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.Extensive Integration 6.8.3 Sources of Value .2 Value Proposition 6.5 Other Factors That Contribute to their Brand Leadership 6.com Sources of Value . Brand-Building Strategy 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 Brand-Building Strategy .8.1 Company Overview Sources of Value .The 7Cs Framework 6.The 7Cs Framework 6.4.1 Company Overview 6.5.1 Company Overview 6.4 6.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.8.7 6.4 Brand-Building Strategy 6.com 6.5 6.8.The Failure of Boo.8.The 7Cs Framework 6.1 Company Overview 6.4 Brand-Building Strategy 6.6.6 Conclusion Case Study: eBay CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2 Value Proposition 6.1 Company Overview 6.2 Value Proposition 6.6 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 7.3 Sources of Value .5 Conclusion Case Study: Gap.5 Conclusion Case Study: CDnow 6.5.5 Other Factors that Contribute to their Brand Leadership 6.1 7.8 Case Study: Boo. Value Proposition 6.6.4 Brand-Building Strategy 6.The 7Cs Framework 6.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.5 Figure 5.9 Figure 6.8 Figure 5.4 Figure 4.com's Website Overview of Boo.4 Figure 5.7 Figure 5.4 Figure 6.2 Figure 4.3 Figure 3.3 Figure 5.7 Figure 5.2 Figure 6.3 Figure 4.3 Figure 2.8 Figure 3.7 Figure 2.1 Figure 1.1 Figure 4.8 Figure 6.2 Figure 2.6 Figure 4.1 Figure 3.6 Figure 2.2 Figure 3.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .4 Figure 2.1 Figure 5.5 Figure 4.3 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 6.5 Figure 2.2 Figure 2.6 Figure 6.com's Website Amazon.2 Figure 5.6 Figure 5.5 Figure 6.4 Figure 4.1 Figure 2.7 Figure 6.com's Associates Programme Overview of BarnesandNoble.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 .

Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .5 Table 6.com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Boo.4 Table 6.2 Table 6.6 Table 6.Timeline and Major Milestones CDnow .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones eBay .com .Timeline and Major Milestones BarnesandNoble.com .3 Table 6.1 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.Timeline and Major Milestones Gap.


and is triggering the need for new brand-building strategies and tools. Figure 1. creating strong brands that are putting established brands at risk. As such. relationships. The Internet also represents a fundamental shift in how buyers and sellers interact. the Internet is changing fundamentals about customers. 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. Internet companies such as Yahoo!. It is empowering customers with more options and more information to make informed decisions.1 . as they face each other through an electronic connection. whereas it has taken decades for traditional companies to achieve the client base.g.com1 Amazon. customer affiliation and level of sales.com's range of 4.an explosion that is also a harbinger of how business will operate in the future.YEARS TO REACH $100 MILLION IN SALES 6 5.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. This is creating new challenges and opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.1 3.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.mckinseyquarterly.com noble.5 million book titles).9 2. Supply chains are being rethought. that these Internet start-ups have achieved.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. service and brands. Amazon. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. aggressive Internet start-ups have emerged.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com Source: Securities and Exchange Commission Filings. America Online (AOL) and eBay have been able to build powerful brands in a few years. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com) 7 . and business models revamped.5 2. As such.1 OVERVIEW Over the past few years.0 1. there has been an explosion in the online world . while providing new tools for promotion.com. FIGURE 1. Amazon.2 3. In the midst of this. McKinsey Analysis (www. products and services reconfigured. interaction and relationship building.

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

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

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

These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. Chapter 6 examines the brand-building efforts of seven companies. provides an analysis of leading academic literature in relation to branding. and outlines the opportunities for further research. 11 . Chapter 4 provides an overview of the Internet and its defining characteristics. summarises the key findings. Chapter 3 explores how brands have traditionally been built. as well as the interactive approach to attracting customers and building loyalty. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. highlighting some key factors that have contributed to brand success. The nature of brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. 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. their purpose and value are discussed. The limitations of the Internet in terms of brand-building are also discussed. The final chapter. by outlining the impact of the Internet on the business and competitive environment. This chapter sets the context within which online brands must be built. Chapter 7.4 STRUCTURE The next chapter. Chapter 2.


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

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

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

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

Customers' expectations are particularly important when dealing with services. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. and a preference for recognised brands they can trust. somewhat satisfied. Expensive purchases involve some risk taking. A consumer tries to deal with this by gathering information from friends.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2.4 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. A consumer's decision to modify. or dissatisfied with the purchase decision. even delighted. they will evaluate their level of satisfaction . customers make decisions purely on the basis of their expectations. and especially important when dealing with purchases made through the Internet. locking out potential competitors. postpone. After a consumer has actually purchased the product or service. If perceived performance and quality exceed their expectations then they are satisfied. advertising and communication.the customer will be highly satisfied. These expectations are formed through a combination of past experiences. If performance falls below their expectations. word-of-mouth. they will be dissatisfied and look for alternative brands in the future. 17 . their negative attitude may influence the consumer's purchase intent or vice versa. Customer satisfaction and loyalty are essential to creating successful brands. as these services are intangible and therefore. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. or avoid a purchase decision is heavily influenced by perceived risk. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations.

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

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

2. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Beyond this. there are brands that customers perceive as acceptable and would not resist buying. whereby customers would be unwilling to substitute it with competitors' offers. FIGURE 2. March 1998. 20 . and understanding the needs and buying processes of the target market is essential.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. there are brands that are unknown by most buyers. S. Journal of Consumer Research. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 343-373.6 .7). which goes well beyond the satisfaction of a specific need.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. However.. FIGURE 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. a 'powerbrand' tends to have a high degree of brand loyalty. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. A stronger brand enjoys a high degree of brand preference over competing brands. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. pp.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.7 .

