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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
The 7Cs Framework 6.1 Company Overview 6.3 Sources of Value .6 Conclusion Case Study: eBay 126.96.36.199.5 Conclusion Case Study: CDnow 6.7.4 Brand-Building Strategy .6.5.4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.com 6.The Failure of Boo.7.Extensive Integration 6.8.4.The 7Cs Framework 6.The 7Cs Framework 6.1 7.4 6.5 6.2 Value Proposition 6.5.3 Sources of Value .2 Value Proposition 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 7.5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.2 Value Proposition 6.6 6.3 Sources of Value .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8.4 Brand-Building Strategy 6.3 Sources of Value .188.8.131.52 Value Proposition 6.7.4 Brand-Building Strategy 184.108.40.206.7.4.1 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 .6.1 Company Overview 6.1 Company Overview 6.1.5 Other Factors that Contribute to their Brand Leadership 6.5.1 Company Overview 6.1 Company Overview 6.8.4.com 6.5 Conclusion Case Study: Gap.8.The 7Cs Framework 6.8 Case Study: Boo.2 Value Proposition 6.8.3 Sources of Value .7 6.5 Conclusion Case Study: Yahoo! 6.com 6.6.
3 Figure 3.6 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 5.3 Figure 6.1 Figure 1.2 Figure 5.5 Figure 5.8 Figure 5.2 Figure 2.4 Figure 2.4 Figure 6.7 Figure 5.1 Figure 2.4 Figure 4.8 Figure 3.2 Figure 3.1 Figure 6.1 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 .7 Figure 6.1 Figure 4.9 Figure 6.6 Figure 6.2 Figure 6.3 Figure 2.3 Figure 4.6 Figure 2.6 Figure 4.2 Figure 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.5 Figure 6.com's Associates Programme Overview of BarnesandNoble.7 Figure 2.5 Figure 4.1 Figure 3.8 Figure 6.4 Figure 5.5 Figure 2.2 Figure 2.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 .com's Website Overview of Boo.4 Figure 4.com's Website Amazon.3 Figure 5.
com .Timeline and Major Milestones Yahoo! .com .Timeline and Major Milestones eBay .2 Table 6.Timeline and Major Milestones Gap.5 Table 6.1 Table 6.Timeline and Major Milestones CDnow .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .1 Table 6.Timeline and Major Milestones Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .Timeline and Major Milestones BarnesandNoble.3 Table 6.7 The Emerging Brand-Building Environment Amazon.6 Table 6.4 Table 6.com .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
Supply chains are being rethought. there has been an explosion in the online world . the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. service and brands.1 .com noble. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. while providing new tools for promotion. As such.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. products and services reconfigured. that these Internet start-ups have achieved. and business models revamped. the Internet is changing fundamentals about customers.5 2.9 2.an explosion that is also a harbinger of how business will operate in the future. FIGURE 1.com's range of 4. creating strong brands that are putting established brands at risk. as they face each other through an electronic connection.0 1. This is creating new challenges and opportunities.g. The Internet also represents a fundamental shift in how buyers and sellers interact.1 3. Internet companies such as Yahoo!. America Online (AOL) and eBay have been able to build powerful brands in a few years.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. It is empowering customers with more options and more information to make informed decisions. relationships. As such.9 3. Figure 1.com Source: Securities and Exchange Commission Filings.2 3. and is triggering the need for new brand-building strategies and tools.com1 Amazon.YEARS TO REACH $100 MILLION IN SALES 6 5.com) 7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. aggressive Internet start-ups have emerged. interaction and relationship building.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. whereas it has taken decades for traditional companies to achieve the client base.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. In the midst of this.com.5 million book titles).1 OVERVIEW Over the past few years. McKinsey Analysis (www. Amazon.mckinseyquarterly. customer affiliation and level of sales. Amazon.
the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. C. and the high cost of acquiring online customers2. rather than drifting from site to site3. 1997. As such. M. 'Internet Communities . Therefore. as the need to build brand loyalty online is reaching a peak. 1 2 3 Christensen. Harvard Business Review. there is a growing recognition that traditional methods are no longer suited to this new interactive environment.. & Elstrom. turning browsers into buyers. P. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies.April 2000. S. attracting traffic or 'eyeballs'. 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. D. brands are even more critical as customers have little to go on other than a recognised brand. 66-76 Hoffman.66 8 . harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. and Novak. R. For pure online players. & Overdorf. 'Meeting the Challenge of Disruptive Change'. T..BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. A Business Week / Harris poll. who are essentially intangible. Given the tremendous clutter in today's e-commerce marketplace. Harvard Business Review. May-June 2000 Hof. Volume 78 Issue 2.. Browder. 'How to Acquire Customers on the Web'. pp. March . L. companies lack a coherent framework and concrete methods to build an online brand.Forget Surfers.. that extends the brand-customer relationship beyond a single transaction. P.. May 5. found that 57% of Internet users go to the same sites over and over again.. In light of this. However. p. building awareness. A New Class of Netizen is Settling Right In' Business Week.
1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. A review and analysis of leading academic thinking will be used to explore these issues. and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. This is based on the outcome of the primary research (in-depth case studies). FIGURE 1. tools and strategies to build brands on the Internet. supported by secondary data related to aspects of online business from accredited and published sources. • To explore how the Internet is changing the brand-building environment.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2 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.2.2 . • To identify the key factors and characteristics that contribute to the development of successful Internet brands.
Conclusion: Discusses the key findings and areas for further research. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. and is used to provide insight into some of the factors that contribute to the development of successful brands. marketing. certain key factors are highlighted in their relevance to the dissertation. to provide an in-depth analysis of the psychological and social dimensions of brands. and factors that contribute to a brand's success. however. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. These are further refined using the insight obtained through the case studies.com).com and Gap. eBay and Yahoo!). Hypothesis (Framework): This is based on the literature review and secondary data. While there is no attempt.com). strategy and economics. 10 . The absence of academic literature on Internet branding posed a major obstacle. this also highlights the true value of the dissertation. relationship management. traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. as well as a recent Internet failure (Boo. CDnow. the literature review draws on leading academic thinking in more established areas such as brand management. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand.com. there is more work in popular rather than academic literature. nor desire. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Consequently. The combination of cases provides a useful and practical insight into brand-building issues and problems.
The limitations of the Internet in terms of brand-building are also discussed. The final chapter.4 STRUCTURE The next chapter. and outlines the opportunities for further research. and introduces the core concepts that form the backbone of the dissertation. Chapter 3 explores how brands have traditionally been built. Chapter 4 provides an overview of the Internet and its defining characteristics. highlighting some key factors that have contributed to brand success. Chapter 2. The nature of brands. as well as the interactive approach to attracting customers and building loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. their purpose and value are discussed. summarises the key findings. Chapter 7. provides an analysis of leading academic literature in relation to branding. This chapter sets the context within which online brands must be built. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. 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. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. by outlining the impact of the Internet on the business and competitive environment. Chapter 6 examines the brand-building efforts of seven companies. 11 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
p. The chapter proceeds to describe the influence of brands on the buying process. (London: Macmillan Press Ltd. unravelled to reveal the nature of brands and their reason for existence.a leading specialist brand consultancy firm . The concept of brand equity is outlined. symbolised in a trademark. These concepts are central to brands and brand-building. (New York: Free Press). 1996. R. p. and the importance of customer satisfaction and brand loyalty. the brand's emotional benefits and its self-expressive benefits .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. Branding is about creating 'value'. if properly managed.1 . This value stems from the products and services that companies create and bring to the market. explaining the value of brands. FIGURE 2. and highlights the importance of brand management. these layers are Brands are made up of many layers and dimensions. but extends further to encompass added values derived from factors such as the brand-customer relationship.1 INTRODUCTION In this chapter. 'Building Strong Brands'.). 74 4 Clifton. both for customers. and to companies. 'The Future of Brands'. E. creates influence and generates value4" This definition truly captures the essence of a brand. 2. whether online or offline. and for the company.see Figure 2. CEO of Interbrand Newell and Sorrell . both to customers. A..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. D. and they form the backbone of this dissertation. & Maughan. which.1. vii 13 .2 WHAT IS A BRAND? According to Rita Clifton. 2000.a brand is: "a mixture of tangible and intangible attributes.
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. Brands are richly endowed entities. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back. making their way into planning and strategy documents. 'Marketing success through differentiation . 1980. p. a 'set of expectations'. and services to customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . which grows out of the cumulative memory and the experiences customers have of products or services. yet ultimately reside as consumer perceptions.2 . and a 'promise'. 2. benefits.. Harvard Business Review. T. The space a brand occupies inside a customer's head can create a 'mental' patent. As such. It is a company's promise to consistently deliver a specific set of features.Figure 2. the basic brand.of anything'. brands are their most valuable asset. a 'reputation'.a 'relationship'.3 THE LAYERS OF A BRAND Brands are made up of four layers . For some companies. FIGURE 2. January-February. They start life as ideas.86 14 . the augmented brand and the potential brand .the core product or service.2.
g. customers buy products to meet certain functional needs. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. These products and services add value and make the offering much more difficult for competitors to emulate. but the brand itself is the store. term. sign. or design. Essentially.com are examples. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. 2. However. 15 . Southwest Airlines and Amazon. (Europe: Prentice Hall) 1996. 5 Kotler.Analysis. preferring things they can see and touch. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. Planning. with supplementary products and services (e. 'Marketing Management . this is the case with all Internet companies. Implementation. & Control'. In fact. P. Levi's). actually sell products.. Kodak. this should support the offering's performance and differentiate the brand from those of competitors. They are the historical core of branding because they are the most prevalent. even when the alternatives are substantially cheaper or more readily available (e. symbol. and because they most readily come to mind when consumers are asked to recall brands. quick delivery) that enhance the customer’s total purchasing and use experience. The most common barrier to competition is building a brand. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. not the products it sells .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. Coca-Cola. 8th Ed.The Gap stores. or a combination of them. Certain service brands. information. Service Brands (intangible) are much less numerous than their product counter parts.g. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. most products and services cannot survive on functionality alone as this is usually matched in time. such as in retailing. The Basic Brand The basic brand consists of the "name.
These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Implementation. FIGURE 2. it is critical to understand what attributes consumers value. p. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. two factors can intervene between the purchase intention and the purchase decision .. and pay the most attention to the brands that will deliver the sought benefits. Through gathering information. These beliefs depend on their previous experiences with the brand. a consumer will be inclined to search for more information. it is important to clarify customers' underlying buying behaviour and the buying process. 'Marketing Management . 1996.Analysis. Therefore. and the effect of selective perception. P. However. Planning. and selective retention. This can be triggered by internal or external stimuli (advertisements). and Control'. either through heightened attention or through an active information search. selective distortion. (Europe: Prentice-Hall) 8th Ed.. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. The buying process consists of five stages (Figure 2.3 .5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. Once aroused. 16 . Consumers differ as to which product / service attributes they see as important. Consumers develop a set of brand beliefs about the attributes of competing brands.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.4).3).194 The process starts when the buyer recognises a need. In the evaluation stage.attitudes of others and unexpected situational factors (Figure 2. the consumer learns about competing brands.
they will be dissatisfied and look for alternative brands in the future. they will evaluate their level of satisfaction . as these services are intangible and therefore. A consumer's decision to modify. These expectations are formed through a combination of past experiences. or avoid a purchase decision is heavily influenced by perceived risk. postpone. Expensive purchases involve some risk taking. 17 . Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. Customer satisfaction and loyalty are essential to creating successful brands. even delighted. somewhat satisfied.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. If performance falls below their expectations. locking out potential competitors. customers make decisions purely on the basis of their expectations. and especially important when dealing with purchases made through the Internet. After a consumer has actually purchased the product or service.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. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. advertising and communication. Customers' expectations are particularly important when dealing with services. word-of-mouth. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. or dissatisfied with the purchase decision.the customer will be highly satisfied. A consumer tries to deal with this by gathering information from friends. their negative attitude may influence the consumer's purchase intent or vice versa. If perceived performance and quality exceed their expectations then they are satisfied. and a preference for recognised brands they can trust.
Spring 1999 18 .. 6 7 Jones.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Hewlett-Packard. Saturn.Harvard Business Review. The customers at the bottom end of the scale are "terrorists" . Johnson & Johnson.Harvard Business Review. 'Growing the Trust Relationship'. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. 'Why Satisfied Customers Defect' . FIGURE 2..customers who are satisfied and loyal and talk favourably about the brand . Marketing Management. This satisfaction encompasses the whole experience and not just a company's products or services.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. E. & Sasser.. At the opposite end of the satisfaction spectrum are "apostles" . and believe that it will always act in their best interest. Federal Express.. T. Nov-Dec 1995..5. E. 'Why Satisfied Customers Defect' . and Johnson. W. 91 Loyalty is derived when customers are continuously satisfied over time. T.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. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Customers that are passionately or emotionally loyal are those that have built trust in a company. M. Southwest Airlines and Xerox7. & Sasser. D. Nov-Dec 1995 Hart. p.Figure 2. Trust is critical for a brand's success. C.those who actively attack the brand telling others not to buy from the company.
