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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
13 13 14 15 16 18 19 20 22 22 23
Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
62 62 62 62 64 66 69 70 71 71 72 72 73 75
Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
4.4 Brand-Building Strategy 6.2 Value Proposition 6.1 Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.2 Value Proposition 184.108.40.206 Sources of Value .The 7Cs Framework 6.The 7Cs Framework 6.8.4 220.127.116.11 Company Overview 6.5.5 Conclusion Case Study: Yahoo! 6.com 6.7.3 Sources of Value .5.8.5 Other Factors that Contribute to their Brand Leadership 6.5 6.1 Company Overview 6.The 7Cs Framework 6.5 Conclusion Case Study: Gap.3 Sources of Value .5.The 7Cs Framework 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .The Failure of Boo.18.104.22.168 Value Proposition 6.7.2 Value Proposition 22.214.171.124.6 6.4.4 Brand-Building Strategy 6.com 6.8.1 126.96.36.199.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 Brand-Building Strategy 6.7 6.3 Sources of Value .2 Value Proposition 6.8 Case Study: Boo.6 Conclusion Case Study: eBay 6.4.1 Company Overview 6.1 Company Overview 6.4.5 Conclusion Case Study: CDnow 6.5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.com 6.3 Sources of Value .6.6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.8.4 Brand-Building Strategy .Extensive Integration 6.
3 Figure 2.6 Figure 5.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 .2 Figure 2.3 Figure 6.4 Figure 5.2 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 6.2 Figure 2.5 Figure 6.4 Figure 4.3 Figure 3.1 Figure 5.8 Figure 3.1 Figure 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.7 Figure 5.7 Figure 2.4 Figure 4.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .1 Figure 3.8 Figure 6.3 Figure 5.2 Figure 3.6 Figure 6.4 Figure 2.5 Figure 4.com's Associates Programme Overview of BarnesandNoble.6 Figure 4.8 Figure 5.2 Figure 6.com's Website Overview of Boo.6 Figure 2.5 Figure 5.3 Figure 4.4 Figure 6.com's Website Amazon.9 Figure 6.1 Figure 2.7 Figure 5.1 Figure 4.5 Figure 2.7 Figure 6.2 Figure 4.
1 Table 6.Timeline and Major Milestones BarnesandNoble.6 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .2 Table 6.1 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones Boo.com .com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Gap.Timeline and Major Milestones CDnow .3 Table 6.5 Table 6.7 The Emerging Brand-Building Environment Amazon.com .4 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
1 3. service and brands.0 1.com noble.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.1 . whereas it has taken decades for traditional companies to achieve the client base. that these Internet start-ups have achieved. as they face each other through an electronic connection.com) 7 .g. and is triggering the need for new brand-building strategies and tools. As such.2 3.9 2. It is empowering customers with more options and more information to make informed decisions. products and services reconfigured. relationships. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. customer affiliation and level of sales. McKinsey Analysis (www.mckinseyquarterly.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.5 million book titles). aggressive Internet start-ups have emerged.com Source: Securities and Exchange Commission Filings.5 2. Amazon. The Internet also represents a fundamental shift in how buyers and sellers interact. FIGURE 1. Internet companies such as Yahoo!. Supply chains are being rethought. This is creating new challenges and opportunities. As such. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. creating strong brands that are putting established brands at risk.9 3. America Online (AOL) and eBay have been able to build powerful brands in a few years. while providing new tools for promotion. Figure 1.com's range of 4. Amazon.com1 Amazon.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. interaction and relationship building. there has been an explosion in the online world .1 OVERVIEW Over the past few years.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com. and business models revamped. In the midst of this.an explosion that is also a harbinger of how business will operate in the future.YEARS TO REACH $100 MILLION IN SALES 6 5. the Internet is changing fundamentals about customers.
the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. May 5. 66-76 Hoffman.. In light of this. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. March . companies lack a coherent framework and concrete methods to build an online brand. Harvard Business Review. T. rather than drifting from site to site3. 'Meeting the Challenge of Disruptive Change'.66 8 . 'How to Acquire Customers on the Web'. p. building awareness. S.. May-June 2000 Hof.. attracting traffic or 'eyeballs'. brands are even more critical as customers have little to go on other than a recognised brand.. As such. Harvard Business Review.. and Novak. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important..BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies.Forget Surfers. as the need to build brand loyalty online is reaching a peak. P. & Overdorf.April 2000. Volume 78 Issue 2. P. M. Given the tremendous clutter in today's e-commerce marketplace. 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. C. that extends the brand-customer relationship beyond a single transaction. Therefore. and the high cost of acquiring online customers2. found that 57% of Internet users go to the same sites over and over again. pp. A New Class of Netizen is Settling Right In' Business Week. who are essentially intangible. turning browsers into buyers. A Business Week / Harris poll. R. However. 'Internet Communities . 1 2 3 Christensen. L. For pure online players. 1997. D. & Elstrom. Browder.
2. tools and strategies to build brands on the Internet. A review and analysis of leading academic thinking will be used to explore these issues. FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. 1. supported by secondary data related to aspects of online business from accredited and published sources. and to identify new sources of value. • To explore how the Internet is changing the brand-building environment.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2 . This is based on the outcome of the primary research (in-depth case studies).RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To identify the key factors and characteristics that contribute to the development of successful Internet brands.
com. 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. strategy and economics. relationship management. as well as a recent Internet failure (Boo. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. and is used to provide insight into some of the factors that contribute to the development of successful brands. Hypothesis (Framework): This is based on the literature review and secondary data. marketing. to provide an in-depth analysis of the psychological and social dimensions of brands. nor desire.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. this also highlights the true value of the dissertation. Consequently. The absence of academic literature on Internet branding posed a major obstacle. eBay and Yahoo!).com). The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. CDnow. The combination of cases provides a useful and practical insight into brand-building issues and problems. While there is no attempt. These are further refined using the insight obtained through the case studies.com). however. 10 . Conclusion: Discusses the key findings and areas for further research. there is more work in popular rather than academic literature. the literature review draws on leading academic thinking in more established areas such as brand management. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. and factors that contribute to a brand's success. certain key factors are highlighted in their relevance to the dissertation.com and Gap.
Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. Chapter 6 examines the brand-building efforts of seven companies. Chapter 2. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. This chapter sets the context within which online brands must be built. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.4 STRUCTURE The next chapter. The limitations of the Internet in terms of brand-building are also discussed. 11 . outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. summarises the key findings. as well as the interactive approach to attracting customers and building loyalty. The final chapter. their purpose and value are discussed. Chapter 3 explores how brands have traditionally been built. provides an analysis of leading academic literature in relation to branding. by outlining the impact of the Internet on the business and competitive environment. The nature of brands. and outlines the opportunities for further research. and introduces the core concepts that form the backbone of the dissertation. Chapter 7.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
1 INTRODUCTION In this chapter. these layers are Brands are made up of many layers and dimensions. vii 13 .see Figure 2.). but extends further to encompass added values derived from factors such as the brand-customer relationship. E.a brand is: "a mixture of tangible and intangible attributes. This value stems from the products and services that companies create and bring to the market.1 . The concept of brand equity is outlined. creates influence and generates value4" This definition truly captures the essence of a brand. whether online or offline. D. both to customers. if properly managed. symbolised in a trademark. CEO of Interbrand Newell and Sorrell . Branding is about creating 'value'. & Maughan. p.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. 2000. The chapter proceeds to describe the influence of brands on the buying process.a leading specialist brand consultancy firm . 74 4 Clifton. 2. These concepts are central to brands and brand-building. explaining the value of brands. p. the brand's emotional benefits and its self-expressive benefits . (London: Macmillan Press Ltd. and for the company. 'Building Strong Brands'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. R. and to companies. 1996.2 WHAT IS A BRAND? According to Rita Clifton. FIGURE 2.1. (New York: Free Press). 'The Future of Brands'. and the importance of customer satisfaction and brand loyalty. and highlights the importance of brand management. and they form the backbone of this dissertation.. unravelled to reveal the nature of brands and their reason for existence. both for customers. A. which.
which grows out of the cumulative memory and the experiences customers have of products or services.. Brands are richly endowed entities.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.a 'relationship'. T.of anything'. They start life as ideas. 2. 1980.2. and services to customers.the core product or service. The space a brand occupies inside a customer's head can create a 'mental' patent. the augmented brand and the potential brand . January-February. p. FIGURE 2. 'Marketing success through differentiation . brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.2 . and a 'promise'. a 'reputation'. making their way into planning and strategy documents.3 THE LAYERS OF A BRAND Brands are made up of four layers .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include .Figure 2. As such.86 14 . the basic brand. brands are their most valuable asset. a 'set of expectations'. benefits. Harvard Business Review. For some companies. It is a company's promise to consistently deliver a specific set of features. yet ultimately reside as consumer perceptions.
Planning. or a combination of them. The most common barrier to competition is building a brand. 'Marketing Management . The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. The Basic Brand The basic brand consists of the "name. such as in retailing. Levi's). & Control'. preferring things they can see and touch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. most products and services cannot survive on functionality alone as this is usually matched in time. However. 2. with supplementary products and services (e. Southwest Airlines and Amazon. even when the alternatives are substantially cheaper or more readily available (e. Kodak. They are the historical core of branding because they are the most prevalent. customers buy products to meet certain functional needs. sign. Essentially. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. Certain service brands. Service Brands (intangible) are much less numerous than their product counter parts. Coca-Cola.The Gap stores. P.com are examples. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. but the brand itself is the store. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.Analysis. and because they most readily come to mind when consumers are asked to recall brands. this is the case with all Internet companies. 5 Kotler. term.g. actually sell products. this should support the offering's performance and differentiate the brand from those of competitors.. Implementation. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising.g. These products and services add value and make the offering much more difficult for competitors to emulate.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. quick delivery) that enhance the customer’s total purchasing and use experience. information. symbol. not the products it sells . In fact. 8th Ed. or design. (Europe: Prentice Hall) 1996. 15 .
These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. and Control'. However. the consumer learns about competing brands. Through gathering information. selective distortion. either through heightened attention or through an active information search. 1996. FIGURE 2. Therefore. two factors can intervene between the purchase intention and the purchase decision .. This can be triggered by internal or external stimuli (advertisements). it is important to clarify customers' underlying buying behaviour and the buying process. 'Marketing Management .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. P. and the effect of selective perception. a consumer will be inclined to search for more information. In the evaluation stage. and pay the most attention to the brands that will deliver the sought benefits.. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.3 .4). Planning.attitudes of others and unexpected situational factors (Figure 2. p. 16 . The buying process consists of five stages (Figure 2. Consumers develop a set of brand beliefs about the attributes of competing brands. Implementation. These beliefs depend on their previous experiences with the brand. (Europe: Prentice-Hall) 8th Ed.3).194 The process starts when the buyer recognises a need.Analysis.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. and selective retention. Once aroused. it is critical to understand what attributes consumers value.
their negative attitude may influence the consumer's purchase intent or vice versa.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. After a consumer has actually purchased the product or service. locking out potential competitors. These expectations are formed through a combination of past experiences. Expensive purchases involve some risk taking. A consumer tries to deal with this by gathering information from friends. customers make decisions purely on the basis of their expectations. Customer satisfaction and loyalty are essential to creating successful brands. or dissatisfied with the purchase decision.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. 17 . somewhat satisfied. postpone. word-of-mouth. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision.the customer will be highly satisfied. If performance falls below their expectations. and a preference for recognised brands they can trust. even delighted. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. advertising and communication. If perceived performance and quality exceed their expectations then they are satisfied. they will be dissatisfied and look for alternative brands in the future. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. as these services are intangible and therefore. and especially important when dealing with purchases made through the Internet. or avoid a purchase decision is heavily influenced by perceived risk. they will evaluate their level of satisfaction . Customers' expectations are particularly important when dealing with services. A consumer's decision to modify.
'Why Satisfied Customers Defect' . 91 Loyalty is derived when customers are continuously satisfied over time.Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. The customers at the bottom end of the scale are "terrorists" . Johnson & Johnson. Spring 1999 18 . Marketing Management. Nov-Dec 1995 Hart.Harvard Business Review. Federal Express. T. Customers that are passionately or emotionally loyal are those that have built trust in a company. Saturn. M. 'Why Satisfied Customers Defect' . E. and Johnson. 'Growing the Trust Relationship'.Harvard Business Review. Nov-Dec 1995.those who actively attack the brand telling others not to buy from the company.. 6 7 Jones. D. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Trust is critical for a brand's success. W.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.customers who are satisfied and loyal and talk favourably about the brand . T. This satisfaction encompasses the whole experience and not just a company's products or services. Hewlett-Packard. C. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. At the opposite end of the satisfaction spectrum are "apostles" . Southwest Airlines and Xerox7. E. and believe that it will always act in their best interest..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. & Sasser. p. FIGURE 2..5.. & Sasser..
