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


2 Value Proposition 6.com Value Proposition 6.1 Company Overview 6.The 7Cs Framework 6.8.8 Case Study: Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.The 7Cs Framework 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 .com 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 7.3 Sources of Value .2 Value Proposition 6.6.1 Company Overview 6.com 6.3 Sources of Value .7 6.The 7Cs Framework Other Factors that Contribute to their Brand Leadership 6.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.The Failure of Boo.4 Brand-Building Strategy 6.2 Value Proposition 6.5 Conclusion Case Study: Yahoo! Company Overview Brand-Building Strategy .4.5 Conclusion Case Study: CDnow 6.3 Sources of Value .8.1 Company Overview 6.5 Company Overview 7.8.3 Sources of Value .5.2 Value Proposition 6.The 7Cs Framework 6.4 Brand-Building Strategy 6.3 Sources of Value .6 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 6.4 Brand-Building Strategy 6.5 Conclusion Case Study: Gap.5 Other Factors That Contribute to their Brand Leadership 6.Extensive Integration 6.

com's Associates Programme Overview of BarnesandNoble.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 .6 Figure 6.5 Figure 6.4 Figure 6.com's Website Overview of Boo.2 Figure 5.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .1 Figure 1.2 Figure 6.3 Figure 2.1 Figure 4.4 Figure 4.3 Figure 3.6 Figure 2.com's Website Amazon.5 Figure 2.7 Figure 6.3 Figure 4.6 Figure 5.4 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 3.5 Figure 5.1 Figure 6.3 Figure 5.1 Figure 2.6 Figure 4.7 Figure 5.2 Figure 2.8 Figure 3.5 Figure 4.8 Figure 5.3 Figure 6.4 Figure 4.2 Figure 3.2 Figure 4.1 Figure 5.7 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.9 Figure 6.7 Figure 2.2 Figure 2.8 Figure 6.4 Figure 2.

Timeline and Major Milestones Gap.1 Table 6.5 Table 6.Timeline and Major Milestones CDnow .com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones BarnesandNoble.2 Table 6.7 The Emerging Brand-Building Environment Amazon.6 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones Boo.3 Table 6.4 Table 6.1 Table 6.com .


interaction and relationship building.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. Figure 1. creating strong brands that are putting established brands at risk.9 3.an explosion that is also a harbinger of how business will operate in the future. The Internet also represents a fundamental shift in how buyers and sellers interact.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. Internet companies such as Yahoo!.com) 7 .1 OVERVIEW Over the past few years. whereas it has taken decades for traditional companies to achieve the client base. As such. as they face each other through an electronic connection.1 3.com. America Online (AOL) and eBay have been able to build powerful brands in a few years.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. As such.0 1. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. Amazon. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.mckinseyquarterly. This is creating new challenges and opportunities. the Internet is changing fundamentals about customers.com noble. Amazon.YEARS TO REACH $100 MILLION IN SALES 6 5. while providing new tools for promotion. In the midst of this. Supply chains are being rethought.com1 Amazon.2 3. FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. aggressive Internet start-ups have emerged. It is empowering customers with more options and more information to make informed decisions. and business models revamped.5 2. that these Internet start-ups have achieved. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. relationships.5 million book titles). and is triggering the need for new brand-building strategies and tools. customer affiliation and level of sales. McKinsey Analysis (www.9 2. service and brands.com's range of 4.1 . products and services reconfigured.g. there has been an explosion in the online world .com Source: Securities and Exchange Commission Filings.

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

1. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. This is based on the outcome of the primary research (in-depth case studies).2.2 . tools and strategies to build brands on the Internet. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. • To explore how the Internet is changing the brand-building environment. 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.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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . A review and analysis of leading academic thinking will be used to explore these issues. and to identify new sources of value. FIGURE 1.

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

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


1 INTRODUCTION In this chapter. the brand's emotional benefits and its self-expressive benefits . and highlights the importance of brand management.1. 'Building Strong Brands'. whether online or offline. but extends further to encompass added values derived from factors such as the brand-customer relationship. (New York: Free Press).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. unravelled to reveal the nature of brands and their reason for existence. both to customers. if properly managed. p. The chapter proceeds to describe the influence of brands on the buying process. 'The Future of Brands'. symbolised in a trademark. and to companies.a brand is: "a mixture of tangible and intangible attributes. R. explaining the value of brands. Branding is about creating 'value'. 1996. A. these layers are Brands are made up of many layers and dimensions. (London: Macmillan Press Ltd. creates influence and generates value4" This definition truly captures the essence of a brand. 74 4 Clifton.). both for customers. 2. which. and the importance of customer satisfaction and brand loyalty.1 . p. CEO of Interbrand Newell and Sorrell . These concepts are central to brands and brand-building. and for the company.. This value stems from the products and services that companies create and bring to the market.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. The concept of brand equity is outlined. vii 13 .see Figure 2.2 WHAT IS A BRAND? According to Rita Clifton. and they form the backbone of this dissertation.a leading specialist brand consultancy firm . D. FIGURE 2. 2000. E. & Maughan.

