1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


2 Value Proposition 6.6 Value Proposition 6.5.4 Brand-Building Strategy 6.The 7Cs Framework Brand-Building Strategy 6.4 Brand-Building Strategy .com 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 7.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.1 Company Overview 6.5 Conclusion Case Study: Gap.3 Sources of Value .4 6.4.7 6.3 Sources of Value .4 Brand-Building Strategy Company Overview 6.The 7Cs Framework 6.2 Value Proposition CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings Other Factors that Contribute to their Brand Leadership Failure of Boo.3 Sources of Value .Extensive Integration 6.5 Other Factors That Contribute to their Brand Leadership 6.1.3 Sources of Value .com 6.2 Value Proposition 6.6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Case Study: Yahoo! 6.1 Company Overview 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 .4.3 Sources of Value .5 Conclusion Case Study: CDnow 6.8 Case Study: Boo.2 Value Proposition 6.The 7Cs Framework 6.The 7Cs Framework 6.1 Company Overview 6.8.1 7.6.1 Company Overview 6.

5 Figure 2.1 Figure 5.2 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.com's Website Overview of Boo.2 Figure 2.4 Figure 6.4 Figure 5.3 Figure 6.7 Figure 5.7 Figure 6.2 Figure 5.4 Figure 2.5 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.8 Figure 6.2 Figure 4.3 Figure 3.6 Figure 5.com's Associates Programme Overview of BarnesandNoble.6 Figure 2.3 Figure 5.1 Figure 2.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .7 Figure 5.5 Figure 5.1 Figure 4.7 Figure 2.6 Figure 4.1 Figure 3.3 Figure 4.4 Figure 4.6 Figure 6.8 Figure 5.1 Figure 6.3 Figure 2.9 Figure 6.8 Figure 3.2 Figure 3.2 Figure 6.com's Website Amazon.1 Figure 1.9 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 .5 Figure 6.4 Figure 4.

2 Table 6.5 Table 6.Timeline and Major Milestones eBay .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones Gap.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones Yahoo! .com .com .6 Table 6.com .4 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.3 Table 6.Timeline and Major Milestones Boo.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.Timeline and Major Milestones CDnow .1 Table 6.


2 3. customer affiliation and level of sales. relationships.com) 7 .0 1. while providing new tools for promotion.mckinseyquarterly. McKinsey Analysis (www.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. Figure 1.5 million book titles). FIGURE 1.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.9 3. interaction and relationship building. aggressive Internet start-ups have emerged. This is creating new challenges and opportunities. Internet companies such as Yahoo!. Amazon.com1 Amazon. there has been an explosion in the online world . that these Internet start-ups have achieved. and business models revamped.com noble. service and brands.com. Supply chains are being rethought. The Internet also represents a fundamental shift in how buyers and sellers interact. America Online (AOL) and eBay have been able to build powerful brands in a few years.9 2. as they face each other through an electronic connection.1 3. As such. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. products and services reconfigured.g. As such.5 2. and is triggering the need for new brand-building strategies and tools.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. the Internet is changing fundamentals about customers. creating strong brands that are putting established brands at risk. In the midst of this.1 . It is empowering customers with more options and more information to make informed decisions.an explosion that is also a harbinger of how business will operate in the future.com's range of 4.1 OVERVIEW Over the past few years.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.YEARS TO REACH $100 MILLION IN SALES 6 5.com Source: Securities and Exchange Commission Filings. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. Amazon. whereas it has taken decades for traditional companies to achieve the client base.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.

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

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

These are further refined using the insight obtained through the case studies. as well as a recent Internet failure (Boo. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com and Gap. The absence of academic literature on Internet branding posed a major obstacle.com). however. Hypothesis (Framework): This is based on the literature review and secondary data. and factors that contribute to a brand's success. and is used to provide insight into some of the factors that contribute to the development of successful brands. the literature review draws on leading academic thinking in more established areas such as brand management. strategy and economics. marketing. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. nor desire. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. Consequently. The combination of cases provides a useful and practical insight into brand-building issues and problems.com). relationship management. certain key factors are highlighted in their relevance to the dissertation. there is more work in popular rather than academic literature. eBay and Yahoo!). The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. While there is no attempt. this also highlights the true value of the dissertation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Conclusion: Discusses the key findings and areas for further research. to provide an in-depth analysis of the psychological and social dimensions of brands. 10 . CDnow.com.

The final chapter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. and outlines the opportunities for further research. The nature of brands. and introduces the core concepts that form the backbone of the dissertation. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. Chapter 7. summarises the key findings. their purpose and value are discussed. provides an analysis of leading academic literature in relation to branding. Chapter 6 examines the brand-building efforts of seven companies. This chapter sets the context within which online brands must be built. The limitations of the Internet in terms of brand-building are also discussed.4 STRUCTURE The next chapter. Chapter 4 provides an overview of the Internet and its defining characteristics. by outlining the impact of the Internet on the business and competitive environment. highlighting some key factors that have contributed to brand success. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. 11 . Chapter 3 explores how brands have traditionally been built. as well as the interactive approach to attracting customers and building loyalty. Chapter 2.


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

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

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

Planning. it is critical to understand what attributes consumers value. 'Marketing Management . either through heightened attention or through an active information search. Implementation. However. and pay the most attention to the brands that will deliver the sought benefits. p. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. P. the consumer learns about competing brands. These beliefs depend on their previous experiences with the brand.194 The process starts when the buyer recognises a need. Through gathering information.Analysis. a consumer will be inclined to search for more information. and selective retention. This can be triggered by internal or external stimuli (advertisements). FIGURE 2. 1996. In the evaluation stage. The buying process consists of five stages (Figure 2. Therefore. and Control'. Once aroused.. and the effect of selective perception. Consumers differ as to which product / service attributes they see as important. it is important to clarify customers' underlying buying behaviour and the buying process.4).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. 16 .3). two factors can intervene between the purchase intention and the purchase decision .. Consumers develop a set of brand beliefs about the attributes of competing brands. (Europe: Prentice-Hall) 8th Ed.3 .FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.attitudes of others and unexpected situational factors (Figure 2. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). selective distortion.

