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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
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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
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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.The 7Cs Framework 6.8.com 6.1 7.1 Company Overview 6.The 7Cs Framework 6.6 184.108.40.206 Company Overview 220.127.116.11 Brand-Building Strategy 18.104.22.168.5 Conclusion Case Study: Yahoo! 6.6 Conclusion Case Study: eBay 6.8.5 Conclusion Case Study: CDnow 6.The 7Cs Framework 22.214.171.124 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 .7 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition 126.96.36.199.3 Sources of Value .5 Conclusion Case Study: Gap.5 6.5 Other Factors that Contribute to their Brand Leadership 6.7.8.The 7Cs Framework 6.6.8 Case Study: Boo.1.4 6.6.com 6.4 Brand-Building Strategy .The Failure of Boo.3 Sources of Value .3 Sources of Value .1 Company Overview 188.8.131.52 Sources of Value .1 Company Overview 6.2 Value Proposition 6.com 6.7.4 Brand-Building Strategy 6.Extensive Integration 6.4 Brand-Building Strategy 6.5.1 Company Overview 6.2 Value Proposition 6.4.3 Sources of Value .5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 184.108.40.206 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.2 Value Proposition 220.127.116.11 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.
2 Figure 3.2 Figure 4.com's Website Overview of Boo.6 Figure 6.9 Figure 6.4 Figure 4.7 Figure 6.6 Figure 5.com's Website Amazon.1 Figure 6.5 Figure 6.4 Figure 6.7 Figure 5.5 Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.2 Figure 2.5 Figure 4.1 Figure 5.6 Figure 2.7 Figure 5.6 Figure 4.1 Figure 1.com's Associates Programme Overview of BarnesandNoble.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .4 Figure 4.1 Figure 3.2 Figure 2.4 Figure 2.8 Figure 6.7 Figure 2.2 Figure 5.2 Figure 6.3 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 4.1 Figure 4.8 Figure 5.3 Figure 3.3 Figure 5.3 Figure 2.8 Figure 3.1 Figure 2.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .5 Figure 5.4 Figure 5.
Timeline and Major Milestones Gap.com .2 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones eBay .1 Table 6.Timeline and Major Milestones CDnow .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones Boo.1 Table 6.7 The Emerging Brand-Building Environment Amazon.3 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .6 Table 6.4 Table 6.Timeline and Major Milestones BarnesandNoble.com .com .5 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
aggressive Internet start-ups have emerged. Supply chains are being rethought. and business models revamped. customer affiliation and level of sales.mckinseyquarterly. Internet companies such as Yahoo!.an explosion that is also a harbinger of how business will operate in the future. Amazon.com) 7 .g. while providing new tools for promotion. and is triggering the need for new brand-building strategies and tools.YEARS TO REACH $100 MILLION IN SALES 6 5. relationships. as they face each other through an electronic connection. As such.com's range of 4.1 OVERVIEW Over the past few years.com1 Amazon.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. This is creating new challenges and opportunities. Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.1 3.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. America Online (AOL) and eBay have been able to build powerful brands in a few years.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.9 2.5 2.com. there has been an explosion in the online world . the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. interaction and relationship building. In the midst of this. The Internet also represents a fundamental shift in how buyers and sellers interact.0 1. the Internet is changing fundamentals about customers.com noble. It is empowering customers with more options and more information to make informed decisions. creating strong brands that are putting established brands at risk. that these Internet start-ups have achieved.2 3. whereas it has taken decades for traditional companies to achieve the client base. FIGURE 1.9 3. products and services reconfigured. Figure 1. service and brands.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. As such.5 million book titles).1 . McKinsey Analysis (www. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com Source: Securities and Exchange Commission Filings.
the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. & Overdorf. 1 2 3 Christensen. 1997.. Given the tremendous clutter in today's e-commerce marketplace. A New Class of Netizen is Settling Right In' Business Week. In light of this. L. P. brands are even more critical as customers have little to go on other than a recognised brand. and Novak. building awareness. 'Meeting the Challenge of Disruptive Change'. 'Internet Communities . who are essentially intangible.April 2000. 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. M. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. For pure online players. companies lack a coherent framework and concrete methods to build an online brand. 'How to Acquire Customers on the Web'. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. C. p. 66-76 Hoffman. As such. as the need to build brand loyalty online is reaching a peak. May-June 2000 Hof. March . D.66 8 . that extends the brand-customer relationship beyond a single transaction. T. turning browsers into buyers. P.. S. found that 57% of Internet users go to the same sites over and over again. and the high cost of acquiring online customers2. Therefore. Harvard Business Review.. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. rather than drifting from site to site3.Forget Surfers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. Browder. However. attracting traffic or 'eyeballs'. Harvard Business Review.. May 5. pp.. A Business Week / Harris poll. R.. Volume 78 Issue 2. & Elstrom.
2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and to identify new sources of value. 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. A review and analysis of leading academic thinking will be used to explore these issues.2 . tools and strategies to build brands on the Internet. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. supported by secondary data related to aspects of online business from accredited and published sources.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . 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. This is based on the outcome of the primary research (in-depth case studies). • To explore how the Internet is changing the brand-building environment.
traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. The combination of cases provides a useful and practical insight into brand-building issues and problems.com). strategy and economics. relationship management. These are further refined using the insight obtained through the case studies. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. marketing. certain key factors are highlighted in their relevance to the dissertation. 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. eBay and Yahoo!). the literature review draws on leading academic thinking in more established areas such as brand management. Hypothesis (Framework): This is based on the literature review and secondary data. there is more work in popular rather than academic literature.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Consequently.com. and factors that contribute to a brand's success. as well as a recent Internet failure (Boo. and is used to provide insight into some of the factors that contribute to the development of successful brands. to provide an in-depth analysis of the psychological and social dimensions of brands.com and Gap. nor desire. 10 .com). The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. The absence of academic literature on Internet branding posed a major obstacle. CDnow. however. While there is no attempt. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. this also highlights the true value of the dissertation. Conclusion: Discusses the key findings and areas for further research.
11 .4 STRUCTURE The next chapter. Chapter 7. as well as the interactive approach to attracting customers and building loyalty. The limitations of the Internet in terms of brand-building are also discussed. This chapter sets the context within which online brands must be built. summarises the key findings. 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. and outlines the opportunities for further research. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. The nature of brands. Chapter 6 examines the brand-building efforts of seven companies. Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. by outlining the impact of the Internet on the business and competitive environment. their purpose and value are discussed. Chapter 3 explores how brands have traditionally been built. The final chapter. Chapter 2. provides an analysis of leading academic literature in relation to branding.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
unravelled to reveal the nature of brands and their reason for existence. whether online or offline. R. if properly managed. D. This value stems from the products and services that companies create and bring to the market.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 2. which. 74 4 Clifton.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.).a brand is: "a mixture of tangible and intangible attributes. CEO of Interbrand Newell and Sorrell . (London: Macmillan Press Ltd. p.a leading specialist brand consultancy firm .1. 1996. E. A. creates influence and generates value4" This definition truly captures the essence of a brand. both for customers. these layers are Brands are made up of many layers and dimensions. These concepts are central to brands and brand-building. and they form the backbone of this dissertation. 'The Future of Brands'. and the importance of customer satisfaction and brand loyalty. Branding is about creating 'value'.. the brand's emotional benefits and its self-expressive benefits . (New York: Free Press). both to customers. but extends further to encompass added values derived from factors such as the brand-customer relationship. explaining the value of brands. FIGURE 2. 2000. & Maughan. vii 13 . and for the company.2 WHAT IS A BRAND? According to Rita Clifton. The chapter proceeds to describe the influence of brands on the buying process. p.see Figure 2. The concept of brand equity is outlined.1 INTRODUCTION In this chapter. and to companies.1 . symbolised in a trademark. and highlights the importance of brand management. 'Building Strong Brands'.
a 'set of expectations'. January-February. and a 'promise'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . T.the core product or service. which grows out of the cumulative memory and the experiences customers have of products or services. and services to customers. making their way into planning and strategy documents.Figure 2.a 'relationship'. Harvard Business Review. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. FIGURE 2.LAYERS OF A BRAND POTENTIAL BRAND AUGMENTED BRAND BASIC BRAND Name Service Design PRODUCT OR SERVICE Quality Credit & Terms Features Packaging Delivery & Installation Guarantees Source: Adapted from Levitt.86 14 . a 'reputation'. For some companies. benefits. brands are their most valuable asset. yet ultimately reside as consumer perceptions.of anything'.2. p.3 THE LAYERS OF A BRAND Brands are made up of four layers . As such. 'Marketing success through differentiation . The space a brand occupies inside a customer's head can create a 'mental' patent.. They start life as ideas. the basic brand. 2. the augmented brand and the potential brand . It is a company's promise to consistently deliver a specific set of features. 1980. Brands are richly endowed entities.2 .
this is the case with all Internet companies. even when the alternatives are substantially cheaper or more readily available (e. term. with supplementary products and services (e. information. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. The Basic Brand The basic brand consists of the "name. 8th Ed. Service Brands (intangible) are much less numerous than their product counter parts. Essentially. P. symbol.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. & Control'. Southwest Airlines and Amazon. such as in retailing. Implementation. However.com are examples..g. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. Certain service brands. Planning. most products and services cannot survive on functionality alone as this is usually matched in time. quick delivery) that enhance the customer’s total purchasing and use experience. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. or a combination of them. The most common barrier to competition is building a brand.Analysis. sign. but the brand itself is the store.g. Coca-Cola.The Gap stores. preferring things they can see and touch. They are the historical core of branding because they are the most prevalent. 'Marketing Management .4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. In fact. not the products it sells . as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. 2. this should support the offering's performance and differentiate the brand from those of competitors. and because they most readily come to mind when consumers are asked to recall brands. 15 . 5 Kotler. Kodak. These products and services add value and make the offering much more difficult for competitors to emulate. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. Levi's). (Europe: Prentice Hall) 1996. or design. actually sell products. customers buy products to meet certain functional needs.
5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Consumers differ as to which product / service attributes they see as important. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. FIGURE 2. These beliefs depend on their previous experiences with the brand. either through heightened attention or through an active information search. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). 1996. P. and Control'. and selective retention. Through gathering information.3). it is important to clarify customers' underlying buying behaviour and the buying process.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. it is critical to understand what attributes consumers value. selective distortion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. two factors can intervene between the purchase intention and the purchase decision .. In the evaluation stage. This can be triggered by internal or external stimuli (advertisements). and the effect of selective perception.Analysis. Implementation. the consumer learns about competing brands.. Consumers develop a set of brand beliefs about the attributes of competing brands. p.attitudes of others and unexpected situational factors (Figure 2. 16 . and pay the most attention to the brands that will deliver the sought benefits. The buying process consists of five stages (Figure 2. (Europe: Prentice-Hall) 8th Ed. However. Planning.4). 'Marketing Management . and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Once aroused.3 . Therefore.194 The process starts when the buyer recognises a need. a consumer will be inclined to search for more information.
locking out potential competitors. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. If perceived performance and quality exceed their expectations then they are satisfied. as these services are intangible and therefore.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. 17 . and a preference for recognised brands they can trust. their negative attitude may influence the consumer's purchase intent or vice versa. A consumer tries to deal with this by gathering information from friends. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. postpone. even delighted.the customer will be highly satisfied. they will evaluate their level of satisfaction . If performance falls below their expectations. Customer satisfaction and loyalty are essential to creating successful brands. word-of-mouth. These expectations are formed through a combination of past experiences. advertising and communication. or avoid a purchase decision is heavily influenced by perceived risk. they will be dissatisfied and look for alternative brands in the future. A consumer's decision to modify. customers make decisions purely on the basis of their expectations. somewhat satisfied. After a consumer has actually purchased the product or service. Customers' expectations are particularly important when dealing with services. Expensive purchases involve some risk taking. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. and especially important when dealing with purchases made through the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. or dissatisfied with the purchase decision.
This satisfaction encompasses the whole experience and not just a company's products or services. 'Growing the Trust Relationship'. Johnson & Johnson.Harvard Business Review. Federal Express. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. p. Marketing Management. Trust is critical for a brand's success. Saturn.5. Nov-Dec 1995 Hart. T. Nov-Dec 1995. FIGURE 2.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Hewlett-Packard. E. The customers at the bottom end of the scale are "terrorists" . Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. and Johnson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. W. & Sasser. Customers that are passionately or emotionally loyal are those that have built trust in a company.Harvard Business Review. E. C. & Sasser... At the opposite end of the satisfaction spectrum are "apostles" .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. and believe that it will always act in their best interest.those who actively attack the brand telling others not to buy from the company. T... Spring 1999 18 . Southwest Airlines and Xerox7.. 'Why Satisfied Customers Defect' . 'Why Satisfied Customers Defect' . 6 7 Jones. 91 Loyalty is derived when customers are continuously satisfied over time. M.Figure 2. D.customers who are satisfied and loyal and talk favourably about the brand .