'Building Stronger Brands through Online Communities' . 8 9 Peppers.g.com.. 'The One to One Future'. M. Firstly. Harley-Davidson motorcycle clubs). the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.they provide good word-of-mouth and are the best salespeople for the product / service 2. D. consistent orders Satisfied customers are the best advertisement . giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. Emotional loyalty can be also created through the formation of a strong user community around the 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. There is also clear evidence of this on the Internet.. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Spring 2000 19 . & Rogers.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. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 1993 McWilliam.Sloan Management Review.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. emotional loyalty is born out of a consumer's personal relationship with a brand. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. In this way. G.
almost irreplaceable bond as well as potentially to the negative feelings of betrayal. and understanding the needs and buying processes of the target market is essential. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. March 1998.7). S. 343-373.7 . there are brands that customers perceive as acceptable and would not resist buying. However. which goes well beyond the satisfaction of a specific need. Journal of Consumer Research.6 . 2. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. FIGURE 2. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. whereby customers would be unwilling to substitute it with competitors' offers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. a 'powerbrand' tends to have a high degree of brand loyalty. Beyond this. pp. FIGURE 2. A stronger brand enjoys a high degree of brand preference over competing brands. there are brands that are unknown by most buyers.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.. 20 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.
. D.8. D. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.8 . According to David Aaker (1991). 1991 21 . 1991 10 Aaker. strong brand associations. and other assets such as patents. The major brand assets are brand loyalty. trademarks. The benefits of each are outlined in Figure 2. and relationships with distributors and strategic partners. perceived quality.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. (New York: Free Press). which is the value of the brand over and above its commodity value. (New York: Free Press).BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.. name awareness. 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.Create Awareness .BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers .
R. N.To have confirmation of your self-image or the image that you present to others • Continuity . J.To be sure of buying the best product in the category.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic . to its logo.To save time and energy through identical repurchasing and loyalty Guarantee .Typically a brand leader obtains twice the market share of the number two brand. 22 .Satisfaction linked to the attractiveness of the brand.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. brands perform several functions that add value and customer benefits: • Identification . production and marketing. and the number two twice the share of the number three12. to its communication • Ethical . May 1993. G. 1986 13 Golder. in the following ways: • Brands.. Journal of Marketing Research.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.. 'Strategic Brand Management'.. (London: McGraw Hill). the best performer for a particular purpose • Characterisation . Premium pricing increases revenue.. & Tellis. market share and profits . 3rd Ed. to quickly identify sought after products • • Practicality . 'Pioneer Advantage: Marketing Logic or Marketing Legend?'. 'Consumer Market Research Handbook'. (New York: Free Press).To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . P. & Downham.To be clearly seen. The brand leader is the most profitable and all beyond number two are unprofitable13.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. to make sense of the offer. • Brand Leverage . pp..The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. 11 12 Kapferer. J. 1992 Worcester.8. 158-170.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11.
Johnson & Johnson with Tylenol).Companies with strong brands attract good recruits. in turn. maintain good price levels and generate strong cash flows. • The Brand Barrier . In trying to estimate the monetary value of brands.Dominating a niche market is usually more profitable than being fifth in a large market. drives up share price and provides the basis for future growth.The product life cycle applies to products.g. 23 . Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. The next chapter describes the process of how brands are built. fashion or prevailing market conditions. In addition.Brand leaders usually have the financial strength to fend off competitors. • Avenues for Growth . and Young & Rubicam have created complex formulas. brand leaders can exploit their superiority in the market (e. This. not brands. but there remains an ongoing controversy about how accurate and meaningful these measures are.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .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. 2.Strong brands are more attractive to investors. They also tend to elicit community and government support. companies such as Interbrand (see Appendix A). and the characteristics of successful brands. Companies can maintain a brand while modifying the underlying product to account for new technology.g. • Motivating Stakeholders . Coca-Cola “the real thing”). • Brand Loyalty and Beliefs . the tools that are used. it can build a strong market share. The brand can also be used to penetrate new markets. When a company creates this type of customer preference and loyalty. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
1. promotion. Through the combination of the stimulus of consistent communications and satisfactory usage and experience.1 . 3. highlighting important factors that contribute to the success of each step along the way. public relations. brand awareness. This is illustrated in Figure 3. This chapter spells out the traditional brandbuilding process. confidence and brand equity are built.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. The major characteristics of successful brands are also reviewed. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. and keep it turning.1 INTRODUCTION Building a strong brand is a complex task. selling. FIGURE 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.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 . which are created through advertising. the next step is to get customers to try the brand. it should provide a satisfactory experience and lead to a willingness to buy again. and direct marketing. To entice trial and repeat purchase requires triggering mechanisms. Once this has been established. If the offering is developed properly.
the brand can elicit feelings of confidence that it is of higher quality than competitors'. Without a good product or service. a compelling value proposition is the combination of an effective product or service (P). In order to do this. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . 26 . it is impossible to build a successful brand. As such. FIGURE 3. and added value (AV). In this way. Similarly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. what they value and how the products or services should be optimised or configured to deliver this value (Figure 3.each is essential. unless differentiation and awareness can be developed. it will never attract a strong client base. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers.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. a distinctive brand identity (I).a strong offer that a potential customer would find compelling and interesting.2 . a company must develop a strong understanding of who their potential customers are.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors.2).
3. providing confidence and incentive to trial.. these needs are as likely to be about satisfying self-actualisation or esteem needs. the number of competing alternatives and the large variety of advertising and selling messages. Hewlett-Packard. Kellogg's) attached to a new product will transfer positive associations. • Belief in Efficacy . Sony. interests. 2nd Ed.if a brand provides good service over time. influenced by brand values.in many cases. 'Marketing Management and Strategy'. 1986 27 . Coca-Cola. 14 15 Doyle. or to gain a sense of belonging. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. P. Lexington Books). (Europe: Prentice-Hall). 'What's in a Name? Advertising and the Concept of Brands' (Lexington. • Brand Appearance . Gillette. • Manufacturers' Name and Reputation . People use brands to express their lifestyles. 1998. values or wealth. if customers have faith that a brand will work. which are additional to those based upon real performance. Customers choose brands. faith in brand generates satisfaction in use. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs.. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. layout and appearance of the brand can clearly affect preference by offering cues to quality. J.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. P. 169 Jones. which they perceive as meeting their needs. the pace of technical change. it is more likely to work effectively for them.In many situations a strong company name (e. MA. The large number of decisions.g. Brand values derive from five major sources15: • Experience of Use . • User Associations .brands frequently acquire an image from the type of people who are seen as using them. it acquires added values of familiarity and proven reliability. as they are to be about satisfying basic physical and economic needs14. industry endorsements and newspaper editorials. In today's affluent society.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. For pharmaceuticals. pp. mean that buyers look for short cuts.the design. cosmetics and high-tech products. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice.
style or cultural differences from one country to another.3. press releases.3: • The Brand Core . features. colour scheme. however the brand style and core tend to be less flexible. glamour.the way the brand communicates through its advertising. which depends on how the target market perceives the brand. friendly). A company should seek to differentiate its brand through developing a distinctive identity. J.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. 16 Kapferer. type of spokesperson / customer image used to advertise the brand). prestige. its reflection (e. its personality and its image or self-projection . 1992 28 . Brand themes are the most flexible element and will tend to change with fashion.g.articulates the brand core in terms of the culture it conveys. visual appearance.the fundamental or genetic code of the brand. • The Brand Style . • The Brand Theme . and the relationship expressed (e. and visual appearance). packaging. which remains fixed over time.g.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . 'Strategic Brand Management'. Themes include the physical appearance (logo. (New York: The Free Press). and advertising. etc.Figure 3. This may be different from the brand image..
Secondly. understanding the brand's core and style helps set the perimeters of brand extensions . below-the-line activities. advertising. It also facilitates consistency in the message being transmitted through presentation (e. structure and ease of use). website design. J.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. 29 .3 . and through line and brand extensions..g. 1992 The brand prism enables management to understand the brand. Finally. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.how far the brand can be meaningfully stretched to other products and market segments. its strengths and opportunities. 'Strategic Brand Management'. (New York: Free Press).
4. 17 Rogers. • Evaluation .The customer is satisfied and decides to make regular use of the product / service. strategy (partnerships and alliances). The value proposition must then be articulated in terms of the 'marketing mix' . it should lead to satisfaction and re-purchase.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. deliver and reinforce this value proposition (see Appendix B .Customers need to be stimulated to seek information about the brand's uses. skills. and the product / service's perceived performance.79-86 The Innovation-Adoption Model consists of: • Awareness .. 'Diffusion of Innovations'.often referred to as the '4Ps' . FIGURE 3. (New York: Free Press). 1962. • Adoption . 'Diffusion of Innovations'. Before potential customers can buy a product / service. Personal sources such as word-of-mouth from friends. 1962. the company must ensure that it develops the appropriate structure.Customers consider whether the product / service will meet their particular needs.. The value proposition must be communicated to entice customers to try the product / service. colleagues and opinion leaders become important influences at this stage.Figure 3.4 . • Interest . E. • Trial .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Advertising and PR are common tools for achieving awareness. If the offering is developed properly.The company has to create awareness of the brand. systems.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. pp. This learning is called the adoption process17 .The McKinsey 7-S Framework). management style.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. Price. and its products / services. E. features and advantages. culture and staff needed to support. (New York: Free Press).79-86 30 .Product and service features. pp. Promotion and Place (distribution strategy). they must learn about it.
In this way.such as airline frequent flyer programmes. 18 Berry. while strengthening the position and value of the brand..g. This focuses on establishing a longterm. This information is a key competitive advantage. Over time. • Structural Ties . & loyalty / discount cards. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. & Parasuraman. Through building relationships with customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. This is often referred to as Customer Relationship Management (CRM). companies can increase buyers' satisfaction. the company may supply customers with special equipment or tools (e. 'Marketing Services: Competing Through Quality'. (New York: Free Press). this process enables an exchange of information. allowing companies to communicate regularly with their customers and customise their interaction.to move customers through the adoption process. but enhanced customer interaction through relationship building. encouraging evaluation and trial. direct marketing.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. multi-transaction relationship. Customer service is an important element of this relationship. companies can increase the value of each customer.for example. L. 3. Advertising and public relations can be effective in generating awareness and interest.advertising.136-142 31 . companies have used the tools of the promotions mix . sales promotion. Internet linkages. making them less likely to switch to a competitor. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. Social Benefits . personal selling and public relations / publicity . when each trusts the other to deal fairly and reliably.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. A. pp. software) to help customers interact with the company. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits . providing insight into customers' needs and wants. 1991.
1998.. and establish a trusting relationship. when the brand has no competitors to rival its position. brands were not built quickly. including: • A Quality Product / Service Experience . and making it more difficult for competitors to emulate. • Unique Positioning Concept .A successful brand requires an effective selling. pp. 2nd Ed. which will add value and distinguish it from competition.a segmentation scheme. • First-Mover Advantage . 19 Doyle. As a result. The Internet provides the opportunity for companies to create compelling value propositions never before possible. companies have the opportunity to start building relationships with their customers. • Time and Consistency . As such. or if the brand is surpassed by superior offers from competitors.Being first into the market does not necessarily bring success.Traditionally. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. the brand is meaningless.176-177 32 . Without building awareness.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. It often takes years to build up the added values. but it makes the task easier.. advertising or promotional campaign. • Strong Communications Programme . while providing new tools for promotion. P. it has a profound impact on the traditional brand-building process. interaction and relationship building. 3. then its position will be undermined. strengthening the brand further. its function and psychological values. companies must actively communicate it to the target audience to entice trial.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. As customers build trust in the brand through satisfaction of use and experience.If the brand is not the innovator. which will communicate the brand's existence.Satisfactory experience is the major determinant of brand values. If the quality of the experience deteriorates. comprehension and intention to buy. value proposition or augmented brand. it must have a unique positioning concept . (Europe: Prentice-Hall). trigger trial and reinforce commitment to it. It is easier to capture a share of the consumer's mind and build a customer base. 'Marketing Management & Strategy'. Once the framework has been established and the organisation configured to provide this proposition.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. E-MAIL Is the part of the Internet that most users use at present. In essence.1. The three core channels include e-mail (the most common). but in practice not in real time. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. Hypertext allows information to be organised in a user-friendly way that is easily accessible. and the 'world wide web' (www) . news groups and mailing lists. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. This chapter provides an overview of the Internet and its defining characteristics. 4. creating new challenges and opportunities. and a critical source of added value. and provides the opportunity for dynamic interaction.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other.Figure 4.1 INTRODUCTION The Internet is transforming the business environment. 34 . it is a common technology platform that allows computing devices to communicate with each other. which contain hypertext and pictures.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.1 . it offers a number of alternative channels that enable businesses and people to communicate. In doing so. FIGURE 4. Information is becoming a major part of the products and services that people buy. The system works as an electronic mailing system and can be used as a real time medium WWW AND CHAT ROOMS Are used by more and more people.
