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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
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
8.4.1 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 .6.5 Conclusion Case Study: Yahoo! 6.2 Value Proposition 220.127.116.11 6.4 Brand-Building Strategy 6.3 Sources of Value .The Failure of Boo.1 Company Overview 6.4 Brand-Building Strategy .8.7.2 Value Proposition 6.3 Sources of Value .4.com 6.7.The 7Cs Framework 6.7.com 6.3 Sources of Value .The 7Cs Framework 18.104.22.168 Value Proposition 6.3 Sources of Value .2 Value Proposition 6.5 Other Factors that Contribute to their Brand Leadership 6.5.5 Conclusion Case Study: Gap.5.5 Conclusion Case Study: CDnow 22.214.171.124.4 Brand-Building Strategy 6.5 Other Factors That Contribute to their Brand Leadership 6.5.7.The 7Cs Framework 6.The 7Cs Framework 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6.4 Brand-Building Strategy 6.7 6.2 Value Proposition 6.4 Brand-Building Strategy 6.com 6.6 Conclusion Case Study: eBay 6.Extensive Integration 6.4.1 Company Overview 6.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.1 7.6 126.96.36.199.1 Company Overview 6.5.1 Company Overview 6.8 Case Study: Boo.3 Sources of Value .1 Company Overview 188.8.131.52.
com's Website Overview of Boo.3 Figure 6.6 Figure 4.7 Figure 2.6 Figure 5.2 Figure 4.8 Figure 5.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .1 Figure 4.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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.4 Figure 2.8 Figure 3.6 Figure 6.1 Figure 1.5 Figure 2.5 Figure 5.9 Figure 6.7 Figure 5.1 Figure 6.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.4 Figure 4.7 Figure 5.2 Figure 6.5 Figure 6.2 Figure 2.4 Figure 4.1 Figure 5.3 Figure 4.3 Figure 3.6 Figure 2.5 Figure 4.com's Associates Programme Overview of BarnesandNoble.8 Figure 6.2 Figure 5.3 Figure 2.7 Figure 6.2 Figure 2.4 Figure 5.4 Figure 6.2 Figure 3.1 Figure 3.3 Figure 5.1 Figure 2.com's Website Amazon.
Timeline and Major Milestones Boo.com .5 Table 6.Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.1 Table 6.com .2 Table 6.Timeline and Major Milestones BarnesandNoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .4 Table 6.3 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones CDnow .6 Table 6.com .1 Table 6.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
and business models revamped. interaction and relationship building. products and services reconfigured.1 3. as they face each other through an electronic connection. Internet companies such as Yahoo!. America Online (AOL) and eBay have been able to build powerful brands in a few years.mckinseyquarterly. As such. while providing new tools for promotion. Supply chains are being rethought.2 3. It is empowering customers with more options and more information to make informed decisions.com.com) 7 . and is triggering the need for new brand-building strategies and tools. relationships. creating strong brands that are putting established brands at risk. As such.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.5 million book titles). FIGURE 1. Amazon.9 3.5 2. service and brands. aggressive Internet start-ups have emerged. the Internet is changing fundamentals about customers. In the midst of this.an explosion that is also a harbinger of how business will operate in the future.com's range of 4.com Source: Securities and Exchange Commission Filings. that these Internet start-ups have achieved.1 OVERVIEW Over the past few years. whereas it has taken decades for traditional companies to achieve the client base.com noble.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.9 2. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. This is creating new challenges and opportunities.0 1.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Figure 1. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.YEARS TO REACH $100 MILLION IN SALES 6 5.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. McKinsey Analysis (www. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. Amazon.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.1 . The Internet also represents a fundamental shift in how buyers and sellers interact.com1 Amazon. customer affiliation and level of sales. there has been an explosion in the online world .
March . pp. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. P. Browder. turning browsers into buyers. who are essentially intangible. Volume 78 Issue 2.. & Overdorf. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. L. T. building awareness.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. M.April 2000. as the need to build brand loyalty online is reaching a peak.. Given the tremendous clutter in today's e-commerce marketplace. S. 1997. May-June 2000 Hof.. 66-76 Hoffman. & Elstrom. For pure online players. 1 2 3 Christensen. 'How to Acquire Customers on the Web'. In light of this. P. attracting traffic or 'eyeballs'. A New Class of Netizen is Settling Right In' Business Week. R. rather than drifting from site to site3. Therefore. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. and the high cost of acquiring online customers2.. C. A Business Week / Harris poll. p. brands are even more critical as customers have little to go on other than a recognised brand..Forget Surfers. 'Internet Communities . Harvard Business Review. However. 'Meeting the Challenge of Disruptive Change'.. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. As such. that extends the brand-customer relationship beyond a single transaction. D. found that 57% of Internet users go to the same sites over and over again. May 5. Harvard Business Review. and Novak. companies lack a coherent framework and concrete methods to build an online brand. this dissertation seeks to explore how companies should go about building a successful Internet brand and to identify the critical factors that must be considered.66 8 .
FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. tools and strategies to build brands on the Internet. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.2.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . This is based on the outcome of the primary research (in-depth case studies).3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. A review and analysis of leading academic thinking will be used to explore these issues. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. 1.2 . • To explore how the Internet is changing the brand-building environment. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. supported by secondary data related to aspects of online business from accredited and published sources. and to identify new sources of value.
traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. nor desire. eBay and Yahoo!). 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.com. While there is no attempt.com).com and Gap. strategy and economics. and factors that contribute to a brand's success. the literature review draws on leading academic thinking in more established areas such as brand management. CDnow. 10 . however. there is more work in popular rather than academic literature. The absence of academic literature on Internet branding posed a major obstacle. Consequently. The combination of cases provides a useful and practical insight into brand-building issues and problems. this also highlights the true value of the dissertation.com). Conclusion: Discusses the key findings and areas for further research. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. relationship management. to provide an in-depth analysis of the psychological and social dimensions of brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. marketing. These are further refined using the insight obtained through the case studies. certain key factors are highlighted in their relevance to the dissertation. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. as well as a recent Internet failure (Boo.
The nature of brands. Chapter 7. and introduces the core concepts that form the backbone of the dissertation. The limitations of the Internet in terms of brand-building are also discussed. and outlines the opportunities for further research. 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. by outlining the impact of the Internet on the business and competitive environment. This chapter sets the context within which online brands must be built. highlighting some key factors that have contributed to brand success. their purpose and value are discussed. Chapter 6 examines the brand-building efforts of seven companies. 11 . summarises the key findings. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption.4 STRUCTURE The next chapter. as well as the interactive approach to attracting customers and building loyalty. Chapter 4 provides an overview of the Internet and its defining characteristics. Chapter 3 explores how brands have traditionally been built. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. provides an analysis of leading academic literature in relation to branding.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. The final chapter. Chapter 2.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
both to customers. & Maughan.2 WHAT IS A BRAND? According to Rita Clifton. the brand's emotional benefits and its self-expressive benefits . (New York: Free Press). E. This value stems from the products and services that companies create and bring to the market. These concepts are central to brands and brand-building. FIGURE 2. p. which.a brand is: "a mixture of tangible and intangible attributes.1. both for customers. Branding is about creating 'value'. if properly managed. 1996. whether online or offline. vii 13 .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. The chapter proceeds to describe the influence of brands on the buying process. D. A. 2.a leading specialist brand consultancy firm . (London: Macmillan Press Ltd. and they form the backbone of this dissertation. 'The Future of Brands'. 2000. explaining the value of brands. and the importance of customer satisfaction and brand loyalty.1 INTRODUCTION In this chapter. 74 4 Clifton.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and to companies. and highlights the importance of brand management. p. symbolised in a trademark.see Figure 2.1 . these layers are Brands are made up of many layers and dimensions. 'Building Strong Brands'. creates influence and generates value4" This definition truly captures the essence of a brand.. CEO of Interbrand Newell and Sorrell . and for the company. unravelled to reveal the nature of brands and their reason for existence. but extends further to encompass added values derived from factors such as the brand-customer relationship. The concept of brand equity is outlined.). R.
and services to customers.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Brands are richly endowed entities. For some companies. It is a company's promise to consistently deliver a specific set of features. brands are their most valuable asset. T. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. They start life as ideas. 'Marketing success through differentiation .LAYERS OF A BRAND POTENTIAL BRAND AUGMENTED BRAND BASIC BRAND Name Service Design PRODUCT OR SERVICE Quality Credit & Terms Features Packaging Delivery & Installation Guarantees Source: Adapted from Levitt.of anything'.3 THE LAYERS OF A BRAND Brands are made up of four layers . a 'reputation'. p. the augmented brand and the potential brand . Harvard Business Review. the basic brand. yet ultimately reside as consumer perceptions. a 'set of expectations'. 1980.86 14 . January-February.2. FIGURE 2. making their way into planning and strategy documents. benefits. and a 'promise'..a 'relationship'.the core product or service. 2.Figure 2. which grows out of the cumulative memory and the experiences customers have of products or services. As such. The space a brand occupies inside a customer's head can create a 'mental' patent.
The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. Certain service brands. such as in retailing. P. Service Brands (intangible) are much less numerous than their product counter parts. The most common barrier to competition is building a brand. They are the historical core of branding because they are the most prevalent. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. Southwest Airlines and Amazon. In fact. preferring things they can see and touch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level.The Gap stores. 'Marketing Management . Planning. or a combination of them. information. symbol.g. actually sell products. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. (Europe: Prentice Hall) 1996. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. 8th Ed. customers buy products to meet certain functional needs. with supplementary products and services (e. most products and services cannot survive on functionality alone as this is usually matched in time. These products and services add value and make the offering much more difficult for competitors to emulate. quick delivery) that enhance the customer’s total purchasing and use experience.g. or design. However. not the products it sells . Essentially. 15 .4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers.com are examples. The Basic Brand The basic brand consists of the "name. this is the case with all Internet companies. Coca-Cola. 5 Kotler. term. Levi's). sign.Analysis. and because they most readily come to mind when consumers are asked to recall brands. Implementation. but the brand itself is the store. this should support the offering's performance and differentiate the brand from those of competitors.. 2. even when the alternatives are substantially cheaper or more readily available (e. & Control'. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. Kodak.
selective distortion. Therefore. Implementation. This can be triggered by internal or external stimuli (advertisements). and pay the most attention to the brands that will deliver the sought benefits. and the effect of selective perception.3). These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). it is important to clarify customers' underlying buying behaviour and the buying process. P. and selective retention.Analysis. and Control'. However. Through gathering information. it is critical to understand what attributes consumers value.attitudes of others and unexpected situational factors (Figure 2. two factors can intervene between the purchase intention and the purchase decision . the consumer learns about competing brands. 1996.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. These beliefs depend on their previous experiences with the brand. In the evaluation stage.3 . Consumers develop a set of brand beliefs about the attributes of competing brands. Consumers differ as to which product / service attributes they see as important.. FIGURE 2. 16 . 'Marketing Management . Once aroused. The buying process consists of five stages (Figure 2.4). (Europe: Prentice-Hall) 8th Ed.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.. p. either through heightened attention or through an active information search. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.194 The process starts when the buyer recognises a need. a consumer will be inclined to search for more information.
word-of-mouth.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. and especially important when dealing with purchases made through the Internet. somewhat satisfied. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. customers make decisions purely on the basis of their expectations. Customer satisfaction and loyalty are essential to creating successful brands. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. even delighted. or dissatisfied with the purchase decision. locking out potential competitors. their negative attitude may influence the consumer's purchase intent or vice versa.the customer will be highly satisfied. advertising and communication. they will be dissatisfied and look for alternative brands in the future. 17 . If perceived performance and quality exceed their expectations then they are satisfied. Customers' expectations are particularly important when dealing with services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. or avoid a purchase decision is heavily influenced by perceived risk. A consumer's decision to modify. After a consumer has actually purchased the product or service. postpone. as these services are intangible and therefore. they will evaluate their level of satisfaction . These expectations are formed through a combination of past experiences. Expensive purchases involve some risk taking. and a preference for recognised brands they can trust. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. If performance falls below their expectations. A consumer tries to deal with this by gathering information from friends.
'Why Satisfied Customers Defect' . 'Growing the Trust Relationship'. The customers at the bottom end of the scale are "terrorists" .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. W.5. E. and Johnson. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. D. Nov-Dec 1995. Trust is critical for a brand's success.those who actively attack the brand telling others not to buy from the company. E. T. & Sasser.. 91 Loyalty is derived when customers are continuously satisfied over time. This satisfaction encompasses the whole experience and not just a company's products or services.. & Sasser. Johnson & Johnson. Federal Express. Hewlett-Packard. Spring 1999 18 .customers who are satisfied and loyal and talk favourably about the brand . C. Marketing Management.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. 'Why Satisfied Customers Defect' . Southwest Airlines and Xerox7.. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 6 7 Jones.Harvard Business Review. Saturn. M. T.. and believe that it will always act in their best interest. p.. At the opposite end of the satisfaction spectrum are "apostles" .Figure 2. Nov-Dec 1995 Hart. FIGURE 2. Customers that are passionately or emotionally loyal are those that have built trust in a company.Harvard Business Review.
they provide good word-of-mouth and are the best salespeople for the product / service 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. Firstly. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. 1993 McWilliam. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. emotional loyalty is born out of a consumer's personal relationship with a brand. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. In this way. There is also clear evidence of this on the Internet.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.g. 'Building Stronger Brands through Online Communities' .. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. G. Emotional loyalty can be also created through the formation of a strong user community around the brand. 8 9 Peppers. D. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.com. Spring 2000 19 .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.. Harley-Davidson motorcycle clubs). consistent orders Satisfied customers are the best advertisement . M. & Rogers. 'The One to One Future'.
Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). 2.CREATING EMOTIONAL LOYALTY TRIGGERS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personification EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier. there are brands that customers perceive as acceptable and would not resist buying. However.. S. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. 20 . whereby customers would be unwilling to substitute it with competitors' offers. Beyond this. which goes well beyond the satisfaction of a specific need.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.7). FIGURE 2.7 . there are brands that are unknown by most buyers. A stronger brand enjoys a high degree of brand preference over competing brands. a 'powerbrand' tends to have a high degree of brand loyalty. 343-373. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.6 . FIGURE 2. Journal of Consumer Research. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. March 1998. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. and understanding the needs and buying processes of the target market is essential. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.
Create Awareness . and relationships with distributors and strategic partners. The benefits of each are outlined in Figure 2. strong brand associations. which is the value of the brand over and above its commodity value. According to David Aaker (1991). 1991 10 Aaker. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.8 .8. D. 1991 21 . 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". FIGURE 2. (New York: Free Press). perceived quality. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. D. (New York: Free Press)..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. name awareness. The major brand assets are brand loyalty. trademarks.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .. and other assets such as patents.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.
.To save time and energy through identical repurchasing and loyalty Guarantee . May 1993. • Brand Leverage . & Downham. to its communication • Ethical . the best performer for a particular purpose • Characterisation .Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . 11 12 Kapferer.. 1992 Worcester. 'Strategic Brand Management'.To be clearly seen. The brand leader is the most profitable and all beyond number two are unprofitable13. market share and profits . 3rd Ed. P. pp. R. 22 . brands perform several functions that add value and customer benefits: • Identification . J. to make sense of the offer. & Tellis. 'Consumer Market Research Handbook'.Satisfaction linked to the attractiveness of the brand. (London: McGraw Hill). Premium pricing increases revenue. 158-170..8. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . 1986 13 Golder.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies..To be sure of buying the best product in the category. N.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. to quickly identify sought after products • • Practicality . and the number two twice the share of the number three12. (New York: Free Press). in the following ways: • Brands.. Journal of Marketing Research. to its logo.To have confirmation of your self-image or the image that you present to others • Continuity .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. production and marketing.Typically a brand leader obtains twice the market share of the number two brand. G. J.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development.8.
drives up share price and provides the basis for future growth. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Coca-Cola “the real thing”).Companies with strong brands attract good recruits. but there remains an ongoing controversy about how accurate and meaningful these measures are. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers.Dominating a niche market is usually more profitable than being fifth in a large market. • Avenues for Growth . Companies can maintain a brand while modifying the underlying product to account for new technology. • Motivating Stakeholders . In addition.g. The next chapter describes the process of how brands are built. They also tend to elicit community and government support. not brands.The product life cycle applies to products.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. in turn. 23 . the tools that are used. This.g. brand leaders can exploit their superiority in the market (e.Strong brands are more attractive to investors.Brand leaders usually have the financial strength to fend off competitors. fashion or prevailing market conditions. The brand can also be used to penetrate new markets. 2. • Brand Loyalty and Beliefs .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . companies such as Interbrand (see Appendix A). maintain good price levels and generate strong cash flows. Johnson & Johnson with Tylenol). • The Brand Barrier . and the characteristics of successful brands. In trying to estimate the monetary value of brands. When a company creates this type of customer preference and loyalty. and Young & Rubicam have created complex formulas. it can build a strong market share.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
If the offering is developed properly. This is illustrated in Figure 3. promotion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1 INTRODUCTION Building a strong brand is a complex task. selling.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 . it should provide a satisfactory experience and lead to a willingness to buy again. highlighting important factors that contribute to the success of each step along the way. which are created through advertising.1 . This chapter spells out the traditional brandbuilding process. The major characteristics of successful brands are also reviewed.1. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. 3. the next step is to get customers to try the brand. and keep it turning.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. To entice trial and repeat purchase requires triggering mechanisms. public relations. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. confidence and brand equity are built. and direct marketing. brand awareness. FIGURE 3. Once this has been established.
and added value (AV). a distinctive brand identity (I). a company must develop a strong understanding of who their potential customers are. unless differentiation and awareness can be developed. As such. Similarly. it is impossible to build a successful brand.2 . what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. In this way.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . 26 .2).DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition.each is essential. FIGURE 3.a strong offer that a potential customer would find compelling and interesting.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . In order to do this. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. the brand can elicit feelings of confidence that it is of higher quality than competitors'. Without a good product or service. a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. it will never attract a strong client base. a compelling value proposition is the combination of an effective product or service (P).
J. values or wealth. which they perceive as meeting their needs. • Manufacturers' Name and Reputation . Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. • Brand Appearance . influenced by brand values.In many situations a strong company name (e. faith in brand generates satisfaction in use. Coca-Cola. industry endorsements and newspaper editorials. if customers have faith that a brand will work. the number of competing alternatives and the large variety of advertising and selling messages. Customers choose brands. these needs are as likely to be about satisfying self-actualisation or esteem needs. which are additional to those based upon real performance. the pace of technical change.in many cases. layout and appearance of the brand can clearly affect preference by offering cues to quality. as they are to be about satisfying basic physical and economic needs14.g.brands frequently acquire an image from the type of people who are seen as using them. 169 Jones. MA. 14 15 Doyle. (Europe: Prentice-Hall). Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. 2nd Ed. P.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. cosmetics and high-tech products. interests. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. People use brands to express their lifestyles. it is more likely to work effectively for them.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 1986 27 . providing confidence and incentive to trial.the design. The large number of decisions. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. • User Associations . Gillette. In today's affluent society. 1998. pp. For pharmaceuticals. or to gain a sense of belonging. • Belief in Efficacy . Brand values derive from five major sources15: • Experience of Use . Sony. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. P.. 'Marketing Management and Strategy'. Lexington Books). Hewlett-Packard. mean that buyers look for short cuts.3. Kellogg's) attached to a new product will transfer positive associations.if a brand provides good service over time.. it acquires added values of familiarity and proven reliability.
1992 28 . 'Strategic Brand Management'. however the brand style and core tend to be less flexible. style or cultural differences from one country to another.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. colour scheme. A company should seek to differentiate its brand through developing a distinctive identity.the way the brand communicates through its advertising. visual appearance.Figure 3. and visual appearance). which remains fixed over time.3: • The Brand Core . and the relationship expressed (e. packaging. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . • The Brand Style . Themes include the physical appearance (logo. Brand themes are the most flexible element and will tend to change with fashion. glamour. press releases. (New York: The Free Press).the fundamental or genetic code of the brand. its personality and its image or self-projection . type of spokesperson / customer image used to advertise the brand). etc. 16 Kapferer. This may be different from the brand image.articulates the brand core in terms of the culture it conveys. prestige. • The Brand Theme . which depends on how the target market perceives the brand..3. its reflection (e. and advertising.g.g. friendly). J. features.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.
it helps in developing the brand strategy and the formulation of a distinctive positioning in the market..3 . below-the-line activities.g. its strengths and opportunities. 29 .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. structure and ease of use).BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. Secondly. advertising.how far the brand can be meaningfully stretched to other products and market segments. website design. 1992 The brand prism enables management to understand the brand. Finally. J. and through line and brand extensions. understanding the brand's core and style helps set the perimeters of brand extensions . It also facilitates consistency in the message being transmitted through presentation (e. (New York: Free Press). 'Strategic Brand Management'.
E. Promotion and Place (distribution strategy).The customer is satisfied and decides to make regular use of the product / service. • Trial . E. Advertising and PR are common tools for achieving awareness. features and advantages. colleagues and opinion leaders become important influences at this stage. 'Diffusion of Innovations'. 17 Rogers. Price. FIGURE 3.Customers consider whether the product / service will meet their particular needs.Figure 3. • Interest .often referred to as the '4Ps' . strategy (partnerships and alliances). Before potential customers can buy a product / service. systems.Customers need to be stimulated to seek information about the brand's uses. 'Diffusion of Innovations'. 1962. and the product / service's perceived performance. culture and staff needed to support. and its products / services.. pp.Product and service features. 1962.The McKinsey 7-S Framework). (New York: Free Press). The value proposition must be communicated to entice customers to try the product / service. The value proposition must then be articulated in terms of the 'marketing mix' . the company must ensure that it develops the appropriate structure. management style.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers.4 . Personal sources such as word-of-mouth from friends.The company has to create awareness of the brand.4. it should lead to satisfaction and re-purchase.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. This learning is called the adoption process17 .. (New York: Free Press).79-86 The Innovation-Adoption Model consists of: • Awareness . If the offering is developed properly. deliver and reinforce this value proposition (see Appendix B . • Adoption .The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. skills. pp.79-86 30 .4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. they must learn about it. • Evaluation .
companies have used the tools of the promotions mix ..for example. personal selling and public relations / publicity . L. pp. • Structural Ties .such as airline frequent flyer programmes. (New York: Free Press). software) to help customers interact with the company. This is often referred to as Customer Relationship Management (CRM). A. Customer service is an important element of this relationship. Social Benefits . 3. 1991. this process enables an exchange of information. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits .g. sales promotion.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. while strengthening the position and value of the brand. Advertising and public relations can be effective in generating awareness and interest. Over time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally.136-142 31 . 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. This information is a key competitive advantage. Internet linkages. Through building relationships with customers. multi-transaction relationship. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience.to move customers through the adoption process. providing insight into customers' needs and wants. 'Marketing Services: Competing Through Quality'. In this way. direct marketing. allowing companies to communicate regularly with their customers and customise their interaction. & Parasuraman. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. but enhanced customer interaction through relationship building. companies can increase the value of each customer. This focuses on establishing a longterm. the company may supply customers with special equipment or tools (e. when each trusts the other to deal fairly and reliably. 18 Berry. & loyalty / discount cards.advertising. encouraging evaluation and trial. making them less likely to switch to a competitor.
P. Once the framework has been established and the organisation configured to provide this proposition. As a result. strengthening the brand further. and establish a trusting relationship. or if the brand is surpassed by superior offers from competitors. It often takes years to build up the added values. brands were not built quickly. The Internet provides the opportunity for companies to create compelling value propositions never before possible. interaction and relationship building.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. • Unique Positioning Concept . while providing new tools for promotion. As customers build trust in the brand through satisfaction of use and experience. It is easier to capture a share of the consumer's mind and build a customer base. 2nd Ed. including: • A Quality Product / Service Experience .. which will communicate the brand's existence.A successful brand requires an effective selling. its function and psychological values. comprehension and intention to buy.. then its position will be undermined. but it makes the task easier. trigger trial and reinforce commitment to it. As such.Being first into the market does not necessarily bring success. • Strong Communications Programme . value proposition or augmented brand. companies have the opportunity to start building relationships with their customers. it has a profound impact on the traditional brand-building process. If the quality of the experience deteriorates. • Time and Consistency .a segmentation scheme. when the brand has no competitors to rival its position.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. • First-Mover Advantage . and making it more difficult for competitors to emulate. companies must actively communicate it to the target audience to entice trial.Traditionally. advertising or promotional campaign.176-177 32 . (Europe: Prentice-Hall). 1998. Without building awareness. it must have a unique positioning concept . 3. which will add value and distinguish it from competition. pp. the brand is meaningless. 19 Doyle. 'Marketing Management & Strategy'.If the brand is not the innovator.Satisfactory experience is the major determinant of brand values.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
E-MAIL Is the part of the Internet that most users use at present. which contain hypertext and pictures. it is a common technology platform that allows computing devices to communicate with each other. In doing so.Figure 4. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. and a critical source of added value. and the 'world wide web' (www) .THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.1 . news groups and mailing lists. creating new challenges and opportunities. Information is becoming a major part of the products and services that people buy. This chapter provides an overview of the Internet and its defining characteristics.1 INTRODUCTION The Internet is transforming the business environment. but in practice not in real time. Hypertext allows information to be organised in a user-friendly way that is easily accessible. 4. 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. In essence. and provides the opportunity for dynamic interaction. The three core channels include e-mail (the most common).1.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. it offers a number of alternative channels that enable businesses and people to communicate. 34 . FIGURE 4.