This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. emotional loyalty is born out of a consumer's personal relationship with a brand. 'The One to One Future'. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. M. D.. 1993 McWilliam. Harley-Davidson motorcycle clubs).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. Spring 2000 19 . 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). There is also clear evidence of this on the Internet.they provide good word-of-mouth and are the best salespeople for the product / service 2. 8 9 Peppers.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways.Sloan Management Review. In this way. Emotional loyalty can be also created through the formation of a strong user community around the brand. Firstly. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. & Rogers. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. 'Building Stronger Brands through Online Communities' . 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.com.g. G. consistent orders Satisfied customers are the best advertisement .
Emotionally loyal customers build a sense of trust and two-way commitment with the brand. there are brands that customers perceive as acceptable and would not resist buying. A stronger brand enjoys a high degree of brand preference over competing brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. whereby customers would be unwilling to substitute it with competitors' offers. S. 2.6 .8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand.. 343-373. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). FIGURE 2.7). Journal of Consumer Research. and understanding the needs and buying processes of the target market is essential. However. pp.7 . 20 . FIGURE 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. March 1998. which goes well beyond the satisfaction of a specific need. there are brands that are unknown by most buyers. Beyond this.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. a 'powerbrand' tends to have a high degree of brand loyalty. almost irreplaceable bond as well as potentially to the negative feelings of betrayal.
The major brand assets are brand loyalty. and relationships with distributors and strategic partners.8. 1991 21 . 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. strong brand associations.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . perceived quality. FIGURE 2. name awareness. According to David Aaker (1991).8 ... (New York: Free Press). The benefits of each are outlined in Figure 2. (New York: Free Press). D. 1991 10 Aaker. '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. and other assets such as patents.Create Awareness . D.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". which is the value of the brand over and above its commodity value. trademarks.
11 12 Kapferer.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and the number two twice the share of the number three12.To have confirmation of your self-image or the image that you present to others • Continuity . 'Strategic Brand Management'. to its communication • Ethical . J. & Tellis.To be clearly seen.Satisfaction linked to the attractiveness of the brand.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.Typically a brand leader obtains twice the market share of the number two brand. R.. 1986 13 Golder. 22 .To be sure of buying the best product in the category. N. to make sense of the offer. the best performer for a particular purpose • Characterisation ..1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.To save time and energy through identical repurchasing and loyalty Guarantee . • Brand Leverage . (London: McGraw Hill). 158-170. to quickly identify sought after products • • Practicality . to its logo.. in the following ways: • Brands. pp. brands perform several functions that add value and customer benefits: • Identification .. J. G.8. P. & Downham. market share and profits . production and marketing.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. 1992 Worcester. 'Consumer Market Research Handbook'. (New York: Free Press). 3rd Ed.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . Premium pricing increases revenue. The brand leader is the most profitable and all beyond number two are unprofitable13. Journal of Marketing Research. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'..2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . May 1993.
2. • Motivating Stakeholders . maintain good price levels and generate strong cash flows.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e.The product life cycle applies to products.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . it can build a strong market share. • Avenues for Growth . • The Brand Barrier . In trying to estimate the monetary value of brands.g. The next chapter describes the process of how brands are built. Johnson & Johnson with Tylenol). in turn. fashion or prevailing market conditions.g. The brand can also be used to penetrate new markets. companies such as Interbrand (see Appendix A). • Brand Loyalty and Beliefs . and Young & Rubicam have created complex formulas. not brands. They also tend to elicit community and government support.Strong brands are more attractive to investors. but there remains an ongoing controversy about how accurate and meaningful these measures are. This. In addition. brand leaders can exploit their superiority in the market (e.Dominating a niche market is usually more profitable than being fifth in a large market.Companies with strong brands attract good recruits. Companies can maintain a brand while modifying the underlying product to account for new technology. 23 . drives up share price and provides the basis for future growth. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. Coca-Cola “the real thing”). the tools that are used. When a company creates this type of customer preference and loyalty. and the characteristics of successful brands.Brand leaders usually have the financial strength to fend off competitors.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
To entice trial and repeat purchase requires triggering mechanisms. which are created through advertising. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. promotion. If the offering is developed properly. This chapter spells out the traditional brandbuilding process.1 . the next step is to get customers to try the brand. and keep it turning. and direct marketing.1 INTRODUCTION Building a strong brand is a complex task. it should provide a satisfactory experience and lead to a willingness to buy again. confidence and brand equity are built. The major characteristics of successful brands are also reviewed.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 . FIGURE 3. highlighting important factors that contribute to the success of each step along the way.1. selling. Once this has been established.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. public relations. This is illustrated in Figure 3. brand awareness. 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.
Similarly. it will never attract a strong client base. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. unless differentiation and awareness can be developed. In this way. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. the brand can elicit feelings of confidence that it is of higher quality than competitors'. Without a good product or service.2). FIGURE 3. it is impossible to build a successful brand. a company must develop a strong understanding of who their potential customers are. a compelling value proposition is the combination of an effective product or service (P).a strong offer that a potential customer would find compelling and interesting.each is essential. and added value (AV). a distinctive brand identity (I). As such. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . In order to do this.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.2 . 26 . The value proposition must be continuously re-evaluated to respond to changes in the marketplace.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.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition .
(Europe: Prentice-Hall). faith in brand generates satisfaction in use. providing confidence and incentive to trial. which they perceive as meeting their needs. For pharmaceuticals. the pace of technical change.brands frequently acquire an image from the type of people who are seen as using them. mean that buyers look for short cuts. Lexington Books). 1998. P. it is more likely to work effectively for them. Hewlett-Packard.In many situations a strong company name (e. Kellogg's) attached to a new product will transfer positive associations. influenced by brand values. Customers choose brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 1986 27 . these needs are as likely to be about satisfying self-actualisation or esteem needs.g. 169 Jones. Brand values derive from five major sources15: • Experience of Use .the design.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. which are additional to those based upon real performance. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. cosmetics and high-tech products. • User Associations .if a brand provides good service over time. • Belief in Efficacy . Gillette.3. 2nd Ed. 14 15 Doyle. J. as they are to be about satisfying basic physical and economic needs14. • Brand Appearance . Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. the number of competing alternatives and the large variety of advertising and selling messages. In today's affluent society.in many cases. it acquires added values of familiarity and proven reliability. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. • Manufacturers' Name and Reputation .. if customers have faith that a brand will work. or to gain a sense of belonging. values or wealth.. layout and appearance of the brand can clearly affect preference by offering cues to quality. People use brands to express their lifestyles. pp. 'Marketing Management and Strategy'. Coca-Cola. interests. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. industry endorsements and newspaper editorials. Sony. The large number of decisions. MA. P.
features. friendly).3. its reflection (e. which remains fixed over time. its personality and its image or self-projection . 'Strategic Brand Management'.g. colour scheme. prestige. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . • The Brand Theme . style or cultural differences from one country to another. type of spokesperson / customer image used to advertise the brand).3: • The Brand Core .. visual appearance.articulates the brand core in terms of the culture it conveys. and visual appearance). which depends on how the target market perceives the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. (New York: The Free Press). This may be different from the brand image. Themes include the physical appearance (logo.Figure 3. etc. and advertising.g. • The Brand Style . 1992 28 .the fundamental or genetic code of the brand.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. however the brand style and core tend to be less flexible. J. A company should seek to differentiate its brand through developing a distinctive identity.the way the brand communicates through its advertising. press releases. Brand themes are the most flexible element and will tend to change with fashion. 16 Kapferer. packaging. and the relationship expressed (e. glamour.
below-the-line activities. 29 . it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. It also facilitates consistency in the message being transmitted through presentation (e.how far the brand can be meaningfully stretched to other products and market segments. Finally.3 . website design.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. (New York: Free Press). 'Strategic Brand Management'. and through line and brand extensions. J.g. its strengths and opportunities. Secondly. structure and ease of use). 1992 The brand prism enables management to understand the brand. understanding the brand's core and style helps set the perimeters of brand extensions .. advertising.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.
systems.79-86 The Innovation-Adoption Model consists of: • Awareness . skills.Product and service features. Advertising and PR are common tools for achieving awareness. they must learn about it. 'Diffusion of Innovations'.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. This learning is called the adoption process17 .Customers consider whether the product / service will meet their particular needs. 17 Rogers. FIGURE 3. The value proposition must be communicated to entice customers to try the product / service.4.4 .The customer is satisfied and decides to make regular use of the product / service. E. Personal sources such as word-of-mouth from friends. (New York: Free Press). Price.Customers need to be stimulated to seek information about the brand's uses. the company must ensure that it develops the appropriate structure. management style. deliver and reinforce this value proposition (see Appendix B . The value proposition must then be articulated in terms of the 'marketing mix' . 'Diffusion of Innovations'. • Adoption ..often referred to as the '4Ps' . • Interest . • Trial .Figure 3. culture and staff needed to support. and the product / service's perceived performance. it should lead to satisfaction and re-purchase.The company has to create awareness of the brand.. pp. and its products / services. If the offering is developed properly. • Evaluation . pp. 1962. 1962. E. strategy (partnerships and alliances). features and advantages. Before potential customers can buy a product / service. (New York: Free Press).The McKinsey 7-S Framework). colleagues and opinion leaders become important influences at this stage.79-86 30 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. Promotion and Place (distribution strategy).
companies can increase the value of each customer.such as airline frequent flyer programmes. In this way.136-142 31 . but enhanced customer interaction through relationship building.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. while strengthening the position and value of the brand.. allowing companies to communicate regularly with their customers and customise their interaction. making them less likely to switch to a competitor.to move customers through the adoption process. 18 Berry.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. & Parasuraman. 'Marketing Services: Competing Through Quality'. providing insight into customers' needs and wants. encouraging evaluation and trial. multi-transaction relationship. Over time. Through building relationships with customers.g. the company may supply customers with special equipment or tools (e. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . companies can increase buyers' satisfaction. sales promotion. direct marketing. (New York: Free Press). this process enables an exchange of information. & loyalty / discount cards. Advertising and public relations can be effective in generating awareness and interest.advertising. 3. when each trusts the other to deal fairly and reliably. This information is a key competitive advantage. 1991. A. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. pp. Customer service is an important element of this relationship. • Structural Ties . software) to help customers interact with the company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. personal selling and public relations / publicity . Social Benefits . L. This focuses on establishing a longterm. companies have used the tools of the promotions mix . This is often referred to as Customer Relationship Management (CRM).for example. Internet linkages. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience.
As a result. • Unique Positioning Concept . The Internet provides the opportunity for companies to create compelling value propositions never before possible.Traditionally. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.Being first into the market does not necessarily bring success. pp. It often takes years to build up the added values. 19 Doyle.176-177 32 .6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. If the quality of the experience deteriorates.If the brand is not the innovator. when the brand has no competitors to rival its position. which will communicate the brand's existence. • Strong Communications Programme . companies have the opportunity to start building relationships with their customers. Without building awareness. It is easier to capture a share of the consumer's mind and build a customer base. 2nd Ed. 'Marketing Management & Strategy'. including: • A Quality Product / Service Experience . interaction and relationship building. brands were not built quickly. P. strengthening the brand further. and establish a trusting relationship. Once the framework has been established and the organisation configured to provide this proposition. advertising or promotional campaign. companies must actively communicate it to the target audience to entice trial. As such.Satisfactory experience is the major determinant of brand values.. and making it more difficult for competitors to emulate.a segmentation scheme. its function and psychological values. value proposition or augmented brand. 3. • First-Mover Advantage . but it makes the task easier.A successful brand requires an effective selling. while providing new tools for promotion. trigger trial and reinforce commitment to it. the brand is meaningless. then its position will be undermined.. • Time and Consistency . (Europe: Prentice-Hall). comprehension and intention to buy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. which will add value and distinguish it from competition. it has a profound impact on the traditional brand-building process. As customers build trust in the brand through satisfaction of use and experience.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. it must have a unique positioning concept . or if the brand is surpassed by superior offers from competitors. 1998.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
which contain hypertext and pictures. Hypertext allows information to be organised in a user-friendly way that is easily accessible. 4. In doing so. FIGURE 4. creating new challenges and opportunities.1 . In essence. This chapter provides an overview of the Internet and its defining characteristics.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. and a critical source of added value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Information is becoming a major part of the products and services that people buy. it offers a number of alternative channels that enable businesses and people to communicate.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. but in practice not in real time.1 INTRODUCTION The Internet is transforming the business environment.1. and the 'world wide web' (www) . E-MAIL Is the part of the Internet that most users use at present. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents.Figure 4. 34 . The three core channels include e-mail (the most common). 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. and provides the opportunity for dynamic interaction. it is a common technology platform that allows computing devices to communicate with each other. news groups and mailing lists.
the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). These qualities eliminate the barriers of time and space that exist in the physical world.24 hours a day. and deliver new products and services at low cost. the Internet lets individuals and companies build interactive relationships with customers and suppliers.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. • It Overcomes the Barriers of Time and Space . 7 days a week. These defining characteristics have fuelled its explosive growth. allowing both parties to identify each other and build one-to-one relationships . • It Allows for Two-way Communication and Interactivity . 4. The context of the Internet and certain key developments are highlighted in the Figure 4. which was intended to link military networks together. ubiquitous links to anyone. when the United States Defence Department developed the 'ARPAnet'.2 (Note: 35 . Graph is not drawn to scale).The Internet is a global network and can be reached from everywhere.not previously available with mass medium forms of communication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. By allowing for direct.2.this radically alters the process of interaction between communicating parties. These characteristics combine to create a very powerful medium. anywhere. The Internet can also be accessed at any time .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 . regardless of where the computer or Internet access device is physically located.
