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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
13 13 14 15 16 18 19 20 22 22 23
Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
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
2 Value Proposition 6.7.7 18.104.22.168 Other Factors that Contribute to their Brand Leadership 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.1 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 .2 Value Proposition 6.4 Brand-Building Strategy 6.5 Conclusion Case Study: Gap.The 7Cs Framework 6.6 Conclusion Case Study: eBay 6.com 6.com 6.1 Company Overview 6.5 Conclusion Case Study: CDnow 6.1.The 7Cs Framework 22.214.171.124 Value Proposition 6.3 Sources of Value .5 Conclusion Case Study: Yahoo! 126.96.36.199 Brand-Building Strategy 6.4 Brand-Building Strategy 6.5 Other Factors That Contribute to their Brand Leadership 6.6 6.4.The Failure of Boo.8.1 Company Overview 6.8 Case Study: Boo.1 Company Overview 6.3 Sources of Value .2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.4.Extensive Integration 6.6.The 7Cs Framework 188.8.131.52 Sources of Value .184.108.40.206 Value Proposition 6.4 Brand-Building Strategy 6.com 6.5.4 6.3 Sources of Value .220.127.116.11 Value Proposition 6.5.6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 Company Overview 6.8.3 Sources of Value .6.1 Company Overview 6.4 Brand-Building Strategy .7.1 7.The 7Cs Framework 18.104.22.168 6.
7 Figure 2.7 Figure 5.4 Figure 6.6 Figure 4.8 Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.4 Figure 2.2 Figure 3.1 Figure 6.9 Figure 6.2 Figure 2.3 Figure 2.2 Figure 2.5 Figure 6.2 Figure 4.8 Figure 6.3 Figure 3.1 Figure 1.5 Figure 5.2 Figure 6.4 Figure 4.6 Figure 6.1 Figure 4.com's Website Amazon.3 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 2.com's Website Overview of Boo.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .3 Figure 6.4 Figure 5.com's Associates Programme Overview of BarnesandNoble.1 Figure 3.1 Figure 5.2 Figure 5.6 Figure 5.5 Figure 4.4 Figure 4.7 Figure 5.8 Figure 5.7 Figure 6.6 Figure 2.5 Figure 2.3 Figure 4.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones BarnesandNoble.1 Table 6.com .com .5 Table 6.Timeline and Major Milestones eBay .com .1 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones CDnow .4 Table 6.3 Table 6.Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones Boo.6 Table 6.2 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
that these Internet start-ups have achieved.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.an explosion that is also a harbinger of how business will operate in the future. the Internet is changing fundamentals about customers. aggressive Internet start-ups have emerged.5 million book titles).com) 7 .g.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. McKinsey Analysis (www. Amazon. and business models revamped. and is triggering the need for new brand-building strategies and tools. products and services reconfigured.9 2. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. creating strong brands that are putting established brands at risk. FIGURE 1.1 3. Supply chains are being rethought.2 3. whereas it has taken decades for traditional companies to achieve the client base.0 1. As such.9 3. relationships.com's range of 4.1 . Internet companies such as Yahoo!. Figure 1. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. America Online (AOL) and eBay have been able to build powerful brands in a few years.com Source: Securities and Exchange Commission Filings. The Internet also represents a fundamental shift in how buyers and sellers interact. interaction and relationship building. This is creating new challenges and opportunities.com1 Amazon. Amazon. as they face each other through an electronic connection.5 2. there has been an explosion in the online world .1 OVERVIEW Over the past few years. while providing new tools for promotion. As such. It is empowering customers with more options and more information to make informed decisions. service and brands.mckinseyquarterly. In the midst of this.com noble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com.YEARS TO REACH $100 MILLION IN SALES 6 5. customer affiliation and level of sales.
pp. 'Internet Communities .66 8 . building awareness.. & Elstrom. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. who are essentially intangible. that extends the brand-customer relationship beyond a single transaction. companies lack a coherent framework and concrete methods to build an online brand. D. Given the tremendous clutter in today's e-commerce marketplace. p. and the high cost of acquiring online customers2. and Novak. For pure online players. As such. rather than drifting from site to site3.. as the need to build brand loyalty online is reaching a peak. Volume 78 Issue 2. & Overdorf.April 2000.Forget Surfers. Harvard Business Review. Browder. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. Therefore. 66-76 Hoffman. In light of this. May-June 2000 Hof. 'How to Acquire Customers on the Web'. found that 57% of Internet users go to the same sites over and over again. March . there is a growing recognition that traditional methods are no longer suited to this new interactive environment. May 5. this dissertation seeks to explore how companies should go about building a successful Internet brand and to identify the critical factors that must be considered. Harvard Business Review. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. 1997. C. A Business Week / Harris poll. P.. A New Class of Netizen is Settling Right In' Business Week. P. turning browsers into buyers. R. 'Meeting the Challenge of Disruptive Change'. L. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. T. However. S.. attracting traffic or 'eyeballs'. 1 2 3 Christensen.. brands are even more critical as customers have little to go on other than a recognised brand..
FIGURE 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. tools and strategies to build brands on the Internet.2 .RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 .2.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. 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. • To explore how the Internet is changing the brand-building environment. 1. and to identify new sources of value. This is based on the outcome of the primary research (in-depth case studies).
this also highlights the true value of the dissertation.com and Gap. 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. While there is no attempt. eBay and Yahoo!). strategy and economics. These are further refined using the insight obtained through the case studies. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. marketing. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. to provide an in-depth analysis of the psychological and social dimensions of brands. Consequently. the literature review draws on leading academic thinking in more established areas such as brand management.com). and factors that contribute to a brand's success. Hypothesis (Framework): This is based on the literature review and secondary data.com). certain key factors are highlighted in their relevance to the dissertation. The combination of cases provides a useful and practical insight into brand-building issues and problems. there is more work in popular rather than academic literature. The absence of academic literature on Internet branding posed a major obstacle. Conclusion: Discusses the key findings and areas for further research. nor desire. CDnow. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. relationship management. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms.com. as well as a recent Internet failure (Boo. 10 . and is used to provide insight into some of the factors that contribute to the development of successful brands. however.
highlighting some key factors that have contributed to brand success. Chapter 6 examines the brand-building efforts of seven companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and introduces the core concepts that form the backbone of the dissertation. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. summarises the key findings. provides an analysis of leading academic literature in relation to branding. This chapter sets the context within which online brands must be built. Chapter 4 provides an overview of the Internet and its defining characteristics. Chapter 2.4 STRUCTURE The next chapter. Chapter 7. The final chapter. The limitations of the Internet in terms of brand-building are also discussed. by outlining the impact of the Internet on the business and competitive environment. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. and outlines the opportunities for further research. 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. their purpose and value are discussed. as well as the interactive approach to attracting customers and building loyalty. The nature of brands. Chapter 3 explores how brands have traditionally been built. 11 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
2. if properly managed. 74 4 Clifton.).a brand is: "a mixture of tangible and intangible attributes. A.2 WHAT IS A BRAND? According to Rita Clifton. which. The concept of brand equity is outlined. E. whether online or offline. and the importance of customer satisfaction and brand loyalty. Branding is about creating 'value'.see Figure 2. and for the company.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. These concepts are central to brands and brand-building. unravelled to reveal the nature of brands and their reason for existence. creates influence and generates value4" This definition truly captures the essence of a brand.1 . (London: Macmillan Press Ltd. p. but extends further to encompass added values derived from factors such as the brand-customer relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. (New York: Free Press). and to companies. 'Building Strong Brands'. & Maughan.1.. and highlights the importance of brand management. and they form the backbone of this dissertation. CEO of Interbrand Newell and Sorrell . D. 2000. these layers are Brands are made up of many layers and dimensions. vii 13 . p. both to customers. The chapter proceeds to describe the influence of brands on the buying process. 'The Future of Brands'.a leading specialist brand consultancy firm . 1996. the brand's emotional benefits and its self-expressive benefits . R. FIGURE 2. explaining the value of brands. This value stems from the products and services that companies create and bring to the market. symbolised in a trademark. both for customers.1 INTRODUCTION In this chapter.
As such.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. T. The space a brand occupies inside a customer's head can create a 'mental' patent. It is a company's promise to consistently deliver a specific set of features. the basic brand. For some companies.2. a 'reputation'.2 . p.3 THE LAYERS OF A BRAND Brands are made up of four layers . 'Marketing success through differentiation .the core product or service. benefits.a 'relationship'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . a 'set of expectations'. yet ultimately reside as consumer perceptions. brands are their most valuable asset. FIGURE 2. Brands are richly endowed entities. which grows out of the cumulative memory and the experiences customers have of products or services.86 14 . 1980. 2. and services to customers. They start life as ideas. the augmented brand and the potential brand ..of anything'. and a 'promise'. Harvard Business Review.Figure 2. making their way into planning and strategy documents. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. January-February.
. even when the alternatives are substantially cheaper or more readily available (e. not the products it sells . or a combination of them. sign.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. 5 Kotler. such as in retailing. and because they most readily come to mind when consumers are asked to recall brands. 'Marketing Management . 15 . In fact. quick delivery) that enhance the customer’s total purchasing and use experience. Implementation.com are examples. this is the case with all Internet companies. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. this should support the offering's performance and differentiate the brand from those of competitors. Southwest Airlines and Amazon. information. term. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. preferring things they can see and touch. Planning. Coca-Cola. P. Kodak.Analysis. Service Brands (intangible) are much less numerous than their product counter parts.g. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. (Europe: Prentice Hall) 1996.g. Essentially. most products and services cannot survive on functionality alone as this is usually matched in time. However. They are the historical core of branding because they are the most prevalent. with supplementary products and services (e. actually sell products. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. These products and services add value and make the offering much more difficult for competitors to emulate. symbol. Levi's).The Gap stores. 2. The most common barrier to competition is building a brand. & Control'.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. 8th Ed. but the brand itself is the store. The Basic Brand The basic brand consists of the "name. or design. customers buy products to meet certain functional needs. Certain service brands. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising.
This can be triggered by internal or external stimuli (advertisements). two factors can intervene between the purchase intention and the purchase decision . (Europe: Prentice-Hall) 8th Ed. 1996. and Control'. Implementation.3). Consumers differ as to which product / service attributes they see as important. a consumer will be inclined to search for more information..5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. and the effect of selective perception.194 The process starts when the buyer recognises a need. and selective retention. and pay the most attention to the brands that will deliver the sought benefits. In the evaluation stage.Analysis. FIGURE 2. the consumer learns about competing brands.. These beliefs depend on their previous experiences with the brand. 16 .FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. p. 'Marketing Management . it is critical to understand what attributes consumers value. it is important to clarify customers' underlying buying behaviour and the buying process. P. Therefore. either through heightened attention or through an active information search.attitudes of others and unexpected situational factors (Figure 2. Through gathering information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.4). selective distortion. However. The buying process consists of five stages (Figure 2. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. Consumers develop a set of brand beliefs about the attributes of competing brands. Planning. Once aroused.3 .
advertising and communication. If perceived performance and quality exceed their expectations then they are satisfied. word-of-mouth. somewhat satisfied. Customer satisfaction and loyalty are essential to creating successful brands. and a preference for recognised brands they can trust. customers make decisions purely on the basis of their expectations.the customer will be highly satisfied. Expensive purchases involve some risk taking. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. locking out potential competitors. and especially important when dealing with purchases made through the Internet. After a consumer has actually purchased the product or service. they will be dissatisfied and look for alternative brands in the future. A consumer's decision to modify. their negative attitude may influence the consumer's purchase intent or vice versa. These expectations are formed through a combination of past experiences. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. even delighted. or avoid a purchase decision is heavily influenced by perceived risk. Customers' expectations are particularly important when dealing with services. 17 . postpone. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. they will evaluate their level of satisfaction .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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. If performance falls below their expectations. as these services are intangible and therefore. or dissatisfied with the purchase decision. A consumer tries to deal with this by gathering information from friends.
customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.. E. Customers that are passionately or emotionally loyal are those that have built trust in a company. Nov-Dec 1995 Hart. C. T.. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney.Figure 2. At the opposite end of the satisfaction spectrum are "apostles" . 'Why Satisfied Customers Defect' . Trust is critical for a brand's success.5.Harvard Business Review. & Sasser.. 'Why Satisfied Customers Defect' .5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. p. D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. & Sasser. Spring 1999 18 .. 'Growing the Trust Relationship'. Marketing Management. Federal Express. Southwest Airlines and Xerox7. FIGURE 2..6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.Harvard Business Review. 91 Loyalty is derived when customers are continuously satisfied over time. and Johnson. E. Johnson & Johnson. This satisfaction encompasses the whole experience and not just a company's products or services. Hewlett-Packard. The customers at the bottom end of the scale are "terrorists" . T. M. Saturn. Nov-Dec 1995.those who actively attack the brand telling others not to buy from the company. 6 7 Jones. W. and believe that it will always act in their best interest.customers who are satisfied and loyal and talk favourably about the brand .
