S U C C E S S F U L

ON

THE

INTERNET

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
AT THE

UNIVERSITY OF CAMBRIDGE

ROBIN S. CLELAND
SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CONTENTS
SUBJECT PAGE

CHAPTER 1
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure

INTRODUCTION

6
7 9 9 11

CHAPTER 2
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

THE NATURE OF BRANDS

12
13 13 14 15 16 18 19 20 22 22 23

2.9

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

CHAPTER 3
3.1 3.2 3.3

BUILDING BRANDS

24
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

1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

CHAPTER 4
4.1 4.2 4.3 4.4 4.5 4.6

THE INTERNET

33
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

CHAPTER 5
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9

BUILDING BRANDS ON THE INTERNET

44
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

CHAPTER 6
6.1 6.2

CASE STUDIES

61
62 62 62 62 64 66 69 70 71 71 72 72 73 75

6.3

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

2

6.1 7.3 Sources of Value .4.1.5 Conclusion Case Study: Yahoo! 6.4 Brand-Building Strategy 6.2 Value Proposition 6.8.5 Other Factors That Contribute to their Brand Leadership 6.6 Conclusion Case Study: eBay 6.8.com 6.5.8 Case Study: Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5.5.5.1 Company Overview 6.7.3 Sources of Value .4.6.1 Company Overview 6.5.5 6.1 Company Overview 6.3 Sources of Value .7.5.4 Brand-Building Strategy 6.4.5 Conclusion Case Study: CDnow 6.The 7Cs Framework 6.The Failure of Boo.The 7Cs Framework 6.8.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.3 Sources of Value .6.5 Other Factors that Contribute to their Brand Leadership 6.2 Value Proposition 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.4 Brand-Building Strategy .2 Value Proposition 6.6.8.com 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 .com 6.The 7Cs Framework 6.8.7.7.8.5 Conclusion Case Study: Gap.1 Company Overview 6.4.2 Value Proposition 6.4 6.Extensive Integration 6.6.1 Company Overview 6.3 Sources of Value .The 7Cs Framework 6.4.7 6.7.2 Value Proposition 6.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.6 6.

8 Figure 6.com's Website Amazon.4 Figure 5.6 Figure 4.4 Figure 6.3 Figure 6.2 Figure 3.5 Figure 5.7 Figure 2.1 Figure 4.9 Figure 6.3 Figure 3.5 Figure 6.5 Figure 4.4 Figure 4.3 Figure 5.4 Figure 4.2 Figure 4.8 Figure 3.com's Website Overview of Boo.4 Figure 2.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 2.6 Figure 2.1 Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.3 Figure 4.5 Figure 2.1 Figure 6.7 Figure 5.6 Figure 5.6 Figure 6.7 Figure 6.8 Figure 5.2 Figure 5.1 Figure 1.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .2 Figure 2.1 Figure 5.2 Figure 2.com's Associates Programme Overview of BarnesandNoble.1 Figure 2.7 Figure 5.2 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .

Timeline and Major Milestones Boo.1 Table 6.6 Table 6.com .4 Table 6.7 The Emerging Brand-Building Environment Amazon.com .com .5 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Gap.Timeline and Major Milestones BarnesandNoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .2 Table 6.Timeline and Major Milestones eBay .1 Table 6.3 Table 6.Timeline and Major Milestones CDnow .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

com) 7 . and is triggering the need for new brand-building strategies and tools.an explosion that is also a harbinger of how business will operate in the future. interaction and relationship building.com. America Online (AOL) and eBay have been able to build powerful brands in a few years. that these Internet start-ups have achieved.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.1 . whereas it has taken decades for traditional companies to achieve the client base.1 OVERVIEW Over the past few years. FIGURE 1.g.5 million book titles). the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. In the midst of this.com1 Amazon. products and services reconfigured.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. Figure 1. This is creating new challenges and opportunities.0 1. there has been an explosion in the online world . as they face each other through an electronic connection. As such.5 2.com's range of 4.com noble. and business models revamped.mckinseyquarterly.9 3. McKinsey Analysis (www. As such. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. The Internet also represents a fundamental shift in how buyers and sellers interact. It is empowering customers with more options and more information to make informed decisions.9 2. customer affiliation and level of sales.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Amazon. Supply chains are being rethought. service and brands.com Source: Securities and Exchange Commission Filings. Internet companies such as Yahoo!.1 3. while providing new tools for promotion. the Internet is changing fundamentals about customers.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Amazon. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. aggressive Internet start-ups have emerged.YEARS TO REACH $100 MILLION IN SALES 6 5. relationships.2 3.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. creating strong brands that are putting established brands at risk.