2.The Internet is a global network and can be reached from everywhere.this radically alters the process of interaction between communicating parties. ubiquitous links to anyone.not previously available with mass medium forms of communication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. regardless of where the computer or Internet access device is physically located. and deliver new products and services at low cost. • It Overcomes the Barriers of Time and Space . which was intended to link military networks together. • It Allows for Two-way Communication and Interactivity .1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . By allowing for direct.24 hours a day. Graph is not drawn to scale). 7 days a week. These qualities eliminate the barriers of time and space that exist in the physical world. allowing both parties to identify each other and build one-to-one relationships . These characteristics combine to create a very powerful medium. The Internet can also be accessed at any time .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). anywhere.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. These defining characteristics have fuelled its explosive growth. when the United States Defence Department developed the 'ARPAnet'. The context of the Internet and certain key developments are highlighted in the Figure 4.2 (Note: 35 . the Internet lets individuals and companies build interactive relationships with customers and suppliers. 4.
3 .000. 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.com) 36 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000. FIGURE 4. 1996 (www.2 .000 100.000 1. as cited in 'E-Business Technology Forecast' .000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.3.000.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.a PricewaterhouseCoopers Report. 1998.000 1.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.Figure 4.000 10. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .economist.000 1969: 10.
increasing to 500 million users by 200220. Multimedia development tools that can be used to create rich content.g. billing. etc.4.Content Aggregators . 1996. 2000 (http://cyberatlas.Low-cost networking alternatives . The growth in support services (e.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.).CyberAtlas Internet Statistics and Market Research. TCP/IP).4 .internet. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. there will be an estimated 375 million Internet users world-wide. and gateway services). No.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington. FIGURE 4.Cheap microprocessors & RAM .High-powered servers .2 20 'World Online Populations' .Higher PC penetration among consumers and companies . L. hosting.E-Marketplaces .g.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .Cheap bandwidth . G. The emergence of open standards in development tools and at the network protocol level (e. The McKinsey Quarterly. offering inexpensive bandwidth. The development of critical processes (ordering.com) 37 ..Attractive infrastructure and middleware software . Easier access to these networks provided by point-and-click web browsers. web design. making it more cost effective for software developers and other technology providers to create interoperable products. the momentum created by all these forces has created a virtuous cycle of growth.. payment. 'Electronic Commerce (finally) Comes of Age'. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. As shown in Figure 4. Reed.
5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).com) 38 .from communicating (90% use e-mail) and sourcing information. These activities highlight the adoption of the Internet as an interactive. 2000 (www. April 13. chat rooms.eiu. FIGURE 4. as cited in the Economist Intelligence Unit (EIU). reveals the wide range of areas where people are embracing the Internet . entertainment) and purchasing (37%) .5.Figure 4.g. to interacting (e. communication and information tool.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.
WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. and people. 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. and no cash register. they all project the value e-commerce transactions to grow at unprecedented rates. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks.6 . software. fax. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact.e. content. However. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. no order book. April 2000 39 . The buyer and seller 'face' each other through an electronic connection. There is no need to travel to a physical location. Instead there is a website. projected by Gartner Group. The main difference between the Internet and other electronic media (i. FIGURE 4. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. web browsers. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.
A 'virtual' presence can mitigate the cost of having to invest in physical facilities. represents a level of efficiency and integration previously unattainable.. Volume 78 Issue 2.. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . 66-76 40 . CISCO e-enabled its financial systems and now has the capability to close its financial year within one day.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. Dell Computers). 'Meeting the Challenge of Disruptive Change'.g.April 2000.g. the Internet is sidelining the role of many traditional intermediaries. M. Harvard Business Review. 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. For example. and transforming traditional distribution channels. how they compete and how they serve their customers . suppliers. This is threatening to undermine many old established brands. & Overdorf. At the same time. The Internet also facilitates the development and co-ordination of global activities (e. C. Additionally. March . operation (e. through the use of extranets).and revolutionary new business models are emerging. By allowing customers to talk knowledgeably and directly to suppliers. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. Yahoo!).g. 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. which are often disruptive to traditional business models21. New brands and business models are emerging to seize this opportunity. Although the particular impact will differ between industries. 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. partners and other corporate constituencies.how companies operate. pp.
in developing products. Customers have more options than ever before .they can choose between traditional 'bricks-and-mortar' companies. improving processes. Internet technology can be used to exploit collective learning and knowledge. As a result. getting closer to customers and ultimately staying ahead of competitors. with no time. fierce competition. the typical clock-speed at which companies need to operate has accelerated. the development of a knowledge economy. This. empowered customers. combined with the emergence of electronic intermediaries. the diminishing barriers-to-entry and the lower switching costs. the globalisation of business. products and services. They can move from one supplier to another searching for the best prices.Forrester Research. these new highly informed customers are "empowered fruit flies".internally and externally . as they are just one 'click' away. 22 Colony. and reorganise as appropriate. quick evolution and all the power. According to George Colony. highest convenience and quickest satisfaction. switching costs are much lower. allowing employees to share knowledge. commit and deploy resources. ensuring the delivery of a satisfying customer experience. respond to competitive and market dynamics. CEO of Forrester Research22. as they have access to more information leading to more informed decision-making. or catalogues. it also removes the geographical protection from competitors. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. 'Empowered Fruit Flies' . Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers.com) 41 . 2000 (www. their organisations must harness knowledge . Now companies need to move at warp-speed.forrester. The Pace of Business is Accelerating With the fast pace of technological change.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. to capture new opportunities. has resulted in a fierce competitive environment. collaborate more effectively and ultimately embed organisational intelligence within processes. little loyalty. and the 24 x 7 environment. constantly innovate. online stores. G.. It also provides easy access to competitors' offers and allows customers to consider every available alternative. This is forcing companies to become flexible and responsive to customer needs.
most Internet and e-commerce partnerships extend beyond this. 1999 . The extent of this partnering is illustrated in Figure 4. which highlights the typical structure and dynamics of an online company. companies can provide customers with a strong value proposition by offering them the best in quality. 23 'The Future of E-Business' . supply chain cooperation. it provides the opportunity to reach customers where they want. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. Increasingly. and most traditional partnerships were vertical. alliances and partnerships have taken on a new level of strategic importance. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. Traditionally.A Research Report by TeslaGroup. information. achieve global reach and realise a new source of cost advantage. and multiple strategic alliances and partnerships. Examples of emerging information age business structures include flat versus hierarchical. companies have looked upon alliances only as a means of filling gaps.(www. thus creating a 'value net23'. linking companies with suppliers and customers up and down a pre-defined value chain.com) 42 . and the need for speed and flexibility have accelerated the unbundling of business systems. 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. However. how they want and with the levels of customer service they demand. extensive outsourcing. It allows companies to improve customer service. linking companies with competitors and players from entirely different industries and business sectors.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. The opportunity of linking the complete supply chain 'virtually'. variety.teslagroup. In this way. As such. when they want. and partnering up with the best for the remaining activities. combined with intense competitive pressures.7. advice and convenience. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence.
As such. This is the substance of the next chapter. 'Organising for e-Commerce' . New opportunities for efficiency and co-ordination are emerging. it is transforming the competitive landscape and brand-building environment. many online companies are blending together the products and services of a wide range of companies.7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. D. S. Partnering with portals and affiliate web sites is important in driving traffic to a web site. April 2000 In an attempt to provide a rich customer experience. the pace of business is accelerating and power is shifting to the customer. This provides customers with added value.. The Internet is transforming every business to some degree.dot. 4. while triggering the emergence of new brandbuilding strategies. tools and opportunities. while making the offering hard to duplicate off-line. G. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage.com CONTENT PARTNERS • Print Media • Broadcast • Online JOINT VENTURE PARTNERSHIP AFFILIATE PROGRAMME CUSTOMER CUSTOMER OUTSOURCING / TECH PARTNERS OFFLINE PRESENCE BACK OFFICE FRONT OFFICE • • • • Customer Services Creative Site Development Hosting CUSTOMER Source: Adapted from Freeland.6 CONCLUSION The Internet and its strategic impact are not technological issues .THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.they are business issues.a Boston Consulting Group (BCG) Analysis. & Stirton. competition is intensifying. 43 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
including the interactive approach to attracting customers and building loyalty. 5. and sites that understand the user's needs and preferences24. New strategies and tools for building brands on the Internet are identified.durlacher. and the fact that customers are buying goods that. However. credit card numbers. 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.2 THE NEW DYNAMICS OF BRANDS Traditionally. On the other hand. the logic of the Internet cuts another way. J. whereby the company can establish a dialogue and 24 Marathe. The limitations of brand-building on the Internet are also discussed. many unnamed customers develop a 'relationship' with the brand. The Internet. In addition. This threatens to undermine the value of brands. in addition to providing added value. on the other hand. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. has placed greater importance on trust and security.sites that provide a wealth of information and make comparison shopping easy. 'Internet Portals' . offers interactivity. the intangible nature of the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. In response. Generally. the Internet makes search and comparison much easier.Durlacher Research. addresses. as well as on topics of interest related to the brand and product characteristics25.names. May 1999 (www. Traditionally. etc. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. Customers derive added value through the provision of information on the products or services they buy. People only tend to transact with sites they know and trust .com) 45 . Transactions on the Internet require customers to provide detailed personal information .. they have never handled or seen (except on-screen). brands have been developed in an environment whereby a company creates a brand. and projects it onto a third party intermediary (the media). people have concerns about sharing personal information. in most cases. where the user feels a part of.
In doing so. brand-building must focus on the end-to-end customer experience .Fuqua School of Business.edu) 26 Peppers.. D. The differences between the traditional approach and the one-to-one approach are outlined in Table 5. & Dorf. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. M. rather than simply speaking at customers. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. Duke University. However. this also poses a challenge as these relationships may take on a life and character of their own.from the promises made in the value proposition. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26.Harvard Business Review. 1999. . 'Adding Product Value Through Information'.1. learn.. January 28. In maximising the customer experience. 'Is Your Company Ready for One-to-One Marketing?' . companies have to find innovative ways of leveraging the information and 25 McCann.duke. to its delivery to the customer.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. TABLE 5. Prof. relationship building characteristics of the Internet.. understand and relate to customers. 1997 (www.1 . B. 151-160 46 . J.. Rogers. January-February. a company can listen. This creates the opportunity for companies to build stronger relationships than previously attainable.
. . almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty.. This view is reinforced by in-depth studies carried out by Bain & Co. Rastogi. R. - Repeat purchasers spend more and generate larger transactions . 'The Value of Online Customer Loyalty and How You Can Capture it'. companies must ensure that they provide a completely satisfying end-to-end customer experience.A Mainspring Communication Report in collaboration with Bain & Co. These points stress the importance of online customer loyalty. .. S. on average..3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. but also provides more opportunities for cross-selling. as cited in 'Creating a High-Impact Digital Customer Experience' . J.An A. For example. high-margin items. 'How to Acquire Customers on the Web'. - Repeat customers refer more people and bring in more business . D. In fact. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer.word-of-mouth is the single most effective and economical way online businesses grow their sites.. 27 'Electronic Business Outlook'. it is very unlikely that an online retailer can break even on a one-time shopper. and with customers holding all the power.pwcglobal. and to recover their investment. it could be argued that customer loyalty is even more critical online.com and www. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers .bain. unless they are selling high-price. Baveja. Chu. March 17. 1999 (www.Research by PricewaterhouseCoopers / The Conference Board. & Hancock. Zook. Therefore. customer acquisition costs are high. P. and Novak. S.due to more frequent shopping and larger purchases. - Loyal customers are more willing to buy other products from the company. 2000 (www.com) 29 Hoffman.often..converence-board. MayJune 2000 30 A Forrester Research Study. T. C. This is further reinforced by the fact that.. companies need to retain customers so that they return to the site repeatedly. Repeat purchasing not only binds trust. L. Kearney White Paper. Harvard Business Review. T. D. and some are spending over $50029. a disgruntled online customer tells 10 people about a poor experience30.org) 28 Rigby. 2000 47 .