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

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

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


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

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

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

type of spokesperson / customer image used to advertise the brand). and the relationship expressed (e. prestige. style or cultural differences from one country to another. and advertising. • The Brand Theme . Brand themes are the most flexible element and will tend to change with fashion. features. (New York: The Free Press).the way the brand communicates through its advertising.3. which depends on how the target market perceives the brand. • The Brand Style . which remains fixed over time. 'Strategic Brand Management'.3: • The Brand Core . its reflection (e.articulates the brand core in terms of the culture it conveys. Themes include the physical appearance (logo. 1992 28 .. packaging. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 .Figure 3. visual appearance.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. etc. This may be different from the brand image. friendly). 16 Kapferer.the fundamental or genetic code of the brand.g.g. colour scheme. however the brand style and core tend to be less flexible. A company should seek to differentiate its brand through developing a distinctive identity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. its personality and its image or self-projection . press releases. J. and visual appearance). glamour.

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

Promotion and Place (distribution strategy).often referred to as the '4Ps' . culture and staff needed to support.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. deliver and reinforce this value proposition (see Appendix B . • Interest . strategy (partnerships and alliances). 1962. FIGURE 3.The company has to create awareness of the brand. (New York: Free Press). 1962. Before potential customers can buy a product / service. • Adoption . pp.Figure 3. systems. the company must ensure that it develops the appropriate structure. 'Diffusion of Innovations'. Price. they must learn about it.79-86 30 . and the product / service's perceived performance. • Trial . The value proposition must then be articulated in terms of the 'marketing mix' . The value proposition must be communicated to entice customers to try the product / service. E. • Evaluation .4 .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 'Diffusion of Innovations'. Advertising and PR are common tools for achieving awareness..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.79-86 The Innovation-Adoption Model consists of: • Awareness . (New York: Free Press). and its products / services. E. If the offering is developed properly. it should lead to satisfaction and re-purchase. colleagues and opinion leaders become important influences at this stage. 17 Rogers.4. Personal sources such as word-of-mouth from friends. pp.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.Customers need to be stimulated to seek information about the brand's uses. This learning is called the adoption process17 . features and advantages..Product and service features.The customer is satisfied and decides to make regular use of the product / service.The McKinsey 7-S Framework). management style.Customers consider whether the product / service will meet their particular needs. skills.

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

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


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

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

FIGURE 4.3.000.economist.com) 36 .000 1969: 10.3 . Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . as cited in 'E-Business Technology Forecast' . 1998. 2000 Internet / ARPAnet was created Dell.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 1.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.2 .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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1. 1996 (www.000 10.000 100.Figure 4.000.a PricewaterhouseCoopers Report.000.

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

chat rooms. as cited in the Economist Intelligence Unit (EIU).eiu.g. These activities highlight the adoption of the Internet as an interactive.5. communication and information tool.5 . entertainment) and purchasing (37%) .Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). reveals the wide range of areas where people are embracing the Internet . 2000 (www. to interacting (e.from communicating (90% use e-mail) and sourcing information. April 13. FIGURE 4.com) 38 .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.

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

. how they compete and how they serve their customers .g.how companies operate. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. 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. M. At the same time.April 2000. By allowing customers to talk knowledgeably and directly to suppliers. which are often disruptive to traditional business models21. 'Meeting the Challenge of Disruptive Change'. partners and other corporate constituencies. operation (e. through the use of extranets).g. represents a level of efficiency and integration previously unattainable. the explosion of information is placing a premium on skilled information management. 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. This is threatening to undermine many old established brands. suppliers. New brands and business models are emerging to seize this opportunity. Yahoo!). & Overdorf. 66-76 40 . Although the particular impact will differ between industries.. pp. Volume 78 Issue 2.g. C. some of which look set to become the superbrands of the future (e.and revolutionary new business models are emerging. Harvard Business Review. the Internet is sidelining the role of many traditional intermediaries. Dell Computers). 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. For example. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. March . Additionally. The Internet also facilitates the development and co-ordination of global activities (e. and transforming traditional distribution channels.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted .

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

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

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


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

Prof. In doing so. 151-160 46 . this also poses a challenge as these relationships may take on a life and character of their own. M.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. TABLE 5. companies have to find innovative ways of leveraging the information and 25 McCann. 'Adding Product Value Through Information'. to its delivery to the customer.duke. J. Rogers. January 28. D. relationship building characteristics of the Internet..from the promises made in the value proposition. learn. pp. understand and relate to customers. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.1 . However. In maximising the customer experience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. rather than simply speaking at customers.edu) 26 Peppers. brand-building must focus on the end-to-end customer experience .1. Duke University. January-February. 1997 (www. & Dorf.. a company can listen...Fuqua School of Business. . 1999.Harvard Business Review. This creates the opportunity for companies to build stronger relationships than previously attainable. B. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. 'Is Your Company Ready for One-to-One Marketing?' .

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

and the value that each member realises. (London: Harper & Row). as illustrated in Figure 5.1 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. where the value of the network. as the benefits of scale are overwhelmed by the disadvantages of size31. and in the case of information-based products. FIGURE 5. 1989. (also referred to as 'viral economics'). 7th Ed. the costs approach zero32. additional products. and other features can be added or changed at low marginal cost. Even more important. increases disproportionately as more people join the network. businesses and online communities that rely on connectivity can enjoy 'network effects'. additional customers and transactions can be managed with limited fixed cost investment. 'Positive Economics'..1. Once the up-front investments are made (for research and development and technology infrastructure). However.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. this is not the case on the Internet. G. As a result. 180-182 48 . Similarly. pp. each additional unit sold does not cost more than the last to deliver.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. R.. customisation for individual customers.

