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


5.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .3 Sources of Value .6.4 6.4 Brand-Building Strategy 6.7.The Failure of Boo.7.8.3 Sources of Value .6.1 Company Overview 6.8.com 6.com 6.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7.5 Conclusion Case Study: Gap.8.1 Company Overview 6.The 7Cs Framework 6.Extensive Integration Value Proposition 6.2 Value Proposition 6.3 Sources of Value .2 Value Proposition 6.5 Conclusion Case Study: CDnow 6.The 7Cs Framework 6.2 Value Proposition 6.3 Sources of Value .com 6.6.The 7Cs Framework 6.4 Brand-Building Strategy 6.3 Sources of Value .5 Conclusion Case Study: Yahoo! 6.4 Brand-Building Strategy 6.1 7.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1 Company Overview 6.5 Other Factors That Contribute to their Brand Leadership 6.6.1 Company Overview 6.8 Case Study: Boo.5 Other Factors that Contribute to their Brand Leadership 6.4.6 Conclusion Case Study: eBay 6.8.7 6.4.6 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 7.4 Brand-Building Strategy 6.2 Value Proposition 6.4.1 Company Overview 6.4 Brand-Building Strategy . 6.4.The 7Cs Framework 6.7.5.

7 Figure 6.1 Figure 2.4 Figure 4.2 Figure 5.3 Figure 3.6 Figure 5.4 Figure 2.8 Figure 3.4 Figure 4.3 Figure 5.7 Figure 5.2 Figure 2.5 Figure 6.5 Figure 4.7 Figure 5.1 Figure 6.com's Associates Programme Overview of BarnesandNoble.4 Figure 6.6 Figure 2.2 Figure 4.1 Figure 5.6 Figure 4.2 Figure 6.5 Figure 5.8 Figure 5.2 Figure 2.4 Figure 5.6 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .9 Figure 6.com's Website Amazon.2 Figure 3.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.3 Figure 4.5 Figure 2.1 Figure 1.1 Figure 4.1 Figure 3.com's Website Overview of Boo.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .3 Figure 2.3 Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.8 Figure 6.7 Figure 2.

Timeline and Major Milestones CDnow .Timeline and Major Milestones Gap.Timeline and Major Milestones Yahoo! .5 Table 6.1 Table 6.Timeline and Major Milestones eBay .com .com .com .Timeline and Major Milestones Boo.2 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.6 Table 6.Timeline and Major Milestones BarnesandNoble.3 Table 6.7 The Emerging Brand-Building Environment Amazon.1 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .4 Table 6.


service and brands.5 2. It is empowering customers with more options and more information to make informed decisions.YEARS TO REACH $100 MILLION IN SALES 6 5. the Internet is changing fundamentals about customers.mckinseyquarterly.g.com Source: Securities and Exchange Commission Filings. as they face each other through an electronic connection.com. and is triggering the need for new brand-building strategies and tools.2 3. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.com's range of 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. America Online (AOL) and eBay have been able to build powerful brands in a few years. FIGURE 1. customer affiliation and level of sales.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. there has been an explosion in the online world . Amazon. Amazon.com) 7 . As such. Supply chains are being rethought. Internet companies such as Yahoo!.1 3.com1 Amazon. that these Internet start-ups have achieved.com noble. In the midst of this.9 3.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. creating strong brands that are putting established brands at risk.5 million book titles). whereas it has taken decades for traditional companies to achieve the client base.1 OVERVIEW Over the past few years. products and services reconfigured. while providing new tools for promotion. and business models revamped.0 1. interaction and relationship building. McKinsey Analysis (www. relationships. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.9 2. Figure 1. The Internet also represents a fundamental shift in how buyers and sellers interact.an explosion that is also a harbinger of how business will operate in the future. This is creating new challenges and opportunities.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. aggressive Internet start-ups have emerged.1 . The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. As such.

. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm.Forget Surfers. 1997. In light of this. and the high cost of acquiring online customers2. P. Volume 78 Issue 2. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. found that 57% of Internet users go to the same sites over and over again. S. For pure online players. Harvard Business Review.. 'Internet Communities . A Business Week / Harris poll. C. Therefore. building awareness. rather than drifting from site to site3. and Novak... & Elstrom. May-June 2000 Hof. brands are even more critical as customers have little to go on other than a recognised brand. D. attracting traffic or 'eyeballs'. 66-76 Hoffman. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. R.. A New Class of Netizen is Settling Right In' Business Week. p.. Given the tremendous clutter in today's e-commerce marketplace. As such. Browder. 'Meeting the Challenge of Disruptive Change'. 1 2 3 Christensen. pp. who are essentially intangible. However. turning browsers into buyers. March . May 5.April 2000.66 8 . P. 'How to Acquire Customers on the Web'. Harvard Business Review. as the need to build brand loyalty online is reaching a peak. & Overdorf. L. T. companies lack a coherent framework and concrete methods to build an online brand. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. M. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. that extends the brand-customer relationship beyond a single transaction.

tools and strategies to build brands on the Internet. • To explore how the Internet is changing the brand-building environment.2 . 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. A review and analysis of leading academic thinking will be used to explore these issues.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . and to identify new sources of value. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. This is based on the outcome of the primary research (in-depth case studies). FIGURE 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.2.

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

The nature of brands. Chapter 2. Chapter 5 explores new strategies and tools for building brands on the Internet (the 7Cs Framework) and the importance of creating a positive end-to-end customer experience. and outlines the opportunities for further research. their purpose and value are discussed. This chapter sets the context within which online brands must be built. 11 . The limitations of the Internet in terms of brand-building are also discussed. provides an analysis of leading academic literature in relation to branding. highlighting some key factors that have contributed to brand success. Chapter 6 examines the brand-building efforts of seven companies. Chapter 7. Chapter 3 explores how brands have traditionally been built. by outlining the impact of the Internet on the business and competitive environment. The final chapter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. as well as the interactive approach to attracting customers and building loyalty. summarises the key findings.4 STRUCTURE The next chapter. Chapter 4 provides an overview of the Internet and its defining characteristics. and introduces the core concepts that form the backbone of the dissertation. outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands.


symbolised in a trademark. & Maughan.2 WHAT IS A BRAND? According to Rita Clifton. 'Building Strong Brands'. and they form the backbone of this dissertation.1. p. The chapter proceeds to describe the influence of brands on the buying process. whether online or offline.a brand is: "a mixture of tangible and intangible attributes.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.1 . These concepts are central to brands and brand-building. (New York: Free Press). 'The Future of Brands'. Branding is about creating 'value'. E. vii 13 . these layers are Brands are made up of many layers and dimensions. but extends further to encompass added values derived from factors such as the brand-customer relationship. and to companies. R. both for customers. unravelled to reveal the nature of brands and their reason for existence. both to customers.1 INTRODUCTION In this chapter. 2.). explaining the value of brands. if properly managed. 74 4 Clifton. The concept of brand equity is outlined. 1996. FIGURE 2. (London: Macmillan Press Ltd. 2000.A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. A.. and highlights the importance of brand management. This value stems from the products and services that companies create and bring to the market. which. p. D. CEO of Interbrand Newell and Sorrell .see Figure 2.a leading specialist brand consultancy firm . the brand's emotional benefits and its self-expressive benefits . creates influence and generates value4" This definition truly captures the essence of a brand. and the importance of customer satisfaction and brand loyalty. and for the company.

a 'reputation'. and a 'promise'.the core product or service.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.2 . The space a brand occupies inside a customer's head can create a 'mental' patent. and services to customers. 'Marketing success through differentiation . p. a 'set of expectations'. Brands are richly endowed entities. 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . Harvard Business Review. They start life as ideas. which grows out of the cumulative memory and the experiences customers have of products or services. T. brands are their most valuable asset.86 14 . 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 . the augmented brand and the potential brand . the basic brand.of anything'. January-February. FIGURE 2. It is a company's promise to consistently deliver a specific set of features.a 'relationship'. making their way into planning and strategy documents. As such. For some companies. benefits. yet ultimately reside as consumer perceptions. 1980.Figure 2.2..