Firstly.Sloan Management Review. Spring 2000 19 . & Rogers.com. consistent orders Satisfied customers are the best advertisement . 1993 McWilliam. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. emotional loyalty is born out of a consumer's personal relationship with a brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent.g. 'The One to One Future'.. Harley-Davidson motorcycle clubs). 8 9 Peppers. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.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).they provide good word-of-mouth and are the best salespeople for the product / service 2. 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. D. In this way. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. There is also clear evidence of this on the Internet. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 'Building Stronger Brands through Online Communities' . Emotional loyalty can be also created through the formation of a strong user community around the brand. G.. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.
2. and understanding the needs and buying processes of the target market is essential. FIGURE 2.6 . pp.7). Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). FIGURE 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. there are brands that customers perceive as acceptable and would not resist buying.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. which goes well beyond the satisfaction of a specific need. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. However. 343-373. 20 .BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.. S. March 1998. whereby customers would be unwilling to substitute it with competitors' offers. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. a 'powerbrand' tends to have a high degree of brand loyalty.7 . Journal of Consumer Research. Beyond this. A stronger brand enjoys a high degree of brand preference over competing brands. there are brands that are unknown by most buyers.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.
BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. trademarks. 1991 21 . (New York: Free Press).. (New York: Free Press). The major brand assets are brand loyalty. D. According to David Aaker (1991).. 1991 10 Aaker. name awareness. The benefits of each are outlined in Figure 2. which is the value of the brand over and above its commodity value. 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". 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. perceived quality. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.Create Awareness .8. FIGURE 2. strong brand associations. D. and relationships with distributors and strategic partners.8 . and other assets such as patents.
to its logo. to make sense of the offer. and the number two twice the share of the number three12.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 its communication • Ethical . 158-170..To be sure of buying the best product in the category. G. May 1993.Typically a brand leader obtains twice the market share of the number two brand. brands perform several functions that add value and customer benefits: • Identification . The brand leader is the most profitable and all beyond number two are unprofitable13. N. 'Consumer Market Research Handbook'. P.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . Journal of Marketing Research.. 1992 Worcester.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. 11 12 Kapferer. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. Premium pricing increases revenue. the best performer for a particular purpose • Characterisation . J. & Downham. pp. in the following ways: • Brands.. R. • Brand Leverage . 1986 13 Golder. 'Strategic Brand Management'.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.. J.To have confirmation of your self-image or the image that you present to others • Continuity . (New York: Free Press). & Tellis.8.To be clearly seen. 22 .Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.To save time and energy through identical repurchasing and loyalty Guarantee . market share and profits . production and marketing..Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 3rd Ed.8. (London: McGraw Hill).Satisfaction linked to the attractiveness of the brand. to quickly identify sought after products • • Practicality .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . brand leaders can exploit their superiority in the market (e.Strong brands are more attractive to investors. When a company creates this type of customer preference and loyalty.Brand leaders usually have the financial strength to fend off competitors. Companies can maintain a brand while modifying the underlying product to account for new technology. and the characteristics of successful brands. In addition.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. the tools that are used. • Avenues for Growth . Potential competitors are usually reluctant to enter the market if existing brands satisfy customers.The product life cycle applies to products. but there remains an ongoing controversy about how accurate and meaningful these measures are. 23 . • The Brand Barrier . • Brand Loyalty and Beliefs .Companies with strong brands attract good recruits. in turn. The brand can also be used to penetrate new markets.g.Dominating a niche market is usually more profitable than being fifth in a large market.g. • Motivating Stakeholders . The next chapter describes the process of how brands are built. drives up share price and provides the basis for future growth. and Young & Rubicam have created complex formulas. Johnson & Johnson with Tylenol). it can build a strong market share. Coca-Cola “the real thing”). fashion or prevailing market conditions. 2. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. companies such as Interbrand (see Appendix A). In trying to estimate the monetary value of brands. maintain good price levels and generate strong cash flows. They also tend to elicit community and government support. This. not brands.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
and keep it turning. brand awareness. it should provide a satisfactory experience and lead to a willingness to buy again. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. which are created through advertising. and direct marketing.1. Once this has been established. To entice trial and repeat purchase requires triggering mechanisms. promotion. public relations. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. The major characteristics of successful brands are also reviewed. selling.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. confidence and brand equity are built. This is illustrated in Figure 3. highlighting important factors that contribute to the success of each step along the way.1 . 3. FIGURE 3.1 INTRODUCTION Building a strong brand is a complex task. the next step is to get customers to try the brand. If the offering is developed properly. This chapter spells out the traditional brandbuilding process.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.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 .
BRAND = P X I X AV These three characteristics are multiplicative rather than additive .3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. Similarly. In order to do this. The value proposition must be continuously re-evaluated to respond to changes in the marketplace.each is essential. a compelling value proposition is the combination of an effective product or service (P). a company must develop a strong understanding of who their potential customers are. it is impossible to build a successful brand. As such. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. 26 .2 .2). and added value (AV). what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. Without a good product or service.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. In this way. FIGURE 3. it will never attract a strong client base.a strong offer that a potential customer would find compelling and interesting. unless differentiation and awareness can be developed. a distinctive brand identity (I). the brand can elicit feelings of confidence that it is of higher quality than competitors'.
the pace of technical change. • User Associations .if a brand provides good service over time. as they are to be about satisfying basic physical and economic needs14. The large number of decisions. Coca-Cola. cosmetics and high-tech products. pp. P. For pharmaceuticals. 2nd Ed. 1986 27 . Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. 14 15 Doyle.. J. Lexington Books). Kellogg's) attached to a new product will transfer positive associations..1 Added Value Most buying decisions are Added value is at the heart of building successful brands. • Belief in Efficacy . these needs are as likely to be about satisfying self-actualisation or esteem needs.brands frequently acquire an image from the type of people who are seen as using them. Hewlett-Packard. Customers choose brands. which they perceive as meeting their needs. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. mean that buyers look for short cuts. 169 Jones. or to gain a sense of belonging.In many situations a strong company name (e. Brand values derive from five major sources15: • Experience of Use . Gillette. P. 1998. if customers have faith that a brand will work. providing confidence and incentive to trial. the number of competing alternatives and the large variety of advertising and selling messages. • Manufacturers' Name and Reputation . 'Marketing Management and Strategy'. layout and appearance of the brand can clearly affect preference by offering cues to quality. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. (Europe: Prentice-Hall). industry endorsements and newspaper editorials. it acquires added values of familiarity and proven reliability. faith in brand generates satisfaction in use. 'What's in a Name? Advertising and the Concept of Brands' (Lexington.in many cases. interests.g. values or wealth. Sony. it is more likely to work effectively for them. MA. which are additional to those based upon real performance. • Brand Appearance . influenced by brand values.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations.the design. In today's affluent society.3. People use brands to express their lifestyles.
which depends on how the target market perceives the brand. its personality and its image or self-projection . style or cultural differences from one country to another. and the relationship expressed (e. features. A company should seek to differentiate its brand through developing a distinctive identity.the fundamental or genetic code of the brand.g. Brand themes are the most flexible element and will tend to change with fashion. This may be different from the brand image. colour scheme. and advertising.3: • The Brand Core . prestige.g. glamour.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. (New York: The Free Press). which remains fixed over time. Themes include the physical appearance (logo.Figure 3.3. 1992 28 . etc. its reflection (e. however the brand style and core tend to be less flexible. press releases. type of spokesperson / customer image used to advertise the brand).the way the brand communicates through its advertising. 16 Kapferer. friendly). J. and visual appearance)..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.articulates the brand core in terms of the culture it conveys. • The Brand Style . Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . packaging. • The Brand Theme . 'Strategic Brand Management'. visual appearance.
structure and ease of use). advertising. its strengths and opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. 'Strategic Brand Management'. Finally. and through line and brand extensions.how far the brand can be meaningfully stretched to other products and market segments. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. 1992 The brand prism enables management to understand the brand. (New York: Free Press). Secondly. J. below-the-line activities.. It also facilitates consistency in the message being transmitted through presentation (e.3 .g. 29 .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. website design. understanding the brand's core and style helps set the perimeters of brand extensions .
Product and service features. 'Diffusion of Innovations'.often referred to as the '4Ps' . • Interest . colleagues and opinion leaders become important influences at this stage. strategy (partnerships and alliances).4 .The company has to create awareness of the brand. Advertising and PR are common tools for achieving awareness. (New York: Free Press).4. 17 Rogers.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. systems.79-86 30 . The value proposition must then be articulated in terms of the 'marketing mix' .. FIGURE 3.The McKinsey 7-S Framework).79-86 The Innovation-Adoption Model consists of: • Awareness . features and advantages. The value proposition must be communicated to entice customers to try the product / service. Before potential customers can buy a product / service.The customer is satisfied and decides to make regular use of the product / service. deliver and reinforce this value proposition (see Appendix B . it should lead to satisfaction and re-purchase. skills. and its products / services. E. they must learn about it.Customers consider whether the product / service will meet their particular needs. If the offering is developed properly. Promotion and Place (distribution strategy).INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. 1962. Personal sources such as word-of-mouth from friends. This learning is called the adoption process17 . • Adoption . pp. management style.Figure 3.Customers need to be stimulated to seek information about the brand's uses. 1962. 'Diffusion of Innovations'. Price.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. the company must ensure that it develops the appropriate structure. (New York: Free Press). E. • Evaluation . culture and staff needed to support..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. • Trial . and the product / service's perceived performance. pp.
In this way.. This focuses on establishing a longterm. 'Marketing Services: Competing Through Quality'. Internet linkages.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. companies can increase buyers' satisfaction. multi-transaction relationship. Over time.136-142 31 .to move customers through the adoption process. This is often referred to as Customer Relationship Management (CRM). 1991. pp.g. but enhanced customer interaction through relationship building. Through building relationships with customers. allowing companies to communicate regularly with their customers and customise their interaction. while strengthening the position and value of the brand.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. companies can increase the value of each customer.advertising. making them less likely to switch to a competitor. 18 Berry. & loyalty / discount cards. 3. software) to help customers interact with the company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. sales promotion. Customer service is an important element of this relationship. providing insight into customers' needs and wants. & Parasuraman. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. (New York: Free Press). Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . This information is a key competitive advantage.such as airline frequent flyer programmes. encouraging evaluation and trial. direct marketing. personal selling and public relations / publicity . A. the company may supply customers with special equipment or tools (e. • Structural Ties . L. companies have used the tools of the promotions mix .for example. Advertising and public relations can be effective in generating awareness and interest. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. Social Benefits . this process enables an exchange of information. when each trusts the other to deal fairly and reliably.
which will add value and distinguish it from competition. • First-Mover Advantage .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. but it makes the task easier.. companies have the opportunity to start building relationships with their customers.a segmentation scheme. • Time and Consistency . the brand is meaningless. 3. when the brand has no competitors to rival its position. companies must actively communicate it to the target audience to entice trial.Being first into the market does not necessarily bring success. or if the brand is surpassed by superior offers from competitors. 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.176-177 32 . If the quality of the experience deteriorates. value proposition or augmented brand.. • Unique Positioning Concept . trigger trial and reinforce commitment to it. 1998. it has a profound impact on the traditional brand-building process. 19 Doyle. then its position will be undermined. which will communicate the brand's existence. P.If the brand is not the innovator.Traditionally. it must have a unique positioning concept . the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. brands were not built quickly.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. As such.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. while providing new tools for promotion. (Europe: Prentice-Hall). strengthening the brand further.A successful brand requires an effective selling.Satisfactory experience is the major determinant of brand values. including: • A Quality Product / Service Experience . and establish a trusting relationship. advertising or promotional campaign. Without building awareness. 'Marketing Management & Strategy'. It often takes years to build up the added values. 2nd Ed. pp. Once the framework has been established and the organisation configured to provide this proposition. As a result. • Strong Communications Programme . and making it more difficult for competitors to emulate. interaction and relationship building. its function and psychological values. comprehension and intention to buy. The Internet provides the opportunity for companies to create compelling value propositions never before possible.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
In doing so. This chapter provides an overview of the Internet and its defining characteristics. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and the 'world wide web' (www) . creating new challenges and opportunities. Information is becoming a major part of the products and services that people buy.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. news groups and mailing lists. but in practice not in real time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. FIGURE 4. E-MAIL Is the part of the Internet that most users use at present. 34 . it is a common technology platform that allows computing devices to communicate with each other.1 . which contain hypertext and pictures. and a critical source of added value. and provides the opportunity for dynamic interaction.Figure 4. Hypertext allows information to be organised in a user-friendly way that is easily accessible. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. it offers a number of alternative channels that enable businesses and people to communicate. In essence. The three core channels include e-mail (the most common).2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. 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.1. 4.1 INTRODUCTION The Internet is transforming the business environment.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.this radically alters the process of interaction between communicating parties. 7 days a week.not previously available with mass medium forms of communication. By allowing for direct. anywhere. allowing both parties to identify each other and build one-to-one relationships . • It Overcomes the Barriers of Time and Space . These qualities eliminate the barriers of time and space that exist in the physical world. when the United States Defence Department developed the 'ARPAnet'. which was intended to link military networks together.2 (Note: 35 .3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. These defining characteristics have fuelled its explosive growth. The Internet can also be accessed at any time . ubiquitous links to anyone. the Internet lets individuals and companies build interactive relationships with customers and suppliers. 4. Graph is not drawn to scale). and deliver new products and services at low cost.2. These characteristics combine to create a very powerful medium.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).24 hours a day.The Internet is a global network and can be reached from everywhere. regardless of where the computer or Internet access device is physically located. • It Allows for Two-way Communication and Interactivity . The context of the Internet and certain key developments are highlighted in the Figure 4.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs .
