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


5 Other Factors That Contribute to their Brand Leadership 6.The 7Cs Framework 6.4 6.7.7.The 7Cs Framework 6.3 Sources of Value .5.6 6.1 7.4 Brand-Building Strategy 6.5 6.4 Brand-Building Strategy .5.4.5 Conclusion Case Study: CDnow 6.2 Value Proposition 6.1 Company Overview 6.The Failure of Boo.2 Value Proposition 6.1 Company Overview 6.5.2 Value Proposition 6.6.Extensive Integration 6.5 Conclusion Case Study: Yahoo! 6.2 Value Proposition Case Study: Boo.3 Sources of Value .4 Brand-Building Strategy Company Overview 6.3 Sources of Value .com 6.4 Brand-Building Strategy 6.com 6.4 Brand-Building Strategy Other Factors that Contribute to their Brand Leadership 6.3 Sources of Value .3 Sources of Value .The 7Cs Framework 6.1 Company Overview Company Overview 6.The 7Cs Framework CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.8.2 Value Proposition 6.7.7 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 .8.8.6 Conclusion Case Study: eBay 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Case Study: Gap.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 Figure 6.com's Website Amazon.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .7 Figure 5.6 Figure 6.1 Figure 4.2 Figure 2.4 Figure 5.2 Figure 3.2 Figure 6.8 Figure 6.2 Figure 5.7 Figure 6.6 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 5.6 Figure 4.6 Figure 2.1 Figure 6.4 Figure 4.1 Figure 3.com's Website Overview of Boo.com's Associates Programme Overview of BarnesandNoble.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 1.4 Figure 2.5 Figure 6.7 Figure 2.5 Figure 2.4 Figure 6.9 Figure 6.1 Figure 2.8 Figure 5.2 Figure 2.5 Figure 5.3 Figure 2.7 Figure 5.5 Figure 4.3 Figure 3.2 Figure 4.3 Figure 4.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .8 Figure 3.3 Figure 5.4 Figure 4.

4 Table 6.Timeline and Major Milestones Gap.com .5 Table 6.2 Table 6.Timeline and Major Milestones CDnow .1 Table 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .Timeline and Major Milestones Boo.Timeline and Major Milestones Yahoo! .7 The Emerging Brand-Building Environment Amazon.1 Table 6.com .com .6 Table 6.3 Table 6.Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones eBay .


Amazon.com noble. products and services reconfigured. as they face each other through an electronic connection.com1 Amazon.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. and business models revamped. customer affiliation and level of sales. Supply chains are being rethought.com's range of 4.9 2. aggressive Internet start-ups have emerged. It is empowering customers with more options and more information to make informed decisions. The Internet also represents a fundamental shift in how buyers and sellers interact. In the midst of this.2 3. the Internet is changing fundamentals about customers. FIGURE 1. Amazon.5 million book titles). McKinsey Analysis (www. As such.1 3.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.mckinseyquarterly. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.an explosion that is also a harbinger of how business will operate in the future. America Online (AOL) and eBay have been able to build powerful brands in a few years. and is triggering the need for new brand-building strategies and tools.com.g.com) 7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. relationships. that these Internet start-ups have achieved.1 . Figure 1. This is creating new challenges and opportunities.5 2. creating strong brands that are putting established brands at risk.YEARS TO REACH $100 MILLION IN SALES 6 5.com Source: Securities and Exchange Commission Filings. whereas it has taken decades for traditional companies to achieve the client base.9 3. Internet companies such as Yahoo!.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. there has been an explosion in the online world . The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. As such. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. while providing new tools for promotion.0 1.1 OVERVIEW Over the past few years. service and brands. interaction and relationship building.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. FIGURE 1.2 . tools and strategies to build brands on the Internet. supported by secondary data related to aspects of online business from accredited and published sources.2. This is based on the outcome of the primary research (in-depth case studies). A review and analysis of leading academic thinking will be used to explore these issues.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. and to identify new sources of value. 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To explore how the Internet is changing the brand-building environment. 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.

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

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


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

a 'reputation'. T. 2.2 . and a 'promise'.86 14 . They start life as ideas. As such. benefits. brands are their most valuable asset.Figure 2.the core product or service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . January-February. FIGURE 2. p.3 THE LAYERS OF A BRAND Brands are made up of four layers .a 'relationship'.2. the basic brand. The space a brand occupies inside a customer's head can create a 'mental' patent. Harvard Business Review. It is a company's promise to consistently deliver a specific set of features. 1980. Brands are richly endowed entities. which grows out of the cumulative memory and the experiences customers have of products or services. making their way into planning and strategy documents.of anything'. the augmented brand and the potential brand .. a 'set of expectations'. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. yet ultimately reside as consumer perceptions. For some companies. and services to customers. 'Marketing success through differentiation .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.