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

it is important to clarify customers' underlying buying behaviour and the buying process. the consumer learns about competing brands. Consumers differ as to which product / service attributes they see as important. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. P. 'Marketing Management .. and pay the most attention to the brands that will deliver the sought benefits. This can be triggered by internal or external stimuli (advertisements). These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). Consumers develop a set of brand beliefs about the attributes of competing brands.3). 1996.4). and Control'. it is critical to understand what attributes consumers value.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. 16 .Analysis. Therefore..attitudes of others and unexpected situational factors (Figure 2. However. Planning.194 The process starts when the buyer recognises a need. Through gathering information. a consumer will be inclined to search for more information. The buying process consists of five stages (Figure 2.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. two factors can intervene between the purchase intention and the purchase decision . FIGURE 2. Once aroused. In the evaluation stage. and the effect of selective perception. and selective retention. (Europe: Prentice-Hall) 8th Ed. selective distortion. Implementation. either through heightened attention or through an active information search.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. p. These beliefs depend on their previous experiences with the brand.

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

. T. 91 Loyalty is derived when customers are continuously satisfied over time. p.those who actively attack the brand telling others not to buy from the company. & Sasser. M. Spring 1999 18 .customers who are satisfied and loyal and talk favourably about the brand . Johnson & Johnson. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.5. Nov-Dec 1995 Hart.Harvard Business Review. Customers that are passionately or emotionally loyal are those that have built trust in a company.. 'Why Satisfied Customers Defect' . This satisfaction encompasses the whole experience and not just a company's products or services. Trust is critical for a brand's success. and believe that it will always act in their best interest. D.Harvard Business Review. Marketing Management. The customers at the bottom end of the scale are "terrorists" . At the opposite end of the satisfaction spectrum are "apostles" .. & Sasser. Saturn. Hewlett-Packard. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Southwest Airlines and Xerox7. E. T.Figure 2. 6 7 Jones. C. FIGURE 2. W. 'Why Satisfied Customers Defect' . E.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPETITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. Federal Express.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. Nov-Dec 1995. and Johnson. 'Growing the Trust Relationship'...

. emotional loyalty is born out of a consumer's personal relationship with a brand. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. Harley-Davidson motorcycle clubs). There is also clear evidence of this on the Internet. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. Firstly.. 'The One to One Future'.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. In this way. Emotional loyalty can be also created through the formation of a strong user community around the brand. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.Sloan Management Review. G. 8 9 Peppers. M. Spring 2000 19 .they provide good word-of-mouth and are the best salespeople for the product / service 2. 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. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets.g. consistent orders Satisfied customers are the best advertisement . Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. 1993 McWilliam. D. 'Building Stronger Brands through Online Communities' . & Rogers.com.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. 20 . almost irreplaceable bond as well as potentially to the negative feelings of betrayal.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.7 . 343-373. FIGURE 2. there are brands that are unknown by most buyers. 2. and understanding the needs and buying processes of the target market is essential. a 'powerbrand' tends to have a high degree of brand loyalty.. March 1998. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. FIGURE 2. S.7). Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). Emotionally loyal customers build a sense of trust and two-way commitment with the brand.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.6 . Beyond this. However.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. there are brands that customers perceive as acceptable and would not resist buying. Journal of Consumer Research. whereby customers would be unwilling to substitute it with competitors' offers. which goes well beyond the satisfaction of a specific need. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. A stronger brand enjoys a high degree of brand preference over competing brands. pp.

and other assets such as patents. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . D. perceived quality.8 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. which is the value of the brand over and above its commodity value. name awareness. trademarks.Create Awareness . The benefits of each are outlined in Figure 2. According to David Aaker (1991). 1991 10 Aaker. brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10".. (New York: Free Press). and relationships with distributors and strategic partners. FIGURE 2.8. (New York: Free Press). The major brand assets are brand loyalty. D.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. strong brand associations.. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. 1991 21 .