FIGURE 5..4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. each additional unit sold does not cost more than the last to deliver.1. businesses and online communities that rely on connectivity can enjoy 'network effects'. However. customisation for individual customers.1 . pp. G. and in the case of information-based products. as the benefits of scale are overwhelmed by the disadvantages of size31. R. and the value that each member realises. as illustrated in Figure 5. 'Positive Economics'.. 180-182 48 . Similarly. As a result. additional products. (also referred to as 'viral economics'). increases disproportionately as more people join the network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.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. additional customers and transactions can be managed with limited fixed cost investment. the costs approach zero32. 1989. where the value of the network. 7th Ed. and other features can be added or changed at low marginal cost. this is not the case on the Internet. Once the up-front investments are made (for research and development and technology infrastructure). Even more important. (London: Harper & Row).
enhancing the interaction.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. 21 . R.2 .org Study in collaboration with The Boston Consulting Group. M.2. No.A Shop. its ability to track customer preferences and customise offerings improves. being first into a market makes it easier to capture the consumer's share of mind. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. fulfilment • Defensible advantage against competitors SCALEABLE. Nov 1998 49 . With no competitors around. cross-selling and up-selling33. Outlook 1999. including direct marketing.A Publication by Andersen Consulting 'The State of Online Retailing' . As the company builds a customer base and develops a relationship with customers. advertising and referrals. link revenues 32 33 Melnicoff. This makes it more efficient in improving product selection. direct marketing. FIGURE 5..Figure 5. It also allows online companies to tap supplementary revenue streams. delivering increased margin per customer . '5 Rules of the eEconomy'.
larger sites can leverage more customer advocates to reduce customer acquisition costs. This is the logic behind some of the extraordinary valuations of Internet companies. such as 'viral' marketing. and word-of-mouth even more effective. chat rooms and bulletin boards. commerce and distribution partners. 34 'The State of Online Retailing' . As a result. This. as once a strong lead is established. makes communication tighter. Nov 1998 50 .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. New marketing strategies. leading to the exponential expansion of the customer base. "creating a buzz". When a company reaches 'critical mass'. Larger sites can also negotiate better supplier discounts or product placement fees. the larger customer base provides online companies with more leverage in attracting and negotiating with key content.A Shop.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. the brand begins to take hold. in turn. with a minimal budget and maximum effect. as it carries the implied endorsement from a friend. 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. By the time a company has reached critical mass.unless the leader makes a serious mistake. web sites. Given the connectivity of the Internet among customers. It is often referred to as "word-of-mouth". creating a potentially exponential growth (like a virus) in the message's visibility and effect. viral marketing is an effective tool in getting a message out fast. the leader will pick up momentum and will stand to gain an insurmountable advantage . The Internet. its growth curve relative to a new entrant is somewhat daunting. As a result. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs.org Study in collaboration with The Boston Consulting Group. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. This snowball effect favours first-movers. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. and "network marketing". with its e-mail lists. Word-of-mouth is a particularly powerful medium. 5. "leveraging the media". the value of the company rises exponentially with market share. or until a competitor finds a way to change the game again. and the cost of switching to an alternative brand becomes quite high.
eGroups and Geocities (both recently acquired by Yahoo!).com. and in doing so spread the word for Geocities. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. • Each new user becomes a company salesperson. When a user builds a website. they tell all their 51 . they will have a powerful viral opportunity at their disposal. In its first 1. A traditional print publication would hope to reach 100. Free Email at http://www.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. but Hotmail signs up more than 150. Geocities enables people to create personal websites for free.5 years. seven days a week. where they have never carried out any promotional activities. Hotmail.5.000 subscribers within a few years of launch. whether for communications or community. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). and then propel the message even further to their own ever-increasing circles of friends and associates. saying: • "Get Your Private. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. a company now owned by Microsoft.1 The Case of Hotmail. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. friends to visit it.com was one of the first free web-based e-mail services. and they created a subscriber base more rapidly than any company in history. 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). 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.000 subscribers every day.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.hotmail. In fact. sign up for their own free e-mail. Hotmail acquired over 12 million subscribers. and the message spreads organically.
An A. The customers' ability to access and display information rapidly is extremely important36. In fact... 2000 (www..bain. T. Promotion. 'The Value of Online Customer Loyalty and How You Can Capture it'. J.. .3). Zook. Chu. Price. D. As 35 36 'Creating a High-Impact Digital Customer Experience' . Baveja. 30% of potential customers leave sites because they cannot find what they are looking for. making customers 'click off' to another site. & Hancock. 2000 37 Rigby. Sites that are difficult to use can cause frustration. Kearney White Paper.A PricewaterhouseCoopers Report. S.. In essence.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. FIGURE 5.com) 52 . T. C.An A. 2000 'The E-business Technology Forecast' . Place). Rastogi. and 66% of people who start a 'shopping basket' fail to complete the transaction37.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. S. R. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. Kearney White Paper..A Mainspring Communication Report in collaboration with Bain & Co.. March 17.
as cited in Business Week. and a wide range of products. 38 39 Cognitiative Inc.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. ease-of-use. whereas a slow response time and site downtime will have a significant negative impact. up-to-date information. ease-of-navigation.businessweek.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. FIGURE 5. which can enhance the company's value proposition. T. 1999 (www.com) Davenport.businessweek. and fast response times are among the most important factors in establishing web brand loyalty38.4 .. expert insights.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. online companies have the opportunity to provide rich. With almost infinite display space and inventory capability. October 29. as cited in Business Week Magazine.4. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. CIO Magazine. February 2000 Issue 53 . 29th October 1999 (www. 'Sticky Business'.
Members can interact in chat rooms. & Hagel. Spring 2000 42 Armstrong. According to Forrester Research40.A Forrester Research Report. use bulletin boards. 'Real Profits from Virtual Communities' .g. 54 . it needs a critical mass of members42.. and organise live events. Customisation Customisation involves tailoring the presentation of a web-site to individuals. 40 41 Morrisette.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. K. An online community offers a compelling way to entice customers back to a site. Clemmer. or prior transactions. No. Customisation creates the feeling of a one-to-one relationship. These sites allow members to interact with one another.. as well as through loyalty programmes that provide targeted benefits. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!).forrester.. Often.5).Sloan Management Review. share information and access a wide range of services.com) McWilliam. 'Building Stronger Brands through Online Communities' . Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. visitors should not be engulfed with too much information. A. demographics. which is facilitated by a combination of factors (Figure 5. 1995. and nearly 20% use it for post-sales support. based on profile information. J. Other content includes community-generated content. . On the other hand. 1999 (www. W. G.. 31% of online consumers use the Internet for obtaining product information.The McKinsey Quarterly. Online sites can track a customer's purchase history and modify its service accordingly. Community Online communities are emerging as new gathering places for consumers with similar interests (e. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. 3. even if they purchase offline. An important contribution of these communities is that they provide members with a medium to communicate with each other. It fosters a sense of belonging41 among the members. S. which enhances the user's online experience. iVillage and Geocities). and advertising (if it is relevant and useful).. & Bluestein. For a community to work. 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).
55 .5 . as well as attracting traffic from other sites.A PricewaterhouseCoopers Study. they opt to input the URL (Internet address . O'Donnell & Gupta.brand-name. S.www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 343-373.. 1999 Communities enhance the speed and value of information sharing. March 1998. M. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5.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. Journal of Consumer Research. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. pp.6). A. Once customers know of a site. Site-tosite connectivity focuses on connecting users to other relevant sites. and can create emotional loyalty. Mulcahy.com) directly into the browser and access the site immediately. 'Making Real Sense of Virtual Communities' . C. allowing customers to deepen their experience with a brand and build more personal connection... Companies can provide a selection of related links that complement the site's purpose and value proposition. This is similar to placing offline stores in high traffic areas. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. when membership in the brand's community becomes an end in itself43.. 43 Fournier. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.
marketwatch.com) 56 .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. It is important in building relationships. delivery and return options. and FAQ pages (Frequently Asked Questions) to solve problems. as well as features such as gift-wrapping. Therefore. 45 MarketWatch.6 . events and subjects of interest to the customer. Customers share security and privacy concerns. (www. Other tools such as bookmarking the page can also facilitate connectivity. and online surveys. The development of loyalty programmes. Customer Care Online customers often require assistance and reassurance. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. In addition. live chat. customer support at all stages of the interaction is important. Communication can be tailored to specific user interests and should allow for two-way interaction. as well as informing and reminding customers of special offers. online chat. news up-dates. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. customer care activities can involve providing a variety of payment. and can be provided through e-mail. activities. serves this purpose and helps to build customer loyalty. which provide targeted and unique (customised) benefits to the customer. toll-free telephone numbers.
mckinseyquarterly. 180-183 (www.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. A. and bring people to the site for the first time. Newspapers.Awareness.. Evaluation.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Figure 3. The mechanisms to communicate range from traditional media (TV. This model consists of five stages . visibility relies solely on Communication. pp. R. This is more difficult online than offline. 'Marketing to the Digital Consumer'. billboards. Engage. Retain. Adoption).7 . Magazines.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.Attract.. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. 1996. Learn and Relate. No.. Interest. McKinsey Quarterly.) to online tools. McQuade.4 .7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Waitman. because there is no physical presence. 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 ’ . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.. Trial. etc. Therefore.7. e-mail notifications and banner advertisements.8. links from directory searches (Connectivity). FIGURE 5. & Zeisser. modified to take into account of the interactive dynamics of the Internet. S. including affiliate programmes with other websites. M.2. The company must build awareness and communicate its value proposition to its target customers.
3. Fig.3 3.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 .1 3.Economist Intelligence Unit 2000 (www.4 4.com) The most effective methods are direct e-mail. it is important to quickly engage consumers' interest before they move on. Kapferer's Brand Prism (Ch. Creativity is also an important factor in gaining attention in today's cluttered marketplace. The key factors at this stage are Convenience combined with interesting Content. as cited in 'Targeting Consumers via the Internet' .0 3.8 4. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. multiplied by the expected rate of transactions.2 4.5) 2. public relations and television advertising.3 2.8 .ebusinessforum. Attracting customers is only the first step in building online brands. discounted over the expected duration of the brand-customer relationship.3) is useful to ensure that a company develops a distinct and consistent brand identity. 58 .WEBSITE PROMOTION METHODS . Companies then need to engage customers to obtain their interest and participation. 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 Source: Forrester Research. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.5 3.4 3.6 3. Engage With the multitude of choice available on the Internet. affiliate programmes.7 4.4 3.
can create value for the customer and help build the brand-customer relationship. and what additional products and services are they interested in provides companies with valuable information which. a company can create value by providing a personalised online experience. and must be continuously updated due to the multiple visit nature of customers. 5. 59 . 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. such as groceries and convenience goods.who they are and why they shop online. if used properly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. TV. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. 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.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. Radio). and forge closer relationships than any offline operator. Certain product categories. • The Internet supports brand-building activities where there is a need to build a relationship.g. The objective is to increase the conversion rate (% of browsers converted into buyers). Learn The Internet provides extensive opportunities to learn about consumers (demographics.9). Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. attitudes and behaviour). Communities and Customisation are other sticky applications. Building up a knowledge database on each customer . Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Content is the basic driver of retaining customers on a site.
However.. providing further added value. 5.. the interaction provides the ability for companies to learn from their customers and relate. and as the relationship develops. The next chapter analyses the brand-building efforts of seven companies.9 . The 7Cs Framework outlines the key components of the brand experience and the sources of added value. These case studies provide a practical insight into how companies are building their online brands. it is not economically feasible to sell certain products.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. A.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. pp. M. The interactive brand-building process involves attracting.from the promises made in the value proposition. McKinsey Quarterly.2.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. Waitman. due to high delivery and transaction costs (relative to the value of the product). touch. 'Marketing to the Digital Consumer'. • Brand-building favours products that can be sold online. smell).. to its delivery to the customer. engaging and retaining customers. McQuade.. 180-183 (www.9 CONCLUSION On the Internet. the experience is the brand. 1996. In order to create "apostles". & Zeisser. Given the high acquisition costs of online customers. R.mckinseyquarterly. No. companies must provide a satisfying end-to-end customer experience . and the need to stimulate the other senses (taste. especially in small quantities. it is critical for companies to build relationships and foster brand loyalty. 60 . S.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
Germany and Japan49. In addition. November 11. Through its provision of a one-stop shopping experience. and the most widely recognised e-commerce brand name in the US (with 60% awareness48).1 outlines Amazon's timeline and major milestones. Amazon serves over 23 million customers from 160 countries.com and Yahoo!. discounted prices. The cases are presented in the following sequence .It's an Ocean.com . Boo.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products.com's success stems from its compelling value proposition. 1999 49 'Amazon's Amazing Ambition' . 6. and other key factors that have contributed to its success (or failure). 'Amazon.2. including: increased selection.2 Value Proposition Amazon. Gap.COM 6.The Economist. February 26.1 Company Overview Amazon. more information. 2000 (www. 47 48 Interbrand (www.1 INTRODUCTION This chapter provides an analysis of seven companies. and has sales of over $2 billion. Amazon. and enjoyable experience. It is the 57th most valuable brand in the world47.com) 62 .Amazon.2 CASE STUDY: AMAZON. Amazon provides increased added value on several dimensions.economist. and is one of the few Internet brands that is recognised all over the world.interbrand.com. 6. and one of the top two or three in Britain.com has become synonymous with e-commerce. its brand-building strategy (how it generates traffic).com. Amazon.see Appendix A. France. combined with its levels of customisation and customer service.com) . it is the most visited e-commerce website in America.com.2. Barnesandnoble. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). Amazon has been able to differentiate itself from other online competitors. Each case is presented in the same format including.com launched with a mission to use the Internet to transform book buying into a fast. Amazon has cultivated a reputation for excellence. its value proposition.Goldman Sachs Report. and higher levels of customisation and service than the traditional shopping experience allows. and has equity investments in several e-tailers. eBay. In addition. Not a River' . greater convenience.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. innovation and delivering on its promises. In July 1995. CDnow. the sources of added value (using the 7Cs Framework). Figure 6. a company overview. easy.
