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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
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Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
5.4 Brand-Building Strategy 6.5.3 Sources of Value .5.6.1 Company Overview 6.8.4 Brand-Building Strategy 6.8.8.com 6.5 Conclusion Case Study: CDnow 6.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.5 Conclusion Case Study: Yahoo! 6.3 Sources of Value .3 Sources of Value .4 6.6.5 Conclusion Case Study: Gap.6.1 7.com 6.2 Value Proposition 6.com 22.214.171.124.7.6 6.The 7Cs Framework 6.2 Value Proposition 6.2 Value Proposition 6.4.4 Brand-Building Strategy 6.1 Company Overview 6.Extensive Integration 6.3 Sources of Value .4.5.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 126.96.36.199.7 6.1 Company Overview 6.The Failure of Boo.7.1 Company Overview 6.4.2 Value Proposition 6.8 Case Study: Boo.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.7.5 Other Factors that Contribute to their Brand Leadership 188.8.131.52 Company Overview 6.4 Brand-Building Strategy .4.5 Other Factors That Contribute to their Brand Leadership 6.5 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .The 7Cs Framework 184.108.40.206 Sources of Value .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.The 7Cs Framework 6.The 7Cs Framework 6.2 Value Proposition 6.
8 Figure 5.3 Figure 5.4 Figure 6.4 Figure 4.8 Figure 3.2 Figure 5.1 Figure 1.3 Figure 2.6 Figure 6.3 Figure 6.2 Figure 4.6 Figure 4.4 Figure 4.3 Figure 4.3 Figure 3.6 Figure 2.1 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.2 Figure 2.1 Figure 3.7 Figure 5.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .5 Figure 4.5 Figure 5.1 Figure 5.com's Associates Programme Overview of BarnesandNoble.7 Figure 6.4 Figure 5.7 Figure 5.6 Figure 5.9 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 3.1 Figure 6.4 Figure 2.7 Figure 2.1 Figure 2.5 Figure 6.com's Website Amazon.5 Figure 2.2 Figure 2.8 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.2 Figure 6.9 Figure 6.com's Website Overview of Boo.
Timeline and Major Milestones Gap.1 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones Boo.Timeline and Major Milestones Yahoo! .4 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .6 Table 6.com .5 Table 6.com .Timeline and Major Milestones eBay .3 Table 6.1 Table 6.Timeline and Major Milestones BarnesandNoble.7 The Emerging Brand-Building Environment Amazon.com .2 Table 6.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
Figure 1. It is empowering customers with more options and more information to make informed decisions.g.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.1 3. In the midst of this.com1 Amazon. as they face each other through an electronic connection. As such. while providing new tools for promotion. McKinsey Analysis (www. aggressive Internet start-ups have emerged. creating strong brands that are putting established brands at risk.5 million book titles). whereas it has taken decades for traditional companies to achieve the client base.1 . Internet companies such as Yahoo!.com Source: Securities and Exchange Commission Filings. The Internet also represents a fundamental shift in how buyers and sellers interact. there has been an explosion in the online world .com's range of 4.9 3. and is triggering the need for new brand-building strategies and tools.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. interaction and relationship building. service and brands.com) 7 .com.2 3. and business models revamped.1 OVERVIEW Over the past few years. relationships.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. Supply chains are being rethought. FIGURE 1. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.an explosion that is also a harbinger of how business will operate in the future.9 2.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. products and services reconfigured.mckinseyquarterly.com noble.0 1. that these Internet start-ups have achieved. As such.YEARS TO REACH $100 MILLION IN SALES 6 5. the Internet is changing fundamentals about customers.5 2. Amazon. customer affiliation and level of sales. America Online (AOL) and eBay have been able to build powerful brands in a few years. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. This is creating new challenges and opportunities. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. Amazon.
'Meeting the Challenge of Disruptive Change'. 66-76 Hoffman. March .April 2000. Given the tremendous clutter in today's e-commerce marketplace. 'Internet Communities . p. attracting traffic or 'eyeballs'.. However. and Novak. P. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. Therefore. D. 1997. & Elstrom. L. M..BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result.. and the high cost of acquiring online customers2. as the need to build brand loyalty online is reaching a peak.Forget Surfers. building awareness. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. A Business Week / Harris poll... pp. turning browsers into buyers. P. May 5. As such..66 8 . R. Volume 78 Issue 2. who are essentially intangible. companies lack a coherent framework and concrete methods to build an online brand. 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. A New Class of Netizen is Settling Right In' Business Week. & Overdorf. rather than drifting from site to site3. Harvard Business Review. In light of this. For pure online players. S. 'How to Acquire Customers on the Web'. May-June 2000 Hof. C. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. 1 2 3 Christensen. found that 57% of Internet users go to the same sites over and over again. T. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. Browder. brands are even more critical as customers have little to go on other than a recognised brand. Harvard Business Review. that extends the brand-customer relationship beyond a single transaction.
• To explore how the Internet is changing the brand-building environment. tools and strategies to build brands on the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 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. FIGURE 1. and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. This is based on the outcome of the primary research (in-depth case studies).3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. A review and analysis of leading academic thinking will be used to explore these issues. supported by secondary data related to aspects of online business from accredited and published sources.2 .RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. 1. • To identify the key factors and characteristics that contribute to the development of successful Internet brands.2.
Hypothesis (Framework): This is based on the literature review and secondary data.com and Gap. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. to provide an in-depth analysis of the psychological and social dimensions of brands. however. relationship management. The combination of cases provides a useful and practical insight into brand-building issues and problems. Conclusion: Discusses the key findings and areas for further research. 10 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. there is more work in popular rather than academic literature. this also highlights the true value of the dissertation. certain key factors are highlighted in their relevance to the dissertation. strategy and economics. 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. CDnow. the literature review draws on leading academic thinking in more established areas such as brand management. and is used to provide insight into some of the factors that contribute to the development of successful brands. While there is no attempt.com. nor desire. marketing. and factors that contribute to a brand's success. as well as a recent Internet failure (Boo.com). traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. The absence of academic literature on Internet branding posed a major obstacle. These are further refined using the insight obtained through the case studies.com). eBay and Yahoo!). Consequently. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.
Chapter 4 provides an overview of the Internet and its defining characteristics. This chapter sets the context within which online brands must be built. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. as well as the interactive approach to attracting customers and building loyalty. The nature of brands. Chapter 2. The final chapter. highlighting some key factors that have contributed to brand success. Chapter 6 examines the brand-building efforts of seven companies. and outlines the opportunities for further research.4 STRUCTURE The next chapter. 11 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. summarises the key findings. Chapter 3 explores how brands have traditionally been built. provides an analysis of leading academic literature in relation to branding. 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 7. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. by outlining the impact of the Internet on the business and competitive environment. and introduces the core concepts that form the backbone of the dissertation. their purpose and value are discussed. The limitations of the Internet in terms of brand-building are also discussed.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
and highlights the importance of brand management. p. symbolised in a trademark. & Maughan.2 WHAT IS A BRAND? According to Rita Clifton. if properly managed. These concepts are central to brands and brand-building.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. D. The concept of brand equity is outlined. whether online or offline.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. both to customers.a leading specialist brand consultancy firm . 'Building Strong Brands'. FIGURE 2. Branding is about creating 'value'. but extends further to encompass added values derived from factors such as the brand-customer relationship. CEO of Interbrand Newell and Sorrell . which. creates influence and generates value4" This definition truly captures the essence of a brand. 2000. unravelled to reveal the nature of brands and their reason for existence. and to companies. R. these layers are Brands are made up of many layers and dimensions. both for customers. p.a brand is: "a mixture of tangible and intangible attributes. (New York: Free Press).1. 1996. and for the company. 2. E. vii 13 . and they form the backbone of this dissertation. The chapter proceeds to describe the influence of brands on the buying process. and the importance of customer satisfaction and brand loyalty.see Figure 2. (London: Macmillan Press Ltd.1 INTRODUCTION In this chapter. 74 4 Clifton. the brand's emotional benefits and its self-expressive benefits . This value stems from the products and services that companies create and bring to the market. explaining the value of brands.). A. 'The Future of Brands'.1 ..
the basic brand. It is a company's promise to consistently deliver a specific set of features. January-February. They start life as ideas. the augmented brand and the potential brand . For some companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . benefits. making their way into planning and strategy documents. As such. 'Marketing success through differentiation . Brands are richly endowed entities. yet ultimately reside as consumer perceptions. and services to customers.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. Harvard Business Review.of anything'. which grows out of the cumulative memory and the experiences customers have of products or services. The space a brand occupies inside a customer's head can create a 'mental' patent.2.. a 'set of expectations'. 2. T. brands are their most valuable asset. and a 'promise'.the core product or service. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.a 'relationship'.86 14 .3 THE LAYERS OF A BRAND Brands are made up of four layers . a 'reputation'. p.2 . FIGURE 2. 1980.Figure 2.
symbol.The Gap stores.Analysis. Certain service brands. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. Levi's). and because they most readily come to mind when consumers are asked to recall brands. However.g. 2. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. Coca-Cola. 5 Kotler. In fact. (Europe: Prentice Hall) 1996. term. even when the alternatives are substantially cheaper or more readily available (e. 'Marketing Management . with supplementary products and services (e. quick delivery) that enhance the customer’s total purchasing and use experience. actually sell products.. preferring things they can see and touch. Planning. The most common barrier to competition is building a brand. Southwest Airlines and Amazon. information. most products and services cannot survive on functionality alone as this is usually matched in time. They are the historical core of branding because they are the most prevalent. customers buy products to meet certain functional needs.g.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. P. or design.com are examples. The Basic Brand The basic brand consists of the "name. this is the case with all Internet companies. Kodak. or a combination of them. this should support the offering's performance and differentiate the brand from those of competitors. but the brand itself is the store. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. sign. such as in retailing. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. 15 . These products and services add value and make the offering much more difficult for competitors to emulate. 8th Ed. Implementation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. Service Brands (intangible) are much less numerous than their product counter parts. Essentially. not the products it sells . & Control'.
3). 1996. Implementation.3 .. Therefore. the consumer learns about competing brands. Through gathering information. two factors can intervene between the purchase intention and the purchase decision .5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands.. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. This can be triggered by internal or external stimuli (advertisements). These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).4). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. selective distortion. and Control'.attitudes of others and unexpected situational factors (Figure 2.194 The process starts when the buyer recognises a need. and pay the most attention to the brands that will deliver the sought benefits. a consumer will be inclined to search for more information. (Europe: Prentice-Hall) 8th Ed. However. 16 . either through heightened attention or through an active information search.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. P. In the evaluation stage. p.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and selective retention. it is critical to understand what attributes consumers value. FIGURE 2. it is important to clarify customers' underlying buying behaviour and the buying process. These beliefs depend on their previous experiences with the brand. and the effect of selective perception. 'Marketing Management . The buying process consists of five stages (Figure 2.Analysis. Consumers develop a set of brand beliefs about the attributes of competing brands. Once aroused. Planning. Consumers differ as to which product / service attributes they see as important.
they will be dissatisfied and look for alternative brands in the future. If performance falls below their expectations. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. or avoid a purchase decision is heavily influenced by perceived risk.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. After a consumer has actually purchased the product or service. they will evaluate their level of satisfaction .the customer will be highly satisfied. Customer satisfaction and loyalty are essential to creating successful brands. somewhat satisfied. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. postpone. Expensive purchases involve some risk taking. their negative attitude may influence the consumer's purchase intent or vice versa. word-of-mouth. 17 . locking out potential competitors.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. as these services are intangible and therefore. A consumer's decision to modify. customers make decisions purely on the basis of their expectations. or dissatisfied with the purchase decision. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. advertising and communication. If perceived performance and quality exceed their expectations then they are satisfied. These expectations are formed through a combination of past experiences. Customers' expectations are particularly important when dealing with services. A consumer tries to deal with this by gathering information from friends. and a preference for recognised brands they can trust. and especially important when dealing with purchases made through the Internet. even delighted.
91 Loyalty is derived when customers are continuously satisfied over time. Saturn. & Sasser. D.Figure 2. T.. Trust is critical for a brand's success.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.those who actively attack the brand telling others not to buy from the company. 'Why Satisfied Customers Defect' . E. 6 7 Jones.. Southwest Airlines and Xerox7. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Why Satisfied Customers Defect' . FIGURE 2.customers who are satisfied and loyal and talk favourably about the brand . Marketing Management. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.. Spring 1999 18 .. Hewlett-Packard. and believe that it will always act in their best interest.5.Harvard Business Review. W. and Johnson. T. Customers that are passionately or emotionally loyal are those that have built trust in a company. The customers at the bottom end of the scale are "terrorists" . C. 'Growing the Trust Relationship'. M. Nov-Dec 1995 Hart.Harvard Business Review. At the opposite end of the satisfaction spectrum are "apostles" .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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. This satisfaction encompasses the whole experience and not just a company's products or services. p. Federal Express. Nov-Dec 1995. E. & Sasser. Johnson & Johnson..
