1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


1.7.4 6.Extensive Integration 6.5 Conclusion Case Study: CDnow 6.7.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.6.4 Brand-Building Strategy 6.8.5 Conclusion Case Study: Gap.2 Value Proposition Value Proposition Company Overview 6.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .1 Company Overview 6.1 7.8 Case Study: Boo.5 Other Factors That Contribute to their Brand Leadership 6.com 6.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.The 7Cs Framework 6.1 Company Overview 6.8.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy .5.1 Company Overview Other Factors that Contribute to their Brand Leadership 6.8.3 Sources of Value .com 6.The Failure of Boo.3 Sources of Value . Sources of Value .6.7 6.4 Brand-Building Strategy 6.6.5 6.6.The 7Cs Framework 6.The 7Cs Framework 6.6 6.2 Value Proposition 6.2 Value Proposition 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 Brand-Building Strategy 6.1 Company Overview 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.2 Value Proposition 6.com Brand-Building Strategy 6.The 7Cs Framework 6.4.3 Sources of Value .

3 Figure 3.7 Figure 6.1 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 .4 Figure 2.4 Figure 4.5 Figure 6.4 Figure 4.1 Figure 6.com's Associates Programme Overview of BarnesandNoble.6 Figure 2.6 Figure 4.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.6 Figure 5.2 Figure 2.3 Figure 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.2 Figure 2.4 Figure 5.8 Figure 3.4 Figure 6.2 Figure 6.3 Figure 5.7 Figure 2.1 Figure 2.5 Figure 5.7 Figure 5.1 Figure 4.5 Figure 2.com's Website Overview of Boo.1 Figure 1.5 Figure 4.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .1 Figure 5.3 Figure 4.2 Figure 3.2 Figure 5.8 Figure 5.8 Figure 6.6 Figure 6.9 Figure 6.com's Website Amazon.2 Figure 4.3 Figure 6.

Timeline and Major Milestones Yahoo! .com .Timeline and Major Milestones CDnow .2 Table 6.1 Table 6.5 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .6 Table 6.Timeline and Major Milestones BarnesandNoble.com .com .Timeline and Major Milestones Gap.3 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.4 Table 6.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones eBay .Timeline and Major Milestones Boo.


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

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

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

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

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


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

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

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

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

or dissatisfied with the purchase decision.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand. After a consumer has actually purchased the product or service. as these services are intangible and therefore. A consumer's decision to modify. even delighted. A consumer tries to deal with this by gathering information from friends. somewhat satisfied. If performance falls below their expectations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. they will evaluate their level of satisfaction . and especially important when dealing with purchases made through the Internet. and a preference for recognised brands they can trust. These expectations are formed through a combination of past experiences. advertising and communication. customers make decisions purely on the basis of their expectations. Customer satisfaction and loyalty are essential to creating successful brands. they will be dissatisfied and look for alternative brands in the future. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. If perceived performance and quality exceed their expectations then they are satisfied. Expensive purchases involve some risk taking. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. word-of-mouth. Customers' expectations are particularly important when dealing with services. locking out potential competitors. postpone. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. their negative attitude may influence the consumer's purchase intent or vice versa. 17 . or avoid a purchase decision is heavily influenced by perceived risk.the customer will be highly satisfied.

Nov-Dec 1995.5. The customers at the bottom end of the scale are "terrorists" . T. At the opposite end of the satisfaction spectrum are "apostles" .. & Sasser. Johnson & Johnson. 'Why Satisfied Customers Defect' . Nov-Dec 1995 Hart. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Trust is critical for a brand's success.those who actively attack the brand telling others not to buy from the company.. and believe that it will always act in their best interest. 'Growing the Trust Relationship'. FIGURE 2.customers who are satisfied and loyal and talk favourably about the brand . Customers that are passionately or emotionally loyal are those that have built trust in a company. p.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. This satisfaction encompasses the whole experience and not just a company's products or services. Marketing Management. E.Figure 2.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. W.Harvard Business Review.Harvard Business Review. 'Why Satisfied Customers Defect' . and Johnson. Saturn.. 91 Loyalty is derived when customers are continuously satisfied over time. D. Spring 1999 18 . & Sasser. Southwest Airlines and Xerox7. 6 7 Jones. E.. M.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. Federal Express. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney.. T. C. Hewlett-Packard.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 'The One to One Future'.they provide good word-of-mouth and are the best salespeople for the product / service 2.7 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. There is also clear evidence of this on the Internet. 8 9 Peppers.. consistent orders Satisfied customers are the best advertisement .Sloan Management Review. 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. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. Emotional loyalty can be also created through the formation of a strong user community around the brand.. 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. G. 1993 McWilliam. Harley-Davidson motorcycle clubs). D. Spring 2000 19 . This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Firstly. 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). with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. M.g. & Rogers. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.com. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. emotional loyalty is born out of a consumer's personal relationship with a brand. In this way. 'Building Stronger Brands through Online Communities' .

However. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.7)..6 . Emotionally loyal customers build a sense of trust and two-way commitment with the brand.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. FIGURE 2. there are brands that customers perceive as acceptable and would not resist buying. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. and understanding the needs and buying processes of the target market is essential. 2. Journal of Consumer Research.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. Beyond this.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. 343-373. S. A stronger brand enjoys a high degree of brand preference over competing brands. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). there are brands that are unknown by most buyers. pp. 20 . March 1998.7 . a 'powerbrand' tends to have a high degree of brand loyalty. whereby customers would be unwilling to substitute it with competitors' offers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. which goes well beyond the satisfaction of a specific need. FIGURE 2.

FIGURE 2.8. D. 1991 21 . D.8 . which is the value of the brand over and above its commodity value. 1991 10 Aaker..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". strong brand associations.Create Awareness . (New York: Free Press). 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. (New York: Free Press).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. and other assets such as patents. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. The benefits of each are outlined in Figure 2. perceived quality. and relationships with distributors and strategic partners. name awareness. trademarks. According to David Aaker (1991).BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . The major brand assets are brand loyalty.

Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.8. • Brand Leverage . 1986 13 Golder. (New York: Free Press). 'Consumer Market Research Handbook'. 1992 Worcester. the best performer for a particular purpose • Characterisation . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .To have confirmation of your self-image or the image that you present to others • Continuity . N. and the number two twice the share of the number three12. 3rd Ed. to quickly identify sought after products • • Practicality . to its logo.Satisfaction linked to the attractiveness of the brand. G. Journal of Marketing Research.. market share and profits . in the following ways: • Brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2..2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. May 1993. P. 22 .1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. pp. 11 12 Kapferer. production and marketing. Premium pricing increases revenue. J.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation .To save time and energy through identical repurchasing and loyalty Guarantee .To be sure of buying the best product in the category.. to its communication • Ethical . R. J.To be clearly seen.Typically a brand leader obtains twice the market share of the number two brand. 158-170..The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. 'Strategic Brand Management'. brands perform several functions that add value and customer benefits: • Identification . (London: McGraw Hill). & Tellis.8.. to make sense of the offer. & Downham. The brand leader is the most profitable and all beyond number two are unprofitable13.

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


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

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

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

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

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

17 Rogers.The customer is satisfied and decides to make regular use of the product / service. • Trial . 1962.79-86 The Innovation-Adoption Model consists of: • Awareness .. If the offering is developed properly.often referred to as the '4Ps' . 'Diffusion of Innovations'. strategy (partnerships and alliances). • Evaluation . (New York: Free Press). Before potential customers can buy a product / service.79-86 30 .The McKinsey 7-S Framework).4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. and its products / services. pp.Figure 3. E.The company has to create awareness of the brand. it should lead to satisfaction and re-purchase.Product and service features. The value proposition must then be articulated in terms of the 'marketing mix' . Personal sources such as word-of-mouth from friends.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. colleagues and opinion leaders become important influences at this stage. This learning is called the adoption process17 . and the product / service's perceived performance. Advertising and PR are common tools for achieving awareness. The value proposition must be communicated to entice customers to try the product / service. (New York: Free Press). • Adoption .4.Customers consider whether the product / service will meet their particular needs. 1962. Price.4 . Promotion and Place (distribution strategy). management style. deliver and reinforce this value proposition (see Appendix B . skills. FIGURE 3. systems.Customers need to be stimulated to seek information about the brand's uses. E. they must learn about it.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. culture and staff needed to support.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.. features and advantages. pp. the company must ensure that it develops the appropriate structure. 'Diffusion of Innovations'. • Interest .

