquires Arthas. and unveils Yahoo! Digital Introduces Bill Payment services .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 .Yahoo! acquires eGroups .e.000 shares at $13. to provide web-based services to PalmTM handheld computers . TVs. Palm computers).8).com.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. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.7 YAHOO! .8 million IPO (2.Yahoo! unveils Yahoo! Finance Vision . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings..3 Sources of Value .Yahoo! Shopping launches personalised shopping service 6.8.com allowing them to offer person-person payment solutions . Their goal is not to list everything under the sun. Yahoo! extended its convenience through its Yahoo! Everywhere service. 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.600.Yahoo! Launches Business-to-Business Marketplace .TIMELINE AND MAJOR MILESTONES 1994 April . regardless of platform (i.Yahoo! forms agreements with Palm Inc.Receives $1 million in venture capital funding from Sequoia Capital $33.Site goes live September .
from stocks and sports results to weather and air fares. and has been at the heart of Yahoo!'s growth and development. and more importantly. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. the partner. the end-user. Their thrust has been to provide valuable content to customers. Yahoo! has increased customer loyalty and retention rates.9). ranging from daily news and weather reports to road maps and books. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. 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. well structured.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. By tailoring the information to users' preferences.8 . easy-touse.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. while providing partners access to a large customer base. They have formed multiple alliances and partnerships with leading online companies such as Amazon. and is similar to a custom tailored newspaper (Figure 6.com and CDnow. This creates a win-win situation as its satisfies Yahoo!. 100 .
Connectivity Connectivity is Yahoo!'s core product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. In 1999. and is driving Yahoo!'s multiple partnerships and alliances. fax. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and many-to-many. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. or to make it their home page. telephone and even traditional mail.9 . In addition. 101 . Yahoo! spends more on customer support than most companies. and encourages them to return frequently. one-to-many. reinforcing the brandcustomer relationship. and contributing to their reputation as a quality service provider. where groups of people with shared interests can communicate through chat. Yahoo! acquired GeoCities. message boards. and e-mail. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. to provide its customer base with access to useful links and content. and plans to incorporate other features such as online chat to facilitate communications. It keeps customers on the site for longer periods.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and the nature of the navigation business. Customer Care Yahoo! responds to customer inquiries via e-mail. 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 through communications via email. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?".4 Brand-Building Strategy Yahoo! is a marketing machine. Yahoo! maintains close contact with customers. 80 'Web Survey Shows Yahoo! Tops'. and an inherent friendliness. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. Yahoo! would be one of the first sites that they visited. (www. by building a recognised brand name. TV commercials and radio spots during drive time. and it formed a critical link in Yahoo!'s brandbuilding strategy. Yahoo!'s brand-building success starts with its name. and its implications of a good time. This was especially important. In 1996. therefore.intelliquest. Yahoo! avoided characterising itself as a technology-oriented company. Yahoo! aggressively promoted the site through public relations. which conveyed the brand's irreverent personality. and according to Intelliquest80. At the time this was considered a breakthrough. Yahoo! extended beyond this to use traditional offline media. Intelliquest. 6.com) 102 .a sense of irreverence. These near surfers represented (and still do) a large and fast growing group and. as experience surfers tend to be loyal to their search engine. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes .people who are not yet online but are likely to use the Internet in the near future. As a result. Yahoo! also encourages customers to e-mail ideas and feedback. While Internet companies were targeting existing Internet users through the use of online promotion methods. 82% of Internet users and 23% of people intending to go online.8. recognise the name Yahoo!. an approachable nature. Their strategy was to target "near surfers" . Given the unease with which the average consumer approaches technology.
81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . services and contests with well known brands such as Ben & Jerry's. 1999. organisers. According to Karen Edwards. it's too late. new services and customised features highlight their ability to relate to customers' needs. They also teamed up with publisher Ziff-Davis Co. Although this seems like a shotgun approach. May 3.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . In addition.yahoo. ER) and Hollywood movies. snowboards. and 76% turned to Yahoo! before visiting another search engine or navigational site. We need to be one step ahead in order to have a better service than our competition82". it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test .higher than all other services81. the research shows that 73% of Yahoo! users bookmark the service .Advertising Age. including backpacks. Once customers access the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. as well as TV shows (Ally McBeal. s4 103 . According to a recent study. 1997 (www. They even have a barter deal with the San Francisco 49ers. Their innovation. to create Yahoo! Internet Life. Yahoo! has managed to cultivate high brand loyalty.it must reinforce the image of the company as 'a service that is fun. which has been instrumental in establishing Yahoo! as a household name. August 26. customers quickly discover its value and through a high quality experience (7Cs). Yahoo! adopted 'guerrilla marketing' techniques . Visa and MCI. sailboats.Yahoo! Press Release. VP-Brand Marketing. stating that "if we wait to hear about it in the news. breath mints. p. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. a monthly magazine guide to what's new on the web and it has co-branded products.with its name being plastered on everything. Yahoo! has paid little for this exposure. T-shirts. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. parachutes. a little wacky and inviting'. and yo-yos.