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

and word-of-mouth even more effective. viral marketing is an effective tool in getting a message out fast. in turn. creating a potentially exponential growth (like a virus) in the message's visibility and effect. This snowball effect favours first-movers. When a company reaches 'critical mass'.unless the leader makes a serious mistake. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. and "network marketing". chat rooms and bulletin boards. 5. with a minimal budget and maximum effect.A Shop. commerce and distribution partners. as once a strong lead is established. the leader will pick up momentum and will stand to gain an insurmountable advantage . This is the logic behind some of the extraordinary valuations of Internet companies. or until a competitor finds a way to change the game again. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. its growth curve relative to a new entrant is somewhat daunting. web sites. leading to the exponential expansion of the customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. makes communication tighter. 34 'The State of Online Retailing' . the value of the company rises exponentially with market share. Nov 1998 50 . have emerged in attempts to exploit the network effect and potential exponential growth of the customer base.org Study in collaboration with The Boston Consulting Group. By the time a company has reached critical mass. the brand begins to take hold. with its e-mail lists. such as 'viral' marketing. This. Larger sites can also negotiate better supplier discounts or product placement fees. The Internet.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. as it carries the implied endorsement from a friend. It is often referred to as "word-of-mouth". New marketing strategies. Word-of-mouth is a particularly powerful medium. As a result. "leveraging the media". provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. "creating a buzz". and the cost of switching to an alternative brand becomes quite high. larger sites can leverage more customer advocates to reduce customer acquisition costs. 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. Given the connectivity of the Internet among customers. As a result.

1 The Case of Hotmail. a company now owned by Microsoft. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. and in doing so spread the word for Geocities. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). they tell all their 51 .hotmail. saying: • "Get Your Private. whether for communications or community. seven days a week. and the message spreads organically. they will have a powerful viral opportunity at their disposal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. but Hotmail signs up more than 150.000 subscribers within a few years of launch. friends to visit it. Today they are the largest e-mail provider in the world with over 40 million users. and then propel the message even further to their own ever-increasing circles of friends and associates. When a user builds a website.000 subscribers every day. 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).com. 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. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. and they created a subscriber base more rapidly than any company in history. where they have never carried out any promotional activities.5 years. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Geocities enables people to create personal websites for free. Free Email at http://www. eGroups and Geocities (both recently acquired by Yahoo!). sign up for their own free e-mail.5.com was one of the first free web-based e-mail services. In fact.com The classic example of viral marketing is Hotmail. Hotmail acquired over 12 million subscribers. In its first 1. Hotmail. • Each new user becomes a company salesperson. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India.

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

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

visitors should not be engulfed with too much information.forrester.g. G. & Bluestein. On the other hand. Spring 2000 42 Armstrong. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. 'Real Profits from Virtual Communities' . K. An online community offers a compelling way to entice customers back to a site. as well as through loyalty programmes that provide targeted benefits. Other content includes community-generated content.A Forrester Research Report. A. Customisation creates the feeling of a one-to-one relationship. based on profile information.Sloan Management Review.. 1995.. 1999 (www.The McKinsey Quarterly. and organise live events. even if they purchase offline. . which is facilitated by a combination of factors (Figure 5. It fosters a sense of belonging41 among the members...com) McWilliam. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). share information and access a wide range of services. Members can interact in chat rooms. No. 'Building Stronger Brands through Online Communities' . it needs a critical mass of members42. and nearly 20% use it for post-sales support. An important contribution of these communities is that they provide members with a medium to communicate with each other. 40 41 Morrisette. These sites allow members to interact with one another. & Hagel. Community Online communities are emerging as new gathering places for consumers with similar interests (e. demographics. 3. Clemmer..BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. According to Forrester Research40. 31% of online consumers use the Internet for obtaining product information. 54 .5). iVillage and Geocities). use bulletin boards. Online sites can track a customer's purchase history and modify its service accordingly. 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). J. and advertising (if it is relevant and useful). A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. For a community to work. which enhances the user's online experience. Customisation Customisation involves tailoring the presentation of a web-site to individuals. W. S. Often. or prior transactions.

March 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 343-373. and can create emotional loyalty.. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 43 Fournier. pp. 'Making Real Sense of Virtual Communities' .A PricewaterhouseCoopers Study. 1999 Communities enhance the speed and value of information sharing. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. Site-tosite connectivity focuses on connecting users to other relevant sites.com) directly into the browser and access the site immediately. A. Once customers know of a site. S. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. allowing customers to deepen their experience with a brand and build more personal connection. as well as attracting traffic from other sites.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..brand-name. C.www. O'Donnell & Gupta.5 . Journal of Consumer Research. 55 ... Companies can provide a selection of related links that complement the site's purpose and value proposition. This is similar to placing offline stores in high traffic areas. M. when membership in the brand's community becomes an end in itself43. they opt to input the URL (Internet address . Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.6). Mulcahy.

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

Adoption). Engage.2. Figure 3.Attract. 180-183 (www.. etc. visibility relies solely on Communication. M. & Zeisser. McQuade. including affiliate programmes with other websites. Learn and Relate. Magazines. e-mail notifications and banner advertisements.4 . modified to take into account of the interactive dynamics of the Internet. Retain. A. Newspapers.Awareness. This is more difficult online than offline.) to online tools. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3... because there is no physical presence. pp.mckinseyquarterly.. 'Marketing to the Digital Consumer'. and bring people to the site for the first time. The company must build awareness and communicate its value proposition to its target customers. billboards. McKinsey Quarterly.7 . No. S. 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 ’ . Therefore.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. Waitman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 1996. The mechanisms to communicate range from traditional media (TV. Interest. FIGURE 5. links from directory searches (Connectivity).com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Evaluation. R.7. This model consists of five stages .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.8. Trial.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.1 3.ebusinessforum.7 4.2 4.Economist Intelligence Unit 2000 (www. Engage With the multitude of choice available on the Internet. discounted over the expected duration of the brand-customer relationship. Creativity is also an important factor in gaining attention in today's cluttered marketplace.8 4.com) The most effective methods are direct e-mail. Kapferer's Brand Prism (Ch.3) is useful to ensure that a company develops a distinct and consistent brand identity. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 58 .4 3.8 . Companies then need to engage customers to obtain their interest and participation. as cited in 'Targeting Consumers via the Internet' .0 3.3 2. 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 Source: Forrester Research.5) 2.4 3. Attracting customers is only the first step in building online brands. affiliate programmes. The key factors at this stage are Convenience combined with interesting Content. 3.WEBSITE PROMOTION METHODS . it is important to quickly engage consumers' interest before they move on.5 3.3 3. Fig. multiplied by the expected rate of transactions.6 3. public relations and television advertising.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 . 3.4 4.