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

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

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

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

Sloan Management Review. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. emotional loyalty is born out of a consumer's personal relationship with a brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. There is also clear evidence of this on the Internet. 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. 1993 McWilliam.g.. & Rogers. In this way. 'Building Stronger Brands through Online Communities' . Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 8 9 Peppers. D. Spring 2000 19 . M. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. consistent orders Satisfied customers are the best advertisement .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. Firstly.com. 'The One to One Future'. G. Emotional loyalty can be also created through the formation of a strong user community around the brand.they provide good word-of-mouth and are the best salespeople for the product / service 2.. Harley-Davidson motorcycle clubs).

A stronger brand enjoys a high degree of brand preference over competing brands. which goes well beyond the satisfaction of a specific need.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.6 . almost irreplaceable bond as well as potentially to the negative feelings of betrayal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 343-373. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Beyond this.7). there are brands that customers perceive as acceptable and would not resist buying. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). However.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.7 . pp. S. 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. a 'powerbrand' tends to have a high degree of brand loyalty. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Journal of Consumer Research. 20 . whereby customers would be unwilling to substitute it with competitors' offers.. there are brands that are unknown by most buyers. FIGURE 2. and understanding the needs and buying processes of the target market is essential. FIGURE 2. March 1998.

Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. and relationships with distributors and strategic partners. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 1991 21 . which is the value of the brand over and above its commodity value. D.Create Awareness . The benefits of each are outlined in Figure 2. trademarks. D.. 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". perceived quality. name awareness. The major brand assets are brand loyalty.8. (New York: Free Press). and other assets such as patents. 1991 10 Aaker.8 . According to David Aaker (1991).. strong brand associations.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . FIGURE 2. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. (New York: Free Press).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.

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

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


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

it will never attract a strong client base. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. Similarly.a strong offer that a potential customer would find compelling and interesting. a distinctive brand identity (I). As such. unless differentiation and awareness can be developed. 26 . what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. FIGURE 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . it is impossible to build a successful brand. In order to do this. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . a company must develop a strong understanding of who their potential customers are. a compelling value proposition is the combination of an effective product or service (P). a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. Without a good product or service.2 . and added value (AV). the brand can elicit feelings of confidence that it is of higher quality than competitors'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.2).DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. In this way.each is essential.

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

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

29 . J.. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.3 . advertising. 'Strategic Brand Management'. It also facilitates consistency in the message being transmitted through presentation (e. website design.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. structure and ease of use). and through line and brand extensions. (New York: Free Press). understanding the brand's core and style helps set the perimeters of brand extensions . 1992 The brand prism enables management to understand the brand.how far the brand can be meaningfully stretched to other products and market segments. below-the-line activities. Secondly. Finally.g. its strengths and opportunities.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.

79-86 30 . systems. This learning is called the adoption process17 . the company must ensure that it develops the appropriate structure.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. culture and staff needed to support. Promotion and Place (distribution strategy). E.The customer is satisfied and decides to make regular use of the product / service. • Evaluation . If the offering is developed properly. pp. strategy (partnerships and alliances). FIGURE 3. colleagues and opinion leaders become important influences at this stage. E. features and advantages. The value proposition must then be articulated in terms of the 'marketing mix' .Customers consider whether the product / service will meet their particular needs. • Trial .The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.. pp.. and its products / services.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. The value proposition must be communicated to entice customers to try the product / service. management style.Customers need to be stimulated to seek information about the brand's uses. 1962. they must learn about it. • Interest . Before potential customers can buy a product / service. 'Diffusion of Innovations'.often referred to as the '4Ps' . 1962. • Adoption . Personal sources such as word-of-mouth from friends. (New York: Free Press). it should lead to satisfaction and re-purchase. Price.Figure 3. deliver and reinforce this value proposition (see Appendix B .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 17 Rogers.The company has to create awareness of the brand. skills.4 . Advertising and PR are common tools for achieving awareness.4.79-86 The Innovation-Adoption Model consists of: • Awareness . (New York: Free Press). 'Diffusion of Innovations'.The McKinsey 7-S Framework). and the product / service's perceived performance.Product and service features.

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

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


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

2. 4. 7 days a week. The Internet can also be accessed at any time .2 (Note: 35 . allowing both parties to identify each other and build one-to-one relationships . These characteristics combine to create a very powerful medium.this radically alters the process of interaction between communicating parties.not previously available with mass medium forms of communication. when the United States Defence Department developed the 'ARPAnet'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. These qualities eliminate the barriers of time and space that exist in the physical world. which was intended to link military networks together. ubiquitous links to anyone. The context of the Internet and certain key developments are highlighted in the Figure 4. These defining characteristics have fuelled its explosive growth.The Internet is a global network and can be reached from everywhere. • It Allows for Two-way Communication and Interactivity .1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale). anywhere. the Internet lets individuals and companies build interactive relationships with customers and suppliers. and deliver new products and services at low cost. • It Overcomes the Barriers of Time and Space .24 hours a day. By allowing for direct.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969.

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.Figure 4. FIGURE 4. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .economist. 2000 Internet / ARPAnet was created Dell.000.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 1998.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000 1.3.000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.a PricewaterhouseCoopers Report.000.2 .3 . 1996 (www.000 1.com) 36 .000 10. as cited in 'E-Business Technology Forecast' .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 1969: 10.000 100.