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

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

This can be triggered by internal or external stimuli (advertisements). and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs.attitudes of others and unexpected situational factors (Figure 2. The buying process consists of five stages (Figure 2. either through heightened attention or through an active information search. P.3). These beliefs depend on their previous experiences with the brand.. a consumer will be inclined to search for more information. it is important to clarify customers' underlying buying behaviour and the buying process.194 The process starts when the buyer recognises a need. selective distortion. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. 1996.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. FIGURE 2. and the effect of selective perception.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. 'Marketing Management .4).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.3 . Consumers differ as to which product / service attributes they see as important. it is critical to understand what attributes consumers value.. However. Through gathering information. Implementation. Consumers develop a set of brand beliefs about the attributes of competing brands. In the evaluation stage. (Europe: Prentice-Hall) 8th Ed. and selective retention. p. two factors can intervene between the purchase intention and the purchase decision . and Control'. Once aroused. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Therefore.Analysis. and pay the most attention to the brands that will deliver the sought benefits. the consumer learns about competing brands. Planning. 16 .

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

Johnson & Johnson.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.. 91 Loyalty is derived when customers are continuously satisfied over time. T... Nov-Dec 1995. T. FIGURE 2. Hewlett-Packard. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. W. Marketing Management. & Sasser. 6 7 Jones. E. E. & Sasser. and believe that it will always act in their best interest.Figure 2.. The customers at the bottom end of the scale are "terrorists" .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. This satisfaction encompasses the whole experience and not just a company's products or services. Southwest Airlines and Xerox7.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Spring 1999 18 . p.those who actively attack the brand telling others not to buy from the company. Nov-Dec 1995 Hart.Harvard Business Review. Saturn. At the opposite end of the satisfaction spectrum are "apostles" . and Johnson. Trust is critical for a brand's success.Harvard Business Review.customers who are satisfied and loyal and talk favourably about the brand . 'Why Satisfied Customers Defect' . Federal Express. C.5. M. Customers that are passionately or emotionally loyal are those that have built trust in a company. D. 'Growing the Trust Relationship'. 'Why Satisfied Customers Defect' ..

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'. consistent orders Satisfied customers are the best advertisement .com. 8 9 Peppers. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. & Rogers. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. Harley-Davidson motorcycle clubs). M. In this way. Emotional loyalty can be also created through the formation of a strong user community around the brand. Spring 2000 19 .Sloan Management Review.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. G.. D.g. 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. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.they provide good word-of-mouth and are the best salespeople for the product / service 2. 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). 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 1993 McWilliam. Firstly. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. emotional loyalty is born out of a consumer's personal relationship with a brand.

whereby customers would be unwilling to substitute it with competitors' offers. there are brands that are unknown by most buyers. Beyond this. FIGURE 2. 343-373. However. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). March 1998.6 . a 'powerbrand' tends to have a high degree of brand loyalty.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. which goes well beyond the satisfaction of a specific need. Journal of Consumer Research. pp. almost irreplaceable bond as well as potentially to the negative feelings of betrayal. S. 2. 20 . 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. FIGURE 2. and understanding the needs and buying processes of the target market is essential.7). Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand..8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. there are brands that customers perceive as acceptable and would not resist buying. Emotionally loyal customers build a sense of trust and two-way commitment with the brand. A stronger brand enjoys a high degree of brand preference over competing brands.7 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.

D. D. which is the value of the brand over and above its commodity value. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. name awareness. (New York: Free Press). 1991 21 . (New York: Free Press). The major brand assets are brand loyalty.8 . and relationships with distributors and strategic partners. 1991 10 Aaker..Reassurance Time to Respond to Competitive Threats Anchor to which other associations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Provides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing programs • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive advantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Process / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Extensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. perceived quality.8..BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . strong brand associations. The benefits of each are outlined in Figure 2. 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". trademarks.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.Create Awareness . 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. According to David Aaker (1991). FIGURE 2. and other assets such as patents.