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.. There is also clear evidence of this on the Internet. consistent orders Satisfied customers are the best advertisement . The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent.g. D.com. Spring 2000 19 .. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. & Rogers. M. emotional loyalty is born out of a consumer's personal relationship with a brand. 'The One to One Future'. Firstly. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. In this way. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. 1993 McWilliam.Sloan Management Review. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. 'Building Stronger Brands through Online Communities' . Emotional loyalty can be also created through the formation of a strong user community around the brand. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. G. 8 9 Peppers. Harley-Davidson motorcycle clubs).they provide good word-of-mouth and are the best salespeople for the product / service 2.
343-373. which goes well beyond the satisfaction of a specific need. A stronger brand enjoys a high degree of brand preference over competing brands.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. 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. S. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. a 'powerbrand' tends to have a high degree of brand loyalty. there are brands that customers perceive as acceptable and would not resist buying. Beyond this. there are brands that are unknown by most buyers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. and understanding the needs and buying processes of the target market is essential.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. Journal of Consumer Research.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. pp. 2.7). March 1998.7 . Emotionally loyal customers build a sense of trust and two-way commitment with the brand.6 .. FIGURE 2. whereby customers would be unwilling to substitute it with competitors' offers. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). 20 . However.
perceived quality. D. According to David Aaker (1991). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. trademarks. and relationships with distributors and strategic partners. FIGURE 2.Create Awareness . 1991 21 .. and other assets such as patents. 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".. The benefits of each are outlined in Figure 2.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. The major brand assets are brand loyalty. which is the value of the brand over and above its commodity value. strong brand associations. (New York: Free Press). D. (New York: Free Press). 1991 10 Aaker. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .8 .8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. name awareness.
N. 158-170.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. the best performer for a particular purpose • Characterisation . G. The brand leader is the most profitable and all beyond number two are unprofitable13. 11 12 Kapferer.. production and marketing.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies.. 22 . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. pp. 'Strategic Brand Management'. Premium pricing increases revenue.To save time and energy through identical repurchasing and loyalty Guarantee ..8.Satisfaction linked to the attractiveness of the brand. (London: McGraw Hill). 3rd Ed. R. market share and profits . & Downham. to its communication • Ethical .To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .To be clearly seen. to make sense of the offer. • Brand Leverage .To be sure of buying the best product in the category..To have confirmation of your self-image or the image that you present to others • Continuity . and the number two twice the share of the number three12.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. to quickly identify sought after products • • Practicality .Typically a brand leader obtains twice the market share of the number two brand. in the following ways: • Brands. May 1993. 1986 13 Golder.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. (New York: Free Press).Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . J. P. & Tellis. Journal of Marketing Research. J. to its logo.8. brands perform several functions that add value and customer benefits: • Identification . 'Consumer Market Research Handbook'. 1992 Worcester..
and the characteristics of successful brands.g. drives up share price and provides the basis for future growth. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. The next chapter describes the process of how brands are built. When a company creates this type of customer preference and loyalty. but there remains an ongoing controversy about how accurate and meaningful these measures are.g. and Young & Rubicam have created complex formulas. not brands. 23 .Brand leaders usually have the financial strength to fend off competitors. maintain good price levels and generate strong cash flows. This. companies such as Interbrand (see Appendix A).Companies with strong brands attract good recruits. Johnson & Johnson with Tylenol). They also tend to elicit community and government support. • Avenues for Growth . it can build a strong market share. brand leaders can exploit their superiority in the market (e.Strong brands are more attractive to investors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .Dominating a niche market is usually more profitable than being fifth in a large market.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. The brand can also be used to penetrate new markets. fashion or prevailing market conditions. In addition. in turn.The product life cycle applies to products. • The Brand Barrier . 2. • Motivating Stakeholders . Coca-Cola “the real thing”). Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. In trying to estimate the monetary value of brands. Companies can maintain a brand while modifying the underlying product to account for new technology. the tools that are used. • Brand Loyalty and Beliefs .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
Once this has been established. To entice trial and repeat purchase requires triggering mechanisms. highlighting important factors that contribute to the success of each step along the way. and keep it turning.1 INTRODUCTION Building a strong brand is a complex task. brand awareness. confidence and brand equity are built.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.1. it should provide a satisfactory experience and lead to a willingness to buy again. The major characteristics of successful brands are also reviewed. public relations. promotion. the next step is to get customers to try the brand. 3. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience.1 . If the offering is developed properly. This chapter spells out the traditional brandbuilding process.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 . selling. FIGURE 3. which are created through advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. This is illustrated in Figure 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. and direct marketing.
As such. unless differentiation and awareness can be developed. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. In this way.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. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . and added value (AV). a company must develop a strong understanding of who their potential customers are. The value proposition must be continuously re-evaluated to respond to changes in the marketplace.each is essential. the brand can elicit feelings of confidence that it is of higher quality than competitors'. it will never attract a strong client base. FIGURE 3. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition .2 . 26 . a distinctive brand identity (I). a compelling value proposition is the combination of an effective product or service (P). In order to do this.2).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.a strong offer that a potential customer would find compelling and interesting. Similarly. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. Without a good product or service. it is impossible to build a successful brand.
the pace of technical change. 2nd Ed. Brand values derive from five major sources15: • Experience of Use .g. • Manufacturers' Name and Reputation . Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. People use brands to express their lifestyles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. the number of competing alternatives and the large variety of advertising and selling messages. J. MA. Kellogg's) attached to a new product will transfer positive associations.. 1998. faith in brand generates satisfaction in use. 14 15 Doyle. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. layout and appearance of the brand can clearly affect preference by offering cues to quality. it acquires added values of familiarity and proven reliability. (Europe: Prentice-Hall). Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice.In many situations a strong company name (e. P. influenced by brand values. which are additional to those based upon real performance. or to gain a sense of belonging. • User Associations .if a brand provides good service over time.3. Sony. 'Marketing Management and Strategy'. pp. these needs are as likely to be about satisfying self-actualisation or esteem needs. mean that buyers look for short cuts. • Brand Appearance . 'What's in a Name? Advertising and the Concept of Brands' (Lexington. it is more likely to work effectively for them. interests. • Belief in Efficacy . providing confidence and incentive to trial. 169 Jones. Customers choose brands. cosmetics and high-tech products. which they perceive as meeting their needs. values or wealth. Gillette.. Coca-Cola.in many cases. P.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. The large number of decisions. Hewlett-Packard. For pharmaceuticals. In today's affluent society. 1986 27 . Lexington Books). industry endorsements and newspaper editorials.the design. as they are to be about satisfying basic physical and economic needs14. if customers have faith that a brand will work.brands frequently acquire an image from the type of people who are seen as using them.
16 Kapferer.g. style or cultural differences from one country to another. visual appearance.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. A company should seek to differentiate its brand through developing a distinctive identity. and the relationship expressed (e. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . type of spokesperson / customer image used to advertise the brand). glamour. friendly).articulates the brand core in terms of the culture it conveys. which remains fixed over time. Themes include the physical appearance (logo. • The Brand Theme . which depends on how the target market perceives the brand.the fundamental or genetic code of the brand.Figure 3. features. however the brand style and core tend to be less flexible. press releases. 'Strategic Brand Management'. and advertising. colour scheme.3. • The Brand Style . This may be different from the brand image..the way the brand communicates through its advertising. packaging.g. 1992 28 . Brand themes are the most flexible element and will tend to change with fashion. prestige. (New York: The Free Press). J.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. its reflection (e.3: • The Brand Core . etc. and visual appearance). its personality and its image or self-projection .
'Strategic Brand Management'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. below-the-line activities.g. advertising.. Secondly. website design. its strengths and opportunities. 1992 The brand prism enables management to understand the brand. J. and through line and brand extensions.3 . Finally. It also facilitates consistency in the message being transmitted through presentation (e. structure and ease of use).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. 29 . (New York: Free Press).how far the brand can be meaningfully stretched to other products and market segments. understanding the brand's core and style helps set the perimeters of brand extensions .
it should lead to satisfaction and re-purchase. pp.The company has to create awareness of the brand. FIGURE 3. • Interest .Customers need to be stimulated to seek information about the brand's uses. E.79-86 30 .The customer is satisfied and decides to make regular use of the product / service.Figure 3. Personal sources such as word-of-mouth from friends. 1962.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.often referred to as the '4Ps' . management style.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. Before potential customers can buy a product / service. Price. • Adoption . 1962. Promotion and Place (distribution strategy). skills.79-86 The Innovation-Adoption Model consists of: • Awareness .Customers consider whether the product / service will meet their particular needs. 'Diffusion of Innovations'.Product and service features. and its products / services. The value proposition must be communicated to entice customers to try the product / service. features and advantages. (New York: Free Press). strategy (partnerships and alliances). deliver and reinforce this value proposition (see Appendix B . 'Diffusion of Innovations'. E.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. systems. If the offering is developed properly. This learning is called the adoption process17 .. 17 Rogers. the company must ensure that it develops the appropriate structure. colleagues and opinion leaders become important influences at this stage. pp. • Trial . they must learn about it. • Evaluation . The value proposition must then be articulated in terms of the 'marketing mix' .The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. Advertising and PR are common tools for achieving awareness. culture and staff needed to support..4. (New York: Free Press). and the product / service's perceived performance.The McKinsey 7-S Framework).4 .
personal selling and public relations / publicity . & Parasuraman. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . Over time. companies have used the tools of the promotions mix . the company may supply customers with special equipment or tools (e. but enhanced customer interaction through relationship building. • Structural Ties . Through building relationships with customers. Customer service is an important element of this relationship. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. companies can increase the value of each customer.to move customers through the adoption process.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. 3.. multi-transaction relationship.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.advertising. when each trusts the other to deal fairly and reliably. (New York: Free Press). 18 Berry. direct marketing. while strengthening the position and value of the brand. companies can increase buyers' satisfaction. making them less likely to switch to a competitor. This is often referred to as Customer Relationship Management (CRM). software) to help customers interact with the company. Internet linkages. This information is a key competitive advantage. providing insight into customers' needs and wants. 1991.136-142 31 . encouraging evaluation and trial.such as airline frequent flyer programmes. & loyalty / discount cards. L. this process enables an exchange of information. In this way. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. A.for example. pp. 'Marketing Services: Competing Through Quality'.g. This focuses on establishing a longterm. sales promotion. allowing companies to communicate regularly with their customers and customise their interaction. Advertising and public relations can be effective in generating awareness and interest. Social Benefits .
1998.Satisfactory experience is the major determinant of brand values. Once the framework has been established and the organisation configured to provide this proposition. • First-Mover Advantage . It is easier to capture a share of the consumer's mind and build a customer base. It often takes years to build up the added values.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. comprehension and intention to buy. 19 Doyle. the brand is meaningless. 2nd Ed. As such. pp.. P. The Internet provides the opportunity for companies to create compelling value propositions never before possible. Without building awareness.If the brand is not the innovator.Being first into the market does not necessarily bring success. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. while providing new tools for promotion. brands were not built quickly. when the brand has no competitors to rival its position. companies have the opportunity to start building relationships with their customers. which will communicate the brand's existence. its function and psychological values. (Europe: Prentice-Hall). strengthening the brand further. value proposition or augmented brand. it has a profound impact on the traditional brand-building process. companies must actively communicate it to the target audience to entice trial. 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. and establish a trusting relationship. then its position will be undermined. and making it more difficult for competitors to emulate..176-177 32 . interaction and relationship building.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. If the quality of the experience deteriorates. • Strong Communications Programme . 3. • Time and Consistency . advertising or promotional campaign.a segmentation scheme.A successful brand requires an effective selling. • Unique Positioning Concept .Traditionally. it must have a unique positioning concept . trigger trial and reinforce commitment to it. but it makes the task easier. including: • A Quality Product / Service Experience . or if the brand is surpassed by superior offers from competitors. which will add value and distinguish it from competition. As a result. 'Marketing Management & Strategy'.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
1 INTRODUCTION The Internet is transforming the business environment.1 . FIGURE 4. E-MAIL Is the part of the Internet that most users use at present. 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.Figure 4. In essence. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment.1. it offers a number of alternative channels that enable businesses and people to communicate. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. Hypertext allows information to be organised in a user-friendly way that is easily accessible. The three core channels include e-mail (the most common). it is a common technology platform that allows computing devices to communicate with each other. and a critical source of added value. but in practice not in real time. In doing so. 34 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Information is becoming a major part of the products and services that people buy. creating new challenges and opportunities.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. which contain hypertext and pictures. 4. This chapter provides an overview of the Internet and its defining characteristics.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. and the 'world wide web' (www) . news groups and mailing lists.