9). Building up a knowledge database on each customer . The initial site registration provides an early opportunity to obtain useful information. such as groceries and convenience goods. 59 . and what additional products and services are they interested in provides companies with valuable information which. can create value for the customer and help build the brand-customer relationship. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. 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.g. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. 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. TV.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. and must be continuously updated due to the multiple visit nature of customers. Radio). Certain product categories. Communities and Customisation are other sticky applications. • The Internet supports brand-building activities where there is a need to build a relationship. 5. and forge closer relationships than any offline operator. a company can create value by providing a personalised online experience. Content is the basic driver of retaining customers on a site. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. The objective is to increase the conversion rate (% of browsers converted into buyers). This helps to create a customer base that spends more time and money at a site.who they are and why they shop online. if used properly. attitudes and behaviour).

Waitman.2. especially in small quantities. to its delivery to the customer. the experience is the brand. A. McQuade. S. 5.. engaging and retaining customers. The interactive brand-building process involves attracting. M. it is critical for companies to build relationships and foster brand loyalty.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. R. These case studies provide a practical insight into how companies are building their online brands. McKinsey Quarterly. providing further added value. In order to create "apostles". companies must provide a satisfying end-to-end customer experience . smell). 1996.. 60 . 'Marketing to the Digital Consumer'. the interaction provides the ability for companies to learn from their customers and relate. it is not economically feasible to sell certain products. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. and as the relationship develops.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.. • Brand-building favours products that can be sold online.from the promises made in the value proposition.9 CONCLUSION On the Internet. No. and the need to stimulate the other senses (taste. Given the high acquisition costs of online customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.9 . & Zeisser. due to high delivery and transaction costs (relative to the value of the product). pp. However. The next chapter analyses the brand-building efforts of seven companies.mckinseyquarterly. 180-183 (www.. touch.


more information.1 Company Overview Amazon. Amazon.com) 62 . Figure 6. It is the 57th most valuable brand in the world47. 47 48 Interbrand (www. Each case is presented in the same format including.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2. Amazon. and one of the top two or three in Britain. Amazon has been able to differentiate itself from other online competitors. innovation and delivering on its promises. 'Amazon. and other key factors that have contributed to its success (or failure). February 26.com .economist.interbrand. The cases are presented in the following sequence . and enjoyable experience.com. combined with its levels of customisation and customer service.Amazon. Not a River' .The Economist. Through its provision of a one-stop shopping experience.It's an Ocean. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). 6. a company overview. discounted prices. easy.Goldman Sachs Report. France. 1999 49 'Amazon's Amazing Ambition' . November 11. Germany and Japan49. eBay. and higher levels of customisation and service than the traditional shopping experience allows.COM 6.com. its brand-building strategy (how it generates traffic).com. Gap.com has become synonymous with e-commerce. the sources of added value (using the 7Cs Framework).com launched with a mission to use the Internet to transform book buying into a fast. its value proposition.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products.com and Yahoo!. In addition. Barnesandnoble. Amazon provides increased added value on several dimensions. including: increased selection. it is the most visited e-commerce website in America. In addition. CDnow. Amazon has cultivated a reputation for excellence. and has equity investments in several e-tailers. greater convenience. and has sales of over $2 billion. Boo.2 CASE STUDY: AMAZON. Amazon serves over 23 million customers from 160 countries.com) . In July 1995. 6.see Appendix A. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).1 outlines Amazon's timeline and major milestones. 2000 (www.2.2 Value Proposition Amazon.1 INTRODUCTION This chapter provides an analysis of seven companies.com's success stems from its compelling value proposition. and is one of the few Internet brands that is recognised all over the world.

Amazon launches health and beauty store .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.amazon.sothebys.Customers can shop at Amazon.amazon.Amazon enters into a strategic partnership with Drugstore.Amazon launches lawn & patio store .com Anywhere. West Virginia.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear. universities.com enters European book market Microsoft signs Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon. Software.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon.com Electronics and Amazon.toolcrib.com Announce Strategic Investment and Promotional Agreement .com is founded by Jeff Bezos 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.Amazon launches new kitchen store .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.TIMELINE AND MAJOR MILESTONES Amazon.com.com .com opens its virtual doors at amazon.com .COM .com.com Auctions and zShops provide new tools to its merchant community .Amazon opens a customer service centre in Huntington. such as the Palm VII organiser.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Amazon launches online Auction site Amazon agrees to purchase Live/bid.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 .New home living store from living.com 63 . a tools and equipment store for professional tool users and woodworkers .Amazon surpasses 20 million cumulative customer accounts .com to create a "home living" store at amazon.Amazon opens customer service centre in The Hague . and more Amazon launches "Amazon. and minority investment in. workplaces. featuring thousands of bestseller lists for hometowns.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.000 members Amazon.Amazon enters strategic alliance with living. Amazon.Amazon announces investment in kozmo. to meet rapid growth . Video Games and Gift Ideas Amazon and Sotheby's launch www. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.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.Amazon and online car-buying service Greenlight.com and NextCard launch co-branded credit card .Amazon launches www.com Amazon introduces "Purchase CirclesTM".com Amazon invests in Pets.com announce investment and strategic alliance .Amazon.com invests in wineshopper.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com via the new wireless pocket PC . Ashford." providing shopping from wireless devices. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com Amazon announces further plans to expand distribution network to meet rapid growth. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon and eziba.com .