1998. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 10. 2000 Internet / ARPAnet was created Dell.000 1969: 10.000.000.3 .Figure 4.000 1.com) 36 . as cited in 'E-Business Technology Forecast' .a PricewaterhouseCoopers Report.000 100.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1.3.000.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.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. 1996 (www. 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.economist.2 . FIGURE 4.
Attractive infrastructure and middleware software . offering inexpensive bandwidth.internet. etc. FIGURE 4. increasing to 500 million users by 200220.4 . TCP/IP). Reed. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . 2000 (http://cyberatlas.E-Marketplaces .2 20 'World Online Populations' . making it more cost effective for software developers and other technology providers to create interoperable products. The development of critical processes (ordering.Higher PC penetration among consumers and companies .com) 37 . and gateway services). As shown in Figure 4. hosting..THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . payment. 'Electronic Commerce (finally) Comes of Age'.Low-cost networking alternatives . G.g.Content Aggregators .CyberAtlas Internet Statistics and Market Research. No. web design..New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. there will be an estimated 375 million Internet users world-wide. The growth in support services (e.Cheap bandwidth . The emergence of open standards in development tools and at the network protocol level (e.High-powered servers . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. 1996.). Multimedia development tools that can be used to create rich content. L.g. The McKinsey Quarterly. the momentum created by all these forces has created a virtuous cycle of growth.Cheap microprocessors & RAM .4. billing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. Easier access to these networks provided by point-and-click web browsers.
2000 (www. chat rooms. to interacting (e. These activities highlight the adoption of the Internet as an interactive.eiu. FIGURE 4.g.Figure 4.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). communication and information tool. entertainment) and purchasing (37%) .from communicating (90% use e-mail) and sourcing information.com) 38 . April 13. as cited in the Economist Intelligence Unit (EIU). reveals the wide range of areas where people are embracing the Internet .5 .5.
Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies.e. There is no need to travel to a physical location. and people. However. FIGURE 4. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. fax. The main difference between the Internet and other electronic media (i. April 2000 39 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Instead there is a website. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. software. web browsers. content.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. projected by Gartner Group. telephone) is that the Internet goes beyond just enabling transactions.6 . The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. The buyer and seller 'face' each other through an electronic connection.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. they all project the value e-commerce transactions to grow at unprecedented rates. no order book. and no cash register.
M.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . A 'virtual' presence can mitigate the cost of having to invest in physical facilities. This is threatening to undermine many old established brands.and revolutionary new business models are emerging. For example. Dell Computers).. March . Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. 66-76 40 . through the use of extranets). Volume 78 Issue 2. The Internet also facilitates the development and co-ordination of global activities (e. the Internet is sidelining the role of many traditional intermediaries. partners and other corporate constituencies.g. operation (e. represents a level of efficiency and integration previously unattainable.g. 'Meeting the Challenge of Disruptive Change'. Although the particular impact will differ between industries.April 2000. & Overdorf. suppliers.how companies operate. pp. C. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. which are often disruptive to traditional business models21. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. By allowing customers to talk knowledgeably and directly to suppliers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Harvard Business Review. 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.g. New brands and business models are emerging to seize this opportunity. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. 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. how they compete and how they serve their customers . Yahoo!).. and transforming traditional distribution channels. the explosion of information is placing a premium on skilled information management. Additionally. some of which look set to become the superbrands of the future (e. At the same time.
collaborate more effectively and ultimately embed organisational intelligence within processes. the diminishing barriers-to-entry and the lower switching costs. as they have access to more information leading to more informed decision-making. improving processes.in developing products.they can choose between traditional 'bricks-and-mortar' companies. highest convenience and quickest satisfaction. CEO of Forrester Research22. quick evolution and all the power. 'Empowered Fruit Flies' . allowing employees to share knowledge. the globalisation of business. little loyalty. This. Internet technology can be used to exploit collective learning and knowledge. This is forcing companies to become flexible and responsive to customer needs. ensuring the delivery of a satisfying customer experience. to capture new opportunities. According to George Colony. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. getting closer to customers and ultimately staying ahead of competitors.forrester. Customers have more options than ever before . and the 24 x 7 environment.internally and externally . 22 Colony. respond to competitive and market dynamics. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. has resulted in a fierce competitive environment. It also provides easy access to competitors' offers and allows customers to consider every available alternative. empowered customers. As a result.Forrester Research. Now companies need to move at warp-speed. as they are just one 'click' away. with no time. G. constantly innovate. or catalogues. combined with the emergence of electronic intermediaries. fierce competition. The Pace of Business is Accelerating With the fast pace of technological change. and reorganise as appropriate. their organisations must harness knowledge .. products and services. these new highly informed customers are "empowered fruit flies". the typical clock-speed at which companies need to operate has accelerated. 2000 (www.com) 41 . it also removes the geographical protection from competitors. They can move from one supplier to another searching for the best prices.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. switching costs are much lower. commit and deploy resources. the development of a knowledge economy. online stores.
com) 42 . combined with intense competitive pressures. and the need for speed and flexibility have accelerated the unbundling of business systems. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. Examples of emerging information age business structures include flat versus hierarchical. 1999 . and multiple strategic alliances and partnerships. variety. achieve global reach and realise a new source of cost advantage. companies have looked upon alliances only as a means of filling gaps. 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. most Internet and e-commerce partnerships extend beyond this. As such.(www. 23 'The Future of E-Business' . In this way. It allows companies to improve customer service. information. supply chain cooperation.teslagroup. when they want. The opportunity of linking the complete supply chain 'virtually'.7. However. alliances and partnerships have taken on a new level of strategic importance.A Research Report by TeslaGroup. companies can provide customers with a strong value proposition by offering them the best in quality. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. and most traditional partnerships were vertical. which highlights the typical structure and dynamics of an online company. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. Traditionally. linking companies with suppliers and customers up and down a pre-defined value chain. thus creating a 'value net23'. The extent of this partnering is illustrated in Figure 4. Increasingly. linking companies with competitors and players from entirely different industries and business sectors. extensive outsourcing. advice and convenience. it provides the opportunity to reach customers where they want. and partnering up with the best for the remaining activities.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. how they want and with the levels of customer service they demand.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. 4. This is the substance of the next chapter.6 CONCLUSION The Internet and its strategic impact are not technological issues . New opportunities for efficiency and co-ordination are emerging. many online companies are blending together the products and services of a wide range of companies. tools and opportunities. & Stirton.dot. The Internet is transforming every business to some degree.they are business issues.7 .. S. April 2000 In an attempt to provide a rich customer experience. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. G.com CONTENT PARTNERS • Print Media • Broadcast • Online JOINT VENTURE PARTNERSHIP AFFILIATE PROGRAMME CUSTOMER CUSTOMER OUTSOURCING / TECH PARTNERS OFFLINE PRESENCE BACK OFFICE FRONT OFFICE • • • • Customer Services Creative Site Development Hosting CUSTOMER Source: Adapted from Freeland. while making the offering hard to duplicate off-line. 'Organising for e-Commerce' . This provides customers with added value. 43 . it is transforming the competitive landscape and brand-building environment. D. the pace of business is accelerating and power is shifting to the customer.a Boston Consulting Group (BCG) Analysis. As such. Partnering with portals and affiliate web sites is important in driving traffic to a web site. while triggering the emergence of new brandbuilding strategies. competition is intensifying.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
people have concerns about sharing personal information. 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. In response. many unnamed customers develop a 'relationship' with the brand.names. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. The limitations of brand-building on the Internet are also discussed. 5. in addition to providing added value. the Internet makes search and comparison much easier.sites that provide a wealth of information and make comparison shopping easy. where the user feels a part of. they have never handled or seen (except on-screen). and sites that understand the user's needs and preferences24. in most cases. New strategies and tools for building brands on the Internet are identified. as well as on topics of interest related to the brand and product characteristics25. Customers derive added value through the provision of information on the products or services they buy. the intangible nature of the Internet. including the interactive approach to attracting customers and building loyalty. addresses. offers interactivity. On the other hand. Traditionally. and projects it onto a third party intermediary (the media). This threatens to undermine the value of brands. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. the logic of the Internet cuts another way.durlacher. brands have been developed in an environment whereby a company creates a brand. credit card numbers. 'Internet Portals' . has placed greater importance on trust and security. whereby the company can establish a dialogue and 24 Marathe. Generally. on the other hand.com) 45 . etc. May 1999 (www.Durlacher Research. People only tend to transact with sites they know and trust .2 THE NEW DYNAMICS OF BRANDS Traditionally. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. J.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'.. Transactions on the Internet require customers to provide detailed personal information . and the fact that customers are buying goods that. The Internet. In addition.
. 'Adding Product Value Through Information'. 'Is Your Company Ready for One-to-One Marketing?' . service approach Customised The Internet gives companies control over all their interactions with customers and therefore. to its delivery to the customer. 151-160 46 . J. brand-building must focus on the end-to-end customer experience . In doing so... & Dorf. 1999. this also poses a challenge as these relationships may take on a life and character of their own.edu) 26 Peppers.duke. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. a company can listen. Duke University. understand and relate to customers.1. Prof.from the promises made in the value proposition. However. TABLE 5. relationship building characteristics of the Internet. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. This creates the opportunity for companies to build stronger relationships than previously attainable. Rogers. In maximising the customer experience. January 28.Harvard Business Review.. companies have to find innovative ways of leveraging the information and 25 McCann. M. rather than simply speaking at customers. January-February. learn.Fuqua School of Business.. pp. D. 1997 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. B.1 .
unless they are selling high-price. In fact.word-of-mouth is the single most effective and economical way online businesses grow their sites. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. . T.org) 28 Rigby. and to recover their investment. as cited in 'Creating a High-Impact Digital Customer Experience' . and with customers holding all the power. L. . Baveja.due to more frequent shopping and larger purchases. - Repeat customers refer more people and bring in more business .com) 29 Hoffman. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. S... C.converence-board. 'How to Acquire Customers on the Web'. March 17. a disgruntled online customer tells 10 people about a poor experience30. Kearney White Paper. - Repeat purchasers spend more and generate larger transactions .An A. & Hancock. R.bain. This view is reinforced by in-depth studies carried out by Bain & Co.Research by PricewaterhouseCoopers / The Conference Board. 1999 (www.pwcglobal.often. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.. Zook. T. For example. Harvard Business Review. Repeat purchasing not only binds trust. on average. companies need to retain customers so that they return to the site repeatedly.. MayJune 2000 30 A Forrester Research Study. companies must ensure that they provide a completely satisfying end-to-end customer experience.. D. J.com and www. and Novak. 27 'Electronic Business Outlook'. D.A Mainspring Communication Report in collaboration with Bain & Co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. and some are spending over $50029. Rastogi. Therefore.. 'The Value of Online Customer Loyalty and How You Can Capture it'.. but also provides more opportunities for cross-selling. This is further reinforced by the fact that. 2000 (www. - Loyal customers are more willing to buy other products from the company.. high-margin items. P. it could be argued that customer loyalty is even more critical online. Chu. it is very unlikely that an online retailer can break even on a one-time shopper. customer acquisition costs are high.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . S. These points stress the importance of online customer loyalty. 2000 47 .
and other features can be added or changed at low marginal cost. Even more important. increases disproportionately as more people join the network. 7th Ed.1.. 'Positive Economics'. pp. 1989. G. R.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. (also referred to as 'viral economics'). Similarly. FIGURE 5. as illustrated in Figure 5. customisation for individual customers. As a result. 180-182 48 . as the benefits of scale are overwhelmed by the disadvantages of size31. where the value of the network. and in the case of information-based products. businesses and online communities that rely on connectivity can enjoy 'network effects'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. additional products. Once the up-front investments are made (for research and development and technology infrastructure). and the value that each member realises. each additional unit sold does not cost more than the last to deliver. However.1 . this is not the case on the Internet. additional customers and transactions can be managed with limited fixed cost investment. the costs approach zero32..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. (London: Harper & Row).
