1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


7.2 Value Proposition 6.5.7 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 7.2 Value Proposition 6.7.1 Company Overview 6.com 6.The Failure of Boo.7.8.5.The 7Cs Framework 6.3 Sources of Value .6.6.6 6.1 Company Overview 6.5 Other Factors that Contribute to their Brand Leadership 6.8.The 7Cs Framework 6.com 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7.1 Company Overview 6.Extensive Integration 6.5 Conclusion Case Study: Gap.5.4 Brand-Building Strategy 6.4.8 Case Study: Boo.2 Value Proposition 6.6.The 7Cs Framework 6.4 Brand-Building Strategy .2 Value Proposition 6.3 Sources of Value .4 Brand-Building Strategy 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.5 Other Factors That Contribute to their Brand Leadership 6.3 Sources of Value . 6.3 Sources of Value .7.5 Conclusion Case Study: CDnow 6.5.1 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 .7.4 Brand-Building Strategy 6.4.5 Conclusion Case Study: Yahoo! 6.The 7Cs Framework Sources of Value .8.2 Value Proposition 6.1 Company Overview 6.1 Company Overview 6.5 6.

2 Figure 2.6 Figure 6.6 Figure 4.com's Website Amazon.7 Figure 5.2 Figure 5.1 Figure 4.3 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .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 .3 Figure 2.4 Figure 2.6 Figure 2.1 Figure 1.4 Figure 6.com's Website Overview of Boo.5 Figure 5.3 Figure 5.3 Figure 3.5 Figure 6.3 Figure 4.1 Figure 6.4 Figure 4.2 Figure 6.4 Figure 4.4 Figure 5.com's Associates Programme Overview of BarnesandNoble.5 Figure 4.8 Figure 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.7 Figure 6.2 Figure 3.8 Figure 5.1 Figure 5.7 Figure 5.1 Figure 2.2 Figure 4.1 Figure 3.7 Figure 2.6 Figure 5.8 Figure 6.2 Figure 2.5 Figure 2.9 Figure 6.

Timeline and Major Milestones BarnesandNoble.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.4 Table 6.Timeline and Major Milestones CDnow .5 Table 6.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .Timeline and Major Milestones Boo.com .Timeline and Major Milestones eBay .Timeline and Major Milestones Yahoo! .com .6 Table 6.2 Table 6.Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.1 Table 6.3 Table 6.1 Table 6.com .


com1 Amazon.9 3.1 3. aggressive Internet start-ups have emerged. and is triggering the need for new brand-building strategies and tools.2 3. Amazon. and business models revamped. In the midst of this.YEARS TO REACH $100 MILLION IN SALES 6 5. service and brands. there has been an explosion in the online world .5 2.com Source: Securities and Exchange Commission Filings. whereas it has taken decades for traditional companies to achieve the client base.com) 7 . McKinsey Analysis (www. the Internet is changing fundamentals about customers. Figure 1. As such. As such. It is empowering customers with more options and more information to make informed decisions.com noble. interaction and relationship building.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. creating strong brands that are putting established brands at risk. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.com's range of 4. Amazon. that these Internet start-ups have achieved. The Internet also represents a fundamental shift in how buyers and sellers interact. products and services reconfigured. while providing new tools for promotion. This is creating new challenges and opportunities. Supply chains are being rethought. America Online (AOL) and eBay have been able to build powerful brands in a few years.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. FIGURE 1. relationships.5 million book titles). Internet companies such as Yahoo!.9 2.an explosion that is also a harbinger of how business will operate in the future. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com. customer affiliation and level of sales.1 OVERVIEW Over the past few years.g.1 . as they face each other through an electronic connection.0 1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.mckinseyquarterly.