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 1985.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 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. 1993 McWilliam. M. 'The One to One Future'. & Rogers.they provide good word-of-mouth and are the best salespeople for the product / service 2.. 8 9 Peppers. emotional loyalty is born out of a consumer's personal relationship with a brand. Spring 2000 19 . 'Building Stronger Brands through Online Communities' . This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Emotional loyalty can be also created through the formation of a strong user community around the brand. Harley-Davidson motorcycle clubs). Firstly.. D. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity.Sloan Management Review. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. consistent orders Satisfied customers are the best advertisement . 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).com. In this way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. G.g.
almost irreplaceable bond as well as potentially to the negative feelings of betrayal. which goes well beyond the satisfaction of a specific need.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. a 'powerbrand' tends to have a high degree of brand loyalty. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.6 . and understanding the needs and buying processes of the target market is essential. 343-373.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 2. there are brands that are unknown by most buyers. 20 . S. FIGURE 2. pp..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. A stronger brand enjoys a high degree of brand preference over competing brands. whereby customers would be unwilling to substitute it with competitors' offers. there are brands that customers perceive as acceptable and would not resist buying. Beyond this. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. However. FIGURE 2.7). March 1998. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. Journal of Consumer Research.7 . Emotionally loyal customers build a sense of trust and two-way commitment with the brand.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.Create Awareness . D.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. 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".BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . (New York: Free Press). name awareness. which is the value of the brand over and above its commodity value. (New York: Free Press). The major brand assets are brand loyalty. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. According to David Aaker (1991).8 . trademarks. 1991 21 . and relationships with distributors and strategic partners. and other assets such as patents. strong brand associations.. 1991 10 Aaker. FIGURE 2. perceived quality.. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. The benefits of each are outlined in Figure 2. D.8.
& Downham.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . & Tellis. and the number two twice the share of the number three12.. 3rd Ed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 'Strategic Brand Management'.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . 1992 Worcester. (New York: Free Press).To save time and energy through identical repurchasing and loyalty Guarantee . to its communication • Ethical .. production and marketing. brands perform several functions that add value and customer benefits: • Identification . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.. market share and profits . 22 . P. to its logo. J.To be sure of buying the best product in the category. R. 'Consumer Market Research Handbook'. to quickly identify sought after products • • Practicality . G. 1986 13 Golder.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.To be clearly seen.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. N. (London: McGraw Hill). May 1993. The brand leader is the most profitable and all beyond number two are unprofitable13.. in the following ways: • Brands. 158-170.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.8.To have confirmation of your self-image or the image that you present to others • Continuity .8.Satisfaction linked to the attractiveness of the brand. Premium pricing increases revenue. Journal of Marketing Research. 11 12 Kapferer.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. to make sense of the offer. the best performer for a particular purpose • Characterisation .Typically a brand leader obtains twice the market share of the number two brand. pp.. J. • Brand Leverage .
• The Brand Barrier . • Brand Loyalty and Beliefs .The product life cycle applies to products. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. companies such as Interbrand (see Appendix A). In addition. but there remains an ongoing controversy about how accurate and meaningful these measures are. and the characteristics of successful brands. in turn. Companies can maintain a brand while modifying the underlying product to account for new technology.Brand leaders usually have the financial strength to fend off competitors. This. • Motivating Stakeholders . The next chapter describes the process of how brands are built. the tools that are used. drives up share price and provides the basis for future growth. 2. The brand can also be used to penetrate new markets. They also tend to elicit community and government support. In trying to estimate the monetary value of brands. fashion or prevailing market conditions. and Young & Rubicam have created complex formulas. brand leaders can exploit their superiority in the market (e. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Coca-Cola “the real thing”).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. Johnson & Johnson with Tylenol).g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . not brands. When a company creates this type of customer preference and loyalty.Dominating a niche market is usually more profitable than being fifth in a large market.g. maintain good price levels and generate strong cash flows. 23 .Strong brands are more attractive to investors. it can build a strong market share. • Avenues for Growth .Companies with strong brands attract good recruits.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
it should provide a satisfactory experience and lead to a willingness to buy again.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 . This is illustrated in Figure 3. which are created through advertising.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. and keep it turning. and direct marketing. 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. To entice trial and repeat purchase requires triggering mechanisms. selling. brand awareness. If the offering is developed properly. The major characteristics of successful brands are also reviewed.1 . confidence and brand equity are built. This chapter spells out the traditional brandbuilding process. the next step is to get customers to try the brand. FIGURE 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. public relations.1. promotion. Once this has been established.1 INTRODUCTION Building a strong brand is a complex task. highlighting important factors that contribute to the success of each step along the way.
it is impossible to build a successful brand.a strong offer that a potential customer would find compelling and interesting. 26 .DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition.2 . a company must develop a strong understanding of who their potential customers are. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . 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. Without a good product or service. unless differentiation and awareness can be developed. In order to do this. and added value (AV). Similarly. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. In this way. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. 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 compelling value proposition is the combination of an effective product or service (P). a distinctive brand identity (I).2). As such.each is essential. FIGURE 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition .
Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. P. Gillette. Brand values derive from five major sources15: • Experience of Use . MA. P.the design.in many cases. 14 15 Doyle. In today's affluent society. 1986 27 . as they are to be about satisfying basic physical and economic needs14. layout and appearance of the brand can clearly affect preference by offering cues to quality. pp.. 'Marketing Management and Strategy'. providing confidence and incentive to trial.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Kellogg's) attached to a new product will transfer positive associations. 'What's in a Name? Advertising and the Concept of Brands' (Lexington.if a brand provides good service over time. which they perceive as meeting their needs. mean that buyers look for short cuts. if customers have faith that a brand will work. • Manufacturers' Name and Reputation . cosmetics and high-tech products. faith in brand generates satisfaction in use. 2nd Ed. • User Associations .In many situations a strong company name (e. People use brands to express their lifestyles.3. • Brand Appearance . Hewlett-Packard. or to gain a sense of belonging. these needs are as likely to be about satisfying self-actualisation or esteem needs. Coca-Cola. 1998.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. influenced by brand values. For pharmaceuticals. (Europe: Prentice-Hall). industry endorsements and newspaper editorials. it is more likely to work effectively for them. 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. the pace of technical change. it acquires added values of familiarity and proven reliability. interests.brands frequently acquire an image from the type of people who are seen as using them. 169 Jones. which are additional to those based upon real performance. the number of competing alternatives and the large variety of advertising and selling messages. Lexington Books). Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. Sony. Customers choose brands. • Belief in Efficacy . J. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations.g.. values or wealth.
friendly).the way the brand communicates through its advertising. Brand themes are the most flexible element and will tend to change with fashion. features. A company should seek to differentiate its brand through developing a distinctive identity. etc.g. (New York: The Free Press).2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. This may be different from the brand image. 1992 28 . and advertising. which depends on how the target market perceives the brand. packaging. and visual appearance).3: • The Brand Core . visual appearance. its personality and its image or self-projection . type of spokesperson / customer image used to advertise the brand).3.articulates the brand core in terms of the culture it conveys.Figure 3.g. which remains fixed over time. Themes include the physical appearance (logo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.the fundamental or genetic code of the brand. however the brand style and core tend to be less flexible. press releases. J. • The Brand Style .. its reflection (e. style or cultural differences from one country to another. and the relationship expressed (e. prestige. glamour. 16 Kapferer. colour scheme. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . • The Brand Theme . 'Strategic Brand Management'.
understanding the brand's core and style helps set the perimeters of brand extensions . J. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. 29 . Finally. below-the-line activities. advertising. 1992 The brand prism enables management to understand the brand. 'Strategic Brand Management'.g.. its strengths and opportunities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. (New York: Free Press).how far the brand can be meaningfully stretched to other products and market segments. Secondly.3 . structure and ease of use).KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. It also facilitates consistency in the message being transmitted through presentation (e. website design. and through line and brand extensions.
it should lead to satisfaction and re-purchase. pp. strategy (partnerships and alliances). • Interest .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. If the offering is developed properly.Product and service features...Figure 3.4. FIGURE 3.The company has to create awareness of the brand. (New York: Free Press). 17 Rogers. The value proposition must then be articulated in terms of the 'marketing mix' . they must learn about it. systems. deliver and reinforce this value proposition (see Appendix B . The value proposition must be communicated to entice customers to try the product / service. Personal sources such as word-of-mouth from friends. (New York: Free Press). 'Diffusion of Innovations'. pp.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.The McKinsey 7-S Framework). culture and staff needed to support.4 .Customers consider whether the product / service will meet their particular needs. Price. This learning is called the adoption process17 .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. Promotion and Place (distribution strategy). and its products / services. skills. Advertising and PR are common tools for achieving awareness.Customers need to be stimulated to seek information about the brand's uses. 'Diffusion of Innovations'. E.79-86 The Innovation-Adoption Model consists of: • Awareness . • Adoption . • Evaluation . E. features and advantages.79-86 30 . colleagues and opinion leaders become important influences at this stage. 1962.The customer is satisfied and decides to make regular use of the product / service. 1962.often referred to as the '4Ps' . • Trial . Before potential customers can buy a product / service. management style. and the product / service's perceived performance. the company must ensure that it develops the appropriate structure.
1991. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience.advertising. but enhanced customer interaction through relationship building. while strengthening the position and value of the brand. (New York: Free Press). Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . A. this process enables an exchange of information. pp. Through building relationships with customers. companies have used the tools of the promotions mix .5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction.. the company may supply customers with special equipment or tools (e. 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. This focuses on establishing a longterm. multi-transaction relationship.g. providing insight into customers' needs and wants. Internet linkages. companies can increase buyers' satisfaction. sales promotion. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. when each trusts the other to deal fairly and reliably.for example. In this way.136-142 31 .to move customers through the adoption process. personal selling and public relations / publicity . encouraging evaluation and trial. 18 Berry. 'Marketing Services: Competing Through Quality'. allowing companies to communicate regularly with their customers and customise their interaction. & loyalty / discount cards. Advertising and public relations can be effective in generating awareness and interest. 3. • Structural Ties .such as airline frequent flyer programmes. L. This is often referred to as Customer Relationship Management (CRM).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. Over time. direct marketing. Social Benefits . This information is a key competitive advantage. Customer service is an important element of this relationship. software) to help customers interact with the company. companies can increase the value of each customer. & Parasuraman.
Traditionally. which will add value and distinguish it from competition. companies must actively communicate it to the target audience to entice trial. and establish a trusting relationship.. which will communicate the brand's existence. including: • A Quality Product / Service Experience . 19 Doyle. Without building awareness. pp. It is easier to capture a share of the consumer's mind and build a customer base.If the brand is not the innovator. trigger trial and reinforce commitment to it. 2nd Ed. The Internet provides the opportunity for companies to create compelling value propositions never before possible.A successful brand requires an effective selling. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. companies have the opportunity to start building relationships with their customers. value proposition or augmented brand. As a result. If the quality of the experience deteriorates.a segmentation scheme.Being first into the market does not necessarily bring success.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. • Strong Communications Programme . while providing new tools for promotion. 'Marketing Management & Strategy'. Once the framework has been established and the organisation configured to provide this proposition. it must have a unique positioning concept . As such. strengthening the brand further. • Unique Positioning Concept . interaction and relationship building. 1998. • Time and Consistency . As customers build trust in the brand through satisfaction of use and experience.176-177 32 . it has a profound impact on the traditional brand-building process. • First-Mover Advantage . but it makes the task easier. advertising or promotional campaign. the brand is meaningless. 3.. (Europe: Prentice-Hall). and making it more difficult for competitors to emulate.Satisfactory experience is the major determinant of brand values. It often takes years to build up the added values. then its position will be undermined. when the brand has no competitors to rival its position. comprehension and intention to buy. or if the brand is surpassed by superior offers from competitors.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. brands were not built quickly. P.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. its function and psychological values.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
4. and a critical source of added value.1 . FIGURE 4. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. but in practice not in real time.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.1.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.1 INTRODUCTION The Internet is transforming the business environment.Figure 4. and the 'world wide web' (www) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. it is a common technology platform that allows computing devices to communicate with each other. This chapter provides an overview of the Internet and its defining characteristics. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. In essence. 34 . it offers a number of alternative channels that enable businesses and people to communicate. and provides the opportunity for dynamic interaction. creating new challenges and opportunities. The three core channels include e-mail (the most common). 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. which contain hypertext and pictures. In doing so. Information is becoming a major part of the products and services that people buy. news groups and mailing lists. E-MAIL Is the part of the Internet that most users use at present. Hypertext allows information to be organised in a user-friendly way that is easily accessible.