000. 1996 (www.000 1. as cited in 'E-Business Technology Forecast' .a PricewaterhouseCoopers Report.000.economist.000 100. 1998.000 1969: 10.000.3 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 1. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.Figure 4.2 . FIGURE 4.com) 36 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 10.3. 2000 Internet / ARPAnet was created Dell.
g.4 .com) 37 . and gateway services). offering inexpensive bandwidth.4. 2000 (http://cyberatlas.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .g.E-Marketplaces .Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . No.Content Aggregators . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.CyberAtlas Internet Statistics and Market Research. there will be an estimated 375 million Internet users world-wide. billing.). Reed. The emergence of open standards in development tools and at the network protocol level (e. 1996.Attractive infrastructure and middleware software .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.Low-cost networking alternatives . G.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. The McKinsey Quarterly.internet. making it more cost effective for software developers and other technology providers to create interoperable products. FIGURE 4. the momentum created by all these forces has created a virtuous cycle of growth.Cheap microprocessors & RAM . The development of critical processes (ordering. The growth in support services (e. increasing to 500 million users by 200220.High-powered servers . payment. As shown in Figure 4. etc. Easier access to these networks provided by point-and-click web browsers.Cheap bandwidth . TCP/IP). L.Higher PC penetration among consumers and companies . 'Electronic Commerce (finally) Comes of Age'.. hosting.. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. Multimedia development tools that can be used to create rich content.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .2 20 'World Online Populations' . web design.
FIGURE 4.eiu. April 13. as cited in the Economist Intelligence Unit (EIU). chat rooms.com) 38 .5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).5. communication and information tool. reveals the wide range of areas where people are embracing the Internet . to interacting (e.from communicating (90% use e-mail) and sourcing information. 2000 (www.g. These activities highlight the adoption of the Internet as an interactive.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.Figure 4. entertainment) and purchasing (37%) .
4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. The buyer and seller 'face' each other through an electronic connection.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. content. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. Instead there is a website. There is no need to travel to a physical location. and people. The main difference between the Internet and other electronic media (i. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. However. no order book. software. fax. projected by Gartner Group. April 2000 39 . FIGURE 4. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. telephone) is that the Internet goes beyond just enabling transactions. web browsers.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. and no cash register.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. they all project the value e-commerce transactions to grow at unprecedented rates.e.6 .
Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. At the same time. represents a level of efficiency and integration previously unattainable. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. 66-76 40 . Additionally.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. 'Meeting the Challenge of Disruptive Change'. pp. a number of sweeping impacts are identifiable: The Development of Electronic Intermediation The Internet is enabling companies to break through organisational and geographic boundaries to create new structures that link businesses 'virtually' (electronically) with customers.April 2000. Dell Computers). how they compete and how they serve their customers . Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. Yahoo!). Although the particular impact will differ between industries. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. the explosion of information is placing a premium on skilled information management. 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. operation (e. which are often disruptive to traditional business models21. This is threatening to undermine many old established brands. & Overdorf. partners and other corporate constituencies.g.g. through the use of extranets). and transforming traditional distribution channels. M.. New brands and business models are emerging to seize this opportunity. Volume 78 Issue 2. the Internet is sidelining the role of many traditional intermediaries. C.g.and revolutionary new business models are emerging. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. suppliers.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . For example. some of which look set to become the superbrands of the future (e. By allowing customers to talk knowledgeably and directly to suppliers.how companies operate. March . The Internet also facilitates the development and co-ordination of global activities (e. Harvard Business Review..
Now companies need to move at warp-speed. collaborate more effectively and ultimately embed organisational intelligence within processes. quick evolution and all the power. The Pace of Business is Accelerating With the fast pace of technological change. to capture new opportunities.Forrester Research. They can move from one supplier to another searching for the best prices. little loyalty. highest convenience and quickest satisfaction. the globalisation of business. the diminishing barriers-to-entry and the lower switching costs. 'Empowered Fruit Flies' . combined with the emergence of electronic intermediaries.forrester. products and services.in developing products. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. it also removes the geographical protection from competitors. This is forcing companies to become flexible and responsive to customer needs. the typical clock-speed at which companies need to operate has accelerated. and reorganise as appropriate. empowered customers.they can choose between traditional 'bricks-and-mortar' companies. Internet technology can be used to exploit collective learning and knowledge. constantly innovate. fierce competition. CEO of Forrester Research22. has resulted in a fierce competitive environment. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. online stores. getting closer to customers and ultimately staying ahead of competitors. commit and deploy resources. their organisations must harness knowledge . According to George Colony. or catalogues.. respond to competitive and market dynamics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. with no time. the development of a knowledge economy. 2000 (www. This. G. and the 24 x 7 environment. It also provides easy access to competitors' offers and allows customers to consider every available alternative. improving processes. 22 Colony. as they are just one 'click' away.internally and externally . allowing employees to share knowledge. as they have access to more information leading to more informed decision-making. these new highly informed customers are "empowered fruit flies". Customers have more options than ever before . ensuring the delivery of a satisfying customer experience. switching costs are much lower.com) 41 . As a result.
The opportunity of linking the complete supply chain 'virtually'. 1999 . In this way. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon.7. and partnering up with the best for the remaining activities. and multiple strategic alliances and partnerships. which highlights the typical structure and dynamics of an online company. Increasingly. linking companies with competitors and players from entirely different industries and business sectors. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves.com) 42 . linking companies with suppliers and customers up and down a pre-defined value chain. thus creating a 'value net23'. combined with intense competitive pressures. information. most Internet and e-commerce partnerships extend beyond this. when they want. companies can provide customers with a strong value proposition by offering them the best in quality. Examples of emerging information age business structures include flat versus hierarchical. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. However. alliances and partnerships have taken on a new level of strategic importance. achieve global reach and realise a new source of cost advantage.A Research Report by TeslaGroup.(www. how they want and with the levels of customer service they demand. supply chain cooperation. variety. Traditionally. As such. advice and convenience. it provides the opportunity to reach customers where they want. and the need for speed and flexibility have accelerated the unbundling of business systems. The extent of this partnering is illustrated in Figure 4. 23 'The Future of E-Business' . extensive outsourcing. It allows companies to improve customer service.teslagroup. companies have looked upon alliances only as a means of filling gaps.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. and most traditional partnerships were vertical.
while triggering the emergence of new brandbuilding strategies. 'Organising for e-Commerce' . competition is intensifying. many online companies are blending together the products and services of a wide range of companies. while making the offering hard to duplicate off-line. April 2000 In an attempt to provide a rich customer experience. The Internet is transforming every business to some degree.dot.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.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. This is the substance of the next chapter. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. tools and opportunities.a Boston Consulting Group (BCG) Analysis. Partnering with portals and affiliate web sites is important in driving traffic to a web site.7 . New opportunities for efficiency and co-ordination are emerging. & Stirton. 43 . This provides customers with added value.they are business issues.6 CONCLUSION The Internet and its strategic impact are not technological issues . G. the pace of business is accelerating and power is shifting to the customer. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.. S. D. 4. it is transforming the competitive landscape and brand-building environment.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
brands have been developed in an environment whereby a company creates a brand. J. 'Internet Portals' .. credit card numbers. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. Customers derive added value through the provision of information on the products or services they buy.Durlacher Research. many unnamed customers develop a 'relationship' with the brand. The limitations of brand-building on the Internet are also discussed.durlacher. the logic of the Internet cuts another way. they have never handled or seen (except on-screen). Traditionally. whereby the company can establish a dialogue and 24 Marathe. etc. In response. New strategies and tools for building brands on the Internet are identified. the intangible nature of the Internet. has placed greater importance on trust and security.names. May 1999 (www. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. People only tend to transact with sites they know and trust . in addition to providing added value. as well as on topics of interest related to the brand and product characteristics25. Generally. and projects it onto a third party intermediary (the media). and sites that understand the user's needs and preferences24.2 THE NEW DYNAMICS OF BRANDS Traditionally. The Internet.sites that provide a wealth of information and make comparison shopping easy. 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. offers interactivity.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. in most cases. 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. the Internet makes search and comparison much easier. Transactions on the Internet require customers to provide detailed personal information .com) 45 . However. In addition. including the interactive approach to attracting customers and building loyalty. This threatens to undermine the value of brands. people have concerns about sharing personal information. where the user feels a part of. on the other hand. On the other hand. and the fact that customers are buying goods that. addresses.
pp.. M. brand-building must focus on the end-to-end customer experience . & Dorf. January-February. TABLE 5. January 28. D..from the promises made in the value proposition. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. 151-160 46 .THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative.edu) 26 Peppers. However. this also poses a challenge as these relationships may take on a life and character of their own.. relationship building characteristics of the Internet. a company can listen.Fuqua School of Business. rather than simply speaking at customers. learn. Duke University. 'Is Your Company Ready for One-to-One Marketing?' . 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. . J. 'Adding Product Value Through Information'. understand and relate to customers.1. In doing so.Harvard Business Review. In maximising the customer experience. Prof. 1999. This creates the opportunity for companies to build stronger relationships than previously attainable. to its delivery to the customer. B. Rogers. service approach Customised The Internet gives companies control over all their interactions with customers and therefore..BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. 1997 (www. companies have to find innovative ways of leveraging the information and 25 McCann.duke.1 .
. companies must ensure that they provide a completely satisfying end-to-end customer experience. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer..pwcglobal. MayJune 2000 30 A Forrester Research Study. 27 'Electronic Business Outlook'. P. In fact. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. This is further reinforced by the fact that. as cited in 'Creating a High-Impact Digital Customer Experience' . and with customers holding all the power.A Mainspring Communication Report in collaboration with Bain & Co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. a disgruntled online customer tells 10 people about a poor experience30.com and www.word-of-mouth is the single most effective and economical way online businesses grow their sites. 2000 (www. Harvard Business Review. Zook..Research by PricewaterhouseCoopers / The Conference Board.due to more frequent shopping and larger purchases. . 1999 (www. - Loyal customers are more willing to buy other products from the company. 'How to Acquire Customers on the Web'.. March 17. - Repeat purchasers spend more and generate larger transactions . Baveja. Chu. customer acquisition costs are high. on average. unless they are selling high-price. For example.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27..com) 29 Hoffman. it could be argued that customer loyalty is even more critical online.org) 28 Rigby. S.. 'The Value of Online Customer Loyalty and How You Can Capture it'. and to recover their investment.. and some are spending over $50029. Repeat purchasing not only binds trust. 2000 47 . J. R. Rastogi. L. D. D. S. but also provides more opportunities for cross-selling.An A. . Therefore. T. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap.often. - Repeat customers refer more people and bring in more business .. These points stress the importance of online customer loyalty. high-margin items. companies need to retain customers so that they return to the site repeatedly.converence-board. This view is reinforced by in-depth studies carried out by Bain & Co. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . it is very unlikely that an online retailer can break even on a one-time shopper.bain. and Novak. C. & Hancock. Kearney White Paper. T.
as illustrated in Figure 5.1. G. Once the up-front investments are made (for research and development and technology infrastructure). the costs approach zero32.1 . 7th Ed. as the benefits of scale are overwhelmed by the disadvantages of size31. and in the case of information-based products.. and the value that each member realises. As a result.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. additional products. (London: Harper & Row). R. customisation for individual customers. However..4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. pp. and other features can be added or changed at low marginal cost. (also referred to as 'viral economics'). 1989. 'Positive Economics'. additional customers and transactions can be managed with limited fixed cost investment. 180-182 48 . where the value of the network.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. Similarly. FIGURE 5. increases disproportionately as more people join the network. each additional unit sold does not cost more than the last to deliver. this is not the case on the Internet. businesses and online communities that rely on connectivity can enjoy 'network effects'. Even more important.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. As the company builds a customer base and develops a relationship with customers.. advertising and referrals. link revenues 32 33 Melnicoff. With no competitors around. This makes it more efficient in improving product selection. FIGURE 5. direct marketing. enhancing the interaction. '5 Rules of the eEconomy'.A Publication by Andersen Consulting 'The State of Online Retailing' . 21 . delivering increased margin per customer . Outlook 1999. fulfilment • Defensible advantage against competitors SCALEABLE. its ability to track customer preferences and customise offerings improves.A Shop.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. R. including direct marketing. Nov 1998 49 .2 . M. No. being first into a market makes it easier to capture the consumer's share of mind.2. cross-selling and up-selling33. It also allows online companies to tap supplementary revenue streams. 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.org Study in collaboration with The Boston Consulting Group.Figure 5.