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

in turn. • Brand Loyalty and Beliefs . Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e.Brand leaders usually have the financial strength to fend off competitors.g.Companies with strong brands attract good recruits. and Young & Rubicam have created complex formulas. • Avenues for Growth . Johnson & Johnson with Tylenol). This. 2. When a company creates this type of customer preference and loyalty. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers.The product life cycle applies to products. • Motivating Stakeholders . brand leaders can exploit their superiority in the market (e. maintain good price levels and generate strong cash flows. Companies can maintain a brand while modifying the underlying product to account for new technology.g.Dominating a niche market is usually more profitable than being fifth in a large market. The brand can also be used to penetrate new markets. The next chapter describes the process of how brands are built. but there remains an ongoing controversy about how accurate and meaningful these measures are. fashion or prevailing market conditions.9 CONCLUSION Branding is essentially about creating value through the provision of a compelling and consistent offering and customer experience that will satisfy customers and keep them coming back. In addition. 23 . Coca-Cola “the real thing”). drives up share price and provides the basis for future growth. In trying to estimate the monetary value of brands.Strong brands are more attractive to investors. it can build a strong market share. the tools that are used. not brands. companies such as Interbrand (see Appendix A). They also tend to elicit community and government support. • The Brand Barrier .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . and the characteristics of successful brands.


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

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

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

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

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

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

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

companies must actively communicate it to the target audience to entice trial.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition.. its function and psychological values. 'Marketing Management & Strategy'. It is easier to capture a share of the consumer's mind and build a customer base. If the quality of the experience deteriorates. As such. and establish a trusting relationship. value proposition or augmented brand. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. strengthening the brand further. Once the framework has been established and the organisation configured to provide this proposition. when the brand has no competitors to rival its position. while providing new tools for promotion. but it makes the task easier. Without building awareness. which will communicate the brand's existence. comprehension and intention to buy. including: • A Quality Product / Service Experience .If the brand is not the innovator. interaction and relationship building. advertising or promotional campaign. 3.176-177 32 . As customers build trust in the brand through satisfaction of use and experience. P.. it must have a unique positioning concept .Satisfactory experience is the major determinant of brand values.Being first into the market does not necessarily bring success.A successful brand requires an effective selling.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. 2nd Ed. then its position will be undermined. • Strong Communications Programme . it has a profound impact on the traditional brand-building process. It often takes years to build up the added values. pp. the brand is meaningless. As a result. trigger trial and reinforce commitment to it. brands were not built quickly. The Internet provides the opportunity for companies to create compelling value propositions never before possible.Traditionally. • Unique Positioning Concept . • First-Mover Advantage . companies have the opportunity to start building relationships with their customers. which will add value and distinguish it from competition. 1998.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. • Time and Consistency . or if the brand is surpassed by superior offers from competitors. and making it more difficult for competitors to emulate.a segmentation scheme. 19 Doyle. (Europe: Prentice-Hall).


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

• It Overcomes the Barriers of Time and Space . These characteristics combine to create a very powerful medium.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. Graph is not drawn to scale). These qualities eliminate the barriers of time and space that exist in the physical world. and deliver new products and services at low cost.2. the Internet lets individuals and companies build interactive relationships with customers and suppliers. which was intended to link military networks together. 4.24 hours a day. regardless of where the computer or Internet access device is physically located.The Internet is a global network and can be reached from everywhere. anywhere. • It Allows for Two-way Communication and Interactivity .the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). 7 days a week. ubiquitous links to anyone. allowing both parties to identify each other and build one-to-one relationships . The context of the Internet and certain key developments are highlighted in the Figure 4.2 (Note: 35 .not previously available with mass medium forms of communication. By allowing for direct. These defining characteristics have fuelled its explosive growth. The Internet can also be accessed at any time .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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. when the United States Defence Department developed the 'ARPAnet'.this radically alters the process of interaction between communicating parties.

000. as cited in 'E-Business Technology Forecast' .2 .economist.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 1969: 10.000 10. FIGURE 4.3 .a PricewaterhouseCoopers Report.000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .com) 36 .Figure 4.3. 1996 (www.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards. 2000 Internet / ARPAnet was created Dell. 1998. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1.000.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.000 100.