). and gateway services). 'Electronic Commerce (finally) Comes of Age'. The McKinsey Quarterly. Reed.Cheap microprocessors & RAM . Easier access to these networks provided by point-and-click web browsers.Content Aggregators . making it more cost effective for software developers and other technology providers to create interoperable products. billing.Cheap bandwidth . 2000 (http://cyberatlas. Multimedia development tools that can be used to create rich content.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . 1996. The development of critical processes (ordering.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.com) 37 .Higher PC penetration among consumers and companies . As shown in Figure 4. The emergence of open standards in development tools and at the network protocol level (e. payment. G. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. hosting. offering inexpensive bandwidth. there will be an estimated 375 million Internet users world-wide..g.internet.Low-cost networking alternatives .Attractive infrastructure and middleware software . L. TCP/IP).g. increasing to 500 million users by 200220.2 20 'World Online Populations' . FIGURE 4. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . etc. web design. The growth in support services (e.High-powered servers .4 .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. No.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .E-Marketplaces .CyberAtlas Internet Statistics and Market Research. the momentum created by all these forces has created a virtuous cycle of growth.4..

to interacting (e. chat rooms.5 . 2000 (www.g. April 13.5.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. entertainment) and purchasing (37%) .eiu. These activities highlight the adoption of the Internet as an interactive.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).Figure 4.com) 38 . communication and information tool. as cited in the Economist Intelligence Unit (EIU).from communicating (90% use e-mail) and sourcing information. FIGURE 4. reveals the wide range of areas where people are embracing the Internet .

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

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

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

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

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


Customers derive added value through the provision of information on the products or services they buy. brands have been developed in an environment whereby a company creates a brand. 'Internet Portals' . The limitations of brand-building on the Internet are also discussed. the logic of the Internet cuts another way.2 THE NEW DYNAMICS OF BRANDS Traditionally. On the other hand. In addition. and the fact that customers are buying goods that. has placed greater importance on trust and security. etc. in addition to providing added value. as well as on topics of interest related to the brand and product characteristics25.com) 45 . where the user feels a part of. J. many unnamed customers develop a 'relationship' with the brand. people have concerns about sharing personal information. 5. they have never handled or seen (except on-screen). and sites that understand the user's needs and preferences24.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. on the other hand. credit card numbers. offers interactivity. This threatens to undermine the value of brands. including the interactive approach to attracting customers and building loyalty.. the Internet makes search and comparison much easier.durlacher. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. May 1999 (www. Traditionally. However. New strategies and tools for building brands on the Internet are identified.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. and projects it onto a third party intermediary (the media). in most cases.names.Durlacher Research. People only tend to transact with sites they know and trust . In response. 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. addresses. whereby the company can establish a dialogue and 24 Marathe. Generally. the intangible nature of the Internet.sites that provide a wealth of information and make comparison shopping easy. The Internet. Transactions on the Internet require customers to provide detailed personal information .

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

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

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

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

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

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

Place).. Promotion.An A. T.. FIGURE 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 2000 'The E-business Technology Forecast' .com) 52 .. 30% of potential customers leave sites because they cannot find what they are looking for. 2000 37 Rigby. . R. C. Baveja.An A. 2000 (www. D. 'The Value of Online Customer Loyalty and How You Can Capture it'. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. S.A PricewaterhouseCoopers Report. Chu.A Mainspring Communication Report in collaboration with Bain & Co. In essence.3). and 66% of people who start a 'shopping basket' fail to complete the transaction37. In fact.3 . 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.. & Hancock. Price. Kearney White Paper.. S. Zook.. March 17. Kearney White Paper. As 35 36 'Creating a High-Impact Digital Customer Experience' ..bain. T.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . making customers 'click off' to another site. Sites that are difficult to use can cause frustration. The customers' ability to access and display information rapidly is extremely important36.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. J. Rastogi.

up-to-date information. FIGURE 5. as cited in Business Week. T. whereas a slow response time and site downtime will have a significant negative impact.businessweek. and a wide range of products. 1999 (www. expert insights. With almost infinite display space and inventory capability. October 29. ease-of-use. which can enhance the company's value proposition.4 . ease-of-navigation.4. online companies have the opportunity to provide rich.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. and fast response times are among the most important factors in establishing web brand loyalty38. 38 39 Cognitiative Inc. February 2000 Issue 53 . 'Sticky Business'.businessweek..com) Davenport.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. CIO Magazine.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. as cited in Business Week Magazine. 29th October 1999 (www.