2. The context of the Internet and certain key developments are highlighted in the Figure 4. By allowing for direct.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. These characteristics combine to create a very powerful medium. • It Allows for Two-way Communication and Interactivity . The Internet can also be accessed at any time . when the United States Defence Department developed the 'ARPAnet'. regardless of where the computer or Internet access device is physically located.24 hours a day. the Internet lets individuals and companies build interactive relationships with customers and suppliers. • It Overcomes the Barriers of Time and Space .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).2 (Note: 35 .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 .The Internet is a global network and can be reached from everywhere. 4. These defining characteristics have fuelled its explosive growth.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. ubiquitous links to anyone. allowing both parties to identify each other and build one-to-one relationships . and deliver new products and services at low cost.this radically alters the process of interaction between communicating parties.not previously available with mass medium forms of communication. anywhere. 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. which was intended to link military networks together.
Figure 4.000 1.000 100.economist.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. as cited in 'E-Business Technology Forecast' .a PricewaterhouseCoopers Report.000 1. FIGURE 4.3 .ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.com) 36 .000. 1998. 2000 Internet / ARPAnet was created Dell.2 . 1996 (www.000.000 1969: 10.000.3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 10. 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.
4.E-Marketplaces . etc.High-powered servers .Cheap microprocessors & RAM . making it more cost effective for software developers and other technology providers to create interoperable products. web design.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.. The McKinsey Quarterly.g. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce.Higher PC penetration among consumers and companies .internet. billing. and gateway services).com) 37 . The emergence of open standards in development tools and at the network protocol level (e.2 20 'World Online Populations' . No. 1996.g. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.Attractive infrastructure and middleware software .Low-cost networking alternatives . The growth in support services (e. The development of critical processes (ordering. Easier access to these networks provided by point-and-click web browsers. TCP/IP).. 'Electronic Commerce (finally) Comes of Age'.4 . Multimedia development tools that can be used to create rich content. As shown in Figure 4.Content Aggregators . 2000 (http://cyberatlas. hosting. offering inexpensive bandwidth.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . there will be an estimated 375 million Internet users world-wide. increasing to 500 million users by 200220.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . G.CyberAtlas Internet Statistics and Market Research.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . Reed.Cheap bandwidth .). L. payment. FIGURE 4. the momentum created by all these forces has created a virtuous cycle of growth.
Figure 4. communication and information tool. FIGURE 4.5.com) 38 . reveals the wide range of areas where people are embracing the Internet . to interacting (e. as cited in the Economist Intelligence Unit (EIU).5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).g. These activities highlight the adoption of the Internet as an interactive.from communicating (90% use e-mail) and sourcing information. entertainment) and purchasing (37%) .eiu. 2000 (www. April 13.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. chat rooms.
they all project the value e-commerce transactions to grow at unprecedented rates. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. content. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. There is no need to travel to a physical location. Instead there is a website.e.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. and people. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks.6 .WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. no order book. and no cash register. fax. The main difference between the Internet and other electronic media (i. web browsers. projected by Gartner Group. FIGURE 4. However. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. telephone) is that the Internet goes beyond just enabling transactions. software. The buyer and seller 'face' each other through an electronic connection.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. April 2000 39 .
Additionally. suppliers. C.and revolutionary new business models are emerging. the explosion of information is placing a premium on skilled information management. 'Meeting the Challenge of Disruptive Change'.g. how they compete and how they serve their customers ..5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted .g. M. the Internet is sidelining the role of many traditional intermediaries. Although the particular impact will differ between industries. operation (e.April 2000..g. & Overdorf. New brands and business models are emerging to seize this opportunity. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. For example.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. pp. partners and other corporate constituencies. and transforming traditional distribution channels. through the use of extranets). represents a level of efficiency and integration previously unattainable. 66-76 40 . Harvard Business Review. Dell Computers). The Internet also facilitates the development and co-ordination of global activities (e.how companies operate. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. March . some of which look set to become the superbrands of the future (e. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. This is threatening to undermine many old established brands. which are often disruptive to traditional business models21. Volume 78 Issue 2. By allowing customers to talk knowledgeably and directly to suppliers. At the same time. Yahoo!). Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. the Internet provides the opportunity for Improved business processes and 'virtual companies to integrate with their suppliers and customers in real-time and create previously unachievable synergies at a very low cost. a 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.
empowered customers. collaborate more effectively and ultimately embed organisational intelligence within processes. allowing employees to share knowledge.. commit and deploy resources. their organisations must harness knowledge . CEO of Forrester Research22. ensuring the delivery of a satisfying customer experience. as they are just one 'click' away. 'Empowered Fruit Flies' . and the 24 x 7 environment. It also provides easy access to competitors' offers and allows customers to consider every available alternative. G.forrester. and reorganise as appropriate. constantly innovate.they can choose between traditional 'bricks-and-mortar' companies. the typical clock-speed at which companies need to operate has accelerated. This is forcing companies to become flexible and responsive to customer needs. to capture new opportunities. it also removes the geographical protection from competitors. Internet technology can be used to exploit collective learning and knowledge. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. the development of a knowledge economy. these new highly informed customers are "empowered fruit flies". The Pace of Business is Accelerating With the fast pace of technological change. combined with the emergence of electronic intermediaries. the diminishing barriers-to-entry and the lower switching costs. switching costs are much lower. Customers have more options than ever before .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. the globalisation of business. with no time. According to George Colony. As a result. fierce competition. getting closer to customers and ultimately staying ahead of competitors. online stores. quick evolution and all the power. as they have access to more information leading to more informed decision-making. respond to competitive and market dynamics. has resulted in a fierce competitive environment. improving processes.in developing products. This. or catalogues. 22 Colony. little loyalty. highest convenience and quickest satisfaction. 2000 (www. Now companies need to move at warp-speed. products and services.Forrester Research. They can move from one supplier to another searching for the best prices.com) 41 .internally and externally . Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers.
Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. information. 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. linking companies with suppliers and customers up and down a pre-defined value chain. companies have looked upon alliances only as a means of filling gaps. how they want and with the levels of customer service they demand. In this way. and the need for speed and flexibility have accelerated the unbundling of business systems. advice and convenience. It allows companies to improve customer service. 1999 . and partnering up with the best for the remaining activities. As such. supply chain cooperation. extensive outsourcing. The extent of this partnering is illustrated in Figure 4.A Research Report by TeslaGroup.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. which highlights the typical structure and dynamics of an online company. linking companies with competitors and players from entirely different industries and business sectors. However.(www. thus creating a 'value net23'.7. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. companies can provide customers with a strong value proposition by offering them the best in quality. achieve global reach and realise a new source of cost advantage. when they want. alliances and partnerships have taken on a new level of strategic importance.com) 42 . Traditionally. Examples of emerging information age business structures include flat versus hierarchical. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. and most traditional partnerships were vertical. Increasingly. most Internet and e-commerce partnerships extend beyond this. 23 'The Future of E-Business' . it provides the opportunity to reach customers where they want. variety.teslagroup. combined with intense competitive pressures. The opportunity of linking the complete supply chain 'virtually'. and multiple strategic alliances and partnerships.
many online companies are blending together the products and services of a wide range of companies. This provides customers with added value.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. 'Organising for e-Commerce' .. D. while making the offering hard to duplicate off-line. tools and opportunities. S.dot. the pace of business is accelerating and power is shifting to the customer. G. 4.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www. The Internet is transforming every business to some degree. As such.6 CONCLUSION The Internet and its strategic impact are not technological issues . New opportunities for efficiency and co-ordination are emerging. This is the substance of the next chapter. it is transforming the competitive landscape and brand-building environment. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. April 2000 In an attempt to provide a rich customer experience. 43 .a Boston Consulting Group (BCG) Analysis.they are business issues.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. while triggering the emergence of new brandbuilding strategies. & Stirton. competition is intensifying. Partnering with portals and affiliate web sites is important in driving traffic to a web site.7 .
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
brands have been developed in an environment whereby a company creates a brand. 5. the logic of the Internet cuts another way. On the other hand. has placed greater importance on trust and security.sites that provide a wealth of information and make comparison shopping easy. as well as on topics of interest related to the brand and product characteristics25.com) 45 . in most cases. 'Internet Portals' . This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. In response. including the interactive approach to attracting customers and building loyalty. they have never handled or seen (except on-screen). and projects it onto a third party intermediary (the media). Transactions on the Internet require customers to provide detailed personal information . Customers derive added value through the provision of information on the products or services they buy. many unnamed customers develop a 'relationship' with the brand. people have concerns about sharing personal information. whereby the company can establish a dialogue and 24 Marathe. People only tend to transact with sites they know and trust . the intangible nature of the Internet.2 THE NEW DYNAMICS OF BRANDS Traditionally. New strategies and tools for building brands on the Internet are identified. and the fact that customers are buying goods that. The Internet.durlacher. the Internet makes search and comparison much easier. credit card numbers. However..names. Traditionally. where the user feels a part of.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. addresses. brands were a substitute for information a way for consumers to simplify the time-consuming process of search and comparison before deciding what to buy. in addition to providing added value. The limitations of brand-building on the Internet are also discussed. J.Durlacher Research. on the other hand. etc. This threatens to undermine the value of brands. May 1999 (www. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. offers interactivity. and sites that understand the user's needs and preferences24.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. In addition. Generally.
Prof.. rather than simply speaking at customers..Fuqua School of Business. B. 1997 (www. 'Is Your Company Ready for One-to-One Marketing?' . pp. brand-building must focus on the end-to-end customer experience . The differences between the traditional approach and the one-to-one approach are outlined in Table 5.from the promises made in the value proposition.edu) 26 Peppers. . to its delivery to the customer. M. & Dorf. Duke University.1. relationship building characteristics of the Internet. This creates the opportunity for companies to build stronger relationships than previously attainable. TABLE 5. In doing so. a company can listen. 1999. January 28. D. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. this also poses a challenge as these relationships may take on a life and character of their own. Rogers..Harvard Business Review. companies have to find innovative ways of leveraging the information and 25 McCann.. In maximising the customer experience. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. J.duke. understand and relate to customers.1 . learn. January-February. 'Adding Product Value Through Information'. 151-160 46 .
com and www.. For example. 2000 47 . unless they are selling high-price.com) 29 Hoffman. a disgruntled online customer tells 10 people about a poor experience30. C. high-margin items. S. Kearney White Paper. MayJune 2000 30 A Forrester Research Study. L. 1999 (www. customer acquisition costs are high.due to more frequent shopping and larger purchases. - Repeat purchasers spend more and generate larger transactions .bain. and with customers holding all the power. and to recover their investment. it is very unlikely that an online retailer can break even on a one-time shopper. . and some are spending over $50029.converence-board. 27 'Electronic Business Outlook'. on average.. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. Repeat purchasing not only binds trust.. - Loyal customers are more willing to buy other products from the company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. as cited in 'Creating a High-Impact Digital Customer Experience' . Harvard Business Review. Rastogi.. it could be argued that customer loyalty is even more critical online. Chu. . but also provides more opportunities for cross-selling.An A. 'The Value of Online Customer Loyalty and How You Can Capture it'. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . D.org) 28 Rigby.. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. R. In fact..word-of-mouth is the single most effective and economical way online businesses grow their sites. Therefore.. companies need to retain customers so that they return to the site repeatedly. This is further reinforced by the fact that. These points stress the importance of online customer loyalty. March 17. J. & Hancock.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27.A Mainspring Communication Report in collaboration with Bain & Co. 2000 (www. 'How to Acquire Customers on the Web'. This view is reinforced by in-depth studies carried out by Bain & Co.often. Zook. S.pwcglobal. D. T.. companies must ensure that they provide a completely satisfying end-to-end customer experience. Baveja. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. T. and Novak. - Repeat customers refer more people and bring in more business .Research by PricewaterhouseCoopers / The Conference Board. P.
Once the up-front investments are made (for research and development and technology infrastructure). as illustrated in Figure 5.1 . customisation for individual customers. as the benefits of scale are overwhelmed by the disadvantages of size31. 180-182 48 . 7th Ed. increases disproportionately as more people join the network. and the value that each member realises. However. 'Positive Economics'. Similarly. (also referred to as 'viral economics'). Even more important. and in the case of information-based products. additional customers and transactions can be managed with limited fixed cost investment. FIGURE 5.1. additional products. R. each additional unit sold does not cost more than the last to deliver.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. G.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.. and other features can be added or changed at low marginal cost. pp. As a result. this is not the case on the Internet.. the costs approach zero32. 1989. where the value of the network. businesses and online communities that rely on connectivity can enjoy 'network effects'. (London: Harper & Row).
2 .org Study in collaboration with The Boston Consulting Group. Nov 1998 49 .THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. enhancing the interaction. As the company builds a customer base and develops a relationship with customers. It also allows online companies to tap supplementary revenue streams. '5 Rules of the eEconomy'. With no competitors around. its ability to track customer preferences and customise offerings improves. 21 . including direct marketing.. advertising and referrals. 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. Outlook 1999. R. FIGURE 5. No. fulfilment • Defensible advantage against competitors SCALEABLE. direct marketing. This makes it more efficient in improving product selection. delivering increased margin per customer .A Publication by Andersen Consulting 'The State of Online Retailing' . being first into a market makes it easier to capture the consumer's share of mind.A Shop.Figure 5.2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions. cross-selling and up-selling33. M. link revenues 32 33 Melnicoff.