This. creating a potentially exponential growth (like a virus) in the message's visibility and effect. with a minimal budget and maximum effect.unless the leader makes a serious mistake. and "network marketing". and the cost of switching to an alternative brand becomes quite high. It is often referred to as "word-of-mouth". New marketing strategies. By the time a company has reached critical mass. such as 'viral' marketing. with its e-mail lists. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. in turn. larger sites can leverage more customer advocates to reduce customer acquisition costs. chat rooms and bulletin boards. This snowball effect favours first-movers. As a result. Word-of-mouth is a particularly powerful medium. Larger sites can also negotiate better supplier discounts or product placement fees. the value of the company rises exponentially with market share. and word-of-mouth even more effective. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. This is the logic behind some of the extraordinary valuations of Internet companies. When a company reaches 'critical mass'. Nov 1998 50 . 34 'The State of Online Retailing' . An expanding customer base enables retailers to amortise the cost of brand-building over a larger base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. commerce and distribution partners.A Shop. its growth curve relative to a new entrant is somewhat daunting. 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. The Internet. as once a strong lead is established. Given the connectivity of the Internet among customers.org Study in collaboration with The Boston Consulting Group. makes communication tighter. viral marketing is an effective tool in getting a message out fast. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. 5. As a result. the brand begins to take hold. web sites. leading to the exponential expansion of the customer base. "creating a buzz". the leader will pick up momentum and will stand to gain an insurmountable advantage . "leveraging the media". as it carries the implied endorsement from a friend. or until a competitor finds a way to change the game again.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.
000 subscribers within a few years of launch.000 subscribers every day. a company now owned by Microsoft. whether for communications or community.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. friends to visit it. and then propel the message even further to their own ever-increasing circles of friends and associates. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. where they have never carried out any promotional activities. In its first 1. and in doing so spread the word for Geocities. 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.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. In fact. A traditional print publication would hope to reach 100. sign up for their own free e-mail. eGroups and Geocities (both recently acquired by Yahoo!). and the message spreads organically. Today they are the largest e-mail provider in the world with over 40 million users. they tell all their 51 .com The classic example of viral marketing is Hotmail.1 The Case of Hotmail.com. When a user builds a website. saying: • "Get Your Private. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). seven days a week. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. they will have a powerful viral opportunity at their disposal.hotmail.5.5 years. but Hotmail signs up more than 150. and they created a subscriber base more rapidly than any company in history. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Geocities enables people to create personal websites for free.com was one of the first free web-based e-mail services. Hotmail acquired over 12 million subscribers. • Each new user becomes a company salesperson. Free Email at http://www.
the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.An A. D. J.An A. As 35 36 'Creating a High-Impact Digital Customer Experience' . 30% of potential customers leave sites because they cannot find what they are looking for. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. and 66% of people who start a 'shopping basket' fail to complete the transaction37. T. 2000 (www. Kearney White Paper. 'The Value of Online Customer Loyalty and How You Can Capture it'. 2000 'The E-business Technology Forecast' . S.3). .A PricewaterhouseCoopers Report.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .com) 52 . Zook.bain. R. FIGURE 5. Rastogi. Sites that are difficult to use can cause frustration.. 2000 37 Rigby.. Promotion. T. In essence. The customers' ability to access and display information rapidly is extremely important36. & Hancock. Place).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Chu. S. Price.. Baveja...3 . making customers 'click off' to another site..6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. Kearney White Paper. In fact.. C.A Mainspring Communication Report in collaboration with Bain & Co. March 17.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. online companies have the opportunity to provide rich. which can enhance the company's value proposition. FIGURE 5. 1999 (www..com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. ease-of-navigation. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. CIO Magazine. whereas a slow response time and site downtime will have a significant negative impact.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc.4. October 29.4 . With almost infinite display space and inventory capability. ease-of-use.businessweek.businessweek. as cited in Business Week Magazine. and fast response times are among the most important factors in establishing web brand loyalty38. 29th October 1999 (www. T. 'Sticky Business'. as cited in Business Week. expert insights. and a wide range of products. up-to-date information. 38 39 Cognitiative Inc.com) Davenport. February 2000 Issue 53 .
as well as through loyalty programmes that provide targeted benefits.forrester. A.com) McWilliam. even if they purchase offline.Sloan Management Review. and organise live events. G. or prior transactions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. which is facilitated by a combination of factors (Figure 5. 'Real Profits from Virtual Communities' . S. Other content includes community-generated content. 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). based on profile information. & Bluestein.5)..g. 'Building Stronger Brands through Online Communities' . demographics.. An online community offers a compelling way to entice customers back to a site. Community Online communities are emerging as new gathering places for consumers with similar interests (e.The McKinsey Quarterly. it needs a critical mass of members42. Online sites can track a customer's purchase history and modify its service accordingly. use bulletin boards. 40 41 Morrisette.. W. Members can interact in chat rooms. For a community to work. On the other hand. K. iVillage and Geocities). It fosters a sense of belonging41 among the members. 54 . share information and access a wide range of services. which enhances the user's online experience. No. and nearly 20% use it for post-sales support. J. 3. Spring 2000 42 Armstrong. Clemmer. 1995. According to Forrester Research40. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. Often.. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).. Customisation Customisation involves tailoring the presentation of a web-site to individuals. 31% of online consumers use the Internet for obtaining product information. These sites allow members to interact with one another. 1999 (www. Customisation creates the feeling of a one-to-one relationship. An important contribution of these communities is that they provide members with a medium to communicate with each other. and advertising (if it is relevant and useful).A Forrester Research Report. & Hagel. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. . visitors should not be engulfed with too much information.
Companies can provide a selection of related links that complement the site's purpose and value proposition.www.brand-name. March 1998.. 'Making Real Sense of Virtual Communities' . Once customers know of a site. M..6). they opt to input the URL (Internet address .. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. Site-tosite connectivity focuses on connecting users to other relevant sites. 55 .com) directly into the browser and access the site immediately.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. Mulcahy. 343-373. This is similar to placing offline stores in high traffic areas.A PricewaterhouseCoopers Study. 43 Fournier. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.. O'Donnell & Gupta. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. Journal of Consumer Research. S. as well as attracting traffic from other sites. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. when membership in the brand's community becomes an end in itself43. allowing customers to deepen their experience with a brand and build more personal connection. and can create emotional loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.5 . 1999 Communities enhance the speed and value of information sharing. A. C. pp.
Therefore. 45 MarketWatch. events and subjects of interest to the customer. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. news up-dates. and online surveys. Customers share security and privacy concerns. (www. customer support at all stages of the interaction is important. live chat. as well as features such as gift-wrapping. Other tools such as bookmarking the page can also facilitate connectivity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. In addition. It is important in building relationships. and can be provided through e-mail. as well as informing and reminding customers of special offers. customer care activities can involve providing a variety of payment. The development of loyalty programmes. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. toll-free telephone numbers. serves this purpose and helps to build customer loyalty. and FAQ pages (Frequently Asked Questions) to solve problems.marketwatch. which provide targeted and unique (customised) benefits to the customer.com) 56 .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.6 . activities. Communication can be tailored to specific user interests and should allow for two-way interaction. delivery and return options. Customer Care Online customers often require assistance and reassurance. online chat.
Trial. 180-183 (www. e-mail notifications and banner advertisements.7.8. M. modified to take into account of the interactive dynamics of the Internet. 'Marketing to the Digital Consumer'.. Interest. FIGURE 5. Evaluation.mckinseyquarterly. This model consists of five stages .Awareness. The company must build awareness and communicate its value proposition to its target customers. McKinsey Quarterly. 1996.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. visibility relies solely on Communication. R. Waitman. No. Engage. This is more difficult online than offline. S. Learn and Relate. links from directory searches (Connectivity)..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.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. and bring people to the site for the first time. 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 ’ .2.4 . McQuade.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.Attract. Adoption). Magazines. A.. including affiliate programmes with other websites.) to online tools. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Therefore. Newspapers. because there is no physical presence. & Zeisser. Figure 3. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.7 .. etc. billboards. Retain. The mechanisms to communicate range from traditional media (TV. pp.
5) 2. Fig.8 4. The key factors at this stage are Convenience combined with interesting Content. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. Attracting customers is only the first step in building online brands. multiplied by the expected rate of transactions. discounted over the expected duration of the brand-customer relationship.Economist Intelligence Unit 2000 (www.8 .3) is useful to ensure that a company develops a distinct and consistent brand identity.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 3.WEBSITE PROMOTION METHODS . Creativity is also an important factor in gaining attention in today's cluttered marketplace.4 4. 3.6 3.0 3. it is important to quickly engage consumers' interest before they move on.4 3. as cited in 'Targeting Consumers via the Internet' . Kapferer's Brand Prism (Ch.2 4. Companies then need to engage customers to obtain their interest and participation.5 3. 58 .7 4.ebusinessforum.1 3.3 2. 3. Engage With the multitude of choice available on the Internet.3 Source: Forrester Research.com) The most effective methods are direct e-mail. affiliate programmes.4 3. 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.
9). attitudes and behaviour). Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. a company can create value by providing a personalised online experience. and forge closer relationships than any offline operator. such as groceries and convenience goods. This helps to create a customer base that spends more time and money at a site. Communities and Customisation are other sticky applications. Learn The Internet provides extensive opportunities to learn about consumers (demographics.who they are and why they shop online. TV. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. • The Internet supports brand-building activities where there is a need to build a relationship. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications.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. Content is the basic driver of retaining customers on a site. if used properly. Certain product categories. can create value for the customer and help build the brand-customer relationship. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Radio). The initial site registration provides an early opportunity to obtain useful information. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. 59 . and what additional products and services are they interested in provides companies with valuable information which. and must be continuously updated due to the multiple visit nature of customers. The objective is to increase the conversion rate (% of browsers converted into buyers).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. 5. Building up a knowledge database on each customer .g.
M.. S.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. These case studies provide a practical insight into how companies are building their online brands.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.. and the need to stimulate the other senses (taste. especially in small quantities. providing further added value. pp.2. the experience is the brand. McQuade.mckinseyquarterly. touch. R. 180-183 (www. McKinsey Quarterly. The next chapter analyses the brand-building efforts of seven companies. • Brand-building favours products that can be sold online. it is not economically feasible to sell certain products. 5. 60 . 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 . it is critical for companies to build relationships and foster brand loyalty. to its delivery to the customer. & Zeisser. and as the relationship develops. In order to create "apostles".9 . No. due to high delivery and transaction costs (relative to the value of the product). However. 'Marketing to the Digital Consumer'.from the promises made in the value proposition. The interactive brand-building process involves attracting.. smell).. Waitman.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. 1996. Given the high acquisition costs of online customers. engaging and retaining customers. A. the interaction provides the ability for companies to learn from their customers and relate.9 CONCLUSION On the Internet.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
Amazon serves over 23 million customers from 160 countries. Amazon.com) . It is the 57th most valuable brand in the world47.1 INTRODUCTION This chapter provides an analysis of seven companies.2. 47 48 Interbrand (www. combined with its levels of customisation and customer service.1 Company Overview Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. In addition. and other key factors that have contributed to its success (or failure). its value proposition. Through its provision of a one-stop shopping experience. it is the most visited e-commerce website in America. Figure 6.com's success stems from its compelling value proposition.The Economist. and higher levels of customisation and service than the traditional shopping experience allows. 6.com launched with a mission to use the Internet to transform book buying into a fast. CDnow.com) 62 . Amazon has been able to differentiate itself from other online competitors. and enjoyable experience.economist. France. eBay.COM 6.Amazon.com. Each case is presented in the same format including.Goldman Sachs Report.com. In July 1995. 6. 2000 (www. easy. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). greater convenience.see Appendix A. Amazon provides increased added value on several dimensions. a company overview. Boo. February 26.2 CASE STUDY: AMAZON. Amazon.2.2 Value Proposition Amazon. Germany and Japan49.com has become synonymous with e-commerce. and has equity investments in several e-tailers. Barnesandnoble. 1999 49 'Amazon's Amazing Ambition' . In addition. Gap. including: increased selection. more information.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.com and Yahoo!. 'Amazon. The cases are presented in the following sequence . and one of the top two or three in Britain. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).com. Amazon has cultivated a reputation for excellence. its brand-building strategy (how it generates traffic). the sources of added value (using the 7Cs Framework). Not a River' .com . and is one of the few Internet brands that is recognised all over the world.interbrand. and has sales of over $2 billion.It's an Ocean. discounted prices. November 11.1 outlines Amazon's timeline and major milestones. innovation and delivering on its promises.
provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Amazon.com Amazon announces further plans to expand distribution network to meet rapid growth.toolcrib.000 members Amazon.New home living store from living.com Anywhere.com .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Amazon introduces "Purchase CirclesTM".TIMELINE AND MAJOR MILESTONES Amazon.sothebys." providing shopping from wireless devices. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.Amazon enters into a strategic partnership with Drugstore. such as the Palm VII organiser.com opens its virtual doors at amazon.Amazon and eziba.Amazon opens customer service centre in The Hague .com to create a "home living" store at amazon. West Virginia.Amazon launches www. Video Games and Gift Ideas Amazon and Sotheby's launch www.com 63 .Amazon launches health and beauty store . a tools and equipment store for professional tool users and woodworkers . and minority investment in. Amazon.com Amazon invests in Pets.Amazon surpasses 20 million cumulative customer accounts .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 Electronics and Amazon.Customers can shop at Amazon.com is founded by Jeff Bezos Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear. to meet rapid growth .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon announces investment in kozmo.Amazon.com. Ashford.com Auctions and zShops provide new tools to its merchant community . workplaces. and more Amazon launches "Amazon.com .com Amazon acquires Back to Basics Toys to add to Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.amazon. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.COM .com .com .com invests in wineshopper. universities.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon launches new kitchen store .com and NextCard launch co-branded credit card . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon and online car-buying service Greenlight.Amazon launches lawn & patio store .Amazon opens a customer service centre in Huntington.amazon. featuring thousands of bestseller lists for hometowns. Software.com announce investment and strategic alliance .com enters European book market Microsoft signs Amazon.com via the new wireless pocket PC .com.com Announce Strategic Investment and Promotional Agreement .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.Amazon enters strategic alliance with living.Amazon.