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

T. At the opposite end of the satisfaction spectrum are "apostles" . M. Customers that are passionately or emotionally loyal are those that have built trust in a company. D. Southwest Airlines and Xerox7. The customers at the bottom end of the scale are "terrorists" .. Hewlett-Packard. & Sasser. 91 Loyalty is derived when customers are continuously satisfied over time.. C.. W.. Johnson & Johnson. Nov-Dec 1995 Hart. and believe that it will always act in their best interest. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Why Satisfied Customers Defect' .Harvard Business Review.Harvard Business Review. and Johnson. Spring 1999 18 .5.those who actively attack the brand telling others not to buy from the company. E.Figure 2. T.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Marketing Management.. This satisfaction encompasses the whole experience and not just a company's products or services. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Federal Express. Nov-Dec 1995.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Saturn. & Sasser. Trust is critical for a brand's success. 6 7 Jones.customers who are satisfied and loyal and talk favourably about the brand . 'Growing the Trust Relationship'. FIGURE 2. p. 'Why Satisfied Customers Defect' . E.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.

The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 'Building Stronger Brands through Online Communities' .they provide good word-of-mouth and are the best salespeople for the product / service 2. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. In this way. D. M. emotional loyalty is born out of a consumer's personal relationship with a brand.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. 'The One to One Future'. 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). consistent orders Satisfied customers are the best advertisement .. G.Sloan Management Review.com. Firstly.. Emotional loyalty can be also created through the formation of a strong user community around the brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. Spring 2000 19 . Harley-Davidson motorcycle clubs). with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. 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.g. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. & Rogers. 8 9 Peppers. 1993 McWilliam.

20 . pp. Beyond this. March 1998. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. a 'powerbrand' tends to have a high degree of brand loyalty.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. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). 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. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. FIGURE 2.6 . However. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. which goes well beyond the satisfaction of a specific need.. Journal of Consumer Research. S.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. A stronger brand enjoys a high degree of brand preference over competing brands. FIGURE 2. 343-373.7 .7). whereby customers would be unwilling to substitute it with competitors' offers. 2. there are brands that customers perceive as acceptable and would not resist buying.

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

to quickly identify sought after products • • Practicality . to its logo. 1986 13 Golder.Satisfaction linked to the attractiveness of the brand. N..8. R.To be clearly seen... May 1993. in the following ways: • Brands.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. (London: McGraw Hill).To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. market share and profits .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. J. production and marketing. J. pp. 'Consumer Market Research Handbook'. G. 3rd Ed.To have confirmation of your self-image or the image that you present to others • Continuity . (New York: Free Press).1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.To be sure of buying the best product in the category.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. & Tellis. • Brand Leverage . The brand leader is the most profitable and all beyond number two are unprofitable13. 158-170. the best performer for a particular purpose • Characterisation . & Downham. 1992 Worcester. 11 12 Kapferer. Journal of Marketing Research. and the number two twice the share of the number three12. 22 . 'Strategic Brand Management'.8.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .To save time and energy through identical repurchasing and loyalty Guarantee . to make sense of the offer. brands perform several functions that add value and customer benefits: • Identification . Premium pricing increases revenue.Typically a brand leader obtains twice the market share of the number two brand. to its communication • Ethical .. P..

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


selling. To entice trial and repeat purchase requires triggering mechanisms. public relations. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. FIGURE 3. 3. promotion. The major characteristics of successful brands are also reviewed. Once this has been established. confidence and brand equity are built. the next step is to get customers to try the brand. If the offering is developed properly.1 .1 INTRODUCTION Building a strong brand is a complex task. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. and direct marketing.1. and keep it turning. This is illustrated in Figure 3. which are created through advertising.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 . highlighting important factors that contribute to the success of each step along the way. it should provide a satisfactory experience and lead to a willingness to buy again. brand awareness.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. This chapter spells out the traditional brandbuilding process.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. 16 Kapferer. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . etc. type of spokesperson / customer image used to advertise the brand). its personality and its image or self-projection . its reflection (e.g.3: • The Brand Core . however the brand style and core tend to be less flexible. Themes include the physical appearance (logo. 'Strategic Brand Management'. which remains fixed over time. which depends on how the target market perceives the brand.g. Brand themes are the most flexible element and will tend to change with fashion. This may be different from the brand image.3. and the relationship expressed (e. style or cultural differences from one country to another. 1992 28 .the fundamental or genetic code of the brand.articulates the brand core in terms of the culture it conveys. J. • The Brand Theme . (New York: The Free Press). packaging. features.Figure 3. prestige. A company should seek to differentiate its brand through developing a distinctive identity.. and visual appearance). colour scheme. press releases. friendly).the way the brand communicates through its advertising. visual appearance. and advertising. glamour. • The Brand Style .

its strengths and opportunities. website design. understanding the brand's core and style helps set the perimeters of brand extensions . J.how far the brand can be meaningfully stretched to other products and market segments. 1992 The brand prism enables management to understand the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. (New York: Free Press). 29 . 'Strategic Brand Management'. Finally.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. advertising. Secondly. and through line and brand extensions. structure and ease of use).3 . It also facilitates consistency in the message being transmitted through presentation (e. below-the-line activities.. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.g.