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

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

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

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


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

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

Service Brands (intangible) are much less numerous than their product counter parts. They are the historical core of branding because they are the most prevalent. In fact. P.. 2. preferring things they can see and touch. or a combination of them. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. and because they most readily come to mind when consumers are asked to recall brands. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. but the brand itself is the store. Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. this is the case with all Internet companies. Essentially. not the products it sells . quick delivery) that enhance the customer’s total purchasing and use experience. (Europe: Prentice Hall) 1996. term. sign. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. this should support the offering's performance and differentiate the brand from those of competitors.The Gap stores. such as in retailing. Levi's). 8th Ed. 15 . information. Implementation. or design. most products and services cannot survive on functionality alone as this is usually matched in time. 5 Kotler. These products and services add value and make the offering much more difficult for competitors to emulate. The most common barrier to competition is building a brand. Certain service brands. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. with supplementary products and services (e. & Control'.Analysis. symbol. Southwest Airlines and Amazon. actually sell products. 'Marketing Management .g. even when the alternatives are substantially cheaper or more readily available (e. However. Coca-Cola.com are examples. Kodak. customers buy products to meet certain functional needs.g. The Basic Brand The basic brand consists of the "name.

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

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

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

the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. 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. D.com. In this way. Spring 2000 19 . Harley-Davidson motorcycle clubs).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.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. M. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. 'Building Stronger Brands through Online Communities' . 'The One to One Future'. Emotional loyalty can be also created through the formation of a strong user community around the brand.. emotional loyalty is born out of a consumer's personal relationship with a brand.Sloan Management Review. 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). 8 9 Peppers. Firstly.g. consistent orders Satisfied customers are the best advertisement . The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. 1993 McWilliam.. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. G.they provide good word-of-mouth and are the best salespeople for the product / service 2. & Rogers. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 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.

'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. there are brands that customers perceive as acceptable and would not resist buying.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. pp. which goes well beyond the satisfaction of a specific need. March 1998. However. and understanding the needs and buying processes of the target market is essential. A stronger brand enjoys a high degree of brand preference over competing brands.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. FIGURE 2. S.. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. Journal of Consumer Research. a 'powerbrand' tends to have a high degree of brand loyalty.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.7 .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. 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. there are brands that are unknown by most buyers. 343-373. FIGURE 2. 20 . Beyond this. 2.7).6 . Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).

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

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

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


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

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

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

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

and through line and brand extensions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. 29 . understanding the brand's core and style helps set the perimeters of brand extensions .KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. structure and ease of use). website design. J. its strengths and opportunities. Secondly. Finally. advertising. 'Strategic Brand Management'.. 1992 The brand prism enables management to understand the brand.3 .g.how far the brand can be meaningfully stretched to other products and market segments. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. (New York: Free Press). below-the-line activities. It also facilitates consistency in the message being transmitted through presentation (e.

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

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

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


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

anywhere.The Internet is a global network and can be reached from everywhere. ubiquitous links to anyone. allowing both parties to identify each other and build one-to-one relationships .1 The Defining Characteristics of the Internet The distinctive characteristics of the Internet can be summarised in three key points: • It Dramatically Reduces Information Costs . when the United States Defence Department developed the 'ARPAnet'.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. 4. These characteristics combine to create a very powerful medium. the Internet lets individuals and companies build interactive relationships with customers and suppliers. and deliver new products and services at low cost. • It Allows for Two-way Communication and Interactivity . 7 days a week.not previously available with mass medium forms of communication. which was intended to link military networks together. These defining characteristics have fuelled its explosive growth. • It Overcomes the Barriers of Time and Space .2.this radically alters the process of interaction between communicating parties.2 (Note: 35 . These qualities eliminate the barriers of time and space that exist in the physical world.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).24 hours a day. Graph is not drawn to scale). By allowing for direct. The context of the Internet and certain key developments are highlighted in the Figure 4. The Internet can also be accessed at any time . regardless of where the computer or Internet access device is physically located.

3 .GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.a PricewaterhouseCoopers Report. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000. as cited in 'E-Business Technology Forecast' .3.000.000. 2000 Internet / ARPAnet was created Dell. FIGURE 4.Figure 4.000 1. 1998.2 .000 10.000 1.com) 36 .000 100.economist. 1996 (www.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000 1969: 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.