The context of the Internet and certain key developments are highlighted in the Figure 4. These characteristics combine to create a very powerful medium. and deliver new products and services at low cost.2. the Internet lets individuals and companies build interactive relationships with customers and suppliers. allowing both parties to identify each other and build one-to-one relationships . anywhere.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 . when the United States Defence Department developed the 'ARPAnet'. 7 days a week.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.2 (Note: 35 .not previously available with mass medium forms of communication. These defining characteristics have fuelled its explosive growth. • It Allows for Two-way Communication and Interactivity . 4.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. Graph is not drawn to scale). By allowing for direct. • It Overcomes the Barriers of Time and Space . which was intended to link military networks together. These qualities eliminate the barriers of time and space that exist in the physical world.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).this radically alters the process of interaction between communicating parties. ubiquitous links to anyone. regardless of where the computer or Internet access device is physically located.24 hours a day. The Internet can also be accessed at any time .The Internet is a global network and can be reached from everywhere.
ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000. 1998.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.3.000.000.com) 36 .3 . FIGURE 4.a PricewaterhouseCoopers Report. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 1. as cited in 'E-Business Technology Forecast' . 2000 Internet / ARPAnet was created Dell. 1996 (www.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.2 .economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1.000 10.Figure 4.000 1969: 10.000 100.
Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .). G. As shown in Figure 4.Higher PC penetration among consumers and companies . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. Multimedia development tools that can be used to create rich content. The growth in support services (e. The McKinsey Quarterly. The development of critical processes (ordering. there will be an estimated 375 million Internet users world-wide..CyberAtlas Internet Statistics and Market Research. increasing to 500 million users by 200220. The emergence of open standards in development tools and at the network protocol level (e.Content Aggregators .com) 37 .High-powered servers . No. FIGURE 4. web design.E-Marketplaces . L.g.Cheap microprocessors & RAM .2 20 'World Online Populations' . the momentum created by all these forces has created a virtuous cycle of growth.. 2000 (http://cyberatlas.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . Easier access to these networks provided by point-and-click web browsers. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . making it more cost effective for software developers and other technology providers to create interoperable products.internet.4 . offering inexpensive bandwidth. hosting.Cheap bandwidth .4. Reed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. 1996. 'Electronic Commerce (finally) Comes of Age'. payment. billing.g. TCP/IP). and gateway services).Low-cost networking alternatives . etc.Attractive infrastructure and middleware software .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.
as cited in the Economist Intelligence Unit (EIU). These activities highlight the adoption of the Internet as an interactive.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000). FIGURE 4.g.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. communication and information tool.eiu. to interacting (e.Figure 4. entertainment) and purchasing (37%) . April 13.from communicating (90% use e-mail) and sourcing information. 2000 (www.com) 38 . reveals the wide range of areas where people are embracing the Internet .5. chat rooms.
6 . These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. Instead there is a website. content. telephone) is that the Internet goes beyond just enabling transactions. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. April 2000 39 .4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. they all project the value e-commerce transactions to grow at unprecedented rates. and people. software.e.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. fax. The buyer and seller 'face' each other through an electronic connection. projected by Gartner Group. web browsers. FIGURE 4. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. and no cash register. The main difference between the Internet and other electronic media (i. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. no order book.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. There is no need to travel to a physical location.
Yahoo!). 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. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen.. the Internet is sidelining the role of many traditional intermediaries. suppliers. Volume 78 Issue 2. Dell Computers). CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. 'Meeting the Challenge of Disruptive Change'. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. pp. some of which look set to become the superbrands of the future (e. partners and other corporate constituencies. A 'virtual' presence can mitigate the cost of having to invest in physical facilities.g. and transforming traditional distribution channels.and revolutionary new business models are emerging.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. By allowing customers to talk knowledgeably and directly to suppliers. March . C. At the same time. 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. the explosion of information is placing a premium on skilled information management. For example. 66-76 40 . through the use of extranets). Although the particular impact will differ between industries.April 2000.how companies operate. The Internet also facilitates the development and co-ordination of global activities (e.g. Additionally. represents a level of efficiency and integration previously unattainable.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. M.g. how they compete and how they serve their customers . which are often disruptive to traditional business models21. This is threatening to undermine many old established brands. Harvard Business Review.. New brands and business models are emerging to seize this opportunity. operation (e. & Overdorf.
to capture new opportunities.forrester. constantly innovate. highest convenience and quickest satisfaction. improving processes. They can move from one supplier to another searching for the best prices. 22 Colony.. Customers have more options than ever before . as they are just one 'click' away.in developing products. getting closer to customers and ultimately staying ahead of competitors. as they have access to more information leading to more informed decision-making. their organisations must harness knowledge . little loyalty. products and services. allowing employees to share knowledge. combined with the emergence of electronic intermediaries. G. 'Empowered Fruit Flies' . As a result. Now companies need to move at warp-speed. ensuring the delivery of a satisfying customer experience. the globalisation of business. these new highly informed customers are "empowered fruit flies". CEO of Forrester Research22. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. commit and deploy resources. it also removes the geographical protection from competitors. or catalogues. the diminishing barriers-to-entry and the lower switching costs. 2000 (www.com) 41 . the typical clock-speed at which companies need to operate has accelerated.Forrester Research. fierce competition.internally and externally . and the 24 x 7 environment. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. The Pace of Business is Accelerating With the fast pace of technological change. It also provides easy access to competitors' offers and allows customers to consider every available alternative. empowered customers. This is forcing companies to become flexible and responsive to customer needs. quick evolution and all the power. and reorganise as appropriate. the development of a knowledge economy. collaborate more effectively and ultimately embed organisational intelligence within processes.they can choose between traditional 'bricks-and-mortar' companies. respond to competitive and market dynamics. has resulted in a fierce competitive environment. This. According to George Colony. with no time. online stores. switching costs are much lower. Internet technology can be used to exploit collective learning and knowledge.
and the need for speed and flexibility have accelerated the unbundling of business systems. combined with intense competitive pressures. Traditionally.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. Increasingly. which highlights the typical structure and dynamics of an online company. thus creating a 'value net23'. information.7. and partnering up with the best for the remaining activities. It allows companies to improve customer service. achieve global reach and realise a new source of cost advantage. However. how they want and with the levels of customer service they demand. New Ways of Organising and Structuring Business Transformed communications costs and capabilities are helping to drive a fundamental rethink of how firms should organise themselves. As such. 23 'The Future of E-Business' . when they want.A Research Report by TeslaGroup. linking companies with competitors and players from entirely different industries and business sectors. and multiple strategic alliances and partnerships. linking companies with suppliers and customers up and down a pre-defined value chain.(www. extensive outsourcing. variety. Examples of emerging information age business structures include flat versus hierarchical. and most traditional partnerships were vertical. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. alliances and partnerships have taken on a new level of strategic importance. supply chain cooperation. In this way. 1999 . most Internet and e-commerce partnerships extend beyond this. The opportunity of linking the complete supply chain 'virtually'. companies have looked upon alliances only as a means of filling gaps.com) 42 . companies can provide customers with a strong value proposition by offering them the best in quality. advice and convenience. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. The extent of this partnering is illustrated in Figure 4.teslagroup. it provides the opportunity to reach customers where they want.
Partnering with portals and affiliate web sites is important in driving traffic to a web site. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. G. New opportunities for efficiency and co-ordination are emerging. while triggering the emergence of new brandbuilding strategies..they are business issues.dot.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.7 . The Internet is transforming every business to some degree. 43 .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. 4.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. D. it is transforming the competitive landscape and brand-building environment. 'Organising for e-Commerce' . This provides customers with added value. 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. As such. tools and opportunities. & Stirton. This is the substance of the next chapter. the pace of business is accelerating and power is shifting to the customer. while making the offering hard to duplicate off-line. S.6 CONCLUSION The Internet and its strategic impact are not technological issues . competition is intensifying.a Boston Consulting Group (BCG) Analysis.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
Transactions on the Internet require customers to provide detailed personal information . brands have been developed in an environment whereby a company creates a brand. The limitations of brand-building on the Internet are also discussed.names. J.durlacher. in most cases. many unnamed customers develop a 'relationship' with the brand. and projects it onto a third party intermediary (the media). Customers derive added value through the provision of information on the products or services they buy. and the fact that customers are buying goods that. offers interactivity. In addition. as well as on topics of interest related to the brand and product characteristics25. they have never handled or seen (except on-screen). and sites that understand the user's needs and preferences24.sites that provide a wealth of information and make comparison shopping easy.Durlacher Research. people have concerns about sharing personal information. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. etc. including the interactive approach to attracting customers and building loyalty. On the other hand. This threatens to undermine the value of brands. Traditionally. People only tend to transact with sites they know and trust . credit card numbers. where the user feels a part of. has placed greater importance on trust and security. 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.com) 45 . in addition to providing added value. the Internet makes search and comparison much easier. the intangible nature of the Internet. In response.2 THE NEW DYNAMICS OF BRANDS Traditionally. However. on the other hand. addresses. 'Internet Portals' . The Internet. New strategies and tools for building brands on the Internet are identified. 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. Generally.. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. the logic of the Internet cuts another way. May 1999 (www.
TABLE 5. a company can listen... companies have to find innovative ways of leveraging the information and 25 McCann.Fuqua School of Business.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. D. understand and relate to customers. January 28. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. & Dorf.from the promises made in the value proposition.1. In doing so.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. relationship building characteristics of the Internet. 1999.Harvard Business Review. this also poses a challenge as these relationships may take on a life and character of their own.edu) 26 Peppers.. 1997 (www. to its delivery to the customer. In maximising the customer experience. rather than simply speaking at customers. learn. B.. 'Adding Product Value Through Information'. 151-160 46 . Duke University. J. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. pp. This creates the opportunity for companies to build stronger relationships than previously attainable.duke. Prof. brand-building must focus on the end-to-end customer experience . . M. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.1 . January-February. However. Rogers. 'Is Your Company Ready for One-to-One Marketing?' .
companies must ensure that they provide a completely satisfying end-to-end customer experience. Rastogi.bain. D. Zook. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . high-margin items.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. Kearney White Paper..A Mainspring Communication Report in collaboration with Bain & Co. 2000 47 . This view is reinforced by in-depth studies carried out by Bain & Co. it could be argued that customer loyalty is even more critical online. companies need to retain customers so that they return to the site repeatedly. D.pwcglobal. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. and some are spending over $50029. and Novak.org) 28 Rigby. T. customer acquisition costs are high. . Therefore. This is further reinforced by the fact that... R. . 1999 (www. March 17. Repeat purchasing not only binds trust. Harvard Business Review.. P. and with customers holding all the power. unless they are selling high-price. 27 'Electronic Business Outlook'...converence-board.com and www. and to recover their investment. - Repeat customers refer more people and bring in more business . L. MayJune 2000 30 A Forrester Research Study. C. S. 2000 (www. a disgruntled online customer tells 10 people about a poor experience30. 'How to Acquire Customers on the Web'..word-of-mouth is the single most effective and economical way online businesses grow their sites. These points stress the importance of online customer loyalty.often.due to more frequent shopping and larger purchases. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. 'The Value of Online Customer Loyalty and How You Can Capture it'. on average.com) 29 Hoffman. S. - Loyal customers are more willing to buy other products from the company. J. it is very unlikely that an online retailer can break even on a one-time shopper. In fact. For example. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer.An A. as cited in 'Creating a High-Impact Digital Customer Experience' . but also provides more opportunities for cross-selling. & Hancock. T. Baveja.Research by PricewaterhouseCoopers / The Conference Board. - Repeat purchasers spend more and generate larger transactions . Chu.