The site is easy-to-use. discussion boards.OVERVIEW OF AMAZON.Figure 6. FIGURE 6.1 . recommendations.3 Sources of Value . including book jacket images. offering multiple paths to a given book or product. and customer Purchase CirclesTM. mobile phones. the 1-ClickTM express checkout. This is an example of 64 . encourage repeat visits and drive higher conversion rates.2.com All Product search (searches the entire web). Customer purchase circles allow shoppers to cross-reference similarities such as where people work.com Anywhere to support access from wireless devices (i. Palm VII PDA device). interviews with authors. expert reviews. and quick-to-load pages Over time. book summaries.e.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. downloads quickly and services visitors adequately . customer testimonials. Amazon has added other features for shopping convenience. Content Amazon provides content on several levels.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. logically structured. gift reminders. and Amazon. such as the Amazon. wish lists. gift click.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. easy-to-use. live or study.1. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic.
Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. Amazon's content is not reproducible by competition. and has developed an Associates Programme. from its shopping basket applications which lists the estimated time to delivery reliably. By leveraging its vast customer base. which helps to build loyalty and create switching costs. and customer interaction.2. Community Amazon has also added a community element to the purchasing process.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. More recently.4. Amazon creates one-to-one relationships with its customers. while driving up repeat purchases and cross-selling opportunities. Amazon introduced Amazon. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. In doing so. and Customisation Amazon provides customised features and services. to the proactive notification of new items of interest. This customer-centricity is evident in all Amazon's activities. from the customer recognition at the point of interface (Figure 6. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. converting them into a storefront for Amazon. These are discussed in more detail in Section 6.thereby increasing conversion rates. creates a competitive advantage.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. therefore. linking it to a large number of other sites. real-time shipping and backorder notices.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 . 65 . Connectivity Amazon has built relationships with high traffic web portals and sites.
2). helped generate publicity and stories about the company in publications such as The Wall Street Journal. This enabled Amazon to reach more customer segments and niches (Figure 6. increasing to over 500. As a result of all these factors (7Cs).4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. enticing them to return to the site and purchase repeatedly. Newsweek. and customers are also e-mailed when the items are shipped from the warehouse. Instead of paying directly for this exposure.2. Eyes and Editors. Through the first half of 1996. attracting member sites of all sizes. and by 1999 it had over 200. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Business Week. The Financial Times. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.000 members. New Yorker and The Economist.com hot-link and offer specific books of interest to their visitors. which only applied to sales that resulted from the initial click-through. The Associates Programme has been phenomenally successful. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. 66 .000 by August 2000. In the second half of 1996. Amazon offered Associates referral fees of up to 15%. two personalised services.a move that along with the novelty of its business model and the newness of the Internet. In July 1996. 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. they are subsequently confirmed by e-mail. and not subsequent purchases. it began to advertise in print media and online . In addition. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Once orders are placed.
Prodigy and @home. spreading the word for Amazon. Amazon has used viral marketing techniques through customer reviews.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. each friend is sent a $5 Amazon. multiyear deals involve exclusive book-selling rights. Interesting viral initiatives include: • Amazon. and Geocities.amazon. was also linked to Amazon's entry into Europe Amazon. Amazon also established agreements with AltaVista.AMAZON.co. mutual links.com gift certificate (in your name).com About Me .com's website (www. the customer acquisition cost is only £10. Netscape's Netcenter and NetSearch.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. free eCards and gift certificates (which customers send to friends. The Yahoo! agreement. including: America Online (AOL).uk the local provider for Yahoo! UK & Ireland. and primary button placement on web portal search engines.2 . • Amazon. In addition. thereby promoting Amazon. 67 . From July 1997 to December 1998.customers are encouraged to provide e-mail addresses of friends.com. Amazon closed deals with five of the six most visited Internet addresses. These multimillion-dollar.com).de became the local provider for Yahoo! Germany and Amazon. In return. Therefore.allows customers to create a personal profile (with pictures) on the site. People tend to tell their friends about it. Excite.COM'S ASSOCIATES PROGRAMME Source: Amazon.com Refer-A-Friend . and you are given a $5 gift certificate for each customer you provide. Yahoo!.
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. Once customers are attracted to the site. however. By relating to customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. which accounts for 66% of Amazon's sales. interesting content. newspapers) to generate awareness. 50 Willis. According to Jeff Bezos.com Really Matter?' .but it was only a tenth as good as the site we have now. so we didn't have to do much advertising.. Purchase CirclesTM). have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates.significantly lower than other online companies. With this combination of promotional methods. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon's proven online merchandise selling techniques including easy-to-use search options. 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. As the relationship develops. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. 'Does Amazon. "we had a world-class site the day we launched . Amazon has been able to achieve average customer acquisition costs of less than $20 . And we relied on word-of-mouth to build awareness. Amazon maintains a database of customer preferences. with the explosion of websites. clear presentation. Amazon is building customer loyalty and encouraging repeat business. April 6. community feel (as discussed previously). and improved customisation and recommendations (e.g. billboards. Magazines. buying patterns and viewing habits. Amazon has also incorporated traditional offline media (TV. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. 1998 68 .Forbes. That's not possible anymore50". C.
51 52 Hazleton. According to Jeff Bezos.com obsessed52".. further enhancing their value proposition. and to convey its vast size and offering. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. establishing a reputation for excellence and fulfilment.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 were blessed with a two-year head start. Saunders. In addition. (Oxford: Capstone Publishing).com Way'. Amazon was able to secure partnerships and alliances with key players. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. due to the hype and coverage it was given. L. 'Business the Amazon. which within six months propelled Amazon to one of the leading online music retailers. Nevertheless. In addition. because he wanted it to be short.a wide range of choice. good value. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. July 1998.. This has helped them attract customers and move up the learning curve quickly. developing customer service centres and expanding its distribution network to support high levels of service. Success. We have been customer obsessed. while our competitors have been Amazon. establishing Amazon as the leading online bookseller with a large customer base. in June 1998. Amazon has been able to build a strong brand at relatively low cost. As such. the balance of power shifts away from the company and goes towards the customer. Amazon unveiled a music store. "Online.2. and according to Jeff Bezos. 1999 69 . "we're not a stationary target. to capture the spirit of the site. According to Jeff Bezos. management realised that Amazon had become more associated with other core brand values . and our goal is to increase that gap51". memorable. For example. and its safe and secure delivery. R. Our secret is that we have not been competitor obsessed. Amazon is constantly seeking new ways of improving its offering. As such. Amazon's understanding of its brand identity has been a critical factor. thereby diluting the value of its association with books. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. Amazon received criticism for expanding its product line.
Amazon delivers on its promises of a wide inventory of products. have kept it ahead. 6. not necessarily a reality. 53 Warner. Amazon is claiming to be making profits on its books and music categories. Amazon also recognised that service quality is a perception. 1998 70 . they're stretchable and pliant. Amazon has continuously invested in customer service. which is critical on the Internet. it has not recorded any profits to date. In doing so. and to sustain a positive image and satisfactory end-to-end experience. 'Marketers of the Year: Jeff Bezos.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.. stem from its compelling value proposition and high quality end-to-end customer experience. secure payment procedures. and investors lose confidence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. speedy delivery and good value. with new products and value added content. perhaps trying to defend its view that losses taken to build market share can reap profits later. they have cultivated a reputation for excellence and fulfilment. This customer-centricity is a key hallmark of a successful Internet brand.Brandweek. However. Although Amazon has successfully built a strong brand and loyal customer base. as the true value of a brand lies in its sustainability. Amazon's intense focus on customer needs and continual innovation. but over time they become more and more associated with a particular thing and harder to stretch53". Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Nevertheless.2. if it continues to incur losses. however. Quality is only measurable in the minds of visitors to the site. This raises a critical issue. October 12. Volume Discounter' . The key factors driving its growth and high retention rates. the drain on their cash resources will push them towards bankruptcy. distribution centres and upgrading the site. When they're young. B.
com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.TIMELINE AND MAJOR MILESTONES .Acquires minority stake in NotHarvard. contacts.3 CASE STUDY: BARNESANDNOBLE.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July .Barnesandnoble. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com announces strategic relationship with Palm Computing . prints & posters and related products.Barnes & Noble University opens registration for free online courses .barnesandnoble. Dalton bookstores (located in shopping malls). and 470 B.Announces distribution relationship with New York Times September .1 Company Overview Barnesandnoble.com). 40% owned by Bertelsmann AG.com is approximately 40% owned by Barnes & Noble. magazines.Offers same day delivery in Manhatten . etc.Barnesandnoble.Barnes & Noble.) established by its parent company.Launches BNTV .2.Launches Video Store 71 . and 20% owned by the public. Barnesandnoble.2 1997 January BARNESANDNOBLE. However. music. Barnes & Noble Inc. Currently.COM . all front-end operations (marketing.com is the fourth largest e-commerce retailer54.com's timeline and major milestones is outlined in Figure 6. Launched in 1997. promotion) between the online store and the retail stores have been kept separate.com was able to 'hit the ground running'.com) . Besides books. TABLE 6.3. as it could capitalise on the infrastructure and back-end operations (warehouses. Inc.Barnes & Noble went online at AOL May . book databases.com and Microsoft announce that they will create an eBook superstore .com launched its website (www.Launches Internet Radio . Barnesandnoble. Barnes & Noble Inc. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Launches Affiliate Network December .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com . rare. and is the second largest online bookseller (after Amazon. is one of the best known traditional booksellers in the United States.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. Barnesandnoble.COM 6..Acquires equity stake in Mightwords .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com provides other online categories offering software. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). Barnesandnoble.
Both Amazon. 6.com or www. easy and secure ordering.com and barnesandnoble.3 Sources of Value .com) 72 .3 .com's virtual storefront is graphically richer than Amazon. previously-owned and rare books. edition.3). the company created a site very similar to Amazon. Both offer detailed bibliographic information. as well as an extended searchable catalogue of millions of out-of-print.OVERVIEW OF BARNESANDNOBLE.com let customers sign up to receive email reviews and announcements of new titles. however. Both have expanded their convenience to offer 54 Media Metrix.com's and takes a bit longer to download. and easy-to-navigate site Categories focus on books.COM'S WEBSITE Simple. music New Initiatives Barnesandnoble. etc.com's website (www.com's (Figure 6.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. the features are practically identical. software. FIGURE 6. but instead of developing an outstanding interface to its inventory.2 Value Proposition Barnesandnoble.barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. publisher. as cited on Barnesandnoble.3.3. good prices.com offers customers an easy-to-search catalogue of virtually every book currently in print. they offer customers fast delivery. in terms of the 7Cs framework. rich editorial content and a community experience. In addition. author. logically structured.bn. Barnes & Noble planned to dominate online book-selling. including title.
com was valued at $21. Both try to foster a community of readers by letting customers post reviews online. prevent cannibalisation of its existing business.com's $1. Yahoo!.The Wall Street Journal. The 6. while Amazon. 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.3. it lags behind first-mover Amazon. Barnesandnoble. Barnesandnoble. Webcrawler. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com's market capitalisation was $251 million. and Barnes & Noble Inc. However.4 Brand-Building Strategy Barnesandnoble.a replica of Amazon's Associates Programme.com's 1999 revenues were $202.64 billion. reasons for this are explained in the next section. 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 . there is little mention of the online store in the traditional 'bricks-and-mortar' stores.1 billion. Netscape and Microsoft Network.000 affiliates in its referral network. Barnesandnoble. and avoid charging sales tax in states where it has stores56.com has created a high quality website and customer experience. Instead.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. December 17. Barnesandnoble.com closed 1999 with 4 million customers. while Amazon. Both offer 'associate programmes' that let other websites link to their sites.6 million. They have developed an affiliate programme that links sites to Barnesandnoble. Both offer customisation that permits users to personalise the experience.com. however. has yet to leverage its strong brand in cyberspace. this programme had more than 300. These initiatives have generated traffic to the site. As of February 2000.com had over 17 million.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Although. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . compared to Amazon. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Lycos. and both are expanding globally.com in return for a commission on any purchases that they originated .