79-86 The Innovation-Adoption Model consists of: • Awareness . management style. features and advantages. colleagues and opinion leaders become important influences at this stage.4 . E. • Interest . the company must ensure that it develops the appropriate structure. FIGURE 3. 'Diffusion of Innovations'.. This learning is called the adoption process17 . 1962.Customers consider whether the product / service will meet their particular needs.Product and service features. The value proposition must be communicated to entice customers to try the product / service. pp. 17 Rogers. and the product / service's perceived performance.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. 1962.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. skills. • Adoption .4. • Trial .The McKinsey 7-S Framework). strategy (partnerships and alliances). (New York: Free Press). it should lead to satisfaction and re-purchase. deliver and reinforce this value proposition (see Appendix B . they must learn about it.Customers need to be stimulated to seek information about the brand's uses. The value proposition must then be articulated in terms of the 'marketing mix' . E. Advertising and PR are common tools for achieving awareness. • Evaluation . systems. culture and staff needed to support. (New York: Free Press).79-86 30 . Before potential customers can buy a product / service. 'Diffusion of Innovations'.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.The customer is satisfied and decides to make regular use of the product / service. If the offering is developed properly.. pp.Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.The company has to create awareness of the brand. Price. Personal sources such as word-of-mouth from friends. and its products / services.often referred to as the '4Ps' . Promotion and Place (distribution strategy).

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

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


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

These characteristics combine to create a very powerful medium.2 (Note: 35 .this radically alters the process of interaction between communicating parties. allowing both parties to identify each other and build one-to-one relationships . • It Overcomes the Barriers of Time and Space .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.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.not previously available with mass medium forms of communication. ubiquitous links to anyone.The Internet is a global network and can be reached from everywhere. 4. the Internet lets individuals and companies build interactive relationships with customers and suppliers.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 .3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. The context of the Internet and certain key developments are highlighted in the Figure 4. anywhere. The Internet can also be accessed at any time .24 hours a day. These qualities eliminate the barriers of time and space that exist in the physical world. regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale). which was intended to link military networks together. 7 days a week. • It Allows for Two-way Communication and Interactivity . These defining characteristics have fuelled its explosive growth. when the United States Defence Department developed the 'ARPAnet'. By allowing for direct.2.

1998.economist.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist. FIGURE 4.3.000 1969: 10.000 1.000 10.000.000.Figure 4.000 1.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. 2000 Internet / ARPAnet was created Dell. 1996 (www.000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.a PricewaterhouseCoopers Report. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .3 . as cited in 'E-Business Technology Forecast' .com) 36 .2 .

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

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

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

& Overdorf. the Internet is sidelining the role of many traditional intermediaries. partners and other corporate constituencies.how companies operate.. some of which look set to become the superbrands of the future (e. Additionally. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. operation (e. the explosion of information is placing a premium on skilled information management.g. Dell Computers). 'Meeting the Challenge of Disruptive Change'. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. represents a level of efficiency and integration previously unattainable.and revolutionary new business models are emerging.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. M. 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. Harvard Business Review.g.g. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. By allowing customers to talk knowledgeably and directly to suppliers. Although the particular impact will differ between industries. At the same time. Volume 78 Issue 2. 66-76 40 .April 2000. Yahoo!). New brands and business models are emerging to seize this opportunity. pp.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . 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. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. which are often disruptive to traditional business models21. how they compete and how they serve their customers . C. For example.. suppliers. and transforming traditional distribution channels. The Internet also facilitates the development and co-ordination of global activities (e. March . through the use of extranets). This is threatening to undermine many old established brands.

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

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

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


BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 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.names. etc. people have concerns about sharing personal information. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. However. J. New strategies and tools for building brands on the Internet are identified. The limitations of brand-building on the Internet are also discussed. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. many unnamed customers develop a 'relationship' with the brand. 'Internet Portals' . they have never handled or seen (except on-screen).. including the interactive approach to attracting customers and building loyalty. in addition to providing added value.com) 45 . and sites that understand the user's needs and preferences24. the Internet makes search and comparison much easier. the intangible nature of the Internet. whereby the company can establish a dialogue and 24 Marathe.durlacher. Generally. where the user feels a part of.Durlacher Research. has placed greater importance on trust and security. The Internet. People only tend to transact with sites they know and trust . Transactions on the Internet require customers to provide detailed personal information . On the other hand. In response. This threatens to undermine the value of brands. the logic of the Internet cuts another way. offers interactivity. brands have been developed in an environment whereby a company creates a brand. in most cases. In addition. 5.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. addresses. credit card numbers. Traditionally.2 THE NEW DYNAMICS OF BRANDS Traditionally. and the fact that customers are buying goods that.sites that provide a wealth of information and make comparison shopping easy. on the other hand. Customers derive added value through the provision of information on the products or services they buy. as well as on topics of interest related to the brand and product characteristics25. and projects it onto a third party intermediary (the media). May 1999 (www.

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

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

businesses and online communities that rely on connectivity can enjoy 'network effects'. the costs approach zero32. As a result. pp. where the value of the network. R. Similarly. as illustrated in Figure 5. Even more important.1 . (London: Harper & Row). and the value that each member realises.1.. 7th Ed. 180-182 48 . 1989.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. (also referred to as 'viral economics').. as the benefits of scale are overwhelmed by the disadvantages of size31. additional products. G. customisation for individual customers. increases disproportionately as more people join the network. FIGURE 5. and other features can be added or changed at low marginal cost.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. and in the case of information-based products. However. this is not the case on the Internet. each additional unit sold does not cost more than the last to deliver. additional customers and transactions can be managed with limited fixed cost investment. 'Positive Economics'. Once the up-front investments are made (for research and development and technology infrastructure).