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

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

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

FIGURE 5.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. & Zeisser.Awareness. McQuade..7 . The mechanisms to communicate range from traditional media (TV.4 .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. R. etc. Waitman.Attract. 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 ’ . 180-183 (www. No. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Retain. pp.2. Learn and Relate.. This is more difficult online than offline. Figure 3. 'Marketing to the Digital Consumer'. visibility relies solely on Communication.mckinseyquarterly.. M.. Evaluation. 1996. billboards. Interest. and bring people to the site for the first time. because there is no physical presence. including affiliate programmes with other websites. This model consists of five stages . The popularity and effectiveness of the different promotion methods are outlined in Figure 5.) to online tools. Therefore. links from directory searches (Connectivity). McKinsey Quarterly. A. Engage. The company must build awareness and communicate its value proposition to its target customers. e-mail notifications and banner advertisements. Adoption). S.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. Newspapers. Trial. Magazines. modified to take into account of the interactive dynamics of the Internet.

affiliate programmes. 3.4 3.4 3.ebusinessforum.Economist Intelligence Unit 2000 (www.8 . it is important to quickly engage consumers' interest before they move on.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 . as cited in 'Targeting Consumers via the Internet' . Engage With the multitude of choice available on the Internet. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.8 4.3 2. Kapferer's Brand Prism (Ch.2 4. Companies then need to engage customers to obtain their interest and participation. public relations and television advertising. 58 . The key factors at this stage are Convenience combined with interesting Content.4 4.3) is useful to ensure that a company develops a distinct and consistent brand identity.3 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.6 3. multiplied by the expected rate of transactions. discounted over the expected duration of the brand-customer relationship. Fig.5) 2.WEBSITE PROMOTION METHODS . Attracting customers is only the first step in building online brands.1 3.5 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.0 3. 3.7 4.com) The most effective methods are direct e-mail.

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

No. 5.9 . the experience is the brand. providing further added value. the interaction provides the ability for companies to learn from their customers and relate. smell). to its delivery to the customer. McKinsey Quarterly. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. The interactive brand-building process involves attracting.. McQuade. R. 60 .from the promises made in the value proposition. companies must provide a satisfying end-to-end customer experience . due to high delivery and transaction costs (relative to the value of the product). 180-183 (www. pp. and as the relationship develops..CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.mckinseyquarterly. The next chapter analyses the brand-building efforts of seven companies..BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. and the need to stimulate the other senses (taste. However.. 'Marketing to the Digital Consumer'.9 CONCLUSION On the Internet. A.2. it is critical for companies to build relationships and foster brand loyalty. Waitman. & Zeisser. especially in small quantities. These case studies provide a practical insight into how companies are building their online brands. touch. 1996. In order to create "apostles". it is not economically feasible to sell certain products. engaging and retaining customers. M. Given the high acquisition costs of online customers. S. • Brand-building favours products that can be sold online.


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

com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com invests in wineshopper.com Amazon launches online Auction site Amazon agrees to purchase Live/bid. workplaces.Amazon opens customer service centre in The Hague . a tools and equipment store for professional tool users and woodworkers . 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 opens a customer service centre in Huntington.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. Amazon.Amazon announces investment in kozmo. and minority investment in. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. to meet rapid growth .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com . universities.com .com .com Announce Strategic Investment and Promotional Agreement .com and NextCard launch co-branded credit card .toolcrib.Amazon surpasses 20 million cumulative customer accounts .com.com is founded by Jeff Bezos Amazon.Amazon.com . such as the Palm VII organiser. Ashford.Amazon enters into a strategic partnership with Drugstore.sothebys.com Amazon introduces "Purchase CirclesTM"." providing shopping from wireless devices.com Amazon invests in Pets. and more Amazon launches "Amazon.Amazon.Amazon and eziba.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon launches health and beauty store .com 63 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com via the new wireless pocket PC . Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon enters strategic alliance with living.com Auctions and zShops provide new tools to its merchant community .COM .Amazon and online car-buying service Greenlight.com Anywhere.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 to create a "home living" store at amazon.com Electronics and Amazon.com opens its virtual doors at amazon.New home living store from living.amazon.com Amazon announces further plans to expand distribution network to meet rapid growth.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon launches www.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .amazon.Amazon launches lawn & patio store .Amazon launches new kitchen store .Amazon. West Virginia.Customers can shop at Amazon.com announce investment and strategic alliance .com enters European book market Microsoft signs Amazon. Software.TIMELINE AND MAJOR MILESTONES Amazon.com. featuring thousands of bestseller lists for hometowns.000 members Amazon.

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

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

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

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

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

Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). Success. management realised that Amazon had become more associated with other core brand values . and our goal is to increase that gap51". Our secret is that we have not been competitor obsessed. the balance of power shifts away from the company and goes towards the customer. July 1998. in June 1998.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. "we're not a stationary target. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. However. 'Business the Amazon. 51 52 Hazleton. and to convey its vast size and offering. developing customer service centres and expanding its distribution network to support high levels of service. Nevertheless. (Oxford: Capstone Publishing). Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. Amazon is constantly seeking new ways of improving its offering. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. R. thereby diluting the value of its association with books. Amazon was able to secure partnerships and alliances with key players. According to Jeff Bezos. According to Jeff Bezos. while our competitors have been Amazon. due to the hype and coverage it was given. 1999 69 . Amazon unveiled a music store.a wide range of choice. which within six months propelled Amazon to one of the leading online music retailers. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. and its safe and secure delivery. to capture the spirit of the site.com obsessed52".. In addition. establishing Amazon as the leading online bookseller with a large customer base. establishing a reputation for excellence and fulfilment. As such. good value. As such. "Online. Amazon received criticism for expanding its product line. Amazon has been able to build a strong brand at relatively low cost.2. L. further enhancing their value proposition. Amazon's understanding of its brand identity has been a critical factor. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists.com Way'. memorable. This has helped them attract customers and move up the learning curve quickly. Saunders. We were blessed with a two-year head start.. For example. and according to Jeff Bezos. In addition. because he wanted it to be short. We have been customer obsessed.