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

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


which contain hypertext and pictures. creating new challenges and opportunities. 4.1 INTRODUCTION The Internet is transforming the business environment. and a critical source of added value. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. FIGURE 4. 34 . In essence. 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. The three core channels include e-mail (the most common).Figure 4.1. 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. In doing so. but in practice not in real time.1 . it is a common technology platform that allows computing devices to communicate with each other.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people. and provides the opportunity for dynamic interaction.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. Hypertext allows information to be organised in a user-friendly way that is easily accessible. it offers a number of alternative channels that enable businesses and people to communicate. and the 'world wide web' (www) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.

when the United States Defence Department developed the 'ARPAnet'.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). These characteristics combine to create a very powerful medium. • It Allows for Two-way Communication and Interactivity . • It Overcomes the Barriers of Time and Space . anywhere. and deliver new products and services at low cost.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. 7 days a week. the Internet lets individuals and companies build interactive relationships with customers and suppliers.24 hours a day. which was intended to link military networks together. The Internet can also be accessed at any time . These defining characteristics have fuelled its explosive growth. The context of the Internet and certain key developments are highlighted in the Figure 4. 4. ubiquitous links to anyone.The Internet is a global network and can be reached from everywhere. regardless of where the computer or Internet access device is physically located. allowing both parties to identify each other and build one-to-one relationships . Graph is not drawn to scale). By allowing for direct.2.1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs .not previously available with mass medium forms of communication.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. These qualities eliminate the barriers of time and space that exist in the physical world.this radically alters the process of interaction between communicating parties.2 (Note: 35 .

1998.3 .economist.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell. as cited in 'E-Business Technology Forecast' .3.2 .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist. 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.000.com) 36 . largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . 1996 (www.a PricewaterhouseCoopers Report.000 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. FIGURE 4.000 100.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.Figure 1969: 10.000 1.000 10.

2 20 'World Online Populations' . hosting. and gateway services).. The emergence of open standards in development tools and at the network protocol level (e. the momentum created by all these forces has created a virtuous cycle of growth.4 . billing. FIGURE 4. The McKinsey Quarterly. The growth in support services (e. No. 'Electronic Commerce (finally) Comes of Age'. The development of critical processes (ordering.internet. payment. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.Cheap microprocessors & RAM . 1996.4. Easier access to these networks provided by point-and-click web browsers.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . increasing to 500 million users by 200220.. Multimedia development tools that can be used to create rich content.High-powered servers .Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .Low-cost networking alternatives . making it more cost effective for software developers and other technology providers to create interoperable products. As shown in Figure 4. offering inexpensive bandwidth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.Content Aggregators .Higher PC penetration among consumers and companies .E-Marketplaces .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . Reed.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. etc.). TCP/IP).g.CyberAtlas Internet Statistics and Market Research.Cheap bandwidth .g. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. web design. 2000 (http://cyberatlas. there will be an estimated 375 million Internet users world-wide.com) 37 .Attractive infrastructure and middleware software . G. L.

WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. entertainment) and purchasing (37%) . as cited in the Economist Intelligence Unit (EIU). to interacting (e.eiu.com) 38 . reveals the wide range of areas where people are embracing the Internet .g.Figure 4. communication and information tool.5. These activities highlight the adoption of the Internet as an interactive. chat rooms.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).5 . 2000 (www. FIGURE 4.from communicating (90% use e-mail) and sourcing information. April 13.

Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. and people. April 2000 39 . Instead there is a website. web browsers. FIGURE 4.6 . These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. telephone) is that the Internet goes beyond just enabling transactions.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. fax. and no cash register. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. no order book.e. projected by Gartner Group. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. they all project the value e-commerce transactions to grow at unprecedented rates.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. content. However. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. The buyer and seller 'face' each other through an electronic connection. There is no need to travel to a physical location. software. The main difference between the Internet and other electronic media (i.

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

4 . Interest. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. Evaluation. & Zeisser.. Figure 3. 1996.2. visibility relies solely on Communication. Adoption). McKinsey Quarterly.8. 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 ’ . and bring people to the site for the first time. etc. links from directory searches (Connectivity). which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. The mechanisms to communicate range from traditional media (TV. No. e-mail notifications and banner advertisements. 'Marketing to the Digital Consumer'. A.) to online tools. Therefore. R..Attract. modified to take into account of the interactive dynamics of the Internet.. This model consists of five stages . Retain. McQuade. M.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Waitman.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. S.7. The company must build awareness and communicate its value proposition to its target customers.7 .Awareness. because there is no physical presence.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. This is more difficult online than offline.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Engage. Learn and Relate. including affiliate programmes with other websites. Newspapers.mckinseyquarterly. pp. 180-183 (www. FIGURE 5. Trial. Magazines.. billboards.

5 3.3 2. 58 .3) is useful to ensure that a company develops a distinct and consistent brand identity. as cited in 'Targeting Consumers via the Internet' .3 3.8 4. it is important to quickly engage consumers' interest before they move on.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Companies then need to engage customers to obtain their interest and participation.ebusinessforum.Economist Intelligence Unit 2000 (www. Kapferer's Brand Prism (Ch. Fig. multiplied by the expected rate of transactions.com) The most effective methods are direct e-mail.2 4. discounted over the expected duration of the brand-customer relationship.7 4.3 Source: Forrester Research. Attracting customers is only the first step in building online brands. Engage With the multitude of choice available on the Internet.6 3.4 3.0 3. Creativity is also an important factor in gaining attention in today's cluttered marketplace.5) 2. The key factors at this stage are Convenience combined with interesting Content.4 4.1 3. 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. public relations and television advertising.WEBSITE PROMOTION METHODS .8 . affiliate programmes.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 . 3.4 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.