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

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

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

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

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

based on profile information. 3. and nearly 20% use it for post-sales support. 'Real Profits from Virtual Communities' . Online sites can track a customer's purchase history and modify its service accordingly. and advertising (if it is relevant and useful). Members can interact in chat rooms. even if they purchase offline. Often.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. Other content includes community-generated content. For a community to work. and organise live events. Clemmer. Community Online communities are emerging as new gathering places for consumers with similar interests (e..com) McWilliam. which is facilitated by a combination of factors (Figure 5. demographics.forrester. An important contribution of these communities is that they provide members with a medium to communicate with each other. 31% of online consumers use the Internet for obtaining product information. & Hagel.The McKinsey Quarterly.A Forrester Research Report. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. An online community offers a compelling way to entice customers back to a site. K. & Bluestein. use bulletin boards. visitors should not be engulfed with too much information. 'Building Stronger Brands through Online Communities' . W. A. Customisation creates the feeling of a one-to-one relationship. iVillage and Geocities). share information and access a wide range of services.. G. Customisation Customisation involves tailoring the presentation of a web-site to individuals.g. 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). According to Forrester Research40. or prior transactions. 54 .. S. it needs a critical mass of members42.. It fosters a sense of belonging41 among the members. On the other hand. 40 41 Morrisette. These sites allow members to interact with one another. 1995. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. which enhances the user's online experience.. J. No. Spring 2000 42 Armstrong. as well as through loyalty programmes that provide targeted benefits. 1999 (www.5).Sloan Management Review. . 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 FIGURE 5. This is similar to placing offline stores in high traffic areas. March 1998. C.6). 1999 Communities enhance the speed and value of information sharing. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 55 .. when membership in the brand's community becomes an end in itself43. Site-tosite connectivity focuses on connecting users to other relevant sites. pp. 43 Fournier.www. Journal of Consumer Research..5 .com) directly into the browser and access the site immediately.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. they opt to input the URL (Internet address . 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. Mulcahy.. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 343-373. and can create emotional loyalty. 'Making Real Sense of Virtual Communities' . Companies can provide a selection of related links that complement the site's purpose and value proposition. O'Donnell & Gupta. Once customers know of a site. allowing customers to deepen their experience with a brand and build more personal connection. S..A PricewaterhouseCoopers Study. as well as attracting traffic from other sites. A. 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. M.

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

Figure 3.4 .. The company must build awareness and communicate its value proposition to its target customers. McKinsey Quarterly. Retain. Adoption).mckinseyquarterly. billboards. FIGURE 5. modified to take into account of the interactive dynamics of the Internet.Awareness. links from directory searches (Connectivity).7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Evaluation. etc. pp.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'.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. e-mail notifications and banner advertisements. R. The mechanisms to communicate range from traditional media (TV. This model consists of five stages .Attract. This is more difficult online than offline.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.) to online tools. 180-183 (www. S. & Zeisser. because there is no physical presence. 1996. McQuade. Trial. Waitman. Therefore. and bring people to the site for the first time. Engage.8.7.. Interest.2. A.. 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 ’ . Learn and Relate. No. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. M. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Newspapers. visibility relies solely on Communication. 'Marketing to the Digital Consumer'..7 . including affiliate programmes with other websites. Magazines.

Kapferer's Brand Prism (Ch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 3.0 3.com) The most effective methods are direct e-mail. Fig. multiplied by the expected rate of transactions. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.5 3. it is important to quickly engage consumers' interest before they move on. Companies then need to engage customers to obtain their interest and participation.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 .2 4.4 3.3 2. 58 . The key factors at this stage are Convenience combined with interesting Content. as cited in 'Targeting Consumers via the Internet' .3 Source: Forrester Research.Economist Intelligence Unit 2000 (www. discounted over the expected duration of the brand-customer relationship.8 4.1 3. Attracting customers is only the first step in building online brands. Engage With the multitude of choice available on the Internet. Creativity is also an important factor in gaining attention in today's cluttered marketplace. public relations and television advertising.6 3.4 3. affiliate programmes.WEBSITE PROMOTION METHODS .7 4.3 3.8 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.3) is useful to ensure that a company develops a distinct and consistent brand identity. 3.4 4.ebusinessforum.5) 2.

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

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


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

1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.COM .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.000 members Amazon.com Electronics and Amazon.Amazon launches new kitchen store .com . workplaces.com 63 .Amazon opens customer service centre in The Hague .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. and more Amazon launches "Amazon. Software.Amazon.com .com Amazon acquires Back to Basics Toys to add to Amazon.Amazon.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com . such as the Palm VII organiser.TIMELINE AND MAJOR MILESTONES Amazon.com is founded by Jeff Bezos Amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Amazon opens a customer service centre in Huntington.com Anywhere.Amazon surpasses 20 million cumulative customer accounts .com to create a "home living" store at amazon.com. a tools and equipment store for professional tool users and woodworkers .com enters European book market Microsoft signs Amazon. to meet rapid growth .Amazon announces investment in kozmo. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. Ashford.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 Announce Strategic Investment and Promotional Agreement . West Virginia.com announce investment and strategic alliance .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .Amazon launches www.com via the new wireless pocket PC .Amazon and online car-buying service Greenlight.com and NextCard launch co-branded credit card . universities.com invests in wineshopper. and minority investment in.Amazon and eziba.com Amazon invests in Pets.com .com Auctions and zShops provide new tools to its merchant community ." providing shopping from wireless devices.toolcrib.com.amazon.Amazon launches health and beauty store .Amazon launches lawn & patio store .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.New home living store from living.com Amazon introduces "Purchase CirclesTM". Amazon.Amazon enters strategic alliance with living.Customers can shop at Amazon.amazon. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon.com opens its virtual doors at amazon.sothebys. featuring thousands of bestseller lists for hometowns.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.Amazon enters into a strategic partnership with Drugstore.com Amazon announces further plans to expand distribution network to meet rapid growth. Video Games and Gift Ideas Amazon and Sotheby's launch www.

com Anywhere to support access from wireless devices (i.Figure 6. including book jacket images. book summaries. mobile phones. logically structured. customer testimonials. and quick-to-load pages Over time. gift reminders.2.1 . live or study. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. This is an example of 64 . FIGURE 6. discussion boards. wish lists. expert reviews.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. Palm VII PDA device).e. Customer purchase circles allow shoppers to cross-reference similarities such as where people work.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. recommendations. easy-to-use.OVERVIEW OF AMAZON. such as the Amazon. the 1-ClickTM express checkout. and Amazon. The site is easy-to-use. offering multiple paths to a given book or product. downloads quickly and services visitors adequately . interviews with authors. Amazon has added other features for shopping convenience. gift click.1. and customer Purchase CirclesTM. Content Amazon provides content on several levels. encourage repeat visits and drive higher conversion rates.com All Product search (searches the entire web).