The context of the Internet and certain key developments are highlighted in the Figure 4. the Internet lets individuals and companies build interactive relationships with customers and suppliers. These defining characteristics have fuelled its explosive growth. 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 . These qualities eliminate the barriers of time and space that exist in the physical world. ubiquitous links to anyone.The Internet is a global network and can be reached from everywhere.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. 7 days a week.2 (Note: 35 . • It Allows for Two-way Communication and Interactivity . which was intended to link military networks together. anywhere. These characteristics combine to create a very powerful medium.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. By allowing for direct. regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale). 4.this radically alters the process of interaction between communicating parties. • It Overcomes the Barriers of Time and Space .24 hours a day. allowing both parties to identify each other and build one-to-one relationships . when the United States Defence Department developed the 'ARPAnet'.not previously available with mass medium forms of communication.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). and deliver new products and services at low cost.2.
000 1969: 10.000.a PricewaterhouseCoopers Report.com) 36 . 2000 Internet / ARPAnet was created Dell. as cited in 'E-Business Technology Forecast' .economist.000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.3 .000 10. FIGURE 4. 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.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.Figure 4.2 .3.000 1.000 1.000.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 100. 1996 (www. 1998.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.
As shown in Figure 4. there will be an estimated 375 million Internet users world-wide. the momentum created by all these forces has created a virtuous cycle of growth. hosting.g. 2000 (http://cyberatlas. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.4. L. web design.Cheap bandwidth . TCP/IP). Reed.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. The McKinsey Quarterly.2 20 'World Online Populations' . payment. FIGURE 4.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .).New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.CyberAtlas Internet Statistics and Market Research. The emergence of open standards in development tools and at the network protocol level (e.Higher PC penetration among consumers and companies .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .High-powered servers . The growth in support services (e.Low-cost networking alternatives .Attractive infrastructure and middleware software .g.internet. 1996.E-Marketplaces . Multimedia development tools that can be used to create rich content.Content Aggregators . and gateway services). increasing to 500 million users by 200220. G.Cheap microprocessors & RAM . billing.4 . The development of critical processes (ordering.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. making it more cost effective for software developers and other technology providers to create interoperable products. etc. offering inexpensive bandwidth. Easier access to these networks provided by point-and-click web browsers... No.com) 37 . 'Electronic Commerce (finally) Comes of Age'.
These activities highlight the adoption of the Internet as an interactive. 2000 (www. to interacting (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). FIGURE 4.5 .from communicating (90% use e-mail) and sourcing information. communication and information tool.5. reveals the wide range of areas where people are embracing the Internet .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.com) 38 . as cited in the Economist Intelligence Unit (EIU).Figure 4. entertainment) and purchasing (37%) . chat rooms.eiu.g. April 13.
FIGURE 4.e. they all project the value e-commerce transactions to grow at unprecedented rates. The main difference between the Internet and other electronic media (i. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. content.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. April 2000 39 .WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies.6 . Instead there is a website. telephone) is that the Internet goes beyond just enabling transactions. projected by Gartner Group.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. software. web browsers. The buyer and seller 'face' each other through an electronic connection. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. and no cash register. fax. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. There is no need to travel to a physical location. and people. no order book.
operation (e. suppliers. Dell Computers). 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. March . Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. partners and other corporate constituencies. Although the particular impact will differ between industries.. Volume 78 Issue 2. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience.g. For example. and transforming traditional distribution channels.g. represents a level of efficiency and integration previously unattainable. 'Meeting the Challenge of Disruptive Change'. By allowing customers to talk knowledgeably and directly to suppliers.g. how they compete and how they serve their customers . the explosion of information is placing a premium on skilled information management. C. Harvard Business Review. through the use of extranets). The Internet also facilitates the development and co-ordination of global activities (e. which are often disruptive to traditional business models21.how companies operate. A 'virtual' presence can mitigate the cost of having to invest in physical facilities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. New brands and business models are emerging to seize this opportunity.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . Additionally. some of which look set to become the superbrands of the future (e. At the same time. This is threatening to undermine many old established brands. Yahoo!). 66-76 40 . 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. 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. & Overdorf.and revolutionary new business models are emerging. pp. M. the Internet is sidelining the role of many traditional intermediaries.April 2000..
Internet technology can be used to exploit collective learning and knowledge. The Pace of Business is Accelerating With the fast pace of technological change. highest convenience and quickest satisfaction.they can choose between traditional 'bricks-and-mortar' companies. respond to competitive and market dynamics. Customers have more options than ever before . CEO of Forrester Research22. empowered customers. ensuring the delivery of a satisfying customer experience. 'Empowered Fruit Flies' . 22 Colony.in developing products. improving processes. constantly innovate.Forrester Research. as they are just one 'click' away.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. has resulted in a fierce competitive environment. They can move from one supplier to another searching for the best prices. and the 24 x 7 environment. According to George Colony. products and services. commit and deploy resources. and reorganise as appropriate. or catalogues. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. these new highly informed customers are "empowered fruit flies". as they have access to more information leading to more informed decision-making.forrester.internally and externally . Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. G. their organisations must harness knowledge . fierce competition. combined with the emergence of electronic intermediaries. the typical clock-speed at which companies need to operate has accelerated. quick evolution and all the power. It also provides easy access to competitors' offers and allows customers to consider every available alternative. online stores. This.. collaborate more effectively and ultimately embed organisational intelligence within processes. to capture new opportunities. As a result. This is forcing companies to become flexible and responsive to customer needs. little loyalty. the diminishing barriers-to-entry and the lower switching costs. getting closer to customers and ultimately staying ahead of competitors. switching costs are much lower. allowing employees to share knowledge. 2000 (www. the development of a knowledge economy. it also removes the geographical protection from competitors. with no time. the globalisation of business.com) 41 . Now companies need to move at warp-speed.
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. However.A Research Report by TeslaGroup. The opportunity of linking the complete supply chain 'virtually'.7. companies have looked upon alliances only as a means of filling gaps. In this way. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. Examples of emerging information age business structures include flat versus hierarchical. it provides the opportunity to reach customers where they want. extensive outsourcing. linking companies with suppliers and customers up and down a pre-defined value chain. information. linking companies with competitors and players from entirely different industries and business sectors. achieve global reach and realise a new source of cost advantage. and the need for speed and flexibility have accelerated the unbundling of business systems. As such. and most traditional partnerships were vertical. Increasingly. 23 'The Future of E-Business' . most Internet and e-commerce partnerships extend beyond this. alliances and partnerships have taken on a new level of strategic importance.teslagroup.(www. The extent of this partnering is illustrated in Figure 4. It allows companies to improve customer service. 1999 . how they want and with the levels of customer service they demand. and partnering up with the best for the remaining activities. thus creating a 'value net23'. advice and convenience. when they want. companies can provide customers with a strong value proposition by offering them the best in quality. which highlights the typical structure and dynamics of an online company.com) 42 . combined with intense competitive pressures. Traditionally. 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. supply chain cooperation. and multiple strategic alliances and partnerships. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. variety.
while making the offering hard to duplicate off-line.7 . This provides customers with added value. Partnering with portals and affiliate web sites is important in driving traffic to a web site.6 CONCLUSION The Internet and its strategic impact are not technological issues . 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. competition is intensifying. D.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. the pace of business is accelerating and power is shifting to the customer. while triggering the emergence of new brandbuilding strategies. This is the substance of the next chapter.they are business issues. G. it is transforming the competitive landscape and brand-building environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. & Stirton. April 2000 In an attempt to provide a rich customer experience. As such. 43 ..THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. S.dot. The Internet is transforming every business to some degree.a Boston Consulting Group (BCG) Analysis. New opportunities for efficiency and co-ordination are emerging. 4. many online companies are blending together the products and services of a wide range of companies. 'Organising for e-Commerce' .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. The limitations of brand-building on the Internet are also discussed.. In addition. 'Internet Portals' . they have never handled or seen (except on-screen). and sites that understand the user's needs and preferences24.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. addresses.Durlacher Research. on the other hand. whereby the company can establish a dialogue and 24 Marathe. On the other hand. many unnamed customers develop a 'relationship' with the brand. brands were a substitute for information a way for consumers to simplify the time-consuming process of search and comparison before deciding what to buy. in most cases. people have concerns about sharing personal information. offers interactivity. Customers derive added value through the provision of information on the products or services they buy. Transactions on the Internet require customers to provide detailed personal information . credit card numbers. May 1999 (www. J. the logic of the Internet cuts another way.com) 45 .durlacher. and projects it onto a third party intermediary (the media). etc. and the fact that customers are buying goods that. brands have been developed in an environment whereby a company creates a brand.2 THE NEW DYNAMICS OF BRANDS Traditionally. In response.names. as well as on topics of interest related to the brand and product characteristics25. The Internet. This threatens to undermine the value of brands. 5. Generally. the Internet makes search and comparison much easier. However.sites that provide a wealth of information and make comparison shopping easy. has placed greater importance on trust and security. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. the intangible nature of the Internet. in addition to providing added value. where the user feels a part of. Traditionally. New strategies and tools for building brands on the Internet are identified. including the interactive approach to attracting customers and building loyalty. People only tend to transact with sites they know and trust .1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'.
pp. brand-building must focus on the end-to-end customer experience . The differences between the traditional approach and the one-to-one approach are outlined in Table 5.Fuqua School of Business. 1999.1 . understand and relate to customers. M. companies have to find innovative ways of leveraging the information and 25 McCann. relationship building characteristics of the Internet. learn. 151-160 46 .. However. TABLE 5. 'Is Your Company Ready for One-to-One Marketing?' .edu) 26 Peppers. In doing so. In maximising the customer experience.. to its delivery to the customer. a company can listen.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. Duke University. 'Adding Product Value Through Information'...Harvard Business Review. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. B. this also poses a challenge as these relationships may take on a life and character of their own. Prof. & Dorf. Rogers.from the promises made in the value proposition. January-February.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. This creates the opportunity for companies to build stronger relationships than previously attainable.1. rather than simply speaking at customers. 1997 (www. D. January 28. J.duke. .
. For example..Research by PricewaterhouseCoopers / The Conference Board. Kearney White Paper. customer acquisition costs are high. as cited in 'Creating a High-Impact Digital Customer Experience' . 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.. 2000 (www. and Novak.due to more frequent shopping and larger purchases.word-of-mouth is the single most effective and economical way online businesses grow their sites. 'The Value of Online Customer Loyalty and How You Can Capture it'. Zook. it is very unlikely that an online retailer can break even on a one-time shopper. MayJune 2000 30 A Forrester Research Study. C. L. T..3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. companies must ensure that they provide a completely satisfying end-to-end customer experience..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. Chu.com and www. R. S. Repeat purchasing not only binds trust. In fact. J. 'How to Acquire Customers on the Web'.. but also provides more opportunities for cross-selling. 27 'Electronic Business Outlook'. unless they are selling high-price. P. Baveja. D.com) 29 Hoffman. and some are spending over $50029. S. This is further reinforced by the fact that.often. & Hancock. 2000 47 . a disgruntled online customer tells 10 people about a poor experience30. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. companies need to retain customers so that they return to the site repeatedly. D. on average. - Repeat customers refer more people and bring in more business . These points stress the importance of online customer loyalty. - Loyal customers are more willing to buy other products from the company. and to recover their investment.pwcglobal. Rastogi.converence-board. T. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . - Repeat purchasers spend more and generate larger transactions ..org) 28 Rigby. Therefore. . This view is reinforced by in-depth studies carried out by Bain & Co. March 17.An A.A Mainspring Communication Report in collaboration with Bain & Co. 1999 (www.. and with customers holding all the power. Harvard Business Review.bain. it could be argued that customer loyalty is even more critical online. high-margin items..
4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. as illustrated in Figure 5. However. businesses and online communities that rely on connectivity can enjoy 'network effects'. increases disproportionately as more people join the network.1 . (London: Harper & Row). As a result. G. and the value that each member realises. and in the case of information-based products. FIGURE 5. the costs approach zero32. 7th Ed. and other features can be added or changed at low marginal cost. 180-182 48 .1. this is not the case on the Internet. pp. as the benefits of scale are overwhelmed by the disadvantages of size31. each additional unit sold does not cost more than the last to deliver. R.. where the value of the network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Similarly.. 'Positive Economics'. Once the up-front investments are made (for research and development and technology infrastructure). Even more important. additional customers and transactions can be managed with limited fixed cost investment. additional products.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. (also referred to as 'viral economics'). customisation for individual customers. 1989.
'5 Rules of the eEconomy'. R. This makes it more efficient in improving product selection. fulfilment • Defensible advantage against competitors SCALEABLE. No.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.A Shop.A Publication by Andersen Consulting 'The State of Online Retailing' .org Study in collaboration with The Boston Consulting Group. As the company builds a customer base and develops a relationship with customers. including direct marketing. Nov 1998 49 . being first into a market makes it easier to capture the consumer's share of mind. It also allows online companies to tap supplementary revenue streams.Figure 5.2 . advertising and referrals. enhancing the interaction. direct marketing.. link revenues 32 33 Melnicoff. delivering increased margin per customer . FIGURE 5. 21 . With no competitors around. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. Outlook 1999. its ability to track customer preferences and customise offerings improves.2. cross-selling and up-selling33. 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.