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

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


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

com Announce Strategic Investment and Promotional Agreement .com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Amazon acquires Back to Basics Toys to add to Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com Amazon introduces "Purchase CirclesTM". Amazon.com announce investment and strategic alliance . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon launches new kitchen store .com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .com 63 ." providing shopping from wireless devices.000 members Amazon. featuring thousands of bestseller lists for hometowns.com Amazon announces further plans to expand distribution network to meet rapid growth.Amazon announces investment in kozmo. such as the Palm VII organiser.Amazon launches www.com and NextCard launch co-branded credit card .com . West Virginia.Customers can shop at Amazon. Software.Amazon enters into a strategic partnership with Drugstore.com Electronics and Amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. and more Amazon launches "Amazon.amazon.com to create a "home living" store at amazon.Amazon surpasses 20 million cumulative customer accounts .com. universities.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon.Amazon launches health and beauty store .com goes live Amazon launches Associate Programme Amazon IPOs for $49million. to meet rapid growth .com via the new wireless pocket PC . provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.sothebys.New home living store from living.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.TIMELINE AND MAJOR MILESTONES Amazon.com opens its virtual doors at amazon.toolcrib.Amazon enters strategic alliance with living. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com .amazon.Amazon and eziba. Video Games and Gift Ideas Amazon and Sotheby's launch www.com enters European book market Microsoft signs Amazon.Amazon opens customer service centre in The Hague .Amazon launches lawn & patio store .Amazon and online car-buying service Greenlight. 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. and minority investment in. Ashford.Amazon opens a customer service centre in Huntington.com Amazon invests in Pets.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com is founded by Jeff Bezos Amazon.com Anywhere.com Auctions and zShops provide new tools to its merchant community . a tools and equipment store for professional tool users and woodworkers .Amazon. workplaces.Amazon.com invests in wineshopper.com .COM .1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.com.com .

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

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

a move that along with the novelty of its business model and the newness of the Internet. The Associates Programme has been phenomenally successful. Amazon offered Associates referral fees of up to 15%. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.2). attracting member sites of all sizes. they are subsequently confirmed by e-mail. In the second half of 1996. In July 1996.000 by August 2000. and customers are also e-mailed when the items are shipped from the warehouse.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. and not subsequent purchases. The Financial Times. it began to advertise in print media and online . 6. 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. Through the first half of 1996. two personalised services. enticing them to return to the site and purchase repeatedly.com hot-link and offer specific books of interest to their visitors.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Business Week. which only applied to sales that resulted from the initial click-through. This enabled Amazon to reach more customer segments and niches (Figure 6. Once orders are placed. New Yorker and The Economist.2.000 members. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. and by 1999 it had over 200. Newsweek. As a result of all these factors (7Cs). 66 . In addition. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Eyes and Editors. increasing to over 500. Instead of paying directly for this exposure. helped generate publicity and stories about the company in publications such as The Wall Street Journal.

These multimillion-dollar.amazon. From July 1997 to December 1998.co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.2 . Interesting viral initiatives include: • Amazon.allows customers to create a personal profile (with pictures) on the site.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. mutual links. Amazon closed deals with five of the six most visited Internet addresses. People tend to tell their friends about it. 67 . Amazon also established agreements with AltaVista.COM'S ASSOCIATES PROGRAMME Source: Amazon. the customer acquisition cost is only £10.de became the local provider for Yahoo! Germany and Amazon. Netscape's Netcenter and NetSearch. Amazon has used viral marketing techniques through customer reviews.com).com's website (www. and you are given a $5 gift certificate for each customer you provide. and Geocities. spreading the word for Amazon. In addition. • Amazon. and primary button placement on web portal search engines.AMAZON. Therefore. each friend is sent a $5 Amazon. was also linked to Amazon's entry into Europe Amazon. free eCards and gift certificates (which customers send to friends. Prodigy and @home. In return.com gift certificate (in your name). The Yahoo! agreement.customers are encouraged to provide e-mail addresses of friends. including: America Online (AOL).com About Me . thereby promoting Amazon. Excite. Yahoo!. multiyear deals involve exclusive book-selling rights.uk the local provider for Yahoo! UK & Ireland.com Refer-A-Friend .com.