The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. wish lists.1 . This is an example of 64 .1. FIGURE 6. offering multiple paths to a given book or product. gift reminders. such as the Amazon. expert reviews. Palm VII PDA device). The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. and quick-to-load pages Over time.e.3 Sources of Value . including book jacket images. book summaries. and Amazon.com Anywhere to support access from wireless devices (i. The site is easy-to-use.Figure 6. discussion boards. encourage repeat visits and drive higher conversion rates. Content Amazon provides content on several levels. gift click. mobile phones.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. easy-to-use.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. interviews with authors. downloads quickly and services visitors adequately . Amazon has added other features for shopping convenience. the 1-ClickTM express checkout. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. recommendations.OVERVIEW OF AMAZON. live or study. and customer Purchase CirclesTM.com All Product search (searches the entire web). logically structured.2. customer testimonials.

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

In addition. Amazon offered Associates referral fees of up to 15%. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Newsweek. 6. Instead of paying directly for this exposure. helped generate publicity and stories about the company in publications such as The Wall Street Journal.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. attracting member sites of all sizes. The Associates Programme has been phenomenally successful. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.000 members. two personalised services.2. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. which only applied to sales that resulted from the initial click-through. increasing to over 500. enticing them to return to the site and purchase repeatedly. 66 .2). they are subsequently confirmed by e-mail. Once orders are placed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. New Yorker and The Economist. This enabled Amazon to reach more customer segments and niches (Figure 6. As a result of all these factors (7Cs). Eyes and Editors. Business Week. it began to advertise in print media and online . and customers are also e-mailed when the items are shipped from the warehouse.com hot-link and offer specific books of interest to their visitors.000 by August 2000.a move that along with the novelty of its business model and the newness of the Internet. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. In July 1996. and not subsequent purchases. and by 1999 it had over 200. The Financial Times. In the second half of 1996. Through the first half of 1996.

free eCards and gift certificates (which customers send to friends. including: America Online (AOL).com. was also linked to Amazon's entry into Europe Amazon. thereby promoting Amazon. 67 .com About Me .com Refer-A-Friend .customers are encouraged to provide e-mail addresses of friends. • Amazon.COM'S ASSOCIATES PROGRAMME Source: Amazon. In addition.com).uk the local provider for Yahoo! UK & Ireland. Excite. multiyear deals involve exclusive book-selling rights.co. Interesting viral initiatives include: • Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.amazon. each friend is sent a $5 Amazon.de became the local provider for Yahoo! Germany and Amazon.AMAZON. Prodigy and @home. Netscape's Netcenter and NetSearch. and Geocities. Amazon has used viral marketing techniques through customer reviews. Therefore. the customer acquisition cost is only £10. People tend to tell their friends about it. and primary button placement on web portal search engines. These multimillion-dollar. Amazon closed deals with five of the six most visited Internet addresses. The Yahoo! agreement. Yahoo!.com) Amazon has developed alliances and partnerships with high traffic web portals and sites.allows customers to create a personal profile (with pictures) on the site.com's website (www. and you are given a $5 gift certificate for each customer you provide. In return. From July 1997 to December 1998.2 . spreading the word for Amazon. mutual links. Amazon also established agreements with AltaVista.com gift certificate (in your name).

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

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

1998 70 . have kept it ahead. and investors lose confidence. This raises a critical issue. and to sustain a positive image and satisfactory end-to-end experience. 53 Warner. they're stretchable and pliant. In doing so.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. 'Marketers of the Year: Jeff Bezos. stem from its compelling value proposition and high quality end-to-end customer experience. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. which is critical on the Internet. Amazon is claiming to be making profits on its books and music categories.. 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. however. Amazon delivers on its promises of a wide inventory of products.2. Amazon's intense focus on customer needs and continual innovation. Amazon has continuously invested in customer service. not necessarily a reality. However. if it continues to incur losses. but over time they become more and more associated with a particular thing and harder to stretch53". Nevertheless. it has not recorded any profits to date. secure payment procedures. This customer-centricity is a key hallmark of a successful Internet brand. B. speedy delivery and good value. the drain on their cash resources will push them towards bankruptcy. Although Amazon has successfully built a strong brand and loyal customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. distribution centres and upgrading the site. Amazon also recognised that service quality is a perception. October 12.Brandweek. When they're young. 6. Quality is only measurable in the minds of visitors to the site. Volume Discounter' . as the true value of a brand lies in its sustainability. with new products and value added content. The key factors driving its growth and high retention rates.

barnesandnoble. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). and is the second largest online bookseller (after Amazon.Announces distribution relationship with New York Times September .Barnes & Noble University opens registration for free online courses . However.2 1997 January BARNESANDNOBLE.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com was able to 'hit the ground running'.Offers same day delivery in Manhatten . Barnes & Noble Inc.3.com provides other online categories offering software. music.Acquires equity stake in Mightwords . etc. Launched in 1997.Barnes & Noble went online at AOL May . Barnesandnoble. promotion) between the online store and the retail stores have been kept separate.com is approximately 40% owned by Barnes & Noble. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. Currently. 40% owned by Bertelsmann AG.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . magazines.Barnesandnoble..com). Dalton bookstores (located in shopping malls). and 20% owned by the public. Barnesandnoble.com .Launches Video Store 71 .com announces strategic relationship with Palm Computing .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com and Microsoft announce that they will create an eBook superstore .Acquires minority stake in NotHarvard.Barnes & Noble.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. Barnesandnoble.Launches Affiliate Network December . prints & posters and related products. and 470 B.TIMELINE AND MAJOR MILESTONES .COM 6.Launches BNTV .com's timeline and major milestones is outlined in Figure 6. is one of the best known traditional booksellers in the United States.1 Company Overview Barnesandnoble. rare.Barnesandnoble. contacts.com launched its website (www.Launches Internet Radio .3 CASE STUDY: BARNESANDNOBLE.2. as it could capitalise on the infrastructure and back-end operations (warehouses. all front-end operations (marketing.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 . and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com) . Inc.com is the fourth largest e-commerce retailer54.) established by its parent company. book databases. Barnes & Noble Inc. Besides books.COM . Barnesandnoble. TABLE 6.