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers . and customer interaction. therefore. while driving up repeat purchases and cross-selling opportunities. which helps to build loyalty and create switching costs. to the proactive notification of new items of interest. converting them into a storefront for Amazon. Community Amazon has also added a community element to the purchasing process. and Customisation Amazon provides customised features and services. 65 . from the customer recognition at the point of interface (Figure 6. creates a competitive advantage.thereby increasing conversion rates. Amazon introduced Amazon. By leveraging its vast customer base. In doing so. Amazon creates one-to-one relationships with its customers. More recently. and has developed an Associates Programme. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. from its shopping basket applications which lists the estimated time to delivery reliably. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. Amazon's content is not reproducible by competition. linking it to a large number of other sites. These are discussed in more detail in Section 6. Connectivity Amazon has built relationships with high traffic web portals and sites.2.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.4. real-time shipping and backorder notices. This customer-centricity is evident in all Amazon's activities.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM.

4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. they are subsequently confirmed by e-mail. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. 66 . Business Week. In July 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal. attracting member sites of all sizes. which only applied to sales that resulted from the initial click-through. Once orders are placed. 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. two personalised services. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. enticing them to return to the site and purchase repeatedly. Instead of paying directly for this exposure.000 by August 2000. The Financial Times. increasing to over 500.2. As a result of all these factors (7Cs).000 members. and not subsequent purchases.2). Through the first half of 1996.a move that along with the novelty of its business model and the newness of the Internet. In the second half of 1996. In addition. Amazon offered Associates referral fees of up to 15%. This enabled Amazon to reach more customer segments and niches (Figure 6. The Associates Programme has been phenomenally successful. New Yorker and The Economist. help maintain contact and build traffic by e-mailing customers when desired products or books become available.com hot-link and offer specific books of interest to their visitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. and by 1999 it had over 200. Newsweek. it began to advertise in print media and online . Eyes and Editors. and customers are also e-mailed when the items are shipped from the warehouse. 6.

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

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

As such. and its safe and secure delivery. Amazon has been able to build a strong brand at relatively low cost. Saunders. 'Business the Amazon. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. "we're not a stationary target. and to convey its vast size and offering. Amazon's understanding of its brand identity has been a critical factor. We have been customer obsessed. management realised that Amazon had become more associated with other core brand values . Amazon unveiled a music store. This has helped them attract customers and move up the learning curve quickly. and according to Jeff Bezos. According to Jeff Bezos. the balance of power shifts away from the company and goes towards the customer. Our secret is that we have not been competitor obsessed. In addition. 51 52 Hazleton. Amazon is constantly seeking new ways of improving its offering.. Success.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. L. However. which within six months propelled Amazon to one of the leading online music retailers.2. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. further enhancing their value proposition. July 1998. while our competitors have been Amazon. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). Amazon was able to secure partnerships and alliances with key players. We were blessed with a two-year head start. and our goal is to increase that gap51".a wide range of choice. R. 1999 69 .com Way'..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. thereby diluting the value of its association with books. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. As such. Amazon received criticism for expanding its product line. because he wanted it to be short. due to the hype and coverage it was given. In addition. good value. memorable. in June 1998. (Oxford: Capstone Publishing). "Online. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. developing customer service centres and expanding its distribution network to support high levels of service. Nevertheless. establishing Amazon as the leading online bookseller with a large customer base. establishing a reputation for excellence and fulfilment. to capture the spirit of the site. According to Jeff Bezos.com obsessed52". For example.

However. 53 Warner. 6.6 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. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. Although Amazon has successfully built a strong brand and loyal customer base. B. it has not recorded any profits to date. if it continues to incur losses. When they're young. the drain on their cash resources will push them towards bankruptcy. however. In doing so. stem from its compelling value proposition and high quality end-to-end customer experience. 'Marketers of the Year: Jeff Bezos. This customer-centricity is a key hallmark of a successful Internet brand.. they have cultivated a reputation for excellence and fulfilment. perhaps trying to defend its view that losses taken to build market share can reap profits later. they're stretchable and pliant. 1998 70 . as the true value of a brand lies in its sustainability. have kept it ahead. Volume Discounter' . distribution centres and upgrading the site. Nevertheless. but over time they become more and more associated with a particular thing and harder to stretch53". Quality is only measurable in the minds of visitors to the site. Amazon has continuously invested in customer service. Amazon also recognised that service quality is a perception. speedy delivery and good value. This raises a critical issue.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. The key factors driving its growth and high retention rates. with new products and value added content.2. not necessarily a reality. and to sustain a positive image and satisfactory end-to-end experience.Brandweek. Amazon's intense focus on customer needs and continual innovation. October 12. which is critical on the Internet. Amazon delivers on its promises of a wide inventory of products. Amazon is claiming to be making profits on its books and music categories. and investors lose confidence. secure payment procedures.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com's timeline and major milestones is outlined in Figure 6.com provides other online categories offering software. magazines. promotion) between the online store and the retail stores have been kept separate. music.TIMELINE AND MAJOR MILESTONES ..com was able to 'hit the ground running'.Launches Internet Radio .3.1 Company Overview Barnesandnoble.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July .Barnes & Noble University opens registration for free online courses .Barnesandnoble. prints & posters and related products. Barnesandnoble. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). as it could capitalise on the infrastructure and back-end operations (warehouses.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. contacts. Barnes & Noble Inc. all front-end operations (marketing.Offers same day delivery in Manhatten . is one of the best known traditional booksellers in the United States. Besides books.Acquires equity stake in Mightwords .Launches Video Store 71 . and 20% owned by the public. and 470 B.3 CASE STUDY: BARNESANDNOBLE. Inc.) established by its parent company. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. TABLE 6. rare. 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.Acquires minority stake in NotHarvard. Barnesandnoble.COM .Barnesandnoble. However. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. Barnesandnoble.com is the fourth largest e-commerce retailer54.com).Launches Affiliate Network December .Launches BNTV . book databases. Launched in 1997.com and Microsoft announce that they will create an eBook superstore .barnesandnoble. Currently.com is approximately 40% owned by Barnes & Noble. etc.com launched its website (www.com) .2 1997 January BARNESANDNOBLE.com announces strategic relationship with Palm Computing . Barnes & Noble Inc.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .2.Barnes & Noble went online at AOL May . Barnesandnoble.COM 6. and is the second largest online bookseller (after Amazon.Barnes & Noble.Announces distribution relationship with New York Times September . 40% owned by Bertelsmann AG.com .