The Internet. As a result. with its e-mail lists. commerce and distribution partners. as once a strong lead is established. its growth curve relative to a new entrant is somewhat daunting. and the cost of switching to an alternative brand becomes quite high.org Study in collaboration with The Boston Consulting Group. When a company reaches 'critical mass'. Word-of-mouth is a particularly powerful medium. larger sites can leverage more customer advocates to reduce customer acquisition costs. As a result. Larger sites can also negotiate better supplier discounts or product placement fees. the leader will pick up momentum and will stand to gain an insurmountable advantage . "leveraging the media". have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. 5.5 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. By the time a company has reached critical mass. as it carries the implied endorsement from a friend. 34 'The State of Online Retailing' . with a minimal budget and maximum effect. the value of the company rises exponentially with market share. Given the connectivity of the Internet among customers. the brand begins to take hold. such as 'viral' marketing. leading to the exponential expansion of the customer base. viral marketing is an effective tool in getting a message out fast. It is often referred to as "word-of-mouth". This. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. New marketing strategies. creating a potentially exponential growth (like a virus) in the message's visibility and effect. "creating a buzz". in turn. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. 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. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base.A Shop. This snowball effect favours first-movers. This is the logic behind some of the extraordinary valuations of Internet companies. Nov 1998 50 . chat rooms and bulletin boards. and word-of-mouth even more effective.unless the leader makes a serious mistake. and "network marketing". or until a competitor finds a way to change the game again.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. web sites. makes communication tighter.
they tell all their 51 . A traditional print publication would hope to reach 100.com The classic example of viral marketing is Hotmail. saying: • "Get Your Private. Free Email at http://www. and they created a subscriber base more rapidly than any company in history.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. sign up for their own free e-mail. and the message spreads organically.5. In fact. • Each new user becomes a company salesperson.com was one of the first free web-based e-mail services. In its first 1. Hotmail acquired over 12 million subscribers.000 subscribers within a few years of launch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.000 subscribers every day. but Hotmail signs up more than 150. 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). seven days a week.com. they will have a powerful viral opportunity at their disposal.5 years. Hotmail. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. and then propel the message even further to their own ever-increasing circles of friends and associates. Today they are the largest e-mail provider in the world with over 40 million users. When a user builds a website. where they have never carried out any promotional activities. and in doing so spread the word for Geocities. friends to visit it.hotmail. eGroups and Geocities (both recently acquired by Yahoo!). whether for communications or community. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. a company now owned by Microsoft. Geocities enables people to create personal websites for free.1 The Case of Hotmail. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.
Zook.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . D. In fact..com) 52 . 2000 (www. Place).3 . In essence. Rastogi. S.. T. 'The Value of Online Customer Loyalty and How You Can Capture it'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. Kearney White Paper. Baveja.. Chu. making customers 'click off' to another site.. 2000 'The E-business Technology Forecast' . 30% of potential customers leave sites because they cannot find what they are looking for. and 66% of people who start a 'shopping basket' fail to complete the transaction37. J. & Hancock.bain. R. FIGURE 5.3).An A.. Kearney White Paper. S. As 35 36 'Creating a High-Impact Digital Customer Experience' . The customers' ability to access and display information rapidly is extremely important36.6 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.A Mainspring Communication Report in collaboration with Bain & Co. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Price.. Sites that are difficult to use can cause frustration. Promotion. C. T.An A. March 17. 2000 37 Rigby.A PricewaterhouseCoopers Report. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. .
com) Davenport. FIGURE 5. whereas a slow response time and site downtime will have a significant negative impact. February 2000 Issue 53 . With almost infinite display space and inventory capability. and fast response times are among the most important factors in establishing web brand loyalty38. expert insights. up-to-date information. and a wide range of products..BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.4 . as cited in Business Week. which can enhance the company's value proposition. T. 'Sticky Business'. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.businessweek. ease-of-use. 1999 (www.4. online companies have the opportunity to provide rich. ease-of-navigation. October 29. 38 39 Cognitiative Inc. as cited in Business Week Magazine.businessweek.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. 29th October 1999 (www.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. CIO Magazine.
Online sites can track a customer's purchase history and modify its service accordingly. 1995. Members can interact in chat rooms. Customisation Customisation involves tailoring the presentation of a web-site to individuals. which is facilitated by a combination of factors (Figure 5.. K. S. visitors should not be engulfed with too much information.. based on profile information.com) McWilliam. W. 'Real Profits from Virtual Communities' . No. 54 . or prior transactions. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. For a community to work. even if they purchase offline. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content.. A.A Forrester Research Report. it needs a critical mass of members42.forrester. An online community offers a compelling way to entice customers back to a site. Clemmer. These sites allow members to interact with one another. Community Online communities are emerging as new gathering places for consumers with similar interests (e. According to Forrester Research40. Other content includes community-generated content. J. which enhances the user's online experience. Often. & Hagel. An important contribution of these communities is that they provide members with a medium to communicate with each other. as well as through loyalty programmes that provide targeted benefits. It fosters a sense of belonging41 among the members. iVillage and Geocities). 40 41 Morrisette. and nearly 20% use it for post-sales support. & Bluestein. 31% of online consumers use the Internet for obtaining product information. Customisation creates the feeling of a one-to-one relationship. 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). demographics.Sloan Management Review. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.. and organise live events.5). share information and access a wide range of services. 1999 (www. Spring 2000 42 Armstrong.The McKinsey Quarterly. On the other hand. G. 'Building Stronger Brands through Online Communities' .g. 3.. use bulletin boards. . and advertising (if it is relevant and useful).
when membership in the brand's community becomes an end in itself43. Site-tosite connectivity focuses on connecting users to other relevant sites. M. 43 Fournier. O'Donnell & Gupta. allowing customers to deepen their experience with a brand and build more personal connection. pp. they opt to input the URL (Internet address . Companies can provide a selection of related links that complement the site's purpose and value proposition. This is similar to placing offline stores in high traffic areas.5 . Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity... 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. and can create emotional loyalty.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole.A PricewaterhouseCoopers Study. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. S.com) directly into the browser and access the site immediately. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.brand-name. March 1998. 'Making Real Sense of Virtual Communities' . Journal of Consumer Research. Mulcahy. as well as attracting traffic from other sites. C.www. A. 55 .. 343-373.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Once customers know of a site. 1999 Communities enhance the speed and value of information sharing.6)..
customer support at all stages of the interaction is important. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. Customer Care Online customers often require assistance and reassurance. In addition. (www. which provide targeted and unique (customised) benefits to the customer.com) 56 . Communication The Internet provides the opportunity to establish dialogue with customers through e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. news up-dates. toll-free telephone numbers. serves this purpose and helps to build customer loyalty. Communication can be tailored to specific user interests and should allow for two-way interaction. online chat. as well as informing and reminding customers of special offers. live chat. Customers share security and privacy concerns. It is important in building relationships. Other tools such as bookmarking the page can also facilitate connectivity. activities. Therefore.marketwatch. 45 MarketWatch. and FAQ pages (Frequently Asked Questions) to solve problems. delivery and return options. events and subjects of interest to the customer. as well as features such as gift-wrapping.6 . customer care activities can involve providing a variety of payment. The development of loyalty programmes. and can be provided through e-mail. and online surveys.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.
THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski.2. 180-183 (www.. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. and bring people to the site for the first time. M. The mechanisms to communicate range from traditional media (TV.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. visibility relies solely on Communication. e-mail notifications and banner advertisements.mckinseyquarterly. 'Marketing to the Digital Consumer'. because there is no physical presence. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. 1996.7. McKinsey Quarterly. 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 ’ .. Adoption). Newspapers. This is more difficult online than offline. Engage.. Evaluation. No. Interest. McQuade.8. billboards.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. This model consists of five stages .Awareness.. & Zeisser.4 . Figure 3. Waitman. links from directory searches (Connectivity).7 . Learn and Relate. including affiliate programmes with other websites. The company must build awareness and communicate its value proposition to its target customers. FIGURE 5. Therefore. S.) to online tools. Magazines. Trial. modified to take into account of the interactive dynamics of the Internet.Attract.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. R. Retain. etc. A. pp.
2 4. Companies then need to engage customers to obtain their interest and participation. discounted over the expected duration of the brand-customer relationship. Attracting customers is only the first step in building online brands. Kapferer's Brand Prism (Ch.3 3.8 . 3.5) 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.0 3.1 3.ebusinessforum.com) The most effective methods are direct e-mail.4 3.7 4. affiliate programmes.3 2.3) is useful to ensure that a company develops a distinct and consistent brand identity.5 3. it is important to quickly engage consumers' interest before they move on.4 4. The key factors at this stage are Convenience combined with interesting Content.6 3. Fig. 58 .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 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 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.8 4. 3. multiplied by the expected rate of transactions.3 Source: Forrester Research. Creativity is also an important factor in gaining attention in today's cluttered marketplace. as cited in 'Targeting Consumers via the Internet' .Economist Intelligence Unit 2000 (www. Engage With the multitude of choice available on the Internet.4 3.WEBSITE PROMOTION METHODS .
It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. 59 . Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers.9). do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Building up a knowledge database on each customer . This helps to create a customer base that spends more time and money at a site. Content is the basic driver of retaining customers on a site. Certain product categories. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Radio). The objective is to increase the conversion rate (% of browsers converted into buyers).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. if used properly. a company can create value by providing a personalised online experience. The initial site registration provides an early opportunity to obtain useful information.g. • The Internet supports brand-building activities where there is a need to build a relationship. and what additional products and services are they interested in provides companies with valuable information which. attitudes and behaviour). can create value for the customer and help build the brand-customer relationship. such as groceries and convenience goods. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. TV. and must be continuously updated due to the multiple visit nature of customers. 5. Learn The Internet provides extensive opportunities to learn about consumers (demographics. and forge closer relationships than any offline operator.who they are and why they shop online. Communities and Customisation are other sticky applications.
2. However. & Zeisser.9 . S. it is not economically feasible to sell certain products. Waitman. the experience is the brand..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. 5. 60 .. No. McKinsey Quarterly. R.. due to high delivery and transaction costs (relative to the value of the product).com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. smell). The interactive brand-building process involves attracting. 'Marketing to the Digital Consumer'.from the promises made in the value proposition. • Brand-building favours products that can be sold online. the interaction provides the ability for companies to learn from their customers and relate. 180-183 (www. engaging and retaining customers. M. The next chapter analyses the brand-building efforts of seven companies. and as the relationship develops. pp. Given the high acquisition costs of online customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.mckinseyquarterly. companies must provide a satisfying end-to-end customer experience . providing further added value. touch. The 7Cs Framework outlines the key components of the brand experience and the sources of added value.9 CONCLUSION On the Internet. to its delivery to the customer. especially in small quantities. it is critical for companies to build relationships and foster brand loyalty. and the need to stimulate the other senses (taste. These case studies provide a practical insight into how companies are building their online brands. A. In order to create "apostles".. 1996. McQuade.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
its brand-building strategy (how it generates traffic).com and Yahoo!.2. 2000 (www. February 26. and higher levels of customisation and service than the traditional shopping experience allows. a company overview. Amazon has been able to differentiate itself from other online competitors. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).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. Not a River' . and one of the top two or three in Britain. November 11.2 Value Proposition Amazon.com has become synonymous with e-commerce. Amazon serves over 23 million customers from 160 countries.1 INTRODUCTION This chapter provides an analysis of seven companies. combined with its levels of customisation and customer service.com. Amazon.com launched with a mission to use the Internet to transform book buying into a fast.Goldman Sachs Report. Gap. Through its provision of a one-stop shopping experience.1 Company Overview Amazon. Barnesandnoble.2.economist.interbrand. Boo. In July 1995.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Amazon has cultivated a reputation for excellence.The Economist. and has equity investments in several e-tailers. and enjoyable experience.com. it is the most visited e-commerce website in America. The cases are presented in the following sequence . In addition. Germany and Japan49. 6.see Appendix A. Each case is presented in the same format including. and is one of the few Internet brands that is recognised all over the world. eBay. discounted prices.1 outlines Amazon's timeline and major milestones.COM 6.com.com) 62 .2 CASE STUDY: AMAZON. and other key factors that have contributed to its success (or failure).It's an Ocean. and has sales of over $2 billion. Amazon. It is the 57th most valuable brand in the world47. innovation and delivering on its promises. easy. including: increased selection. Figure 6. In addition. 'Amazon. 6. 47 48 Interbrand (www.Amazon. CDnow. 1999 49 'Amazon's Amazing Ambition' .com's success stems from its compelling value proposition.com) . Amazon provides increased added value on several dimensions. France. more information. its value proposition. the sources of added value (using the 7Cs Framework). greater convenience.com .
com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. a tools and equipment store for professional tool users and woodworkers . Video Games and Gift Ideas Amazon and Sotheby's launch www. featuring thousands of bestseller lists for hometowns.Amazon and eziba.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com Amazon invests in Pets.com and NextCard launch co-branded credit card . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. Ashford. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com opens its virtual doors at amazon.Amazon.com Auctions and zShops provide new tools to its merchant community .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com.com .COM .com is founded by Jeff Bezos Amazon.Amazon opens customer service centre in The Hague .Amazon surpasses 20 million cumulative customer accounts .com .toolcrib.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 Anywhere.Amazon launches health and beauty store .Amazon launches new kitchen store .000 members Amazon.com 63 .Amazon enters into a strategic partnership with Drugstore. universities.TIMELINE AND MAJOR MILESTONES Amazon. West Virginia.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com via the new wireless pocket PC .com Electronics and Amazon.Amazon.com announce investment and strategic alliance .Amazon opens a customer service centre in Huntington.amazon. to meet rapid growth .com to create a "home living" store at amazon. and more Amazon launches "Amazon. workplaces.com.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.New home living store from living.Amazon announces investment in kozmo.Amazon launches www.Amazon.com invests in wineshopper.com Amazon introduces "Purchase CirclesTM". and minority investment in.sothebys.com . Software. 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." providing shopping from wireless devices.amazon.Amazon launches lawn & patio store .Amazon enters strategic alliance with living. Amazon.com enters European book market Microsoft signs Amazon.Amazon and online car-buying service Greenlight.com Announce Strategic Investment and Promotional Agreement .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Amazon acquires Back to Basics Toys to add to Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com Amazon launches online Auction site Amazon agrees to purchase Live/bid. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com Amazon announces further plans to expand distribution network to meet rapid growth.Customers can shop at Amazon.com . such as the Palm VII organiser.