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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 ’ . 'Marketing to the Digital Consumer'.4 . FIGURE 5. Figure 3. Newspapers.. Learn and Relate. R.2. because there is no physical presence. This model consists of five stages . modified to take into account of the interactive dynamics of the Internet. Engage. The mechanisms to communicate range from traditional media (TV. visibility relies solely on Communication. Retain.7 .. A. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. & Zeisser.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. The company must build awareness and communicate its value proposition to its target customers. S. 180-183 (www. This is more difficult online than offline. Adoption). M.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'..) to online tools. including affiliate programmes with other websites.mckinseyquarterly. links from directory searches (Connectivity). 1996.7.8. Therefore. Evaluation. Magazines.Attract. Trial.Awareness. etc. and bring people to the site for the first time. Waitman. No.. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. billboards.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. McQuade. Interest. e-mail notifications and banner advertisements. McKinsey Quarterly.

5) 2. 58 .7 4.5 3. The key factors at this stage are Convenience combined with interesting Content. Fig.8 .3 Source: Forrester Research. Engage With the multitude of choice available on the Internet. public relations and television advertising.4 3.3 3. discounted over the expected duration of the brand-customer relationship. as cited in 'Targeting Consumers via the Internet' .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 .4 3. it is important to quickly engage consumers' interest before they move on.6 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. Kapferer's Brand Prism (Ch.0 3. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.Economist Intelligence Unit 2000 (www. multiplied by the expected rate of transactions. affiliate programmes. Attracting customers is only the first step in building online brands. Creativity is also an important factor in gaining attention in today's cluttered marketplace. 3.2 4.com) The most effective methods are direct e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.1 3. 3.3 2.ebusinessforum.WEBSITE PROMOTION METHODS .3) is useful to ensure that a company develops a distinct and consistent brand identity.4 4.8 4. Companies then need to engage customers to obtain their interest and participation.

if used properly. and what additional products and services are they interested in provides companies with valuable information which.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. Building up a knowledge database on each customer .8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. 59 .9). Communities and Customisation are other sticky applications.who they are and why they shop online. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. Certain product categories. a company can create value by providing a personalised online experience. The initial site registration provides an early opportunity to obtain useful information. Content is the basic driver of retaining customers on a site. The objective is to increase the conversion rate (% of browsers converted into buyers).g. 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. 5. and must be continuously updated due to the multiple visit nature of customers. such as groceries and convenience goods. and forge closer relationships than any offline operator. • The Internet supports brand-building activities where there is a need to build a relationship. Radio). This helps to create a customer base that spends more time and money at a site. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. TV. can create value for the customer and help build the brand-customer relationship. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. Learn The Internet provides extensive opportunities to learn about consumers (demographics. attitudes and behaviour).

. companies must provide a satisfying end-to-end customer experience . M. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. 5. 1996. 60 .. These case studies provide a practical insight into how companies are building their online brands. touch. and as the relationship develops. McQuade. smell). engaging and retaining customers.from the promises made in the value proposition.. The next chapter analyses the brand-building efforts of seven companies. and the need to stimulate the other senses (taste.2. 180-183 (www. to its delivery to the customer. 'Marketing to the Digital Consumer'. Given the high acquisition costs of online customers. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. the interaction provides the ability for companies to learn from their customers and relate.9 CONCLUSION On the Internet. R. due to high delivery and transaction costs (relative to the value of the product).mckinseyquarterly. especially in small quantities. No. & Zeisser.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. it is not economically feasible to sell certain products. pp. Waitman. McKinsey Quarterly.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. the experience is the brand. A.. providing further added value. • Brand-building favours products that can be sold online.9 . In order to create "apostles". S. The interactive brand-building process involves attracting. it is critical for companies to build relationships and foster brand loyalty.