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

FIGURE 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.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. 1. A review and analysis of leading academic thinking will be used to explore these issues. tools and strategies to build brands on the Internet. supported by secondary data related to aspects of online business from accredited and published sources.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2 . Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. • To identify the key factors and characteristics that contribute to the development of successful Internet brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . and to identify new sources of value. This is based on the outcome of the primary research (in-depth case studies). • To explore how the Internet is changing the brand-building environment.2.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .

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

the augmented brand and the potential brand . They start life as ideas. p. FIGURE 2. 'Marketing success through differentiation . January-February. a 'reputation'. the basic brand. which grows out of the cumulative memory and the experiences customers have of products or services. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. brands are their most valuable asset. and services to customers. T. It is a company's promise to consistently deliver a specific set of features.2.2 . benefits. 1980.3 THE LAYERS OF A BRAND Brands are made up of four layers .a 'relationship'.Figure 2.the core product or service. yet ultimately reside as consumer perceptions. and a 'promise'. 2. As such.of anything'. The space a brand occupies inside a customer's head can create a 'mental' patent. Harvard Business Review. a 'set of expectations'.86 14 .. making their way into planning and strategy documents.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Brands are richly endowed entities. For some companies.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.

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

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

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

C. & Sasser. Customers that are passionately or emotionally loyal are those that have built trust in a company.Harvard Business Review. Nov-Dec 1995.. W. Federal Express. This satisfaction encompasses the whole experience and not just a company's products or services. E. 6 7 Jones. Spring 1999 18 . customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Hewlett-Packard.Harvard Business Review.customers who are satisfied and loyal and talk favourably about the brand . 'Growing the Trust Relationship'. Johnson & Johnson. T. p. FIGURE 2. Saturn..Figure 2. D...6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.5 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. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Why Satisfied Customers Defect' . and believe that it will always act in their best interest. & Sasser.5. At the opposite end of the satisfaction spectrum are "apostles" . 'Why Satisfied Customers Defect' . E.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. T. and Johnson. Trust is critical for a brand's success. The customers at the bottom end of the scale are "terrorists" . Marketing Management. Nov-Dec 1995 Hart. M. Southwest Airlines and Xerox7.those who actively attack the brand telling others not to buy from the company.. 91 Loyalty is derived when customers are continuously satisfied over time.

.. Harley-Davidson motorcycle clubs). M. Firstly. 8 9 Peppers. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. 'The One to One Future'. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need.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. In this way. 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. emotional loyalty is born out of a consumer's personal relationship with a brand. 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). The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.com. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand.Sloan Management Review. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. & Rogers. 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. G. 'Building Stronger Brands through Online Communities' . the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Spring 2000 19 . D. consistent orders Satisfied customers are the best advertisement . 1993 McWilliam.

. FIGURE 2. Journal of Consumer Research.7). A stronger brand enjoys a high degree of brand preference over competing brands. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). which goes well beyond the satisfaction of a specific need. 343-373.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. 2. S. a 'powerbrand' tends to have a high degree of brand loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.6 . pp. and understanding the needs and buying processes of the target market is essential. there are brands that customers perceive as acceptable and would not resist buying. there are brands that are unknown by most buyers. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. whereby customers would be unwilling to substitute it with competitors' offers. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. However. March 1998.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. FIGURE 2. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. 20 . Beyond this.7 .

'Managing Brand Equity: Capitalising on the Value of a Brand Name'.Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. and relationships with distributors and strategic partners.8.. D. strong brand associations. FIGURE 2.8 . (New York: Free Press). perceived quality. name awareness. D. The major brand assets are brand loyalty. 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". 1991 21 . The benefits of each are outlined in Figure 2. trademarks.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . (New York: Free Press). and other assets such as patents. According to David Aaker (1991). 1991 10 Aaker.Create Awareness . which is the value of the brand over and above its commodity value.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .

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

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

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

style or cultural differences from one country to another. This may be different from the brand image. and visual appearance). prestige. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . A company should seek to differentiate its brand through developing a distinctive identity.. Brand themes are the most flexible element and will tend to change with fashion. type of spokesperson / customer image used to advertise the brand). 16 Kapferer.g. (New York: The Free Press). press releases.the fundamental or genetic code of the brand. 'Strategic Brand Management'. features.g. J.the way the brand communicates through its advertising. visual appearance. however the brand style and core tend to be less flexible. colour scheme. • The Brand Style .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3.articulates the brand core in terms of the culture it conveys. 1992 28 . friendly). its personality and its image or self-projection .3: • The Brand Core . packaging. which depends on how the target market perceives the brand. its reflection (e. etc. and the relationship expressed (e. glamour. which remains fixed over time. Themes include the physical appearance (logo.Figure 3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. and advertising. • The Brand Theme .

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .

In essence. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. and a critical source of added value.1 INTRODUCTION The Internet is transforming the business environment. but in practice not in real time. and the 'world wide web' (www) . 34 . news groups and mailing lists. and provides the opportunity for dynamic interaction.1. 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. Information is becoming a major part of the products and services that people buy. E-MAIL Is the part of the Internet that most users use at present. The three core channels include e-mail (the most common). it offers a number of alternative channels that enable businesses and people to communicate. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. FIGURE 4.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. which contain hypertext and pictures.Figure 4. 4.1 .THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. In doing so. This chapter provides an overview of the Internet and its defining characteristics. it is a common technology platform that allows computing devices to communicate with each other. creating new challenges and opportunities. Hypertext allows information to be organised in a user-friendly way that is easily accessible.

By allowing for direct. • It Overcomes the Barriers of Time and Space . The context of the Internet and certain key developments are highlighted in the Figure 4. 7 days a week. These characteristics combine to create a very powerful medium.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 . which was intended to link military networks together.this radically alters the process of interaction between communicating parties. 4.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. anywhere.2.2 (Note: 35 . The Internet can also be accessed at any time . • It Allows for Two-way Communication and Interactivity . regardless of where the computer or Internet access device is physically located.not previously available with mass medium forms of communication.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). allowing both parties to identify each other and build one-to-one relationships . These defining characteristics have fuelled its explosive growth. Graph is not drawn to scale). These qualities eliminate the barriers of time and space that exist in the physical world.The Internet is a global network and can be reached from everywhere.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. the Internet lets individuals and companies build interactive relationships with customers and suppliers. and deliver new products and services at low cost.24 hours a day. when the United States Defence Department developed the 'ARPAnet'. ubiquitous links to anyone.

000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. 1996 (www.a PricewaterhouseCoopers Report.000.3. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .2 .000 1.com) 36 .Figure 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100.000 1.000.000 10.000 1969: 10.3 .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000. 2000 Internet / ARPAnet was created Dell. 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. 1998. as cited in 'E-Business Technology Forecast' .economist.

payment.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Attractive infrastructure and middleware software . The development of critical processes (ordering.Low-cost networking alternatives . The McKinsey Quarterly. hosting.Higher PC penetration among consumers and companies . No.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. L.g. FIGURE 4.4 . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce...BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. increasing to 500 million users by 200220. making it more cost effective for software developers and other technology providers to create interoperable products. G.internet. 1996. etc. and gateway services). 'Electronic Commerce (finally) Comes of Age'. the momentum created by all these forces has created a virtuous cycle of growth. Multimedia development tools that can be used to create rich content.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .g.Content Aggregators . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. The growth in support services (e.2 20 'World Online Populations' .CyberAtlas Internet Statistics and Market Research. Reed. web design. Easier access to these networks provided by point-and-click web browsers.High-powered servers . 2000 (http://cyberatlas.E-Marketplaces .Cheap bandwidth .4.). there will be an estimated 375 million Internet users world-wide. As shown in Figure 4. TCP/IP).Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .com) 37 . offering inexpensive bandwidth. The emergence of open standards in development tools and at the network protocol level (e.Cheap microprocessors & RAM . billing.

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

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

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .

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

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

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

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

link revenues 32 33 Melnicoff. FIGURE 5. delivering increased margin per customer .org Study in collaboration with The Boston Consulting Group. 21 . cross-selling and up-selling33. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distribution leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enhanced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplemental revenue advertising.2.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. M. being first into a market makes it easier to capture the consumer's share of mind. advertising and referrals. It also allows online companies to tap supplementary revenue streams..A Publication by Andersen Consulting 'The State of Online Retailing' . Outlook 1999. fulfilment • Defensible advantage against competitors SCALEABLE. direct marketing. enhancing the interaction. No. As the company builds a customer base and develops a relationship with customers. This makes it more efficient in improving product selection. With no competitors around.2 .A Shop. its ability to track customer preferences and customise offerings improves. '5 Rules of the eEconomy'. R.Figure 5. Nov 1998 49 . including direct marketing.

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

000 subscribers every day. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). Geocities enables people to create personal websites for free.5. and in doing so spread the word for Geocities.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. sign up for their own free e-mail. where they have never carried out any promotional activities. When a user builds a website.hotmail.com The classic example of viral marketing is Hotmail. Free Email at http://www. and they created a subscriber base more rapidly than any company in history.5 years. saying: • "Get Your Private. they will have a powerful viral opportunity at their disposal. eGroups and Geocities (both recently acquired by Yahoo!). but Hotmail signs up more than 150.com was one of the first free web-based e-mail services. a company now owned by Microsoft. and then propel the message even further to their own ever-increasing circles of friends and associates. • Each new user becomes a company salesperson. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. friends to visit it. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging).com. Today they are the largest e-mail provider in the world with over 40 million users. seven days a week. A traditional print publication would hope to reach 100. In fact. In its first 1. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. whether for communications or community.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.000 subscribers within a few years of launch.1 The Case of Hotmail. Hotmail. they tell all their 51 . and the message spreads organically. Hotmail acquired over 12 million subscribers. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host.

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

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

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

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

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

Adoption).com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. A. M. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Figure 3. visibility relies solely on Communication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.2. Waitman. This model consists of five stages . 1996. and bring people to the site for the first time.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. & Zeisser. Trial.Awareness. This is more difficult online than offline. Engage. McKinsey Quarterly..7. 180-183 (www. including affiliate programmes with other websites. 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 ’ . Evaluation.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Retain. modified to take into account of the interactive dynamics of the Internet. 'Marketing to the Digital Consumer'. The mechanisms to communicate range from traditional media (TV..) to online tools. No.Attract..7 . because there is no physical presence.8.4 . pp. links from directory searches (Connectivity). Therefore. Magazines. Learn and Relate. The company must build awareness and communicate its value proposition to its target customers. R.mckinseyquarterly. McQuade. etc. e-mail notifications and banner advertisements. Newspapers. FIGURE 5. billboards. S. Interest.

it is important to quickly engage consumers' interest before they move on.Economist Intelligence Unit 2000 (www. Engage With the multitude of choice available on the Internet.5) 2. Kapferer's Brand Prism (Ch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. affiliate programmes.5 3. public relations and television advertising.4 3. The key factors at this stage are Convenience combined with interesting Content.3 Source: Forrester Research. Creativity is also an important factor in gaining attention in today's cluttered marketplace.0 3.6 3. as cited in 'Targeting Consumers via the Internet' . 58 .4 3.8 4. Attracting customers is only the first step in building online brands. 3.7 4. Companies then need to engage customers to obtain their interest and participation. discounted over the expected duration of the brand-customer relationship. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.8 .com) The most effective methods are direct e-mail.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 .WEBSITE PROMOTION METHODS .4 4.ebusinessforum.2 4.3 2. 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. multiplied by the expected rate of transactions. Fig.3 3.1 3.3) is useful to ensure that a company develops a distinct and consistent brand identity.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .

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

com invests in wineshopper.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.Amazon enters strategic alliance with living.Amazon.New home living store from living.Amazon enters into a strategic partnership with Drugstore.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com enters European book market Microsoft signs Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com.Amazon and online car-buying service Greenlight. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com opens its virtual doors at amazon.com via the new wireless pocket PC .com Auctions and zShops provide new tools to its merchant community .sothebys.Amazon opens customer service centre in The Hague .Amazon and eziba. Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid. and minority investment in.TIMELINE AND MAJOR MILESTONES Amazon.com 63 . and more Amazon launches "Amazon.Amazon launches health and beauty store .com Amazon introduces "Purchase CirclesTM".com .com to create a "home living" store at amazon.amazon.COM .com Amazon announces further plans to expand distribution network to meet rapid growth.com is founded by Jeff Bezos Amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Amazon acquires Back to Basics Toys to add to Amazon.com and NextCard launch co-branded credit card .com Announce Strategic Investment and Promotional Agreement . universities. Ashford.Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement." providing shopping from wireless devices.Amazon launches www.com Anywhere. featuring thousands of bestseller lists for hometowns.Amazon launches lawn & patio store .Amazon announces investment in kozmo.Amazon.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.com announce investment and strategic alliance .toolcrib.Customers can shop at Amazon.com Amazon invests in Pets. Software.Amazon opens a customer service centre in Huntington.000 members Amazon. West Virginia.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon surpasses 20 million cumulative customer accounts . such as the Palm VII organiser.com . Video Games and Gift Ideas Amazon and Sotheby's launch www.com .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . to meet rapid growth . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com. a tools and equipment store for professional tool users and woodworkers .amazon.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. workplaces.com .com Electronics and Amazon.Amazon launches new kitchen store .

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

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

6. Instead of paying directly for this exposure. Business Week. New Yorker and The Economist. and not subsequent purchases.a move that along with the novelty of its business model and the newness of the Internet. Through the first half of 1996. Once orders are placed. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. 66 . enticing them to return to the site and purchase repeatedly.000 members. As a result of all these factors (7Cs).2. two personalised services. help maintain contact and build traffic by e-mailing customers when desired products or books become available. helped generate publicity and stories about the company in publications such as The Wall Street Journal. it began to advertise in print media and online .4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. In July 1996. The Associates Programme has been phenomenally successful. The Financial Times. attracting member sites of all sizes. In the second half of 1996.2). and customers are also e-mailed when the items are shipped from the warehouse.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.com hot-link and offer specific books of interest to their visitors. Newsweek. Amazon offered Associates referral fees of up to 15%. This enabled Amazon to reach more customer segments and niches (Figure 6. In addition.000 by August 2000. Eyes and Editors. which only applied to sales that resulted from the initial click-through. and by 1999 it had over 200. they are subsequently confirmed by e-mail. increasing to over 500. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.

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

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

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

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

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

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

a replica of Amazon's Associates Programme.com. Yahoo!.com has created a high quality website and customer experience. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. December 17. Barnesandnoble. Although.64 billion. Barnesandnoble. and both are expanding globally. 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 . Lycos.com's $1. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. The 6. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). however. Webcrawler.com closed 1999 with 4 million customers.com had over 17 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . As of February 2000.000 affiliates in its referral network. They have developed an affiliate programme that links sites to Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Instead.4 Brand-Building Strategy Barnesandnoble.com in return for a commission on any purchases that they originated . Both offer 'associate programmes' that let other websites link to their sites. compared to Amazon. Netscape and Microsoft Network.6 million. has yet to leverage its strong brand in cyberspace. However. and Barnes & Noble Inc. Both try to foster a community of readers by letting customers post reviews online.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.com was valued at $21. Barnesandnoble. Barnesandnoble.1 billion. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). reasons for this are explained in the next section. while Amazon. and avoid charging sales tax in states where it has stores56. These initiatives have generated traffic to the site. this programme had more than 300.3. it lags behind first-mover Amazon. Both offer customisation that permits users to personalise the experience. prevent cannibalisation of its existing business.com's market capitalisation was $251 million. while Amazon.The Wall Street Journal.

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
59
60

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

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

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

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.

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and they aim to "make every visit to the site.Merges with Columbia Records .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. $18. $22. This unprecedented degree of access to music and information is the core of CDnow's value proposition. & Novak. convenience.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. daily music news. announce marketing alliance .Raises $10 million through private placement . good prices. as well as music reviews. and an average daily audience of over 800. It has a customer base of 4 million people.5. guides to music genres.5 million distribution deal with Lycos Signs three-year.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.000 music-related products and 650. CDnow is the leading online music store. and was the first site to offer the sale of music downloads and custom CDs. 'How to Acquire Customers on the Web' .179-188 63 CDnow website (www. CDnow provides access to over 500.5.Launches merged CDnow/N2K site . D. former arch rival .TIMELINE AND MAJOR MILESTONES . pp.Merges with N2K.5 CASE STUDY: CDNOW 6. TABLE 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . a valuable and rewarding experience"63. 62 Hoffman. CDnow is also driving the digital distribution of music.. cover art.Site goes live .Forges distribution partnership with Yahoo! $65. T. and one of the most popular shopping sites on the Internet62.Harvard Business Review.Partnership program with Geffen Records .1 Company Overview Founded in 1994.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .com) 80 .ten times the selection of a conventional bricks-and-mortar music store).000 people. CDnow was acquired by Bertelsmann AG.CDnow and Time Inc. customisation and a wealth of information and content to help in the purchase decision.000 sound samples. and exclusive interviews and reviews from CDnow's award-winning editorial staff.000 music related items .6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. whether for browsing or buying. On 19th July 2000. by twin brothers Jason and Matt Olim. features.cdnow. May-June 2000.