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

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

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

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

com's (Figure 6. FIGURE 6.com's and takes a bit longer to download.3. the features are practically identical. In addition. the company created a site very similar to Amazon.com or www. easy and secure ordering. and easy-to-navigate site Categories focus on books. software. edition.barnesandnoble.3).OVERVIEW OF BARNESANDNOBLE. including title.com and barnesandnoble. in terms of the 7Cs framework.2 Value Proposition Barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print. Both Amazon.3 Sources of Value . previously-owned and rare books.com's virtual storefront is graphically richer than Amazon. as well as an extended searchable catalogue of millions of out-of-print. however.COM'S WEBSITE Simple. 6.bn. as cited on Barnesandnoble. good prices. music New Initiatives Barnesandnoble. Both have expanded their convenience to offer 54 Media Metrix. but instead of developing an outstanding interface to its inventory. Barnes & Noble planned to dominate online book-selling.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.com let customers sign up to receive email reviews and announcements of new titles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 . etc. author. Both offer detailed bibliographic information.com) 72 . publisher.com's website (www.3. logically structured. they offer customers fast delivery. rich editorial content and a community experience.

has yet to leverage its strong brand in cyberspace.com had over 17 million.4 Brand-Building Strategy Barnesandnoble. and both are expanding globally. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . 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. Both offer customisation that permits users to personalise the experience.com's $1.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). it lags behind first-mover Amazon. Barnesandnoble. Lycos.com's 1999 revenues were $202.1 billion.a replica of Amazon's Associates Programme. Webcrawler. These initiatives have generated traffic to the site. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com closed 1999 with 4 million customers. and avoid charging sales tax in states where it has stores56.3. Barnesandnoble. and Barnes & Noble Inc. Netscape and Microsoft Network. while Amazon. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). while Amazon. December 17. As of February 2000.com was valued at $21.com has created a high quality website and customer experience.000 affiliates in its referral network. Yahoo!. compared to Amazon.com. Instead. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.6 million.The Wall Street Journal. reasons for this are explained in the next section. Both offer 'associate programmes' that let other websites link to their sites. However. The 6. however.com's market capitalisation was $251 million.64 billion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both try to foster a community of readers by letting customers post reviews online.com in return for a commission on any purchases that they originated . this programme had more than 300. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Although. They have developed an affiliate programme that links sites to Barnesandnoble. prevent cannibalisation of its existing business. Barnesandnoble.

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

Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. significant market momentum. by portraying them as slow and clumsy in comparison to the more nimble Amazon.com) 75 . In addition. it also caused a major setback.com has been able to create a high impact and high-quality customer experience.com.3.6 Conclusion Although Barnesandnoble. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. 2000 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and allowed them to offer stock options as compensation and achieve a high market capitalisation. and its lack of innovation (by copying Amazon.com's experience is instructive.forbes. otherwise they risk losing out to other online competitors. 57 'Bn. customer relationships and offline presence . The Press have also contributed. it has not been able to establish itself as the leading online bookseller. The company failed to leverage its established brand. August 4. Barnesandnoble. feature for feature) has failed to differentiate Barnesandnoble. a wellestablished Internet brand. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". meant that Amazon. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.Forbes.its key differentiating factors.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.Not a Best Seller' . Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com's late start in 1997. even if that means eating into their existing sales.com . and was further up the growth curve.com and has given them the image of a second rate 'me too' brand. Barnesandnoble.

They intended to add France.2 Value Proposition According to Kajsa Leander. and was billed as one of Europe's hottest e-commerce ventures.4. the company was hindered by technical problems that delayed the site going live by five months (until November 1999).Marketing Week. Boo. Finland. and eventually debut in Asia. On going live.com.com had set the record as Europe's best-funded European Internet Start-up. and Converse.Announces it has only 500.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com collapsed through lack of funds.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and included high profile investors such as Bernard Arnault. among others. November 2000 January February May 6. receiving $125 million of funding. P.Appeals for $30 million more funding . Morgan.com. sack 20% of staff and sell stock at 40% discount . Italy and Spain within a few months. founder and Chief Marketing Officer of Boo.First sign of problems . due to its poor performance and inability to build a customer base. it means all that brand's product line is available.1 Company Overview Founded in 1999.com entered six markets: US.TIMELINE AND MAJOR MILESTONES . 58 Kajsa Leander. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). After a high profile launch. 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. TABLE 6.Raises funding of $125 million .com opens its virtual doors' . 1999 76 .fails and appoints KPMG as liquidator. it's about range and convenience. Boo.com provided a range of 18 fashion and footwear brands including DKNY. If a clothing brand is on the Boo site. as well as create a kid's site. not the limited range you might get at most London fashion shops58".COM 6.4 CASE STUDY: BOO. arranged through J. England. Puma. June 10.they redesign site. CMO of Boo.Site goes live . However. Boo. as cited in 'Boo. Company is put up for sale. Sweden.000 unique visitors .3 1999 Mid year BOO.Multi-million pound advertising campaign created by BMP DDB .4. and the resulting loss of investors' confidence.COM . Germany and Denmark. Everlast. within six months Boo. Boo. "our marketing thrust is not based on prices.