1. customisation for individual customers. increases disproportionately as more people join the network. and in the case of information-based products. (also referred to as 'viral economics'). 7th Ed. FIGURE 5. 'Positive Economics'. each additional unit sold does not cost more than the last to deliver. (London: Harper & Row). Once the up-front investments are made (for research and development and technology infrastructure). G... additional customers and transactions can be managed with limited fixed cost investment. 1989. this is not the case on the Internet. where the value of the network. businesses and online communities that rely on connectivity can enjoy 'network effects'. as the benefits of scale are overwhelmed by the disadvantages of size31. As a result. and the value that each member realises. additional products. and other features can be added or changed at low marginal cost. the costs approach zero32.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Even more important. R. as illustrated in Figure 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. Similarly.1 . However. 180-182 48 .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. pp.
cross-selling and up-selling33. advertising and referrals. its ability to track customer preferences and customise offerings improves.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. Outlook 1999. fulfilment • Defensible advantage against competitors SCALEABLE. direct marketing. being first into a market makes it easier to capture the consumer's share of mind. enhancing the interaction. This makes it more efficient in improving product selection. 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. '5 Rules of the eEconomy'.org Study in collaboration with The Boston Consulting Group.. including direct marketing. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. FIGURE 5. delivering increased margin per customer .2.2 . As the company builds a customer base and develops a relationship with customers. It also allows online companies to tap supplementary revenue streams. With no competitors around.A Shop. 21 . link revenues 32 33 Melnicoff.A Publication by Andersen Consulting 'The State of Online Retailing' . No. M.Figure 5. Nov 1998 49 .
with its e-mail lists. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. or until a competitor finds a way to change the game again.unless the leader makes a serious mistake. with a minimal budget and maximum effect. "creating a buzz". makes communication tighter.A Shop. The Internet. As a result. such as 'viral' marketing. as once a strong lead is established. This is the logic behind some of the extraordinary valuations of Internet companies. It is often referred to as "word-of-mouth". creating a potentially exponential growth (like a virus) in the message's visibility and effect. 5. and word-of-mouth even more effective. in turn. leading to the exponential expansion of the customer base. viral marketing is an effective tool in getting a message out fast. New marketing strategies. 34 'The State of Online Retailing' . provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. Nov 1998 50 . web sites. By the time a company has reached critical mass.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. This snowball effect favours first-movers.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. its growth curve relative to a new entrant is somewhat daunting. the brand begins to take hold. commerce and distribution partners. 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. This. As a result. Word-of-mouth is a particularly powerful medium. the value of the company rises exponentially with market share. larger sites can leverage more customer advocates to reduce customer acquisition costs.org Study in collaboration with The Boston Consulting Group. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. "leveraging the media". as it carries the implied endorsement from a friend. When a company reaches 'critical mass'. the leader will pick up momentum and will stand to gain an insurmountable advantage . and the cost of switching to an alternative brand becomes quite high. Larger sites can also negotiate better supplier discounts or product placement fees. and "network marketing". Given the connectivity of the Internet among customers. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. chat rooms and bulletin boards.
but Hotmail signs up more than 150. A traditional print publication would hope to reach 100. Hotmail acquired over 12 million subscribers. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out.5. and in doing so spread the word for Geocities.com was one of the first free web-based e-mail services.hotmail. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. friends to visit it.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. Today they are the largest e-mail provider in the world with over 40 million users. they tell all their 51 . where they have never carried out any promotional activities.000 subscribers every day. 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.com.000 subscribers within a few years of launch. saying: • "Get Your Private. whether for communications or community.1 The Case of Hotmail. eGroups and Geocities (both recently acquired by Yahoo!). and they created a subscriber base more rapidly than any company in history. and the message spreads organically. a company now owned by Microsoft. In fact.com The classic example of viral marketing is Hotmail. seven days a week. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. 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). they will have a powerful viral opportunity at their disposal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. When a user builds a website. Hotmail. and then propel the message even further to their own ever-increasing circles of friends and associates.5 years. Geocities enables people to create personal websites for free. • Each new user becomes a company salesperson. Free Email at http://www.
Zook. Sites that are difficult to use can cause frustration. 'The Value of Online Customer Loyalty and How You Can Capture it'. March 17. R. T.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. As 35 36 'Creating a High-Impact Digital Customer Experience' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5... C.. FIGURE 5. and 66% of people who start a 'shopping basket' fail to complete the transaction37.com) 52 . Chu. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. Price.An A. 2000 'The E-business Technology Forecast' . S.3 . The customers' ability to access and display information rapidly is extremely important36. T. Baveja.. Promotion. Kearney White Paper.An A. . the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.bain. 30% of potential customers leave sites because they cannot find what they are looking for. In essence.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . Place). 2000 (www. J. & Hancock.3). Rastogi. making customers 'click off' to another site.A Mainspring Communication Report in collaboration with Bain & Co.. D. 2000 37 Rigby.. In fact. S..A PricewaterhouseCoopers Report. Kearney White Paper.
FIGURE 5. ease-of-navigation. 1999 (www. as cited in Business Week.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. and a wide range of products. T.businessweek. online companies have the opportunity to provide rich.4. expert insights.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. as cited in Business Week Magazine. CIO Magazine. 'Sticky Business'. October 29.. and fast response times are among the most important factors in establishing web brand loyalty38. 29th October 1999 (www.4 . February 2000 Issue 53 . up-to-date information. which can enhance the company's value proposition. ease-of-use.businessweek. With almost infinite display space and inventory capability. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.com) Davenport. whereas a slow response time and site downtime will have a significant negative impact. 38 39 Cognitiative Inc.
demographics. Customisation Customisation involves tailoring the presentation of a web-site to individuals. K. Online sites can track a customer's purchase history and modify its service accordingly. 1999 (www. it needs a critical mass of members42.. share information and access a wide range of services. iVillage and Geocities). Community Online communities are emerging as new gathering places for consumers with similar interests (e. 3. and organise live events. 40 41 Morrisette. Other content includes community-generated content. 31% of online consumers use the Internet for obtaining product information.. Clemmer.com) McWilliam. which is facilitated by a combination of factors (Figure 5. Often. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).The McKinsey Quarterly.forrester. These sites allow members to interact with one another.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. A. visitors should not be engulfed with too much information. On the other hand. An online community offers a compelling way to entice customers back to a site. even if they purchase offline. which enhances the user's online experience. 1995. G.A Forrester Research Report.. & Bluestein. No. and advertising (if it is relevant and useful). Spring 2000 42 Armstrong. 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).g.. S. or prior transactions. 54 . For a community to work. as well as through loyalty programmes that provide targeted benefits. Customisation creates the feeling of a one-to-one relationship. based on profile information.. . An important contribution of these communities is that they provide members with a medium to communicate with each other. use bulletin boards. Members can interact in chat rooms. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction.5). and nearly 20% use it for post-sales support. W. 'Real Profits from Virtual Communities' . 'Building Stronger Brands through Online Communities' . & Hagel. It fosters a sense of belonging41 among the members. J.Sloan Management Review. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. According to Forrester Research40.
com) directly into the browser and access the site immediately.. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.brand-name.A PricewaterhouseCoopers Study. O'Donnell & Gupta.6). C. allowing customers to deepen their experience with a brand and build more personal connection.5 .www. they opt to input the URL (Internet address . This is similar to placing offline stores in high traffic areas. 'Making Real Sense of Virtual Communities' . March 1998. as well as attracting traffic from other sites. Mulcahy. Journal of Consumer Research. when membership in the brand's community becomes an end in itself43. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. pp. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.. 43 Fournier. and can create emotional loyalty.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED USERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 343-373... 1999 Communities enhance the speed and value of information sharing. M. Site-tosite connectivity focuses on connecting users to other relevant sites. Once customers know of a site. S. 55 . A. Companies can provide a selection of related links that complement the site's purpose and value proposition.
6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. (www. It is important in building relationships. In addition.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. activities. Customer Care Online customers often require assistance and reassurance. customer care activities can involve providing a variety of payment. Customers share security and privacy concerns. Other tools such as bookmarking the page can also facilitate connectivity. toll-free telephone numbers. online chat. which provide targeted and unique (customised) benefits to the customer. as well as informing and reminding customers of special offers. events and subjects of interest to the customer. and FAQ pages (Frequently Asked Questions) to solve problems. and online surveys. news up-dates. The development of loyalty programmes. 45 MarketWatch. delivery and return options. as well as features such as gift-wrapping. serves this purpose and helps to build customer loyalty. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail.com) 56 . Therefore. and can be provided through e-mail. customer support at all stages of the interaction is important. Communication can be tailored to specific user interests and should allow for two-way interaction. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. live chat.marketwatch.
. 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 ’ .Attract. Engage. Trial. Figure 3. e-mail notifications and banner advertisements.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. This model consists of five stages . modified to take into account of the interactive dynamics of the Internet. Newspapers.2. Therefore. links from directory searches (Connectivity).7.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. because there is no physical presence. M. No. and bring people to the site for the first time. Learn and Relate.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. visibility relies solely on Communication. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. A. 'Marketing to the Digital Consumer'.. This is more difficult online than offline. 180-183 (www. including affiliate programmes with other websites. McQuade. Adoption).8.Awareness.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.) to online tools.. Magazines.. McKinsey Quarterly. & Zeisser. The mechanisms to communicate range from traditional media (TV.7 . 1996. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. S. pp.mckinseyquarterly. Waitman. billboards. R. Evaluation. The company must build awareness and communicate its value proposition to its target customers. etc.4 . Interest. Retain. FIGURE 5.
as cited in 'Targeting Consumers via the Internet' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 3.7 4. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.com) The most effective methods are direct e-mail. discounted over the expected duration of the brand-customer relationship. public relations and television advertising.Economist Intelligence Unit 2000 (www. 58 .WEBSITE PROMOTION METHODS .5 3. multiplied by the expected rate of transactions.4 3.3 Source: Forrester Research.6 3.4 3.8 .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 . it is important to quickly engage consumers' interest before they move on. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.3 3.5) 2.ebusinessforum. The key factors at this stage are Convenience combined with interesting Content.1 3.0 3. Companies then need to engage customers to obtain their interest and participation. Engage With the multitude of choice available on the Internet. 3. affiliate programmes.8 4.4 4. Creativity is also an important factor in gaining attention in today's cluttered marketplace. Attracting customers is only the first step in building online brands. Kapferer's Brand Prism (Ch.3) is useful to ensure that a company develops a distinct and consistent brand identity.3 2. Fig.2 4.
Building up a knowledge database on each customer . if used properly. can create value for the customer and help build the brand-customer relationship. 5. and retaining customers and engaging them on an ongoing basis results in increased product purchase opportunities and provides the opportunity to learn more about the customer. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. such as groceries and convenience goods. 59 . This helps to create a customer base that spends more time and money at a site. a company can create value by providing a personalised online experience. • The Internet supports brand-building activities where there is a need to build a relationship. The initial site registration provides an early opportunity to obtain useful information. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. and must be continuously updated due to the multiple visit nature of customers. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. attitudes and behaviour). Certain product categories. Radio).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.9). and forge closer relationships than any offline operator. The objective is to increase the conversion rate (% of browsers converted into buyers). TV. Learn The Internet provides extensive opportunities to learn about consumers (demographics.g. Content is the basic driver of retaining customers on a site. and what additional products and services are they interested in provides companies with valuable information which. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Communities and Customisation are other sticky applications.who they are and why they shop online.
smell). In order to create "apostles". No. and the need to stimulate the other senses (taste. Waitman.mckinseyquarterly.. & Zeisser. • Brand-building favours products that can be sold online. R. the interaction provides the ability for companies to learn from their customers and relate. companies must provide a satisfying end-to-end customer experience . M. 5. McKinsey Quarterly..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. pp. the experience is the brand.. A. it is critical for companies to build relationships and foster brand loyalty. engaging and retaining customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. touch. The interactive brand-building process involves attracting.. providing further added value.from the promises made in the value proposition. 180-183 (www. and as the relationship develops. due to high delivery and transaction costs (relative to the value of the product).com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. 'Marketing to the Digital Consumer'.2. to its delivery to the customer.9 . The next chapter analyses the brand-building efforts of seven companies. 60 . Given the high acquisition costs of online customers. especially in small quantities. McQuade. it is not economically feasible to sell certain products. 1996.9 CONCLUSION On the Internet. These case studies provide a practical insight into how companies are building their online brands. However. S.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
its value proposition. greater convenience. It is the 57th most valuable brand in the world47. Amazon provides increased added value on several dimensions.2 CASE STUDY: AMAZON.com and Yahoo!.com) 62 .1 Company Overview Amazon. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).com launched with a mission to use the Internet to transform book buying into a fast.see Appendix A. innovation and delivering on its promises. and enjoyable experience.economist. and other key factors that have contributed to its success (or failure). Amazon has been able to differentiate itself from other online competitors. discounted prices.1 outlines Amazon's timeline and major milestones. Barnesandnoble. November 11.com . and one of the top two or three in Britain. 47 48 Interbrand (www. and higher levels of customisation and service than the traditional shopping experience allows.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow. more information. 1999 49 'Amazon's Amazing Ambition' .1 INTRODUCTION This chapter provides an analysis of seven companies. Through its provision of a one-stop shopping experience. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). the sources of added value (using the 7Cs Framework).com. Amazon. easy.COM 6. and is one of the few Internet brands that is recognised all over the world.It's an Ocean. In July 1995.Amazon.2 Value Proposition Amazon. Amazon.com's success stems from its compelling value proposition. 6. a company overview.interbrand. Not a River' .com) . combined with its levels of customisation and customer service.com has become synonymous with e-commerce. and has equity investments in several e-tailers. Amazon serves over 23 million customers from 160 countries. 'Amazon. and has sales of over $2 billion. it is the most visited e-commerce website in America. Boo. France. The cases are presented in the following sequence . including: increased selection. its brand-building strategy (how it generates traffic).2.2. 2000 (www. 6. Amazon has cultivated a reputation for excellence. February 26.Goldman Sachs Report. Each case is presented in the same format including.The Economist. In addition. Figure 6.com. eBay.com. In addition. Germany and Japan49.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. Gap.