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

6 million. compared to Amazon. However. and both are expanding globally. Although. They have developed an affiliate programme that links sites to Barnesandnoble.com's $1.The Wall Street Journal. Yahoo!.64 billion.1 billion. Both offer customisation that permits users to personalise the experience. and Barnes & Noble Inc. this programme had more than 300. These initiatives have generated traffic to the site. Barnesandnoble. Instead. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. while Amazon.a replica of Amazon's Associates Programme. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . there is little mention of the online store in the traditional 'bricks-and-mortar' stores. reasons for this are explained in the next section. Lycos. 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 . As of February 2000.com was valued at $21.3. Barnesandnoble.com in return for a commission on any purchases that they originated . Both offer 'associate programmes' that let other websites link to their sites. The 6.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com had over 17 million. Netscape and Microsoft Network.com closed 1999 with 4 million customers. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). December 17. however. it lags behind first-mover Amazon. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. and avoid charging sales tax in states where it has stores56. has yet to leverage its strong brand in cyberspace.com's 1999 revenues were $202.com has created a high quality website and customer experience. while Amazon. Webcrawler. prevent cannibalisation of its existing business. Both try to foster a community of readers by letting customers post reviews online.com's market capitalisation was $251 million.com.000 affiliates in its referral network.4 Brand-Building Strategy Barnesandnoble. 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.

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

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

TABLE 6.COM 6. as well as create a kid's site. and the resulting loss of investors' confidence.Site goes live . Germany and Denmark. Everlast.they redesign site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 1999 Mid year BOO. sack 20% of staff and sell stock at 40% discount .1 Company Overview Founded in 1999.com. Morgan. within six months Boo. Italy and Spain within a few months. receiving $125 million of funding.4.4. it means all that brand's product line is available. Boo.com collapsed through lack of funds. Boo. They intended to add France. due to its poor performance and inability to build a customer base. as cited in 'Boo.Raises funding of $125 million .2 Value Proposition According to Kajsa Leander. November 2000 January February May 6. Boo. among others.com. 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 .com opens its virtual doors' . England. 1999 76 .Appeals for $30 million more funding .fails and appoints KPMG as liquidator.Announces it has only 500. After a high profile launch. CMO of Boo. and eventually debut in Asia.Multi-million pound advertising campaign created by BMP DDB . the company was hindered by technical problems that delayed the site going live by five months (until November 1999). 58 Kajsa Leander. Puma.com provided a range of 18 fashion and footwear brands including DKNY. arranged through J.com entered six markets: US. However.Marketing Week.First sign of problems . Sweden. "our marketing thrust is not based on prices.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".TIMELINE AND MAJOR MILESTONES . and was billed as one of Europe's hottest e-commerce ventures. If a clothing brand is on the Boo site. it's about range and convenience. On going live. P.com had set the record as Europe's best-funded European Internet Start-up. and Converse. and included high profile investors such as Bernard Arnault.000 unique visitors . Finland.4 CASE STUDY: BOO. Company is put up for sale. June 10. Boo. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). not the limited range you might get at most London fashion shops58". founder and Chief Marketing Officer of Boo.


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.


5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .ten times the selection of a conventional bricks-and-mortar music store). CDnow provides access to over 500.Partnership program with Geffen Records . $18.cdnow. cover art. good prices. guides to music genres.Raises $10 million through private placement . CDnow was acquired by Bertelsmann AG.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. & Novak.Merges with N2K. convenience. pp.Merges with Columbia Records . 62 Hoffman. TABLE 6.5 million distribution deal with Lycos Signs three-year. It has a customer base of 4 million people.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .TIMELINE AND MAJOR MILESTONES . and was the first site to offer the sale of music downloads and custom CDs.CDnow and Time Inc. customisation and a wealth of information and content to help in the purchase decision.179-188 63 CDnow website (www. T.. and an average daily audience of over 800.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 sound samples. and they aim to "make every visit to the site. as well as music reviews. On 19th July 2000. D. and one of the most popular shopping sites on the Internet62.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. whether for browsing or buying. by twin brothers Jason and Matt Olim.000 people.com) 80 . $22.Forges distribution partnership with Yahoo! $65. former arch rival . CDnow is also driving the digital distribution of music.Harvard Business Review. and exclusive interviews and reviews from CDnow's award-winning editorial staff. daily music news.000 music related items . May-June 2000.000 music-related products and 650. features. announce marketing alliance . 'How to Acquire Customers on the Web' .1 Company Overview Founded in 1994.5. CDnow is the leading online music store.Site goes live .5 CASE STUDY: CDNOW 6.Launches merged CDnow/N2K site . a valuable and rewarding experience"63.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.5. This unprecedented degree of access to music and information is the core of CDnow's value proposition.

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

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

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

Hampel & Stefanides (www. The story of how CDnow was founded in a basement.htm) 84 . with 44% of sales coming from new customers65. • Word-of-Mouth .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .4 million. it is in this context that the large investments in advertising and partnerships make sense.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.Press Release. and scaled it awareness-building efforts.com/cdnow. 1998: $56.5.4 million). April 28. CDnow's promotion strategies have attracted high levels of traffic. with repeat customers accounting for more than 50% of sales. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.they were the first site to offer the sale of music downloads and custom CDs.cdnow. 1998 . 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . In fact. The company continually pushed for new distribution partnerships to widen its sphere of influence. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. It is a powerful source of acquiring new customers at low cost. word-of-mouth accounts for the lion's share of CDnow's customers. both in the online and offline worlds. as a way to fuel very lucrative word of mouth. and to increases in the customer base of more than 30% quarter-to-quarter. This has contributed to a 225% increase in sales (1997: $17. It is constantly adding new functionality to the site and has been innovative in its offering .(www.As for many successful online retailers. Public relations efforts helped to generate word of mouth and influence sales. resulting in increased conversion rates.CDnow made public relations a high priority brand-building tool.com) 65 'Pioneering in Cyberspace' . 6.hsny.