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

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

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

1998: $56. 6. The story of how CDnow was founded in a basement. resulting in increased conversion rates. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.Press Release. with 44% of sales coming from new customers65.5 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. CDnow's promotion strategies have attracted high levels of traffic.cdnow. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . The company continually pushed for new distribution partnerships to widen its sphere of influence.com/cdnow.(www.Hampel & Stefanides (www. It is a powerful source of acquiring new customers at low cost.they were the first site to offer the sale of music downloads and custom CDs. it is in this context that the large investments in advertising and partnerships make sense. as a way to fuel very lucrative word of mouth.4 million. and scaled it awareness-building efforts. • Word-of-Mouth . Public relations efforts helped to generate word of mouth and influence sales. This has contributed to a 225% increase in sales (1997: $17. It is constantly adding new functionality to the site and has been innovative in its offering . by two twin brothers with little money reflects the 'American dream' and was quickly picked up. with repeat customers accounting for more than 50% of sales. both in the online and offline worlds.hsny.5. and to increases in the customer base of more than 30% quarter-to-quarter.com) 65 'Pioneering in Cyberspace' . word-of-mouth accounts for the lion's share of CDnow's customers. April 28.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .htm) 84 .As for many successful online retailers.CDnow made public relations a high priority brand-building tool. 1998 . In fact.4 million).

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

eBay is not about auctions. "at its core.ebay.2 Value Proposition eBay offers consumers an efficient. global trading place for buying and selling personal items in an entertaining auction format. the eBay community has grown to include more than 10 million registered users. flea markets and auctions.eBay website (www. and 450.the closest thing in the offline world are trading forums such as classified ads.eBay website (www. from collectibles and antiques to electronics and toys. Auctions make it fun. and eBay receives a transaction fee that ranges from 1.25% to 5% of the final sale price on any item sold.Company Overview' .6. shipping.com) 'eBay . payment) between themselves. 24 hour a day. The buyer and the seller work out the logistics of the transport (e. People perceive the auction format to offer better prices.782 million in January 200068. or the payment for the item . There are over half a million new auctions.300 categories. Sellers pay a nominal fee for placing an item up for sale.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. with emphasis being placed on its unique community feel and culture. as cited in 'eBay .com) 70 'Meg Whitman at eBay Inc.000 new items joining the "for sale" list every 24 hours69. Individuals use eBay to buy and sell items in more than 4. and eBay never takes possession of the item being sold.efficient one-to-one trading in an auction format. According to Meg Whitman. collectable shows.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.removing the need for inventory. 1st October 1999 86 . and eBay provides added value through its convenience. transportation and other overhead costs. (A)' .Company Overview' .6. This is a new market . Auctions are an enabler. eBay effectively created a new business model never before possible . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. with the number of unique daily visitors setting a record of 1.A Harvard Business School Case Study. 6. garage sales. extensive selection and geographical reach. CEO of eBay.g.6 CASE STUDY: EBAY 6. Since its launch in September 1995. Auctions represent a platform.ebay.