New marketing strategies. makes communication tighter. the larger customer base provides online companies with more leverage in attracting and negotiating with key content. creating a potentially exponential growth (like a virus) in the message's visibility and effect.unless the leader makes a serious mistake. As a result. such as 'viral' marketing. This snowball effect favours first-movers. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. It is often referred to as "word-of-mouth". in turn. viral marketing is an effective tool in getting a message out fast. the value of the company rises exponentially with market share. leading to the exponential expansion of the customer base. its growth curve relative to a new entrant is somewhat daunting. 5. The Internet. Nov 1998 50 . When a company reaches 'critical mass'. as it carries the implied endorsement from a friend. This is the logic behind some of the extraordinary valuations of Internet companies. larger sites can leverage more customer advocates to reduce customer acquisition costs. Word-of-mouth is a particularly powerful medium. Larger sites can also negotiate better supplier discounts or product placement fees. "creating a buzz". or until a competitor finds a way to change the game again. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. with a minimal budget and maximum effect. "leveraging the media". the brand begins to take hold. and the cost of switching to an alternative brand becomes quite high.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition.5 VIRAL MARKETING Viral Marketing is a marketing technique that induces web sites or users to pass on a marketing message to other sites or users. commerce and distribution partners.A Shop. 34 'The State of Online Retailing' . with its e-mail lists. This. and "network marketing". the leader will pick up momentum and will stand to gain an insurmountable advantage . By the time a company has reached critical mass. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base. chat rooms and bulletin boards. web sites. Given the connectivity of the Internet among customers. 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. and word-of-mouth even more effective.org Study in collaboration with The Boston Consulting Group. As a result. as once a strong lead is established.
A traditional print publication would hope to reach 100. sign up for their own free e-mail. Hotmail acquired over 12 million subscribers. friends to visit it.com was one of the first free web-based e-mail services.5 years. Free Email at http://www.com The classic example of viral marketing is Hotmail. where they have never carried out any promotional activities. whether for communications or community. and then propel the message even further to their own ever-increasing circles of friends and associates.hotmail. they will have a powerful viral opportunity at their disposal. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging).com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. they tell all their 51 .com. saying: • "Get Your Private. a company now owned by Microsoft.000 subscribers within a few years of launch. Geocities enables people to create personal websites for free.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. When a user builds a website. • Each new user becomes a company salesperson. If a company can provide a strong enough incentive for customers to share their lists of personal contacts. and they created a subscriber base more rapidly than any company in history.000 subscribers every day. In its first 1. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). Today they are the largest e-mail provider in the world with over 40 million users. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. but Hotmail signs up more than 150. and the message spreads organically. and in doing so spread the word for Geocities. seven days a week.5.1 The Case of Hotmail. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. In fact. eGroups and Geocities (both recently acquired by Yahoo!). Hotmail.
Baveja. The customers' ability to access and display information rapidly is extremely important36. D. . Sites that are difficult to use can cause frustration. Kearney White Paper.An A. Kearney White Paper. As 35 36 'Creating a High-Impact Digital Customer Experience' .. Place). the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. Promotion.. C. S.3 .com) 52 . Rastogi.. T. & Hancock.A PricewaterhouseCoopers Report. 30% of potential customers leave sites because they cannot find what they are looking for. S. In fact. making customers 'click off' to another site. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock..A Mainspring Communication Report in collaboration with Bain & Co. 2000 (www.... Price. Zook. 'The Value of Online Customer Loyalty and How You Can Capture it'.bain. In essence.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. J.3).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. T. Chu. and 66% of people who start a 'shopping basket' fail to complete the transaction37. R. March 17. 2000 37 Rigby. FIGURE 5.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .An A. 2000 'The E-business Technology Forecast' .
online companies have the opportunity to provide rich. as cited in Business Week Magazine.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users.businessweek. whereas a slow response time and site downtime will have a significant negative impact. ease-of-use. and fast response times are among the most important factors in establishing web brand loyalty38. February 2000 Issue 53 . 38 39 Cognitiative Inc.4.com) Davenport. as cited in Business Week.4 . With almost infinite display space and inventory capability. 'Sticky Business'. 1999 (www. October 29. up-to-date information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. and a wide range of products. expert insights. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site.businessweek. which can enhance the company's value proposition. 29th October 1999 (www. ease-of-navigation. CIO Magazine.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc.. FIGURE 5. T.
. and nearly 20% use it for post-sales support. Community Online communities are emerging as new gathering places for consumers with similar interests (e. 31% of online consumers use the Internet for obtaining product information. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). 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). Clemmer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. G. According to Forrester Research40. which enhances the user's online experience. as well as through loyalty programmes that provide targeted benefits. On the other hand. Online sites can track a customer's purchase history and modify its service accordingly. S.. 54 . and advertising (if it is relevant and useful). These sites allow members to interact with one another.forrester. W. Other content includes community-generated content. 'Real Profits from Virtual Communities' .com) McWilliam. and organise live events. & Hagel. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. based on profile information.. Customisation Customisation involves tailoring the presentation of a web-site to individuals.5). use bulletin boards. Members can interact in chat rooms. Spring 2000 42 Armstrong. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. Customisation creates the feeling of a one-to-one relationship. demographics. iVillage and Geocities). it needs a critical mass of members42. 'Building Stronger Brands through Online Communities' . even if they purchase offline. 1995.Sloan Management Review. A. It fosters a sense of belonging41 among the members. An online community offers a compelling way to entice customers back to a site. J. For a community to work. 1999 (www.. & Bluestein. 40 41 Morrisette.The McKinsey Quarterly. share information and access a wide range of services. . 3. Often.. K.g.A Forrester Research Report. No. visitors should not be engulfed with too much information. which is facilitated by a combination of factors (Figure 5. An important contribution of these communities is that they provide members with a medium to communicate with each other. or prior transactions.
55 . and can create emotional loyalty. Journal of Consumer Research. A. when membership in the brand's community becomes an end in itself43. they opt to input the URL (Internet address .com) directly into the browser and access the site immediately. 343-373.. Once customers know of a site. 'Making Real Sense of Virtual Communities' . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. as well as attracting traffic from other sites. March 1998. This is similar to placing offline stores in high traffic areas. 43 Fournier. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. Site-tosite connectivity focuses on connecting users to other relevant sites. allowing customers to deepen their experience with a brand and build more personal connection. M.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. pp. 1999 Communities enhance the speed and value of information sharing.6).brand-name.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Companies can provide a selection of related links that complement the site's purpose and value proposition. S. C.. O'Donnell & Gupta.5 . Mulcahy. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5..A PricewaterhouseCoopers Study.www..
45 MarketWatch. toll-free telephone numbers. customer support at all stages of the interaction is important. and FAQ pages (Frequently Asked Questions) to solve problems.6 . It is important in building relationships. and online surveys. The development of loyalty programmes. events and subjects of interest to the customer. Other tools such as bookmarking the page can also facilitate connectivity. (www.com) 56 . live chat. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. as well as informing and reminding customers of special offers. Customers share security and privacy concerns. and can be provided through e-mail. which provide targeted and unique (customised) benefits to the customer. online chat. serves this purpose and helps to build customer loyalty.marketwatch. Therefore. Communication can be tailored to specific user interests and should allow for two-way interaction. Customer Care Online customers often require assistance and reassurance.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. delivery and return options. news up-dates. In addition.CUSTOMER ACCESS TO INFORMATION CUSTOMER INTERNET ACCESS DEVICE SOFTWARE AND BROWSER PORTAL VERTICAL PORTAL WEBSITE CUSTOMER SIDE INTERNET SIDE User-to-site connectivity focuses on providing incentives for users to connect back to the site. customer care activities can involve providing a variety of payment. activities. as well as features such as gift-wrapping.
The mechanisms to communicate range from traditional media (TV. Engage. Newspapers. including affiliate programmes with other websites.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.. links from directory searches (Connectivity). 'Marketing to the Digital Consumer'.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Evaluation. Figure 3.4 . 1996. Learn and Relate.Awareness. e-mail notifications and banner advertisements. Interest. The company must build awareness and communicate its value proposition to its target customers. Retain.Attract. McKinsey Quarterly.7 . McQuade. pp.mckinseyquarterly..8. etc. S.2. This is more difficult online than offline. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S’ LE AR LE A RN A PR BO E U FE T C RE O NC NSU ES ME N RS ’ . 180-183 (www. M. and bring people to the site for the first time.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. Therefore. Magazines. modified to take into account of the interactive dynamics of the Internet.) to online tools. because there is no physical presence. Adoption). No. billboards.. Trial. This model consists of five stages . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.7. FIGURE 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. R. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.. & Zeisser. A. visibility relies solely on Communication. Waitman.
Companies then need to engage customers to obtain their interest and participation.3 3.ebusinessforum.3) is useful to ensure that a company develops a distinct and consistent brand identity.2 4. it is important to quickly engage consumers' interest before they move on.4 3. The key factors at this stage are Convenience combined with interesting Content. Creativity is also an important factor in gaining attention in today's cluttered marketplace.5 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.WEBSITE PROMOTION METHODS . affiliate programmes. Fig. 3. as cited in 'Targeting Consumers via the Internet' . Kapferer's Brand Prism (Ch.3 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.0 3.Economist Intelligence Unit 2000 (www. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.4 4.com) The most effective methods are direct e-mail.8 4. Engage With the multitude of choice available on the Internet. Attracting customers is only the first step in building online brands.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 .6 3. discounted over the expected duration of the brand-customer relationship.1 3.5) 2.7 4.8 . 3. 58 .3 Source: Forrester Research.4 3. public relations and television advertising. multiplied by the expected rate of transactions.
This helps to create a customer base that spends more time and money at a site. Building up a knowledge database on each customer . if used properly. The objective is to increase the conversion rate (% of browsers converted into buyers). and what additional products and services are they interested in provides companies with valuable information which. Content is the basic driver of retaining customers on a site.who they are and why they shop online. a company can create value by providing a personalised online experience. • The Internet supports brand-building activities where there is a need to build a relationship.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Radio). attitudes and behaviour). 5. Learn The Internet provides extensive opportunities to learn about consumers (demographics. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers.g.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e.9). Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. can create value for the customer and help build the brand-customer relationship. Communities and Customisation are other sticky applications. Certain product categories. 59 . and forge closer relationships than any offline operator. such as groceries and convenience goods. and must be continuously updated due to the multiple visit nature of customers. TV. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. The initial site registration provides an early opportunity to obtain useful information. 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.
smell). to its delivery to the customer.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction.. R. and the need to stimulate the other senses (taste.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.9 . and as the relationship develops. providing further added value. the experience is the brand. No. it is not economically feasible to sell certain products.mckinseyquarterly. 1996.2.from the promises made in the value proposition. S. pp. Waitman. However. Given the high acquisition costs of online customers. McKinsey Quarterly. companies must provide a satisfying end-to-end customer experience . M. the interaction provides the ability for companies to learn from their customers and relate. & Zeisser. A. These case studies provide a practical insight into how companies are building their online brands. especially in small quantities.9 CONCLUSION On the Internet. The next chapter analyses the brand-building efforts of seven companies. 5.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. 180-183 (www.. engaging and retaining customers. due to high delivery and transaction costs (relative to the value of the product). McQuade. touch. • Brand-building favours products that can be sold online. 60 . The interactive brand-building process involves attracting. The 7Cs Framework outlines the key components of the brand experience and the sources of added value... it is critical for companies to build relationships and foster brand loyalty. 'Marketing to the Digital Consumer'. In order to create "apostles".