As a result of all these factors. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. Yahoo! has built a strong brand. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. if a user cannot find what it is searching for. VPBrand Marketing of Yahoo!.com. have created a distinct brand identity that differentiates the brand and appeals to its target market. HotBot. from its convenient and logical structure and display of information. As the first online navigational guide to the web. Yahoo! has benefited from a first-mover advantage.Advertising Age. These relationships have provided end-users with added-value. s4 104 . To maintain its lead. 6. and has cultivated a reputation for excellence. Yahoo! points them to its competitors by including links to AltaVista. their innovative promotional and guerrilla marketing techniques.8. that have set it apart from the pack. 1999. to its simple design. they have carried out extensive partnering. with a large customer base and high levels of customer loyalty. In addition. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". and its openness (for example.6 Conclusion Yahoo! is one of the most successful brands on the Internet. p. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . and first to go mainstream by advertising its name using traditional media.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. its excellent customer service. GoTo. alliances and acquisitions to provide added value services to their customers. while also associating Yahoo! with well known brands. They have maintained that lead through the creation of a high quality end-to-end customer experience. May 3. while attracting new customers. first to turn around an annual profit. its choice of partners. and other search engines at the bottom of its search results page). Yahoo! has invested relentlessly in new services and marketing programmes. first to go public.8. In addition.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
• Strong Partnerships and Strategic Alliances Rather than doing everything on their own. to distinguish themselves from competitors. these companies must have an inherent understanding of their brand identity and core values. and exclusive alliances can lock out competitors from valuable content or online real estate. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. leading brands have focused on building strong partnerships and alliances. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. integrated customer acquisition strategies. content. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. and by partnering with well-known brands. The most successful partnerships are symbiotic matches. to maintain consistency. as well as determine how far the brand can be meaningfully stretched to other products and market segments. before it fractures. variety. a company can leverage the partner's brand and reputation to reinforce its own.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. these companies are creating even stronger value propositions. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. In addition. 108 . By distinguishing their offering and focusing on unique sources of value-added. but also provide added value to the brand community. Alliances and partnerships play an important role in achieving speed and momentum. particularly to secure content and widen reach to new customer segments and niches. brands are harder for competitors to emulate. As a result. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. offering customers the best in quality. ranging from online methods to traditional offline media. whereby each party benefits from the other's expertise or skills. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. while ultimately benefiting the end-customers. and convenience.
these well-publicised brands also took off. As Internet penetration exploded. and differentiating it from other brands. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. Many strong online brands were also early-movers on the Internet. the innovations are the result of the company's ability to data mine its vast database of customer information. The challenge then lies in keeping up the momentum. and develop a detailed understanding of their customers' needs. It locks up important content and distribution partnerships. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. and benefited from additional hype. are leveraging this customer knowledge (learning) to nurture relationships (relate). these innovations are difficult for competitors to reproduce. the company benefits from the buzz. through past transactions and solicited input. and are continuously adding new services and functionality to their sites. In many cases. and it can acquire customers while it is still inexpensive to do so. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. These brands are accumulating knowledge about customers. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. and traffic. by providing better services. 109 . giving the brand an edge. 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 it aligns itself with the most influential venture capital sources. By leveraging unique customer information. By getting to market early. A first-mover advantage is an important asset for an online brand. customisation and customer care. and by focusing on customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. that comes with innovation. and extensive word-of-mouth due to its novelty.
value remains (and always will) the basic building block for every successful brand.factors that clearly differentiate them from pure players.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. while reaping the benefits of lower customer acquisition costs and extended reach.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. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. the concepts. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. 110 . 7. Brands and brand-building tools tend to be associated with consumer markets. Yet while everything is being turned upside down. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. they are equally important in business markets. an in-depth analysis. Therefore. with the emergence of wireless access and new platforms. however. there has been a limited time horizon to evaluate the durability of Internet brands. Nevertheless. building relationships and satisfying needs. Having established a strategic perspective on building online brands. clicks-andmortar brands are providing customers with true added-value. ongoing research would be necessary to build on the findings of this dissertation. established customer relationships. would represent an exciting opportunity for further research. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. They have an established brand. Nevertheless. tools and key factors outlined in this dissertation are also applicable to business markets. As such. They possess critical assets that give them an advantage over pure online start-ups. and a physical presence (tangibility) . but at the same time. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. The Internet has radically changed the business and competitive environments. In addition. In doing so. Through extensive and seamless integration. established fulfilment systems and infrastructure. one component remains unchanged . drawing on several case studies from business markets. expand the brand experience to meet customers' expectations in the online world.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
329 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .804 2.361 1.043 8.052 6.422 1.231 12.634 1.781 33.932 4.423 2.143 2.048 20.527 3.Interbrand's Ranking of the Top 60 Brands (www.510 8.313 2.interbrand.603 5.595 17.596 3.654 43.830 14.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.464 3.147 9.792 3.806 2.895 2.231 24.281 11.845 56.909 7.155 7.761 1.806 11.193 112 .197 32.550 12.894 14.021 26.262 1.076 3.681 2.568 3.181 21.602 4.101 9.985 2.502 33.643 3.404 4.184 1.648 1.283 4.132 15.225 11.319 1.781 17.766 14.275 30.310 11.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.694 17.
commit and deploy resources. and reorganise as appropriate. Internet companies must be able to move at warp-speed. (Harper & Row). The fundamental difference is that traditional companies have focused on 'managing for efficiency'. 1982 113 . As such. * Peters. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. constantly innovate. activities. and the emergence of a knowledgebased economy. global competition. respond to competitive and market dynamics. T. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B .The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. They must move quickly to capture new opportunities.. & Waterman. showing how they are interrelated. the informal management style and the constant strategy re-calibration. 'In Search of Excellence'. all these dimensions must change accordingly. R. customer empowerment. It is critical that all these dimensions come together and are re-enforcing. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. and structures are aligned differently. As a result. with the fast pace of technological change. whereas entrepreneurial Internet companies must focus on 'managing for change'. all their operations. and as the business environment changes. However.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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