easy.com and Yahoo!.com.com) 62 .2 Value Proposition Amazon.com. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). 2000 (www.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. greater convenience.The Economist. discounted prices. the sources of added value (using the 7Cs Framework). The cases are presented in the following sequence .1 outlines Amazon's timeline and major milestones. It is the 57th most valuable brand in the world47. and one of the top two or three in Britain.com launched with a mission to use the Internet to transform book buying into a fast. 'Amazon. its value proposition. Germany and Japan49. CDnow.Amazon. Barnesandnoble. 6. and enjoyable experience.COM 6. Amazon has been able to differentiate itself from other online competitors. 1999 49 'Amazon's Amazing Ambition' . Amazon provides increased added value on several dimensions.Goldman Sachs Report. In addition. Amazon. eBay.com has become synonymous with e-commerce.It's an Ocean.2. and has sales of over $2 billion. November 11. February 26. its brand-building strategy (how it generates traffic). In addition.1 INTRODUCTION This chapter provides an analysis of seven companies.see Appendix A. Amazon.com) .interbrand. 6. innovation and delivering on its promises.economist. more information. France. including: increased selection. and has equity investments in several e-tailers. Figure 6.1 Company Overview Amazon.com's success stems from its compelling value proposition. Amazon has cultivated a reputation for excellence. Amazon serves over 23 million customers from 160 countries.com . and higher levels of customisation and service than the traditional shopping experience allows. Gap. Boo. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). and other key factors that have contributed to its success (or failure). it is the most visited e-commerce website in America. Not a River' . In July 1995. combined with its levels of customisation and customer service.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Through its provision of a one-stop shopping experience. a company overview.com.2 CASE STUDY: AMAZON.2. 47 48 Interbrand (www. Each case is presented in the same format including. and is one of the few Internet brands that is recognised all over the world.

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

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

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

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

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

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

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

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

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

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

however. The 6.6 million. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.com was valued at $21. prevent cannibalisation of its existing business. Barnesandnoble. 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. reasons for this are explained in the next section. Both offer 'associate programmes' that let other websites link to their sites. Netscape and Microsoft Network. December 17. it lags behind first-mover Amazon. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).com has created a high quality website and customer experience.com's 1999 revenues were $202.64 billion. Yahoo!. Barnesandnoble. Both offer customisation that permits users to personalise the experience. has yet to leverage its strong brand in cyberspace. Instead. while Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).4 Brand-Building Strategy Barnesandnoble.com's $1. Barnesandnoble. As of February 2000.3.com had over 17 million. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .1 billion. Webcrawler.a replica of Amazon's Associates Programme.com's market capitalisation was $251 million.The Wall Street Journal.com.com closed 1999 with 4 million customers. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. this programme had more than 300. and both are expanding globally. Although. and Barnes & Noble Inc. while Amazon. They have developed an affiliate programme that links sites to Barnesandnoble. However. and avoid charging sales tax in states where it has stores56.com in return for a commission on any purchases that they originated .000 affiliates in its referral network. These initiatives have generated traffic to the site. compared to Amazon. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players. Lycos. Both try to foster a community of readers by letting customers post reviews online.

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

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

If a clothing brand is on the Boo site.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".com opens its virtual doors' . Sweden.2 Value Proposition According to Kajsa Leander.com had set the record as Europe's best-funded European Internet Start-up. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). within six months Boo. and eventually debut in Asia. P.Site goes live . Company is put up for sale. Boo. receiving $125 million of funding.4. among others. 58 Kajsa Leander. Puma.com. Finland. June 10. Boo. and the resulting loss of investors' confidence. After a high profile launch.com provided a range of 18 fashion and footwear brands including DKNY.com collapsed through lack of funds.3 1999 Mid year BOO. They intended to add France.First sign of problems . Boo.com entered six markets: US.Marketing Week. 1999 76 . and Converse. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). Germany and Denmark. Morgan.4 CASE STUDY: BOO. arranged through J. Italy and Spain within a few months.COM .000 unique visitors .TIMELINE AND MAJOR MILESTONES . and included high profile investors such as Bernard Arnault. However. as well as create a kid's site. founder and Chief Marketing Officer of Boo.1 Company Overview Founded in 1999.4.Appeals for $30 million more funding . it means all that brand's product line is available. Boo. as cited in 'Boo. England.fails and appoints KPMG as liquidator. CMO of Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com. "our marketing thrust is not based on prices. not the limited range you might get at most London fashion shops58". Everlast. due to its poor performance and inability to build a customer base.Multi-million pound advertising campaign created by BMP DDB . TABLE 6. it's about range and convenience. On going live.Raises funding of $125 million . sack 20% of staff and sell stock at 40% discount .COM 6.they redesign site.Announces it has only 500. November 2000 January February May 6. and was billed as one of Europe's hottest e-commerce ventures. 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.