com invests in wineshopper.com . such as the Palm VII organiser. a tools and equipment store for professional tool users and woodworkers . Ashford.com and NextCard launch co-branded credit card .com is founded by Jeff Bezos Amazon.com. featuring thousands of bestseller lists for hometowns.toolcrib.000 members Amazon.Amazon surpasses 20 million cumulative customer accounts .com.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com Auctions and zShops provide new tools to its merchant community .com Announce Strategic Investment and Promotional Agreement .Customers can shop at Amazon. Software.amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com opens its virtual doors at amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. Amazon.com .com .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.Amazon.com to create a "home living" store at amazon.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.Amazon.Amazon and eziba.Amazon enters strategic alliance with living.com .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.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.Amazon. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.Amazon launches lawn & patio store . and minority investment in. and more Amazon launches "Amazon.COM .com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon launches new kitchen store ." providing shopping from wireless devices.com Amazon announces further plans to expand distribution network to meet rapid growth.com Anywhere.Amazon opens a customer service centre in Huntington.Amazon launches www. West Virginia.TIMELINE AND MAJOR MILESTONES Amazon.com Amazon invests in Pets.com Amazon introduces "Purchase CirclesTM".Amazon enters into a strategic partnership with Drugstore.Amazon announces investment in kozmo.com enters European book market Microsoft signs Amazon.Amazon and online car-buying service Greenlight.com via the new wireless pocket PC . to meet rapid growth . Video Games and Gift Ideas Amazon and Sotheby's launch www.Amazon launches health and beauty store .amazon.com Electronics and Amazon. universities.com announce investment and strategic alliance .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com 63 .sothebys. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.New home living store from living.Amazon opens customer service centre in The Hague . workplaces.com Amazon acquires Back to Basics Toys to add to Amazon.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .
The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. logically structured. and Amazon. interviews with authors. gift click. Content Amazon provides content on several levels. expert reviews.1 .e. and quick-to-load pages Over time.2. Amazon has added other features for shopping convenience. recommendations.OVERVIEW OF AMAZON. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. such as the Amazon. downloads quickly and services visitors adequately . live or study.1. mobile phones.Figure 6. wish lists. easy-to-use.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. The site is easy-to-use.3 Sources of Value . This is an example of 64 .com All Product search (searches the entire web). and customer Purchase CirclesTM. offering multiple paths to a given book or product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. the 1-ClickTM express checkout. Palm VII PDA device).com Anywhere to support access from wireless devices (i. FIGURE 6. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. including book jacket images. discussion boards. gift reminders. encourage repeat visits and drive higher conversion rates. customer testimonials. book summaries.
1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. linking it to a large number of other sites. Amazon's content is not reproducible by competition.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. to the proactive notification of new items of interest. 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.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 . from the customer recognition at the point of interface (Figure 6. This customer-centricity is evident in all Amazon's activities. and customer interaction.thereby increasing conversion rates. and has developed an Associates Programme. Amazon introduced Amazon.4. More recently. real-time shipping and backorder notices. By leveraging its vast customer base. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. Community Amazon has also added a community element to the purchasing process. which helps to build loyalty and create switching costs. Connectivity Amazon has built relationships with high traffic web portals and sites. therefore. creates a competitive advantage. In doing so. and Customisation Amazon provides customised features and services. from its shopping basket applications which lists the estimated time to delivery reliably. converting them into a storefront for Amazon. 65 . These are discussed in more detail in Section 6. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. Amazon creates one-to-one relationships with its customers.
Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers.2. two personalised services. The Financial Times. As a result of all these factors (7Cs). New Yorker and The Economist. help maintain contact and build traffic by e-mailing customers when desired products or books become available.2). Eyes and Editors. Instead of paying directly for this exposure. This enabled Amazon to reach more customer segments and niches (Figure 6. Newsweek. and customers are also e-mailed when the items are shipped from the warehouse. which only applied to sales that resulted from the initial click-through.a move that along with the novelty of its business model and the newness of the Internet.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. it began to advertise in print media and online . 66 . 6. In the second half of 1996. they are subsequently confirmed by e-mail. Amazon offered Associates referral fees of up to 15%.000 members. attracting member sites of all sizes. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. enticing them to return to the site and purchase repeatedly. Business Week. In July 1996. and not subsequent purchases. helped generate publicity and stories about the company in publications such as The Wall Street Journal. The Associates Programme has been phenomenally successful. Amazon inaugurated the Associates Programme under which other websites could display the Amazon.000 by August 2000. Once orders are placed.com hot-link and offer specific books of interest to their visitors. In addition. Through the first half of 1996. increasing to over 500. and by 1999 it had over 200.
and Geocities.com. The Yahoo! agreement. was also linked to Amazon's entry into Europe Amazon. Excite. In return.com gift certificate (in your name). Netscape's Netcenter and NetSearch.customers are encouraged to provide e-mail addresses of friends. 67 .uk the local provider for Yahoo! UK & Ireland. each friend is sent a $5 Amazon.de became the local provider for Yahoo! Germany and Amazon. Amazon also established agreements with AltaVista. Interesting viral initiatives include: • Amazon.co. • Amazon. People tend to tell their friends about it.allows customers to create a personal profile (with pictures) on the site. multiyear deals involve exclusive book-selling rights.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. the customer acquisition cost is only £10. Prodigy and @home.com). Amazon has used viral marketing techniques through customer reviews.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. including: America Online (AOL). free eCards and gift certificates (which customers send to friends.amazon. From July 1997 to December 1998.2 .COM'S ASSOCIATES PROGRAMME Source: Amazon. spreading the word for Amazon. In addition. and you are given a $5 gift certificate for each customer you provide.com's website (www. and primary button placement on web portal search engines. Yahoo!. thereby promoting Amazon. These multimillion-dollar. Amazon closed deals with five of the six most visited Internet addresses.com Refer-A-Friend .AMAZON.com About Me . mutual links. Therefore.
have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. interesting content.com Really Matter?' .. however. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses.but it was only a tenth as good as the site we have now. According to Jeff Bezos. Once customers are attracted to the site. Amazon maintains a database of customer preferences. billboards. clear presentation. 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. Purchase CirclesTM). and improved customisation and recommendations (e. 1998 68 . with the explosion of websites. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. 'Does Amazon. Amazon has also incorporated traditional offline media (TV.Forbes. Amazon has been able to achieve average customer acquisition costs of less than $20 . By relating to customer needs. As the relationship develops. And we relied on word-of-mouth to build awareness. C. 50 Willis. April 6. Amazon is building customer loyalty and encouraging repeat business.significantly lower than other online companies. 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. With this combination of promotional methods. buying patterns and viewing habits. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Magazines. "we had a world-class site the day we launched . newspapers) to generate awareness.g. That's not possible anymore50". Amazon's proven online merchandise selling techniques including easy-to-use search options. which accounts for 66% of Amazon's sales. community feel (as discussed previously). so we didn't have to do much advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth.
R.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. According to Jeff Bezos. good value. establishing a reputation for excellence and fulfilment. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities.2. further enhancing their value proposition. Amazon received criticism for expanding its product line. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. (Oxford: Capstone Publishing). and our goal is to increase that gap51". 1999 69 . he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. because he wanted it to be short. However. July 1998. in June 1998. We have been customer obsessed. Saunders. "we're not a stationary target.a wide range of choice. Success. 'Business the Amazon. Our secret is that we have not been competitor obsessed. In addition.. L. According to Jeff Bezos. Amazon unveiled a music store. management realised that Amazon had become more associated with other core brand values .com Way'. In addition. and its safe and secure delivery. As such. and to convey its vast size and offering. Amazon was able to secure partnerships and alliances with key players. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. and according to Jeff Bezos. to capture the spirit of the site. memorable..com obsessed52". 51 52 Hazleton. developing customer service centres and expanding its distribution network to support high levels of service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Amazon is constantly seeking new ways of improving its offering. For example. the balance of power shifts away from the company and goes towards the customer. due to the hype and coverage it was given. "Online. while our competitors have been Amazon. establishing Amazon as the leading online bookseller with a large customer base. We were blessed with a two-year head start. As such. Amazon's understanding of its brand identity has been a critical factor. thereby diluting the value of its association with books. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. This has helped them attract customers and move up the learning curve quickly. Nevertheless. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). which within six months propelled Amazon to one of the leading online music retailers. Amazon has been able to build a strong brand at relatively low cost.
and to sustain a positive image and satisfactory end-to-end experience. secure payment procedures. However. however. This raises a critical issue. 53 Warner. Volume Discounter' . distribution centres and upgrading the site. Amazon also recognised that service quality is a perception.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement.. In doing so. they're stretchable and pliant. it has not recorded any profits to date. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. 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. Amazon has continuously invested in customer service. which is critical on the Internet. not necessarily a reality. Amazon's intense focus on customer needs and continual innovation. the drain on their cash resources will push them towards bankruptcy. Quality is only measurable in the minds of visitors to the site. B. but over time they become more and more associated with a particular thing and harder to stretch53". Nevertheless.2. 'Marketers of the Year: Jeff Bezos. with new products and value added content. stem from its compelling value proposition and high quality end-to-end customer experience. and investors lose confidence. they have cultivated a reputation for excellence and fulfilment.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. This customer-centricity is a key hallmark of a successful Internet brand. 6. have kept it ahead.Brandweek. as the true value of a brand lies in its sustainability. The key factors driving its growth and high retention rates. if it continues to incur losses. speedy delivery and good value. October 12. 1998 70 . When they're young. Amazon delivers on its promises of a wide inventory of products. Amazon is claiming to be making profits on its books and music categories.
com) . all front-end operations (marketing. is one of the best known traditional booksellers in the United States. and 20% owned by the public.Launches Internet Radio . etc.Barnes & Noble went online at AOL May . prints & posters and related products.Acquires equity stake in Mightwords .COM 6.. Barnesandnoble.Acquires minority stake in NotHarvard.com is approximately 40% owned by Barnes & Noble. Barnesandnoble.com's timeline and major milestones is outlined in Figure 6.Launches Affiliate Network December . and 470 B.) established by its parent company.com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July .3. music.com announces strategic relationship with Palm Computing . Barnesandnoble.Launches BNTV .com provides other online categories offering software.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas). Launched in 1997. Barnesandnoble.com was able to 'hit the ground running'. book databases. contacts. magazines.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com . including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.barnesandnoble.Offers same day delivery in Manhatten . and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. Currently.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .Launches Video Store 71 .2 1997 January BARNESANDNOBLE.3 CASE STUDY: BARNESANDNOBLE.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.com launched its website (www. and is the second largest online bookseller (after Amazon. TABLE 6. However. as it could capitalise on the infrastructure and back-end operations (warehouses.com and Microsoft announce that they will create an eBook superstore .1 Company Overview Barnesandnoble.2.com is the fourth largest e-commerce retailer54.Barnesandnoble. rare. Dalton bookstores (located in shopping malls).com).Barnes & Noble University opens registration for free online courses . Inc.Announces distribution relationship with New York Times September . Besides books.TIMELINE AND MAJOR MILESTONES . 40% owned by Bertelsmann AG. Barnes & Noble Inc.COM .Barnes & Noble. Barnes & Noble Inc. promotion) between the online store and the retail stores have been kept separate.Barnesandnoble.
author.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. music New Initiatives Barnesandnoble.com's (Figure 6.COM'S WEBSITE Simple.3 .bn. Both have expanded their convenience to offer 54 Media Metrix. but instead of developing an outstanding interface to its inventory.com let customers sign up to receive email reviews and announcements of new titles. they offer customers fast delivery.3. 6. the company created a site very similar to Amazon. previously-owned and rare books. the features are practically identical. as cited on Barnesandnoble.OVERVIEW OF BARNESANDNOBLE. easy and secure ordering. in terms of the 7Cs framework.com offers customers an easy-to-search catalogue of virtually every book currently in print. and easy-to-navigate site Categories focus on books.3. Barnes & Noble planned to dominate online book-selling.com's virtual storefront is graphically richer than Amazon. logically structured. including title. FIGURE 6. publisher.3).com's website (www.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores. however. Both Amazon.barnesandnoble. In addition.2 Value Proposition Barnesandnoble.com's and takes a bit longer to download. software.com or www. good prices.com) 72 . edition.3 Sources of Value . as well as an extended searchable catalogue of millions of out-of-print. rich editorial content and a community experience. etc.com and barnesandnoble. Both offer detailed bibliographic information.