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
In July 1995. 'Amazon. 47 48 Interbrand (www. 1999 49 'Amazon's Amazing Ambition' .com has become synonymous with e-commerce. February 26. including: increased selection. November 11. easy. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). In addition. and has equity investments in several e-tailers.2 CASE STUDY: AMAZON. Boo. discounted prices. more information.2. Amazon. innovation and delivering on its promises. and higher levels of customisation and service than the traditional shopping experience allows. Barnesandnoble.com. and one of the top two or three in Britain.1 Company Overview Amazon. greater convenience.com) 62 . Germany and Japan49. Through its provision of a one-stop shopping experience. and enjoyable experience.1 outlines Amazon's timeline and major milestones. Each case is presented in the same format including. 2000 (www. its value proposition. Amazon has been able to differentiate itself from other online competitors.com and Yahoo!. The cases are presented in the following sequence . 6.economist. its brand-building strategy (how it generates traffic).Goldman Sachs Report. Figure 6. Amazon serves over 23 million customers from 160 countries. and is one of the few Internet brands that is recognised all over the world.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. Amazon. Amazon provides increased added value on several dimensions.com. Amazon has cultivated a reputation for excellence.com. It is the 57th most valuable brand in the world47.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap. and has sales of over $2 billion. eBay.2.2 Value Proposition Amazon. combined with its levels of customisation and customer service. France. it is the most visited e-commerce website in America.com . In addition. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). and other key factors that have contributed to its success (or failure).It's an Ocean.com's success stems from its compelling value proposition.com) . Not a River' . 6.The Economist. the sources of added value (using the 7Cs Framework). a company overview. CDnow.interbrand.com launched with a mission to use the Internet to transform book buying into a fast.1 INTRODUCTION This chapter provides an analysis of seven companies.see Appendix A.Amazon.COM 6.
com .amazon. to meet rapid growth .Amazon surpasses 20 million cumulative customer accounts . a tools and equipment store for professional tool users and woodworkers .com enters European book market Microsoft signs Amazon.sothebys.com announce investment and strategic alliance . such as the Palm VII organiser.com and NextCard launch co-branded credit card . and more Amazon launches "Amazon. and minority investment in.com.Amazon opens a customer service centre in Huntington. Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com Anywhere.com Amazon invests in Pets.com. featuring thousands of bestseller lists for hometowns.Amazon.com 63 .com .Amazon announces investment in kozmo.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON. Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Amazon launches health and beauty store .New home living store from living.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com to create a "home living" store at amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.Amazon and online car-buying service Greenlight.Amazon launches www.Amazon enters strategic alliance with living. universities. Software.com opens its virtual doors at amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .TIMELINE AND MAJOR MILESTONES Amazon.000 members Amazon.amazon.com is founded by Jeff Bezos Amazon.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Announce Strategic Investment and Promotional Agreement . workplaces. Ashford.Amazon opens customer service centre in The Hague .Amazon launches new kitchen store .Amazon.com Amazon acquires Back to Basics Toys to add to Amazon.com Auctions and zShops provide new tools to its merchant community .com .com Electronics and Amazon.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. 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 Amazon introduces "Purchase CirclesTM".Amazon launches lawn & patio store . Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com via the new wireless pocket PC .toolcrib.Amazon enters into a strategic partnership with Drugstore.com .Customers can shop at Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid." providing shopping from wireless devices.COM .com Amazon announces further plans to expand distribution network to meet rapid growth. Video Games and Gift Ideas Amazon and Sotheby's launch www.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.com invests in wineshopper.Amazon and eziba. West Virginia.
customer testimonials. encourage repeat visits and drive higher conversion rates. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. recommendations. logically structured. FIGURE 6.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. offering multiple paths to a given book or product. mobile phones. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. interviews with authors. downloads quickly and services visitors adequately . easy-to-use.OVERVIEW OF AMAZON. gift reminders. book summaries. the 1-ClickTM express checkout. expert reviews. and customer Purchase CirclesTM.1 .Figure 6. This is an example of 64 . and quick-to-load pages Over time.e. such as the Amazon. Amazon has added other features for shopping convenience. The site is easy-to-use.2. live or study. discussion boards.3 Sources of Value . and Amazon.com All Product search (searches the entire web). Content Amazon provides content on several levels.com Anywhere to support access from wireless devices (i.1. gift click. Palm VII PDA device).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. wish lists. including book jacket images.
These are discussed in more detail in Section 6. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. In doing so. while driving up repeat purchases and cross-selling opportunities. Community Amazon has also added a community element to the purchasing process. This customer-centricity is evident in all Amazon's activities. therefore. creates a competitive advantage. from its shopping basket applications which lists the estimated time to delivery reliably. Connectivity Amazon has built relationships with high traffic web portals and sites. from the customer recognition at the point of interface (Figure 6. to the proactive notification of new items of interest.4. Amazon creates one-to-one relationships with its customers.2. linking it to a large number of other sites. Amazon introduced Amazon. and customer interaction. More recently. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. Amazon's content is not reproducible by competition. and Customisation Amazon provides customised features and services. converting them into a storefront for Amazon. real-time shipping and backorder notices. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service.thereby increasing conversion rates. By leveraging its vast customer base.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 . 65 . This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. which helps to build loyalty and create switching costs. and has developed an Associates Programme.
Newsweek. enticing them to return to the site and purchase repeatedly. As a result of all these factors (7Cs). Instead of paying directly for this exposure.a move that along with the novelty of its business model and the newness of the Internet. New Yorker and The Economist.2). 6. 66 . In addition. and customers are also e-mailed when the items are shipped from the warehouse.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways.com hot-link and offer specific books of interest to their visitors. Eyes and Editors. This enabled Amazon to reach more customer segments and niches (Figure 6. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. it began to advertise in print media and online . and by 1999 it had over 200.000 members.2. Amazon offered Associates referral fees of up to 15%. and not subsequent purchases. help maintain contact and build traffic by e-mailing customers when desired products or books become available. Once orders are placed. Business Week. two personalised services. In July 1996. Through the first half of 1996. The Associates Programme has been phenomenally successful. helped generate publicity and stories about the company in publications such as The Wall Street Journal. The Financial Times. In the second half of 1996. increasing to over 500. 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. which only applied to sales that resulted from the initial click-through.000 by August 2000. they are subsequently confirmed by e-mail. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. attracting member sites of all sizes.
com Refer-A-Friend . including: America Online (AOL). Excite.de became the local provider for Yahoo! Germany and Amazon. The Yahoo! agreement. Netscape's Netcenter and NetSearch. Amazon closed deals with five of the six most visited Internet addresses. • Amazon. Therefore.amazon.co. From July 1997 to December 1998.allows customers to create a personal profile (with pictures) on the site. Amazon also established agreements with AltaVista. 67 . was also linked to Amazon's entry into Europe Amazon.com About Me .customers are encouraged to provide e-mail addresses of friends.com gift certificate (in your name).uk the local provider for Yahoo! UK & Ireland. In addition. and primary button placement on web portal search engines. thereby promoting Amazon.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. each friend is sent a $5 Amazon. spreading the word for Amazon. These multimillion-dollar.COM'S ASSOCIATES PROGRAMME Source: Amazon. and you are given a $5 gift certificate for each customer you provide. Interesting viral initiatives include: • Amazon.com).com. Amazon has used viral marketing techniques through customer reviews.com's website (www. mutual links. In return.AMAZON.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. free eCards and gift certificates (which customers send to friends. People tend to tell their friends about it. Prodigy and @home. Yahoo!. multiyear deals involve exclusive book-selling rights. and Geocities. the customer acquisition cost is only £10.
1998 68 . community feel (as discussed previously). have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. By relating to customer needs..g.significantly lower than other online companies. interesting content. Amazon has also incorporated traditional offline media (TV. This strategy has created an efficient traffic-generating machine by creating virtual loops of traffic so that Amazon is top of mind when customers go online. Once customers are attracted to the site. which accounts for 66% of Amazon's sales. with the explosion of websites. 'Does Amazon. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. 50 Willis.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. "we had a world-class site the day we launched . According to Jeff Bezos. Magazines.Forbes. April 6. With this combination of promotional methods. Purchase CirclesTM). billboards. And we relied on word-of-mouth to build awareness. Amazon's proven online merchandise selling techniques including easy-to-use search options. Amazon maintains a database of customer preferences. so we didn't have to do much advertising. Amazon has been able to achieve average customer acquisition costs of less than $20 . newspapers) to generate awareness. Amazon is building customer loyalty and encouraging repeat business. however. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) have significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams.com Really Matter?' . buying patterns and viewing habits. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. That's not possible anymore50". clear presentation. As the relationship develops.but it was only a tenth as good as the site we have now. C. and improved customisation and recommendations (e.
good value. In addition. and our goal is to increase that gap51". We have been customer obsessed. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. For example. further enhancing their value proposition. Amazon is constantly seeking new ways of improving its offering. Amazon received criticism for expanding its product line. 51 52 Hazleton. and according to Jeff Bezos. "we're not a stationary target. According to Jeff Bezos. Saunders. establishing a reputation for excellence and fulfilment. L. 'Business the Amazon. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'.. According to Jeff Bezos.2. However. This has helped them attract customers and move up the learning curve quickly. (Oxford: Capstone Publishing). which within six months propelled Amazon to one of the leading online music retailers. "Online. while our competitors have been Amazon. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. We were blessed with a two-year head start. Amazon has been able to build a strong brand at relatively low cost. Nevertheless. developing customer service centres and expanding its distribution network to support high levels of service. the balance of power shifts away from the company and goes towards the customer. to capture the spirit of the site. due to the hype and coverage it was given. 1999 69 . because he wanted it to be short. in June 1998.a wide range of choice. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Amazon was able to secure partnerships and alliances with key players. Amazon's understanding of its brand identity has been a critical factor. memorable.com Way'. In addition.. establishing Amazon as the leading online bookseller with a large customer base.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 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. R. and its safe and secure delivery. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. Our secret is that we have not been competitor obsessed. management realised that Amazon had become more associated with other core brand values . Success. thereby diluting the value of its association with books. July 1998. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations). Amazon unveiled a music store.com obsessed52". As such. and to convey its vast size and offering. As such.
Although Amazon has successfully built a strong brand and loyal customer base. October 12. Volume Discounter' . the drain on their cash resources will push them towards bankruptcy. they're stretchable and pliant. as the true value of a brand lies in its sustainability. with new products and value added content. Amazon's intense focus on customer needs and continual innovation. However. speedy delivery and good value. 'Marketers of the Year: Jeff Bezos. have kept it ahead. 53 Warner. not necessarily a reality. B. if it continues to incur losses. perhaps trying to defend its view that losses taken to build market share can reap profits later. When they're young. and to sustain a positive image and satisfactory end-to-end experience. This raises a critical issue. stem from its compelling value proposition and high quality end-to-end customer experience. This customer-centricity is a key hallmark of a successful Internet brand. however. The key factors driving its growth and high retention rates. Amazon delivers on its promises of a wide inventory of products. it has not recorded any profits to date. Amazon has also benefited from a first-mover advantage giving it an edge over competitors.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. secure payment procedures. In doing so. Amazon has continuously invested in customer service. Quality is only measurable in the minds of visitors to the site.2. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. and investors lose confidence. Amazon also recognised that service quality is a perception. they have cultivated a reputation for excellence and fulfilment. Amazon is claiming to be making profits on its books and music categories.. which is critical on the Internet.Brandweek. 1998 70 . Nevertheless. distribution centres and upgrading the site. but over time they become more and more associated with a particular thing and harder to stretch53".
com launched its website (www.2 1997 January BARNESANDNOBLE. book databases. Barnes & Noble Inc. and 20% owned by the public. contacts. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com's timeline and major milestones is outlined in Figure 6.com).COM 6. music.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .Acquires equity stake in Mightwords .Barnesandnoble. Besides books.Launches Affiliate Network December . Barnesandnoble. and 470 B.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used. rare.Announces distribution relationship with New York Times September . 40% owned by Bertelsmann AG.Barnesandnoble.com provides other online categories offering software. is one of the best known traditional booksellers in the United States. as it could capitalise on the infrastructure and back-end operations (warehouses.COM .3. magazines.com is approximately 40% owned by Barnes & Noble. Barnesandnoble. Barnes & Noble Inc. and is the second largest online bookseller (after Amazon. Launched in 1997.Launches Internet Radio .Acquires minority stake in NotHarvard. etc. Dalton bookstores (located in shopping malls).Barnes & Noble University opens registration for free online courses . Inc.Offers same day delivery in Manhatten ..Barnes & Noble. Currently.com is the fourth largest e-commerce retailer54.Barnes & Noble went online at AOL May .1 Company Overview Barnesandnoble.3 CASE STUDY: BARNESANDNOBLE.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 . all front-end operations (marketing.TIMELINE AND MAJOR MILESTONES .com) .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com was able to 'hit the ground running'.Launches BNTV .barnesandnoble. promotion) between the online store and the retail stores have been kept separate.Launches Video Store 71 .com and Microsoft announce that they will create an eBook superstore .2. Barnesandnoble.) established by its parent company. TABLE 6. prints & posters and related products. Barnesandnoble. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. However.com .com announces strategic relationship with Palm Computing .