It also allows online companies to tap supplementary revenue streams. fulfilment • Defensible advantage against competitors SCALEABLE.Figure 5. including direct marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. advertising and referrals.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. its ability to track customer preferences and customise offerings improves. M.A Shop..A Publication by Andersen Consulting 'The State of Online Retailing' . Nov 1998 49 .2.org Study in collaboration with The Boston Consulting Group. Outlook 1999. FIGURE 5. '5 Rules of the eEconomy'. being first into a market makes it easier to capture the consumer's share of mind. 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. delivering increased margin per customer . 21 . R. This makes it more efficient in improving product selection. direct marketing. cross-selling and up-selling33. With no competitors around. As the company builds a customer base and develops a relationship with customers. No. enhancing the interaction.2 . link revenues 32 33 Melnicoff.
Larger sites can also negotiate better supplier discounts or product placement fees. makes communication tighter. Word-of-mouth is a particularly powerful medium. web sites. As a result. and "network marketing". 34 'The State of Online Retailing' . These factors help to understand why many online companies are spending aggressively (up to 65% of their revenue34) on marketing and site development to acquire customers and build critical mass. chat rooms and bulletin boards.A Shop.unless the leader makes a serious mistake. commerce and distribution partners. larger sites can leverage more customer advocates to reduce customer acquisition costs. When a company reaches 'critical mass'. or until a competitor finds a way to change the game again.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. in turn. the brand begins to take hold. with its e-mail lists. The Internet. the leader will pick up momentum and will stand to gain an insurmountable advantage . Given the connectivity of the Internet among customers. 5. leading to the exponential expansion of the customer base. This snowball effect favours first-movers. such as 'viral' marketing. New marketing strategies.5 VIRAL MARKETING Viral Marketing is a marketing technique that induces web sites or users to pass on a marketing message to other sites or users. "leveraging the media". This is the logic behind some of the extraordinary valuations of Internet companies. and word-of-mouth even more effective. the value of the company rises exponentially with market share. creating a potentially exponential growth (like a virus) in the message's visibility and effect. with a minimal budget and maximum effect. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. viral marketing is an effective tool in getting a message out fast. "creating a buzz". as it carries the implied endorsement from a friend. as once a strong lead is established. its growth curve relative to a new entrant is somewhat daunting.org Study in collaboration with The Boston Consulting Group. By the time a company has reached critical mass. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. As a result. It is often referred to as "word-of-mouth". This. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. Nov 1998 50 . and the cost of switching to an alternative brand becomes quite high.
where they have never carried out any promotional activities. In its first 1. Hotmail acquired over 12 million subscribers. Free Email at http://www. Geocities enables people to create personal websites for free. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). and they created a subscriber base more rapidly than any company in history. they will have a powerful viral opportunity at their disposal. whether for communications or community. they tell all their 51 .000 subscribers every day. and in doing so spread the word for Geocities. friends to visit it. 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). Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India.hotmail. When a user builds a website. seven days a week.5.1 The Case of Hotmail.000 subscribers within a few years of launch.com. In fact. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. and then propel the message even further to their own ever-increasing circles of friends and associates. Today they are the largest e-mail provider in the world with over 40 million users. A traditional print publication would hope to reach 100. and the message spreads organically.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.5 years. eGroups and Geocities (both recently acquired by Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. a company now owned by Microsoft. • Each new user becomes a company salesperson. saying: • "Get Your Private. but Hotmail signs up more than 150.com was one of the first free web-based e-mail services. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.com The classic example of viral marketing is Hotmail. sign up for their own free e-mail. Hotmail.
In essence.bain. Kearney White Paper..com) 52 . the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.A Mainspring Communication Report in collaboration with Bain & Co. March 17.A PricewaterhouseCoopers Report.An A. T. D..3 . FIGURE 5. S. J.3).. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. In fact. Sites that are difficult to use can cause frustration. 2000 'The E-business Technology Forecast' . Baveja. Price..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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. As 35 36 'Creating a High-Impact Digital Customer Experience' . making customers 'click off' to another site. Zook. 'The Value of Online Customer Loyalty and How You Can Capture it'. Rastogi. 2000 37 Rigby. C. & Hancock. Chu. 30% of potential customers leave sites because they cannot find what they are looking for..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . . The customers' ability to access and display information rapidly is extremely important36. 2000 (www.An A.. T. R. S. Place). Promotion. and 66% of people who start a 'shopping basket' fail to complete the transaction37. Kearney White Paper..
February 2000 Issue 53 . 'Sticky Business'. 38 39 Cognitiative Inc. expert insights.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.4. October 29. T. CIO Magazine.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. as cited in Business Week Magazine.businessweek. and fast response times are among the most important factors in establishing web brand loyalty38. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. FIGURE 5.businessweek. as cited in Business Week. ease-of-navigation. online companies have the opportunity to provide rich. which can enhance the company's value proposition. up-to-date information..4 . and a wide range of products. 29th October 1999 (www. With almost infinite display space and inventory capability. whereas a slow response time and site downtime will have a significant negative impact.com) Davenport. ease-of-use. 1999 (www.
. J. 31% of online consumers use the Internet for obtaining product information. and advertising (if it is relevant and useful). 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). These sites allow members to interact with one another. Customisation Customisation involves tailoring the presentation of a web-site to individuals. as well as through loyalty programmes that provide targeted benefits.. and nearly 20% use it for post-sales support.The McKinsey Quarterly. 1999 (www. . 'Real Profits from Virtual Communities' .Sloan Management Review.A Forrester Research Report.. Often. On the other hand. G. For a community to work. 40 41 Morrisette. Members can interact in chat rooms.. use bulletin boards. An important contribution of these communities is that they provide members with a medium to communicate with each other. based on profile information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. A.g. 54 . 3. which is facilitated by a combination of factors (Figure 5. and organise live events. iVillage and Geocities). No. & Bluestein.com) McWilliam. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). S. Customisation creates the feeling of a one-to-one relationship. Clemmer. Other content includes community-generated content. 1995. visitors should not be engulfed with too much information. Online sites can track a customer's purchase history and modify its service accordingly. share information and access a wide range of services. which enhances the user's online experience. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. 'Building Stronger Brands through Online Communities' . Community Online communities are emerging as new gathering places for consumers with similar interests (e.. K.5). It fosters a sense of belonging41 among the members. W. According to Forrester Research40. it needs a critical mass of members42. demographics. & Hagel. even if they purchase offline. Spring 2000 42 Armstrong. or prior transactions. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.forrester. An online community offers a compelling way to entice customers back to a site.
A PricewaterhouseCoopers Study. A. 343-373.5 .www. 43 Fournier. March 1998. pp. Companies can provide a selection of related links that complement the site's purpose and value proposition. Journal of Consumer Research.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. they opt to input the URL (Internet address . S. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 1999 Communities enhance the speed and value of information sharing. O'Donnell & Gupta.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.. Once customers know of a site. and can create emotional loyalty. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords..brand-name.6). This is similar to placing offline stores in high traffic areas. as well as attracting traffic from other sites. C. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.com) directly into the browser and access the site immediately. M. allowing customers to deepen their experience with a brand and build more personal connection. when membership in the brand's community becomes an end in itself43. Site-tosite connectivity focuses on connecting users to other relevant sites. 55 .. Mulcahy. 'Making Real Sense of Virtual Communities' .
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. live chat. toll-free telephone numbers. online chat. news up-dates. which provide targeted and unique (customised) benefits to the customer. Communication can be tailored to specific user interests and should allow for two-way interaction. as well as features such as gift-wrapping. activities. Therefore. customer care activities can involve providing a variety of payment.6 . events and subjects of interest to the customer. The development of loyalty programmes. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. Customers share security and privacy concerns. serves this purpose and helps to build customer loyalty. and can be provided through e-mail. delivery and return options. customer support at all stages of the interaction is important. It is important in building relationships.marketwatch. 45 MarketWatch.com) 56 . as well as informing and reminding customers of special offers. Customer Care Online customers often require assistance and reassurance. Other tools such as bookmarking the page can also facilitate connectivity. and FAQ pages (Frequently Asked Questions) to solve problems.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. (www. 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. In addition.
Figure 3. 1996. McKinsey Quarterly. This is more difficult online than offline. 'Marketing to the Digital Consumer'.. modified to take into account of the interactive dynamics of the Internet. This model consists of five stages .com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.. 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 ’ . McQuade.Awareness. because there is no physical presence. etc. Newspapers. A. Engage. Interest. 180-183 (www.2.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. No.8. Evaluation. Magazines.Attract.7.4 . Trial.) to online tools. R. pp.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. M. visibility relies solely on Communication. e-mail notifications and banner advertisements. and bring people to the site for the first time. Retain. Waitman.. including affiliate programmes with other websites. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Therefore.mckinseyquarterly. The mechanisms to communicate range from traditional media (TV. billboards. S. Adoption). links from directory searches (Connectivity). The company must build awareness and communicate its value proposition to its target customers.. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. & Zeisser. Learn and Relate. FIGURE 5.
discounted over the expected duration of the brand-customer relationship. 3. 58 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.8 4.6 3.3) is useful to ensure that a company develops a distinct and consistent brand identity. Creativity is also an important factor in gaining attention in today's cluttered marketplace. The key factors at this stage are Convenience combined with interesting Content.4 4.Economist Intelligence Unit 2000 (www.3 2. 3. multiplied by the expected rate of transactions. Attracting customers is only the first step in building online brands.4 3. Companies then need to engage customers to obtain their interest and participation.com) The most effective methods are direct e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.8 .WEBSITE PROMOTION METHODS .4 3.ebusinessforum. it is important to quickly engage consumers' interest before they move on. as cited in 'Targeting Consumers via the Internet' .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 . Kapferer's Brand Prism (Ch.5 3.3 Source: Forrester Research. Engage With the multitude of choice available on the Internet.1 3.7 4. Fig. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. public relations and television advertising.2 4.3 3. affiliate programmes.5) 2.0 3.
attitudes and behaviour). Communities and Customisation are other sticky applications. This helps to create a customer base that spends more time and money at a site. Radio). can create value for the customer and help build the brand-customer relationship. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. 59 . do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. a company can create value by providing a personalised online experience. and forge closer relationships than any offline operator. The initial site registration provides an early opportunity to obtain useful information. The objective is to increase the conversion rate (% of browsers converted into buyers). Building up a knowledge database on each customer . Certain product categories. and must be continuously updated due to the multiple visit nature of customers. if used properly. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. such as groceries and convenience goods. and what additional products and services are they interested in provides companies with valuable information which. • The Internet supports brand-building activities where there is a need to build a relationship.9). Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. Learn The Internet provides extensive opportunities to learn about consumers (demographics. TV.g. Content is the basic driver of retaining customers on a site. 5.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships.who they are and why they shop online.
1996. the interaction provides the ability for companies to learn from their customers and relate. due to high delivery and transaction costs (relative to the value of the product). & Zeisser. and the need to stimulate the other senses (taste.9 . engaging and retaining customers. The next chapter analyses the brand-building efforts of seven companies..from the promises made in the value proposition. S.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. A. it is critical for companies to build relationships and foster brand loyalty.. 5. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. companies must provide a satisfying end-to-end customer experience . 180-183 (www. pp. R. These case studies provide a practical insight into how companies are building their online brands. the experience is the brand. Given the high acquisition costs of online customers. smell). McKinsey Quarterly. McQuade. 'Marketing to the Digital Consumer'. especially in small quantities. and as the relationship develops.. Waitman. The interactive brand-building process involves attracting. 60 . M. In order to create "apostles". However.2. touch. providing further added value.9 CONCLUSION On the Internet.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..com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. to its delivery to the customer. it is not economically feasible to sell certain products. No. • Brand-building favours products that can be sold online.mckinseyquarterly.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
com. Amazon. In addition.Goldman Sachs Report. it is the most visited e-commerce website in America.com and Yahoo!. discounted prices. and is one of the few Internet brands that is recognised all over the world. including: increased selection.economist. and one of the top two or three in Britain. and has equity investments in several e-tailers. Each case is presented in the same format including.com. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Amazon has been able to differentiate itself from other online competitors. 6.1 INTRODUCTION This chapter provides an analysis of seven companies. In addition.2. November 11. Boo.2. 47 48 Interbrand (www. its value proposition. combined with its levels of customisation and customer service. Amazon serves over 23 million customers from 160 countries.com. Amazon has cultivated a reputation for excellence. 1999 49 'Amazon's Amazing Ambition' . Not a River' . and has sales of over $2 billion.com has become synonymous with e-commerce. 2000 (www. Barnesandnoble. and higher levels of customisation and service than the traditional shopping experience allows.com) 62 . its brand-building strategy (how it generates traffic). the sources of added value (using the 7Cs Framework). a company overview. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). eBay.com launched with a mission to use the Internet to transform book buying into a fast.COM 6.The Economist. 'Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Figure 6.Amazon. greater convenience. CDnow.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. France. and enjoyable experience.com) . and other key factors that have contributed to its success (or failure).see Appendix A. It is the 57th most valuable brand in the world47. In July 1995.1 Company Overview Amazon.interbrand. Through its provision of a one-stop shopping experience.com's success stems from its compelling value proposition. more information.com .1 outlines Amazon's timeline and major milestones.2 Value Proposition Amazon. 6.2 CASE STUDY: AMAZON. The cases are presented in the following sequence .It's an Ocean. Gap. February 26. innovation and delivering on its promises. Amazon. easy. Amazon provides increased added value on several dimensions. Germany and Japan49.