com Amazon invests in Pets.Amazon announces investment in kozmo.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore." providing shopping from wireless devices.Amazon launches lawn & patio store .Amazon launches www.Amazon.Amazon and online car-buying service Greenlight.com opens its virtual doors at amazon. Ashford.com and NextCard launch co-branded credit card .Amazon.com .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon opens a customer service centre in Huntington.com Anywhere.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.toolcrib.com Auctions and zShops provide new tools to its merchant community .TIMELINE AND MAJOR MILESTONES Amazon.000 members Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.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 .COM .com Amazon acquires Back to Basics Toys to add to Amazon.Amazon enters strategic alliance with living. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.sothebys.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com Amazon announces further plans to expand distribution network to meet rapid growth.com. a tools and equipment store for professional tool users and woodworkers .com enters European book market Microsoft signs Amazon.Amazon opens customer service centre in The Hague .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com Amazon introduces "Purchase CirclesTM".com announce investment and strategic alliance .Amazon and eziba.Amazon.Amazon enters into a strategic partnership with Drugstore. Amazon.com via the new wireless pocket PC .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. such as the Palm VII organiser.New home living store from living.Amazon launches health and beauty store .com to create a "home living" store at amazon.com . West Virginia.com Announce Strategic Investment and Promotional Agreement . Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon launches new kitchen store .com Electronics and Amazon.com.amazon.com invests in wineshopper. workplaces. and minority investment in. universities.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.Amazon surpasses 20 million cumulative customer accounts .Customers can shop at Amazon.com .com 63 .amazon. featuring thousands of bestseller lists for hometowns. to meet rapid growth . and more Amazon launches "Amazon.com is founded by Jeff Bezos Amazon. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear. Software.
and customer Purchase CirclesTM. easy-to-use. encourage repeat visits and drive higher conversion rates. FIGURE 6.com All Product search (searches the entire web). including book jacket images. gift reminders.com Anywhere to support access from wireless devices (i.3 Sources of Value . discussion boards.1 . gift click.2. Amazon has added other features for shopping convenience. This is an example of 64 . mobile phones. logically structured. Content Amazon provides content on several levels. Palm VII PDA device). The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. such as the Amazon. the 1-ClickTM express checkout. live or study.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. recommendations. expert reviews.OVERVIEW OF AMAZON. book summaries.1. The site is easy-to-use.Figure 6. wish lists. Customer purchase circles allow shoppers to cross-reference similarities such as where people work.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. customer testimonials. interviews with authors.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. downloads quickly and services visitors adequately . and quick-to-load pages Over time. and Amazon.e. offering multiple paths to a given book or product.
therefore. Amazon's content is not reproducible by competition.4. while driving up repeat purchases and cross-selling opportunities. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.thereby increasing conversion rates. 65 . converting them into a storefront for Amazon. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. real-time shipping and backorder notices. In doing so. from its shopping basket applications which lists the estimated time to delivery reliably. creates a competitive advantage. which helps to build loyalty and create switching costs. Amazon creates one-to-one relationships with its customers. This customer-centricity is evident in all Amazon's activities. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. linking it to a large number of other sites. and has developed an Associates Programme. to the proactive notification of new items of interest.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. More recently. Connectivity Amazon has built relationships with high traffic web portals and sites. These are discussed in more detail in Section 6. and Customisation Amazon provides customised features and services. Community Amazon has also added a community element to the purchasing process. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.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 . By leveraging its vast customer base. and customer interaction. from the customer recognition at the point of interface (Figure 6. Amazon introduced Amazon.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest.2.
000 by August 2000.a move that along with the novelty of its business model and the newness of the Internet. enticing them to return to the site and purchase repeatedly.2). Business Week. As a result of all these factors (7Cs). and customers are also e-mailed when the items are shipped from the warehouse. Eyes and Editors. This enabled Amazon to reach more customer segments and niches (Figure 6.000 members. In the second half of 1996. 66 . In addition. Through the first half of 1996. and by 1999 it had over 200. The Financial Times. Newsweek. and not subsequent purchases. helped generate publicity and stories about the company in publications such as The Wall Street Journal. In July 1996. they are subsequently confirmed by e-mail. New Yorker and The Economist. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains 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. attracting member sites of all sizes.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. which only applied to sales that resulted from the initial click-through. two personalised services. 6. The Associates Programme has been phenomenally successful.2. increasing to over 500. Instead of paying directly for this exposure. it began to advertise in print media and online . Amazon offered Associates referral fees of up to 15%. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. Once orders are placed.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. help maintain contact and build traffic by e-mailing customers when desired products or books become available.
thereby promoting Amazon. People tend to tell their friends about it.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. In addition. mutual links. Amazon has used viral marketing techniques through customer reviews.com.co.com's website (www. and you are given a $5 gift certificate for each customer you provide.uk the local provider for Yahoo! UK & Ireland. each friend is sent a $5 Amazon.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. Amazon also established agreements with AltaVista. Netscape's Netcenter and NetSearch. and primary button placement on web portal search engines.de became the local provider for Yahoo! Germany and Amazon. The Yahoo! agreement. In return. including: America Online (AOL).amazon. multiyear deals involve exclusive book-selling rights. was also linked to Amazon's entry into Europe Amazon. • Amazon.COM'S ASSOCIATES PROGRAMME Source: Amazon.AMAZON.customers are encouraged to provide e-mail addresses of friends.allows customers to create a personal profile (with pictures) on the site. Amazon closed deals with five of the six most visited Internet addresses. 67 . Therefore. Prodigy and @home. and Geocities. Interesting viral initiatives include: • Amazon.com Refer-A-Friend . spreading the word for Amazon. These multimillion-dollar. free eCards and gift certificates (which customers send to friends.com About Me . Excite.com gift certificate (in your name).com).2 . From July 1997 to December 1998. the customer acquisition cost is only £10. Yahoo!.
According to Jeff Bezos. and improved customisation and recommendations (e. newspapers) to generate awareness. with the explosion of websites. 50 Willis. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. Amazon maintains a database of customer preferences. Magazines. As the relationship develops. Once customers are attracted to the site. community feel (as discussed previously). so we didn't have to do much advertising. And we relied on word-of-mouth to build awareness. interesting content. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) have significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams. This 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. C. That's not possible anymore50". Amazon has been able to achieve average customer acquisition costs of less than $20 . which accounts for 66% of Amazon's sales.com Really Matter?' .Forbes. Amazon has also incorporated traditional offline media (TV.g. With this combination of promotional methods. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. "we had a world-class site the day we launched . Purchase CirclesTM). Amazon is building customer loyalty and encouraging repeat business. buying patterns and viewing habits.but it was only a tenth as good as the site we have now. Amazon's proven online merchandise selling techniques including easy-to-use search options. By relating to customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. billboards. however. clear presentation. 1998 68 . April 6. 'Does Amazon.significantly lower than other online companies.. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base.
Amazon received criticism for expanding its product line. 51 52 Hazleton. As such. good value. 'Business the Amazon. thereby diluting the value of its association with books. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. For example.2.. developing customer service centres and expanding its distribution network to support high levels of service.a wide range of choice. to capture the spirit of the site. establishing a reputation for excellence and fulfilment. which within six months propelled Amazon to one of the leading online music retailers. L. We were blessed with a two-year head start. Amazon was able to secure partnerships and alliances with key players. Amazon is constantly seeking new ways of improving its offering.. Amazon unveiled a music store. Success.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. 1999 69 . As such. However. "Online. In addition. Amazon's understanding of its brand identity has been a critical factor. and according to Jeff Bezos. (Oxford: Capstone Publishing). he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Saunders. because he wanted it to be short. This has helped them attract customers and move up the learning curve quickly. According to Jeff Bezos. establishing Amazon as the leading online bookseller with a large customer base. and to convey its vast size and offering. memorable. due to the hype and coverage it was given. in June 1998. We have been customer obsessed. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. the balance of power shifts away from the company and goes towards the customer. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations).com obsessed52". Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. further enhancing their value proposition. management realised that Amazon had become more associated with other core brand values . Our secret is that we have not been competitor obsessed. and its safe and secure delivery. Amazon has been able to build a strong brand at relatively low cost. and our goal is to increase that gap51". In addition.com Way'. "we're not a stationary target. while our competitors have been Amazon. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. R. July 1998. According to Jeff Bezos. Nevertheless.
B. and to sustain a positive image and satisfactory end-to-end experience. have kept it ahead. October 12. Amazon's intense focus on customer needs and continual innovation. However. The key factors driving its growth and high retention rates. as the true value of a brand lies in its sustainability. speedy delivery and good value. however. they have cultivated a reputation for excellence and fulfilment. which is critical on the Internet. This customer-centricity is a key hallmark of a successful Internet brand. Amazon delivers on its promises of a wide inventory of products. distribution centres and upgrading the site. Volume Discounter' . Nevertheless. the drain on their cash resources will push them towards bankruptcy. with new products and value added content. and investors lose confidence. Quality is only measurable in the minds of visitors to the site. not necessarily a reality. stem from its compelling value proposition and high quality end-to-end customer experience.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. In doing so. Amazon is claiming to be making profits on its books and music categories. This raises a critical issue. Amazon has also benefited from a first-mover advantage giving it an edge over competitors.Brandweek. 53 Warner. perhaps trying to defend its view that losses taken to build market share can reap profits later. if it continues to incur losses. 'Marketers of the Year: Jeff Bezos.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. Amazon also recognised that service quality is a perception. When they're young. 6.2. they're stretchable and pliant. it has not recorded any profits to date. secure payment procedures. but over time they become more and more associated with a particular thing and harder to stretch53".. Although Amazon has successfully built a strong brand and loyal customer base. 1998 70 . Amazon has continuously invested in customer service.
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 .3 CASE STUDY: BARNESANDNOBLE.com) .Offers same day delivery in Manhatten .Acquires equity stake in Mightwords . Barnesandnoble. Barnesandnoble.TIMELINE AND MAJOR MILESTONES . Currently. Barnes & Noble Inc. book databases.COM . Inc. TABLE 6. is one of the best known traditional booksellers in the United States. as it could capitalise on the infrastructure and back-end operations (warehouses.com is approximately 40% owned by Barnes & Noble.Barnesandnoble.com was able to 'hit the ground running'.) established by its parent company.com announces strategic relationship with Palm Computing .com provides other online categories offering software.com).2 1997 January BARNESANDNOBLE. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.2. Barnesandnoble. contacts.Barnes & Noble University opens registration for free online courses . Launched in 1997. Dalton bookstores (located in shopping malls). and 20% owned by the public.Acquires minority stake in NotHarvard. 40% owned by Bertelsmann AG.Announces distribution relationship with New York Times September . rare.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. magazines.COM 6. Barnesandnoble.Launches Affiliate Network December .com . and is the second largest online bookseller (after Amazon. promotion) between the online store and the retail stores have been kept separate.Barnes & Noble went online at AOL May .3.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.Launches Internet Radio . However.1 Company Overview Barnesandnoble. etc.. Barnes & Noble Inc.com is the fourth largest e-commerce retailer54. all front-end operations (marketing.com and Microsoft announce that they will create an eBook superstore .Launches BNTV .Launches Video Store 71 .Barnesandnoble. and 470 B.com's timeline and major milestones is outlined in Figure 6.Barnes & Noble.barnesandnoble. Besides books.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . prints & posters and related products.com launched its website (www. music.
com or www. logically structured. previously-owned and rare books.com's virtual storefront is graphically richer than Amazon. in terms of the 7Cs framework.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. software. Both Amazon.3 Sources of Value . Both have expanded their convenience to offer 54 Media Metrix. Barnes & Noble planned to dominate online book-selling. etc.com's website (www. Both offer detailed bibliographic information.com's (Figure 6.3. music New Initiatives Barnesandnoble. the company created a site very similar to Amazon.3.barnesandnoble.com's and takes a bit longer to download. In addition.2 Value Proposition Barnesandnoble.bn. the features are practically identical. including title.com and barnesandnoble.com let customers sign up to receive email reviews and announcements of new titles. good prices. as well as an extended searchable catalogue of millions of out-of-print. edition. rich editorial content and a community experience.3 . publisher.com offers customers an easy-to-search catalogue of virtually every book currently in print. easy and secure ordering.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.3). 6. author. FIGURE 6.COM'S WEBSITE Simple. they offer customers fast delivery. but instead of developing an outstanding interface to its inventory. however.OVERVIEW OF BARNESANDNOBLE.com) 72 . as cited on Barnesandnoble. and easy-to-navigate site Categories focus on books.
a replica of Amazon's Associates Programme.com closed 1999 with 4 million customers. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. and avoid charging sales tax in states where it has stores56. while Amazon.64 billion. it lags behind first-mover Amazon. Yahoo!. this programme had more than 300.4 Brand-Building Strategy Barnesandnoble. Instead.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com.com's $1. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Netscape and Microsoft Network.The Wall Street Journal.com's 1999 revenues were $202.1 billion. As of February 2000. and Barnes & Noble Inc.3. and both are expanding globally. compared to Amazon. however. Lycos. These initiatives have generated traffic to the site. prevent cannibalisation of its existing business.6 million. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Barnesandnoble. Both try to foster a community of readers by letting customers post reviews online. while Amazon. Both offer customisation that permits users to personalise the experience. has yet to leverage its strong brand in cyberspace. Barnesandnoble. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com had over 17 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com was valued at $21. December 17.com's market capitalisation was $251 million.com has created a high quality website and customer experience. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. However. 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 . Webcrawler. Barnesandnoble. They have developed an affiliate programme that links sites to Barnesandnoble. The 6.com in return for a commission on any purchases that they originated . Although. reasons for this are explained in the next section. Both offer 'associate programmes' that let other websites link to their sites. Barnesandnoble.000 affiliates in its referral network.