2 Value Proposition Barnesandnoble.com offers customers an easy-to-search catalogue of virtually every book currently in print. previously-owned and rare books. music New Initiatives Barnesandnoble.OVERVIEW OF BARNESANDNOBLE.com's and takes a bit longer to download.bn. in terms of the 7Cs framework.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.3). rich editorial content and a community experience.com) 72 . logically structured. Both have expanded their convenience to offer 54 Media Metrix. author. easy and secure ordering. but instead of developing an outstanding interface to its inventory. software. etc. edition. however. and easy-to-navigate site Categories focus on books.COM'S WEBSITE Simple. FIGURE 6.com or www. the company created a site very similar to Amazon.3 Sources of Value .com let customers sign up to receive email reviews and announcements of new titles. they offer customers fast delivery.com's website (www. 6. Both offer detailed bibliographic information.3. Barnes & Noble planned to dominate online book-selling. as cited on Barnesandnoble.com's (Figure 6.barnesandnoble. the features are practically identical.3 .com's virtual storefront is graphically richer than Amazon. publisher. including title. as well as an extended searchable catalogue of millions of out-of-print.3. In addition. good prices.com and barnesandnoble. Both Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.
however.000 affiliates in its referral network.64 billion. Barnesandnoble. As of February 2000. Although.com. Both offer 'associate programmes' that let other websites link to their sites. These initiatives have generated traffic to the site. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Barnesandnoble. this programme had more than 300.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Both try to foster a community of readers by letting customers post reviews online.com closed 1999 with 4 million customers. Instead. Webcrawler. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.com's $1.3. and Barnes & Noble Inc.1 billion.com's market capitalisation was $251 million. 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. reasons for this are explained in the next section. compared to Amazon. prevent cannibalisation of its existing business. However. The 6. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com in return for a commission on any purchases that they originated .4 Brand-Building Strategy Barnesandnoble.The Wall Street Journal. Yahoo!.com's 1999 revenues were $202. December 17.com has created a high quality website and customer experience.6 million. has yet to leverage its strong brand in cyberspace. it lags behind first-mover Amazon. Barnesandnoble.com had over 17 million.a replica of Amazon's Associates Programme. while Amazon. while Amazon. and avoid charging sales tax in states where it has stores56. They have developed an affiliate programme that links sites to Barnesandnoble. Lycos.com was valued at $21. Netscape and Microsoft Network. and both are expanding globally. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . Barnesandnoble. Both offer customisation that permits users to personalise the experience. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.
when it struck reciprocal marketing deals with Expedia. • Barnesandnoble.com. LLbean. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved.com.com should have aggressively cross-promoted their stores through advertising. Barnesandnoble. with a similar discount.com offers links to each partner's site and a discount for visitors who click-through.com. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. and a same-day delivery option in Manhattan. and its BMG Entertainment division includes music giants Arista Records and RCA Records. content and distribution opportunities.com. and leverage its real-world presence. By failing to leverage it. as Bertelsmann's book division includes partners such as Random House. In return.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. in the attempt to gain traction and build momentum. in-store displays.com created a new cross-marketing genre in February 2000. Recent Initiatives Barnesandnoble. provides access to valuable resources. Barnesandnoble.com has changed its name to Barnes & Noble.com and VitaminShoppe. Under the seven separate agreements. Planetrx. Unfortunately. Barnesandnoble. Petsmart. Jcrew. and in recent months has aggressively sought new ways to differentiate itself.com has begun to acknowledge some of these mistakes. Barnesandnoble..com is its association with Barnes & Noble Inc. At any given point there are hundreds of customers browsing their aisles looking for something to read. • In addition. 74 .com. Barnesandnoble.com.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). and the tangibility that this provides. people began using their stores as a physical showcase for online rivals such as Amazon.com has lost access to valuable customers. each partner offers a similar link to Barnesandnoble.com's link to Bertelsmann AG. and Internet terminals in the bookstores. Barnes & Noble University (a free online education resource).com. • Barnesandnoble.com. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases.com.com's key differentiator from Amazon. To signal its intentions. 1-800Flowers.com. or deliver books directly from the retailers.
by portraying them as slow and clumsy in comparison to the more nimble Amazon. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. and its lack of innovation (by copying Amazon. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax.com. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness. even if that means eating into their existing sales. customer relationships and offline presence .com . 2000 (www.com and has given them the image of a second rate 'me too' brand.com's experience is instructive. and allowed them to offer stock options as compensation and achieve a high market capitalisation. meant that Amazon.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.Not a Best Seller' .6 Conclusion Although Barnesandnoble. The company failed to leverage its established brand. feature for feature) has failed to differentiate Barnesandnoble. and was further up the growth curve.com's late start in 1997. it has not been able to establish itself as the leading online bookseller. otherwise they risk losing out to other online competitors. a wellestablished Internet brand.com has been able to create a high impact and high-quality customer experience. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". August 4.Forbes.its key differentiating factors. 57 'Bn. significant market momentum.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. In addition.3.com) 75 .forbes. Barnesandnoble. The Press have also contributed. Barnesandnoble. it also caused a major setback.
Boo. Germany and Denmark.Appeals for $30 million more funding . founder and Chief Marketing Officer of Boo.3 1999 Mid year BOO. and eventually debut in Asia. Company is put up for sale. it means all that brand's product line is available. Boo.fails and appoints KPMG as liquidator.4 CASE STUDY: BOO. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).4. June 10.com opens its virtual doors' . November 2000 January February May 6. arranged through J. Everlast. Puma. England.First sign of problems .Announces it has only 500.1 Company Overview Founded in 1999. If a clothing brand is on the Boo site. within six months Boo. it's about range and convenience. Finland. not the limited range you might get at most London fashion shops58". and included high profile investors such as Bernard Arnault.Multi-million pound advertising campaign created by BMP DDB . and Converse.4.com collapsed through lack of funds. They intended to add France.TIMELINE AND MAJOR MILESTONES . sack 20% of staff and sell stock at 40% discount . the company was hindered by technical problems that delayed the site going live by five months (until November 1999).Marketing Week.com. After a high profile launch. CMO of Boo. 58 Kajsa Leander. among others. On going live. However.COM 6. 1999 76 . Italy and Spain within a few months.Raises funding of $125 million .they redesign site. P. as well as create a kid's site. "our marketing thrust is not based on prices.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com had set the record as Europe's best-funded European Internet Start-up. due to its poor performance and inability to build a customer base. Boo. and was billed as one of Europe's hottest e-commerce ventures.000 unique visitors . 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.Site goes live . TABLE 6.COM .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". receiving $125 million of funding. and the resulting loss of investors' confidence.com provided a range of 18 fashion and footwear brands including DKNY. Morgan.com. as cited in 'Boo.2 Value Proposition According to Kajsa Leander.com entered six markets: US. Sweden. Boo.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
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.
62 Hoffman. $18. as well as music reviews. CDnow provides access to over 500. a valuable and rewarding experience"63. It has a customer base of 4 million people. cover art. $22.TIMELINE AND MAJOR MILESTONES .5. D.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and exclusive interviews and reviews from CDnow's award-winning editorial staff. TABLE 6. whether for browsing or buying.com) 80 .Raises $10 million through private placement .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . announce marketing alliance .1 Company Overview Founded in 1994.000 music related items .Harvard Business Review. CDnow was acquired by Bertelsmann AG. daily music news. T.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. convenience.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.179-188 63 CDnow website (www. and they aim to "make every visit to the site. & Novak.Site goes live .CDnow and Time Inc.000 sound samples..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. pp. and was the first site to offer the sale of music downloads and custom CDs. May-June 2000. CDnow is also driving the digital distribution of music.Partnership program with Geffen Records . former arch rival .5 CASE STUDY: CDNOW 6.Merges with N2K. features. On 19th July 2000. and an average daily audience of over 800.Launches merged CDnow/N2K site . good prices.000 music-related products and 650.Merges with Columbia Records . by twin brothers Jason and Matt Olim.5 million distribution deal with Lycos Signs three-year. and one of the most popular shopping sites on the Internet62. 'How to Acquire Customers on the Web' . CDnow is the leading online music store.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .Forges distribution partnership with Yahoo! $65. customisation and a wealth of information and content to help in the purchase decision. guides to music genres.5. This unprecedented degree of access to music and information is the core of CDnow's value proposition.000 people.ten times the selection of a conventional bricks-and-mortar music store).cdnow.
easy-tonavigate.5. CDnow has cultivated similar relationships with MTV. artists biographies. For example.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. cover art. to make it easier for customers to explore new music and make informed purchasing decisions. FIGURE 6. etc. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.3 Sources of Value . By partnering with well-known content providers..OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has leveraged the reputation of their brands to reinforce its own. CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. 81 .5. and has secured rights to music reviews.5 .Figure 6.
Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . German. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . Spanish.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). Yahoo!. and Geocities as well as more focused specialist sites.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. they will be reluctant to visit another online store and enter the information again. Due to International interest. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. In addition.search engines.such as AOL. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. Portuguese. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book. 82 . It also creates switching costs. it gives them a sense of ownership and a compelling reason for them to return. Other features such as My CDnow's Wish List. Excite. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Internet access providers. and key news and entertainment sites . By customising the store to meets customers' needs. Whenever a customer makes a purchase they earn Fast Forward Reward points. Italian. French. CDnow developed the Fast Forward Rewards programme. CDnow hired a group of multilingual customer service representatives to handle questions. an incentive programme that rewards customers and encourages them to connect back to the site. Community CDnow has not exploited the potential of creating a community feel. Customer Care CDnow's site can be viewed in English. allow customers to keep track of albums to buy in the future. which accumulate and can be spent on a variety of music-related products. Dutch and Japanese. allowing them to respond to detailed customer queries. 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.
and radio spots on the Howard Stern Show to build a cult following among radio listeners.000 small. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. customers buy music.They have also stuck exclusive alliances with AOL. they buy from CDnow. Excite and other powerful Internet content and service providers. • Affiliate Programme . integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. print advertising is music-related publications such as Rolling Stone. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. By keeping the brand in front of the customer in this way.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. It is a revenue-sharing arrangement.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. this is their "most successful customer building programme64". 83 . CDnow extended its distribution reach to include more than 250.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. • Traditional offline Media . Spin. CDnow's initiatives include: • Banner Ads . as well as more-targeted music-related sites like Billboard. 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. Yahoo!. • Alliances and Partnerships . CDnow is doing everything it can to ensure that the next time that 6. and spot radio to build reach.Through the Cosmic Credit Programme. According to Jason Olim. music-oriented websites.CDnow's advertisements are targeted to some degree. and Variety. covering the entire music spectrum.5.
It is a powerful source of acquiring new customers at low cost. The story of how CDnow was founded in a basement.they were the first site to offer the sale of music downloads and custom CDs.Hampel & Stefanides (www. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. It is constantly adding new functionality to the site and has been innovative in its offering . word-of-mouth accounts for the lion's share of CDnow's customers. This has contributed to a 225% increase in sales (1997: $17. CDnow's promotion strategies have attracted high levels of traffic.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . both in the online and offline worlds.As for many successful online retailers. with 44% of sales coming from new customers65.hsny. 1998 . 6.CDnow made public relations a high priority brand-building tool.com) 65 'Pioneering in Cyberspace' .htm) 84 . with repeat customers accounting for more than 50% of sales. it is in this context that the large investments in advertising and partnerships make sense.(www.5. and to increases in the customer base of more than 30% quarter-to-quarter.4 million). and scaled it awareness-building efforts. Public relations efforts helped to generate word of mouth and influence sales. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .Press Release. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.cdnow. The company continually pushed for new distribution partnerships to widen its sphere of influence.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. April 28. In fact. 1998: $56.com/cdnow. resulting in increased conversion rates.4 million. • Word-of-Mouth . as a way to fuel very lucrative word of mouth.
CEO of CDnow.89 67 Jason Olim.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. 2000 p.Building an Internet Business at Breakneck Speed". "eBrands . to ensure quick delivery to customers. 66 Jason Olim. This gives the customer the impression that the order is being handled quickly. "eBrands . 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. CEO of CDnow. 2000 p. According to Jason Olim. combined with the high impact customer experience created . (Boston: Harvard Business School Press). as cited in Carpenter.Building an Internet Business at Breakneck Speed". P. "your brand is not just what you say . and ensure that it exploits its early-mover advantage and keeps ahead of competition. This. P. 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. (Boston: Harvard Business School Press). It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. 6. and innovative.75 85 .it's what you do66". CDnow has developed a relationship with Valley Records.from how CDnow has personalised its product offering to its capable customer service team . The development of an extensive affiliate network. They also provide the customer with an order number and customer support contact information should they have questions. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. as cited in Carpenter.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand. a record distributor that handles the majority of CDnow's fulfilment logistics. The company sends an automated order confirmation note via e-mail as soon as the order has been placed.5. It was able to create a strong value proposition and high quality customer experience.
1st October 1999 86 .6.Company Overview' .the closest thing in the offline world are trading forums such as classified ads.000 new items joining the "for sale" list every 24 hours69. 6. 24 hour a day. Auctions make it fun. According to Meg Whitman.ebay. This is a new market . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.eBay website (www.25% to 5% of the final sale price on any item sold.6 CASE STUDY: EBAY 6.g.782 million in January 200068. flea markets and auctions. with emphasis being placed on its unique community feel and culture. CEO of eBay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.ebay.A Harvard Business School Case Study. shipping. Sellers pay a nominal fee for placing an item up for sale.eBay website (www. extensive selection and geographical reach.6.1 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. with the number of unique daily visitors setting a record of 1. (A)' .300 categories. People perceive the auction format to offer better prices.com) 'eBay . "at its core. and eBay receives a transaction fee that ranges from 1.efficient one-to-one trading in an auction format. eBay effectively created a new business model never before possible .com) 70 'Meg Whitman at eBay Inc. The buyer and the seller work out the logistics of the transport (e. Since its launch in September 1995. from collectibles and antiques to electronics and toys. global trading place for buying and selling personal items in an entertaining auction format. eBay is not about auctions. payment) between themselves. collectable shows. as cited in 'eBay . and eBay provides added value through its convenience. garage sales. and 450. transportation and other overhead costs. and eBay never takes possession of the item being sold. Individuals use eBay to buy and sell items in more than 4.removing the need for inventory. Auctions represent a platform. There are over half a million new auctions.2 Value Proposition eBay offers consumers an efficient. or the payment for the item . the eBay community has grown to include more than 10 million registered users.Company Overview' . Auctions are an enabler.