com Amazon introduces "Purchase CirclesTM".com.Amazon opens customer service centre in The Hague . Ashford.Amazon launches health and beauty store .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon. Software.amazon.New home living store from living.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com . Amazon.Amazon. a tools and equipment store for professional tool users and woodworkers .TIMELINE AND MAJOR MILESTONES Amazon. West Virginia.000 members Amazon.Amazon opens a customer service centre in Huntington.com to create a "home living" store at amazon.toolcrib.com is founded by Jeff Bezos Amazon. featuring thousands of bestseller lists for hometowns. Video Games and Gift Ideas Amazon and Sotheby's launch www.com announce investment and strategic alliance .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com Electronics and Amazon.com via the new wireless pocket PC .com. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com Amazon acquires Back to Basics Toys to add to Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.COM .Customers can shop at Amazon.com Auctions and zShops provide new tools to its merchant community .com Amazon announces further plans to expand distribution network to meet rapid growth. workplaces. to meet rapid growth .Amazon and eziba.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com 63 . 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 Amazon invests in Pets.com Anywhere.Amazon enters into a strategic partnership with Drugstore.Amazon announces investment in kozmo.com and NextCard launch co-branded credit card .com .Amazon surpasses 20 million cumulative customer accounts ." providing shopping from wireless devices.sothebys.Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com .com enters European book market Microsoft signs Amazon.com opens its virtual doors at amazon.com .amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear. and minority investment in.Amazon.Amazon and online car-buying service Greenlight. such as the Palm VII organiser.Amazon enters strategic alliance with living.com invests in wineshopper.Amazon launches lawn & patio store . and more Amazon launches "Amazon.Amazon launches www.com Announce Strategic Investment and Promotional Agreement .com Amazon launches online Auction site Amazon agrees to purchase Live/bid.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.Amazon launches new kitchen store . universities.
Palm VII PDA device). live or study.1. book summaries. wish lists. gift click. and quick-to-load pages Over time. logically structured.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. offering multiple paths to a given book or product.Figure 6.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. encourage repeat visits and drive higher conversion rates. customer testimonials. Content Amazon provides content on several levels.com Anywhere to support access from wireless devices (i. including book jacket images. mobile phones.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. interviews with authors. FIGURE 6. downloads quickly and services visitors adequately . expert reviews.3 Sources of Value . the 1-ClickTM express checkout. This is an example of 64 . recommendations. The site is easy-to-use.com All Product search (searches the entire web).1 . The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. Amazon has added other features for shopping convenience. such as the Amazon. and Amazon. easy-to-use.e.2. gift reminders. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. discussion boards. and customer Purchase CirclesTM.OVERVIEW OF AMAZON.
from the customer recognition at the point of interface (Figure 6. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. creates a competitive advantage. and customer interaction.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. linking it to a large number of other sites. and Customisation Amazon provides customised features and services. These are discussed in more detail in Section 6. which helps to build loyalty and create switching costs. Amazon creates one-to-one relationships with its customers. therefore. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. and has developed an Associates Programme.4.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 . to the proactive notification of new items of interest. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. real-time shipping and backorder notices. 65 . 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. This customer-centricity is evident in all Amazon's activities.2.thereby increasing conversion rates. Amazon introduced Amazon. converting them into a storefront for Amazon. By leveraging its vast customer base. In doing so. Amazon's content is not reproducible by competition. More recently.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. while driving up repeat purchases and cross-selling opportunities. Connectivity Amazon has built relationships with high traffic web portals and sites.
and by 1999 it had over 200. In addition. helped generate publicity and stories about the company in publications such as The Wall Street Journal. 66 . New Yorker and The Economist.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways.000 members. increasing to over 500. Through the first half of 1996. Business Week. enticing them to return to the site and purchase repeatedly.2). Newsweek. Instead of paying directly for this exposure.000 by August 2000. The Associates Programme has been phenomenally successful.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. help maintain contact and build traffic by e-mailing customers when desired products or books become available. which only applied to sales that resulted from the initial click-through. they are subsequently confirmed by e-mail. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. Eyes and Editors. 6. Amazon offered Associates referral fees of up to 15%. In July 1996.2.a move that along with the novelty of its business model and the newness of the Internet. Once orders are placed. This enabled Amazon to reach more customer segments and niches (Figure 6. 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. and customers are also e-mailed when the items are shipped from the warehouse. The Financial Times. attracting member sites of all sizes. two personalised services. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. As a result of all these factors (7Cs).com hot-link and offer specific books of interest to their visitors. it began to advertise in print media and online . and not subsequent purchases. In the second half of 1996.
In return. In addition. From July 1997 to December 1998.com's website (www. Netscape's Netcenter and NetSearch. mutual links. and Geocities.AMAZON. Interesting viral initiatives include: • Amazon.allows customers to create a personal profile (with pictures) on the site. spreading the word for Amazon. The Yahoo! agreement. Amazon also established agreements with AltaVista.com About Me .2 . was also linked to Amazon's entry into Europe Amazon. People tend to tell their friends about it.amazon. the customer acquisition cost is only £10. Amazon closed deals with five of the six most visited Internet addresses. thereby promoting Amazon. and primary button placement on web portal search engines. Amazon has used viral marketing techniques through customer reviews.com.COM'S ASSOCIATES PROGRAMME Source: Amazon.com gift certificate (in your name).co.com). each friend is sent a $5 Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. including: America Online (AOL).com Refer-A-Friend . and you are given a $5 gift certificate for each customer you provide.uk the local provider for Yahoo! UK & Ireland. • Amazon. free eCards and gift certificates (which customers send to friends. Prodigy and @home.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. Therefore. Excite. Yahoo!.de became the local provider for Yahoo! Germany and Amazon. 67 . These multimillion-dollar.customers are encouraged to provide e-mail addresses of friends. multiyear deals involve exclusive book-selling rights.
so we didn't have to do much advertising. Amazon has been able to achieve average customer acquisition costs of less than $20 . 'Does Amazon. newspapers) to generate awareness.significantly lower than other online companies. 1998 68 . By relating to customer needs. which accounts for 66% of Amazon's sales. interesting content. Amazon's proven online merchandise selling techniques including easy-to-use search options. Magazines. with the explosion of websites. Once customers are attracted to the site. Amazon is building customer loyalty and encouraging repeat business. Amazon maintains a database of customer preferences. "we had a world-class site the day we launched . 50 Willis. According to Jeff Bezos. and improved customisation and recommendations (e. 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. And we relied on word-of-mouth to build awareness. however.Forbes.com Really Matter?' . 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. buying patterns and viewing habits. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. As the relationship develops. That's not possible anymore50". clear presentation. community feel (as discussed previously). Purchase CirclesTM).. 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. C. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses.g. Amazon has also incorporated traditional offline media (TV.but it was only a tenth as good as the site we have now. April 6. billboards. With this combination of promotional methods.
he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Amazon was able to secure partnerships and alliances with key players. memorable. R. in June 1998. 51 52 Hazleton. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. L. while our competitors have been Amazon. establishing Amazon as the leading online bookseller with a large customer base. management realised that Amazon had become more associated with other core brand values . We have been customer obsessed. due to the hype and coverage it was given. developing customer service centres and expanding its distribution network to support high levels of service. Amazon is constantly seeking new ways of improving its offering. thereby diluting the value of its association with books. Our secret is that we have not been competitor obsessed. Success. This has helped them attract customers and move up the learning curve quickly. (Oxford: Capstone Publishing).com obsessed52". Amazon has been able to build a strong brand at relatively low cost. Amazon unveiled a music store. According to Jeff Bezos. further enhancing their value proposition. the balance of power shifts away from the company and goes towards the customer. Saunders. 'Business the Amazon. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'.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. "we're not a stationary target. Amazon's understanding of its brand identity has been a critical factor. According to Jeff Bezos. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. and according to Jeff Bezos. good value. establishing a reputation for excellence and fulfilment. However. and its safe and secure delivery. "Online. and our goal is to increase that gap51".com Way'. In addition.2. We were blessed with a two-year head start. As such. As such.. which within six months propelled Amazon to one of the leading online music retailers.. Amazon received criticism for expanding its product line.a wide range of choice. Nevertheless. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. July 1998. For example. 1999 69 . In addition. and to convey its vast size and offering. because he wanted it to be short. to capture the spirit of the site. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses.
Amazon's intense focus on customer needs and continual innovation. speedy delivery and good value. Volume Discounter' . it has not recorded any profits to date. not necessarily a reality. 1998 70 . Amazon is claiming to be making profits on its books and music categories. distribution centres and upgrading the site. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Nevertheless. perhaps trying to defend its view that losses taken to build market share can reap profits later..Brandweek. however. 'Marketers of the Year: Jeff Bezos. Amazon has continuously invested in customer service. The key factors driving its growth and high retention rates. and investors lose confidence. 53 Warner.2. with new products and value added content.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. In doing so. the drain on their cash resources will push them towards bankruptcy. Amazon also recognised that service quality is a perception. they're stretchable and pliant. When they're young. Amazon delivers on its promises of a wide inventory of products. they have cultivated a reputation for excellence and fulfilment. However. have kept it ahead. which is critical on the Internet. as the true value of a brand lies in its sustainability. This raises a critical issue. if it continues to incur losses. B. secure payment procedures.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. but over time they become more and more associated with a particular thing and harder to stretch53". and to sustain a positive image and satisfactory end-to-end experience. Although Amazon has successfully built a strong brand and loyal customer base. This customer-centricity is a key hallmark of a successful Internet brand. stem from its compelling value proposition and high quality end-to-end customer experience. October 12. 6. Quality is only measurable in the minds of visitors to the site.
including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.com launched its website (www.com). book databases.Barnesandnoble.Launches Affiliate Network December .COM 6. Barnesandnoble.com .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.Acquires equity stake in Mightwords .Launches BNTV . Launched in 1997. 40% owned by Bertelsmann AG.Barnesandnoble. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. etc. rare.com provides other online categories offering software. prints & posters and related products.. all front-end operations (marketing. and 20% owned by the public. promotion) between the online store and the retail stores have been kept separate. Barnesandnoble.Barnes & Noble University opens registration for free online courses . TABLE 6.com is approximately 40% owned by Barnes & Noble.2. However.3 CASE STUDY: BARNESANDNOBLE. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).3.Launches Video Store 71 . Currently. Inc.Offers same day delivery in Manhatten .Acquires minority stake in NotHarvard.com was able to 'hit the ground running'. is one of the best known traditional booksellers in the United States.Barnes & Noble went online at AOL May .TIMELINE AND MAJOR MILESTONES .com is the fourth largest e-commerce retailer54. and 470 B.com's timeline and major milestones is outlined in Figure 6.COM . Barnesandnoble. Besides books. music.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. Barnesandnoble.barnesandnoble.com and Microsoft announce that they will create an eBook superstore .Announces distribution relationship with New York Times September . contacts. magazines.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .) established by its parent company. Dalton bookstores (located in shopping malls).Barnes & Noble. Barnes & Noble Inc.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 . as it could capitalise on the infrastructure and back-end operations (warehouses.2 1997 January BARNESANDNOBLE.com announces strategic relationship with Palm Computing . Barnes & Noble Inc. and is the second largest online bookseller (after Amazon.1 Company Overview Barnesandnoble.Launches Internet Radio .com) .
and easy-to-navigate site Categories focus on books. the company created a site very similar to Amazon.OVERVIEW OF BARNESANDNOBLE. logically structured.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. publisher. Both have expanded their convenience to offer 54 Media Metrix.com) 72 .com's (Figure 6.com let customers sign up to receive email reviews and announcements of new titles. good prices.3). the features are practically identical. however.com or www.COM'S WEBSITE Simple. Both Amazon.com offers customers an easy-to-search catalogue of virtually every book currently in print. including title. Both offer detailed bibliographic information.3. but instead of developing an outstanding interface to its inventory. rich editorial content and a community experience. etc. they offer customers fast delivery.com's website (www.2 Value Proposition Barnesandnoble.com's virtual storefront is graphically richer than Amazon. FIGURE 6.bn. in terms of the 7Cs framework.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.3. previously-owned and rare books.3 .3 Sources of Value . author.com and barnesandnoble. 6. easy and secure ordering. Barnes & Noble planned to dominate online book-selling. edition. music New Initiatives Barnesandnoble.com's and takes a bit longer to download. software. as well as an extended searchable catalogue of millions of out-of-print.barnesandnoble. In addition. as cited on Barnesandnoble.