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

They also tend to elicit community and government support. fashion or prevailing market conditions. maintain good price levels and generate strong cash flows. in turn. and Young & Rubicam have created complex formulas. • Avenues for Growth . companies such as Interbrand (see Appendix A). Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. Companies can maintain a brand while modifying the underlying product to account for new technology. The brand can also be used to penetrate new markets.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands .The product life cycle applies to products. This.Dominating a niche market is usually more profitable than being fifth in a large market. but there remains an ongoing controversy about how accurate and meaningful these measures are. the tools that are used. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. In addition.Companies with strong brands attract good recruits.Brand leaders usually have the financial strength to fend off competitors. The next chapter describes the process of how brands are built.Strong brands are more attractive to investors.g.g. brand leaders can exploit their superiority in the market (e. In trying to estimate the monetary value of brands. • Motivating Stakeholders . and the characteristics of successful brands. 23 . When a company creates this type of customer preference and loyalty. Coca-Cola “the real thing”). • The Brand Barrier . 2.9 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. it can build a strong market share. Johnson & Johnson with Tylenol). • Brand Loyalty and Beliefs . drives up share price and provides the basis for future growth. not brands.


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

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

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

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

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

(New York: Free Press).INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. deliver and reinforce this value proposition (see Appendix B . 'Diffusion of Innovations'. If the offering is developed properly. culture and staff needed to support. strategy (partnerships and alliances). • Adoption .often referred to as the '4Ps' .79-86 30 . Personal sources such as word-of-mouth from friends.Product and service features. 1962. features and advantages.4 . and its products / services. Advertising and PR are common tools for achieving awareness. systems. (New York: Free Press). Promotion and Place (distribution strategy). E. pp. 'Diffusion of Innovations'. Before potential customers can buy a product / service.Customers need to be stimulated to seek information about the brand's uses.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. colleagues and opinion leaders become important influences at this stage. • Evaluation .Customers consider whether the product / service will meet their particular needs. E.. it should lead to satisfaction and re-purchase. 1962. Price. • Trial . 17 Rogers.Figure 3. management style. The value proposition must then be articulated in terms of the 'marketing mix' . pp.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations.4.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. FIGURE 3. skills. This learning is called the adoption process17 .The company has to create awareness of the brand. they must learn about it.The McKinsey 7-S Framework).79-86 The Innovation-Adoption Model consists of: • Awareness . The value proposition must be communicated to entice customers to try the product / service. • Interest .. and the product / service's perceived performance.The customer is satisfied and decides to make regular use of the product / service. the company must ensure that it develops the appropriate structure.

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

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


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

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

000 10.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 2000 Internet / ARPAnet was created Dell.3.3 .economist.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. as cited in 'E-Business Technology Forecast' . 1998.000 100.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.000.a PricewaterhouseCoopers Report.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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .Figure 4.com) 36 .2 . 1996 (www. FIGURE 4.000 1969: 10.000. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000 1.000 1.

1996. FIGURE 4.Low-cost networking alternatives .4 .Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD .g. making it more cost effective for software developers and other technology providers to create interoperable products. web design. 2000 (http://cyberatlas.Cheap bandwidth . there will be an estimated 375 million Internet users world-wide. billing..).2 20 'World Online Populations' . The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. This boom has been the result of several underlying forces that have come together: The wider availability of the Internet. Reed.Cheap microprocessors & RAM . 'Electronic Commerce (finally) Comes of Age'. payment. and gateway services). the momentum created by all these forces has created a virtuous cycle of growth. The emergence of open standards in development tools and at the network protocol level (e. The growth in support services (e.E-Marketplaces .. Multimedia development tools that can be used to create rich content.com) 37 .internet. Easier access to these networks provided by point-and-click web browsers. As shown in Figure 4.4. offering inexpensive bandwidth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.Content Aggregators . The development of critical processes (ordering.CyberAtlas Internet Statistics and Market Research. No.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE . The McKinsey Quarterly. hosting. increasing to 500 million users by 200220. L. TCP/IP).g. G.High-powered servers . etc.Higher PC penetration among consumers and companies .THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Attractive infrastructure and middleware software .

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

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

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

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

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

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


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. Transactions on the Internet require customers to provide detailed personal information . 'Internet Portals' . In addition. However.durlacher. on the other hand. New strategies and tools for building brands on the Internet are identified.. This threatens to undermine the value of brands. as well as on topics of interest related to the brand and product characteristics25. people have concerns about sharing personal information. addresses.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. In response. May 1999 (www.names. Customers derive added value through the provision of information on the products or services they buy. brands have been developed in an environment whereby a company creates a brand. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. and projects it onto a third party intermediary (the media). has placed greater importance on trust and security. many unnamed customers develop a 'relationship' with the brand. J.Durlacher Research.sites that provide a wealth of information and make comparison shopping easy. offers interactivity. Traditionally. in addition to providing added value. where the user feels a part of. On the other hand. the logic of the Internet cuts another way. including the interactive approach to attracting customers and building loyalty. 5.2 THE NEW DYNAMICS OF BRANDS Traditionally. credit card numbers. the intangible nature of the Internet. they have never handled or seen (except on-screen).com) 45 . and sites that understand the user's needs and preferences24. The Internet. and the fact that customers are buying goods that. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. in most cases. whereby the company can establish a dialogue and 24 Marathe. the Internet makes search and comparison much easier.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. Generally. etc. People only tend to transact with sites they know and trust . The limitations of brand-building on the Internet are also discussed.