Recent Initiatives Barnesandnoble.com.com has lost access to valuable customers..BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble.com. By failing to leverage it. Under the seven separate agreements. with a similar discount. LLbean.com offers links to each partner's site and a discount for visitors who click-through. as Bertelsmann's book division includes partners such as Random House.com. • Barnesandnoble. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com created a new cross-marketing genre in February 2000. in-store displays. and in recent months has aggressively sought new ways to differentiate itself. Barnesandnoble. At any given point there are hundreds of customers browsing their aisles looking for something to read. Planetrx.com. Jcrew. and leverage its real-world presence. Petsmart. 1-800Flowers. provides access to valuable resources. Unfortunately.com is its association with Barnes & Noble Inc.com. people began using their stores as a physical showcase for online rivals such as Amazon. 74 . and the tangibility that this provides. Barnesandnoble.com's link to Bertelsmann AG. and its BMG Entertainment division includes music giants Arista Records and RCA Records. in the attempt to gain traction and build momentum.com has changed its name to Barnes & Noble.com. To signal its intentions.com.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet).com and VitaminShoppe. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. Barnesandnoble. or deliver books directly from the retailers. • Barnesandnoble. 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. In return.com's key differentiator from Amazon. and Internet terminals in the bookstores.com should have aggressively cross-promoted their stores through advertising. Barnes & Noble University (a free online education resource). Barnesandnoble. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. • In addition. each partner offers a similar link to Barnesandnoble. content and distribution opportunities.com.com.com has begun to acknowledge some of these mistakes. Barnesandnoble. and a same-day delivery option in Manhattan.com.
com has been able to create a high impact and high-quality customer experience. it has not been able to establish itself as the leading online bookseller. a wellestablished Internet brand.com) 75 .com . 57 'Bn.com and has given them the image of a second rate 'me too' brand. Barnesandnoble. 2000 (www. Barnesandnoble. by portraying them as slow and clumsy in comparison to the more nimble Amazon. feature for feature) has failed to differentiate Barnesandnoble. even if that means eating into their existing sales. meant that Amazon. In addition.forbes. and its lack of innovation (by copying Amazon. August 4. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". and allowed them to offer stock options as compensation and achieve a high market capitalisation.com.Not a Best Seller' .com's late start in 1997.its key differentiating factors. The Press have also contributed.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. The company failed to leverage its established brand.com's experience is instructive.6 Conclusion Although Barnesandnoble. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and was further up the growth curve. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. it also caused a major setback. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.Forbes.3. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. otherwise they risk losing out to other online competitors. customer relationships and offline presence . significant market momentum.
COM .com opens its virtual doors' . Italy and Spain within a few months.com provided a range of 18 fashion and footwear brands including DKNY. among others.Raises funding of $125 million .Announces it has only 500. Puma. However. Sweden. within six months Boo.com. 1999 76 .Multi-million pound advertising campaign created by BMP DDB .4. arranged through J.fails and appoints KPMG as liquidator. it means all that brand's product line is available. due to its poor performance and inability to build a customer base.4 CASE STUDY: BOO.Appeals for $30 million more funding . as cited in 'Boo. On going live. Boo. November 2000 January February May 6. sack 20% of staff and sell stock at 40% discount .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". After a high profile launch.they redesign site. Boo.3 1999 Mid year BOO. and the resulting loss of investors' confidence. Boo.2 Value Proposition According to Kajsa Leander.4. England. If a clothing brand is on the Boo site. and was billed as one of Europe's hottest e-commerce ventures.com. as well as create a kid's site.First sign of problems . 58 Kajsa Leander. Everlast. 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. Germany and Denmark.000 unique visitors . Finland.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). Morgan. founder and Chief Marketing Officer of Boo. receiving $125 million of funding.TIMELINE AND MAJOR MILESTONES . and Converse. it's about range and convenience.com had set the record as Europe's best-funded European Internet Start-up. and included high profile investors such as Bernard Arnault.COM 6. TABLE 6. Boo.1 Company Overview Founded in 1999. and eventually debut in Asia.com collapsed through lack of funds. They intended to add France. CMO of Boo.Site goes live . June 10. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Company is put up for sale.com entered six markets: US. "our marketing thrust is not based on prices. P.Marketing Week. not the limited range you might get at most London fashion shops58".
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
$22. convenience.5 CASE STUDY: CDNOW 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . good prices. On 19th July 2000. daily music news.ten times the selection of a conventional bricks-and-mortar music store). a valuable and rewarding experience"63.Launches merged CDnow/N2K site . former arch rival . as well as music reviews.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. guides to music genres.Partnership program with Geffen Records . It has a customer base of 4 million people. T.000 sound samples. cover art.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.000 music-related products and 650. CDnow provides access to over 500. & Novak. announce marketing alliance . TABLE 6. May-June 2000. pp. and they aim to "make every visit to the site.Harvard Business Review. 'How to Acquire Customers on the Web' . CDnow is the leading online music store.com) 80 .cdnow. and exclusive interviews and reviews from CDnow's award-winning editorial staff.Merges with Columbia Records .179-188 63 CDnow website (www.TIMELINE AND MAJOR MILESTONES .4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. D.Site goes live . and was the first site to offer the sale of music downloads and custom CDs.1 Company Overview Founded in 1994. CDnow is also driving the digital distribution of music.000 people. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5. customisation and a wealth of information and content to help in the purchase decision. by twin brothers Jason and Matt Olim. and one of the most popular shopping sites on the Internet62. features. whether for browsing or buying.5 million distribution deal with Lycos Signs three-year.Merges with N2K.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.Raises $10 million through private placement . $18.000 music related items .Forges distribution partnership with Yahoo! $65.CDnow and Time Inc. 62 Hoffman.. CDnow was acquired by Bertelsmann AG.5. and an average daily audience of over 800.
. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).5.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. For example.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.5 . By partnering with well-known content providers. etc. and has secured rights to music reviews. CDnow has cultivated similar relationships with MTV.Figure 6. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. 81 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CDnow has leveraged the reputation of their brands to reinforce its own. The whole process of searching for albums or music titles to the actual purchase is simple . artists biographies. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. FIGURE 6. easy-tonavigate. to make it easier for customers to explore new music and make informed purchasing decisions.5.3 Sources of Value . cover art.
Spanish. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. By customising the store to meets customers' needs. Customer Care CDnow's site can be viewed in English. CDnow developed the Fast Forward Rewards programme. Whenever a customer makes a purchase they earn Fast Forward Reward points. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . and could consider introducing customer reviews or set-up communities around different music genres such as a Jazz Club or Classical Club offering members relevant content and the option to chat with other club members. In addition. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Excite. Community CDnow has not exploited the potential of creating a community feel. allow customers to keep track of albums to buy in the future. CDnow hired a group of multilingual customer service representatives to handle questions. It also creates switching costs. Yahoo!. it gives them a sense of ownership and a compelling reason for them to return. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas.such as AOL. allowing them to respond to detailed customer queries. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. which accumulate and can be spent on a variety of music-related products. they will be reluctant to visit another online store and enter the information again. Other features such as My CDnow's Wish List.search engines. Due to International interest.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. and key news and entertainment sites .from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). an incentive programme that rewards customers and encourages them to connect back to the site. and Geocities as well as more focused specialist sites. Portuguese. 82 . German. Dutch and Japanese. Internet access providers. French. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. Italian. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites .
Spin. and spot radio to build reach. Excite and other powerful Internet content and service providers. CDnow extended its distribution reach to include more than 250. as well as more-targeted music-related sites like Billboard. By keeping the brand in front of the customer in this way. • Affiliate Programme . Yahoo!. It is a revenue-sharing arrangement. and radio spots on the Howard Stern Show to build a cult following among radio listeners.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. covering the entire music spectrum.000 small. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. According to Jason Olim. CDnow's initiatives include: • Banner Ads . These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. • Traditional offline Media . CDnow is doing everything it can to ensure that the next time that 6. print advertising is music-related publications such as Rolling Stone. this is their "most successful customer building programme64". integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. • Alliances and Partnerships . giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. and Variety.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. they buy from CDnow.They have also stuck exclusive alliances with AOL.Through the Cosmic Credit Programme.CDnow's advertisements are targeted to some degree. customers buy music.5. 83 . 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. music-oriented websites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account.
The story of how CDnow was founded in a basement. resulting in increased conversion rates. This has contributed to a 225% increase in sales (1997: $17.htm) 84 . with repeat customers accounting for more than 50% of sales. 1998: $56.com/cdnow. and scaled it awareness-building efforts. and to increases in the customer base of more than 30% quarter-to-quarter.(www.Press Release.hsny. In fact.Hampel & Stefanides (www. word-of-mouth accounts for the lion's share of CDnow's customers. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . It is a powerful source of acquiring new customers at low cost. The company continually pushed for new distribution partnerships to widen its sphere of influence. Public relations efforts helped to generate word of mouth and influence sales. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.As for many successful online retailers.com) 65 'Pioneering in Cyberspace' .they were the first site to offer the sale of music downloads and custom CDs.5. • Word-of-Mouth . CDnow's promotion strategies have attracted high levels of traffic. April 28. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. it is in this context that the large investments in advertising and partnerships make sense.4 million. as a way to fuel very lucrative word of mouth.CDnow made public relations a high priority brand-building tool. It is constantly adding new functionality to the site and has been innovative in its offering . 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. both in the online and offline worlds.4 million). 6.cdnow. 1998 .
CEO of CDnow. 2000 p. as cited in Carpenter. "eBrands . "your brand is not just what you say . CDnow has developed a relationship with Valley Records.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. 66 Jason Olim.it's what you do66". 2000 p. P. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. to ensure quick delivery to customers. This gives the customer the impression that the order is being handled quickly. They also provide the customer with an order number and customer support contact information should they have questions. combined with the high impact customer experience created . 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. and ensure that it exploits its early-mover advantage and keeps ahead of competition. a record distributor that handles the majority of CDnow's fulfilment logistics.89 67 Jason Olim. This. According to Jason Olim. "eBrands . P. CEO of CDnow. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. (Boston: Harvard Business School Press).Building an Internet Business at Breakneck Speed". The development of an extensive affiliate network.from how CDnow has personalised its product offering to its capable customer service team . It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns.75 85 . as cited in Carpenter. 6. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. (Boston: Harvard Business School Press).5. and innovative. It was able to create a strong value proposition and high quality customer experience.Building an Internet Business at Breakneck Speed".
the eBay community has grown to include more than 10 million registered users. Sellers pay a nominal fee for placing an item up for sale. 1st October 1999 86 .A Harvard Business School Case Study.6. extensive selection and geographical reach.6. People perceive the auction format to offer better prices.000 new items joining the "for sale" list every 24 hours69.782 million in January 200068. with emphasis being placed on its unique community feel and culture. 6. and eBay never takes possession of the item being sold.eBay website (www. According to Meg Whitman. (A)' . from collectibles and antiques to electronics and toys. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. garage sales.g.ebay.2 Value Proposition eBay offers consumers an efficient. flea markets and auctions. collectable shows. Since its launch in September 1995.ebay. shipping. or the payment for the item . payment) between themselves.25% to 5% of the final sale price on any item sold. and eBay receives a transaction fee that ranges from 1. global trading place for buying and selling personal items in an entertaining auction format. Auctions make it fun. with the number of unique daily visitors setting a record of 1. The buyer and the seller work out the logistics of the transport (e.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. This is a new market .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and eBay provides added value through its convenience.eBay website (www.6 CASE STUDY: EBAY 6.com) 70 'Meg Whitman at eBay Inc. Auctions are an enabler.Company Overview' .the closest thing in the offline world are trading forums such as classified ads. Auctions represent a platform. transportation and other overhead costs.Company Overview' . eBay is not about auctions.com) 'eBay . Individuals use eBay to buy and sell items in more than 4. CEO of eBay. as cited in 'eBay . "at its core. There are over half a million new auctions.300 categories. 24 hour a day. and 450. eBay effectively created a new business model never before possible .removing the need for inventory.efficient one-to-one trading in an auction format.
eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .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. Unlike the previous case studies discussed. This raises challenges in how to control and influence the customer experience. 1 is have a great customer experience71". the eBay customer experience is based on how their customers deal with each other. Norfolk & Virginia Beach.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. as they rarely deal directly with the company. and Salt Lake City .eBay goes live . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay goes live in Australia . .eBay goes wireless with Palm VII connected organiser . allowing users to create personal homepages .Launches "My eBay!" to customise the online auction experience .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. .eBay and AOL launch co-branded site .eBay introduces eBay Magazine in collaboration with Krause Publications.Com form alliance - 6.Germany's leading online person-to-person trading site . and two books -.eBay expands strategic relationship with Netscape .eBay acquires alando.eBay IPOed raising $58 million .de .eBay launches 'About Me' feature. and raises $700 million . Still the vast majority of our new users come from word-of-mouth. Seattle & Tacoma. Providence. Las Vegas.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .eBay teams up with Carclub. Selling.eBay acquires Kruse International .eBay acquires Jump Inc. "the first brand-building strategy that we have is to have a great customer experience.Business Week.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 . Milwaukee. Dallas & Fort Worth. and its online trading site (Up4Sale) . 21st May 1999 (www.6. co-marketing relationship.S. and Collecting Just About Anything and eBay for Dummies. they try to influence customer behaviour by encouraging them to adopt certain values. Nashville.businessweek. The Official eBay Guide to Buying.The 7Cs Framework According to Meg Whitman. emphasis is placed on community development and customer care.com) 87 .eBay launches local websites in Baltimore & Washington DC. Since eBay cannot control how one person treats another.eBay and First Auction sign a partnership agreement .eBay acquires Butterfield & Butterfield. Boston. And you only get word-of-mouth if you have a great customer experience.eBay and Ultimatebid.3 Sources of Value .eBay acquires Blackthorne Software GO.America Online and eBay announce strategic marketing alliance . So brand-building job No.Compaq Computer Corporation and eBay form a strategic U.com to provide automotive service for eBay Users . and in terms of the '7Cs'.