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


Miss Boo

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



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

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

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



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

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


& Novak. a valuable and rewarding experience"63.Launches merged CDnow/N2K site .CDnow and Time Inc. CDnow was acquired by Bertelsmann AG.Partnership program with Geffen Records .Raises $10 million through private placement . whether for browsing or buying.ten times the selection of a conventional bricks-and-mortar music store).1 Company Overview Founded in 1994.. This unprecedented degree of access to music and information is the core of CDnow's value proposition. 62 Hoffman. and exclusive interviews and reviews from CDnow's award-winning editorial staff. features. as well as music reviews.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . daily music news. D.000 people. $18.5 million distribution deal with Lycos Signs three-year. former arch rival . and one of the most popular shopping sites on the Internet62.5 CASE STUDY: CDNOW 6.000 music-related products and 650.000 music related items . CDnow is also driving the digital distribution of music.Harvard Business Review. convenience.Forges distribution partnership with Yahoo! $65.Merges with Columbia Records .com) 80 . guides to music genres.5. and an average daily audience of over 800. cover art. pp.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . TABLE 6. by twin brothers Jason and Matt Olim.Merges with N2K. It has a customer base of 4 million people.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.cdnow. customisation and a wealth of information and content to help in the purchase decision.179-188 63 CDnow website (www.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. CDnow provides access to over 500.TIMELINE AND MAJOR MILESTONES . CDnow is the leading online music store. and was the first site to offer the sale of music downloads and custom CDs. and they aim to "make every visit to the site. On 19th July 2000. announce marketing alliance .Site goes live . T. May-June 2000.000 sound samples.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. good prices. $22. 'How to Acquire Customers on the Web' .

FIGURE 6. 81 . etc. The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has cultivated similar relationships with MTV. artists biographies. CDnow has leveraged the reputation of their brands to reinforce its own. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). For example.Figure 6. and has secured rights to music reviews. easy-tonavigate. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.. By partnering with well-known content providers. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.5.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 Sources of Value . to make it easier for customers to explore new music and make informed purchasing decisions.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load.5. cover art.

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

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

com/cdnow. as a way to fuel very lucrative word of mouth.4 million). 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .Press Release. It is constantly adding new functionality to the site and has been innovative in its offering .(www. The company continually pushed for new distribution partnerships to widen its sphere of influence.Hampel & Stefanides (www. Public relations efforts helped to generate word of mouth and influence sales. and scaled it awareness-building efforts. with repeat customers accounting for more than 50% of sales.As for many successful online retailers. word-of-mouth accounts for the lion's share of CDnow's customers. 1998: $56.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . In fact. April 28.4 million. 1998 .cdnow. 6.htm) 84 .they were the first site to offer the sale of music downloads and custom CDs. and to increases in the customer base of more than 30% quarter-to-quarter. The story of how CDnow was founded in a basement. CDnow's promotion strategies have attracted high levels of traffic.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. This has contributed to a 225% increase in sales (1997: $17.5. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.com) 65 'Pioneering in Cyberspace' . it is in this context that the large investments in advertising and partnerships make sense. It is a powerful source of acquiring new customers at low cost. resulting in increased conversion rates. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.hsny. with 44% of sales coming from new customers65.CDnow made public relations a high priority brand-building tool. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. both in the online and offline worlds. • Word-of-Mouth .