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

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

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

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

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

and in doing so spread the word for Geocities. Today they are the largest e-mail provider in the world with over 40 million users. and the message spreads organically. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. saying: • "Get Your Private. friends to visit it. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. Geocities enables people to create personal websites for free.com was one of the first free web-based e-mail services.com The classic example of viral marketing is Hotmail. In its first 1. Free Email at http://www. sign up for their own free e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. a company now owned by Microsoft.com. where they have never carried out any promotional activities. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).000 subscribers every day. and then propel the message even further to their own ever-increasing circles of friends and associates. and they created a subscriber base more rapidly than any company in history. In fact. A traditional print publication would hope to reach 100.5.1 The Case of Hotmail. they tell all their 51 . If a company can provide a strong enough incentive for customers to share their lists of personal contacts. whether for communications or community.5 years.hotmail. eGroups and Geocities (both recently acquired by Yahoo!). they will have a powerful viral opportunity at their disposal. When a user builds a website.000 subscribers within a few years of launch. seven days a week.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. Hotmail acquired over 12 million subscribers. • Each new user becomes a company salesperson. but Hotmail signs up more than 150. Hotmail. 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).

bain. making customers 'click off' to another site... & Hancock.A PricewaterhouseCoopers Report. Place). As 35 36 'Creating a High-Impact Digital Customer Experience' . 2000 37 Rigby. T. 30% of potential customers leave sites because they cannot find what they are looking for. and 66% of people who start a 'shopping basket' fail to complete the transaction37.3). Chu. Kearney White Paper. In essence. Promotion. Baveja. R.com) 52 . Sites that are difficult to use can cause frustration. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.. S. Rastogi. 'The Value of Online Customer Loyalty and How You Can Capture it'.THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . 2000 (www.An A. C. Zook. T. J. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product. FIGURE 5. S..6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.3 ..An A. 2000 'The E-business Technology Forecast' .A Mainspring Communication Report in collaboration with Bain & Co. Price.. D. In fact. Kearney White Paper. The customers' ability to access and display information rapidly is extremely important36.. March 17. .

com) Davenport. whereas a slow response time and site downtime will have a significant negative impact. and a wide range of products.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. 'Sticky Business'. ease-of-navigation. ease-of-use.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. and fast response times are among the most important factors in establishing web brand loyalty38. expert insights.businessweek.4 .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. T. February 2000 Issue 53 . October 29. as cited in Business Week. 1999 (www. 38 39 Cognitiative Inc. as cited in Business Week Magazine. which can enhance the company's value proposition. FIGURE 5. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. online companies have the opportunity to provide rich. 29th October 1999 (www. CIO Magazine. With almost infinite display space and inventory capability.businessweek.. up-to-date information.4.

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

O'Donnell & Gupta. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity.A PricewaterhouseCoopers Study.. 1999 Communities enhance the speed and value of information sharing. Companies can provide a selection of related links that complement the site's purpose and value proposition. Site-tosite connectivity focuses on connecting users to other relevant sites. 43 Fournier.. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. M. C. allowing customers to deepen their experience with a brand and build more personal connection... Once customers know of a site. S.6). 44 Search engines / portals enable users to find information based on relevancy to a query or keywords. pp. 'Making Real Sense of Virtual Communities' . Mulcahy. A. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. as well as attracting traffic from other sites. This is similar to placing offline stores in high traffic areas. when membership in the brand's community becomes an end in itself43. 343-373. and can create emotional loyalty.www. March 1998.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. 55 .brand-name.5 .com) directly into the browser and access the site immediately.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. they opt to input the URL (Internet address . Journal of Consumer Research.

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

links from directory searches (Connectivity).7 . Retain. S. Learn and Relate.Attract.Awareness.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.. Adoption). billboards..) to online tools. 'Marketing to the Digital Consumer'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Waitman. Evaluation. visibility relies solely on Communication. Therefore. modified to take into account of the interactive dynamics of the Internet.7. e-mail notifications and banner advertisements.2. etc.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski.. This model consists of five stages . FIGURE 5. Interest. pp. Newspapers. The company must build awareness and communicate its value proposition to its target customers. R. & Zeisser. Magazines. Figure 3. 1996. including affiliate programmes with other websites. No.mckinseyquarterly. This is more difficult online than offline. McQuade. A. Engage. M. and bring people to the site for the first time. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3.4 .com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. McKinsey Quarterly. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. because there is no physical presence. 180-183 (www. 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 ’ .8. The mechanisms to communicate range from traditional media (TV.. Trial.