1998 70 . speedy delivery and good value. Amazon has also benefited from a first-mover advantage giving it an edge over competitors.. Quality is only measurable in the minds of visitors to the site. it has not recorded any profits to date. have kept it ahead. not necessarily a reality. which is critical on the Internet. This customer-centricity is a key hallmark of a successful Internet brand.2. B. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Amazon has continuously invested in customer service. October 12. they have cultivated a reputation for excellence and fulfilment. secure payment procedures. perhaps trying to defend its view that losses taken to build market share can reap profits later. but over time they become more and more associated with a particular thing and harder to stretch53". they're stretchable and pliant. Nevertheless. 53 Warner. In doing so. however. as the true value of a brand lies in its sustainability.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. Amazon also recognised that service quality is a perception. 'Marketers of the Year: Jeff Bezos. distribution centres and upgrading the site. and to sustain a positive image and satisfactory end-to-end experience. Amazon is claiming to be making profits on its books and music categories. Amazon delivers on its promises of a wide inventory of products. However. if it continues to incur losses. Volume Discounter' . with new products and value added content. When they're young. and investors lose confidence. Amazon's intense focus on customer needs and continual innovation. Although Amazon has successfully built a strong brand and loyal customer base. stem from its compelling value proposition and high quality end-to-end customer experience. the drain on their cash resources will push them towards bankruptcy. The key factors driving its growth and high retention rates.Brandweek. This raises a critical issue.

Barnesandnoble. and 470 B. Barnes & Noble Inc.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com provides other online categories offering software.Acquires equity stake in Mightwords . Inc. music. is one of the best known traditional booksellers in the United States. contacts. as it could capitalise on the infrastructure and back-end operations (warehouses.com).Announces distribution relationship with New York Times September . and 20% owned by the public. Barnesandnoble. Barnesandnoble.Barnes & Noble went online at AOL May .Barnes & Noble. book databases.com announces strategic relationship with Palm Computing . However. Barnes & Noble Inc.) established by its parent company.1 Company Overview Barnesandnoble.Launches Affiliate Network December .COM .2. TABLE 6.3.com launched its website (www.Barnesandnoble. rare. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. Launched in 1997. Dalton bookstores (located in shopping malls).COM 6..Launches Video Store 71 .com is the fourth largest e-commerce retailer54.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com was able to 'hit the ground running'. promotion) between the online store and the retail stores have been kept separate.Barnesandnoble. all front-end operations (marketing. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.com is approximately 40% owned by Barnes & Noble.Offers same day delivery in Manhatten . 40% owned by Bertelsmann AG.2 1997 January BARNESANDNOBLE. Besides books. etc.Launches BNTV .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 .Launches Internet Radio .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.TIMELINE AND MAJOR MILESTONES .com's timeline and major milestones is outlined in Figure 6. Currently. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Barnes & Noble University opens registration for free online courses .Acquires minority stake in NotHarvard. and is the second largest online bookseller (after Amazon. Barnesandnoble.com) .barnesandnoble.com and Microsoft announce that they will create an eBook superstore .3 CASE STUDY: BARNESANDNOBLE. magazines. prints & posters and related products.

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

compared to Amazon. prevent cannibalisation of its existing business.3.com had over 17 million. it lags behind first-mover Amazon. They have developed an affiliate programme that links sites to Barnesandnoble. Netscape and Microsoft Network. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com was valued at $21. Lycos. Although. while Amazon. Both try to foster a community of readers by letting customers post reviews online.The Wall Street Journal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Barnesandnoble. As of February 2000. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com's 1999 revenues were $202. 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. however. The 6.com. Barnesandnoble. Yahoo!. However. Both offer 'associate programmes' that let other websites link to their sites.com has created a high quality website and customer experience.1 billion. reasons for this are explained in the next section. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and avoid charging sales tax in states where it has stores56.64 billion. Instead. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 .4 Brand-Building Strategy Barnesandnoble.com's $1. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. and Barnes & Noble Inc.a replica of Amazon's Associates Programme. Barnesandnoble. These initiatives have generated traffic to the site. Both offer customisation that permits users to personalise the experience.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com in return for a commission on any purchases that they originated .6 million. Barnesandnoble. December 17.com's market capitalisation was $251 million. while Amazon. Webcrawler. has yet to leverage its strong brand in cyberspace.com closed 1999 with 4 million customers. and both are expanding globally. this programme had more than 300.000 affiliates in its referral network.