Com form alliance - 6. as they rarely deal directly with the company.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.America Online and eBay announce strategic marketing alliance . Boston. Since eBay cannot control how one person treats another.com) 87 .eBay launches 'About Me' feature.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay and First Auction sign a partnership agreement . Still the vast majority of our new users come from word-of-mouth. "the first brand-building strategy that we have is to have a great customer experience. 21st May 1999 (www. So brand-building job No.6.eBay introduces eBay Magazine in collaboration with Krause Publications.eBay expands strategic relationship with Netscape .eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 .eBay goes wireless with Palm VII connected organiser . and in terms of the '7Cs'.eBay acquires Jump Inc.eBay acquires Kruse International . And you only get word-of-mouth if you have a great customer experience.Germany's leading online person-to-person trading site . Selling. Providence. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .eBay goes live . allowing users to create personal homepages . Nashville.eBay acquires Butterfield & Butterfield. and its online trading site (Up4Sale) .eBay acquires alando. Norfolk & Virginia Beach.eBay and AOL launch co-branded site .eBay IPOed raising $58 million .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques . . and Salt Lake City . This raises challenges in how to control and influence the customer experience. Dallas & Fort Worth.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.businessweek. Seattle & Tacoma. 1 is have a great customer experience71".Launches "My eBay!" to customise the online auction experience .5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES . Milwaukee.eBay goes live in Australia .com to provide automotive service for eBay Users . and Collecting Just About Anything and eBay for Dummies.Compaq Computer Corporation and eBay form a strategic U.Business Week. Las Vegas.eBay launches local websites in Baltimore & Washington DC. they try to influence customer behaviour by encouraging them to adopt certain values. and two books -.3 Sources of Value . the eBay customer experience is based on how their customers deal with each other. Unlike the previous case studies discussed. emphasis is placed on community development and customer care.eBay teams up with Carclub. co-marketing relationship. The Official eBay Guide to Buying.de .The 7Cs Framework According to Meg Whitman. .S.eBay and Ultimatebid. and raises $700 million .eBay acquires Blackthorne Software GO.
6). and adds to the experience and the discovery of the auction process.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. and since. Other content includes the banner ads. increasing the risk of outages. angering hundreds of thousands of eBay users. Nevertheless. eBay had a 'wake up call' when the website crashed for 8 hours. topically arranged. FIGURE 6. 88 .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. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. 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. they have continually invested in system capacity.6 . eBay's site has to process thousands of live bids simultaneously. easy-to-use online service (Figure 6. This contributes to the community feel. eBay has also expanded to accommodate access through wireless devices for added convenience. which is much more demanding on the system. Content Content is primarily user generated through the items listed for sale. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. categorically arranged.
a monthly newsletter. e-mail. eBay offers its users category-specific chat rooms. the culture has come under strain due to the company's rapid growth from a small community into a "big city". After a sale. It is a place where people can meet with similar interests. eBay Salt Lake City) have helped them restore that community feel. has enabled eBay to foster a strong sense of community on its site.g. and there are several reports of eBay users vacationing together. and in doing so. and is considered by many users as one of the best features on the website.as eBay users refer to themselves . working together and helping each other offline. Community eBay attributes much of its success to a strong sense of community among its users. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. Whitman describes eBay's community culture as a site "of the people. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. discuss topics they care about. To encourage this sense of community. respect. Recent initiatives such as the development of local websites in major US cities (e. a "giving-board" for charitable donations to user-identified causes. eBay Boston. by the people. which is then added to the partner's trading profile.eBay represents more than just a place to buy and sell goods. the community spirit and personal relationships also transcend the online experience. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. which is posted to the site. 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). For many 'eBayers' . autonomy. However. This has created a self-regulating mechanism that encourages good behaviour. In addition. eBay's community has a distinct culture based on trust.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. 89 . and share information. bulletin boards. for the people". empowerment and equality.
which was dedicated to monitoring the site for illegal and infringing activities. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. These people worked from their homes. answering e-mails and responding to questions posted on the site's bulletin boards. and willingness to empower. By using its own enthusiastic. eBay has invested in customer care and support to ensure people conduct safe transactions. and the introduction of two specialised customer support groups . As such. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Customer Care eBay controls neither end of the transaction. eBay's approach to customer care has evolved over time.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. links to high traffic sites. Communication eBay maintains close communication with its members. the largest of which was with AOL. which was dedicated to investigating misuses of the system (e. 90 . shill bidding) and helping to resolve user-to-user conflicts. eBay was able to cost-effectively offer 24x7 customer support early on. Customer support activities were constantly upgraded and expanded as the business developed. This was later expanded to include customer support representatives who worked out of eBay's headquarters.the Community Watch group. and the Safe Harbour group. geographically dispersed users as customer support representatives. its user community. knowledgeable. in which the company hired active. During the first two years.g. eBay employed a "remote" customer support model. eBay also engaged in marketing partnerships. but they have other partnerships with over 150 websites of varying scales. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. fraud. This also reinforced the company's respect for. and respected members of its own user community to serve as customer support representatives.
91 . whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. eBay Magazine. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). representing about 40% of revenues. $75 million joint marketing alliance and development deal.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. Based on this. provide a wealth of information about the 'ins and outs' of trading on eBay. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. but they have other partnerships with over 150 websites of varying scales.a four-year.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The Official eBay Guide to Buying.g. as a result of the high quality experience it provides. Selling. and two books. The AOL partnership was one of the largest strategic partnerships on the Internet . In 1998. and highlight opportunities created by e-commerce. These new publications appeal to the collecting spirit. Mary Beth's Beanie World.3 million in advertising. and maintained the same ratio for 1999. eBay has been able to attract a large customer base. Early on. eBay has since expanded its promotion efforts and engaged in marketing partnerships. Through this combination of its advertising efforts and targeted promotions.6. and facilitate the spread of positive wordof-mouth. eBay transformed from a pure online play into a 'clicks-and-mortar' company. eBay decided that it would not enter into major portal advertising deals in the short term. and Collecting Just About Anything and eBay for Dummies. the largest of which was with AOL. Recent promotional initiatives include its new publication. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. who tended to be serious collectors. 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. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. they decided to target their marketing efforts on these heavy users. they spent $12. As a result. Doll Collector) and appearance in trade shows.
72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . This is achieved by listening to their community (learning) and developing new improved products and services (relating). very fast.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'.com) 92 . which in turn attracts more sellers . however. As a result. and their first-mover advantage. and according to Meg Whitman. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. 6. "the devil in so much of this is in the detail. such as the Feedback Form.businessweek. I think you are not well served by moving incredibly rapidly and not doing things well72". which were all ideas of eBay users. 21st May 1999 (www. And while we have to move very.contributing to its strong lead and competitive advantage. have been key factors that have contributed to the success of the brand.6. as they could not opt for a 'go slow' strategy. However. Their focus on heavy users and targeted promotions.Business Week. eBay has also faced difficult challenges in scaling the organisation fast enough. This has become part of the eBay culture.the ultimate network effect . is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way. eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. eBay attracts a broader selection of buyers. have been instrumental in building a 'quality' customer base. the Personal Shopper and the eBay Life Newsletter. which has established eBay above other online auction communities.5 Conclusion eBay's compelling value proposition. their ability to create a new market using Internet technology. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. and according to research carried out by eBay.
"to deliver style. Canada. from shirts to accessories and hard-to-find sizes.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Gap's online sales tripled in 1998 alone. Gap online exploits the accessibility and convenience of the Internet.com is an example of successful crossover marketing.com and www. UK. whether in the store or online76". and BabyGap.Business Week. 73 74 Interbrand (www.see Appendix A Gap. announce multi-year partnership. from jeans and T-shirts to khakis and jackets. Germany and Japan. and provides useful insight into how traditional brands can leverage their strength online. Gap Inc.Business Week.an early convert to the then-revolutionary idea of clothes retailing on the Internet. GapKids. letting customers access the Gap brands. and analysts estimate that sales in 1999 amounted to $50 . 6. head of Gap Online. 1999 76 Jeanne Jackson.COM 6.7 CASE STUDY: GAP. standard styles are well suited to online shopping.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www.gap. the growth prospects are enormous. The Gap offers a balance of modern and seasonal styles of clothing. In addition.com. In late 1997. as cited in Lee. Currently. Gap. service and value to everyone74".COM .'s website (www.2 Value Proposition Gap's simple. and Gap online provides access to the full range of items at Gap. 'Clicks and Mortar at Gap.1 Company Overview Gap opened its first store in San Francisco in 1969. however.interbrand. October 8. L.gapkids.com' .6 1969 1986 1989 1997 1998 1999 - GAP & GAP. October 8. and today it is the 29th most valuable brand in the world73. Gap started selling items online . online sales are only available to US customers. California GapKids opens its first store BabyGap is born Gap opens its online store at www. as cited in Lee.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.800 stores in the US.com' . 1999 93 .7.gapinc.com/about_us.7. up from $20 million in 199875. 'Clicks and Mortar at Gap. America Online (AOL) and Gap Inc.$100 million. surpasses $9 billion in net sales and increase earnings by 54% over previous year. and are still relatively small compared to Gap's $9 billion in annual sales. This success is largely due to their simple formula .com) . L.babygap. Inc. TABLE 6. to provide customers with greater convenience and options. Its reach extends across more than 1. "this is about being clicks-and-mortar. According to Jeanne Jackson.htm) 75 Jeanne Jackson.
7 . The Observer..very easy. Gap Online primarily focuses on Convenience.com.. The site also offers sharp graphics. but provides customers with the option of viewing text-only. Unlike Barnesandnoble.. FIGURE 6. very efficient"77.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. feel and design of the site is consistent with the bricks-and-mortar stores. This personality is reinforced online through the simple structure and layout.. describes the company's brand personality as "direct and straightforward. reinforcing its brand identity. Executive Vice President of Global Marketing. Simple. 1998 94 . easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. D. April 18. making navigation even faster.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look..The 7Cs Framework In terms of the 7Cs framework. Michael McCadden.. and Customer Care. 'Mind the Gap'. Content. Visiting the gap. and easy-to-use.3 Sources of Value .7.. the extensive integration of Gap's online and offline activities are clearly evident.com store one immediately notices the consistency between the online and retail stores.. from the blue and white colour scheme to the easy-toshop format . making it convenient.making visual references to its offline roots.
However.com's content consists of detailed information on its full range of products. once customers are registered online. Gap communicates with customers through customised e-mails. GapKids.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap.com allows customers to track the status of online purchases and provides contact information on the nearest store. and goods bought online get returned at the same rate as store purchases . Gap. Unlike the case of Boo. which would not be possible in the store. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. In addition. Gap made a decision to charge sales tax on online sales. and customers can view their latest TV adverts for buying inspiration.as most Gap online shoppers have a good idea of how Gap clothes fit. twice a month. without causing complications. In order to integrate its offline and online operations and logistics. standard styles are well suited to online clothes shopping. Gap's simple. allowing shoppers to contrast different cuts and styles. and BabyGap. promoting its specials and including links directly to items on Gap's website. The Gap site connects to other Gap online stores including GapKids and BabyGap. and customers can register to get e-mail reminders of upcoming holidays and birthdays. customers can return goods purchased online to their neighbourhood store. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. Gap. Gap does not provide any community features on its site. Gap has also developed an affiliate programme. 95 . as well as sample all of the latest shades of fingernail polish on a virtual hand. By doing so.com also provides a Gift Central feature which offers gift suggestion from Gap. and had recently established marketing deals with AOL and CDnow.com.
which can be used towards future purchases.com" on the display screens between transactions. they send the customer a $20 Gap ShopCard. etc.com has links with CDnow to cross promote websites. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace.com has been able to piggy-back on The Gap's offline advertisements (in TV. it is fully leveraging its offline presence to build awareness.gap.gap.) that also promote the online store. on shopping bags and even on the cash register.Extensive Integration Gap.com.4 Brand-Building Strategy . by displaying the URL (www.7.com in return for a 5% commission on every sale referred through the site. on counter cards. • Gap. 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. by offering a 10% discount and free shipping on their first online purchase.com has also created an affiliate programme encouraging sites to establish links to gap.shop. Most of Gap's online traffic is generated by leveraging its physical presence.ship".BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. In certain high traffic Gap and GapKids stores. billboards. Magazines. These efforts doubled the size of Gap's e-mail database. • They offer Online discounts and promotions such as the ShopCard. 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. To convert walk-in shoppers to cybershoppers. Gap has also supplemented this with online promotions: • In August 1999. • Gap. In addition. whereby for every $100 a customer spends at Gap Online.com) in store windows with the slogan "surf. providing a useful way to directly reach customers. which displays "Shop online at www. however. Gap has held in-store campaigns to get customers to submit their e-mail addresses. Gap secured a 3-year commerce and marketing agreement with AOL. 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. 96 .