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

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

Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. and no cash register. There is no need to travel to a physical location.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. April 2000 39 .6 .6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. no order book. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. content. web browsers. The main difference between the Internet and other electronic media (i. they all project the value e-commerce transactions to grow at unprecedented rates. fax. FIGURE 4. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. and people. projected by Gartner Group. Instead there is a website.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce. telephone) is that the Internet goes beyond just enabling transactions.e. However. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. software. 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.

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

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

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

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


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

In doing so. M.Fuqua School of Business. 'Is Your Company Ready for One-to-One Marketing?' . The differences between the traditional approach and the one-to-one approach are outlined in Table 5. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. 1997 (www. learn. 1999. brand-building must focus on the end-to-end customer experience . TABLE 5.1 . B. However.THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. January-February. pp. Duke University. 151-160 46 . Rogers. companies have to find innovative ways of leveraging the information and 25 McCann. D. . In maximising the customer experience. This creates the opportunity for companies to build stronger relationships than previously attainable. to its delivery to the customer. a company can listen.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. relationship building characteristics of the Internet.duke..from the promises made in the value proposition.1. 'Adding Product Value Through Information'. & Dorf..edu) 26 Peppers. this also poses a challenge as these relationships may take on a life and character of their own..Harvard Business Review. J. understand and relate to customers. rather than simply speaking at customers. January 28.. Prof.

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

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

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

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

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

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

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

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

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

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

because there is no physical presence. S.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 . 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 ’ .mckinseyquarterly..2. Newspapers.Awareness.. 'Marketing to the Digital Consumer'. R.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. and bring people to the site for the first time. The company must build awareness and communicate its value proposition to its target customers. Waitman.7. billboards. e-mail notifications and banner advertisements.8. etc. including affiliate programmes with other websites. Evaluation. McKinsey Quarterly.7 . The mechanisms to communicate range from traditional media (TV. links from directory searches (Connectivity). Interest.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. FIGURE 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. pp. Learn and Relate. modified to take into account of the interactive dynamics of the Internet. Trial. & Zeisser. Retain. McQuade. visibility relies solely on Communication.. No. The popularity and effectiveness of the different promotion methods are outlined in Figure 5.. A. 1996. Adoption). Figure 3. M. Engage.4 . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Therefore.) to online tools. This is more difficult online than offline. Magazines. 180-183 (www.Attract.

58 . 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.4 3. Fig.7 4.4 3. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.0 3.6 3. as cited in 'Targeting Consumers via the Internet' .ebusinessforum.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 .WEBSITE PROMOTION METHODS . discounted over the expected duration of the brand-customer relationship.3 Source: Forrester Research. affiliate programmes.8 4. Engage With the multitude of choice available on the Internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. public relations and television advertising. multiplied by the expected rate of transactions. 3.2 4. The key factors at this stage are Convenience combined with interesting Content. Companies then need to engage customers to obtain their interest and participation.5 3.5) 2. Kapferer's Brand Prism (Ch.4 4.1 3.3 2. Attracting customers is only the first step in building online brands. Creativity is also an important factor in gaining attention in today's cluttered marketplace.Economist Intelligence Unit 2000 (www.3 3.com) The most effective methods are direct e-mail. it is important to quickly engage consumers' interest before they move on.8 .3) is useful to ensure that a company develops a distinct and consistent brand identity. 3.