as cited in 'Targeting Consumers via the Internet' .0 3.1 3. Kapferer's Brand Prism (Ch.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.3 Source: Forrester Research.2 4. Creativity is also an important factor in gaining attention in today's cluttered marketplace.8 .4 3.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 3. multiplied by the expected rate of transactions. Attracting customers is only the first step in building online brands. public relations and television advertising. Fig.4 4. discounted over the expected duration of the brand-customer relationship. it is important to quickly engage consumers' interest before they move on. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. Companies then need to engage customers to obtain their interest and participation.3 3.4 3. Engage With the multitude of choice available on the Internet.8 4.5) 2.3 2.Economist Intelligence Unit 2000 (www.7 4.WEBSITE PROMOTION METHODS .3) is useful to ensure that a company develops a distinct and consistent brand identity.com) The most effective methods are direct e-mail. 3.6 3.5 3. The key factors at this stage are Convenience combined with interesting Content. 58 .ebusinessforum. affiliate programmes.

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

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


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

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

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

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

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

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

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

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

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

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

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

Both offer 'associate programmes' that let other websites link to their sites. Barnesandnoble. and Barnes & Noble Inc.6 million.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices.com's $1. Instead.4 Brand-Building Strategy Barnesandnoble. As of February 2000.64 billion. However.com in return for a commission on any purchases that they originated . Barnesandnoble. has yet to leverage its strong brand in cyberspace. Although. this programme had more than 300. Both try to foster a community of readers by letting customers post reviews online.1 billion. while Amazon. Lycos.com.com was valued at $21. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and both are expanding globally. Netscape and Microsoft Network. it lags behind first-mover Amazon.com had over 17 million. The 6. prevent cannibalisation of its existing business. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.com's market capitalisation was $251 million. December 17. reasons for this are explained in the next section. Barnesandnoble. and avoid charging sales tax in states where it has stores56. Barnesandnoble. Yahoo!.3. Both offer customisation that permits users to personalise the experience. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 .com's 1999 revenues were $202. compared to Amazon. They have developed an affiliate programme that links sites to Barnesandnoble. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). however. These initiatives have generated traffic to the site.000 affiliates in its referral network.a replica of Amazon's Associates Programme.com closed 1999 with 4 million customers. Webcrawler. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. while Amazon. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. 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.The Wall Street Journal.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.

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

by portraying them as slow and clumsy in comparison to the more nimble Amazon. feature for feature) has failed to differentiate Barnesandnoble. a wellestablished Internet brand. it also caused a major setback. 57 'Bn. and was further up the growth curve. and allowed them to offer stock options as compensation and achieve a high market capitalisation.com's late start in 1997. The Press have also contributed. significant market momentum.Not a Best Seller' .com has been able to create a high impact and high-quality customer experience.com. 2000 (www.com and has given them the image of a second rate 'me too' brand. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". and its lack of innovation (by copying Amazon. otherwise they risk losing out to other online competitors. The company failed to leverage its established brand.Forbes. it has not been able to establish itself as the leading online bookseller. Although the decision to keep the online operations separate from the retail outlets freed the start-up from bureaucracy and from charging sales tax. its failure to leverage its bricks-and-mortar stores to drive traffic to its site.com's experience is instructive.6 Conclusion Although Barnesandnoble. meant that Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Barnesandnoble. In addition.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.3. August 4. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures.forbes.its key differentiating factors. even if that means eating into their existing sales. customer relationships and offline presence . According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.com .com) 75 . Barnesandnoble.

Boo. it's about range and convenience.4.Announces it has only 500. and included high profile investors such as Bernard Arnault. CMO of Boo. sack 20% of staff and sell stock at 40% discount . Puma. Boo.TIMELINE AND MAJOR MILESTONES .com.Appeals for $30 million more funding . not the limited range you might get at most London fashion shops58".4 CASE STUDY: BOO.they redesign site. Boo. November 2000 January February May 6. On going live.COM 6.Raises funding of $125 million . Finland.000 unique visitors .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). among others. and eventually debut in Asia. June 10. After a high profile launch. Boo. TABLE 6.3 1999 Mid year BOO. and the resulting loss of investors' confidence. 1999 76 . within six months Boo.Marketing Week.COM . and was billed as one of Europe's hottest e-commerce ventures. 58 Kajsa Leander. founder and Chief Marketing Officer of Boo. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Sweden. as cited in 'Boo. If a clothing brand is on the Boo site. "our marketing thrust is not based on prices.4.fails and appoints KPMG as liquidator. England.com had set the record as Europe's best-funded European Internet Start-up. P. Morgan. However. and Converse. receiving $125 million of funding.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".1 Company Overview Founded in 1999. Everlast. arranged through J. They intended to add France.Multi-million pound advertising campaign created by BMP DDB .First sign of problems .2 Value Proposition According to Kajsa Leander. as well as create a kid's site. Italy and Spain within a few months.com entered six markets: US. Company is put up for sale.Site goes live .com opens its virtual doors' .com. it means all that brand's product line is available. Germany and Denmark.com provided a range of 18 fashion and footwear brands including DKNY. due to its poor performance and inability to build a customer base. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.com collapsed through lack of funds.