OVERVIEW OF EBAY'S WEBSITE Customisation Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. 88 . This contributes to the community feel. eBay had a 'wake up call' when the website crashed for 8 hours. easy-to-use online service (Figure 6. eBay has also expanded to accommodate access through wireless devices for added convenience. Nevertheless. which is much more demanding on the system. and since. topically arranged. angering hundreds of thousands of eBay users. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. Other content includes the banner ads. they have continually invested in system capacity. categorically arranged.6 . and adds to the experience and the discovery of the auction process. and easyto-use site allowing multiple options for browsing Added convenience and sense of community through option of focusing on local area Unlike most websites that simply post content.6). Content Content is primarily user generated through the items listed for sale. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. FIGURE 6. increasing the risk of outages. eBay's site has to process thousands of live bids simultaneously.
by the people.as eBay users refer to themselves . 89 . and in doing so. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. working together and helping each other offline. has enabled eBay to foster a strong sense of community on its site. However. the culture has come under strain due to the company's rapid growth from a small community into a "big city". This has created a self-regulating mechanism that encourages good behaviour. and there are several reports of eBay users vacationing together. discuss topics they care about. Recent initiatives such as the development of local websites in major US cities (e.eBay represents more than just a place to buy and sell goods. After a sale. the community spirit and personal relationships also transcend the online experience. autonomy. eBay Boston. for the people". e-mail. which is posted to the site. a monthly newsletter. To encourage this sense of community. each user is encouraged to submit feedback through eBay's 'Feedback Forum'.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. and share information. Whitman describes eBay's community culture as a site "of the people. bulletin boards. respect. eBay offers its users category-specific chat rooms. Community eBay attributes much of its success to a strong sense of community among its users. a "giving-board" for charitable donations to user-identified causes. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). It is a place where people can meet with similar interests. and is considered by many users as one of the best features on the website. For many 'eBayers' . This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. eBay Salt Lake City) have helped them restore that community feel. empowerment and equality. In addition. eBay's community has a distinct culture based on trust. which is then added to the partner's trading profile.
They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. and the introduction of two specialised customer support groups . in which the company hired active. eBay's approach to customer care has evolved over time. Customer Care eBay controls neither end of the transaction. This also reinforced the company's respect for. Communication eBay maintains close communication with its members. knowledgeable.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. This was later expanded to include customer support representatives who worked out of eBay's headquarters. 90 . the largest of which was with AOL. By using its own enthusiastic. geographically dispersed users as customer support representatives. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. These people worked from their homes. links to high traffic sites. eBay also engaged in marketing partnerships. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. eBay employed a "remote" customer support model. and willingness to empower. fraud. answering e-mails and responding to questions posted on the site's bulletin boards. and respected members of its own user community to serve as customer support representatives. During the first two years. which was dedicated to investigating misuses of the system (e.the Community Watch group. eBay has invested in customer care and support to ensure people conduct safe transactions. which was dedicated to monitoring the site for illegal and infringing activities. its user community. but they have other partnerships with over 150 websites of varying scales. Customer support activities were constantly upgraded and expanded as the business developed. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. As such. eBay was able to cost-effectively offer 24x7 customer support early on.g. and the Safe Harbour group. shill bidding) and helping to resolve user-to-user conflicts.
provide a wealth of information about the 'ins and outs' of trading on eBay. and maintained the same ratio for 1999. 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. Through this combination of its advertising efforts and targeted promotions. Doll Collector) and appearance in trade shows.a four-year. Mary Beth's Beanie World.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and facilitate the spread of positive wordof-mouth. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins.6. $75 million joint marketing alliance and development deal. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. Selling. but they have other partnerships with over 150 websites of varying scales. as a result of the high quality experience it provides. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e.3 million in advertising. they decided to target their marketing efforts on these heavy users. whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. eBay Magazine. who tended to be serious collectors. In 1998. representing about 40% of revenues. and Collecting Just About Anything and eBay for Dummies. eBay has been able to attract a large customer base. The AOL partnership was one of the largest strategic partnerships on the Internet . 91 . eBay decided that it would not enter into major portal advertising deals in the short term. The Official eBay Guide to Buying. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Recent promotional initiatives include its new publication. eBay transformed from a pure online play into a 'clicks-and-mortar' company.g. As a result. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Early on. Based on this. the largest of which was with AOL. These new publications appeal to the collecting spirit. eBay has since expanded its promotion efforts and engaged in marketing partnerships. and two books. they spent $12.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and highlight opportunities created by e-commerce.
Their focus on heavy users and targeted promotions. This has become part of the eBay culture. "the devil in so much of this is in the detail. This is achieved by listening to their community (learning) and developing new improved products and services (relating).BUILDING SUCCESSFUL BRANDS ON THE INTERNET eBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer 'lock-in'. eBay has also faced difficult challenges in scaling the organisation fast enough. 6. the Personal Shopper and the eBay Life Newsletter. such as the Feedback Form. And while we have to move very. As a result.contributing to its strong lead and competitive advantage. which in turn attracts more sellers .businessweek. and according to Meg Whitman. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. however. as they could not opt for a 'go slow' strategy.Business Week. and their first-mover advantage. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. which were all ideas of eBay users. their ability to create a new market using Internet technology. and according to research carried out by eBay. 21st May 1999 (www.6. However. have been key factors that have contributed to the success of the brand.5 Conclusion eBay's compelling value proposition.the ultimate network effect . which has established eBay above other online auction communities. eBay attracts a broader selection of buyers. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions.com) 92 . 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . have been instrumental in building a 'quality' customer base. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. I think you are not well served by moving incredibly rapidly and not doing things well72". The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. very fast.
1 Company Overview Gap opened its first store in San Francisco in 1969. and analysts estimate that sales in 1999 amounted to $50 . Gap Inc. 1999 76 Jeanne Jackson. head of Gap Online. announce multi-year partnership.'s website (www. 6. 1999 93 . and today it is the 29th most valuable brand in the world73. Inc.$100 million. letting customers access the Gap brands.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.7.Business Week. Gap started selling items online . from jeans and T-shirts to khakis and jackets.7.see Appendix A Gap. In addition. the growth prospects are enormous. This success is largely due to their simple formula . Germany and Japan. 73 74 Interbrand (www. Gap.gapkids.gapinc.interbrand.htm) 75 Jeanne Jackson.com' . L.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and BabyGap. Gap online exploits the accessibility and convenience of the Internet. The Gap offers a balance of modern and seasonal styles of clothing. Canada.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. and Gap online provides access to the full range of items at Gap.com/about_us. California GapKids opens its first store BabyGap is born Gap opens its online store at www. whether in the store or online76". to provide customers with greater convenience and options.com) . as cited in Lee. online sales are only available to US customers. In late 1997. however. surpasses $9 billion in net sales and increase earnings by 54% over previous year.800 stores in the US. According to Jeanne Jackson. L."to deliver style. 'Clicks and Mortar at Gap.com. and provides useful insight into how traditional brands can leverage their strength online. 'Clicks and Mortar at Gap.Business Week. TABLE 6.COM 6. from shirts to accessories and hard-to-find sizes.babygap. Gap's online sales tripled in 1998 alone. standard styles are well suited to online shopping. October 8. service and value to everyone74".6 1969 1986 1989 1997 1998 1999 - GAP & GAP.com is an example of successful crossover marketing. up from $20 million in 199875. UK.gap. America Online (AOL) and Gap Inc.COM .an early convert to the then-revolutionary idea of clothes retailing on the Internet.7 CASE STUDY: GAP.2 Value Proposition Gap's simple. Its reach extends across more than 1. Currently. as cited in Lee.com and www.com' . "this is about being clicks-and-mortar. and are still relatively small compared to Gap's $9 billion in annual sales. October 8. GapKids.
April 18. 'Mind the Gap'.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.7 .. Unlike Barnesandnoble..3 Sources of Value .. making it convenient.. Visiting the gap.. reinforcing its brand identity. and Customer Care.com store one immediately notices the consistency between the online and retail stores. 1998 94 . from the blue and white colour scheme to the easy-toshop format . but provides customers with the option of viewing text-only. Executive Vice President of Global Marketing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. FIGURE 6. The Observer. describes the company's brand personality as "direct and straightforward. the extensive integration of Gap's online and offline activities are clearly evident.. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. Michael McCadden. Content.The 7Cs Framework In terms of the 7Cs framework..making visual references to its offline roots.com. feel and design of the site is consistent with the bricks-and-mortar stores. The site also offers sharp graphics.7. This personality is reinforced online through the simple structure and layout. Simple. making navigation even faster. and easy-to-use.. Gap Online primarily focuses on Convenience. D. very efficient"77.very easy.
and customers can register to get e-mail reminders of upcoming holidays and birthdays.as most Gap online shoppers have a good idea of how Gap clothes fit. 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. Gap. In addition. as well as sample all of the latest shades of fingernail polish on a virtual hand. and customers can view their latest TV adverts for buying inspiration. which would not be possible in the store.com's content consists of detailed information on its full range of products. The site's virtual style feature also allows customers to mix-and-match combinations of clothing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. Gap does not provide any community features on its site. twice a month. The Gap site connects to other Gap online stores including GapKids and BabyGap.com allows customers to track the status of online purchases and provides contact information on the nearest store. once customers are registered online. standard styles are well suited to online clothes shopping. and had recently established marketing deals with AOL and CDnow. allowing shoppers to contrast different cuts and styles. Gap communicates with customers through customised e-mails. Gap.com also provides a Gift Central feature which offers gift suggestion from Gap. customers can return goods purchased online to their neighbourhood store. and goods bought online get returned at the same rate as store purchases . In order to integrate its offline and online operations and logistics. Unlike the case of Boo. GapKids. By doing so. 95 . and BabyGap. Gap has also developed an affiliate programme. without causing complications. Gap's simple.com. However. Gap made a decision to charge sales tax on online sales.
com has links with CDnow to cross promote websites. Gap has also supplemented this with online promotions: • In August 1999.4 Brand-Building Strategy . Gap secured a 3-year commerce and marketing agreement with AOL.com has been able to piggy-back on The Gap's offline advertisements (in TV.com in return for a 5% commission on every sale referred through the site. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. These efforts doubled the size of Gap's e-mail database.gap. it is fully leveraging its offline presence to build awareness. Magazines. • 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. • Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. • Gap. by displaying the URL (www.com. 96 .7. In addition. In certain high traffic Gap and GapKids stores. however. either online or in stores. by offering a 10% discount and free shipping on their first online purchase. etc. Most of Gap's online traffic is generated by leveraging its physical presence. or to refer shoppers to Gap's website. billboards.) that also promote the online store.com) in store windows with the slogan "surf.com has also created an affiliate programme encouraging sites to establish links to gap. on counter cards. 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. whereby for every $100 a customer spends at Gap Online. they send the customer a $20 Gap ShopCard. Gap has held in-store campaigns to get customers to submit their e-mail addresses. which displays "Shop online at www.shop. which can be used towards future purchases. on shopping bags and even on the cash register. providing a useful way to directly reach customers.gap. To convert walk-in shoppers to cybershoppers.Extensive Integration Gap.com" on the display screens between transactions.ship". Store clerks are also trained to look for products online for their customers if the store does not have them in stock.