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

there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Lycos.com had over 17 million. Barnesandnoble. it lags behind first-mover Amazon. while Amazon. Netscape and Microsoft Network.com's market capitalisation was $251 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Instead.4 Brand-Building Strategy Barnesandnoble.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. December 17. Both try to foster a community of readers by letting customers post reviews online.64 billion. Barnesandnoble.com's $1.1 billion. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).The Wall Street Journal. The 6. while Amazon. however.com was valued at $21. compared to Amazon. Yahoo!.com closed 1999 with 4 million customers.6 million. reasons for this are explained in the next section.000 affiliates in its referral network.com in return for a commission on any purchases that they originated . and Barnes & Noble Inc. Both offer 'associate programmes' that let other websites link to their sites.com's 1999 revenues were $202. 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 . 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. has yet to leverage its strong brand in cyberspace. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. prevent cannibalisation of its existing business. Both offer customisation that permits users to personalise the experience. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). and both are expanding globally.a replica of Amazon's Associates Programme.com. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . However. These initiatives have generated traffic to the site. They have developed an affiliate programme that links sites to Barnesandnoble. Webcrawler.3. As of February 2000. Although. Barnesandnoble. Barnesandnoble. this programme had more than 300. and avoid charging sales tax in states where it has stores56.com has created a high quality website and customer experience.

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

Forbes. 57 'Bn. even if that means eating into their existing sales. significant market momentum. The Press have also contributed. Barnesandnoble. customer relationships and offline presence .com) 75 . it also caused a major setback.3.its key differentiating factors. and its lack of innovation (by copying Amazon.com's experience is instructive. feature for feature) has failed to differentiate Barnesandnoble. Barnesandnoble. a wellestablished Internet brand. and allowed them to offer stock options as compensation and achieve a high market capitalisation. 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.com's late start in 1997. 2000 (www. it has not been able to establish itself as the leading online bookseller.6 Conclusion Although Barnesandnoble. otherwise they risk losing out to other online competitors. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.com . and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". and was further up the growth curve.com has been able to create a high impact and high-quality customer experience. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.Not a Best Seller' . meant that Amazon. by portraying them as slow and clumsy in comparison to the more nimble Amazon.forbes.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. The company failed to leverage its established brand.com and has given them the image of a second rate 'me too' brand. August 4.

Company is put up for sale. "our marketing thrust is not based on prices. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).000 unique visitors . it means all that brand's product line is available.they redesign site. Boo.Appeals for $30 million more funding . among others. as cited in 'Boo.Announces it has only 500.1 Company Overview Founded in 1999. 58 Kajsa Leander. Boo.Marketing Week. Boo.4.4 CASE STUDY: BOO. 1999 76 . receiving $125 million of funding.COM 6. Boo. sack 20% of staff and sell stock at 40% discount . Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). Everlast.com collapsed through lack of funds.Raises funding of $125 million .com. and included high profile investors such as Bernard Arnault. If a clothing brand is on the Boo site. Germany and Denmark.com had set the record as Europe's best-funded European Internet Start-up.TIMELINE AND MAJOR MILESTONES . arranged through J.fails and appoints KPMG as liquidator.com.Site goes live .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". due to its poor performance and inability to build a customer base. November 2000 January February May 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com provided a range of 18 fashion and footwear brands including DKNY. and the resulting loss of investors' confidence. TABLE 6. and Converse. and was billed as one of Europe's hottest e-commerce ventures. England. June 10. Finland. After a high profile launch. Sweden. within six months Boo.First sign of problems . Puma. not the limited range you might get at most London fashion shops58". and eventually debut in Asia. On going live. Italy and Spain within a few months.com opens its virtual doors' . However. Morgan.3 1999 Mid year BOO.com entered six markets: US. CMO of Boo. it's about range and convenience. founder and Chief Marketing Officer of Boo.4. They intended to add France.2 Value Proposition According to Kajsa Leander. P.COM . as well as create a kid's site.Multi-million pound advertising campaign created by BMP DDB .


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


Miss Boo

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



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

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

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



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

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


$18.cdnow. and exclusive interviews and reviews from CDnow's award-winning editorial staff. and they aim to "make every visit to the site.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.Harvard Business Review.TIMELINE AND MAJOR MILESTONES . This unprecedented degree of access to music and information is the core of CDnow's value proposition.5 million distribution deal with Lycos Signs three-year.ten times the selection of a conventional bricks-and-mortar music store). May-June 2000. customisation and a wealth of information and content to help in the purchase decision.com) 80 .CDnow and Time Inc. & Novak.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .Merges with Columbia Records .Site goes live .5. CDnow was acquired by Bertelsmann AG. On 19th July 2000. and one of the most popular shopping sites on the Internet62. CDnow is also driving the digital distribution of music. and an average daily audience of over 800. It has a customer base of 4 million people.1 Company Overview Founded in 1994..5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .Forges distribution partnership with Yahoo! $65.000 sound samples.000 music-related products and 650. convenience.5.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.5 CASE STUDY: CDNOW 6. whether for browsing or buying.000 people.Partnership program with Geffen Records . a valuable and rewarding experience"63. announce marketing alliance .Launches merged CDnow/N2K site . and was the first site to offer the sale of music downloads and custom CDs. as well as music reviews. CDnow is the leading online music store. $22.179-188 63 CDnow website (www. D. guides to music genres. CDnow provides access to over 500.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. 'How to Acquire Customers on the Web' . TABLE 6.Merges with N2K.000 music related items . 62 Hoffman. good prices.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. T.Raises $10 million through private placement . by twin brothers Jason and Matt Olim. daily music news. former arch rival . features. pp. cover art.