64 billion.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. These initiatives have generated traffic to the site. Both offer 'associate programmes' that let other websites link to their sites. it lags behind first-mover Amazon. Instead.4 Brand-Building Strategy Barnesandnoble.000 affiliates in its referral network. and Barnes & Noble Inc. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). Netscape and Microsoft Network. However. As of February 2000. Both try to foster a community of readers by letting customers post reviews online. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. however. Although. 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 .com.com's 1999 revenues were $202.1 billion.6 million. and both are expanding globally.3.com had over 17 million. Lycos. this programme had more than 300. Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Both offer customisation that permits users to personalise the experience. has yet to leverage its strong brand in cyberspace. Barnesandnoble. Barnesandnoble. December 17.The Wall Street Journal. The 6. compared to Amazon.com closed 1999 with 4 million customers. prevent cannibalisation of its existing business. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com was valued at $21.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com's $1. reasons for this are explained in the next section. Yahoo!. and avoid charging sales tax in states where it has stores56. Barnesandnoble.com has created a high quality website and customer experience. Webcrawler.com in return for a commission on any purchases that they originated . while Amazon.a replica of Amazon's Associates Programme.com's market capitalisation was $251 million. They have developed an affiliate programme that links sites to Barnesandnoble. while Amazon. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.
com. At any given point there are hundreds of customers browsing their aisles looking for something to read.com. In return. Barnesandnoble. as Bertelsmann's book division includes partners such as Random House.com.com. provides access to valuable resources. • In addition. Unfortunately. people began using their stores as a physical showcase for online rivals such as Amazon.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.. and leverage its real-world presence. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved. and a same-day delivery option in Manhattan. By failing to leverage it. Barnesandnoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. and Internet terminals in the bookstores.com's link to Bertelsmann AG. or deliver books directly from the retailers. and in recent months has aggressively sought new ways to differentiate itself.com has changed its name to Barnes & Noble. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com created a new cross-marketing genre in February 2000. 1-800Flowers. and the tangibility that this provides. Petsmart.com is its association with Barnes & Noble Inc.com.com offers links to each partner's site and a discount for visitors who click-through. 74 . content and distribution opportunities.com should have aggressively cross-promoted their stores through advertising.com. Barnesandnoble. • Barnesandnoble. when it struck reciprocal marketing deals with Expedia.com. and its BMG Entertainment division includes music giants Arista Records and RCA Records. Planetrx. Barnesandnoble.com.com. LLbean. in-store displays. Jcrew.com has lost access to valuable customers. Barnesandnoble. Under the seven separate agreements. To signal its intentions.com and VitaminShoppe. each partner offers a similar link to Barnesandnoble.com has begun to acknowledge some of these mistakes. • Barnesandnoble. with a similar discount. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com's key differentiator from Amazon. Barnes & Noble University (a free online education resource). Recent Initiatives Barnesandnoble. in the attempt to gain traction and build momentum.
and was further up the growth curve. August 4. meant that Amazon.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base. The Press have also contributed.its key differentiating factors.com and has given them the image of a second rate 'me too' brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. by portraying them as slow and clumsy in comparison to the more nimble Amazon. feature for feature) has failed to differentiate Barnesandnoble.com has been able to create a high impact and high-quality customer experience. customer relationships and offline presence . In addition. otherwise they risk losing out to other online competitors.com's late start in 1997. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. Barnesandnoble. a wellestablished Internet brand. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57".com's experience is instructive.com . 2000 (www.Forbes.com. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.forbes. and its lack of innovation (by copying Amazon.3.Not a Best Seller' . even if that means eating into their existing sales. significant market momentum. it also caused a major setback. it has not been able to establish itself as the leading online bookseller. 57 'Bn.6 Conclusion Although Barnesandnoble. The company failed to leverage its established brand.com) 75 . Barnesandnoble. and allowed them to offer stock options as compensation and achieve a high market capitalisation.
England.3 1999 Mid year BOO.Marketing Week. Boo.4.First sign of problems . 1999 76 .Announces it has only 500.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CMO of Boo.com. it's about range and convenience. Finland. and the resulting loss of investors' confidence.they redesign site.Site goes live . as cited in 'Boo.fails and appoints KPMG as liquidator. Boo.COM . not the limited range you might get at most London fashion shops58". They intended to add France.com collapsed through lack of funds.TIMELINE AND MAJOR MILESTONES . as well as create a kid's site. and Converse. Boo. However. Italy and Spain within a few months.com provided a range of 18 fashion and footwear brands including DKNY.Raises funding of $125 million .4. June 10. among others.4 CASE STUDY: BOO. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). Sweden.com had set the record as Europe's best-funded European Internet Start-up. within six months Boo. On going live. Morgan.000 unique visitors . November 2000 January February May 6. P. TABLE 6. it means all that brand's product line is available. 58 Kajsa Leander. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com opens its virtual doors' . sack 20% of staff and sell stock at 40% discount .1 Company Overview Founded in 1999. Everlast.Multi-million pound advertising campaign created by BMP DDB . Germany and Denmark.COM 6. due to its poor performance and inability to build a customer base.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". receiving $125 million of funding. arranged through J. Puma.Appeals for $30 million more funding . the company was hindered by technical problems that delayed the site going live by five months (until November 1999).2 Value Proposition According to Kajsa Leander.com entered six markets: US. Company is put up for sale. If a clothing brand is on the Boo site. founder and Chief Marketing Officer of Boo. "our marketing thrust is not based on prices. and was billed as one of Europe's hottest e-commerce ventures. and eventually debut in Asia. After a high profile launch.com. Boo. and included high profile investors such as Bernard Arnault.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
5.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.5 CASE STUDY: CDNOW 6.5 million distribution deal with Lycos Signs three-year. features. and was the first site to offer the sale of music downloads and custom CDs.com) 80 . former arch rival .000 sound samples.cdnow. convenience. $22.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .. and one of the most popular shopping sites on the Internet62.000 music-related products and 650.179-188 63 CDnow website (www. On 19th July 2000.000 music related items . 'How to Acquire Customers on the Web' . guides to music genres. good prices.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .CDnow and Time Inc. and exclusive interviews and reviews from CDnow's award-winning editorial staff. as well as music reviews. whether for browsing or buying.1 Company Overview Founded in 1994.Site goes live . announce marketing alliance . May-June 2000.Merges with N2K. daily music news.Partnership program with Geffen Records . $18.000 people. by twin brothers Jason and Matt Olim. and an average daily audience of over 800. 62 Hoffman. TABLE 6. D.Forges distribution partnership with Yahoo! $65. & Novak.5.Merges with Columbia Records . cover art.Launches merged CDnow/N2K site . It has a customer base of 4 million people.Raises $10 million through private placement . T. and they aim to "make every visit to the site. This unprecedented degree of access to music and information is the core of CDnow's value proposition. CDnow is also driving the digital distribution of music.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. pp.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. CDnow was acquired by Bertelsmann AG. customisation and a wealth of information and content to help in the purchase decision.ten times the selection of a conventional bricks-and-mortar music store).Harvard Business Review.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.TIMELINE AND MAJOR MILESTONES . CDnow is the leading online music store. a valuable and rewarding experience"63. CDnow provides access to over 500.
and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.5. For example.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. easy-tonavigate. FIGURE 6. and has secured rights to music reviews. etc. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).3 Sources of Value . By partnering with well-known content providers.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.5 . artists biographies. The whole process of searching for albums or music titles to the actual purchase is simple . to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has cultivated similar relationships with MTV.Figure 6.5. 81 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.. CDnow has leveraged the reputation of their brands to reinforce its own. cover art. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.
Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. Whenever a customer makes a purchase they earn Fast Forward Reward points. Italian. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. It also creates switching costs. which accumulate and can be spent on a variety of music-related products. 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. allow customers to keep track of albums to buy in the future.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). and Geocities as well as more focused specialist sites. Due to International interest. French. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. By customising the store to meets customers' needs. an incentive programme that rewards customers and encourages them to connect back to the site. and key news and entertainment sites . 82 . for once the relationship starts to develop and customers have entered numerous addresses into their Address Book.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts.search engines. Customer Care CDnow's site can be viewed in English. Portuguese. they will be reluctant to visit another online store and enter the information again. CDnow developed the Fast Forward Rewards programme. Dutch and Japanese. Community CDnow has not exploited the potential of creating a community feel. it gives them a sense of ownership and a compelling reason for them to return. German. In addition. Spanish. Excite. CDnow hired a group of multilingual customer service representatives to handle questions.such as AOL. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Yahoo!. Internet access providers. Other features such as My CDnow's Wish List. allowing them to respond to detailed customer queries.
CDnow is doing everything it can to ensure that the next time that 6. and Variety. Spin. print advertising is music-related publications such as Rolling Stone. Excite and other powerful Internet content and service providers. this is their "most successful customer building programme64". These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. • Alliances and Partnerships .They have also stuck exclusive alliances with AOL. Yahoo!.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. and spot radio to build reach. as well as more-targeted music-related sites like Billboard. CDnow's initiatives include: • Banner Ads . music-oriented websites.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. 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. 83 .Through the Cosmic Credit Programme. • Affiliate Programme . and radio spots on the Howard Stern Show to build a cult following among radio listeners. covering the entire music spectrum. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. According to Jason Olim. CDnow extended its distribution reach to include more than 250. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce.5.000 small. customers buy music.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. It is a revenue-sharing arrangement. they buy from CDnow.CDnow's advertisements are targeted to some degree. • Traditional offline Media . By keeping the brand in front of the customer in this way.
it is in this context that the large investments in advertising and partnerships make sense. with 44% of sales coming from new customers65.Press Release. 6. It is constantly adding new functionality to the site and has been innovative in its offering .As for many successful online retailers.com) 65 'Pioneering in Cyberspace' . and scaled it awareness-building efforts.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . and to increases in the customer base of more than 30% quarter-to-quarter. 1998: $56. The story of how CDnow was founded in a basement.4 million. as a way to fuel very lucrative word of mouth.Hampel & Stefanides (www.CDnow made public relations a high priority brand-building tool.5. April 28. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. CDnow's promotion strategies have attracted high levels of traffic. resulting in increased conversion rates. The company continually pushed for new distribution partnerships to widen its sphere of influence. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . with repeat customers accounting for more than 50% of sales.cdnow. word-of-mouth accounts for the lion's share of CDnow's customers. both in the online and offline worlds.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.(www.they were the first site to offer the sale of music downloads and custom CDs. This has contributed to a 225% increase in sales (1997: $17. In fact. 1998 . It is a powerful source of acquiring new customers at low cost.hsny. • Word-of-Mouth . Public relations efforts helped to generate word of mouth and influence sales. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases.htm) 84 .com/cdnow.4 million).
"eBrands .from how CDnow has personalised its product offering to its capable customer service team . This. It was able to create a strong value proposition and high quality customer experience. 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. as cited in Carpenter. CDnow has developed a relationship with Valley Records. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. a record distributor that handles the majority of CDnow's fulfilment logistics. P. (Boston: Harvard Business School Press).89 67 Jason Olim. According to Jason Olim. This gives the customer the impression that the order is being handled quickly. "eBrands .have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. and innovative. P.5. combined with the high impact customer experience created . CEO of CDnow. as cited in Carpenter. 66 Jason Olim.it's what you do66". "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this.Building an Internet Business at Breakneck Speed". They also provide the customer with an order number and customer support contact information should they have questions.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw.75 85 . 2000 p. to ensure quick delivery to customers. "your brand is not just what you say .Building an Internet Business at Breakneck Speed". 2000 p. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. 6. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. The development of an extensive affiliate network. CEO of CDnow. and ensure that it exploits its early-mover advantage and keeps ahead of competition. (Boston: Harvard Business School Press).
eBay is not about auctions. the eBay community has grown to include more than 10 million registered users.6. CEO of eBay.000 new items joining the "for sale" list every 24 hours69.2 Value Proposition eBay offers consumers an efficient. This is a new market . 24 hour a day. There are over half a million new auctions. transportation and other overhead costs.Company Overview' . and eBay receives a transaction fee that ranges from 1. 1st October 1999 86 . eBay effectively created a new business model never before possible . flea markets and auctions. and eBay never takes possession of the item being sold. from collectibles and antiques to electronics and toys.eBay website (www.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. 6. garage sales. (A)' . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.com) 'eBay . global trading place for buying and selling personal items in an entertaining auction format.300 categories.ebay.removing the need for inventory. extensive selection and geographical reach. People perceive the auction format to offer better prices. or the payment for the item . Auctions make it fun. Individuals use eBay to buy and sell items in more than 4.com) 70 'Meg Whitman at eBay Inc. "at its core. with emphasis being placed on its unique community feel and culture.6 CASE STUDY: EBAY 6.6. Since its launch in September 1995. and eBay provides added value through its convenience.g.ebay. shipping.efficient one-to-one trading in an auction format.25% to 5% of the final sale price on any item sold. Auctions are an enabler. According to Meg Whitman. with the number of unique daily visitors setting a record of 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Company Overview' . The buyer and the seller work out the logistics of the transport (e. Sellers pay a nominal fee for placing an item up for sale. payment) between themselves.eBay website (www. as cited in 'eBay . and 450. Auctions represent a platform.the closest thing in the offline world are trading forums such as classified ads.782 million in January 200068. collectable shows.A Harvard Business School Case Study.