have already established the back-end operations and can use them as the cornerstone of their online business.7. thereby reinforcing its brand identity.thereby increasing the company's reach.5 Conclusion Gap. while reaping the benefits of low customer acquisition costs and extended reach. and allowing each to leverage the strengths of the other. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. provides existing customers with added value through the convenience of purchasing online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com is an example of successful crossover marketing. By aggressively marketing both the stores and the website. 97 . whereas established companies. and can also provide access to different customer segments who may not usually buy the products at all . The Internet. Pure online players have to invest heavily in logistics. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. such as Gap. Gap has been able to significantly strengthen their brand-customer relationship. on the other hand. With their brand awareness and network of retail outlets. Gap had a significant advantage over pure online players in attracting customers and building critical mass.
household and business user reach.interbrand. lies the directory . and the number of websites continues to explode.1 Company Overview In April 1994.8. The Strategy. from e-mail services to stock quotes and much more. Yahoo! was founded by David Filo and Jerry Yang.2 Value Proposition At the core of Yahoo!'s value proposition. As the first online navigational guide to the web. 78 79 Interbrand (www. The Stock' . advertising.com) . and is one of the few Internet companies to turn a profit early in the development of the Internet. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. As such. Yahoo! offers a range of supporting services that add value. 6. two Ph. There's nothing in the real world to compare to that79". According to Timothy Koogle.com) 98 . 1998 (www.8 CASE STUDY: YAHOO! 6. CEO of Yahoo!.see Appendix A 'Yahoo! . Yahoo! is a leading guide in terms of traffic.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.8. the site was receiving 1 million hits per day.D students at Stanford University. who started an online guide as a way to keep track of their personal interests on the Internet. the amount of information. September 7.businessweek. Yahoo! has since morphed from an ordinary search service into a global Internet communications.The Company. The company's global web network includes 23 world properties outside the US. The concept exploded (through word-of-mouth) and in less than six months. all in a single location.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Business Week. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.
com. Palm computers). 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. regardless of platform (i.3 Sources of Value .000 shares at $13.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! unveils Yahoo! Finance Vision . Their goal is not to list everything under the sun. More recently.Yahoo! acquires Arthas.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .Yahoo! Shopping launches personalised shopping service 6.Site goes live September . and unveils Yahoo! Digital Introduces Bill Payment services . mobiles. to provide web-based services to PalmTM handheld computers . 99 . Yahoo! extended its convenience through its Yahoo! Everywhere service..8 million IPO (2. to allow access.8.00 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.7 YAHOO! .e.The 7Cs Framework Convenience Central to Yahoo!'s success.8).com allowing them to offer person-person payment solutions .600. is the way it has structured and displayed information.Receives $1 million in venture capital funding from Sequoia Capital $33.Yahoo! forms agreements with Palm Inc. TVs.Yahoo! Launches Business-to-Business Marketplace . .TIMELINE AND MAJOR MILESTONES 1994 April . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. 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! acquires eGroups .
easy-touse. from stocks and sports results to weather and air fares. Their thrust has been to provide valuable content to customers. the end-user. and is similar to a custom tailored newspaper (Figure 6.9).OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple.8 . and has been at the heart of Yahoo!'s growth and development. They have formed multiple alliances and partnerships with leading online companies such as Amazon. ranging from daily news and weather reports to road maps and books. and quick-toload webpages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies. By tailoring the information to users' preferences.com and CDnow. the partner. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. This creates a win-win situation as its satisfies Yahoo!. Yahoo! has increased customer loyalty and retention rates. 100 . well structured. and more importantly. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. while providing partners access to a large customer base.
and e-mail. one-to-many. Yahoo! has also implemented campaigns to persuade users to bookmark the site. Connectivity Connectivity is Yahoo!'s core product. telephone and even traditional mail. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. and many-to-many. Customer Care Yahoo! responds to customer inquiries via e-mail. In 1999. Yahoo! acquired GeoCities. and plans to incorporate other features such as online chat to facilitate communications. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. fax. It keeps customers on the site for longer periods. 101 .9 . or to make it their home page. and encourages them to return frequently. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. Yahoo! spends more on customer support than most companies. reinforcing the brandcustomer relationship.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. message boards. and the nature of the navigation business. and contributing to their reputation as a quality service provider. where groups of people with shared interests can communicate through chat. and is driving Yahoo!'s multiple partnerships and alliances. to provide its customer base with access to useful links and content.
people who are not yet online but are likely to use the Internet in the near future. Yahoo! maintains close contact with customers. Yahoo! avoided characterising itself as a technology-oriented company. Their strategy was to target "near surfers" . which conveyed the brand's irreverent personality. Yahoo! aggressively promoted the site through public relations. Intelliquest. recognise the name Yahoo!. and according to Intelliquest80.intelliquest. As a result. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . and it formed a critical link in Yahoo!'s brandbuilding strategy. This was especially important. While Internet companies were targeting existing Internet users through the use of online promotion methods. as experience surfers tend to be loyal to their search engine. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". In 1996. Yahoo! also encourages customers to e-mail ideas and feedback. At the time this was considered a breakthrough. 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. TV commercials and radio spots during drive time. and an inherent friendliness. therefore.8.a sense of irreverence. 80 'Web Survey Shows Yahoo! Tops'. (www. 6. 82% of Internet users and 23% of people intending to go online. Given the unease with which the average consumer approaches technology. an approachable nature. These near surfers represented (and still do) a large and fast growing group and. by building a recognised brand name.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often.4 Brand-Building Strategy Yahoo! is a marketing machine. Yahoo! would be one of the first sites that they visited.com) 102 . and through communications via email. Yahoo! extended beyond this to use traditional offline media. and its implications of a good time. Yahoo!'s brand-building success starts with its name.
with its name being plastered on everything. VP-Brand Marketing. Although this seems like a shotgun approach. parachutes. new services and customised features highlight their ability to relate to customers' needs. a monthly magazine guide to what's new on the web and it has co-branded products. customers quickly discover its value and through a high quality experience (7Cs). which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. ER) and Hollywood movies. August 26. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products.yahoo. 1997 (www. a little wacky and inviting'.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . p.Advertising Age. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . it's too late. the research shows that 73% of Yahoo! users bookmark the service . Yahoo! adopted 'guerrilla marketing' techniques . Visa and MCI. They also teamed up with publisher Ziff-Davis Co. snowboards. services and contests with well known brands such as Ben & Jerry's. May 3. Once customers access the site. Yahoo! has managed to cultivate high brand loyalty. According to Karen Edwards. According to a recent study. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. and yo-yos. sailboats. breath mints. 1999. including backpacks.it must reinforce the image of the company as 'a service that is fun. as well as TV shows (Ally McBeal. which has been instrumental in establishing Yahoo! as a household name. T-shirts. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. Yahoo! has paid little for this exposure. stating that "if we wait to hear about it in the news.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. They even have a barter deal with the San Francisco 49ers. We need to be one step ahead in order to have a better service than our competition82". In addition.higher than all other services81.Yahoo! Press Release. and 76% turned to Yahoo! before visiting another search engine or navigational site. to create Yahoo! Internet Life. s4 103 . organisers. Their innovation.
its choice of partners. to its simple design. VPBrand Marketing of Yahoo!. its excellent customer service. and its openness (for example. first to turn around an annual profit. These relationships have provided end-users with added-value. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. have created a distinct brand identity that differentiates the brand and appeals to its target market. As the first online navigational guide to the web. from its convenient and logical structure and display of information.com. In addition. GoTo. and other search engines at the bottom of its search results page). Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. In addition. HotBot. Yahoo! points them to its competitors by including links to AltaVista.8.Advertising Age. while attracting new customers. their innovative promotional and guerrilla marketing techniques. first to go public. while also associating Yahoo! with well known brands. Yahoo! has invested relentlessly in new services and marketing programmes.6 Conclusion Yahoo! is one of the most successful brands on the Internet. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . and first to go mainstream by advertising its name using traditional media. if a user cannot find what it is searching for. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. May 3. They have maintained that lead through the creation of a high quality end-to-end customer experience. alliances and acquisitions to provide added value services to their customers. with a large customer base and high levels of customer loyalty. Yahoo! has benefited from a first-mover advantage. 1999.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. To maintain its lead. they have carried out extensive partnering. s4 104 . that have set it apart from the pack. 6. and has cultivated a reputation for excellence. As a result of all these factors.8. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. p. Yahoo! has built a strong brand.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
integrated customer acquisition strategies. and by partnering with well-known brands. As a result. while ultimately benefiting the end-customers. to distinguish themselves from competitors. these companies must have an inherent understanding of their brand identity and core values. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. By distinguishing their offering and focusing on unique sources of value-added. Alliances and partnerships play an important role in achieving speed and momentum. but also provide added value to the brand community. a company can leverage the partner's brand and reputation to reinforce its own. variety. and convenience. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. and exclusive alliances can lock out competitors from valuable content or online real estate. ranging from online methods to traditional offline media. The most successful partnerships are symbiotic matches. 108 . They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. leading brands have focused on building strong partnerships and alliances. whereby each party benefits from the other's expertise or skills. offering customers the best in quality. content. In addition. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. to maintain consistency. brands are harder for competitors to emulate. these companies are creating even stronger value propositions. before it fractures. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. as well as determine how far the brand can be meaningfully stretched to other products and market segments.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. particularly to secure content and widen reach to new customer segments and niches.
and it can acquire customers while it is still inexpensive to do so. These brands are accumulating knowledge about customers. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. In many cases. by providing better services. The challenge then lies in keeping up the momentum. these well-publicised brands also took off. and benefited from additional hype. As Internet penetration exploded. It locks up important content and distribution partnerships. customisation and customer care. By getting to market early. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. and develop a detailed understanding of their customers' needs. through past transactions and solicited input. to create new services and content that satisfy customer needs. that comes with innovation. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. and traffic. the company benefits from the buzz. these innovations are difficult for competitors to reproduce. Many strong online brands were also early-movers on the Internet. A first-mover advantage is an important asset for an online brand. By leveraging unique customer information. are leveraging this customer knowledge (learning) to nurture relationships (relate). giving the brand an edge. and differentiating it from other brands. 109 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. and by focusing on customer needs. and extensive word-of-mouth due to its novelty. and it aligns itself with the most influential venture capital sources. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and are continuously adding new services and functionality to their sites. the innovations are the result of the company's ability to data mine its vast database of customer information.
Nevertheless. In doing so. clicks-andmortar brands are providing customers with true added-value. while reaping the benefits of lower customer acquisition costs and extended reach. one component remains unchanged . They have an established brand. expand the brand experience to meet customers' expectations in the online world. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. Brands and brand-building tools tend to be associated with consumer markets. As such. building relationships and satisfying needs. Nevertheless. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist.value remains (and always will) the basic building block for every successful brand. They possess critical assets that give them an advantage over pure online start-ups. tools and key factors outlined in this dissertation are also applicable to business markets. The Internet has radically changed the business and competitive environments. however. 7. with the emergence of wireless access and new platforms.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. the concepts. 110 .factors that clearly differentiate them from pure players. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. there has been a limited time horizon to evaluate the durability of Internet brands. ongoing research would be necessary to build on the findings of this dissertation. Yet while everything is being turned upside down. and a physical presence (tangibility) . Having established a strategic perspective on building online brands. Through extensive and seamless integration.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. drawing on several case studies from business markets. an in-depth analysis. established fulfilment systems and infrastructure. they are equally important in business markets. Therefore. but at the same time. would represent an exciting opportunity for further research. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. established customer relationships. In addition.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
225 11.806 11.806 2.761 1.262 1.076 3.603 5.792 3.Interbrand's Ranking of the Top 60 Brands (www.694 17.909 7.781 33.313 2.595 17.043 8.932 4.interbrand.184 1.596 3.281 11.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.602 4.329 4.550 12.568 3.766 14.422 1.895 2.132 15.310 11.231 12.404 4.319 1.197 32.804 2.052 6.985 2.648 1.634 1.283 4.464 3.845 56.654 43.527 3.894 14.502 33.147 9.193 112 .781 17.275 30.423 2.643 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .181 21.048 20.681 2.231 24.143 2.101 9.155 7.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) 83.021 26.830 14.361 1.510 8.
1982 113 . commit and deploy resources. and as the business environment changes.. It is critical that all these dimensions come together and are re-enforcing. As a result. Internet companies must be able to move at warp-speed. and reorganise as appropriate. all their operations. 'In Search of Excellence'. the informal management style and the constant strategy re-calibration. and structures are aligned differently. * Peters. constantly innovate. T. As such. whereas entrepreneurial Internet companies must focus on 'managing for change'. and the emergence of a knowledgebased economy. with the fast pace of technological change. respond to competitive and market dynamics. all these dimensions must change accordingly. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. R. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. (Harper & Row). However. They must move quickly to capture new opportunities. global competition. activities. & Waterman.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. customer empowerment. The fundamental difference is that traditional companies have focused on 'managing for efficiency'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . showing how they are interrelated.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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