To signal its intentions. in the attempt to gain traction and build momentum. Unfortunately. and its BMG Entertainment division includes music giants Arista Records and RCA Records..com has changed its name to Barnes & Noble.com has begun to acknowledge some of these mistakes. or deliver books directly from the retailers. • Barnesandnoble. Petsmart. By failing to leverage it. Barnesandnoble. and Internet terminals in the bookstores. Barnesandnoble. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. and the tangibility that this provides. 74 . content and distribution opportunities. people began using their stores as a physical showcase for online rivals such as Amazon.com is its association with Barnes & Noble Inc. provides access to valuable resources. Planetrx.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). Under the seven separate agreements. and leverage its real-world presence.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. when it struck reciprocal marketing deals with Expedia. as Bertelsmann's book division includes partners such as Random House. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com.com's key differentiator from Amazon.com. each partner offers a similar link to Barnesandnoble.com's link to Bertelsmann AG.com created a new cross-marketing genre in February 2000. and a same-day delivery option in Manhattan. • Barnesandnoble. Recent Initiatives Barnesandnoble.com.com has lost access to valuable customers.com.com. 1-800Flowers.com. Barnesandnoble. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. in-store displays.com. and in recent months has aggressively sought new ways to differentiate itself. with a similar discount.com. Barnes & Noble University (a free online education resource).com offers links to each partner's site and a discount for visitors who click-through. At any given point there are hundreds of customers browsing their aisles looking for something to read.com and VitaminShoppe. Barnesandnoble. Barnesandnoble. LLbean. In return. • In addition.com should have aggressively cross-promoted their stores through advertising. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com. Jcrew.
57 'Bn.com. Barnesandnoble.com's experience is instructive.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 2000 (www. Barnesandnoble. customer relationships and offline presence . meant that Amazon. by portraying them as slow and clumsy in comparison to the more nimble Amazon.forbes. The Press have also contributed.Not a Best Seller' . The company failed to leverage its established brand. a wellestablished Internet brand.6 Conclusion Although Barnesandnoble. even if that means eating into their existing sales.com) 75 .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. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.3. and allowed them to offer stock options as compensation and achieve a high market capitalisation. August 4.com .com has been able to create a high impact and high-quality customer experience. feature for feature) has failed to differentiate Barnesandnoble. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". its failure to leverage its bricks-and-mortar stores to drive traffic to its site.Forbes.its key differentiating factors. it has not been able to establish itself as the leading online bookseller. significant market momentum. and its lack of innovation (by copying Amazon. In addition.com and has given them the image of a second rate 'me too' brand. it also caused a major setback.com's late start in 1997. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. and was further up the growth curve.
not the limited range you might get at most London fashion shops58". After a high profile launch. sack 20% of staff and sell stock at 40% discount .Marketing Week. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). P. England. receiving $125 million of funding. 1999 76 . Germany and Denmark. and eventually debut in Asia.com entered six markets: US. arranged through J. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). "our marketing thrust is not based on prices. Puma. On going live. Company is put up for sale. Sweden. within six months Boo. founder and Chief Marketing Officer of Boo. due to its poor performance and inability to build a customer base.com opens its virtual doors' .First sign of problems . as well as create a kid's site. Boo. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.000 unique visitors . TABLE 6. However.Announces it has only 500. Everlast. as cited in 'Boo.4 CASE STUDY: BOO. If a clothing brand is on the Boo site.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com. Boo.Site goes live .3 1999 Mid year BOO.fails and appoints KPMG as liquidator. Boo.2 Value Proposition According to Kajsa Leander.they redesign site. June 10. They intended to add France. and Converse. November 2000 January February May 6. Boo.Raises funding of $125 million .com. it means all that brand's product line is available. and was billed as one of Europe's hottest e-commerce ventures.Multi-million pound advertising campaign created by BMP DDB .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Finland. 58 Kajsa Leander.4. CMO of Boo. it's about range and convenience.com collapsed through lack of funds.COM 6.com had set the record as Europe's best-funded European Internet Start-up. Italy and Spain within a few months. and included high profile investors such as Bernard Arnault.com provided a range of 18 fashion and footwear brands including DKNY.1 Company Overview Founded in 1999. among others. and the resulting loss of investors' confidence. Morgan.4.TIMELINE AND MAJOR MILESTONES .Appeals for $30 million more funding .COM .
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.
On 19th July 2000. customisation and a wealth of information and content to help in the purchase decision. TABLE 6.Raises $10 million through private placement . & Novak. convenience. D.Launches merged CDnow/N2K site . pp.000 music related items . $22. good prices. T. $18.5. and an average daily audience of over 800. CDnow was acquired by Bertelsmann AG.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow is also driving the digital distribution of music.CDnow and Time Inc.000 people.5 million distribution deal with Lycos Signs three-year.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. 'How to Acquire Customers on the Web' . and one of the most popular shopping sites on the Internet62. features. CDnow is the leading online music store. a valuable and rewarding experience"63.Harvard Business Review. and was the first site to offer the sale of music downloads and custom CDs. daily music news.000 music-related products and 650.Site goes live .cdnow.ten times the selection of a conventional bricks-and-mortar music store).000 sound samples.Forges distribution partnership with Yahoo! $65. 62 Hoffman..5 CASE STUDY: CDNOW 6. announce marketing alliance . and they aim to "make every visit to the site. May-June 2000. former arch rival .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. cover art.Partnership program with Geffen Records . and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow provides access to over 500.com) 80 .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . This unprecedented degree of access to music and information is the core of CDnow's value proposition.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . as well as music reviews.179-188 63 CDnow website (www. whether for browsing or buying.Merges with N2K. guides to music genres. It has a customer base of 4 million people.5.1 Company Overview Founded in 1994. by twin brothers Jason and Matt Olim.TIMELINE AND MAJOR MILESTONES .Merges with Columbia Records .
5.3 Sources of Value . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. By partnering with well-known content providers. CDnow has leveraged the reputation of their brands to reinforce its own. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. easy-tonavigate.5. artists biographies. cover art. CDnow has cultivated similar relationships with MTV.Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 81 .5 . and has secured rights to music reviews. FIGURE 6. For example.. to make it easier for customers to explore new music and make informed purchasing decisions. etc.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. The whole process of searching for albums or music titles to the actual purchase is simple .
82 . Whenever a customer makes a purchase they earn Fast Forward Reward points. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Internet access providers. and Geocities as well as more focused specialist sites. By customising the store to meets customers' needs. Excite. 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. Other features such as My CDnow's Wish List. and key news and entertainment sites . Community CDnow has not exploited the potential of creating a community feel.such as AOL. Italian. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. allow customers to keep track of albums to buy in the future. Customer Care CDnow's site can be viewed in English. which accumulate and can be spent on a variety of music-related products. French. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. CDnow hired a group of multilingual customer service representatives to handle questions. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Yahoo!.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Spanish. In addition.search engines. Portuguese. an incentive programme that rewards customers and encourages them to connect back to the site. German. Due to International interest. CDnow developed the Fast Forward Rewards programme.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. it gives them a sense of ownership and a compelling reason for them to return. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. they will be reluctant to visit another online store and enter the information again. It also creates switching costs. allowing them to respond to detailed customer queries. Dutch and Japanese. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites .
customers buy music.They have also stuck exclusive alliances with AOL.CDnow's advertisements are targeted to some degree. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. Spin.Through the Cosmic Credit Programme. • Alliances and Partnerships . covering the entire music spectrum. CDnow extended its distribution reach to include more than 250. print advertising is music-related publications such as Rolling Stone. CDnow is doing everything it can to ensure that the next time that 6. It is a revenue-sharing arrangement. this is their "most successful customer building programme64". These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. By keeping the brand in front of the customer in this way. and spot radio to build reach. 83 . and Variety.000 small.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. Yahoo!.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. and radio spots on the Howard Stern Show to build a cult following among radio listeners. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.5. they buy from CDnow. • Traditional offline Media . Excite and other powerful Internet content and service providers. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. as well as more-targeted music-related sites like Billboard. According to Jason Olim. • Affiliate Programme . CDnow's initiatives include: • Banner Ads . music-oriented websites.
both in the online and offline worlds. This has contributed to a 225% increase in sales (1997: $17. as a way to fuel very lucrative word of mouth. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . with 44% of sales coming from new customers65.they were the first site to offer the sale of music downloads and custom CDs. 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. The company continually pushed for new distribution partnerships to widen its sphere of influence. In fact. it is in this context that the large investments in advertising and partnerships make sense.4 million).cdnow. It is constantly adding new functionality to the site and has been innovative in its offering .htm) 84 . CDnow's promotion strategies have attracted high levels of traffic.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .CDnow made public relations a high priority brand-building tool.5. The story of how CDnow was founded in a basement. 6. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. with repeat customers accounting for more than 50% of sales. 1998 .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.Hampel & Stefanides (www. • Word-of-Mouth . resulting in increased conversion rates. April 28.4 million.(www. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. Public relations efforts helped to generate word of mouth and influence sales. and scaled it awareness-building efforts.hsny. word-of-mouth accounts for the lion's share of CDnow's customers.com/cdnow.com) 65 'Pioneering in Cyberspace' . It is a powerful source of acquiring new customers at low cost.Press Release.As for many successful online retailers. 1998: $56.
75 85 . (Boston: Harvard Business School Press).5. to ensure quick delivery to customers. combined with the high impact customer experience created . 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. CDnow has developed a relationship with Valley Records. a record distributor that handles the majority of CDnow's fulfilment logistics.Building an Internet Business at Breakneck Speed".from how CDnow has personalised its product offering to its capable customer service team . The development of an extensive affiliate network. It was able to create a strong value proposition and high quality customer experience. 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. "eBrands . as cited in Carpenter. 2000 p. 2000 p.it's what you do66". This gives the customer the impression that the order is being handled quickly. and innovative. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. This. and ensure that it exploits its early-mover advantage and keeps ahead of competition. "eBrands .6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. According to Jason Olim. 66 Jason Olim. 6. "your brand is not just what you say . CEO of CDnow.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. P. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. CEO of CDnow. P. as cited in Carpenter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim.Building an Internet Business at Breakneck Speed". (Boston: Harvard Business School Press).89 67 Jason Olim.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as cited in 'eBay .eBay website (www. (A)' . Auctions are an enabler.ebay. People perceive the auction format to offer better prices. garage sales.efficient one-to-one trading in an auction format. eBay is not about auctions. or the payment for the item . This is a new market . According to Meg Whitman.A Harvard Business School Case Study. and 450. CEO of eBay. payment) between themselves. and eBay provides added value through its convenience.the closest thing in the offline world are trading forums such as classified ads. with the number of unique daily visitors setting a record of 1.000 new items joining the "for sale" list every 24 hours69. "at its core. 24 hour a day.com) 70 'Meg Whitman at eBay Inc. Auctions represent a platform.eBay website (www.removing the need for inventory.2 Value Proposition eBay offers consumers an efficient.g. the eBay community has grown to include more than 10 million registered users.300 categories. transportation and other overhead costs.6.com) 'eBay . from collectibles and antiques to electronics and toys. flea markets and auctions. Individuals use eBay to buy and sell items in more than 4.1 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.Company Overview' . Sellers pay a nominal fee for placing an item up for sale. Since its launch in September 1995.782 million in January 200068. global trading place for buying and selling personal items in an entertaining auction format. shipping. The buyer and the seller work out the logistics of the transport (e.ebay.Company Overview' . Auctions make it fun. extensive selection and geographical reach.6 CASE STUDY: EBAY 6. and eBay never takes possession of the item being sold. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. 6. There are over half a million new auctions. eBay effectively created a new business model never before possible . with emphasis being placed on its unique community feel and culture. collectable shows.6. and eBay receives a transaction fee that ranges from 1. 1st October 1999 86 .25% to 5% of the final sale price on any item sold.