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

According to Meg Whitman. This is a new market . and eBay receives a transaction fee that ranges from 1.ebay. Since its launch in September 1995. 24 hour a day. global trading place for buying and selling personal items in an entertaining auction format.25% to 5% of the final sale price on any item sold.eBay website (www.Company Overview' .com) 'eBay . Auctions are an enabler.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.g. Sellers pay a nominal fee for placing an item up for sale. 1st October 1999 86 . People perceive the auction format to offer better prices.efficient one-to-one trading in an auction format.300 categories. from collectibles and antiques to electronics and toys. as cited in 'eBay .ebay. CEO of eBay. eBay effectively created a new business model never before possible . 6. garage sales.6. transportation and other overhead costs. "at its core.Company Overview' . flea markets and auctions. and eBay provides added value through its convenience. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.6.the closest thing in the offline world are trading forums such as classified ads.A Harvard Business School Case Study. with emphasis being placed on its unique community feel and culture. payment) between themselves. and 450.6 CASE STUDY: EBAY 6.eBay website (www.000 new items joining the "for sale" list every 24 hours69. There are over half a million new auctions. Auctions make it fun. the eBay community has grown to include more than 10 million registered users.removing the need for inventory.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay is not about auctions. The buyer and the seller work out the logistics of the transport (e.782 million in January 200068. shipping. Auctions represent a platform.com) 70 'Meg Whitman at eBay Inc. Individuals use eBay to buy and sell items in more than 4.2 Value Proposition eBay offers consumers an efficient. (A)' . or the payment for the item . collectable shows. and eBay never takes possession of the item being sold. extensive selection and geographical reach. with the number of unique daily visitors setting a record of 1.

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

88 . eBay has also expanded to accommodate access through wireless devices for added convenience. angering hundreds of thousands of eBay users.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. eBay had a 'wake up call' when the website crashed for 8 hours.6 . FIGURE 6. and since. This contributes to the community feel. which is much more demanding on the system.6). they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. increasing the risk of outages. easy-to-use online service (Figure 6. eBay's site has to process thousands of live bids simultaneously. they have continually invested in system capacity. Content Content is primarily user generated through the items listed for sale. Nevertheless. topically arranged. categorically arranged. Other content includes the banner ads. and adds to the experience and the discovery of the auction process.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. 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.

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

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

91 . Mary Beth's Beanie World. the largest of which was with AOL. Based on this.g. 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 1999.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). These new publications appeal to the collecting spirit. The AOL partnership was one of the largest strategic partnerships on the Internet . In 1998.6. and highlight opportunities created by e-commerce.3 million in advertising. The Official eBay Guide to Buying. eBay Magazine. provide a wealth of information about the 'ins and outs' of trading on eBay. Early on.a four-year. As a result. Recent promotional initiatives include its new publication. who tended to be serious collectors. they spent $12. $75 million joint marketing alliance and development deal. Doll Collector) and appearance in trade shows. as a result of the high quality experience it provides. Through this combination of its advertising efforts and targeted promotions. eBay decided that it would not enter into major portal advertising deals in the short term. representing about 40% of revenues. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. eBay transformed from a pure online play into a 'clicks-and-mortar' company. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. and two books. 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. eBay has since expanded its promotion efforts and engaged in marketing partnerships. and facilitate the spread of positive wordof-mouth. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. and maintained the same ratio for 1999. and Collecting Just About Anything and eBay for Dummies. Selling.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay has been able to attract a large customer base. they decided to target their marketing efforts on these heavy users. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. but they have other partnerships with over 150 websites of varying scales.

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

Gap online exploits the accessibility and convenience of the Internet. from shirts to accessories and hard-to-find sizes. 'Clicks and Mortar at Gap.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Canada. and provides useful insight into how traditional brands can leverage their strength online.COM 6. whether in the store or online76". 1999 93 . 1999 76 Jeanne Jackson. however. surpasses $9 billion in net sales and increase earnings by 54% over previous year.$100 million.interbrand. Currently.com/about_us. and Gap online provides access to the full range of items at Gap.com' .babygap. Inc. 73 74 Interbrand (www.1 Company Overview Gap opened its first store in San Francisco in 1969. and BabyGap. Gap's online sales tripled in 1998 alone. GapKids.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.Business Week. as cited in Lee. 6.see Appendix A Gap. and analysts estimate that sales in 1999 amounted to $50 . L. Germany and Japan.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. and are still relatively small compared to Gap's $9 billion in annual sales. as cited in Lee. to provide customers with greater convenience and options. The Gap offers a balance of modern and seasonal styles of clothing. and today it is the 29th most valuable brand in the world73.com' . According to Jeanne Jackson. 'Clicks and Mortar at Gap.7 CASE STUDY: GAP. Its reach extends across more than 1. from jeans and T-shirts to khakis and jackets.7. "this is about being clicks-and-mortar. online sales are only available to US customers. head of Gap Online. In late 1997.gap. standard styles are well suited to online shopping.gapkids.com) . service and value to everyone74".htm) 75 Jeanne Jackson. Gap Inc. October 8. TABLE 6. America Online (AOL) and Gap Inc. Gap. letting customers access the Gap brands.'s website (www. L. Gap started selling items online . This success is largely due to their simple formula .gapinc.2 Value Proposition Gap's simple.7. In addition.COM ."to deliver style.com.com is an example of successful crossover marketing.Business Week. up from $20 million in 199875. California GapKids opens its first store BabyGap is born Gap opens its online store at www.an early convert to the then-revolutionary idea of clothes retailing on the Internet. UK.com and www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. October 8. announce multi-year partnership.800 stores in the US. the growth prospects are enormous.