1 .OVERVIEW OF AMAZON. The site is easy-to-use.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. easy-to-use.1. and Amazon.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping.e. interviews with authors. the 1-ClickTM express checkout. including book jacket images.Figure 6. FIGURE 6. mobile phones. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. Amazon has added other features for shopping convenience. and customer Purchase CirclesTM. live or study. discussion boards. wish lists. such as the Amazon. recommendations.3 Sources of Value . offering multiple paths to a given book or product.com Anywhere to support access from wireless devices (i. gift reminders. expert reviews. logically structured. encourage repeat visits and drive higher conversion rates. Palm VII PDA device). Content Amazon provides content on several levels. and quick-to-load pages Over time.com All Product search (searches the entire web). book summaries. This is an example of 64 . customer testimonials. downloads quickly and services visitors adequately .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. gift click.2.
converting them into a storefront for Amazon. from the customer recognition at the point of interface (Figure 6. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.2. linking it to a large number of other sites. and has developed an Associates Programme. creates a competitive advantage.thereby increasing conversion rates. while driving up repeat purchases and cross-selling opportunities. Community Amazon has also added a community element to the purchasing process. In doing so. to the proactive notification of new items of interest. which helps to build loyalty and create switching costs. Connectivity Amazon has built relationships with high traffic web portals and sites. and Customisation Amazon provides customised features and services. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. This customer-centricity is evident in all Amazon's activities. More recently. By leveraging its vast customer base. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. and customer interaction.4.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. These are discussed in more detail in Section 6. from its shopping basket applications which lists the estimated time to delivery reliably. 65 . Amazon's content is not reproducible by competition. 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 . therefore. Amazon introduced Amazon. Amazon creates one-to-one relationships with its customers.
which only applied to sales that resulted from the initial click-through.a move that along with the novelty of its business model and the newness of the Internet.2). attracting member sites of all sizes. they are subsequently confirmed by e-mail. This enabled Amazon to reach more customer segments and niches (Figure 6.2. and by 1999 it had over 200. increasing to over 500. Instead of paying directly for this exposure. two personalised services. Through the first half of 1996. The Financial Times.com hot-link and offer specific books of interest to their visitors. it began to advertise in print media and online . In addition.000 members. helped generate publicity and stories about the company in publications such as The Wall Street Journal. help maintain contact and build traffic by e-mailing customers when desired products or books become available. New Yorker and The Economist. Once orders are placed. 66 . Amazon inaugurated the Associates Programme under which other websites could display the Amazon.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. 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. In July 1996. Newsweek.000 by August 2000. As a result of all these factors (7Cs). and not subsequent purchases.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. and customers are also e-mailed when the items are shipped from the warehouse. enticing them to return to the site and purchase repeatedly. Eyes and Editors. 6. The Associates Programme has been phenomenally successful. Amazon offered Associates referral fees of up to 15%. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. In the second half of 1996. Business Week.
From July 1997 to December 1998. multiyear deals involve exclusive book-selling rights. These multimillion-dollar. Amazon closed deals with five of the six most visited Internet addresses. and Geocities. the customer acquisition cost is only £10.co. Amazon also established agreements with AltaVista.de became the local provider for Yahoo! Germany and Amazon.com. and you are given a $5 gift certificate for each customer you provide.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Therefore. each friend is sent a $5 Amazon.com's website (www. Interesting viral initiatives include: • Amazon. Excite.amazon.AMAZON. Netscape's Netcenter and NetSearch. The Yahoo! agreement.com About Me . and primary button placement on web portal search engines. spreading the word for Amazon. mutual links.2 .com Refer-A-Friend . was also linked to Amazon's entry into Europe Amazon.customers are encouraged to provide e-mail addresses of friends. including: America Online (AOL). People tend to tell their friends about it.com).COM'S ASSOCIATES PROGRAMME Source: Amazon. Yahoo!. free eCards and gift certificates (which customers send to friends.allows customers to create a personal profile (with pictures) on the site. In addition. Amazon has used viral marketing techniques through customer reviews. 67 . • Amazon. Prodigy and @home.uk the local provider for Yahoo! UK & Ireland. In return.com gift certificate (in your name). thereby promoting Amazon.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.
Amazon maintains a database of customer preferences. Amazon has also incorporated traditional offline media (TV. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. 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. Magazines. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. 1998 68 . That's not possible anymore50".but it was only a tenth as good as the site we have now.Forbes. "we had a world-class site the day we launched . 'Does Amazon. Amazon has been able to achieve average customer acquisition costs of less than $20 . buying patterns and viewing habits. however. so we didn't have to do much advertising. Amazon is building customer loyalty and encouraging repeat business. C. newspapers) to generate awareness. clear presentation. billboards. Purchase CirclesTM). have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. April 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. community feel (as discussed previously). Once customers are attracted to the site. With this combination of promotional methods. According to Jeff Bezos. 50 Willis..significantly lower than other online companies. Amazon's proven online merchandise selling techniques including easy-to-use search options.g. which accounts for 66% of Amazon's sales.com Really Matter?' . By relating to customer needs. with the explosion of websites. And we relied on word-of-mouth to build awareness. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) have significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. interesting content. As the relationship develops. and improved customisation and recommendations (e.
"we're not a stationary target. because he wanted it to be short. Saunders. which within six months propelled Amazon to one of the leading online music retailers. and according to Jeff Bezos. This has helped them attract customers and move up the learning curve quickly. in June 1998. Success. and to convey its vast size and offering.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. thereby diluting the value of its association with books. management realised that Amazon had become more associated with other core brand values . As such. 51 52 Hazleton. Amazon received criticism for expanding its product line.com obsessed52". while our competitors have been Amazon. establishing a reputation for excellence and fulfilment. and its safe and secure delivery. good value. According to Jeff Bezos. L. July 1998. 1999 69 . "Online. Amazon unveiled a music store.com Way'. further enhancing their value proposition.a wide range of choice.2. We were blessed with a two-year head start. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). Our secret is that we have not been competitor obsessed. to capture the spirit of the site. We have been customer obsessed. developing customer service centres and expanding its distribution network to support high levels of service. In addition. and our goal is to increase that gap51". Nevertheless. memorable. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Amazon has been able to build a strong brand at relatively low cost. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. For example. (Oxford: Capstone Publishing). Amazon's understanding of its brand identity has been a critical factor. establishing Amazon as the leading online bookseller with a large customer base. In addition. Amazon was able to secure partnerships and alliances with key players. According to Jeff Bezos. 'Business the Amazon. However. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. due to the hype and coverage it was given. the balance of power shifts away from the company and goes towards the customer. As such.. Amazon is constantly seeking new ways of improving its offering..
. perhaps trying to defend its view that losses taken to build market share can reap profits later. Quality is only measurable in the minds of visitors to the site. speedy delivery and good value. Amazon has continuously invested in customer service. they're stretchable and pliant. Amazon delivers on its promises of a wide inventory of products. The key factors driving its growth and high retention rates. however. and investors lose confidence. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. B.Brandweek. not necessarily a reality. the drain on their cash resources will push them towards bankruptcy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. In doing so. it has not recorded any profits to date. but over time they become more and more associated with a particular thing and harder to stretch53". and to sustain a positive image and satisfactory end-to-end experience. distribution centres and upgrading the site.2. Although Amazon has successfully built a strong brand and loyal customer base.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. as the true value of a brand lies in its sustainability. Amazon's intense focus on customer needs and continual innovation. have kept it ahead. This customer-centricity is a key hallmark of a successful Internet brand. 53 Warner. 1998 70 . they have cultivated a reputation for excellence and fulfilment. Volume Discounter' . with new products and value added content. Amazon is claiming to be making profits on its books and music categories. secure payment procedures. This raises a critical issue. However. which is critical on the Internet. 6. Nevertheless. 'Marketers of the Year: Jeff Bezos. Amazon also recognised that service quality is a perception. if it continues to incur losses. October 12. When they're young. stem from its compelling value proposition and high quality end-to-end customer experience.
rare. book databases.com .Barnesandnoble. prints & posters and related products.com was able to 'hit the ground running'. Dalton bookstores (located in shopping malls).com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. 40% owned by Bertelsmann AG. TABLE 6. Barnes & Noble Inc. Barnesandnoble. and 470 B.Acquires equity stake in Mightwords .com) . Barnesandnoble.2.com). Inc.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .TIMELINE AND MAJOR MILESTONES . all front-end operations (marketing..com is approximately 40% owned by Barnes & Noble.Barnesandnoble.Launches Affiliate Network December .Offers same day delivery in Manhatten . and 20% owned by the public.Barnes & Noble. magazines.com's timeline and major milestones is outlined in Figure 6.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 . Currently. as it could capitalise on the infrastructure and back-end operations (warehouses. promotion) between the online store and the retail stores have been kept separate.) established by its parent company.Announces distribution relationship with New York Times September .com launched its website (www. music. is one of the best known traditional booksellers in the United States.Launches BNTV . Barnes & Noble Inc.COM . and is the second largest online bookseller (after Amazon.Launches Video Store 71 .2 1997 January BARNESANDNOBLE. Besides books. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Acquires minority stake in NotHarvard.barnesandnoble.3.com announces strategic relationship with Palm Computing . Barnesandnoble.com and Microsoft announce that they will create an eBook superstore .Barnes & Noble University opens registration for free online courses .Launches Internet Radio .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Launched in 1997.com is the fourth largest e-commerce retailer54.Barnes & Noble went online at AOL May . etc. contacts. Barnesandnoble. However.3 CASE STUDY: BARNESANDNOBLE.1 Company Overview Barnesandnoble.COM 6.com provides other online categories offering software.
music New Initiatives Barnesandnoble.com's website (www.barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. etc.3). but instead of developing an outstanding interface to its inventory.bn. as cited on Barnesandnoble.2 Value Proposition Barnesandnoble.com or www.com's (Figure 6.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. including title. Barnes & Noble planned to dominate online book-selling.com and barnesandnoble. in terms of the 7Cs framework. good prices. 6. easy and secure ordering.OVERVIEW OF BARNESANDNOBLE. edition.com let customers sign up to receive email reviews and announcements of new titles. publisher. rich editorial content and a community experience. logically structured.com's virtual storefront is graphically richer than Amazon. previously-owned and rare books.3 Sources of Value . Both Amazon. In addition.3.3. the features are practically identical. as well as an extended searchable catalogue of millions of out-of-print.com's and takes a bit longer to download.COM'S WEBSITE Simple. Both have expanded their convenience to offer 54 Media Metrix. and easy-to-navigate site Categories focus on books. FIGURE 6.3 . author.com offers customers an easy-to-search catalogue of virtually every book currently in print. however. Both offer detailed bibliographic information. the company created a site very similar to Amazon. software. they offer customers fast delivery.com) 72 .