They have developed an affiliate programme that links sites to Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. and both are expanding globally. Lycos. The 6. Barnesandnoble.The Wall Street Journal.com's 1999 revenues were $202. Barnesandnoble. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com in return for a commission on any purchases that they originated . this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Both offer customisation that permits users to personalise the experience. 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 .4 Brand-Building Strategy Barnesandnoble. As of February 2000. and Barnes & Noble Inc. 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.64 billion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com closed 1999 with 4 million customers.com had over 17 million.000 affiliates in its referral network.1 billion. has yet to leverage its strong brand in cyberspace. Barnesandnoble. however.com. These initiatives have generated traffic to the site. this programme had more than 300. However.a replica of Amazon's Associates Programme. while Amazon. reasons for this are explained in the next section. Yahoo!.6 million. Although.3. prevent cannibalisation of its existing business. 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. December 17. Instead.com was valued at $21. Webcrawler. and avoid charging sales tax in states where it has stores56. while Amazon. Netscape and Microsoft Network.com's $1. compared to Amazon.com has created a high quality website and customer experience. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com's market capitalisation was $251 million. Barnesandnoble. Both offer 'associate programmes' that let other websites link to their sites.
Barnesandnoble. • In addition. provides access to valuable resources. and leverage its real-world presence.com. To signal its intentions. in the attempt to gain traction and build momentum.com. in-store displays.com. Recent Initiatives Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through. people began using their stores as a physical showcase for online rivals such as Amazon. 74 .com created a new cross-marketing genre in February 2000. • Barnesandnoble. Under the seven separate agreements.com.com. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. and in recent months has aggressively sought new ways to differentiate itself.com's key differentiator from Amazon. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. Barnesandnoble. and a same-day delivery option in Manhattan. Barnesandnoble.com and VitaminShoppe.com. At any given point there are hundreds of customers browsing their aisles looking for something to read.com has changed its name to Barnes & Noble. and its BMG Entertainment division includes music giants Arista Records and RCA Records. Petsmart.com is its association with Barnes & Noble Inc. and the tangibility that this provides.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet).com. and Internet terminals in the bookstores. or deliver books directly from the retailers. Barnes & Noble University (a free online education resource). • Barnesandnoble. By failing to leverage it.com has begun to acknowledge some of these mistakes. Barnesandnoble. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. 1-800Flowers. Planetrx.com should have aggressively cross-promoted their stores through advertising. content and distribution opportunities. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. Jcrew.. Unfortunately. each partner offers a similar link to Barnesandnoble. LLbean. with a similar discount.com has lost access to valuable customers.com. when it struck reciprocal marketing deals with Expedia.com.com. as Bertelsmann's book division includes partners such as Random House. Barnesandnoble.com's link to Bertelsmann AG. In return.
Barnesandnoble. customer relationships and offline presence . meant that Amazon.its key differentiating factors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Not a Best Seller' . Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. it also caused a major setback. In addition. even if that means eating into their existing sales. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com and has given them the image of a second rate 'me too' brand.com's late start in 1997. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". 57 'Bn. and its lack of innovation (by copying Amazon. 2000 (www. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.com) 75 . The company failed to leverage its established brand.com . According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. The Press have also contributed. by portraying them as slow and clumsy in comparison to the more nimble Amazon. and allowed them to offer stock options as compensation and achieve a high market capitalisation. feature for feature) has failed to differentiate Barnesandnoble. Barnesandnoble.com.forbes.com has been able to create a high impact and high-quality customer experience.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. otherwise they risk losing out to other online competitors.Forbes. significant market momentum. August 4. and was further up the growth curve.com's experience is instructive. a wellestablished Internet brand.6 Conclusion Although Barnesandnoble.3. it has not been able to establish itself as the leading online bookseller.
4.they redesign site.4 CASE STUDY: BOO.com opens its virtual doors' . Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). Morgan. P. Germany and Denmark. Boo. and eventually debut in Asia.COM . within six months Boo. and Converse.2 Value Proposition According to Kajsa Leander. "our marketing thrust is not based on prices. 58 Kajsa Leander. receiving $125 million of funding. Company is put up for sale. Boo. November 2000 January February May 6. it's about range and convenience. not the limited range you might get at most London fashion shops58".Marketing Week.Raises funding of $125 million .First sign of problems . sack 20% of staff and sell stock at 40% discount . TABLE 6. On going live. Boo.TIMELINE AND MAJOR MILESTONES . and was billed as one of Europe's hottest e-commerce ventures. Sweden. If a clothing brand is on the Boo site.1 Company Overview Founded in 1999. After a high profile launch. June 10.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. However. Puma. as cited in 'Boo. Boo. arranged through J. 1999 76 . the company was hindered by technical problems that delayed the site going live by five months (until November 1999). as well as create a kid's site. They intended to add France.4.com.Site goes live . it means all that brand's product line is available.fails and appoints KPMG as liquidator.com provided a range of 18 fashion and footwear brands including DKNY.com had set the record as Europe's best-funded European Internet Start-up.COM 6.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com.000 unique visitors . Everlast. Italy and Spain within a few months.3 1999 Mid year BOO. founder and Chief Marketing Officer of Boo. and the resulting loss of investors' confidence. Finland. 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.Multi-million pound advertising campaign created by BMP DDB .Announces it has only 500.com entered six markets: US. among others. England.com collapsed through lack of funds. due to its poor performance and inability to build a customer base. CMO of Boo. and included high profile investors such as Bernard Arnault.Appeals for $30 million more funding .
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.
TIMELINE AND MAJOR MILESTONES . 62 Hoffman. On 19th July 2000.5.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.Launches merged CDnow/N2K site .1 Company Overview Founded in 1994.com) 80 .179-188 63 CDnow website (www..4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . May-June 2000.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Site goes live . and was the first site to offer the sale of music downloads and custom CDs. and one of the most popular shopping sites on the Internet62. 'How to Acquire Customers on the Web' . $22. TABLE 6. CDnow was acquired by Bertelsmann AG.cdnow. and an average daily audience of over 800. & Novak.5 million distribution deal with Lycos Signs three-year. CDnow provides access to over 500.Merges with N2K.Harvard Business Review. It has a customer base of 4 million people. a valuable and rewarding experience"63. $18.Raises $10 million through private placement .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. whether for browsing or buying. good prices. guides to music genres. as well as music reviews.Forges distribution partnership with Yahoo! $65. T.Partnership program with Geffen Records .000 people. and they aim to "make every visit to the site. features. D. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5.Merges with Columbia Records .CDnow and Time Inc.000 music related items . daily music news. announce marketing alliance . pp.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow is the leading online music store. former arch rival . by twin brothers Jason and Matt Olim. cover art. customisation and a wealth of information and content to help in the purchase decision. convenience.000 sound samples. CDnow is also driving the digital distribution of music.000 music-related products and 650.5 CASE STUDY: CDNOW 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . and exclusive interviews and reviews from CDnow's award-winning editorial staff.ten times the selection of a conventional bricks-and-mortar music store).
artists biographies.5. to make it easier for customers to explore new music and make informed purchasing decisions. The whole process of searching for albums or music titles to the actual purchase is simple .3 Sources of Value .5 . and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. easy-tonavigate. CDnow has cultivated similar relationships with MTV. cover art. CDnow has leveraged the reputation of their brands to reinforce its own.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. etc. 81 .. For example. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.Figure 6. and has secured rights to music reviews.5. FIGURE 6. By partnering with well-known content providers.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.
from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). By customising the store to meets customers' needs. and Geocities as well as more focused specialist sites. 82 . Italian. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand.such as AOL. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. Customer Care CDnow's site can be viewed in English. allow customers to keep track of albums to buy in the future. it gives them a sense of ownership and a compelling reason for them to return. French. Other features such as My CDnow's Wish List. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. It also creates switching costs. and key news and entertainment sites . Dutch and Japanese. Excite. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. which accumulate and can be spent on a variety of music-related products. Yahoo!. CDnow developed the Fast Forward Rewards programme. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . they will be reluctant to visit another online store and enter the information again. allowing them to respond to detailed customer queries. an incentive programme that rewards customers and encourages them to connect back to the site. and could consider introducing customer reviews or set-up communities around different music genres such as a Jazz Club or Classical Club offering members relevant content and the option to chat with other club members. German. In addition. CDnow hired a group of multilingual customer service representatives to handle questions.search engines. Community CDnow has not exploited the potential of creating a community feel. Whenever a customer makes a purchase they earn Fast Forward Reward points.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Internet access providers. Spanish. Portuguese. Due to International interest.
• 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. music-oriented websites. CDnow extended its distribution reach to include more than 250. 83 . Excite and other powerful Internet content and service providers. and radio spots on the Howard Stern Show to build a cult following among radio listeners. Yahoo!. According to Jason Olim.000 small. CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences.Through the Cosmic Credit Programme.5.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. and spot radio to build reach. It is a revenue-sharing arrangement. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. CDnow is doing everything it can to ensure that the next time that 6. and Variety. Spin. they buy from CDnow.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. covering the entire music spectrum. • Traditional offline Media .They have also stuck exclusive alliances with AOL.CDnow's advertisements are targeted to some degree. customers buy music. • Affiliate Programme . as well as more-targeted music-related sites like Billboard. By keeping the brand in front of the customer in this way.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. this is their "most successful customer building programme64". print advertising is music-related publications such as Rolling Stone. CDnow's initiatives include: • Banner Ads .
com/cdnow. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. and to increases in the customer base of more than 30% quarter-to-quarter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .com) 65 'Pioneering in Cyberspace' .As for many successful online retailers. both in the online and offline worlds.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.they were the first site to offer the sale of music downloads and custom CDs. It is constantly adding new functionality to the site and has been innovative in its offering . it is in this context that the large investments in advertising and partnerships make sense. The story of how CDnow was founded in a basement. It is a powerful source of acquiring new customers at low cost. 1998: $56. 6. • Word-of-Mouth . Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. as a way to fuel very lucrative word of mouth. In fact.CDnow made public relations a high priority brand-building tool. resulting in increased conversion rates. April 28.5.hsny.Hampel & Stefanides (www. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. with 44% of sales coming from new customers65. and scaled it awareness-building efforts.cdnow. word-of-mouth accounts for the lion's share of CDnow's customers.Press Release.4 million). Public relations efforts helped to generate word of mouth and influence sales. with repeat customers accounting for more than 50% of sales. 1998 .4 million. CDnow's promotion strategies have attracted high levels of traffic. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .(www.htm) 84 . This has contributed to a 225% increase in sales (1997: $17. The company continually pushed for new distribution partnerships to widen its sphere of influence.
Building an Internet Business at Breakneck Speed". 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. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. combined with the high impact customer experience created . "eBrands . The development of an extensive affiliate network. "your brand is not just what you say . to ensure quick delivery to customers. (Boston: Harvard Business School Press). CDnow has developed a relationship with Valley Records. According to Jason Olim. and innovative.5.it's what you do66". as cited in Carpenter. 2000 p. CEO of CDnow.75 85 . and ensure that it exploits its early-mover advantage and keeps ahead of competition. This gives the customer the impression that the order is being handled quickly. It was able to create a strong value proposition and high quality customer experience. (Boston: Harvard Business School Press). 6. 66 Jason Olim. P.89 67 Jason Olim. CEO of CDnow. 2000 p. This. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. "eBrands .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. They also provide the customer with an order number and customer support contact information should they have questions. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. P. as cited in Carpenter.Building an Internet Business at Breakneck Speed". The company sends an automated order confirmation note via e-mail as soon as the order has been placed.from how CDnow has personalised its product offering to its capable customer service team . a record distributor that handles the majority of CDnow's fulfilment logistics.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.