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

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


com. Not a River' . the sources of added value (using the 7Cs Framework).com has become synonymous with e-commerce.Goldman Sachs Report.com) 62 .2 Value Proposition Amazon.see Appendix A. In addition. Boo. combined with its levels of customisation and customer service. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products). CDnow. Amazon has been able to differentiate itself from other online competitors. eBay. including: increased selection. 2000 (www.Amazon. 47 48 Interbrand (www. Amazon serves over 23 million customers from 160 countries. and other key factors that have contributed to its success (or failure). and higher levels of customisation and service than the traditional shopping experience allows. November 11.1 INTRODUCTION This chapter provides an analysis of seven companies. and has sales of over $2 billion.2. innovation and delivering on its promises.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.2. Amazon has cultivated a reputation for excellence.interbrand.com and Yahoo!. and enjoyable experience. discounted prices. The cases are presented in the following sequence .It's an Ocean. and has equity investments in several e-tailers.1 Company Overview Amazon. 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. more information. February 26. and one of the top two or three in Britain.com's success stems from its compelling value proposition. Amazon. It is the 57th most valuable brand in the world47. Barnesandnoble. 1999 49 'Amazon's Amazing Ambition' . a company overview.COM 6. In July 1995.com. Figure 6. Germany and Japan49. Each case is presented in the same format including. 6. Through its provision of a one-stop shopping experience. and is one of the few Internet brands that is recognised all over the world. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Gap. its brand-building strategy (how it generates traffic). its value proposition.2 CASE STUDY: AMAZON.com launched with a mission to use the Internet to transform book buying into a fast. France.economist. Amazon provides increased added value on several dimensions.com. easy.1 outlines Amazon's timeline and major milestones. it is the most visited e-commerce website in America. Amazon. greater convenience. 'Amazon.The Economist.com . In addition.com) .

provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.TIMELINE AND MAJOR MILESTONES Amazon.com.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com 63 . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com invests in wineshopper.Customers can shop at Amazon. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.com and NextCard launch co-branded credit card .com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Amazon opens Music Store Amazon establishes relationship with Intuit's personal finance website and select desktop software.amazon.com Amazon announces further plans to expand distribution network to meet rapid growth.COM .com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.Amazon.com Electronics and Amazon. such as the Palm VII organiser.Amazon and eziba.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon launches new kitchen store .com is founded by Jeff Bezos Amazon.com ." providing shopping from wireless devices.New home living store from living.000 members Amazon.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com.com Anywhere. Video Games and Gift Ideas Amazon and Sotheby's launch www. Amazon.Amazon.Amazon opens customer service centre in The Hague .Amazon launches lawn & patio store . a tools and equipment store for professional tool users and woodworkers .Amazon opens a customer service centre in Huntington. universities.1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 1999 January February March April May July August October November December AMAZON.amazon. Software.com Announce Strategic Investment and Promotional Agreement .com via the new wireless pocket PC .Amazon announces investment in kozmo.com to create a "home living" store at amazon.Amazon enters into a strategic partnership with Drugstore.com opens its virtual doors at amazon.com Auctions and zShops provide new tools to its merchant community . workplaces.Amazon enters strategic alliance with living.com Amazon introduces "Purchase CirclesTM".com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com announce investment and strategic alliance .Amazon.com Amazon invests in Pets.toolcrib. and more Amazon launches "Amazon. and minority investment in.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May . to meet rapid growth . featuring thousands of bestseller lists for hometowns.Amazon and online car-buying service Greenlight.com .com .com enters European book market Microsoft signs Amazon.Amazon launches www. West Virginia.sothebys.com .Amazon launches health and beauty store . Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon. Ashford.com goes live Amazon launches Associate Programme Amazon IPOs for $49million.Amazon surpasses 20 million cumulative customer accounts .

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

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

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

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

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

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

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

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

they offer customers fast delivery. FIGURE 6.barnesandnoble. in terms of the 7Cs framework.3.3 . edition. as cited on Barnesandnoble. logically structured. rich editorial content and a community experience. the company created a site very similar to Amazon. easy and secure ordering.OVERVIEW OF BARNESANDNOBLE.3 Sources of Value . but instead of developing an outstanding interface to its inventory. previously-owned and rare books. Both have expanded their convenience to offer 54 Media Metrix.3).2 Value Proposition Barnesandnoble.com's (Figure 6.com's website (www.com and barnesandnoble. Both Amazon. and easy-to-navigate site Categories focus on books. author.3.com's and takes a bit longer to download. publisher. In addition.com) 72 .com offers customers an easy-to-search catalogue of virtually every book currently in print. however. music New Initiatives Barnesandnoble. etc.com's virtual storefront is graphically richer than Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. as well as an extended searchable catalogue of millions of out-of-print.bn. software. good prices. including title. the features are practically identical.com let customers sign up to receive email reviews and announcements of new titles. Barnes & Noble planned to dominate online book-selling. 6.com or www. Both offer detailed bibliographic information.COM'S WEBSITE Simple.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.