4 Brand-Building Strategy Barnesandnoble.com had over 17 million. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.000 affiliates in its referral network. and Barnes & Noble Inc. Barnesandnoble. Both offer 'associate programmes' that let other websites link to their sites. reasons for this are explained in the next section. However. Barnesandnoble.6 million. prevent cannibalisation of its existing business. Instead. Yahoo!.1 billion. Netscape and Microsoft Network.com closed 1999 with 4 million customers. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com's 1999 revenues were $202. Lycos. has yet to leverage its strong brand in cyberspace. They have developed an affiliate programme that links sites to Barnesandnoble. this programme had more than 300.The Wall Street Journal. As of February 2000. These initiatives have generated traffic to the site. it lags behind first-mover Amazon.com in return for a commission on any purchases that they originated .com's market capitalisation was $251 million.3. 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 .com.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. and both are expanding globally. December 17. 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. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .64 billion. Both offer customisation that permits users to personalise the experience.com was valued at $21. and avoid charging sales tax in states where it has stores56. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Although.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both try to foster a community of readers by letting customers post reviews online.a replica of Amazon's Associates Programme. however. Webcrawler. while Amazon. Barnesandnoble. Barnesandnoble. while Amazon.com's $1. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). compared to Amazon.com has created a high quality website and customer experience. The 6.
Planetrx. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. Barnesandnoble. and the tangibility that this provides. Jcrew. LLbean.com created a new cross-marketing genre in February 2000. with a similar discount. 1-800Flowers. Barnesandnoble.com. in-store displays. At any given point there are hundreds of customers browsing their aisles looking for something to read.com. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience.com has changed its name to Barnes & Noble. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved.com. when it struck reciprocal marketing deals with Expedia. or deliver books directly from the retailers.com. each partner offers a similar link to Barnesandnoble. • Barnesandnoble. By failing to leverage it. and leverage its real-world presence.com. people began using their stores as a physical showcase for online rivals such as Amazon. and its BMG Entertainment division includes music giants Arista Records and RCA Records.com has lost access to valuable customers. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com is its association with Barnes & Noble Inc. Under the seven separate agreements.com offers links to each partner's site and a discount for visitors who click-through.com's link to Bertelsmann AG. as Bertelsmann's book division includes partners such as Random House. 74 . and a same-day delivery option in Manhattan. content and distribution opportunities. • In addition. in the attempt to gain traction and build momentum. To signal its intentions.com and VitaminShoppe.com's key differentiator from Amazon.com. provides access to valuable resources. Petsmart.com has begun to acknowledge some of these mistakes.. • Barnesandnoble.com. Recent Initiatives Barnesandnoble.com. and in recent months has aggressively sought new ways to differentiate itself. Barnesandnoble.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). Unfortunately. Barnesandnoble.com should have aggressively cross-promoted their stores through advertising.com. Barnes & Noble University (a free online education resource). and Internet terminals in the bookstores.com. In return.
even if that means eating into their existing sales.3. The Press have also contributed.its key differentiating factors.com.com . and its lack of innovation (by copying Amazon. customer relationships and offline presence . otherwise they risk losing out to other online competitors. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 57 'Bn.Forbes. it has not been able to establish itself as the leading online bookseller. by portraying them as slow and clumsy in comparison to the more nimble Amazon. 2000 (www. In addition.6 Conclusion Although Barnesandnoble. meant that Amazon.forbes. it also caused a major setback. August 4.com's late start in 1997. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. The company failed to leverage its established brand.Not a Best Seller' . Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com has been able to create a high impact and high-quality customer experience. significant market momentum.com) 75 .com and has given them the image of a second rate 'me too' brand. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". feature for feature) has failed to differentiate Barnesandnoble. Barnesandnoble. and allowed them to offer stock options as compensation and achieve a high market capitalisation. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and was further up the growth curve. a wellestablished Internet brand.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.com's experience is instructive.
4. as well as create a kid's site. Boo.1 Company Overview Founded in 1999. and the resulting loss of investors' confidence. TABLE 6. Company is put up for sale. and was billed as one of Europe's hottest e-commerce ventures. it means all that brand's product line is available.com entered six markets: US. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". Italy and Spain within a few months. "our marketing thrust is not based on prices.Raises funding of $125 million .fails and appoints KPMG as liquidator. and Converse.com collapsed through lack of funds. Morgan. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).Marketing Week. Puma.Appeals for $30 million more funding . Boo. founder and Chief Marketing Officer of Boo. After a high profile launch.com opens its virtual doors' . They intended to add France. Germany and Denmark.COM 6. due to its poor performance and inability to build a customer base. sack 20% of staff and sell stock at 40% discount . it's about range and convenience.they redesign site.First sign of problems .000 unique visitors . Everlast.com had set the record as Europe's best-funded European Internet Start-up.3 1999 Mid year BOO. arranged through J. receiving $125 million of funding. England. 58 Kajsa Leander.4. and included high profile investors such as Bernard Arnault. among others. Boo.Site goes live . the company was hindered by technical problems that delayed the site going live by five months (until November 1999). P. Boo. On going live. as cited in 'Boo. Sweden. CMO of Boo.2 Value Proposition According to Kajsa Leander. November 2000 January February May 6. However. within six months Boo.com.COM .Announces it has only 500. and eventually debut in Asia. 1999 76 . Finland.TIMELINE AND MAJOR MILESTONES . not the limited range you might get at most London fashion shops58".Multi-million pound advertising campaign created by BMP DDB .com provided a range of 18 fashion and footwear brands including DKNY.com. June 10.4 CASE STUDY: BOO. If a clothing brand is on the Boo site.
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.
CDnow and Time Inc. and an average daily audience of over 800.000 music-related products and 650.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. T. and was the first site to offer the sale of music downloads and custom CDs. $18. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. $22. and they aim to "make every visit to the site. On 19th July 2000. as well as music reviews.Raises $10 million through private placement . good prices. 'How to Acquire Customers on the Web' . convenience. a valuable and rewarding experience"63. whether for browsing or buying. & Novak.5. features. May-June 2000.Partnership program with Geffen Records . customisation and a wealth of information and content to help in the purchase decision.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .TIMELINE AND MAJOR MILESTONES . and one of the most popular shopping sites on the Internet62. pp.000 people.Launches merged CDnow/N2K site .com) 80 .5 CASE STUDY: CDNOW 6.Forges distribution partnership with Yahoo! $65. CDnow provides access to over 500.1 Company Overview Founded in 1994.5 million distribution deal with Lycos Signs three-year. D. 62 Hoffman. cover art.000 sound samples. CDnow was acquired by Bertelsmann AG. former arch rival .000 music related items .Harvard Business Review. guides to music genres.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow is also driving the digital distribution of music. announce marketing alliance .Site goes live .Merges with N2K.ten times the selection of a conventional bricks-and-mortar music store). CDnow is the leading online music store. TABLE 6. It has a customer base of 4 million people.cdnow. by twin brothers Jason and Matt Olim. and exclusive interviews and reviews from CDnow's award-winning editorial staff.179-188 63 CDnow website (www.. daily music news.5.Merges with Columbia Records .
artists biographies. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. and has secured rights to music reviews. FIGURE 6.5 . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. The whole process of searching for albums or music titles to the actual purchase is simple .3 Sources of Value . 81 . to make it easier for customers to explore new music and make informed purchasing decisions. By partnering with well-known content providers. cover art. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5..5. etc. easy-tonavigate. CDnow has leveraged the reputation of their brands to reinforce its own.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. CDnow has cultivated similar relationships with MTV.Figure 6. For example.
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. French. Other features such as My CDnow's Wish List. allow customers to keep track of albums to buy in the future. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. Italian. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site .from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. Yahoo!. In addition. it gives them a sense of ownership and a compelling reason for them to return. Excite. German. which accumulate and can be spent on a variety of music-related products. Spanish. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). By customising the store to meets customers' needs. allowing them to respond to detailed customer queries. Due to International interest. 82 . It also creates switching costs. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. Customer Care CDnow's site can be viewed in English. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites .search engines. and Geocities as well as more focused specialist sites. Internet access providers. Dutch and Japanese. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. they will be reluctant to visit another online store and enter the information again. CDnow developed the Fast Forward Rewards programme. and key news and entertainment sites . Portuguese. an incentive programme that rewards customers and encourages them to connect back to the site.such as AOL. Whenever a customer makes a purchase they earn Fast Forward Reward points.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. Community CDnow has not exploited the potential of creating a community feel. CDnow hired a group of multilingual customer service representatives to handle questions.
They have also stuck exclusive alliances with AOL. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. Yahoo!. as well as more-targeted music-related sites like Billboard. they buy from CDnow. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. CDnow is doing everything it can to ensure that the next time that 6.Through the Cosmic Credit Programme. It is a revenue-sharing arrangement. • Traditional offline Media . print advertising is music-related publications such as Rolling Stone. and radio spots on the Howard Stern Show to build a cult following among radio listeners. covering the entire music spectrum. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. this is their "most successful customer building programme64". Spin.000 small. By keeping the brand in front of the customer in this way. According to Jason Olim. music-oriented websites. and spot radio to build reach. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. • Alliances and Partnerships . 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.5. Excite and other powerful Internet content and service providers. CDnow extended its distribution reach to include more than 250. 83 .CDnow's advertisements are targeted to some degree. • Affiliate Programme . customers buy music.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. CDnow's initiatives include: • Banner Ads . and Variety.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted.
64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 6.Hampel & Stefanides (www. The company continually pushed for new distribution partnerships to widen its sphere of influence. April 28. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. It is constantly adding new functionality to the site and has been innovative in its offering . by two twin brothers with little money reflects the 'American dream' and was quickly picked up. • Word-of-Mouth . In fact. it is in this context that the large investments in advertising and partnerships make sense. Public relations efforts helped to generate word of mouth and influence sales.4 million).com) 65 'Pioneering in Cyberspace' . CDnow's promotion strategies have attracted high levels of traffic.CDnow made public relations a high priority brand-building tool.hsny. and scaled it awareness-building efforts.htm) 84 . 1998: $56. both in the online and offline worlds. resulting in increased conversion rates.com/cdnow. This has contributed to a 225% increase in sales (1997: $17. It is a powerful source of acquiring new customers at low cost.cdnow. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. and to increases in the customer base of more than 30% quarter-to-quarter. The story of how CDnow was founded in a basement.4 million.Press Release. with 44% of sales coming from new customers65. 1998 . word-of-mouth accounts for the lion's share of CDnow's customers.they were the first site to offer the sale of music downloads and custom CDs.As for many successful online retailers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .(www. as a way to fuel very lucrative word of mouth. with repeat customers accounting for more than 50% of sales.5.5 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.
The company sends an automated order confirmation note via e-mail as soon as the order has been placed.Building an Internet Business at Breakneck Speed". P.from how CDnow has personalised its product offering to its capable customer service team . CEO of CDnow. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. This. "eBrands . "your brand is not just what you say . (Boston: Harvard Business School Press). 2000 p. 2000 p. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. a record distributor that handles the majority of CDnow's fulfilment logistics. It was able to create a strong value proposition and high quality customer experience. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. 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.it's what you do66". P.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. as cited in Carpenter. (Boston: Harvard Business School Press). "eBrands . This gives the customer the impression that the order is being handled quickly.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. combined with the high impact customer experience created . as cited in Carpenter.Building an Internet Business at Breakneck Speed". The development of an extensive affiliate network.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. CEO of CDnow. and innovative. and ensure that it exploits its early-mover advantage and keeps ahead of competition. 66 Jason Olim.89 67 Jason Olim. to ensure quick delivery to customers. 6. They also provide the customer with an order number and customer support contact information should they have questions.75 85 . According to Jason Olim.5. CDnow has developed a relationship with Valley Records.