6.782 million in January 200068.Company Overview' . 1st October 1999 86 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 24 hour a day. as cited in 'eBay . The buyer and the seller work out the logistics of the transport (e. with emphasis being placed on its unique community feel and culture. Auctions make it fun. and eBay receives a transaction fee that ranges from 1. garage sales. According to Meg Whitman. and eBay never takes possession of the item being sold. Auctions are an enabler.6. the eBay community has grown to include more than 10 million registered users.efficient one-to-one trading in an auction format. eBay is not about auctions. Since its launch in September 1995.Company Overview' .ebay. with the number of unique daily visitors setting a record of 1. (A)' . shipping.A Harvard Business School Case Study. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. flea markets and auctions.com) 'eBay . eBay effectively created a new business model never before possible . extensive selection and geographical reach.000 new items joining the "for sale" list every 24 hours69. and 450.2 Value Proposition eBay offers consumers an efficient. and eBay provides added value through its convenience.eBay website (www. global trading place for buying and selling personal items in an entertaining auction format. Individuals use eBay to buy and sell items in more than 4. from collectibles and antiques to electronics and toys. transportation and other overhead costs. This is a new market . collectable shows. "at its core. There are over half a million new auctions. or the payment for the item .com) 70 'Meg Whitman at eBay Inc.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.the closest thing in the offline world are trading forums such as classified ads.removing the need for inventory. payment) between themselves.300 categories. Sellers pay a nominal fee for placing an item up for sale. People perceive the auction format to offer better prices. CEO of eBay. 6.6 CASE STUDY: EBAY 6.eBay website (www.25% to 5% of the final sale price on any item sold.ebay.g. Auctions represent a platform.
eBay launches local websites in Baltimore & Washington DC.eBay expands strategic relationship with Netscape . Providence. co-marketing relationship.6.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques . And you only get word-of-mouth if you have a great customer experience.The 7Cs Framework According to Meg Whitman. Seattle & Tacoma. Norfolk & Virginia Beach.eBay acquires alando. .Com form alliance - 6.com) 87 .Germany's leading online person-to-person trading site .eBay goes wireless with Palm VII connected organiser . Milwaukee.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and its online trading site (Up4Sale) .eBay launches 'About Me' feature. and raises $700 million .Compaq Computer Corporation and eBay form a strategic U. Unlike the previous case studies discussed.America Online and eBay announce strategic marketing alliance . 21st May 1999 (www.eBay and AOL launch co-branded site .com to provide automotive service for eBay Users .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. This raises challenges in how to control and influence the customer experience.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay and First Auction sign a partnership agreement .de . 1 is have a great customer experience71". and in terms of the '7Cs'. and Salt Lake City . Boston. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . allowing users to create personal homepages . .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.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 .Business Week.eBay IPOed raising $58 million .S. Selling. as they rarely deal directly with the company. "the first brand-building strategy that we have is to have a great customer experience. Since eBay cannot control how one person treats another. Still the vast majority of our new users come from word-of-mouth.eBay and Ultimatebid.3 Sources of Value . Dallas & Fort Worth. The Official eBay Guide to Buying.businessweek.eBay acquires Kruse International .eBay teams up with Carclub. they try to influence customer behaviour by encouraging them to adopt certain values.eBay acquires Jump Inc. emphasis is placed on community development and customer care. Nashville.eBay acquires Blackthorne Software GO.eBay goes live in Australia . the eBay customer experience is based on how their customers deal with each other. So brand-building job No. and Collecting Just About Anything and eBay for Dummies. Las Vegas.Launches "My eBay!" to customise the online auction experience .eBay acquires Butterfield & Butterfield.eBay introduces eBay Magazine in collaboration with Krause Publications. and two books -.eBay goes live .
Content Content is primarily user generated through the items listed for sale. and since.6).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. categorically arranged. This contributes to the community feel. Nevertheless. increasing the risk of outages. 88 .6 . they have continually invested in system capacity. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. which is much more demanding on the system. easy-to-use online service (Figure 6. eBay has also expanded to accommodate access through wireless devices for added convenience. eBay had a 'wake up call' when the website crashed for 8 hours. Other content includes the banner ads. topically arranged. FIGURE 6. eBay's site has to process thousands of live bids simultaneously. 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.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. and adds to the experience and the discovery of the auction process. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. angering hundreds of thousands of eBay users.
respect. Community eBay attributes much of its success to a strong sense of community among its users. and share information. It is a place where people can meet with similar interests. eBay Salt Lake City) have helped them restore that community feel.eBay represents more than just a place to buy and sell goods. working together and helping each other offline. and in doing so. eBay's community has a distinct culture based on trust. the culture has come under strain due to the company's rapid growth from a small community into a "big city". each user is encouraged to submit feedback through eBay's 'Feedback Forum'. bulletin boards. which is posted to the site. eBay offers its users category-specific chat rooms. has enabled eBay to foster a strong sense of community on its site.as eBay users refer to themselves . e-mail. by the people. 89 . Recent initiatives such as the development of local websites in major US cities (e. 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). eBay Boston. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. the community spirit and personal relationships also transcend the online experience. a monthly newsletter. and is considered by many users as one of the best features on the website. for the people". empowerment and equality.g. a "giving-board" for charitable donations to user-identified causes. This has created a self-regulating mechanism that encourages good behaviour. and there are several reports of eBay users vacationing together. After a sale. For many 'eBayers' . discuss topics they care about. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. To encourage this sense of community. which is then added to the partner's trading profile. In addition. Whitman describes eBay's community culture as a site "of the people. autonomy.
the largest of which was with AOL. 90 . and the introduction of two specialised customer support groups . geographically dispersed users as customer support representatives.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. but they have other partnerships with over 150 websites of varying scales. This also reinforced the company's respect for. These people worked from their homes. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. which was dedicated to investigating misuses of the system (e. links to high traffic sites. During the first two years. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. and the Safe Harbour group. fraud. eBay has invested in customer care and support to ensure people conduct safe transactions. eBay's approach to customer care has evolved over time. By using its own enthusiastic. Communication eBay maintains close communication with its members. This was later expanded to include customer support representatives who worked out of eBay's headquarters.the Community Watch group. knowledgeable. which was dedicated to monitoring the site for illegal and infringing activities. eBay also engaged in marketing partnerships. and respected members of its own user community to serve as customer support representatives. shill bidding) and helping to resolve user-to-user conflicts. eBay was able to cost-effectively offer 24x7 customer support early on. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Customer Care eBay controls neither end of the transaction. answering e-mails and responding to questions posted on the site's bulletin boards. Customer support activities were constantly upgraded and expanded as the business developed. its user community. eBay employed a "remote" customer support model. in which the company hired active. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum.g. As such. and willingness to empower.
representing about 40% of revenues. These new publications appeal to the collecting spirit. eBay has been able to attract a large customer base. and maintained the same ratio for 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. Doll Collector) and appearance in trade shows. the largest of which was with AOL. In 1998. As a result. Through this combination of its advertising efforts and targeted promotions. and two books.g. Based on this. $75 million joint marketing alliance and development deal. The Official eBay Guide to Buying. and highlight opportunities created by e-commerce.a four-year.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. The AOL partnership was one of the largest strategic partnerships on the Internet . eBay Magazine. but they have other partnerships with over 150 websites of varying scales. and facilitate the spread of positive wordof-mouth. and Collecting Just About Anything and eBay for Dummies. Selling.3 million in advertising. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Early on. eBay decided that it would not enter into major portal advertising deals in the short term.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. who tended to be serious collectors. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Mary Beth's Beanie World. Recent promotional initiatives include its new publication. 91 . With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. provide a wealth of information about the 'ins and outs' of trading on eBay. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). eBay has since expanded its promotion efforts and engaged in marketing partnerships.6. eBay transformed from a pure online play into a 'clicks-and-mortar' company. they decided to target their marketing efforts on these heavy users. they spent $12. as a result of the high quality experience it provides.
very fast.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'. I think you are not well served by moving incredibly rapidly and not doing things well72". their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. This is achieved by listening to their community (learning) and developing new improved products and services (relating). have been instrumental in building a 'quality' customer base. which in turn attracts more sellers . is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.5 Conclusion eBay's compelling value proposition.Business Week. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. 6. However.com) 92 . Their focus on heavy users and targeted promotions. the Personal Shopper and the eBay Life Newsletter. eBay has also faced difficult challenges in scaling the organisation fast enough. And while we have to move very. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . and according to Meg Whitman. and their first-mover advantage. As a result. which were all ideas of eBay users. "the devil in so much of this is in the detail. such as the Feedback Form. as they could not opt for a 'go slow' strategy.6. their ability to create a new market using Internet technology. and according to research carried out by eBay.the ultimate network effect . however. 21st May 1999 (www. This has become part of the eBay culture.contributing to its strong lead and competitive advantage.businessweek. have been key factors that have contributed to the success of the brand. which has established eBay above other online auction communities. eBay attracts a broader selection of buyers.
California GapKids opens its first store BabyGap is born Gap opens its online store at www. online sales are only available to US customers. Its reach extends across more than 1. as cited in Lee.$100 million. Inc. standard styles are well suited to online shopping.1 Company Overview Gap opened its first store in San Francisco in 1969.gapinc.7 CASE STUDY: GAP."to deliver style.com' . 1999 76 Jeanne Jackson.gapkids. "this is about being clicks-and-mortar.800 stores in the US. whether in the store or online76".6 1969 1986 1989 1997 1998 1999 - GAP & GAP.7. 6. service and value to everyone74".com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. UK. as cited in Lee. Gap. surpasses $9 billion in net sales and increase earnings by 54% over previous year. Gap started selling items online . from jeans and T-shirts to khakis and jackets.htm) 75 Jeanne Jackson. and analysts estimate that sales in 1999 amounted to $50 . Gap online exploits the accessibility and convenience of the Internet.gap.com is an example of successful crossover marketing. 'Clicks and Mortar at Gap.babygap. According to Jeanne Jackson.com/about_us. In late 1997.Business Week. The Gap offers a balance of modern and seasonal styles of clothing. October 8. to provide customers with greater convenience and options. Gap Inc. Germany and Japan.Business Week.com. America Online (AOL) and Gap Inc. 73 74 Interbrand (www.COM .see Appendix A Gap.interbrand. L.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 1999 93 .'s website (www. the growth prospects are enormous. and Gap online provides access to the full range of items at Gap. TABLE 6.com) .COM 6. letting customers access the Gap brands. and are still relatively small compared to Gap's $9 billion in annual sales.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com and www. and today it is the 29th most valuable brand in the world73. Currently. Gap's online sales tripled in 1998 alone. L. 'Clicks and Mortar at Gap. announce multi-year partnership. and provides useful insight into how traditional brands can leverage their strength online. however. October 8.7. GapKids. from shirts to accessories and hard-to-find sizes. In addition.com' .2 Value Proposition Gap's simple. head of Gap Online. This success is largely due to their simple formula . and BabyGap. up from $20 million in 199875. Canada.
making it convenient..making visual references to its offline roots. Simple. Unlike Barnesandnoble. reinforcing its brand identity..OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. describes the company's brand personality as "direct and straightforward. The site also offers sharp graphics. but provides customers with the option of viewing text-only.. D. from the blue and white colour scheme to the easy-toshop format . easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. 'Mind the Gap'....7. This personality is reinforced online through the simple structure and layout..3 Sources of Value . and easy-to-use. April 18. FIGURE 6.The 7Cs Framework In terms of the 7Cs framework. Content. making navigation even faster.com store one immediately notices the consistency between the online and retail stores. and Customer Care.very easy. 1998 94 . very efficient"77. the extensive integration of Gap's online and offline activities are clearly evident.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Visiting the gap. The Observer.. Gap Online primarily focuses on Convenience.com. feel and design of the site is consistent with the bricks-and-mortar stores. Michael McCadden. Executive Vice President of Global Marketing.7 .
and customers can view their latest TV adverts for buying inspiration. Gap does not provide any community features on its site. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Unlike the case of Boo. once customers are registered online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap.com. customers can return goods purchased online to their neighbourhood store. allowing shoppers to contrast different cuts and styles. and BabyGap.com also provides a Gift Central feature which offers gift suggestion from Gap. Gap.com's content consists of detailed information on its full range of products. 95 . and goods bought online get returned at the same rate as store purchases . Gap communicates with customers through customised e-mails. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. In order to integrate its offline and online operations and logistics. which would not be possible in the store. standard styles are well suited to online clothes shopping. By doing so. The Gap site connects to other Gap online stores including GapKids and BabyGap. as well as sample all of the latest shades of fingernail polish on a virtual hand. Gap's simple.as most Gap online shoppers have a good idea of how Gap clothes fit. GapKids. In addition. and had recently established marketing deals with AOL and CDnow. twice a month. and customers can register to get e-mail reminders of upcoming holidays and birthdays. However. promoting its specials and including links directly to items on Gap's website. Gap has also developed an affiliate programme. without causing complications. Gap made a decision to charge sales tax on online sales.com allows customers to track the status of online purchases and provides contact information on the nearest store. Gap.
In addition. it is fully leveraging its offline presence to build awareness.shop.com in return for a 5% commission on every sale referred through the site. Gap has also supplemented this with online promotions: • In August 1999.com.com) in store windows with the slogan "surf. by offering a 10% discount and free shipping on their first online purchase. however. • They offer Online discounts and promotions such as the ShopCard.gap.) that also promote the online store. Gap secured a 3-year commerce and marketing agreement with AOL. Gap has held in-store campaigns to get customers to submit their e-mail addresses.Extensive Integration Gap. which displays "Shop online at www. • Gap. • Gap. on counter cards. billboards. 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.ship".7. Most of Gap's online traffic is generated by leveraging its physical presence. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. These efforts doubled the size of Gap's e-mail database. In certain high traffic Gap and GapKids stores. they send the customer a $20 Gap ShopCard. by displaying the URL (www. on shopping bags and even on the cash register.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Magazines. etc. 96 . whereby for every $100 a customer spends at Gap Online.com has links with CDnow to cross promote websites. providing a useful way to directly reach customers.com" on the display screens between transactions.4 Brand-Building Strategy .gap. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. either online or in stores. To convert walk-in shoppers to cybershoppers. which can be used towards future purchases.com has been able to piggy-back on The Gap's offline advertisements (in TV. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.com has also created an affiliate programme encouraging sites to establish links to gap. or to refer shoppers to Gap's website.