5 Conclusion Gap. while reaping the benefits of low customer acquisition costs and extended reach. The Internet. Gap had a significant advantage over pure online players in attracting customers and building critical mass. and allowing each to leverage the strengths of the other.7. provides existing customers with added value through the convenience of purchasing online. With their brand awareness and network of retail outlets. whereas established companies.com is an example of successful crossover marketing. By aggressively marketing both the stores and the website. on the other hand. Pure online players have to invest heavily in logistics. have already established the back-end operations and can use them as the cornerstone of their online business. thereby reinforcing its brand identity. such as Gap. and can also provide access to different customer segments who may not usually buy the products at all . Gap has been able to significantly strengthen their brand-customer relationship. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands.thereby increasing the company's reach. 97 .
The Company. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.Business Week. and is one of the few Internet companies to turn a profit early in the development of the Internet.8 CASE STUDY: YAHOO! 6.see Appendix A 'Yahoo! . Yahoo! has since morphed from an ordinary search service into a global Internet communications.D students at Stanford University. 1998 (www. two Ph. from e-mail services to stock quotes and much more.2 Value Proposition At the core of Yahoo!'s value proposition. household and business user reach. and the number of websites continues to explode. 78 79 Interbrand (www. The Strategy. the amount of information. September 7. 6.com) 98 . Yahoo! offers a range of supporting services that add value. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. advertising. The concept exploded (through word-of-mouth) and in less than six months.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. who started an online guide as a way to keep track of their personal interests on the Internet. the site was receiving 1 million hits per day. all in a single location. Yahoo! was founded by David Filo and Jerry Yang.businessweek. The company's global web network includes 23 world properties outside the US. As the first online navigational guide to the web.8. According to Timothy Koogle.com) . There's nothing in the real world to compare to that79". CEO of Yahoo!. As such. lies the directory .1 Company Overview In April 1994.interbrand. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. Yahoo! is a leading guide in terms of traffic.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. The Stock' .
8 million IPO (2.8.The 7Cs Framework Convenience Central to Yahoo!'s success.000 shares at $13. Palm computers).com allowing them to offer person-person payment solutions .Receives $1 million in venture capital funding from Sequoia Capital $33. is the way it has structured and displayed information.Yahoo! unveils Yahoo! Finance Vision ..3 Sources of Value .00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.e.7 YAHOO! . More recently.com.Site goes live September . regardless of platform (i. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Yahoo! acquires eGroups .600.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 .TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! Shopping launches personalised shopping service 6. 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.Yahoo! acquires Arthas. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! Launches Business-to-Business Marketplace . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. TVs. Their goal is not to list everything under the sun.8). 99 .Yahoo! forms agreements with Palm Inc. Yahoo! extended its convenience through its Yahoo! Everywhere service. .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices. mobiles. and unveils Yahoo! Digital Introduces Bill Payment services . to allow access.
and more importantly. from stocks and sports results to weather and air fares. This creates a win-win situation as its satisfies Yahoo!. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. and has been at the heart of Yahoo!'s growth and development. Their thrust has been to provide valuable content to customers. well structured. and is similar to a custom tailored newspaper (Figure 6. Yahoo! has increased customer loyalty and retention rates. 100 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9).8 .OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. the end-user. while providing partners access to a large customer base. By tailoring the information to users' preferences. ranging from daily news and weather reports to road maps and books. the partner. 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. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.com and CDnow. easy-touse. They have formed multiple alliances and partnerships with leading online companies such as Amazon.
fax. In 1999. and contributing to their reputation as a quality service provider. and the nature of the navigation business. Yahoo! acquired GeoCities.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Connectivity Connectivity is Yahoo!'s core product. or to make it their home page. It keeps customers on the site for longer periods. where groups of people with shared interests can communicate through chat. 101 . and plans to incorporate other features such as online chat to facilitate communications. one-to-many.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. Yahoo! has also implemented campaigns to persuade users to bookmark the site. Yahoo! spends more on customer support than most companies. message boards. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one.9 . to provide its customer base with access to useful links and content. Customer Care Yahoo! responds to customer inquiries via e-mail. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. and e-mail. and encourages them to return frequently. reinforcing the brandcustomer relationship. telephone and even traditional mail. In addition. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. and many-to-many. and is driving Yahoo!'s multiple partnerships and alliances.
As a result. While Internet companies were targeting existing Internet users through the use of online promotion methods. Intelliquest. Yahoo! would be one of the first sites that they visited. an approachable nature. and according to Intelliquest80. by building a recognised brand name. In 1996. Yahoo! aggressively promoted the site through public relations. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes .8. and through communications via email. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness. recognise the name Yahoo!. 6.4 Brand-Building Strategy Yahoo! is a marketing machine.a sense of irreverence. This was especially important.com) 102 . and an inherent friendliness. and it formed a critical link in Yahoo!'s brandbuilding strategy. Yahoo! maintains close contact with customers. Yahoo!'s brand-building success starts with its name. which conveyed the brand's irreverent personality. 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! also encourages customers to e-mail ideas and feedback. These near surfers represented (and still do) a large and fast growing group and. Yahoo! extended beyond this to use traditional offline media.intelliquest.people who are not yet online but are likely to use the Internet in the near future. and its implications of a good time. TV commercials and radio spots during drive time. Yahoo! avoided characterising itself as a technology-oriented company. At the time this was considered a breakthrough. (www. Given the unease with which the average consumer approaches technology. 80 'Web Survey Shows Yahoo! Tops'. as experience surfers tend to be loyal to their search engine. 82% of Internet users and 23% of people intending to go online.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. Their strategy was to target "near surfers" . therefore.
T-shirts. services and contests with well known brands such as Ben & Jerry's.higher than all other services81. new services and customised features highlight their ability to relate to customers' needs. it's too late. and 76% turned to Yahoo! before visiting another search engine or navigational site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. Although this seems like a shotgun approach. Yahoo! has paid little for this exposure.yahoo. VP-Brand Marketing. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. the research shows that 73% of Yahoo! users bookmark the service . breath mints. 1997 (www. They also teamed up with publisher Ziff-Davis Co. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . organisers. Visa and MCI. Once customers access the site. which has been instrumental in establishing Yahoo! as a household name. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. In addition. According to Karen Edwards. p. May 3. We need to be one step ahead in order to have a better service than our competition82".it must reinforce the image of the company as 'a service that is fun. as well as TV shows (Ally McBeal. August 26. snowboards. and yo-yos. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. ER) and Hollywood movies.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . a little wacky and inviting'. According to a recent study. 1999. sailboats. including backpacks. Yahoo! adopted 'guerrilla marketing' techniques .Yahoo! Press Release. customers quickly discover its value and through a high quality experience (7Cs). s4 103 . They even have a barter deal with the San Francisco 49ers. stating that "if we wait to hear about it in the news. parachutes. Yahoo! has managed to cultivate high brand loyalty.Advertising Age. to create Yahoo! Internet Life. Their innovation. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success.with its name being plastered on everything. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . a monthly magazine guide to what's new on the web and it has co-branded products.
VPBrand Marketing of Yahoo!.6 Conclusion Yahoo! is one of the most successful brands on the Internet. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". its excellent customer service. alliances and acquisitions to provide added value services to their customers. that have set it apart from the pack.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. 1999. its choice of partners. from its convenient and logical structure and display of information. Yahoo! points them to its competitors by including links to AltaVista. have created a distinct brand identity that differentiates the brand and appeals to its target market. As a result of all these factors.8. GoTo. As the first online navigational guide to the web. p. Yahoo! has invested relentlessly in new services and marketing programmes. To maintain its lead. first to turn around an annual profit. and first to go mainstream by advertising its name using traditional media. s4 104 . HotBot. while also associating Yahoo! with well known brands. and has cultivated a reputation for excellence. and other search engines at the bottom of its search results page). 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . to its simple design. if a user cannot find what it is searching for. Yahoo! has built a strong brand. They have maintained that lead through the creation of a high quality end-to-end customer experience. while attracting new customers.com. and its openness (for example. Yahoo! has benefited from a first-mover advantage. first to go public. In addition.Advertising Age. their innovative promotional and guerrilla marketing techniques. These relationships have provided end-users with added-value. In addition. May 3. 6. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. they have carried out extensive partnering. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. with a large customer base and high levels of customer loyalty.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine.8.
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
a company can leverage the partner's brand and reputation to reinforce its own. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. Alliances and partnerships play an important role in achieving speed and momentum. and exclusive alliances can lock out competitors from valuable content or online real estate. before it fractures. ranging from online methods to traditional offline media. By distinguishing their offering and focusing on unique sources of value-added. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. as well as determine how far the brand can be meaningfully stretched to other products and market segments. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. and by partnering with well-known brands. but also provide added value to the brand community. integrated customer acquisition strategies. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. As a result. to maintain consistency. The most successful partnerships are symbiotic matches. these companies must have an inherent understanding of their brand identity and core values. and convenience. In addition. to distinguish themselves from competitors. leading brands have focused on building strong partnerships and alliances. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. variety. while ultimately benefiting the end-customers. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts.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. brands are harder for competitors to emulate. particularly to secure content and widen reach to new customer segments and niches. these companies are creating even stronger value propositions. whereby each party benefits from the other's expertise or skills. content. offering customers the best in quality. 108 .
The challenge then lies in keeping up the momentum. to create new services and content that satisfy customer needs. 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 benefited from additional hype. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and moved quickly to capitalise on the potential they saw. and differentiating it from other brands. and extensive word-of-mouth due to its novelty. and by focusing on customer needs. and it aligns itself with the most influential venture capital sources. that comes with innovation. A first-mover advantage is an important asset for an online brand. and it can acquire customers while it is still inexpensive to do so. In many cases. these well-publicised brands also took off. customisation and customer care. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. the innovations are the result of the company's ability to data mine its vast database of customer information. the company benefits from the buzz. and are continuously adding new services and functionality to their sites. As Internet penetration exploded. these innovations are difficult for competitors to reproduce. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. By getting to market early. by providing better services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. are leveraging this customer knowledge (learning) to nurture relationships (relate). It locks up important content and distribution partnerships. 109 . and develop a detailed understanding of their customers' needs. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. These brands are accumulating knowledge about customers. By leveraging unique customer information. Many strong online brands were also early-movers on the Internet. through past transactions and solicited input. and traffic.
The Internet has radically changed the business and competitive environments. In addition. established fulfilment systems and infrastructure. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. clicks-andmortar brands are providing customers with true added-value. Through extensive and seamless integration. Nevertheless. 7. Nevertheless.factors that clearly differentiate them from pure players. they are equally important in business markets. however. In doing so. but at the same time. drawing on several case studies from business markets. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. building relationships and satisfying needs. tools and key factors outlined in this dissertation are also applicable to business markets. They have an established brand. established customer relationships. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. Brands and brand-building tools tend to be associated with consumer markets. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. ongoing research would be necessary to build on the findings of this dissertation.value remains (and always will) the basic building block for every successful brand. and a physical presence (tangibility) . with the emergence of wireless access and new platforms. expand the brand experience to meet customers' expectations in the online world. Therefore. They possess critical assets that give them an advantage over pure online start-ups. would represent an exciting opportunity for further research. one component remains unchanged . Having established a strategic perspective on building online brands. 110 . Yet while everything is being turned upside down.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. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. there has been a limited time horizon to evaluate the durability of Internet brands. the concepts. while reaping the benefits of lower customer acquisition costs and extended reach. an in-depth analysis. As such.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
Interbrand's Ranking of the Top 60 Brands (www.231 24.319 1.464 3.043 8.interbrand.510 8.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.766 14.231 12.845 56.694 17.932 4.361 1.052 6.895 2.894 14.602 4.147 9.262 1.502 33.634 1.283 4.021 26.101 9.830 14.806 11.155 7.781 33.193 112 .681 2.527 3.197 32.792 3.313 2.761 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .184 1.423 2.132 15.654 43.048 20.985 2.806 2.181 21.329 4.281 11.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) 83.225 11.568 3.603 5.648 1.550 12.275 30.909 7.595 17.422 1.596 3.310 11.804 2.781 17.643 3.404 4.143 2.076 3.
activities. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. the informal management style and the constant strategy re-calibration. They must move quickly to capture new opportunities. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. As such. However. T. and the emergence of a knowledgebased economy. customer empowerment. commit and deploy resources. global competition. all these dimensions must change accordingly. 1982 113 . & Waterman. showing how they are interrelated. and structures are aligned differently. R. all their operations. the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. 'In Search of Excellence'. It is critical that all these dimensions come together and are re-enforcing.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . As a result. whereas entrepreneurial Internet companies must focus on 'managing for change'. * Peters. and as the business environment changes. and reorganise as appropriate. (Harper & Row). respond to competitive and market dynamics. with the fast pace of technological change.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business. constantly innovate. Internet companies must be able to move at warp-speed. from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure..
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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