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

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

On going live.they redesign site. arranged through J. Italy and Spain within a few months.Announces it has only 500. due to its poor performance and inability to build a customer base.Multi-million pound advertising campaign created by BMP DDB .Appeals for $30 million more funding . and Converse. However.Raises funding of $125 million . June 10. CMO of Boo. and included high profile investors such as Bernard Arnault.com. After a high profile launch. Finland.4. England.COM . and was billed as one of Europe's hottest e-commerce ventures. among others. as well as create a kid's site. 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. and eventually debut in Asia.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Site goes live . They intended to add France. November 2000 January February May 6. Everlast.com provided a range of 18 fashion and footwear brands including DKNY.4 CASE STUDY: BOO. it's about range and convenience. Boo. within six months Boo. Sweden. If a clothing brand is on the Boo site. it means all that brand's product line is available. Puma. sack 20% of staff and sell stock at 40% discount . 58 Kajsa Leander.com opens its virtual doors' . as cited in 'Boo.com collapsed through lack of funds. Company is put up for sale.4.com.3 1999 Mid year BOO.COM 6. "our marketing thrust is not based on prices. P. Boo.com entered six markets: US.Marketing Week. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).000 unique visitors . founder and Chief Marketing Officer of Boo.First sign of problems .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". 1999 76 . TABLE 6. Boo. not the limited range you might get at most London fashion shops58". Boo.1 Company Overview Founded in 1999. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Morgan.2 Value Proposition According to Kajsa Leander. Germany and Denmark.com had set the record as Europe's best-funded European Internet Start-up. receiving $125 million of funding.fails and appoints KPMG as liquidator.TIMELINE AND MAJOR MILESTONES . and the resulting loss of investors' confidence.


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.


and they aim to "make every visit to the site. a valuable and rewarding experience"63.Site goes live . cover art. former arch rival . 62 Hoffman.Partnership program with Geffen Records .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.179-188 63 CDnow website (www. and was the first site to offer the sale of music downloads and custom CDs.cdnow.Harvard Business Review. pp..5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . and one of the most popular shopping sites on the Internet62.000 music related items .5 million distribution deal with Lycos Signs three-year. $22. announce marketing alliance . and an average daily audience of over 800.TIMELINE AND MAJOR MILESTONES .ten times the selection of a conventional bricks-and-mortar music store). D.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .000 people. and exclusive interviews and reviews from CDnow's award-winning editorial staff. This unprecedented degree of access to music and information is the core of CDnow's value proposition. On 19th July 2000. customisation and a wealth of information and content to help in the purchase decision.000 sound samples.Launches merged CDnow/N2K site . It has a customer base of 4 million people. by twin brothers Jason and Matt Olim. guides to music genres. features.com) 80 . CDnow provides access to over 500. whether for browsing or buying. good prices.000 music-related products and 650.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. TABLE 6. 'How to Acquire Customers on the Web' . & Novak.Forges distribution partnership with Yahoo! $65. CDnow was acquired by Bertelsmann AG.1 Company Overview Founded in 1994.Merges with N2K. May-June 2000.Merges with Columbia Records . convenience.5.Raises $10 million through private placement . T. CDnow is the leading online music store.CDnow and Time Inc. $18.5. CDnow is also driving the digital distribution of music.5 CASE STUDY: CDNOW 6. as well as music reviews.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. daily music news.

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

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

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

1998: $56.htm) 84 . word-of-mouth accounts for the lion's share of CDnow's customers. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. This has contributed to a 225% increase in sales (1997: $17. it is in this context that the large investments in advertising and partnerships make sense.Hampel & Stefanides (www. both in the online and offline worlds. and scaled it awareness-building efforts.5.4 million. The story of how CDnow was founded in a basement. It is a powerful source of acquiring new customers at low cost. It is constantly adding new functionality to the site and has been innovative in its offering . April 28.As for many successful online retailers.hsny. CDnow's promotion strategies have attracted high levels of traffic. 6.(www.cdnow. In fact. The company continually pushed for new distribution partnerships to widen its sphere of influence.4 million). with 44% of sales coming from new customers65. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .com/cdnow. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.CDnow made public relations a high priority brand-building tool. with repeat customers accounting for more than 50% of sales. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. and to increases in the customer base of more than 30% quarter-to-quarter. 1998 . as a way to fuel very lucrative word of mouth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .Press Release. • Word-of-Mouth . Public relations efforts helped to generate word of mouth and influence sales.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.com) 65 'Pioneering in Cyberspace' .they were the first site to offer the sale of music downloads and custom CDs. resulting in increased conversion rates.