eBay goes wireless with Palm VII connected organiser . Selling.eBay teams up with Carclub.eBay acquires alando. . co-marketing relationship. Seattle & Tacoma.eBay goes live . and its online trading site (Up4Sale) .com to provide automotive service for eBay Users . And you only get word-of-mouth if you have a great customer experience. Dallas & Fort Worth.eBay acquires Jump Inc. So brand-building job No.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 .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .America Online and eBay announce strategic marketing alliance .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay introduces eBay Magazine in collaboration with Krause Publications.businessweek. 1 is have a great customer experience71". they try to influence customer behaviour by encouraging them to adopt certain values. This raises challenges in how to control and influence the customer experience.eBay expands strategic relationship with Netscape . Las Vegas. Since eBay cannot control how one person treats another. Still the vast majority of our new users come from word-of-mouth.eBay acquires Kruse International . emphasis is placed on community development and customer care.eBay acquires Butterfield & Butterfield.eBay acquires Blackthorne Software GO.eBay and Ultimatebid.6. and Salt Lake City .eBay IPOed raising $58 million .eBay goes live in Australia .3 Sources of Value . The Official eBay Guide to Buying. 21st May 1999 (www. Nashville.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.The 7Cs Framework According to Meg Whitman.eBay and AOL launch co-branded site . "the first brand-building strategy that we have is to have a great customer experience. allowing users to create personal homepages . as they rarely deal directly with the company. Providence. and Collecting Just About Anything and eBay for Dummies.Business Week.S. .de .Launches "My eBay!" to customise the online auction experience . Unlike the previous case studies discussed.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 launches local websites in Baltimore & Washington DC.Com form alliance - 6. and raises $700 million . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay launches 'About Me' feature.com) 87 .eBay and First Auction sign a partnership agreement . Boston.Compaq Computer Corporation and eBay form a strategic U.Germany's leading online person-to-person trading site . Milwaukee. the eBay customer experience is based on how their customers deal with each other. Norfolk & Virginia Beach. and in terms of the '7Cs'. and two books -.
easy-to-use online service (Figure 6. increasing the risk of outages. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. which is much more demanding on the system. Nevertheless. eBay has also expanded to accommodate access through wireless devices for added convenience. 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. topically arranged.6). and since. eBay's site has to process thousands of live bids simultaneously. This contributes to the community feel. Content Content is primarily user generated through the items listed for sale.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. 88 . Other content includes the banner ads.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. angering hundreds of thousands of eBay users. they have continually invested in system capacity. and adds to the experience and the discovery of the auction process. eBay had a 'wake up call' when the website crashed for 8 hours. categorically arranged. FIGURE 6.6 .
eBay offers its users category-specific chat rooms. for the people". Community eBay attributes much of its success to a strong sense of community among its users. by the people. autonomy. discuss topics they care about.g. and in doing so. which is posted to the site. It is a place where people can meet with similar interests. the culture has come under strain due to the company's rapid growth from a small community into a "big city". This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. This has created a self-regulating mechanism that encourages good behaviour. respect. eBay's community has a distinct culture based on trust. Whitman describes eBay's community culture as a site "of the people. 89 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. 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). In addition. However. the community spirit and personal relationships also transcend the online experience. To encourage this sense of community. and there are several reports of eBay users vacationing together. a monthly newsletter. which is then added to the partner's trading profile. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. and share information. eBay Salt Lake City) have helped them restore that community feel. Recent initiatives such as the development of local websites in major US cities (e.eBay represents more than just a place to buy and sell goods.as eBay users refer to themselves . empowerment and equality. e-mail. and is considered by many users as one of the best features on the website. has enabled eBay to foster a strong sense of community on its site. eBay Boston. For many 'eBayers' . while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. After a sale. bulletin boards. a "giving-board" for charitable donations to user-identified causes. working together and helping each other offline.
eBay's approach to customer care has evolved over time.the Community Watch group. 90 . banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics.g. the largest of which was with AOL. and willingness to empower. which was dedicated to investigating misuses of the system (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. in which the company hired active. As such. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. This was later expanded to include customer support representatives who worked out of eBay's headquarters. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. links to high traffic sites. which was dedicated to monitoring the site for illegal and infringing activities. and the introduction of two specialised customer support groups . fraud. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. and respected members of its own user community to serve as customer support representatives. answering e-mails and responding to questions posted on the site's bulletin boards. This also reinforced the company's respect for. and the Safe Harbour group. its user community. Customer support activities were constantly upgraded and expanded as the business developed. Customer Care eBay controls neither end of the transaction. knowledgeable. These people worked from their homes. eBay has invested in customer care and support to ensure people conduct safe transactions. geographically dispersed users as customer support representatives. but they have other partnerships with over 150 websites of varying scales. shill bidding) and helping to resolve user-to-user conflicts. During the first two years. eBay also engaged in marketing partnerships. By using its own enthusiastic. Communication eBay maintains close communication with its members. eBay was able to cost-effectively offer 24x7 customer support early on. eBay employed a "remote" customer support model.
4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. eBay decided that it would not enter into major portal advertising deals in the short term. eBay Magazine. but they have other partnerships with over 150 websites of varying scales. and highlight opportunities created by e-commerce. provide a wealth of information about the 'ins and outs' of trading on eBay. representing about 40% of revenues. 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. they decided to target their marketing efforts on these heavy users. eBay transformed from a pure online play into a 'clicks-and-mortar' company. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. and two books. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins.a four-year.g. These new publications appeal to the collecting spirit. as a result of the high quality experience it provides. Doll Collector) and appearance in trade shows. 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. The Official eBay Guide to Buying.6. Selling.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The AOL partnership was one of the largest strategic partnerships on the Internet . $75 million joint marketing alliance and development deal. eBay has been able to attract a large customer base. eBay has since expanded its promotion efforts and engaged in marketing partnerships.3 million in advertising. Mary Beth's Beanie World. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. they spent $12. 91 . and Collecting Just About Anything and eBay for Dummies. As a result. who tended to be serious collectors. and facilitate the spread of positive wordof-mouth. the largest of which was with AOL. Based on this. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Recent promotional initiatives include its new publication. Early on. and maintained the same ratio for 1999. Through this combination of its advertising efforts and targeted promotions. In 1998.
I think you are not well served by moving incredibly rapidly and not doing things well72". 6.com) 92 . is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. the Personal Shopper and the eBay Life Newsletter.contributing to its strong lead and competitive advantage. This is achieved by listening to their community (learning) and developing new improved products and services (relating).the ultimate network effect .Business Week. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .5 Conclusion eBay's compelling value proposition. eBay has also faced difficult challenges in scaling the organisation fast enough. have been key factors that have contributed to the success of the brand. their ability to create a new market using Internet technology. This has become part of the eBay culture. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers.businessweek. and according to Meg Whitman. and according to research carried out by eBay. which were all ideas of eBay users. However. as they could not opt for a 'go slow' strategy. 21st May 1999 (www. As a result.BUILDING SUCCESSFUL BRANDS ON THE INTERNET eBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer 'lock-in'. very fast. eBay attracts a broader selection of buyers. which in turn attracts more sellers . such as the Feedback Form. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions.6. have been instrumental in building a 'quality' customer base. and their first-mover advantage. Their focus on heavy users and targeted promotions. which has established eBay above other online auction communities. And while we have to move very. however. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. "the devil in so much of this is in the detail.
Business Week. Gap. In late 1997. 73 74 Interbrand (www. GapKids.see Appendix A Gap.gapinc.babygap. In addition.com) . and are still relatively small compared to Gap's $9 billion in annual sales. letting customers access the Gap brands. from jeans and T-shirts to khakis and jackets. the growth prospects are enormous. Its reach extends across more than 1. as cited in Lee.com' . announce multi-year partnership.COM 6.gap.$100 million.com. whether in the store or online76". Canada.7. 6. UK. California GapKids opens its first store BabyGap is born Gap opens its online store at www. however. standard styles are well suited to online shopping. and analysts estimate that sales in 1999 amounted to $50 .an early convert to the then-revolutionary idea of clothes retailing on the Internet.COM . online sales are only available to US customers. to provide customers with greater convenience and options. Gap started selling items online . The Gap offers a balance of modern and seasonal styles of clothing. 'Clicks and Mortar at Gap."to deliver style. "this is about being clicks-and-mortar. and BabyGap.2 Value Proposition Gap's simple.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.7. L.1 Company Overview Gap opened its first store in San Francisco in 1969.interbrand. TABLE 6. Germany and Japan.800 stores in the US. and provides useful insight into how traditional brands can leverage their strength online.com and www.7 CASE STUDY: GAP. L. Gap Inc. Gap online exploits the accessibility and convenience of the Internet.com' .TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Inc. America Online (AOL) and Gap Inc.com/about_us. This success is largely due to their simple formula . up from $20 million in 199875. According to Jeanne Jackson. 1999 93 . Gap's online sales tripled in 1998 alone. as cited in Lee.'s website (www. 1999 76 Jeanne Jackson. service and value to everyone74".gapkids. and today it is the 29th most valuable brand in the world73. October 8. Currently. and Gap online provides access to the full range of items at Gap. from shirts to accessories and hard-to-find sizes.com is an example of successful crossover marketing. surpasses $9 billion in net sales and increase earnings by 54% over previous year. head of Gap Online. 'Clicks and Mortar at Gap. October 8.6 1969 1986 1989 1997 1998 1999 - GAP & GAP.htm) 75 Jeanne Jackson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Business Week.
... The Observer..very easy.com store one immediately notices the consistency between the online and retail stores.7 . easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.making visual references to its offline roots. 1998 94 . the extensive integration of Gap's online and offline activities are clearly evident. The site also offers sharp graphics. and easy-to-use..3 Sources of Value . Content. Michael McCadden. Executive Vice President of Global Marketing. Gap Online primarily focuses on Convenience.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. and Customer Care..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6..7. D. making it convenient. This personality is reinforced online through the simple structure and layout. making navigation even faster. very efficient"77. reinforcing its brand identity. 'Mind the Gap'. but provides customers with the option of viewing text-only. April 18. Simple. FIGURE 6.com. Unlike Barnesandnoble.The 7Cs Framework In terms of the 7Cs framework. 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. describes the company's brand personality as "direct and straightforward. Visiting the gap..
Gap. In order to integrate its offline and online operations and logistics. promoting its specials and including links directly to items on Gap's website. and goods bought online get returned at the same rate as store purchases . Gap. By doing so.com's content consists of detailed information on its full range of products. and customers can view their latest TV adverts for buying inspiration. However.com also provides a Gift Central feature which offers gift suggestion from Gap. and had recently established marketing deals with AOL and CDnow. and customers can register to get e-mail reminders of upcoming holidays and birthdays. Gap's simple. 95 .com allows customers to track the status of online purchases and provides contact information on the nearest store. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. Gap does not provide any community features on its site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. without causing complications. Unlike the case of Boo. standard styles are well suited to online clothes shopping. allowing shoppers to contrast different cuts and styles. The Gap site connects to other Gap online stores including GapKids and BabyGap. as well as sample all of the latest shades of fingernail polish on a virtual hand. twice a month. which would not be possible in the store. In addition. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Gap made a decision to charge sales tax on online sales. once customers are registered online.as most Gap online shoppers have a good idea of how Gap clothes fit. GapKids. Gap communicates with customers through customised e-mails. customers can return goods purchased online to their neighbourhood store. and BabyGap.com. Gap has also developed an affiliate programme.
com in return for a 5% commission on every sale referred through the site. on counter cards. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com" on the display screens between transactions. Magazines.com has also created an affiliate programme encouraging sites to establish links to gap. In certain high traffic Gap and GapKids stores. by offering a 10% discount and free shipping on their first online purchase.) that also promote the online store. • Gap.com. by displaying the URL (www.com has links with CDnow to cross promote websites. 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. on shopping bags and even on the cash register. which can be used towards future purchases. it is fully leveraging its offline presence to build awareness. or to refer shoppers to Gap's website. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. Gap has held in-store campaigns to get customers to submit their e-mail addresses. Most of Gap's online traffic is generated by leveraging its physical presence. These efforts doubled the size of Gap's e-mail database. To convert walk-in shoppers to cybershoppers. • Gap. however.gap. billboards.com) in store windows with the slogan "surf.ship". Gap has also supplemented this with online promotions: • In August 1999. etc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.gap.Extensive Integration Gap. Gap secured a 3-year commerce and marketing agreement with AOL. 96 .shop.com has been able to piggy-back on The Gap's offline advertisements (in TV. In addition. which displays "Shop online at www. they send the customer a $20 Gap ShopCard. • They offer Online discounts and promotions such as the ShopCard. providing a useful way to directly reach customers. whereby for every $100 a customer spends at Gap Online. either online or in stores. Store clerks are also trained to look for products online for their customers if the store does not have them in stock.4 Brand-Building Strategy .7.
and allowing each to leverage the strengths of the other. By aggressively marketing both the stores and the website. and can also provide access to different customer segments who may not usually buy the products at all . The Internet.7. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. while reaping the benefits of low customer acquisition costs and extended reach. have already established the back-end operations and can use them as the cornerstone of their online business.com is an example of successful crossover marketing. Gap has been able to significantly strengthen their brand-customer relationship. on the other hand. Pure online players have to invest heavily in logistics. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands.5 Conclusion Gap.thereby increasing the company's reach. such as Gap. provides existing customers with added value through the convenience of purchasing online. With their brand awareness and network of retail outlets. 97 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. whereas established companies. Gap had a significant advantage over pure online players in attracting customers and building critical mass. thereby reinforcing its brand identity.