to make it easier for customers to explore new music and make informed purchasing decisions. The whole process of searching for albums or music titles to the actual purchase is simple . easy-tonavigate. By partnering with well-known content providers..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.5 . CDnow has cultivated similar relationships with MTV. For example. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).3 Sources of Value . CDnow has leveraged the reputation of their brands to reinforce its own. FIGURE 6. and has secured rights to music reviews. cover art.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. etc. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.Figure 6. artists biographies. 81 .5. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.

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

By keeping the brand in front of the customer in this way.Through the Cosmic Credit Programme.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. • Affiliate Programme . 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. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1.They have also stuck exclusive alliances with AOL. they buy from CDnow. customers buy music. Yahoo!. print advertising is music-related publications such as Rolling Stone.000 small. CDnow's initiatives include: • Banner Ads .4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. • Alliances and Partnerships . 83 . integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. music-oriented websites. and spot radio to build reach. According to Jason Olim. covering the entire music spectrum. CDnow extended its distribution reach to include more than 250. and radio spots on the Howard Stern Show to build a cult following among radio listeners. this is their "most successful customer building programme64".CDnow's advertisements are targeted to some degree.5. Excite and other powerful Internet content and service providers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. as well as more-targeted music-related sites like Billboard. • Traditional offline Media . CDnow is doing everything it can to ensure that the next time that 6. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. Spin. and Variety. It is a revenue-sharing arrangement. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate.

1998 . both in the online and offline worlds. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. In fact. word-of-mouth accounts for the lion's share of CDnow's customers. CDnow's promotion strategies have attracted high levels of traffic.(www. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998: $56. This has contributed to a 225% increase in sales (1997: $17. 6. and scaled it awareness-building efforts. It is constantly adding new functionality to the site and has been innovative in its offering .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. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.4 million.Hampel & Stefanides (www. with repeat customers accounting for more than 50% of sales. as a way to fuel very lucrative word of mouth.4 million). Public relations efforts helped to generate word of mouth and influence sales.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .Press Release.hsny. The company continually pushed for new distribution partnerships to widen its sphere of influence. • Word-of-Mouth .htm) 84 . with 44% of sales coming from new customers65. resulting in increased conversion rates.com) 65 'Pioneering in Cyberspace' .com/cdnow. it is in this context that the large investments in advertising and partnerships make sense. It is a powerful source of acquiring new customers at low cost. and to increases in the customer base of more than 30% quarter-to-quarter.CDnow made public relations a high priority brand-building tool. April 28.5. The story of how CDnow was founded in a basement.they were the first site to offer the sale of music downloads and custom CDs.As for many successful online retailers.cdnow.

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

6 CASE STUDY: EBAY 6. collectable shows. shipping.com) 'eBay . "at its core. Individuals use eBay to buy and sell items in more than 4. payment) between themselves. from collectibles and antiques to electronics and toys. Auctions make it fun.782 million in January 200068. eBay is not about auctions. with the number of unique daily visitors setting a record of 1.Company Overview' .2 Value Proposition eBay offers consumers an efficient.removing the need for inventory. 24 hour a day. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. There are over half a million new auctions. with emphasis being placed on its unique community feel and culture. and 450. extensive selection and geographical reach.the closest thing in the offline world are trading forums such as classified ads.300 categories. garage sales. and eBay provides added value through its convenience.6.Company Overview' .25% to 5% of the final sale price on any item sold.com) 70 'Meg Whitman at eBay Inc.ebay. eBay effectively created a new business model never before possible .A Harvard Business School Case Study.6. The buyer and the seller work out the logistics of the transport (e. or the payment for the item . According to Meg Whitman. (A)' .efficient one-to-one trading in an auction format.eBay website (www. 1st October 1999 86 . and eBay never takes possession of the item being sold. flea markets and auctions. Auctions are an enabler. 6. Sellers pay a nominal fee for placing an item up for sale.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 new items joining the "for sale" list every 24 hours69.ebay. transportation and other overhead costs. global trading place for buying and selling personal items in an entertaining auction format. as cited in 'eBay . and eBay receives a transaction fee that ranges from 1. People perceive the auction format to offer better prices.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. CEO of eBay. Since its launch in September 1995.g. the eBay community has grown to include more than 10 million registered users.eBay website (www. Auctions represent a platform. This is a new market .

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

they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. Other content includes the banner ads. eBay's site has to process thousands of live bids simultaneously. and since. angering hundreds of thousands of eBay users. eBay has also expanded to accommodate access through wireless devices for added convenience. FIGURE 6. topically arranged.6). This contributes to the community feel. easy-to-use online service (Figure 6. categorically arranged. Content Content is primarily user generated through the items listed for sale. increasing the risk of outages. Nevertheless. 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. 88 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. which is much more demanding on the system. eBay had a 'wake up call' when the website crashed for 8 hours. 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. they have continually invested in system capacity.6 . and adds to the experience and the discovery of the auction process.