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.


and was the first site to offer the sale of music downloads and custom CDs.5 million distribution deal with Lycos Signs three-year. and one of the most popular shopping sites on the Internet62. pp. and they aim to "make every visit to the site.000 people.000 music related items .CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . convenience. whether for browsing or buying. D.. as well as music reviews. CDnow is the leading online music store. and an average daily audience of over 800.5. $22.TIMELINE AND MAJOR MILESTONES . 'How to Acquire Customers on the Web' . & Novak. T. CDnow was acquired by Bertelsmann AG. CDnow provides access to over 500.Harvard Business Review.Merges with Columbia Records . announce marketing alliance . good prices.1 Company Overview Founded in 1994.179-188 63 CDnow website (www.5.Raises $10 million through private placement .cdnow. TABLE 6.Merges with N2K.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .000 music-related products and 650.5 CASE STUDY: CDNOW 6.CDnow and Time Inc. daily music news.Partnership program with Geffen Records . This unprecedented degree of access to music and information is the core of CDnow's value proposition. $18. guides to music genres.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Launches merged CDnow/N2K site . CDnow is also driving the digital distribution of music. and exclusive interviews and reviews from CDnow's award-winning editorial staff. cover art. former arch rival .ten times the selection of a conventional bricks-and-mortar music store). May-June 2000.000 sound samples. features.Site goes live . It has a customer base of 4 million people. a valuable and rewarding experience"63.Forges distribution partnership with Yahoo! $65. 62 Hoffman.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. On 19th July 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. by twin brothers Jason and Matt Olim.com) 80 . customisation and a wealth of information and content to help in the purchase decision.

CDnow has leveraged the reputation of their brands to reinforce its own. etc. artists biographies. FIGURE 6.5. and has secured rights to music reviews.Figure 6. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.5 . 81 . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. By partnering with well-known content providers.3 Sources of Value . For example.. cover art. CDnow has cultivated similar relationships with MTV. The whole process of searching for albums or music titles to the actual purchase is simple . easy-tonavigate.5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 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. to make it easier for customers to explore new music and make informed purchasing decisions.

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

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

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

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

782 million in January 200068.6. payment) between themselves.eBay website (www. People perceive the auction format to offer better prices. 1st October 1999 86 .6. Auctions make it fun. with the number of unique daily visitors setting a record of 1.efficient one-to-one trading in an auction format. Individuals use eBay to buy and sell items in more than 4. extensive selection and geographical reach.com) 'eBay . global trading place for buying and selling personal items in an entertaining auction format. from collectibles and antiques to electronics and toys.25% to 5% of the final sale price on any item sold.2 Value Proposition eBay offers consumers an efficient. This is a new market . (A)' .Company Overview' . Auctions represent a platform.A Harvard Business School Case Study.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. Auctions are an enabler. and eBay provides added value through its convenience.ebay. eBay effectively created a new business model never before possible .300 categories. Since its launch in September 1995. Sellers pay a nominal fee for placing an item up for sale. 24 hour a day.g. shipping.000 new items joining the "for sale" list every 24 hours69. CEO of eBay. and eBay receives a transaction fee that ranges from 1.com) 70 'Meg Whitman at eBay Inc. and eBay never takes possession of the item being sold. as cited in 'eBay . garage sales. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. 6.ebay.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 CASE STUDY: EBAY 6.removing the need for inventory. the eBay community has grown to include more than 10 million registered users. According to Meg Whitman. There are over half a million new auctions. flea markets and auctions. collectable shows. and 450. The buyer and the seller work out the logistics of the transport (e. transportation and other overhead costs. or the payment for the item . eBay is not about auctions. with emphasis being placed on its unique community feel and culture.the closest thing in the offline world are trading forums such as classified ads.Company Overview' .eBay website (www. "at its core.