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


Miss Boo

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



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

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

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



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

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


guides to music genres.TIMELINE AND MAJOR MILESTONES . and they aim to "make every visit to the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.000 people.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .1 Company Overview Founded in 1994.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and an average daily audience of over 800. cover art. daily music news.000 music related items .Site goes live .5. 'How to Acquire Customers on the Web' . and was the first site to offer the sale of music downloads and custom CDs.cdnow. CDnow is the leading online music store..179-188 63 CDnow website (www.Launches merged CDnow/N2K site .5 CASE STUDY: CDNOW 6. D. and one of the most popular shopping sites on the Internet62.CDnow and Time Inc. 62 Hoffman. TABLE 6. former arch rival . $22.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.5 million distribution deal with Lycos Signs three-year. whether for browsing or buying. as well as music reviews.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . It has a customer base of 4 million people.Merges with Columbia Records . $18. and exclusive interviews and reviews from CDnow's award-winning editorial staff.Raises $10 million through private placement . T. by twin brothers Jason and Matt Olim.Forges distribution partnership with Yahoo! $65.000 music-related products and 650. & Novak. CDnow was acquired by Bertelsmann AG.ten times the selection of a conventional bricks-and-mortar music store). customisation and a wealth of information and content to help in the purchase decision. May-June 2000.com) 80 .Merges with N2K. pp.000 sound samples. features. announce marketing alliance . a valuable and rewarding experience"63. On 19th July 2000.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.Harvard Business Review. convenience.Partnership program with Geffen Records . This unprecedented degree of access to music and information is the core of CDnow's value proposition.5. good prices. CDnow provides access to over 500. CDnow is also driving the digital distribution of music.

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

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

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

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

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

There are over half a million new auctions.6 CASE STUDY: EBAY 6.ebay. payment) between themselves. According to Meg Whitman. Sellers pay a nominal fee for placing an item up for sale.eBay website (www. and eBay provides added value through its convenience. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.Company Overview' . Auctions make it fun. with the number of unique daily visitors setting a record of 1. eBay is not about auctions. Auctions are an enabler. 6. CEO of eBay. Since its launch in September 1995. from collectibles and antiques to electronics and toys. extensive selection and geographical reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 1st October 1999 86 . flea markets and auctions. transportation and other overhead costs. eBay effectively created a new business model never before possible .g.000 new items joining the "for sale" list every 24 hours69. with emphasis being placed on its unique community feel and culture.300 categories.2 Value Proposition eBay offers consumers an efficient. 24 hour a day. global trading place for buying and selling personal items in an entertaining auction format.A Harvard Business School Case Study.6.6. Auctions represent a platform. and eBay never takes possession of the item being sold.Company Overview' . Individuals use eBay to buy and sell items in more than 4. or the payment for the item .com) 'eBay .the closest thing in the offline world are trading forums such as classified ads. People perceive the auction format to offer better prices.782 million in January 200068.eBay website (www.com) 70 'Meg Whitman at eBay Inc. This is a new market . and 450. "at its core. as cited in 'eBay . (A)' .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.ebay. the eBay community has grown to include more than 10 million registered users.efficient one-to-one trading in an auction format. shipping. collectable shows. garage sales. and eBay receives a transaction fee that ranges from 1.removing the need for inventory.25% to 5% of the final sale price on any item sold. The buyer and the seller work out the logistics of the transport (e.

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

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

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

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

Selling. provide a wealth of information about the 'ins and outs' of trading on eBay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 91 . eBay transformed from a pure online play into a 'clicks-and-mortar' company. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. eBay has since expanded its promotion efforts and engaged in marketing partnerships. eBay Magazine.6. and highlight opportunities created by e-commerce. who tended to be serious collectors. As a result. they decided to target their marketing efforts on these heavy users. they spent $12. Recent promotional initiatives include its new publication. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. and facilitate the spread of positive wordof-mouth. 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 has been able to attract a large customer base.a four-year. In 1998. Based on this. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. The AOL partnership was one of the largest strategic partnerships on the Internet .3 million in advertising. Mary Beth's Beanie World. representing about 40% of revenues. These new publications appeal to the collecting spirit. the largest of which was with AOL. The Official eBay Guide to Buying. and two books. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. as a result of the high quality experience it provides. eBay decided that it would not enter into major portal advertising deals in the short term. Doll Collector) and appearance in trade shows. Through this combination of its advertising efforts and targeted promotions.g. $75 million joint marketing alliance and development deal. and maintained the same ratio for 1999. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. but they have other partnerships with over 150 websites of varying scales. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Early on. and Collecting Just About Anything and eBay for Dummies.