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

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

and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. they spent $12. and maintained the same ratio for 1999. Recent promotional initiatives include its new publication. eBay decided that it would not enter into major portal advertising deals in the short term.a four-year. eBay Magazine. and Collecting Just About Anything and eBay for Dummies. Mary Beth's Beanie World.6. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999. whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. The Official eBay Guide to Buying. Doll Collector) and appearance in trade shows. and two books. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. The AOL partnership was one of the largest strategic partnerships on the Internet . eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Early on. the largest of which was with AOL. who tended to be serious collectors. eBay has since expanded its promotion efforts and engaged in marketing partnerships. and highlight opportunities created by e-commerce. Based on this. representing about 40% of revenues.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 91 .4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. $75 million joint marketing alliance and development deal.g. but they have other partnerships with over 150 websites of varying scales. As a result. 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. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Through this combination of its advertising efforts and targeted promotions. eBay has been able to attract a large customer base. as a result of the high quality experience it provides. In 1998. and facilitate the spread of positive wordof-mouth. eBay transformed from a pure online play into a 'clicks-and-mortar' company. Selling. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.3 million in advertising. These new publications appeal to the collecting spirit.

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

online sales are only available to US customers.COM . UK. as cited in Lee.gapkids.1 Company Overview Gap opened its first store in San Francisco in 1969. up from $20 million in 199875. however. Inc. and today it is the 29th most valuable brand in the world73.gapinc.com) . According to Jeanne Jackson.see Appendix A Gap. GapKids. surpasses $9 billion in net sales and increase earnings by 54% over previous year.interbrand.7. and analysts estimate that sales in 1999 amounted to $50 . from jeans and T-shirts to khakis and jackets.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. Canada.7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com' . 1999 93 ."to deliver style. letting customers access the Gap brands.com. L. standard styles are well suited to online shopping. October 8. head of Gap Online.com and www.babygap.Business Week. from shirts to accessories and hard-to-find sizes.'s website (www.Business Week. and Gap online provides access to the full range of items at Gap.2 Value Proposition Gap's simple. whether in the store or online76". to provide customers with greater convenience and options.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. and are still relatively small compared to Gap's $9 billion in annual sales.com' . Gap online exploits the accessibility and convenience of the Internet. as cited in Lee. Its reach extends across more than 1. Gap Inc.$100 million. Gap's online sales tripled in 1998 alone. and BabyGap. 'Clicks and Mortar at Gap. L. In late 1997. TABLE 6.800 stores in the US.com/about_us. The Gap offers a balance of modern and seasonal styles of clothing.com is an example of successful crossover marketing. Gap.gap. October 8. 6. the growth prospects are enormous. America Online (AOL) and Gap Inc. 1999 76 Jeanne Jackson. In addition. Currently. service and value to everyone74". This success is largely due to their simple formula .COM 6.htm) 75 Jeanne Jackson. Germany and Japan. Gap started selling items online . and provides useful insight into how traditional brands can leverage their strength online.an early convert to the then-revolutionary idea of clothes retailing on the Internet. announce multi-year partnership.7 CASE STUDY: GAP. 'Clicks and Mortar at Gap.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. California GapKids opens its first store BabyGap is born Gap opens its online store at www. "this is about being clicks-and-mortar. 73 74 Interbrand (www.

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

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

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

This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. whereas established companies. such as Gap. on the other hand.7. while reaping the benefits of low customer acquisition costs and extended reach. 97 . Pure online players have to invest heavily in logistics. thereby reinforcing its brand identity. The Internet. By aggressively marketing both the stores and the website. Gap has been able to significantly strengthen their brand-customer relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Gap.com is an example of successful crossover marketing. have already established the back-end operations and can use them as the cornerstone of their online business. Gap had a significant advantage over pure online players in attracting customers and building critical mass. provides existing customers with added value through the convenience of purchasing online. With their brand awareness and network of retail outlets. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. and can also provide access to different customer segments who may not usually buy the products at all . and allowing each to leverage the strengths of the other.thereby increasing the company's reach.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. Palm computers).600. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. to provide web-based services to PalmTM handheld computers .8).e. is the way it has structured and displayed information.Yahoo! Shopping launches personalised shopping service 6.The 7Cs Framework Convenience Central to Yahoo!'s success.com allowing them to offer person-person payment solutions .3 Sources of Value .Yahoo! forms agreements with Palm Inc.8.com.000 shares at $13. mobiles.TIMELINE AND MAJOR MILESTONES 1994 April . Their goal is not to list everything under the sun. 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. TVs. regardless of platform (i.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. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.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 .7 YAHOO! . to allow access.Receives $1 million in venture capital funding from Sequoia Capital $33. Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! Launches Business-to-Business Marketplace .Yahoo! acquires Arthas. Yahoo! extended its convenience through its Yahoo! Everywhere service. More recently.Yahoo! acquires eGroups .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. . and unveils Yahoo! Digital Introduces Bill Payment services . 99 .Yahoo! unveils Yahoo! Finance Vision ..

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

message boards. 101 . one-to-many. In addition. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and plans to incorporate other features such as online chat to facilitate communications. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. and many-to-many. Yahoo! acquired GeoCities. or to make it their home page. reinforcing the brandcustomer relationship. fax.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Connectivity Connectivity is Yahoo!'s core product. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. telephone and even traditional mail. and encourages them to return frequently. It keeps customers on the site for longer periods. where groups of people with shared interests can communicate through chat. Customer Care Yahoo! responds to customer inquiries via e-mail.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. In 1999.9 . Yahoo! spends more on customer support than most companies. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. to provide its customer base with access to useful links and content. and e-mail. and is driving Yahoo!'s multiple partnerships and alliances. and contributing to their reputation as a quality service provider. and the nature of the navigation business.

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

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

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








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



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

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

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

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

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

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

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


568 3.634 1.550 12.502 33.792 3.781 33.283 4.281 11.101 9.761 1.310 11.132 15.231 12.184 1.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.694 17.602 4.319 1.231 24.225 11.Interbrand's Ranking of the Top 60 Brands (www.806 11.143 2.932 4.313 2.603 5.423 2.527 3.197 32.596 3.894 14.830 14.155 7.193 112 .262 1.845 56.052 6.275 30.654 43.781 17.595 17.895 2.985 2.464 3.804 2.interbrand.361 1.043 8.404 4.909 7.147 9.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .681 2.766 14.076 3.048 20.181 21.806 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.648 1.422 1.510 8.643 3.021 26.329 4.

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





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