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

But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. as cited in 'eBay . garage sales.000 new items joining the "for sale" list every 24 hours69. the eBay community has grown to include more than 10 million registered users. There are over half a million new auctions. Auctions represent a platform. The buyer and the seller work out the logistics of the transport (e.6 CASE STUDY: EBAY 6. and eBay receives a transaction fee that ranges from 1. People perceive the auction format to offer better prices.Company Overview' . with the number of unique daily visitors setting a record of 1. Individuals use eBay to buy and sell items in more than 4.eBay website (www. eBay effectively created a new business model never before possible .A Harvard Business School Case Study. 6. or the payment for the item . collectable shows. 24 hour a day. Sellers pay a nominal fee for placing an item up for sale. Since its launch in September 1995. transportation and other overhead costs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and eBay provides added value through its convenience. (A)' .25% to 5% of the final sale price on any item sold.com) 'eBay .Company Overview' .ebay. with emphasis being placed on its unique community feel and culture.6.the closest thing in the offline world are trading forums such as classified ads. flea markets and auctions. This is a new market .ebay. eBay is not about auctions.removing the need for inventory. Auctions are an enabler.g. Auctions make it fun. extensive selection and geographical reach.efficient one-to-one trading in an auction format.6. shipping. 1st October 1999 86 .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. According to Meg Whitman.782 million in January 200068.com) 70 'Meg Whitman at eBay Inc. and 450. and eBay never takes possession of the item being sold. "at its core. payment) between themselves. from collectibles and antiques to electronics and toys.eBay website (www. global trading place for buying and selling personal items in an entertaining auction format. CEO of eBay.2 Value Proposition eBay offers consumers an efficient.300 categories.

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

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

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

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

but they have other partnerships with over 150 websites of varying scales. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. and facilitate the spread of positive wordof-mouth. who tended to be serious collectors. 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.6. The Official eBay Guide to Buying. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. In 1998.a four-year. The AOL partnership was one of the largest strategic partnerships on the Internet . These new publications appeal to the collecting spirit. eBay decided that it would not enter into major portal advertising deals in the short term. 91 .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. $75 million joint marketing alliance and development deal. and highlight opportunities created by e-commerce. Early on. Based on this. Mary Beth's Beanie World. eBay Magazine. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. Recent promotional initiatives include its new publication. provide a wealth of information about the 'ins and outs' of trading on eBay. the largest of which was with AOL. representing about 40% of revenues. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. and maintained the same ratio for 1999.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. they spent $12. Selling. eBay has been able to attract a large customer base. as a result of the high quality experience it provides. they decided to target their marketing efforts on these heavy users.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and Collecting Just About Anything and eBay for Dummies. eBay transformed from a pure online play into a 'clicks-and-mortar' company. Through this combination of its advertising efforts and targeted promotions. and two books. Doll Collector) and appearance in trade shows. As a result.3 million in advertising. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). eBay has since expanded its promotion efforts and engaged in marketing partnerships.

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

Its reach extends across more than 1.7 CASE STUDY: GAP. Gap online exploits the accessibility and convenience of the Internet."to deliver style. letting customers access the Gap brands. Inc. however.com/about_us. 6. The Gap offers a balance of modern and seasonal styles of clothing.htm) 75 Jeanne Jackson. L. California GapKids opens its first store BabyGap is born Gap opens its online store at www. Germany and Japan.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.com' . "this is about being clicks-and-mortar.see Appendix A Gap. and today it is the 29th most valuable brand in the world73. UK.com is an example of successful crossover marketing. 1999 93 . surpasses $9 billion in net sales and increase earnings by 54% over previous year.gapinc. and provides useful insight into how traditional brands can leverage their strength online.gap. Canada.babygap. 73 74 Interbrand (www.com.Business Week.1 Company Overview Gap opened its first store in San Francisco in 1969. standard styles are well suited to online shopping.Business Week. Gap. 'Clicks and Mortar at Gap.7. to provide customers with greater convenience and options. October 8. 'Clicks and Mortar at Gap. up from $20 million in 199875. Currently. as cited in Lee.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. from jeans and T-shirts to khakis and jackets.COM . as cited in Lee. According to Jeanne Jackson. head of Gap Online.an early convert to the then-revolutionary idea of clothes retailing on the Internet. whether in the store or online76". In late 1997. Gap started selling items online .gapkids. and Gap online provides access to the full range of items at Gap. and are still relatively small compared to Gap's $9 billion in annual sales.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. announce multi-year partnership. GapKids. and analysts estimate that sales in 1999 amounted to $50 . Gap's online sales tripled in 1998 alone. Gap Inc. online sales are only available to US customers.COM 6. This success is largely due to their simple formula . L.com) .interbrand.$100 million.7. In addition. service and value to everyone74".2 Value Proposition Gap's simple. and BabyGap. 1999 76 Jeanne Jackson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. the growth prospects are enormous. October 8. TABLE 6.com and www.800 stores in the US.'s website (www.com' . America Online (AOL) and Gap Inc. from shirts to accessories and hard-to-find sizes.

The 7Cs Framework In terms of the 7Cs framework. very efficient"77. Unlike Barnesandnoble. The Observer.com.. feel and design of the site is consistent with the bricks-and-mortar stores..OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. Content. FIGURE 6.7 . easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.. D. April 18. the extensive integration of Gap's online and offline activities are clearly evident. reinforcing its brand identity. from the blue and white colour scheme to the easy-toshop format . describes the company's brand personality as "direct and straightforward. 'Mind the Gap'. and easy-to-use. Gap Online primarily focuses on Convenience. Simple. The site also offers sharp graphics. 1998 94 .. and Customer Care. Michael McCadden.com store one immediately notices the consistency between the online and retail stores. making navigation even faster. Executive Vice President of Global Marketing.making visual references to its offline roots. Visiting the gap.3 Sources of Value . making it convenient. This personality is reinforced online through the simple structure and layout.. but provides customers with the option of viewing text-only.7.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6...very easy..