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

eBay is not about auctions.Company Overview' . shipping. According to Meg Whitman.the closest thing in the offline world are trading forums such as classified ads.A Harvard Business School Case Study. Since its launch in September 1995. extensive selection and geographical reach. or the payment for the item .ebay.Company Overview' . as cited in 'eBay . Auctions represent a platform. and eBay never takes possession of the item being sold. (A)' .6.2 Value Proposition eBay offers consumers an efficient. and eBay receives a transaction fee that ranges from 1. Auctions are an enabler. from collectibles and antiques to electronics and toys. with emphasis being placed on its unique community feel and culture. transportation and other overhead costs. collectable shows.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. and eBay provides added value through its convenience.25% to 5% of the final sale price on any item sold.eBay website (www.efficient one-to-one trading in an auction format. the eBay community has grown to include more than 10 million registered users. This is a new market . People perceive the auction format to offer better prices. and 450.000 new items joining the "for sale" list every 24 hours69.6. 6.782 million in January 200068. with the number of unique daily visitors setting a record of 1.eBay website (www. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. "at its core. 1st October 1999 86 .300 categories.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Auctions make it fun. eBay effectively created a new business model never before possible .com) 70 'Meg Whitman at eBay Inc. flea markets and auctions. There are over half a million new auctions.com) 'eBay . payment) between themselves.6 CASE STUDY: EBAY 6.removing the need for inventory.ebay. Sellers pay a nominal fee for placing an item up for sale.g. Individuals use eBay to buy and sell items in more than 4. CEO of eBay. The buyer and the seller work out the logistics of the transport (e. 24 hour a day. garage sales. global trading place for buying and selling personal items in an entertaining auction format.

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

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

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

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

Doll Collector) and appearance in trade shows. and Collecting Just About Anything and eBay for Dummies. eBay has since expanded its promotion efforts and engaged in marketing partnerships. The Official eBay Guide to Buying. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). In 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. eBay decided that it would not enter into major portal advertising deals in the short term. the largest of which was with AOL. $75 million joint marketing alliance and development deal.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth.a four-year. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.3 million in advertising. eBay transformed from a pure online play into a 'clicks-and-mortar' company. Recent promotional initiatives include its new publication. Based on this. 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 1999.6. The AOL partnership was one of the largest strategic partnerships on the Internet . but they have other partnerships with over 150 websites of varying scales. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. eBay Magazine. 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. provide a wealth of information about the 'ins and outs' of trading on eBay. they spent $12. 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. eBay has been able to attract a large customer base.g. as a result of the high quality experience it provides. Mary Beth's Beanie World. Through this combination of its advertising efforts and targeted promotions. they decided to target their marketing efforts on these heavy users. Selling. and highlight opportunities created by e-commerce. Early on. and maintained the same ratio for 1999. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. 91 . representing about 40% of revenues. and two books. who tended to be serious collectors. As a result. These new publications appeal to the collecting spirit.

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

COM 6. letting customers access the Gap brands. TABLE 6. October 8. and today it is the 29th most valuable brand in the world73.com and www.com' .Business Week.800 stores in the US. Gap. In late 1997. 1999 93 . online sales are only available to US customers. Canada.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. Germany and Japan. Gap started selling items online . GapKids.COM . L. standard styles are well suited to online shopping.com is an example of successful crossover marketing. whether in the store or online76".TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Gap online exploits the accessibility and convenience of the Internet. 1999 76 Jeanne Jackson. Currently. According to Jeanne Jackson.gap. as cited in Lee. the growth prospects are enormous. surpasses $9 billion in net sales and increase earnings by 54% over previous year. The Gap offers a balance of modern and seasonal styles of clothing.com/about_us.'s website (www.7. L.$100 million. "this is about being clicks-and-mortar. and are still relatively small compared to Gap's $9 billion in annual sales. service and value to everyone74". 'Clicks and Mortar at Gap.2 Value Proposition Gap's simple. 'Clicks and Mortar at Gap."to deliver style. head of Gap Online.com' .Business Week. October 8. to provide customers with greater convenience and options. and BabyGap.an early convert to the then-revolutionary idea of clothes retailing on the Internet.com.see Appendix A Gap. This success is largely due to their simple formula .6 1969 1986 1989 1997 1998 1999 - GAP & GAP. Gap's online sales tripled in 1998 alone. Its reach extends across more than 1. and analysts estimate that sales in 1999 amounted to $50 . Gap Inc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. announce multi-year partnership. America Online (AOL) and Gap Inc. from shirts to accessories and hard-to-find sizes. up from $20 million in 199875.7.1 Company Overview Gap opened its first store in San Francisco in 1969.babygap.gapkids. Inc.com) . In addition. as cited in Lee.htm) 75 Jeanne Jackson. 6. however. California GapKids opens its first store BabyGap is born Gap opens its online store at www. from jeans and T-shirts to khakis and jackets.gapinc. and Gap online provides access to the full range of items at Gap.7 CASE STUDY: GAP. and provides useful insight into how traditional brands can leverage their strength online. 73 74 Interbrand (www.interbrand. UK.