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

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

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

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

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

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

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

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

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

To convert walk-in shoppers to cybershoppers.com has been able to piggy-back on The Gap's offline advertisements (in TV. Magazines.ship". by offering a 10% discount and free shipping on their first online purchase. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.com in return for a 5% commission on every sale referred through the site. Gap secured a 3-year commerce and marketing agreement with AOL. however. 96 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com has also created an affiliate programme encouraging sites to establish links to gap. on shopping bags and even on the cash register. etc. on counter cards.com" on the display screens between transactions. whereby for every $100 a customer spends at Gap Online. • They offer Online discounts and promotions such as the ShopCard. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com) in store windows with the slogan "surf. billboards. which can be used towards future purchases. Most of Gap's online traffic is generated by leveraging its physical presence. or to refer shoppers to Gap's website. In certain high traffic Gap and GapKids stores. which displays "Shop online at www. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. providing a useful way to directly reach customers. In addition.com. • Gap.shop. • Gap. either online or in stores. The idea emerged as Gap was flooded with e-mails form customers asking how they could buy a recording of the music played in Gap TV commercials.gap.4 Brand-Building Strategy .Extensive Integration Gap. Gap has held in-store campaigns to get customers to submit their e-mail addresses. Gap has also supplemented this with online promotions: • In August 1999.7. by displaying the URL (www. These efforts doubled the size of Gap's e-mail database. they send the customer a $20 Gap ShopCard. it is fully leveraging its offline presence to build awareness.) that also promote the online store.com has links with CDnow to cross promote websites.gap.

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

Yahoo! is a leading guide in terms of traffic.com) 98 . household and business user reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. advertising. The concept exploded (through word-of-mouth) and in less than six months. As the first online navigational guide to the web. lies the directory .1 Company Overview In April 1994. The company's global web network includes 23 world properties outside the US. and is one of the few Internet companies to turn a profit early in the development of the Internet.8.8. The Stock' .The Company. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. According to Timothy Koogle. who started an online guide as a way to keep track of their personal interests on the Internet.com) . Yahoo! was founded by David Filo and Jerry Yang. the amount of information.businessweek. Yahoo! offers a range of supporting services that add value. 78 79 Interbrand (www.D students at Stanford University. Yahoo! has since morphed from an ordinary search service into a global Internet communications. and the number of websites continues to explode. CEO of Yahoo!.8 CASE STUDY: YAHOO! 6. There's nothing in the real world to compare to that79". The Strategy. two Ph.Business Week. all in a single location. from e-mail services to stock quotes and much more. September 7.interbrand.2 Value Proposition At the core of Yahoo!'s value proposition. 1998 (www.see Appendix A 'Yahoo! . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. 6. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. the site was receiving 1 million hits per day.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. As such.

Their goal is not to list everything under the sun..8. .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. 99 .8).000 shares at $13. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. to provide web-based services to PalmTM handheld computers .Yahoo! acquires eGroups .Receives $1 million in venture capital funding from Sequoia Capital $33.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.e.7 YAHOO! .TIMELINE AND MAJOR MILESTONES 1994 April .Site goes live September .Yahoo! acquires Arthas.Yahoo! Shopping launches personalised shopping service 6. mobiles. is the way it has structured and displayed information.8 million IPO (2. More recently.Yahoo! forms agreements with Palm Inc. to allow access. TVs.The 7Cs Framework Convenience Central to Yahoo!'s success.3 Sources of Value . Palm computers). and unveils Yahoo! Digital Introduces Bill Payment services . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.600.Yahoo! unveils Yahoo! Finance Vision .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb. regardless of platform (i. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! Launches Business-to-Business Marketplace . Yahoo! extended its convenience through its Yahoo! Everywhere service.com allowing them to offer person-person payment solutions .com. 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.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 .

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

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

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

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

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

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CHAPTER 7

CONCLUSION

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7.1

CONCLUSION & DISCUSSION OF KEY FINDINGS

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

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7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •

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

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

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

262 1.310 11.361 1.806 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .781 33.313 2.052 6.193 112 .231 24.830 14.225 11.319 1.043 8.275 30.634 1.404 4.643 3.985 2.766 14.502 33.021 26.076 3.681 2.283 4.155 7.806 11.654 43.281 11.181 21.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) 83.894 14.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.101 9.845 56.143 2.464 3.909 7.Interbrand's Ranking of the Top 60 Brands (www.602 4.184 1.932 4.792 3.781 17.568 3.329 4.603 5.231 12.761 1.596 3.527 3.510 8.595 17.694 17.132 15.550 12.895 2.048 20.648 1.422 1.804 2.197 32.423 2.147 9.interbrand.

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

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BIBLIOGRAPHY

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET

ARTICLES FROM BUSINESS & ACADEMIC JOURNALS
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