The Stock' . As the first online navigational guide to the web.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. who started an online guide as a way to keep track of their personal interests on the Internet. all in a single location. Yahoo! has since morphed from an ordinary search service into a global Internet communications.8 CASE STUDY: YAHOO! 6. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. from e-mail services to stock quotes and much more.interbrand.Business Week. lies the directory .see Appendix A 'Yahoo! .2 Value Proposition At the core of Yahoo!'s value proposition. 78 79 Interbrand (www. advertising. 6.8.com) 98 . September 7. Yahoo! was founded by David Filo and Jerry Yang.businessweek. household and business user reach.1 Company Overview In April 1994. The Strategy.com) . The concept exploded (through word-of-mouth) and in less than six months.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.D students at Stanford University. 1998 (www.8. and the number of websites continues to explode.The Company. The company's global web network includes 23 world properties outside the US. CEO of Yahoo!. the amount of information. two Ph. Yahoo! is a leading guide in terms of traffic. Yahoo! offers a range of supporting services that add value. There's nothing in the real world to compare to that79". the site was receiving 1 million hits per day. and is one of the few Internet companies to turn a profit early in the development of the Internet. As such. According to Timothy Koogle.
Their goal is not to list everything under the sun. to provide web-based services to PalmTM handheld computers . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast. . More recently.TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! unveils Yahoo! Finance Vision .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and unveils Yahoo! Digital Introduces Bill Payment services .Receives $1 million in venture capital funding from Sequoia Capital $33.Site goes live September .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 .com allowing them to offer person-person payment solutions .Yahoo! Launches Business-to-Business Marketplace .600.Yahoo! forms agreements with Palm Inc. 99 .Yahoo! acquires Arthas. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. mobiles.8 million IPO (2. is the way it has structured and displayed information.. to allow access.Yahoo! acquires eGroups .8). Yahoo! extended its convenience through its Yahoo! Everywhere service.7 YAHOO! . They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.3 Sources of Value . regardless of platform (i.The 7Cs Framework Convenience Central to Yahoo!'s success.com.8. Palm computers). Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.000 shares at $13.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.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. TVs.e.Yahoo! Shopping launches personalised shopping service 6.
They have formed multiple alliances and partnerships with leading online companies such as Amazon. while providing partners access to a large customer base. Yahoo! has increased customer loyalty and retention rates.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. ranging from daily news and weather reports to road maps and books. and more importantly. well structured.com and CDnow.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. the end-user.8 . the partner. 100 . and is similar to a custom tailored newspaper (Figure 6. 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.9). Their thrust has been to provide valuable content to customers. easy-touse. By tailoring the information to users' preferences. These have helped Yahoo! become the place to track down a broad range of valuable information and resources. This creates a win-win situation as its satisfies Yahoo!. from stocks and sports results to weather and air fares. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.
Connectivity Connectivity is Yahoo!'s core product.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. reinforcing the brandcustomer relationship. where groups of people with shared interests can communicate through chat. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. 101 . Yahoo! acquired GeoCities. to provide its customer base with access to useful links and content. and is driving Yahoo!'s multiple partnerships and alliances. telephone and even traditional mail. message boards. one-to-many. and many-to-many. and e-mail. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. It keeps customers on the site for longer periods. Yahoo! spends more on customer support than most companies. Customer Care Yahoo! responds to customer inquiries via e-mail.9 . In addition. In 1999. fax. Yahoo! has also implemented campaigns to persuade users to bookmark the site. or to make it their home page. and encourages them to return frequently. and the nature of the navigation business. and plans to incorporate other features such as online chat to facilitate communications.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. and contributing to their reputation as a quality service provider.
therefore. TV commercials and radio spots during drive time. Yahoo! aggressively promoted the site through public relations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. While Internet companies were targeting existing Internet users through the use of online promotion methods. Yahoo! maintains close contact with customers. As a result. and an inherent friendliness. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes .intelliquest. Intelliquest. (www. Yahoo! also encourages customers to e-mail ideas and feedback. by building a recognised brand name. Their strategy was to target "near surfers" . and through communications via email. At the time this was considered a breakthrough. as experience surfers tend to be loyal to their search engine. Yahoo! extended beyond this to use traditional offline media. Yahoo! avoided characterising itself as a technology-oriented company.a sense of irreverence.4 Brand-Building Strategy Yahoo! is a marketing machine. and according to Intelliquest80. recognise the name Yahoo!. and its implications of a good time. 80 'Web Survey Shows Yahoo! Tops'. which conveyed the brand's irreverent personality. 6.com) 102 . In 1996. 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.people who are not yet online but are likely to use the Internet in the near future.8. an approachable nature. Yahoo!'s brand-building success starts with its name. 82% of Internet users and 23% of people intending to go online. and it formed a critical link in Yahoo!'s brandbuilding strategy. Given the unease with which the average consumer approaches technology. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". Yahoo! would be one of the first sites that they visited. These near surfers represented (and still do) a large and fast growing group and. This was especially important.
breath mints. p. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. VP-Brand Marketing. 1999.yahoo. parachutes.Yahoo! Press Release. to create Yahoo! Internet Life. a monthly magazine guide to what's new on the web and it has co-branded products. 1997 (www. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. Although this seems like a shotgun approach. They also teamed up with publisher Ziff-Davis Co. According to Karen Edwards. and 76% turned to Yahoo! before visiting another search engine or navigational site. organisers. new services and customised features highlight their ability to relate to customers' needs. it's too late. which has been instrumental in establishing Yahoo! as a household name. a little wacky and inviting'. In addition. the research shows that 73% of Yahoo! users bookmark the service . services and contests with well known brands such as Ben & Jerry's. s4 103 . which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. ER) and Hollywood movies. stating that "if we wait to hear about it in the news. Yahoo! adopted 'guerrilla marketing' techniques . Their innovation.Advertising Age. T-shirts. They even have a barter deal with the San Francisco 49ers. Yahoo! has managed to cultivate high brand loyalty.higher than all other services81. May 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. We need to be one step ahead in order to have a better service than our competition82".with its name being plastered on everything. customers quickly discover its value and through a high quality experience (7Cs).com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . as well as TV shows (Ally McBeal. including backpacks. snowboards. According to a recent study. sailboats.it must reinforce the image of the company as 'a service that is fun. and yo-yos. Yahoo! has paid little for this exposure. Once customers access the site. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . Visa and MCI. August 26.
Yahoo! has benefited from a first-mover advantage. while also associating Yahoo! with well known brands. p. from its convenient and logical structure and display of information. and other search engines at the bottom of its search results page). that have set it apart from the pack. to its simple design. They have maintained that lead through the creation of a high quality end-to-end customer experience. May 3. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. GoTo. their innovative promotional and guerrilla marketing techniques. if a user cannot find what it is searching for.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. 6. HotBot. Yahoo! has built a strong brand. while attracting new customers. s4 104 . its excellent customer service. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence.8. first to turn around an annual profit.Advertising Age. To maintain its lead. As the first online navigational guide to the web. These relationships have provided end-users with added-value. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . and first to go mainstream by advertising its name using traditional media. they have carried out extensive partnering. alliances and acquisitions to provide added value services to their customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8. VPBrand Marketing of Yahoo!. Yahoo! has invested relentlessly in new services and marketing programmes. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. first to go public. and its openness (for example. with a large customer base and high levels of customer loyalty. its choice of partners. and has cultivated a reputation for excellence. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". In addition. In addition. 1999. have created a distinct brand identity that differentiates the brand and appeals to its target market. Yahoo! points them to its competitors by including links to AltaVista.com. As a result of all these factors. 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.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
integrated customer acquisition strategies. these companies must have an inherent understanding of their brand identity and core values. whereby each party benefits from the other's expertise or skills. ranging from online methods to traditional offline media. particularly to secure content and widen reach to new customer segments and niches. 108 . and by partnering with well-known brands. while ultimately benefiting the end-customers. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. By distinguishing their offering and focusing on unique sources of value-added. a company can leverage the partner's brand and reputation to reinforce its own. to distinguish themselves from competitors. before it fractures. variety. and exclusive alliances can lock out competitors from valuable content or online real estate. but also provide added value to the brand community. content. offering customers the best in quality. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image.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. and convenience. As a result. Alliances and partnerships play an important role in achieving speed and momentum. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. to maintain consistency. In addition. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. these companies are creating even stronger value propositions. leading brands have focused on building strong partnerships and alliances. as well as determine how far the brand can be meaningfully stretched to other products and market segments. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. brands are harder for competitors to emulate. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. The most successful partnerships are symbiotic matches.
and it can acquire customers while it is still inexpensive to do so. and extensive word-of-mouth due to its novelty. 109 . are leveraging this customer knowledge (learning) to nurture relationships (relate). By leveraging unique customer information. that comes with innovation. customisation and customer care. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. giving the brand an edge. and it aligns itself with the most influential venture capital sources. these innovations are difficult for competitors to reproduce. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. the innovations are the result of the company's ability to data mine its vast database of customer information. In many cases. the company benefits from the buzz. It locks up important content and distribution partnerships. The challenge then lies in keeping up the momentum. A first-mover advantage is an important asset for an online brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. to create new services and content that satisfy customer needs. and benefited from additional hype. and traffic. these well-publicised brands also took off. Many strong online brands were also early-movers on the Internet. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. By getting to market early. by providing better services. • 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. and develop a detailed understanding of their customers' needs. As Internet penetration exploded. These brands are accumulating knowledge about customers. and by focusing on customer needs. and differentiating it from other brands. and are continuously adding new services and functionality to their sites.
one component remains unchanged . established fulfilment systems and infrastructure.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. 7. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. As such. Yet while everything is being turned upside down. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour.value remains (and always will) the basic building block for every successful brand. while reaping the benefits of lower customer acquisition costs and extended reach. building relationships and satisfying needs. expand the brand experience to meet customers' expectations in the online world. however. but at the same time. 110 .2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. The Internet has radically changed the business and competitive environments. clicks-andmortar brands are providing customers with true added-value. Nevertheless. drawing on several case studies from business markets. the concepts. established customer relationships. and a physical presence (tangibility) . Through extensive and seamless integration. They have an established brand. In addition. They possess critical assets that give them an advantage over pure online start-ups. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. Therefore.factors that clearly differentiate them from pure players. In doing so. there has been a limited time horizon to evaluate the durability of Internet brands. with the emergence of wireless access and new platforms. tools and key factors outlined in this dissertation are also applicable to business markets. ongoing research would be necessary to build on the findings of this dissertation. Nevertheless. an in-depth analysis. they are equally important in business markets. Having established a strategic perspective on building online brands. would represent an exciting opportunity for further research. Brands and brand-building tools tend to be associated with consumer markets. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.894 14.313 2.596 3.225 11.985 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .361 1.231 12.643 3.197 32.694 17.781 33.781 17.052 6.464 3.895 2.283 4.595 17.101 9.568 3.423 2.792 3.043 8.806 2.804 2.648 1.193 112 .932 4.761 1.181 21.132 15.830 14.603 5.281 11.634 1.262 1.806 11.143 2.319 1.231 24.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.845 56.155 7.329 4.909 7.147 9.681 2.interbrand.550 12.404 4.422 1.184 1.654 43.310 11.076 3.527 3.048 20.502 33.510 8.275 30.021 26.766 14.Interbrand's Ranking of the Top 60 Brands (www.602 4.
The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. It is critical that all these dimensions come together and are re-enforcing. As a result. As such. all their operations. and structures are aligned differently. whereas entrepreneurial Internet companies must focus on 'managing for change'. and as the business environment changes. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. customer empowerment. the informal management style and the constant strategy re-calibration. 'In Search of Excellence'. global competition. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. showing how they are interrelated. and reorganise as appropriate. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. all these dimensions must change accordingly. T. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. & Waterman. Internet companies must be able to move at warp-speed. * Peters.. commit and deploy resources. activities. (Harper & Row). and the emergence of a knowledgebased economy. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. constantly innovate. They must move quickly to capture new opportunities. However. with the fast pace of technological change. respond to competitive and market dynamics. 1982 113 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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