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

htm) 75 Jeanne Jackson.gapinc. According to Jeanne Jackson. announce multi-year partnership.com' . In addition. Currently. Canada. "this is about being clicks-and-mortar. October 8. whether in the store or online76". surpasses $9 billion in net sales and increase earnings by 54% over previous year. 1999 76 Jeanne Jackson. and Gap online provides access to the full range of items at Gap. as cited in Lee. however.'s website (www.com and www.an early convert to the then-revolutionary idea of clothes retailing on the Internet.COM 6. from shirts to accessories and hard-to-find sizes. as cited in Lee. UK. and provides useful insight into how traditional brands can leverage their strength online.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. Its reach extends across more than 1. up from $20 million in 199875. TABLE 6. This success is largely due to their simple formula . to provide customers with greater convenience and options.$100 million. and today it is the 29th most valuable brand in the world73. L.7. The Gap offers a balance of modern and seasonal styles of clothing.interbrand. 'Clicks and Mortar at Gap. California GapKids opens its first store BabyGap is born Gap opens its online store at www. Gap Inc. L. from jeans and T-shirts to khakis and jackets.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. and are still relatively small compared to Gap's $9 billion in annual sales.gapkids. letting customers access the Gap brands.7 CASE STUDY: GAP."to deliver style. GapKids.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. standard styles are well suited to online shopping.babygap. 1999 93 .see Appendix A Gap.COM .com is an example of successful crossover marketing.com. the growth prospects are enormous.6 1969 1986 1989 1997 1998 1999 - GAP & GAP. 73 74 Interbrand (www. 'Clicks and Mortar at Gap. online sales are only available to US customers.7. head of Gap Online.800 stores in the US. service and value to everyone74". Germany and Japan. Gap started selling items online . Gap online exploits the accessibility and convenience of the Internet. In late 1997. 6. and BabyGap.com/about_us. October 8.1 Company Overview Gap opened its first store in San Francisco in 1969. and analysts estimate that sales in 1999 amounted to $50 .com) . Inc.Business Week.Business Week.gap. Gap. America Online (AOL) and Gap Inc.com' .2 Value Proposition Gap's simple. Gap's online sales tripled in 1998 alone.

. Simple. Content.very easy. This personality is reinforced online through the simple structure and layout. Executive Vice President of Global Marketing.3 Sources of Value .. the extensive integration of Gap's online and offline activities are clearly evident. making navigation even faster.com. FIGURE 6.7 . The site also offers sharp graphics. very efficient"77. reinforcing its brand identity. April 18..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap Online primarily focuses on Convenience.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look. Michael McCadden. feel and design of the site is consistent with the bricks-and-mortar stores. and Customer Care.com store one immediately notices the consistency between the online and retail stores.The 7Cs Framework In terms of the 7Cs framework. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill. D.7. and easy-to-use. Visiting the gap. The Observer. but provides customers with the option of viewing text-only.. 'Mind the Gap'. 1998 94 . Unlike Barnesandnoble.. from the blue and white colour scheme to the easy-toshop format .... making it convenient. describes the company's brand personality as "direct and straightforward.making visual references to its offline roots.

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

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

such as Gap.7.5 Conclusion Gap. By aggressively marketing both the stores and the website. With their brand awareness and network of retail outlets.thereby increasing the company's reach. and can also provide access to different customer segments who may not usually buy the products at all .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Gap had a significant advantage over pure online players in attracting customers and building critical mass. on the other hand. 97 . while reaping the benefits of low customer acquisition costs and extended reach. and allowing each to leverage the strengths of the other. thereby reinforcing its brand identity. Pure online players have to invest heavily in logistics. The Internet. have already established the back-end operations and can use them as the cornerstone of their online business. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. whereas established companies. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand.com is an example of successful crossover marketing. Gap has been able to significantly strengthen their brand-customer relationship. provides existing customers with added value through the convenience of purchasing online.