com) 87 .Com form alliance - 6. Las Vegas.eBay acquires Blackthorne Software GO.eBay goes live in Australia . and its online trading site (Up4Sale) . Unlike the previous case studies discussed. Since eBay cannot control how one person treats another.5 1995 September 1998 January May July September October 1999 January February March April May June July August October November December 2000 February March May June July EBAY - TIMELINE AND MAJOR MILESTONES .com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques . and two books -. 21st May 1999 (www. Nashville. Norfolk & Virginia Beach.com to provide automotive service for eBay Users . This raises challenges in how to control and influence the customer experience.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . .com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen. the eBay customer experience is based on how their customers deal with each other.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.eBay and AOL launch co-branded site . Providence. co-marketing relationship.eBay and First Auction sign a partnership agreement . allowing users to create personal homepages .eBay acquires Kruse International .eBay goes live .eBay acquires alando.Germany's leading online person-to-person trading site . Selling.eBay acquires Jump Inc. and in terms of the '7Cs'.The 7Cs Framework According to Meg Whitman.America Online and eBay announce strategic marketing alliance .eBay launches local websites in Baltimore & Washington DC.eBay launches 'About Me' feature. And you only get word-of-mouth if you have a great customer experience.businessweek. 1 is have a great customer experience71".Launches "My eBay!" to customise the online auction experience .6. "the first brand-building strategy that we have is to have a great customer experience. Seattle & Tacoma.de .eBay goes wireless with Palm VII connected organiser .S.eBay acquires Butterfield & Butterfield. and raises $700 million .eBay teams up with Carclub.eBay and Ultimatebid.Compaq Computer Corporation and eBay form a strategic U. and Salt Lake City .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. and Collecting Just About Anything and eBay for Dummies. Milwaukee.eBay IPOed raising $58 million .3 Sources of Value . emphasis is placed on community development and customer care. they try to influence customer behaviour by encouraging them to adopt certain values.eBay introduces eBay Magazine in collaboration with Krause Publications. Still the vast majority of our new users come from word-of-mouth. The Official eBay Guide to Buying. Dallas & Fort Worth. Boston. So brand-building job No. as they rarely deal directly with the company.eBay expands strategic relationship with Netscape . . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .Business Week.

which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. Other content includes the banner ads. This contributes to the community feel.6 . they have continually invested in system capacity. Content Content is primarily user generated through the items listed for sale. easy-to-use online service (Figure 6.6).OVERVIEW OF EBAY'S WEBSITE Customisation Simple. Nevertheless. categorically arranged. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. 88 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated. eBay had a 'wake up call' when the website crashed for 8 hours. 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. eBay has also expanded to accommodate access through wireless devices for added convenience. increasing the risk of outages. eBay's site has to process thousands of live bids simultaneously. and since. which is much more demanding on the system. and adds to the experience and the discovery of the auction process. topically arranged. angering hundreds of thousands of eBay users. FIGURE 6.

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

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

Recent promotional initiatives include its new publication. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. eBay transformed from a pure online play into a 'clicks-and-mortar' company. eBay has been able to attract a large customer base. as a result of the high quality experience it provides.g.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). they decided to target their marketing efforts on these heavy users. $75 million joint marketing alliance and development deal. These new publications appeal to the collecting spirit. Doll Collector) and appearance in trade shows. and maintained the same ratio for 1999. and Collecting Just About Anything and eBay for Dummies. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999.6. provide a wealth of information about the 'ins and outs' of trading on eBay. and two books. Mary Beth's Beanie World. who tended to be serious collectors. representing about 40% of revenues. 91 .3 million in advertising.a four-year. eBay Magazine. whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL's other properties. Early on. but they have other partnerships with over 150 websites of varying scales. In 1998. and facilitate the spread of positive wordof-mouth. Through this combination of its advertising efforts and targeted promotions. the largest of which was with AOL. they spent $12. and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. The Official eBay Guide to Buying. eBay has since expanded its promotion efforts and engaged in marketing partnerships. eBay decided that it would not enter into major portal advertising deals in the short term. As a result. Selling. Based on this. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The AOL partnership was one of the largest strategic partnerships on the Internet . and highlight opportunities created by e-commerce.

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

standard styles are well suited to online shopping.Business Week. from jeans and T-shirts to khakis and jackets. L. from shirts to accessories and hard-to-find sizes. and provides useful insight into how traditional brands can leverage their strength online. 'Clicks and Mortar at Gap. and BabyGap.com' .babygap. America Online (AOL) and Gap Inc. Gap Inc. and are still relatively small compared to Gap's $9 billion in annual sales.htm) 75 Jeanne Jackson. Germany and Japan. "this is about being clicks-and-mortar.com is an example of successful crossover marketing. as cited in Lee.COM 6. announce multi-year partnership. According to Jeanne Jackson.7. Canada. Currently.'s website (www. surpasses $9 billion in net sales and increase earnings by 54% over previous year. up from $20 million in 199875.com' . In late 1997. to provide customers with greater convenience and options. service and value to everyone74".7 CASE STUDY: GAP.gap.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. the growth prospects are enormous.7. Gap. and today it is the 29th most valuable brand in the world73. letting customers access the Gap brands.com. GapKids.com and www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. online sales are only available to US customers. This success is largely due to their simple formula . head of Gap Online.interbrand. as cited in Lee.800 stores in the US. Gap started selling items online . Inc. 6.1 Company Overview Gap opened its first store in San Francisco in 1969. Its reach extends across more than 1.com/about_us. however. October 8. In addition. whether in the store or online76". 1999 76 Jeanne Jackson. Gap's online sales tripled in 1998 alone. and analysts estimate that sales in 1999 amounted to $50 .6 1969 1986 1989 1997 1998 1999 - GAP & GAP.gapkids. L. 1999 93 . Gap online exploits the accessibility and convenience of the Internet. October 8. and Gap online provides access to the full range of items at Gap.Business Week.see Appendix A Gap."to deliver style.COM .gapinc.$100 million. California GapKids opens its first store BabyGap is born Gap opens its online store at www.com) .an early convert to the then-revolutionary idea of clothes retailing on the Internet. 73 74 Interbrand (www. UK.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. TABLE 6. 'Clicks and Mortar at Gap.2 Value Proposition Gap's simple. The Gap offers a balance of modern and seasonal styles of clothing.