2 Value Proposition eBay offers consumers an efficient.com) 'eBay .ebay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. with the number of unique daily visitors setting a record of 1. extensive selection and geographical reach.6. According to Meg Whitman. 6. and eBay provides added value through its convenience. (A)' .000 new items joining the "for sale" list every 24 hours69.25% to 5% of the final sale price on any item sold. eBay is not about auctions.efficient one-to-one trading in an auction format. People perceive the auction format to offer better prices. Auctions represent a platform. This is a new market .removing the need for inventory. with emphasis being placed on its unique community feel and culture.Company Overview' . payment) between themselves. There are over half a million new auctions. 24 hour a day.com) 70 'Meg Whitman at eBay Inc.the closest thing in the offline world are trading forums such as classified ads. as cited in 'eBay . garage sales. shipping. Since its launch in September 1995. The buyer and the seller work out the logistics of the transport (e. global trading place for buying and selling personal items in an entertaining auction format.6 CASE STUDY: EBAY 6.782 million in January 200068. and eBay never takes possession of the item being sold. "at its core. Individuals use eBay to buy and sell items in more than 4. eBay effectively created a new business model never before possible . and eBay receives a transaction fee that ranges from 1. or the payment for the item . Sellers pay a nominal fee for placing an item up for sale.A Harvard Business School Case Study. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. flea markets and auctions.300 categories.eBay website (www.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. Auctions are an enabler. transportation and other overhead costs. Auctions make it fun.6.eBay website (www.g.ebay. collectable shows. 1st October 1999 86 . the eBay community has grown to include more than 10 million registered users. from collectibles and antiques to electronics and toys.Company Overview' . CEO of eBay. and 450.
eBay introduces eBay Magazine in collaboration with Krause Publications.eBay goes wireless with Palm VII connected organiser .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 launches local websites in Baltimore & Washington DC. Providence. Las Vegas.Com form alliance - 6. Milwaukee.eBay and First Auction sign a partnership agreement . And you only get word-of-mouth if you have a great customer experience.Compaq Computer Corporation and eBay form a strategic U.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay expands strategic relationship with Netscape .6. and in terms of the '7Cs'.5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES .Business Week.eBay goes live in Australia .America Online and eBay announce strategic marketing alliance . Still the vast majority of our new users come from word-of-mouth. 21st May 1999 (www.Germany's leading online person-to-person trading site .com) 87 .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques . and Collecting Just About Anything and eBay for Dummies.eBay and Ultimatebid.eBay acquires Jump Inc. co-marketing relationship. . and raises $700 million .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay goes live . So brand-building job No. as they rarely deal directly with the company. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . allowing users to create personal homepages .eBay teams up with Carclub. and its online trading site (Up4Sale) . Selling. the eBay customer experience is based on how their customers deal with each other. 1 is have a great customer experience71". Dallas & Fort Worth. Unlike the previous case studies discussed. they try to influence customer behaviour by encouraging them to adopt certain values. Seattle & Tacoma.S.3 Sources of Value . emphasis is placed on community development and customer care.eBay acquires Kruse International .eBay acquires Butterfield & Butterfield.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. "the first brand-building strategy that we have is to have a great customer experience. The Official eBay Guide to Buying.com to provide automotive service for eBay Users .eBay IPOed raising $58 million . Norfolk & Virginia Beach.eBay acquires alando. and Salt Lake City . .businessweek.eBay launches 'About Me' feature. Boston.The 7Cs Framework According to Meg Whitman. This raises challenges in how to control and influence the customer experience.de . and two books -. Nashville.eBay and AOL launch co-branded site . Since eBay cannot control how one person treats another.Launches "My eBay!" to customise the online auction experience .eBay acquires Blackthorne Software GO.
categorically arranged. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users.OVERVIEW OF EBAY'S WEBSITE Customisation Simple.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. which is much more demanding on the system. topically arranged. they have continually invested in system capacity. and adds to the experience and the discovery of the auction process. 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. angering hundreds of thousands of eBay users. increasing the risk of outages. Other content includes the banner ads. Nevertheless. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. eBay had a 'wake up call' when the website crashed for 8 hours. eBay has also expanded to accommodate access through wireless devices for added convenience. eBay's site has to process thousands of live bids simultaneously. 88 . FIGURE 6. easy-to-use online service (Figure 6. and since. Content Content is primarily user generated through the items listed for sale.6). This contributes to the community feel.6 .
89 .eBay represents more than just a place to buy and sell goods. for the people". However. eBay offers its users category-specific chat rooms. respect. Community eBay attributes much of its success to a strong sense of community among its users. working together and helping each other offline.as eBay users refer to themselves . In addition. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. by the people. which is then added to the partner's trading profile. a monthly newsletter. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. It is a place where people can meet with similar interests. Recent initiatives such as the development of local websites in major US cities (e. and is considered by many users as one of the best features on the website. discuss topics they care about. Whitman describes eBay's community culture as a site "of the people. For many 'eBayers' . This has created a self-regulating mechanism that encourages good behaviour. empowerment and equality. eBay's community has a distinct culture based on trust. a "giving-board" for charitable donations to user-identified causes. and in doing so.g. and share information. has enabled eBay to foster a strong sense of community on its site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. and there are several reports of eBay users vacationing together. eBay Salt Lake City) have helped them restore that community feel. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). eBay Boston. the community spirit and personal relationships also transcend the online experience. autonomy. the culture has come under strain due to the company's rapid growth from a small community into a "big city". e-mail. which is posted to the site. To encourage this sense of community. bulletin boards. After a sale.
Customer Care eBay controls neither end of the transaction. knowledgeable. 90 . shill bidding) and helping to resolve user-to-user conflicts. which was dedicated to investigating misuses of the system (e. As such. Communication eBay maintains close communication with its members.g. geographically dispersed users as customer support representatives. and willingness to empower. During the first two years. the largest of which was with AOL. eBay also engaged in marketing partnerships. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. Customer support activities were constantly upgraded and expanded as the business developed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. which was dedicated to monitoring the site for illegal and infringing activities. These people worked from their homes. in which the company hired active. By using its own enthusiastic. links to high traffic sites. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. This was later expanded to include customer support representatives who worked out of eBay's headquarters.the Community Watch group. eBay was able to cost-effectively offer 24x7 customer support early on. eBay has invested in customer care and support to ensure people conduct safe transactions. answering e-mails and responding to questions posted on the site's bulletin boards. its user community. fraud. This also reinforced the company's respect for. but they have other partnerships with over 150 websites of varying scales. eBay employed a "remote" customer support model. and the introduction of two specialised customer support groups . eBay's approach to customer care has evolved over time. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. and respected members of its own user community to serve as customer support representatives. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. and the Safe Harbour group.
but they have other partnerships with over 150 websites of varying scales. The AOL partnership was one of the largest strategic partnerships on the Internet . they spent $12. As a result. and maintained the same ratio for 1999. eBay has been able to attract a large customer base. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. the largest of which was with AOL. as a result of the high quality experience it provides. and facilitate the spread of positive wordof-mouth. who tended to be serious collectors.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. representing about 40% of revenues. $75 million joint marketing alliance and development deal.g. and Collecting Just About Anything and eBay for Dummies. Doll Collector) and appearance in trade shows. eBay Magazine. eBay has since expanded its promotion efforts and engaged in marketing partnerships. These new publications appeal to the collecting spirit.6. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. eBay decided that it would not enter into major portal advertising deals in the short term. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. 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 intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. and highlight opportunities created by e-commerce. eBay transformed from a pure online play into a 'clicks-and-mortar' company. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Based on this.a four-year. The Official eBay Guide to Buying. Through this combination of its advertising efforts and targeted promotions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and two books. 91 . provide a wealth of information about the 'ins and outs' of trading on eBay. they decided to target their marketing efforts on these heavy users. Recent promotional initiatives include its new publication. Early on.3 million in advertising. 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. In 1998. Selling. Mary Beth's Beanie World.
"the devil in so much of this is in the detail.5 Conclusion eBay's compelling value proposition. This is achieved by listening to their community (learning) and developing new improved products and services (relating). 21st May 1999 (www.Business Week.businessweek. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . eBay has also faced difficult challenges in scaling the organisation fast enough.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'. however. I think you are not well served by moving incredibly rapidly and not doing things well72". eBay prefers the opt-in model whereby users have the option to choose such services if they were interested.com) 92 . have been key factors that have contributed to the success of the brand. very fast. such as the Feedback Form.contributing to its strong lead and competitive advantage. This has become part of the eBay culture. Their focus on heavy users and targeted promotions. the Personal Shopper and the eBay Life Newsletter. and according to Meg Whitman. 6. As a result. and according to research carried out by eBay. which were all ideas of eBay users. which in turn attracts more sellers . their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. which has established eBay above other online auction communities. However. eBay attracts a broader selection of buyers. And while we have to move very. and their first-mover advantage. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. have been instrumental in building a 'quality' customer base. as they could not opt for a 'go slow' strategy. their ability to create a new market using Internet technology. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.the ultimate network effect .6. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors.
gapinc.7 CASE STUDY: GAP.an early convert to the then-revolutionary idea of clothes retailing on the Internet. Gap online exploits the accessibility and convenience of the Internet. from shirts to accessories and hard-to-find sizes. Gap Inc. announce multi-year partnership. The Gap offers a balance of modern and seasonal styles of clothing. standard styles are well suited to online shopping.babygap. online sales are only available to US customers. from jeans and T-shirts to khakis and jackets.com' . however. October 8.$100 million. and are still relatively small compared to Gap's $9 billion in annual sales.com is an example of successful crossover marketing. L. L. This success is largely due to their simple formula . In addition.see Appendix A Gap. as cited in Lee. California GapKids opens its first store BabyGap is born Gap opens its online store at www.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. and today it is the 29th most valuable brand in the world73. the growth prospects are enormous. head of Gap Online. TABLE 6. 1999 76 Jeanne Jackson. service and value to everyone74".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 73 74 Interbrand (www. Germany and Japan.2 Value Proposition Gap's simple. 6. and provides useful insight into how traditional brands can leverage their strength online. Canada. Gap started selling items online . Gap. According to Jeanne Jackson. Gap's online sales tripled in 1998 alone. and analysts estimate that sales in 1999 amounted to $50 .Business Week. and BabyGap.com) .com and www. as cited in Lee. up from $20 million in 199875. and Gap online provides access to the full range of items at Gap.7.COM . to provide customers with greater convenience and options.7. Currently. Its reach extends across more than 1.com."to deliver style.htm) 75 Jeanne Jackson. America Online (AOL) and Gap Inc.'s website (www.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.com/about_us.Business Week. whether in the store or online76". letting customers access the Gap brands.interbrand. 'Clicks and Mortar at Gap.gapkids. UK.800 stores in the US.1 Company Overview Gap opened its first store in San Francisco in 1969. Inc.gap.com' . GapKids. In late 1997. October 8.COM 6. surpasses $9 billion in net sales and increase earnings by 54% over previous year. 'Clicks and Mortar at Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. "this is about being clicks-and-mortar. 1999 93 .
but provides customers with the option of viewing text-only.7 . The Observer.3 Sources of Value . Unlike Barnesandnoble. Gap Online primarily focuses on Convenience.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look...very easy. The site also offers sharp graphics. making navigation even faster. reinforcing its brand identity. Michael McCadden. FIGURE 6. Content.. feel and design of the site is consistent with the bricks-and-mortar stores. very efficient"77. 'Mind the Gap'.. and easy-to-use. 1998 94 . Executive Vice President of Global Marketing.. and Customer Care...making visual references to its offline roots. This personality is reinforced online through the simple structure and layout. D.com. Simple. the extensive integration of Gap's online and offline activities are clearly evident. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.7. April 18..com store one immediately notices the consistency between the online and retail stores. from the blue and white colour scheme to the easy-toshop format . making it convenient. describes the company's brand personality as "direct and straightforward. Visiting the gap.The 7Cs Framework In terms of the 7Cs framework.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
Gap communicates with customers through customised e-mails. By doing so.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap.com. Gap's simple. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. and customers can register to get e-mail reminders of upcoming holidays and birthdays. customers can return goods purchased online to their neighbourhood store. without causing complications. Unlike the case of Boo. and customers can view their latest TV adverts for buying inspiration. Gap. as well as sample all of the latest shades of fingernail polish on a virtual hand. GapKids.as most Gap online shoppers have a good idea of how Gap clothes fit. once customers are registered online. In order to integrate its offline and online operations and logistics. allowing shoppers to contrast different cuts and styles.com's content consists of detailed information on its full range of products. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. Gap made a decision to charge sales tax on online sales. and had recently established marketing deals with AOL and CDnow. In addition. which would not be possible in the store. and BabyGap. twice a month. promoting its specials and including links directly to items on Gap's website. Gap.com allows customers to track the status of online purchases and provides contact information on the nearest store. standard styles are well suited to online clothes shopping. Gap does not provide any community features on its site. and goods bought online get returned at the same rate as store purchases . However. The Gap site connects to other Gap online stores including GapKids and BabyGap. 95 . Gap has also developed an affiliate programme.com also provides a Gift Central feature which offers gift suggestion from Gap.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. they send the customer a $20 Gap ShopCard. Gap has also supplemented this with online promotions: • In August 1999.com in return for a 5% commission on every sale referred through the site.ship". by offering a 10% discount and free shipping on their first online purchase.com has been able to piggy-back on The Gap's offline advertisements (in TV. providing a useful way to directly reach customers. billboards.4 Brand-Building Strategy . on shopping bags and even on the cash register.com has also created an affiliate programme encouraging sites to establish links to gap. Gap has held in-store campaigns to get customers to submit their e-mail addresses.com) in store windows with the slogan "surf.gap. however.) that also promote the online store. by displaying the URL (www. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. Gap secured a 3-year commerce and marketing agreement with AOL. Magazines. To convert walk-in shoppers to cybershoppers. which displays "Shop online at www. These efforts doubled the size of Gap's e-mail database.com has links with CDnow to cross promote websites. In certain high traffic Gap and GapKids stores.gap. etc. In addition.7. which can be used towards future purchases. either online or in stores. 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.shop. • They offer Online discounts and promotions such as the ShopCard. whereby for every $100 a customer spends at Gap Online. 96 .Extensive Integration Gap.com" on the display screens between transactions. Most of Gap's online traffic is generated by leveraging its physical presence. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. • Gap. or to refer shoppers to Gap's website. it is fully leveraging its offline presence to build awareness. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com. on counter cards. • Gap.
while reaping the benefits of low customer acquisition costs and extended reach. and can also provide access to different customer segments who may not usually buy the products at all . By aggressively marketing both the stores and the website. have already established the back-end operations and can use them as the cornerstone of their online business.5 Conclusion Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Pure online players have to invest heavily in logistics. 97 . whereas established companies. on the other hand. With their brand awareness and network of retail outlets. provides existing customers with added value through the convenience of purchasing online. Gap had a significant advantage over pure online players in attracting customers and building critical mass.7. thereby reinforcing its brand identity. Gap has been able to significantly strengthen their brand-customer relationship. and allowing each to leverage the strengths of the other. such as Gap. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand.thereby increasing the company's reach.com is an example of successful crossover marketing. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. The Internet.