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

they send the customer a $20 Gap ShopCard. Gap has also supplemented this with online promotions: • In August 1999.4 Brand-Building Strategy .com in return for a 5% commission on every sale referred through the site.com" on the display screens between transactions.gap. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. on counter cards. billboards.Extensive Integration Gap.com. whereby for every $100 a customer spends at Gap Online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. on shopping bags and even on the cash register. In certain high traffic Gap and GapKids stores. etc. providing a useful way to directly reach customers. which displays "Shop online at www.com has also created an affiliate programme encouraging sites to establish links to gap. • Gap. • Gap. either online or in stores. by offering a 10% discount and free shipping on their first online purchase. by displaying the URL (www. Magazines. it is fully leveraging its offline presence to build awareness.com) in store windows with the slogan "surf. Most of Gap's online traffic is generated by leveraging its physical presence. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. • They offer Online discounts and promotions such as the ShopCard. These efforts doubled the size of Gap's e-mail database. To convert walk-in shoppers to cybershoppers.ship". The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.shop.com has been able to piggy-back on The Gap's offline advertisements (in TV. however. 96 . Gap has held in-store campaigns to get customers to submit their e-mail addresses. Gap secured a 3-year commerce and marketing agreement with AOL.gap. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.7.com has links with CDnow to cross promote websites. In addition. which can be used towards future purchases.) that also promote the online store. or to refer shoppers to Gap's website.

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

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

Yahoo! acquires Arthas.600. mobiles.com.3 Sources of Value .Yahoo! acquires eGroups . 99 . TVs. to allow access.Yahoo! unveils Yahoo! Finance Vision . regardless of platform (i.Receives $1 million in venture capital funding from Sequoia Capital $33. Yahoo! extended its convenience through its Yahoo! Everywhere service. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.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 . to provide web-based services to PalmTM handheld computers . . More recently.8).com allowing them to offer person-person payment solutions .Yahoo! forms agreements with Palm Inc.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices..7 YAHOO! .8.e.8 million IPO (2. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. Their goal is not to list everything under the sun.Yahoo! Launches Business-to-Business Marketplace . Palm computers).The 7Cs Framework Convenience Central to Yahoo!'s success. and unveils Yahoo! Digital Introduces Bill Payment services . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Site goes live September . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast. is the way it has structured and displayed information.000 shares at $13.00 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Yahoo! Shopping launches personalised shopping service 6.TIMELINE AND MAJOR MILESTONES 1994 April .

and has been at the heart of Yahoo!'s growth and development. By tailoring the information to users' preferences. well structured. and more importantly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. 100 . while providing partners access to a large customer base. the partner. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. the end-user. This creates a win-win situation as its satisfies Yahoo!. easy-touse.9).OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. Their thrust has been to provide valuable content to customers. 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.com and CDnow. from stocks and sports results to weather and air fares. They have formed multiple alliances and partnerships with leading online companies such as Amazon. Yahoo! has increased customer loyalty and retention rates. and is similar to a custom tailored newspaper (Figure 6.8 . ranging from daily news and weather reports to road maps and books.

Customer Care Yahoo! responds to customer inquiries via e-mail. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. and the nature of the navigation business. Yahoo! spends more on customer support than most companies. It keeps customers on the site for longer periods. one-to-many. message boards. and many-to-many.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9 . In addition. and encourages them to return frequently. to provide its customer base with access to useful links and content. or to make it their home page.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. telephone and even traditional mail. reinforcing the brandcustomer relationship. and e-mail. fax. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. where groups of people with shared interests can communicate through chat. Yahoo! has also implemented campaigns to persuade users to bookmark the site. and is driving Yahoo!'s multiple partnerships and alliances. 101 . In 1999. and plans to incorporate other features such as online chat to facilitate communications. Yahoo! acquired GeoCities. and contributing to their reputation as a quality service provider. Connectivity Connectivity is Yahoo!'s core product.

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

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

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








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

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

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

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


Interbrand's Ranking of the Top 60 Brands (www.985 2.510 8.602 4.804 2.634 1.806 11.603 5.894 14.193 112 .329 4.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) 83.766 14.361 1.283 4.231 12.076 3.262 1.681 2.181 21.830 14.694 17.792 3.021 26.761 1.132 15.313 2.interbrand.197 32.502 33.464 3.231 24.595 17.101 9.909 7.147 9.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .550 12.184 1.895 2.155 7.310 11.048 20.781 33.643 3.143 2.404 4.052 6.568 3.281 11.319 1.422 1.654 43.527 3.043 8.275 30.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.423 2.596 3.845 56.781 17.225 11.806 2.932 4.648 1.

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





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