1998 94 . describes the company's brand personality as "direct and straightforward. This personality is reinforced online through the simple structure and layout. Michael McCadden.making visual references to its offline roots. very efficient"77.7. Content. Gap Online primarily focuses on Convenience. Unlike Barnesandnoble. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill....OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. and easy-to-use. 'Mind the Gap'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Visiting the gap...com. D. but provides customers with the option of viewing text-only. Simple. reinforcing its brand identity. The site also offers sharp graphics.The 7Cs Framework In terms of the 7Cs framework..very easy. making navigation even faster.7 . from the blue and white colour scheme to the easy-toshop format . feel and design of the site is consistent with the bricks-and-mortar stores. April 18. Executive Vice President of Global Marketing. making it convenient. the extensive integration of Gap's online and offline activities are clearly evident.com store one immediately notices the consistency between the online and retail stores. and Customer Care. FIGURE 6...3 Sources of Value . The Observer.

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

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

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

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

Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. regardless of platform (i. More recently.Yahoo! forms agreements with Palm Inc.Yahoo! unveils Yahoo! Finance Vision .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 .Site goes live September .e.8. 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 Arthas. to allow access.Yahoo! acquires eGroups . 99 .7 YAHOO! . and unveils Yahoo! Digital Introduces Bill Payment services . Palm computers).com.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..8 million IPO (2. Yahoo! extended its convenience through its Yahoo! Everywhere service.com allowing them to offer person-person payment solutions .Yahoo! Shopping launches personalised shopping service 6. mobiles.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.TIMELINE AND MAJOR MILESTONES 1994 April . TVs.8).Yahoo! Launches Business-to-Business Marketplace . to provide web-based services to PalmTM handheld computers .600.The 7Cs Framework Convenience Central to Yahoo!'s success.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.000 shares at $13.3 Sources of Value . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast. is the way it has structured and displayed information.Receives $1 million in venture capital funding from Sequoia Capital $33. Their goal is not to list everything under the sun. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. .

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

and is driving Yahoo!'s multiple partnerships and alliances. and e-mail. Connectivity Connectivity is Yahoo!'s core product. telephone and even traditional mail. message boards. fax. and contributing to their reputation as a quality service provider. It keeps customers on the site for longer periods. where groups of people with shared interests can communicate through chat.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. and encourages them to return frequently. and plans to incorporate other features such as online chat to facilitate communications. Customer Care Yahoo! responds to customer inquiries via e-mail. In addition. In 1999. and many-to-many. 101 . reinforcing the brandcustomer relationship. or to make it their home page. Yahoo! spends more on customer support than most companies. one-to-many. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. and the nature of the navigation business.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. to provide its customer base with access to useful links and content.9 . Yahoo! acquired GeoCities. Yahoo! has also implemented campaigns to persuade users to bookmark the site. 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 through communications via email. As a result. 82% of Internet users and 23% of people intending to go online. Given the unease with which the average consumer approaches technology.intelliquest. an approachable nature. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". therefore. Yahoo! also encourages customers to e-mail ideas and feedback. At the time this was considered a breakthrough. Yahoo!'s brand-building success starts with its name. and according to Intelliquest80. In 1996. This was especially important. 6. These near surfers represented (and still do) a large and fast growing group and.com) 102 . Their strategy was to target "near surfers" . Yahoo! aggressively promoted the site through public relations. Yahoo! would be one of the first sites that they visited. Yahoo! avoided characterising itself as a technology-oriented company. and its implications of a good time. Yahoo! extended beyond this to use traditional offline media. TV commercials and radio spots during drive time. Intelliquest. 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. recognise the name Yahoo!. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . which conveyed the brand's irreverent personality. (www.4 Brand-Building Strategy Yahoo! is a marketing machine.8. and it formed a critical link in Yahoo!'s brandbuilding strategy. While Internet companies were targeting existing Internet users through the use of online promotion methods.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. 80 'Web Survey Shows Yahoo! Tops'. and an inherent friendliness.people who are not yet online but are likely to use the Internet in the near future.a sense of irreverence. by building a recognised brand name. Yahoo! maintains close contact with customers. as experience surfers tend to be loyal to their search engine.

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

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








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



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

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

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

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

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

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

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


602 4.197 32.076 3.527 3.184 1.894 14.310 11.792 3.281 11.132 15.101 9.052 6.043 8.634 1.761 1.283 4.681 2.596 3.422 1.143 2.319 1.603 5.568 3.interbrand.830 14.845 56.048 20.806 11.806 2.895 2.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.313 2.985 2.502 33.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) 83.231 24.595 17.781 33.181 21.193 112 .643 3.423 2.404 4.147 9.231 12.155 7.909 7.464 3.361 1.225 11.021 26.781 17.694 17.766 14.Interbrand's Ranking of the Top 60 Brands (www.510 8.275 30.932 4.804 2.329 4.654 43.262 1.550 12.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .648 1.

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





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