71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. as they rarely deal directly with the company. and in terms of the '7Cs'. emphasis is placed on community development and customer care.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.eBay IPOed raising $58 million . the eBay customer experience is based on how their customers deal with each other.eBay introduces eBay Magazine in collaboration with Krause Publications. The Official eBay Guide to Buying.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay acquires Kruse International . Selling. So brand-building job No.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .eBay acquires Butterfield & Butterfield.de . 21st May 1999 (www. 1 is have a great customer experience71".Com form alliance - 6. Dallas & Fort Worth.eBay expands strategic relationship with Netscape .America Online and eBay announce strategic marketing alliance . they try to influence customer behaviour by encouraging them to adopt certain values.eBay launches local websites in Baltimore & Washington DC. Unlike the previous case studies discussed.eBay teams up with Carclub.3 Sources of Value . This raises challenges in how to control and influence the customer experience. and Collecting Just About Anything and eBay for Dummies. "the first brand-building strategy that we have is to have a great customer experience. and raises $700 million .eBay and First Auction sign a partnership agreement .com to provide automotive service for eBay Users .Launches "My eBay!" to customise the online auction experience . and Salt Lake City .eBay goes live in Australia .Compaq Computer Corporation and eBay form a strategic U.eBay goes wireless with Palm VII connected organiser .5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES . and its online trading site (Up4Sale) . Since eBay cannot control how one person treats another.6.eBay goes live . . Providence.eBay acquires Blackthorne Software GO. Still the vast majority of our new users come from word-of-mouth.businessweek.eBay launches 'About Me' feature. Norfolk & Virginia Beach.eBay and AOL launch co-branded site .The 7Cs Framework According to Meg Whitman. Seattle & Tacoma.Business Week.Germany's leading online person-to-person trading site .eBay and Ultimatebid.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. allowing users to create personal homepages . Milwaukee. co-marketing relationship. Boston. And you only get word-of-mouth if you have a great customer experience.eBay acquires Jump Inc. Nashville. Las Vegas.S.eBay acquires alando. . and two books -.com) 87 .
and since. 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. FIGURE 6. categorically arranged. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. 88 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. they have continually invested in system capacity. eBay's site has to process thousands of live bids simultaneously.6).OVERVIEW OF EBAY'S WEBSITE Customisation Simple. increasing the risk of outages. Other content includes the banner ads. topically arranged. This contributes to the community feel. angering hundreds of thousands of eBay users. Nevertheless. eBay has also expanded to accommodate access through wireless devices for added convenience. which is much more demanding on the system. easy-to-use online service (Figure 6. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users.6 . eBay had a 'wake up call' when the website crashed for 8 hours. Content Content is primarily user generated through the items listed for sale. and adds to the experience and the discovery of the auction process.
as eBay users refer to themselves . and share information. which is then added to the partner's trading profile. the culture has come under strain due to the company's rapid growth from a small community into a "big city". working together and helping each other offline. eBay Boston. a monthly newsletter. autonomy. Whitman describes eBay's community culture as a site "of the people. and there are several reports of eBay users vacationing together. e-mail. It is a place where people can meet with similar interests. However. a "giving-board" for charitable donations to user-identified causes. by the people. and is considered by many users as one of the best features on the website. Recent initiatives such as the development of local websites in major US cities (e. for the people". each user is encouraged to submit feedback through eBay's 'Feedback Forum'. the community spirit and personal relationships also transcend the online experience. eBay's community has a distinct culture based on trust. empowerment and equality.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. and in doing so. respect. which is posted to the site. In addition. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. For many 'eBayers' . This has created a self-regulating mechanism that encourages good behaviour. has enabled eBay to foster a strong sense of community on its site. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest.g. eBay offers its users category-specific chat rooms. 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). After a sale. To encourage this sense of community. eBay Salt Lake City) have helped them restore that community feel. Community eBay attributes much of its success to a strong sense of community among its users. bulletin boards. 89 . discuss topics they care about.eBay represents more than just a place to buy and sell goods.
its user community. answering e-mails and responding to questions posted on the site's bulletin boards. Communication eBay maintains close communication with its members. and willingness to empower. and respected members of its own user community to serve as customer support representatives. and the Safe Harbour group. Customer support activities were constantly upgraded and expanded as the business developed. eBay has invested in customer care and support to ensure people conduct safe transactions. in which the company hired active. eBay was able to cost-effectively offer 24x7 customer support early on. which was dedicated to monitoring the site for illegal and infringing activities. eBay's approach to customer care has evolved over time. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. but they have other partnerships with over 150 websites of varying scales. 90 . 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. By using its own enthusiastic. This also reinforced the company's respect for. eBay also engaged in marketing partnerships. This was later expanded to include customer support representatives who worked out of eBay's headquarters. geographically dispersed users as customer support representatives. eBay employed a "remote" customer support model. As such. Customer Care eBay controls neither end of the transaction. knowledgeable. links to high traffic sites. the largest of which was with AOL. which was dedicated to investigating misuses of the system (e. shill bidding) and helping to resolve user-to-user conflicts. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. and the introduction of two specialised customer support groups .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network.the Community Watch group. These people worked from their homes. fraud. During the first two years.
and facilitate the spread of positive wordof-mouth. $75 million joint marketing alliance and development deal. who tended to be serious collectors. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.6. The Official eBay Guide to Buying. and two books. they spent $12.3 million in advertising. eBay decided that it would not enter into major portal advertising deals in the short term. Mary Beth's Beanie World. and maintained the same ratio for 1999. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Through this combination of its advertising efforts and targeted promotions. the largest of which was with AOL. Doll Collector) and appearance in trade shows. they decided to target their marketing efforts on these heavy users. Selling. and highlight opportunities created by e-commerce. but they have other partnerships with over 150 websites of varying scales. 91 .4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth.a four-year. 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. eBay Magazine. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). and Collecting Just About Anything and eBay for Dummies. eBay has since expanded its promotion efforts and engaged in marketing partnerships. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally.g. as a result of the high quality experience it provides. In 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Recent promotional initiatives include its new publication. The AOL partnership was one of the largest strategic partnerships on the Internet . Based on this. As a result. Early on. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. eBay has been able to attract a large customer base. representing about 40% of revenues. eBay transformed from a pure online play into a 'clicks-and-mortar' company. provide a wealth of information about the 'ins and outs' of trading on eBay. 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. These new publications appeal to the collecting spirit.
their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions.the ultimate network effect . 6.5 Conclusion eBay's compelling value proposition. As a result.com) 92 . "the devil in so much of this is in the detail. eBay attracts a broader selection of buyers. This has become part of the eBay culture. however. However. and their first-mover advantage. This is achieved by listening to their community (learning) and developing new improved products and services (relating). 21st May 1999 (www. eBay has also faced difficult challenges in scaling the organisation fast enough. as they could not opt for a 'go slow' strategy.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'. and according to Meg Whitman. And while we have to move very. have been key factors that have contributed to the success of the brand. which has established eBay above other online auction communities. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors.Business Week. have been instrumental in building a 'quality' customer base. very fast. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. the Personal Shopper and the eBay Life Newsletter.contributing to its strong lead and competitive advantage. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. I think you are not well served by moving incredibly rapidly and not doing things well72". 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .businessweek.6. which were all ideas of eBay users. and according to research carried out by eBay. Their focus on heavy users and targeted promotions. such as the Feedback Form. their ability to create a new market using Internet technology. 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.
online sales are only available to US customers. to provide customers with greater convenience and options. and today it is the 29th most valuable brand in the world73.gapinc. California GapKids opens its first store BabyGap is born Gap opens its online store at www.7.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. 'Clicks and Mortar at Gap.800 stores in the US. from jeans and T-shirts to khakis and jackets. 1999 76 Jeanne Jackson.7. Gap online exploits the accessibility and convenience of the Internet. Its reach extends across more than 1.htm) 75 Jeanne Jackson. L.com and www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.an early convert to the then-revolutionary idea of clothes retailing on the Internet. GapKids. Gap started selling items online . however. and Gap online provides access to the full range of items at Gap. 6. 1999 93 . Gap's online sales tripled in 1998 alone. the growth prospects are enormous.babygap. Germany and Japan. service and value to everyone74". from shirts to accessories and hard-to-find sizes. Inc."to deliver style. and BabyGap. and provides useful insight into how traditional brands can leverage their strength online.com' .interbrand. up from $20 million in 199875. surpasses $9 billion in net sales and increase earnings by 54% over previous year. Currently. America Online (AOL) and Gap Inc.com/about_us. head of Gap Online.Business Week.gap. The Gap offers a balance of modern and seasonal styles of clothing.gapkids.COM . L.see Appendix A Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.'s website (www. According to Jeanne Jackson.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. Canada. letting customers access the Gap brands. whether in the store or online76". Gap.7 CASE STUDY: GAP. and analysts estimate that sales in 1999 amounted to $50 . "this is about being clicks-and-mortar. 73 74 Interbrand (www. October 8.com' .com. TABLE 6. as cited in Lee.COM 6. standard styles are well suited to online shopping. In late 1997. In addition.2 Value Proposition Gap's simple.com is an example of successful crossover marketing. announce multi-year partnership. UK.$100 million.Business Week. and are still relatively small compared to Gap's $9 billion in annual sales. as cited in Lee. October 8. 'Clicks and Mortar at Gap.1 Company Overview Gap opened its first store in San Francisco in 1969. Gap Inc.com) . This success is largely due to their simple formula .
'Mind the Gap'. making it convenient. and Customer Care. Gap Online primarily focuses on Convenience..com store one immediately notices the consistency between the online and retail stores..making visual references to its offline roots.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Content. from the blue and white colour scheme to the easy-toshop format .. making navigation even faster.very easy. The site also offers sharp graphics. FIGURE 6. The Observer. D.7.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. Michael McCadden. but provides customers with the option of viewing text-only. Visiting the gap. describes the company's brand personality as "direct and straightforward. and easy-to-use.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. April 18.The 7Cs Framework In terms of the 7Cs framework. the extensive integration of Gap's online and offline activities are clearly evident. very efficient"77. This personality is reinforced online through the simple structure and layout. reinforcing its brand identity.. 1998 94 . Executive Vice President of Global Marketing..com. Unlike Barnesandnoble. Simple. feel and design of the site is consistent with the bricks-and-mortar stores..7 ..
Gap does not provide any community features on its site. Gap has also developed an affiliate programme. Unlike the case of Boo.com's content consists of detailed information on its full range of products. standard styles are well suited to online clothes shopping.as most Gap online shoppers have a good idea of how Gap clothes fit. as well as sample all of the latest shades of fingernail polish on a virtual hand. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. Gap's simple. and had recently established marketing deals with AOL and CDnow. which would not be possible in the store. GapKids. However. and customers can view their latest TV adverts for buying inspiration. and goods bought online get returned at the same rate as store purchases . Gap. In addition. once customers are registered online. Gap made a decision to charge sales tax on online sales. 95 . allowing shoppers to contrast different cuts and styles. The Gap site connects to other Gap online stores including GapKids and BabyGap.com.com allows customers to track the status of online purchases and provides contact information on the nearest store. customers can return goods purchased online to their neighbourhood store. and BabyGap. Gap communicates with customers through customised e-mails. By doing so. without causing complications. promoting its specials and including links directly to items on Gap's website. Gap. twice a month.com also provides a Gift Central feature which offers gift suggestion from Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. In order to integrate its offline and online operations and logistics. and customers can register to get e-mail reminders of upcoming holidays and birthdays.
Gap has held in-store campaigns to get customers to submit their e-mail addresses.com) in store windows with the slogan "surf. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.) that also promote the online store. it is fully leveraging its offline presence to build awareness.com has links with CDnow to cross promote websites.7. however. on shopping bags and even on the cash register. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. by displaying the URL (www.shop. which can be used towards future purchases. by offering a 10% discount and free shipping on their first online purchase.4 Brand-Building Strategy . 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. either online or in stores.com. In addition.com has also created an affiliate programme encouraging sites to establish links to gap. To convert walk-in shoppers to cybershoppers.gap.ship". In certain high traffic Gap and GapKids stores. • They offer Online discounts and promotions such as the ShopCard.gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com in return for a 5% commission on every sale referred through the site. Magazines. or to refer shoppers to Gap's website.com" on the display screens between transactions.Extensive Integration Gap. which displays "Shop online at www. • Gap. Gap has also supplemented this with online promotions: • In August 1999. Gap secured a 3-year commerce and marketing agreement with AOL.com has been able to piggy-back on The Gap's offline advertisements (in TV. providing a useful way to directly reach customers. Most of Gap's online traffic is generated by leveraging its physical presence. they send the customer a $20 Gap ShopCard. • Gap. billboards. These efforts doubled the size of Gap's e-mail database. etc. 96 . on counter cards. whereby for every $100 a customer spends at Gap Online.
and allowing each to leverage the strengths of the other. 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. while reaping the benefits of low customer acquisition costs and extended reach. thereby reinforcing its brand identity. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. With their brand awareness and network of retail outlets.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. whereas established companies.com is an example of successful crossover marketing. such as Gap.7. on the other hand. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. provides existing customers with added value through the convenience of purchasing online. Pure online players have to invest heavily in logistics. 97 . The Internet. By aggressively marketing both the stores and the website.5 Conclusion Gap.thereby increasing the company's reach. Gap has been able to significantly strengthen their brand-customer relationship. have already established the back-end operations and can use them as the cornerstone of their online business.