The company's global web network includes 23 world properties outside the US. The Stock' . Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. Yahoo! offers a range of supporting services that add value. 78 79 Interbrand (www.8.D students at Stanford University. There's nothing in the real world to compare to that79". and is one of the few Internet companies to turn a profit early in the development of the Internet. household and business user reach. 1998 (www. who started an online guide as a way to keep track of their personal interests on the Internet. from e-mail services to stock quotes and much more.Business Week.com) . Yahoo! was founded by David Filo and Jerry Yang. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.businessweek. lies the directory . the amount of information. advertising.com) 98 .1 Company Overview In April 1994. all in a single location. The Strategy.The Company. 6. Yahoo! is a leading guide in terms of traffic. two Ph. According to Timothy Koogle. September 7. the site was receiving 1 million hits per day. and the number of websites continues to explode. As the first online navigational guide to the web.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. Yahoo! has since morphed from an ordinary search service into a global Internet communications.8 CASE STUDY: YAHOO! 6. CEO of Yahoo!. The concept exploded (through word-of-mouth) and in less than six months.interbrand. As such.see Appendix A 'Yahoo! .2 Value Proposition At the core of Yahoo!'s value proposition.
regardless of platform (i. Their goal is not to list everything under the sun.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.Yahoo! forms agreements with Palm Inc. to provide web-based services to PalmTM handheld computers .8).e. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.8 million IPO (2. 99 .8.The 7Cs Framework Convenience Central to Yahoo!'s success.TIMELINE AND MAJOR MILESTONES 1994 April . Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! Shopping launches personalised shopping service 6. is the way it has structured and displayed information. More recently.3 Sources of Value .000 shares at $13.Yahoo! acquires eGroups . Palm computers).BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.600. mobiles.7 YAHOO! .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. TVs. . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. and unveils Yahoo! Digital Introduces Bill Payment services . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! unveils Yahoo! Finance Vision ..Yahoo! Launches Business-to-Business Marketplace .com allowing them to offer person-person payment solutions .Yahoo! acquires Arthas.Receives $1 million in venture capital funding from Sequoia Capital $33.Site goes live September .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 .com. to allow access. 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.
the end-user. Yahoo! has increased customer loyalty and retention rates. easy-touse. 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. and more importantly. This creates a win-win situation as its satisfies Yahoo!. from stocks and sports results to weather and air fares. ranging from daily news and weather reports to road maps and books.8 . 100 .com and CDnow. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.9). while providing partners access to a large customer base. They have formed multiple alliances and partnerships with leading online companies such as Amazon. Their thrust has been to provide valuable content to customers.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. By tailoring the information to users' preferences. and is similar to a custom tailored newspaper (Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. well structured. the partner. and has been at the heart of Yahoo!'s growth and development.
101 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Yahoo! spends more on customer support than most companies.9 . In 1999. telephone and even traditional mail. and plans to incorporate other features such as online chat to facilitate communications. and is driving Yahoo!'s multiple partnerships and alliances. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. Yahoo! acquired GeoCities. reinforcing the brandcustomer relationship.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and e-mail. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. or to make it their home page. It keeps customers on the site for longer periods. to provide its customer base with access to useful links and content. where groups of people with shared interests can communicate through chat. and many-to-many. Customer Care Yahoo! responds to customer inquiries via e-mail. Connectivity Connectivity is Yahoo!'s core product. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. and encourages them to return frequently. In addition. fax. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and the nature of the navigation business. and contributing to their reputation as a quality service provider. message boards. one-to-many.
This was especially important. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . and through communications via email. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". an approachable nature. Intelliquest. 6. and its implications of a good time. 80 'Web Survey Shows Yahoo! Tops'. Their strategy was to target "near surfers" .4 Brand-Building Strategy Yahoo! is a marketing machine. 82% of Internet users and 23% of people intending to go online. by building a recognised brand name. At the time this was considered a breakthrough. In 1996. Yahoo! maintains close contact with customers. therefore. (www. and an inherent friendliness. recognise the name Yahoo!. TV commercials and radio spots during drive time. Yahoo!'s brand-building success starts with its name.intelliquest.a sense of irreverence.8.people who are not yet online but are likely to use the Internet in the near future. which conveyed the brand's irreverent personality. Yahoo! also encourages customers to e-mail ideas and feedback.com) 102 . As a result.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. Yahoo! aggressively promoted the site through public relations. Yahoo! extended beyond this to use traditional offline media. These near surfers represented (and still do) a large and fast growing group and. Yahoo! avoided characterising itself as a technology-oriented company. as experience surfers tend to be loyal to their search engine. 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. and according to Intelliquest80. Yahoo! would be one of the first sites that they visited. Given the unease with which the average consumer approaches technology. While Internet companies were targeting existing Internet users through the use of online promotion methods. and it formed a critical link in Yahoo!'s brandbuilding strategy.
Visa and MCI. Yahoo! has managed to cultivate high brand loyalty. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. customers quickly discover its value and through a high quality experience (7Cs).com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . ER) and Hollywood movies. as well as TV shows (Ally McBeal. Yahoo! has paid little for this exposure. Their innovation.Advertising Age. the research shows that 73% of Yahoo! users bookmark the service . In addition. which has been instrumental in establishing Yahoo! as a household name. stating that "if we wait to hear about it in the news. We need to be one step ahead in order to have a better service than our competition82". p. Once customers access the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . According to a recent study. May 3.higher than all other services81. 1999. According to Karen Edwards. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. s4 103 . Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. T-shirts.it must reinforce the image of the company as 'a service that is fun.yahoo. VP-Brand Marketing. to create Yahoo! Internet Life. parachutes. including backpacks. breath mints. sailboats. services and contests with well known brands such as Ben & Jerry's. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen.Yahoo! Press Release. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . organisers. new services and customised features highlight their ability to relate to customers' needs. snowboards. Although this seems like a shotgun approach. They even have a barter deal with the San Francisco 49ers. and yo-yos. a monthly magazine guide to what's new on the web and it has co-branded products. it's too late. and 76% turned to Yahoo! before visiting another search engine or navigational site. August 26. They also teamed up with publisher Ziff-Davis Co. 1997 (www. Yahoo! adopted 'guerrilla marketing' techniques . a little wacky and inviting'.with its name being plastered on everything.
its excellent customer service. while also associating Yahoo! with well known brands. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. first to go public. Yahoo! has benefited from a first-mover advantage. s4 104 . they have carried out extensive partnering. to its simple design. with a large customer base and high levels of customer loyalty. their innovative promotional and guerrilla marketing techniques. and has cultivated a reputation for excellence. May 3. To maintain its lead. alliances and acquisitions to provide added value services to their customers.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 Conclusion Yahoo! is one of the most successful brands on the Internet. In addition. and its openness (for example. that have set it apart from the pack. and other search engines at the bottom of its search results page). p. while attracting new customers. VPBrand Marketing of Yahoo!. GoTo. Yahoo! has built a strong brand. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. have created a distinct brand identity that differentiates the brand and appeals to its target market. As a result of all these factors. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands.8.com. Yahoo! points them to its competitors by including links to AltaVista. and first to go mainstream by advertising its name using traditional media.8. from its convenient and logical structure and display of information. 6. 1999. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . first to turn around an annual profit. HotBot. Yahoo! has invested relentlessly in new services and marketing programmes. They have maintained that lead through the creation of a high quality end-to-end customer experience. if a user cannot find what it is searching for. In addition. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". As the first online navigational guide to the web. its choice of partners. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. These relationships have provided end-users with added-value.Advertising Age.
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
variety. Alliances and partnerships play an important role in achieving speed and momentum. and by partnering with well-known brands. leading brands have focused on building strong partnerships and alliances. 108 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and have developed multifaceted. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. while ultimately benefiting the end-customers. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. content. and convenience. to distinguish themselves from competitors. particularly to secure content and widen reach to new customer segments and niches. offering customers the best in quality. integrated customer acquisition strategies. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. but also provide added value to the brand community. 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. whereby each party benefits from the other's expertise or skills. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. before it fractures. as well as determine how far the brand can be meaningfully stretched to other products and market segments. a company can leverage the partner's brand and reputation to reinforce its own. ranging from online methods to traditional offline media. and exclusive alliances can lock out competitors from valuable content or online real estate. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. these companies are creating even stronger value propositions. brands are harder for competitors to emulate. to maintain consistency. these companies must have an inherent understanding of their brand identity and core values. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. In addition. As a result. By distinguishing their offering and focusing on unique sources of value-added.
the innovations are the result of the company's ability to data mine its vast database of customer information. the company benefits from the buzz. these well-publicised brands also took off. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. customisation and customer care. Many strong online brands were also early-movers on the Internet. that comes with innovation. by providing better services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. and benefited from additional hype. It locks up important content and distribution partnerships. and differentiating it from other brands. These brands are accumulating knowledge about customers. and it aligns itself with the most influential venture capital sources. to create new services and content that satisfy customer needs. and are continuously adding new services and functionality to their sites. these innovations are difficult for competitors to reproduce. In many cases. and it can acquire customers while it is still inexpensive to do so. and develop a detailed understanding of their customers' needs. and traffic. through past transactions and solicited input. • 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. As Internet penetration exploded. are leveraging this customer knowledge (learning) to nurture relationships (relate). A first-mover advantage is an important asset for an online brand. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. By getting to market early. 109 . giving the brand an edge. and by focusing on customer needs. The challenge then lies in keeping up the momentum. and extensive word-of-mouth due to its novelty. By leveraging unique customer information.
and a physical presence (tangibility) . tools and key factors outlined in this dissertation are also applicable to business markets. Brands and brand-building tools tend to be associated with consumer markets. Nevertheless. while reaping the benefits of lower customer acquisition costs and extended reach. In addition. an in-depth analysis. clicks-andmortar brands are providing customers with true added-value. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. 110 . As such. Nevertheless. would represent an exciting opportunity for further research. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. established fulfilment systems and infrastructure.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. They possess critical assets that give them an advantage over pure online start-ups. The Internet has radically changed the business and competitive environments. 7. Yet while everything is being turned upside down. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. building relationships and satisfying needs. with the emergence of wireless access and new platforms. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. but at the same time.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. there has been a limited time horizon to evaluate the durability of Internet brands. the concepts. ongoing research would be necessary to build on the findings of this dissertation. however. In doing so. expand the brand experience to meet customers' expectations in the online world.factors that clearly differentiate them from pure players. Having established a strategic perspective on building online brands. one component remains unchanged .value remains (and always will) the basic building block for every successful brand. drawing on several case studies from business markets. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. established customer relationships. They have an established brand. Through extensive and seamless integration. they are equally important in business markets. Therefore.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
804 2.681 2.422 1.275 30.225 11.021 26.845 56.895 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.643 3.197 32.464 3.909 7.766 14.310 11.806 2.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) 83.423 2.694 17.193 112 .985 2.792 3.603 5.781 33.361 1.654 43.181 21.313 2.329 4.147 9.781 17.043 8.510 8.231 12.761 1.076 3.interbrand.596 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .283 4.155 7.048 20.595 17.052 6.648 1.502 33.806 11.281 11.132 15.568 3.830 14.634 1.143 2.Interbrand's Ranking of the Top 60 Brands (www.550 12.894 14.527 3.602 4.404 4.932 4.262 1.319 1.231 24.101 9.184 1.
whereas entrepreneurial Internet companies must focus on 'managing for change'. 1982 113 . and structures are aligned differently. respond to competitive and market dynamics. constantly innovate. As such. and the emergence of a knowledgebased economy. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. and as the business environment changes.. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. Internet companies must be able to move at warp-speed. As a result.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. commit and deploy resources. activities. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. all their operations. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. * Peters. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. and reorganise as appropriate. T. It is critical that all these dimensions come together and are re-enforcing. the informal management style and the constant strategy re-calibration.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . global competition. (Harper & Row). They must move quickly to capture new opportunities. However. showing how they are interrelated. customer empowerment. with the fast pace of technological change. R. 'In Search of Excellence'. all these dimensions must change accordingly. & Waterman.
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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