7.com is an example of successful crossover marketing. The Internet. thereby reinforcing its brand identity. With their brand awareness and network of retail outlets. and allowing each to leverage the strengths of the other. 97 .5 Conclusion Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap has been able to significantly strengthen their brand-customer relationship. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. on the other hand. while reaping the benefits of low customer acquisition costs and extended reach. provides existing customers with added value through the convenience of purchasing online. have already established the back-end operations and can use them as the cornerstone of their online business. Pure online players have to invest heavily in logistics. such as Gap. By aggressively marketing both the stores and the website. whereas established companies. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. and can also provide access to different customer segments who may not usually buy the products at all . Gap had a significant advantage over pure online players in attracting customers and building critical mass.thereby increasing the company's reach.
According to Timothy Koogle. advertising. Yahoo! was founded by David Filo and Jerry Yang. who started an online guide as a way to keep track of their personal interests on the Internet.8 CASE STUDY: YAHOO! 6.1 Company Overview In April 1994. from e-mail services to stock quotes and much more. 78 79 Interbrand (www.The Company. lies the directory . all in a single location. Yahoo! has since morphed from an ordinary search service into a global Internet communications. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. The company's global web network includes 23 world properties outside the US.8.interbrand. the site was receiving 1 million hits per day. household and business user reach. and the number of websites continues to explode.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.D students at Stanford University. 1998 (www. and is one of the few Internet companies to turn a profit early in the development of the Internet.8. CEO of Yahoo!. Yahoo! offers a range of supporting services that add value.businessweek. the amount of information.com) . There's nothing in the real world to compare to that79". "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! is a leading guide in terms of traffic.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition At the core of Yahoo!'s value proposition.Business Week. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.com) 98 . As such. As the first online navigational guide to the web. The Strategy. The concept exploded (through word-of-mouth) and in less than six months. 6. two Ph. September 7. The Stock' .see Appendix A 'Yahoo! .
Yahoo! Shopping launches personalised shopping service 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.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 .8.Yahoo! unveils Yahoo! Finance Vision . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.600. Their goal is not to list everything under the sun. to allow access.Receives $1 million in venture capital funding from Sequoia Capital $33.000 shares at $13. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.com. 99 .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb. Palm computers).TIMELINE AND MAJOR MILESTONES 1994 April .7 YAHOO! .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. regardless of platform (i. and unveils Yahoo! Digital Introduces Bill Payment services .com allowing them to offer person-person payment solutions .. .Yahoo! forms agreements with Palm Inc. is the way it has structured and displayed information.8).Site goes live September . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! acquires Arthas. to provide web-based services to PalmTM handheld computers . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. mobiles. More recently.Yahoo! Launches Business-to-Business Marketplace .The 7Cs Framework Convenience Central to Yahoo!'s success.3 Sources of Value .8 million IPO (2.e. TVs.
Their thrust has been to provide valuable content to customers. well structured. 100 .8 . while providing partners access to a large customer base. from stocks and sports results to weather and air fares. By tailoring the information to users' preferences. and has been at the heart of Yahoo!'s growth and development. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. They have formed multiple alliances and partnerships with leading online companies such as Amazon. the partner. and more importantly.9). This creates a win-win situation as its satisfies Yahoo!. easy-touse.com and CDnow. ranging from daily news and weather reports to road maps and books. 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. the end-user. Yahoo! has increased customer loyalty and retention rates. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. and is similar to a custom tailored newspaper (Figure 6.
fax. It keeps customers on the site for longer periods. where groups of people with shared interests can communicate through chat. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. message boards. and the nature of the navigation business. one-to-many. In addition. to provide its customer base with access to useful links and content. Yahoo! spends more on customer support than most companies. and contributing to their reputation as a quality service provider. Yahoo! acquired GeoCities. Customer Care Yahoo! responds to customer inquiries via e-mail. reinforcing the brandcustomer relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. and e-mail. telephone and even traditional mail. or to make it their home page. and plans to incorporate other features such as online chat to facilitate communications. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. Community Yahoo! has developed customisable web communities called Yahoo! Clubs.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. In 1999. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and is driving Yahoo!'s multiple partnerships and alliances. 101 . Connectivity Connectivity is Yahoo!'s core product.9 . and many-to-many. and encourages them to return frequently.
82% of Internet users and 23% of people intending to go online.8. This was especially important. Yahoo!'s brand-building success starts with its name. Yahoo! avoided characterising itself as a technology-oriented company.com) 102 . It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. Given the unease with which the average consumer approaches technology. Yahoo! maintains close contact with customers. At the time this was considered a breakthrough. Yahoo! would be one of the first sites that they visited. and according to Intelliquest80. Intelliquest. While Internet companies were targeting existing Internet users through the use of online promotion methods. These near surfers represented (and still do) a large and fast growing group and. (www. Yahoo! extended beyond this to use traditional offline media. As a result. In 1996.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". and an inherent friendliness. recognise the name Yahoo!. as experience surfers tend to be loyal to their search engine. TV commercials and radio spots during drive time. Yahoo! aggressively promoted the site through public relations. and it formed a critical link in Yahoo!'s brandbuilding strategy. which conveyed the brand's irreverent personality.intelliquest. and its implications of a good time. Their strategy was to target "near surfers" . therefore. 80 'Web Survey Shows Yahoo! Tops'. by building a recognised brand name. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . 6. an approachable nature. Yahoo! also encourages customers to e-mail ideas and feedback. and through communications via email.people who are not yet online but are likely to use the Internet in the near future.a sense of irreverence.4 Brand-Building Strategy Yahoo! is a marketing machine.
In addition. as well as TV shows (Ally McBeal. T-shirts. They even have a barter deal with the San Francisco 49ers. to create Yahoo! Internet Life.it must reinforce the image of the company as 'a service that is fun. According to Karen Edwards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. including backpacks. Visa and MCI. a monthly magazine guide to what's new on the web and it has co-branded products.Yahoo! Press Release. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . stating that "if we wait to hear about it in the news. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . p. 1997 (www.with its name being plastered on everything. 1999. sailboats. August 26.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! has paid little for this exposure. ER) and Hollywood movies. May 3. new services and customised features highlight their ability to relate to customers' needs. Yahoo! has managed to cultivate high brand loyalty. the research shows that 73% of Yahoo! users bookmark the service . from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. and 76% turned to Yahoo! before visiting another search engine or navigational site. customers quickly discover its value and through a high quality experience (7Cs). which has been instrumental in establishing Yahoo! as a household name. Once customers access the site. According to a recent study.yahoo. Yahoo! adopted 'guerrilla marketing' techniques . breath mints. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. They also teamed up with publisher Ziff-Davis Co. it's too late. parachutes. and yo-yos. We need to be one step ahead in order to have a better service than our competition82". snowboards. Although this seems like a shotgun approach. Their innovation.Advertising Age. services and contests with well known brands such as Ben & Jerry's. organisers. a little wacky and inviting'. VP-Brand Marketing.higher than all other services81. s4 103 .
and first to go mainstream by advertising its name using traditional media. and has cultivated a reputation for excellence. and other search engines at the bottom of its search results page). s4 104 . May 3. while also associating Yahoo! with well known brands. alliances and acquisitions to provide added value services to their customers. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. to its simple design. Yahoo! has invested relentlessly in new services and marketing programmes. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. 1999.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. from its convenient and logical structure and display of information. they have carried out extensive partnering. GoTo.Advertising Age. its excellent customer service. As a result of all these factors. 6. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . while attracting new customers.8. p.6 Conclusion Yahoo! is one of the most successful brands on the Internet. with a large customer base and high levels of customer loyalty. VPBrand Marketing of Yahoo!. Yahoo! points them to its competitors by including links to AltaVista. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. HotBot. first to turn around an annual profit.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards.com. its choice of partners. To maintain its lead. In addition. have created a distinct brand identity that differentiates the brand and appeals to its target market. Yahoo! has built a strong brand. As the first online navigational guide to the web. In addition. their innovative promotional and guerrilla marketing techniques.8. These relationships have provided end-users with added-value. first to go public. if a user cannot find what it is searching for. Yahoo! has benefited from a first-mover advantage. They have maintained that lead through the creation of a high quality end-to-end customer experience. and its openness (for example. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". that have set it apart from the pack.
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
Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. ranging from online methods to traditional offline media. these companies must have an inherent understanding of their brand identity and core values. The most successful partnerships are symbiotic matches. these companies are creating even stronger value propositions. By distinguishing their offering and focusing on unique sources of value-added. but also provide added value to the brand community. particularly to secure content and widen reach to new customer segments and niches. 108 . In addition. and exclusive alliances can lock out competitors from valuable content or online real estate. whereby each party benefits from the other's expertise or skills. brands are harder for competitors to emulate. offering customers the best in quality. content. to maintain consistency. and convenience. leading brands have focused on building strong partnerships and alliances. to distinguish themselves from competitors. variety. while ultimately benefiting the end-customers. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. integrated customer acquisition strategies. As a result. a company can leverage the partner's brand and reputation to reinforce its own. Alliances and partnerships play an important role in achieving speed and momentum. as well as determine how far the brand can be meaningfully stretched to other products and market segments. before it fractures. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. Alliances with leading portals and popular sites is important to generate traffic and brand visibility.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and have developed multifaceted. and by partnering with well-known brands.
109 . Many strong online brands were also early-movers on the Internet. These brands are accumulating knowledge about customers. and benefited from additional hype. and are continuously adding new services and functionality to their sites. As Internet penetration exploded. and traffic. and develop a detailed understanding of their customers' needs. and differentiating it from other brands. and by focusing on customer needs. In many cases. the innovations are the result of the company's ability to data mine its vast database of customer information. giving the brand an edge. to create new services and content that satisfy customer needs. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. customisation and customer care. through past transactions and solicited input. 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. the company benefits from the buzz. By leveraging unique customer information. these well-publicised brands also took off. these innovations are difficult for competitors to reproduce. The challenge then lies in keeping up the momentum. A first-mover advantage is an important asset for an online brand. and it can acquire customers while it is still inexpensive to do so. and extensive word-of-mouth due to its novelty. by providing better services. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. • 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. that comes with innovation. are leveraging this customer knowledge (learning) to nurture relationships (relate). and it aligns itself with the most influential venture capital sources. By getting to market early.
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. they are equally important in business markets.value remains (and always will) the basic building block for every successful brand. expand the brand experience to meet customers' expectations in the online world. would represent an exciting opportunity for further research. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. Yet while everything is being turned upside down. with the emergence of wireless access and new platforms. 110 . an in-depth analysis. They have an established brand. and a physical presence (tangibility) . clicks-andmortar brands are providing customers with true added-value. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. one component remains unchanged . Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. They possess critical assets that give them an advantage over pure online start-ups. building relationships and satisfying needs. the concepts.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Therefore. Nevertheless. Having established a strategic perspective on building online brands. drawing on several case studies from business markets. while reaping the benefits of lower customer acquisition costs and extended reach. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. 7. In addition. but at the same time. however. Brands and brand-building tools tend to be associated with consumer markets.factors that clearly differentiate them from pure players. established customer relationships. Through extensive and seamless integration. The Internet has radically changed the business and competitive environments. Nevertheless. In doing so. there has been a limited time horizon to evaluate the durability of Internet brands. As such. tools and key factors outlined in this dissertation are also applicable to business markets. ongoing research would be necessary to build on the findings of this dissertation. established fulfilment systems and infrastructure.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
147 9.596 3.464 3.895 2.603 5.648 1.781 17.361 1.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.interbrand.319 1.423 2.225 11.643 3.262 1.602 4.329 4.595 17.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .155 7.132 15.985 2.283 4.502 33.804 2.275 30.806 2.550 12.281 11.792 3.510 8.184 1.694 17.894 14.193 112 .681 2.021 26.634 1.052 6.845 56.048 20.Interbrand's Ranking of the Top 60 Brands (www.310 11.568 3.766 14.404 4.781 33.101 9.313 2.654 43.181 21.761 1.422 1.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.143 2.830 14.932 4.231 24.043 8.076 3.806 11.527 3.197 32.231 12.909 7.
(Harper & Row). whereas entrepreneurial Internet companies must focus on 'managing for change'. & Waterman. and reorganise as appropriate. global competition. and the emergence of a knowledgebased economy. constantly innovate. activities. all their operations. Internet companies must be able to move at warp-speed. T.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. As a result. 1982 113 . showing how they are interrelated. They must move quickly to capture new opportunities. with the fast pace of technological change. * Peters. customer empowerment. and structures are aligned differently. respond to competitive and market dynamics. the informal management style and the constant strategy re-calibration. and as the business environment changes. all these dimensions must change accordingly. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. As such. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. However. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. R. It is critical that all these dimensions come together and are re-enforcing. 'In Search of Excellence'.. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. commit and deploy resources.
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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