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

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

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

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

September 7. Yahoo! was founded by David Filo and Jerry Yang. There's nothing in the real world to compare to that79". As such. As the first online navigational guide to the web. advertising. household and business user reach. According to Timothy Koogle. the amount of information. Yahoo! offers a range of supporting services that add value.see Appendix A 'Yahoo! . 6.D students at Stanford University.8 CASE STUDY: YAHOO! 6. Yahoo! is a leading guide in terms of traffic. and is one of the few Internet companies to turn a profit early in the development of the Internet. two Ph. CEO of Yahoo!. 1998 (www.1 Company Overview In April 1994.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The Stock' . who started an online guide as a way to keep track of their personal interests on the Internet. the site was receiving 1 million hits per day.businessweek. The concept exploded (through word-of-mouth) and in less than six months. The Strategy.The Company.2 Value Proposition At the core of Yahoo!'s value proposition. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide.com) .interbrand. 78 79 Interbrand (www.8. from e-mail services to stock quotes and much more. all in a single location.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.Business Week. and the number of websites continues to explode.com) 98 . lies the directory . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. The company's global web network includes 23 world properties outside the US. Yahoo! has since morphed from an ordinary search service into a global Internet communications.

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. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.7 YAHOO! .Yahoo! forms agreements with Palm Inc.com. to provide web-based services to PalmTM handheld computers .8. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. More recently. Yahoo! extended its convenience through its Yahoo! Everywhere service.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 . mobiles.600.Yahoo! unveils Yahoo! Finance Vision .com allowing them to offer person-person payment solutions .8 million IPO (2.3 Sources of Value .Yahoo! Launches Business-to-Business Marketplace . to allow access.Yahoo! acquires Arthas. Palm computers).Site goes live September .The 7Cs Framework Convenience Central to Yahoo!'s success.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.000 shares at $13. 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. TVs. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. Their goal is not to list everything under the sun.TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! Shopping launches personalised shopping service 6.Yahoo! acquires eGroups .Receives $1 million in venture capital funding from Sequoia Capital $33.8). is the way it has structured and displayed information. . 99 . regardless of platform (i.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6..e. and unveils Yahoo! Digital Introduces Bill Payment services .

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

telephone and even traditional mail. message boards.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. Yahoo! spends more on customer support than most companies. or to make it their home page.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. and many-to-many. (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. and contributing to their reputation as a quality service provider. fax. and e-mail. to provide its customer base with access to useful links and content. Yahoo! has also implemented campaigns to persuade users to bookmark the site. one-to-many. and the nature of the navigation business. It keeps customers on the site for longer periods. and is driving Yahoo!'s multiple partnerships and alliances. Yahoo! acquired GeoCities. Community Yahoo! has developed customisable web communities called Yahoo! Clubs.9 . and encourages them to return frequently. where groups of people with shared interests can communicate through chat. reinforcing the brandcustomer relationship. Connectivity Connectivity is Yahoo!'s core product. In 1999. Customer Care Yahoo! responds to customer inquiries via e-mail. In addition. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. 101 . and plans to incorporate other features such as online chat to facilitate communications.

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

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

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








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

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

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

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


Interbrand's Ranking of the Top 60 Brands (www.909 7.132 15.313 2.464 3.806 2.197 32.845 56.550 12.681 2.595 17.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .262 1.781 17.101 9.281 11.602 4.648 1.283 4.804 2.830 14.694 17.319 1.052 6.527 3.643 3.048 20.021 26.147 9.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) 83.985 2.792 3.193 112 .275 30.568 3.404 4.603 5.895 2.225 11.310 11.510 8.932 4.766 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.143 2.231 24.043 8.761 1.184 1.502 33.155 7.422 1.654 43.894 14.806 11.596 3.interbrand.361 1.181 21.329 4.634 1.231 12.076 3.423 2.781 33.

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





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