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

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

by displaying the URL (www. In addition. they send the customer a $20 Gap ShopCard. To convert walk-in shoppers to cybershoppers. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com has been able to piggy-back on The Gap's offline advertisements (in TV. Magazines. which can be used towards future purchases. Gap has held in-store campaigns to get customers to submit their e-mail addresses. whereby for every $100 a customer spends at Gap Online. • Gap. These efforts doubled the size of Gap's e-mail database. 96 . either online or in stores.com. etc. it is fully leveraging its offline presence to build awareness. on counter cards.com has also created an affiliate programme encouraging sites to establish links to gap. or to refer shoppers to Gap's website.gap. which displays "Shop online at www. In certain high traffic Gap and GapKids stores.com in return for a 5% commission on every sale referred through the site. on shopping bags and even on the cash register. however. by offering a 10% discount and free shipping on their first online purchase. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap.Extensive Integration Gap.com has links with CDnow to cross promote websites.4 Brand-Building Strategy . providing a useful way to directly reach customers. Gap secured a 3-year commerce and marketing agreement with AOL.com) in store windows with the slogan "surf.ship". billboards. Gap has also supplemented this with online promotions: • In August 1999. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.) that also promote the online store.gap. • They offer Online discounts and promotions such as the ShopCard.shop.com" on the display screens between transactions. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7. Most of Gap's online traffic is generated by leveraging its physical presence. • Gap.

Gap has been able to significantly strengthen their brand-customer relationship.7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap had a significant advantage over pure online players in attracting customers and building critical mass. on the other hand. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand.5 Conclusion Gap. and allowing each to leverage the strengths of the other. 97 .thereby increasing the company's reach. The Internet. With their brand awareness and network of retail outlets. such as Gap. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. have already established the back-end operations and can use them as the cornerstone of their online business. while reaping the benefits of low customer acquisition costs and extended reach. Pure online players have to invest heavily in logistics. whereas established companies. By aggressively marketing both the stores and the website. thereby reinforcing its brand identity. provides existing customers with added value through the convenience of purchasing online.com is an example of successful crossover marketing. and can also provide access to different customer segments who may not usually buy the products at all .

The Stock' . 78 79 Interbrand (www.1 Company Overview In April 1994.8. the amount of information. two Ph.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. As such. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! has since morphed from an ordinary search service into a global Internet communications.interbrand. all in a single location.2 Value Proposition At the core of Yahoo!'s value proposition. lies the directory . 6. Yahoo! offers a range of supporting services that add value. who started an online guide as a way to keep track of their personal interests on the Internet.The Company. As the first online navigational guide to the web. Yahoo! is a leading guide in terms of traffic.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. CEO of Yahoo!.8 CASE STUDY: YAHOO! 6. advertising. There's nothing in the real world to compare to that79".D students at Stanford University. and the number of websites continues to explode. The concept exploded (through word-of-mouth) and in less than six months. The company's global web network includes 23 world properties outside the US. The Strategy.com) . the site was receiving 1 million hits per day.8. According to Timothy Koogle. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. September 7. from e-mail services to stock quotes and much more.com) 98 .businessweek.Business Week. 1998 (www. and is one of the few Internet companies to turn a profit early in the development of the Internet.see Appendix A 'Yahoo! . Yahoo! was founded by David Filo and Jerry Yang. household and business user reach. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.

and unveils Yahoo! Digital Introduces Bill Payment services . Their goal is not to list everything under the sun.8 million IPO (2.The 7Cs Framework Convenience Central to Yahoo!'s success. 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.7 YAHOO! .e.Yahoo! forms agreements with Palm Inc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. mobiles. More recently. 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.Yahoo! Launches Business-to-Business Marketplace .3 Sources of Value .Yahoo! unveils Yahoo! Finance Vision .Yahoo! acquires Arthas.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 . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. . Palm computers).000 shares at $13. to allow access. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. is the way it has structured and displayed information. 99 .600.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.8.com allowing them to offer person-person payment solutions .com.Yahoo! acquires eGroups .Receives $1 million in venture capital funding from Sequoia Capital $33.TIMELINE AND MAJOR MILESTONES 1994 April . Yahoo! extended its convenience through its Yahoo! Everywhere service. to provide web-based services to PalmTM handheld computers ..Yahoo! Shopping launches personalised shopping service 6.8).Site goes live September .

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

In 1999. fax. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. message boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. 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. It keeps customers on the site for longer periods. reinforcing the brandcustomer relationship. Connectivity Connectivity is Yahoo!'s core product. and the nature of the navigation business. Yahoo! spends more on customer support than most companies. and plans to incorporate other features such as online chat to facilitate communications. Yahoo! acquired GeoCities. Customer Care Yahoo! responds to customer inquiries via e-mail. and contributing to their reputation as a quality service provider. one-to-many. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. telephone and even traditional mail. where groups of people with shared interests can communicate through chat. and many-to-many. 101 . and is driving Yahoo!'s multiple partnerships and alliances. and e-mail. or to make it their home page.9 . In addition. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and encourages them to return frequently.

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

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

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

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

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

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


502 33.766 14.781 17.830 14.527 3.319 1.422 1.792 3.101 9.197 32.283 4.806 2.143 2.932 4.275 30.076 3.281 11.310 11.231 24.603 5.329 4.181 21.634 1.184 1.895 2.648 1.Interbrand's Ranking of the Top 60 Brands (www.155 7.804 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.654 43.643 3.021 26.761 1.894 14.596 3.845 56.602 4.313 2.464 3.225 11.043 8.231 12.423 2.510 8.781 33.052 6.048 20.694 17.262 1.193 112 .595 17.361 1.681 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .132 15.985 2.806 11.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.568 3.147 9.404 4.550 12.909 7.interbrand.

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





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