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

They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.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 . to allow access. 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. 99 .Yahoo! acquires Arthas. and unveils Yahoo! Digital Introduces Bill Payment services .Receives $1 million in venture capital funding from Sequoia Capital $33.3 Sources of Value .000 shares at $13. regardless of platform (i.Site goes live September .TIMELINE AND MAJOR MILESTONES 1994 April . TVs. is the way it has structured and displayed information. Palm computers). Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! Launches Business-to-Business Marketplace . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. More recently..600.Yahoo! acquires eGroups . Their goal is not to list everything under the sun.com.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.Yahoo! unveils Yahoo! Finance Vision .8.Yahoo! Shopping launches personalised shopping service 6. mobiles.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.8).7 YAHOO! .The 7Cs Framework Convenience Central to Yahoo!'s success. .e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com allowing them to offer person-person payment solutions . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! forms agreements with Palm Inc.8 million IPO (2. to provide web-based services to PalmTM handheld computers .

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

and contributing to their reputation as a quality service provider. and the nature of the navigation business. message boards. Yahoo! acquired GeoCities. to provide its customer base with access to useful links and content. one-to-many. It keeps customers on the site for longer periods. In addition. and many-to-many. Yahoo! has also implemented campaigns to persuade users to bookmark the site. or to make it their home page. and is driving Yahoo!'s multiple partnerships and alliances. and e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9 . In 1999. where groups of people with shared interests can communicate through chat. and plans to incorporate other features such as online chat to facilitate communications. and encourages them to return frequently. reinforcing the brandcustomer relationship. Customer Care Yahoo! responds to customer inquiries via e-mail. Connectivity Connectivity is Yahoo!'s core product. Yahoo! spends more on customer support than most companies. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. telephone and even traditional mail.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. 101 . (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. fax. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one.

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

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

As a result of all these factors. that have set it apart from the pack. Yahoo! has benefited from a first-mover advantage. if a user cannot find what it is searching for. p. to its simple design. HotBot.6 Conclusion Yahoo! is one of the most successful brands on the Internet. As the first online navigational guide to the web. 1999. and its openness (for example. Yahoo! has built a strong brand. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. alliances and acquisitions to provide added value services to their customers. with a large customer base and high levels of customer loyalty. To maintain its lead. 6. first to go public. These relationships have provided end-users with added-value. and first to go mainstream by advertising its name using traditional media. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". while attracting new customers.com. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers. Yahoo! points them to its competitors by including links to AltaVista. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. its excellent customer service. They have maintained that lead through the creation of a high quality end-to-end customer experience. In addition. while also associating Yahoo! with well known brands. have created a distinct brand identity that differentiates the brand and appeals to its target market. GoTo. they have carried out extensive partnering. Yahoo! has invested relentlessly in new services and marketing programmes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' .8. VPBrand Marketing of Yahoo!. and other search engines at the bottom of its search results page). from its convenient and logical structure and display of information. first to turn around an annual profit. In addition. May 3.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. its choice of partners. their innovative promotional and guerrilla marketing techniques.Advertising Age. s4 104 .8. and has cultivated a reputation for excellence.








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



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

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

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

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

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

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

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


143 2.464 3.985 2.894 14.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.interbrand.527 3.184 1.830 14.193 112 .021 26.361 1.654 43.231 24.895 2.643 3.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) 83.932 4.231 12.648 1.048 20.147 9.181 21.806 11.281 11.792 3.781 17.510 8.761 1.052 6.781 33.568 3.909 7.550 12.806 2.602 4.596 3.101 9.225 11.404 4.845 56.310 11.197 32.313 2.681 2.423 2.043 8.694 17.275 30.319 1.155 7.132 15.603 5.283 4.262 1.Interbrand's Ranking of the Top 60 Brands (www.595 17.422 1.329 4.076 3.766 14.634 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .804 2.502 33.

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





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