The Strategy. from e-mail services to stock quotes and much more. household and business user reach. the site was receiving 1 million hits per day.8 CASE STUDY: YAHOO! 6. The company's global web network includes 23 world properties outside the US. The concept exploded (through word-of-mouth) and in less than six months. Yahoo! was founded by David Filo and Jerry Yang. lies the directory .com) . There's nothing in the real world to compare to that79". commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The Company.interbrand. CEO of Yahoo!. The Stock' . Yahoo! offers a range of supporting services that add value. 1998 (www.1 Company Overview In April 1994.8. September 7.D students at Stanford University. and is one of the few Internet companies to turn a profit early in the development of the Internet. all in a single location.com) 98 . two Ph. 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.8. As the first online navigational guide to the web. who started an online guide as a way to keep track of their personal interests on the Internet. Yahoo! has since morphed from an ordinary search service into a global Internet communications. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. advertising. As such.see Appendix A 'Yahoo! .2 Value Proposition At the core of Yahoo!'s value proposition. the amount of information. According to Timothy Koogle.Business Week.businessweek. Yahoo! is a leading guide in terms of traffic. 78 79 Interbrand (www. 6.
8 million IPO (2.Receives $1 million in venture capital funding from Sequoia Capital $33. Their goal is not to list everything under the sun. mobiles.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 . .e. to provide web-based services to PalmTM handheld computers .com.7 YAHOO! .Yahoo! unveils Yahoo! Finance Vision . Yahoo! extended its convenience through its Yahoo! Everywhere service.8.3 Sources of Value .The 7Cs Framework Convenience Central to Yahoo!'s success.600.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. 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! forms agreements with Palm Inc. to allow access. 99 .Yahoo! Launches Business-to-Business Marketplace .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.00 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. regardless of platform (i.Yahoo! acquires Arthas.Site goes live September . Palm computers).TIMELINE AND MAJOR MILESTONES 1994 April . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. is the way it has structured and displayed information.Yahoo! Shopping launches personalised shopping service 6.. TVs. and unveils Yahoo! Digital Introduces Bill Payment services . More recently.Yahoo! acquires eGroups .com allowing them to offer person-person payment solutions .000 shares at $13. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.8).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and more importantly. They have formed multiple alliances and partnerships with leading online companies such as Amazon. and is similar to a custom tailored newspaper (Figure 6.com and CDnow. from stocks and sports results to weather and air fares. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. By tailoring the information to users' preferences. and has been at the heart of Yahoo!'s growth and development.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple.8 . the end-user. well structured.9). Yahoo! has increased customer loyalty and retention rates. while providing partners access to a large customer base. easy-touse. Their thrust has been to provide valuable content to customers. 100 . ranging from daily news and weather reports to road maps and books. the partner. This creates a win-win situation as its satisfies Yahoo!. and quick-toload webpages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies.
reinforcing the brandcustomer relationship. or to make it their home page. 101 . In addition. Customer Care Yahoo! responds to customer inquiries via e-mail. and the nature of the navigation business. fax. Connectivity Connectivity is Yahoo!'s core product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Yahoo! acquired GeoCities. and e-mail. Yahoo! has also implemented campaigns to persuade users to bookmark the site. Yahoo! spends more on customer support than most companies. and plans to incorporate other features such as online chat to facilitate communications. one-to-many. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. telephone and even traditional mail. and is driving Yahoo!'s multiple partnerships and alliances. where groups of people with shared interests can communicate through chat. to provide its customer base with access to useful links and content.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application.9 . and contributing to their reputation as a quality service provider. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. It keeps customers on the site for longer periods. message boards. and many-to-many. In 1999. and encourages them to return frequently.
and according to Intelliquest80.people who are not yet online but are likely to use the Internet in the near future. and its implications of a good time. 82% of Internet users and 23% of people intending to go online. 6. by building a recognised brand name.com) 102 . and an inherent friendliness. (www. Their strategy was to target "near surfers" . While Internet companies were targeting existing Internet users through the use of online promotion methods.a sense of irreverence. Yahoo!'s brand-building success starts with its name. Intelliquest. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. Yahoo! maintains close contact with customers. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . as experience surfers tend to be loyal to their search engine. which conveyed the brand's irreverent personality.8. an approachable nature. As a result.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. Yahoo! extended beyond this to use traditional offline media.4 Brand-Building Strategy Yahoo! is a marketing machine. Yahoo! aggressively promoted the site through public relations. Yahoo! would be one of the first sites that they visited. and it formed a critical link in Yahoo!'s brandbuilding strategy. In 1996. and through communications via email. Given the unease with which the average consumer approaches technology. recognise the name Yahoo!. therefore. At the time this was considered a breakthrough. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". This was especially important. 80 'Web Survey Shows Yahoo! Tops'. Yahoo! avoided characterising itself as a technology-oriented company. TV commercials and radio spots during drive time. Yahoo! also encourages customers to e-mail ideas and feedback. These near surfers represented (and still do) a large and fast growing group and.intelliquest.
and yo-yos. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. According to Karen Edwards. VP-Brand Marketing. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. Although this seems like a shotgun approach. We need to be one step ahead in order to have a better service than our competition82". services and contests with well known brands such as Ben & Jerry's.with its name being plastered on everything.Advertising Age. They also teamed up with publisher Ziff-Davis Co. the research shows that 73% of Yahoo! users bookmark the service . Yahoo! adopted 'guerrilla marketing' techniques . parachutes. Yahoo! has managed to cultivate high brand loyalty. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . Their innovation. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. it's too late. breath mints. as well as TV shows (Ally McBeal. In addition. Once customers access the site. new services and customised features highlight their ability to relate to customers' needs. s4 103 . including backpacks. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . snowboards. organisers. May 3. and 76% turned to Yahoo! before visiting another search engine or navigational site.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . August 26. Yahoo! has paid little for this exposure. Visa and MCI.it must reinforce the image of the company as 'a service that is fun. which has been instrumental in establishing Yahoo! as a household name. customers quickly discover its value and through a high quality experience (7Cs). a monthly magazine guide to what's new on the web and it has co-branded products.Yahoo! Press Release. 1999. sailboats. a little wacky and inviting'.yahoo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. 1997 (www. They even have a barter deal with the San Francisco 49ers. According to a recent study. ER) and Hollywood movies.higher than all other services81. to create Yahoo! Internet Life. T-shirts. p. stating that "if we wait to hear about it in the news. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". while attracting new customers. first to turn around an annual profit. if a user cannot find what it is searching for.8.Advertising Age.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. to its simple design. p. and has cultivated a reputation for excellence. Yahoo! points them to its competitors by including links to AltaVista. 1999. To maintain its lead. alliances and acquisitions to provide added value services to their customers. In addition. with a large customer base and high levels of customer loyalty. Yahoo! has built a strong brand. first to go public. s4 104 . Yahoo! has benefited from a first-mover advantage. while also associating Yahoo! with well known brands. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . they have carried out extensive partnering. May 3. have created a distinct brand identity that differentiates the brand and appeals to its target market.8. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. its choice of partners. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. and its openness (for example. In addition. and other search engines at the bottom of its search results page). As the first online navigational guide to the web. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. that have set it apart from the pack. Yahoo! has invested relentlessly in new services and marketing programmes. HotBot. VPBrand Marketing of Yahoo!.com. their innovative promotional and guerrilla marketing techniques. from its convenient and logical structure and display of information. As a result of all these factors. These relationships have provided end-users with added-value. GoTo. 6. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. and first to go mainstream by advertising its name using traditional media.6 Conclusion Yahoo! is one of the most successful brands on the Internet. its excellent customer service. They have maintained that lead through the creation of a high quality end-to-end customer experience.
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
Alliances with leading portals and popular sites is important to generate traffic and brand visibility. brands are harder for competitors to emulate.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. By distinguishing their offering and focusing on unique sources of value-added. but also provide added value to the brand community. to maintain consistency. and exclusive alliances can lock out competitors from valuable content or online real estate. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. leading brands have focused on building strong partnerships and alliances. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. as well as determine how far the brand can be meaningfully stretched to other products and market segments. As a result. The most successful partnerships are symbiotic matches. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. and convenience. 108 . Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. 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. these companies are creating even stronger value propositions. ranging from online methods to traditional offline media. while ultimately benefiting the end-customers. these companies must have an inherent understanding of their brand identity and core values. integrated customer acquisition strategies. whereby each party benefits from the other's expertise or skills. content. before it fractures. offering customers the best in quality. variety. and by partnering with well-known brands. to distinguish themselves from competitors. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. In addition. particularly to secure content and widen reach to new customer segments and niches.
and by focusing on customer needs. The challenge then lies in keeping up the momentum. By leveraging unique customer information. and differentiating it from other brands. the innovations are the result of the company's ability to data mine its vast database of customer information. and it can acquire customers while it is still inexpensive to do so. customisation and customer care. In many cases. through past transactions and solicited input. As Internet penetration exploded.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. A first-mover advantage is an important asset for an online brand. It locks up important content and distribution partnerships. giving the brand an edge. and benefited from additional hype. these well-publicised brands also took off. These brands are accumulating knowledge about customers. to create new services and content that satisfy customer needs. by providing better services. the company benefits from the buzz. and develop a detailed understanding of their customers' needs. and it aligns itself with the most influential venture capital sources. and are continuously adding new services and functionality to their sites. are leveraging this customer knowledge (learning) to nurture relationships (relate). that comes with innovation. and extensive word-of-mouth due to its novelty. and traffic. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. Many strong online brands were also early-movers on the Internet. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. these innovations are difficult for competitors to reproduce. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. By getting to market early. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. 109 .
however. one component remains unchanged . 110 . there has been a limited time horizon to evaluate the durability of Internet brands. they are equally important in business markets. 7. They have an established brand. drawing on several case studies from business markets. Therefore. but at the same time. Nevertheless. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. while reaping the benefits of lower customer acquisition costs and extended reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Ability to Leverage Offline Brand and Assets Bricks-and-mortar brands are often well positioned to succeed on the Internet. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. In addition. and a physical presence (tangibility) . As such. In doing so. the concepts. expand the brand experience to meet customers' expectations in the online world. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. building relationships and satisfying needs. Nevertheless. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. ongoing research would be necessary to build on the findings of this dissertation. clicks-andmortar brands are providing customers with true added-value. tools and key factors outlined in this dissertation are also applicable to business markets. an in-depth analysis. Having established a strategic perspective on building online brands.value remains (and always will) the basic building block for every successful brand. established customer relationships.factors that clearly differentiate them from pure players. Brands and brand-building tools tend to be associated with consumer markets. would represent an exciting opportunity for further research. with the emergence of wireless access and new platforms. Yet while everything is being turned upside down. established fulfilment systems and infrastructure. Through extensive and seamless integration. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. The Internet has radically changed the business and competitive environments. They possess critical assets that give them an advantage over pure online start-ups.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
648 1.197 32.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) 83.361 1.052 6.527 3.766 14.Interbrand's Ranking of the Top 60 Brands (www.568 3.048 20.550 12.761 1.985 2.043 8.694 17.281 11.806 2.464 3.895 2.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.596 3.909 7.781 33.404 4.634 1.147 9.021 26.654 43.101 9.132 15.804 2.262 1.932 4.806 11.510 8.313 2.143 2.310 11.422 1.845 56.643 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .319 1.423 2.894 14.193 112 .076 3.231 24.225 11.595 17.830 14.329 4.602 4.275 30.184 1.181 21.155 7.502 33.792 3.781 17.231 12.603 5.283 4.681 2.interbrand.
As a result. As such. the informal management style and the constant strategy re-calibration. 'In Search of Excellence'. R. Internet companies must be able to move at warp-speed. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. showing how they are interrelated. whereas entrepreneurial Internet companies must focus on 'managing for change'. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. and the emergence of a knowledgebased economy. commit and deploy resources.. * Peters. and as the business environment changes. customer empowerment. T. However. and structures are aligned differently. constantly innovate. It is critical that all these dimensions come together and are re-enforcing. & Waterman. They must move quickly to capture new opportunities. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. and reorganise as appropriate. respond to competitive and market dynamics. activities.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. (Harper & Row).BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . all their operations. with the fast pace of technological change. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. all these dimensions must change accordingly. 1982 113 . global competition.
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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