com's market capitalisation was $251 million. while Amazon. reasons for this are explained in the next section. Both offer customisation that permits users to personalise the experience. and Barnes & Noble Inc. and avoid charging sales tax in states where it has stores56. These initiatives have generated traffic to the site. As of February 2000.1 billion. However.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. however. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions.000 affiliates in its referral network. Lycos.com. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . Barnesandnoble. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 .The Wall Street Journal. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).a replica of Amazon's Associates Programme. compared to Amazon.3. Instead. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55).com's 1999 revenues were $202.6 million. Although. it lags behind first-mover Amazon.4 Brand-Building Strategy Barnesandnoble. The 6.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Webcrawler.com's $1.com has created a high quality website and customer experience. Yahoo!. Barnesandnoble. and both are expanding globally. Both try to foster a community of readers by letting customers post reviews online.com was valued at $21. while Amazon. Netscape and Microsoft Network. this programme had more than 300.com had over 17 million. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.com in return for a commission on any purchases that they originated .64 billion. prevent cannibalisation of its existing business. December 17. Barnesandnoble. has yet to leverage its strong brand in cyberspace. Both offer 'associate programmes' that let other websites link to their sites.com closed 1999 with 4 million customers. there is little mention of the online store in the traditional 'bricks-and-mortar' stores. They have developed an affiliate programme that links sites to Barnesandnoble. Barnesandnoble.

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

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

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


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.


Merges with N2K.5 million distribution deal with Lycos Signs three-year. CDnow is also driving the digital distribution of music. daily music news. T. whether for browsing or buying. and exclusive interviews and reviews from CDnow's award-winning editorial staff. On 19th July 2000.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.TIMELINE AND MAJOR MILESTONES . convenience.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . May-June 2000. CDnow is the leading online music store. and they aim to "make every visit to the site.5 CASE STUDY: CDNOW 6.CDnow and Time Inc. $22. It has a customer base of 4 million people. D.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.cdnow. and one of the most popular shopping sites on the Internet62.000 people.5. good prices.Forges distribution partnership with Yahoo! $65. CDnow was acquired by Bertelsmann AG. TABLE 6. cover art.5.Partnership program with Geffen Records .Harvard Business Review. CDnow provides access to over 500. customisation and a wealth of information and content to help in the purchase decision. as well as music reviews.. and was the first site to offer the sale of music downloads and custom CDs. and an average daily audience of over 800.000 sound samples. pp. 62 Hoffman.000 music related items .2 Value Proposition CDnow offers consumers a high degree of choice (over 500. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .Launches merged CDnow/N2K site . former arch rival . announce marketing alliance . features. & Novak.Merges with Columbia Records .ten times the selection of a conventional bricks-and-mortar music store).000 music-related products and 650.179-188 63 CDnow website (www.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. $18. by twin brothers Jason and Matt Olim. a valuable and rewarding experience"63.com) 80 .Raises $10 million through private placement .1 Company Overview Founded in 1994. guides to music genres.Site goes live . 'How to Acquire Customers on the Web' .

CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. cover art.5. By partnering with well-known content providers. 81 . and has secured rights to music reviews. FIGURE 6.5. etc.5 . The whole process of searching for albums or music titles to the actual purchase is simple . and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. artists biographies. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).3 Sources of Value .. to make it easier for customers to explore new music and make informed purchasing decisions. CDnow has leveraged the reputation of their brands to reinforce its own. easy-tonavigate. CDnow has cultivated similar relationships with MTV. For example.Figure 6.

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

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

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

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

eBay website (www. Auctions make it fun. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. CEO of eBay. The buyer and the seller work out the logistics of the transport (e. and eBay receives a transaction fee that ranges from 1. or the payment for the item . extensive selection and geographical reach. Sellers pay a nominal fee for placing an item up for sale.com) 'eBay .6 CASE STUDY: EBAY 6. eBay is not about auctions. garage sales. as cited in 'eBay .000 new items joining the "for sale" list every 24 hours69.removing the need for inventory. global trading place for buying and selling personal items in an entertaining auction format. According to Meg Whitman.300 categories.ebay. (A)' . the eBay community has grown to include more than 10 million registered users. with the number of unique daily visitors setting a record of 1.2 Value Proposition eBay offers consumers an efficient. eBay effectively created a new business model never before possible .A Harvard Business School Case Study. payment) between themselves. 6.25% to 5% of the final sale price on any item sold. and eBay never takes possession of the item being sold.Company Overview' .782 million in January 200068. collectable shows. flea markets and auctions. and 450. Auctions represent a platform.6. from collectibles and antiques to electronics and toys. Auctions are an enabler. with emphasis being placed on its unique community feel and culture.efficient one-to-one trading in an auction format. Individuals use eBay to buy and sell items in more than 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.the closest thing in the offline world are trading forums such as classified ads. "at its core.Company Overview' . transportation and other overhead costs.g. shipping. People perceive the auction format to offer better prices. 24 hour a day.6.eBay website (www. and eBay provides added value through its convenience. This is a new market . Since its launch in September 1995.ebay. 1st October 1999 86 .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.com) 70 'Meg Whitman at eBay Inc. There are over half a million new auctions.

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

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

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

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

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

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

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

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

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

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

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

from e-mail services to stock quotes and much more.interbrand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. household and business user reach.Business Week. 1998 (www. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. September 7. There's nothing in the real world to compare to that79". 6.8 CASE STUDY: YAHOO! 6. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. all in a single location. and the number of websites continues to explode.com) . Yahoo! was founded by David Filo and Jerry Yang.The Company. and is one of the few Internet companies to turn a profit early in the development of the Internet.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. Yahoo! offers a range of supporting services that add value. The company's global web network includes 23 world properties outside the US. 78 79 Interbrand (www. Yahoo! is a leading guide in terms of traffic. two Ph. As such.1 Company Overview In April 1994. CEO of Yahoo!. advertising. According to Timothy Koogle.8.businessweek.see Appendix A 'Yahoo! . As the first online navigational guide to the web. The Stock' . who started an online guide as a way to keep track of their personal interests on the Internet. The concept exploded (through word-of-mouth) and in less than six months.D students at Stanford University.2 Value Proposition At the core of Yahoo!'s value proposition.com) 98 . The Strategy. lies the directory .8. Yahoo! has since morphed from an ordinary search service into a global Internet communications. the site was receiving 1 million hits per day. the amount of information.

3 Sources of Value .Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .com allowing them to offer person-person payment solutions . to allow access. 99 . .8 million IPO (2.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.Yahoo! unveils Yahoo! Finance Vision . regardless of platform (i.TIMELINE AND MAJOR MILESTONES 1994 April . mobiles. TVs.000 shares at $13. and unveils Yahoo! Digital Introduces Bill Payment services .8.Yahoo! acquires eGroups . More recently.600. 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. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Receives $1 million in venture capital funding from Sequoia Capital $33.Site goes live September .com.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.Yahoo! forms agreements with Palm Inc. Their goal is not to list everything under the sun. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.8). is the way it has structured and displayed information.The 7Cs Framework Convenience Central to Yahoo!'s success.7 YAHOO! .. to provide web-based services to PalmTM handheld computers .e. Palm computers).Yahoo! Launches Business-to-Business Marketplace .Yahoo! Shopping launches personalised shopping service 6.Yahoo! acquires Arthas. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.

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

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

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

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

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








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

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

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

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


048 20.985 2.283 4.510 8.143 2.648 1.464 3.Interbrand's Ranking of the Top 60 Brands (www.654 43.527 3.231 24.681 2.502 33.197 32.568 3.781 33.634 1.694 17.076 3.932 4.761 1.319 1.262 1.184 1.643 3.894 14.193 112 .181 21.101 9.603 5.423 2.595 17.792 3.422 1.043 8.interbrand.804 2.404 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .329 4.155 7.806 2.313 2.361 1.895 2.550 12.132 15.052 6.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) 83.830 14.281 11.806 11.596 3.781 17.275 30.310 11.602 4.021 26.225 11.845 56.909 7.147 9.231 12.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.766 14.

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





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