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A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA)
UNIVERSITY OF CAMBRIDGE
ROBIN S. CLELAND
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure
7 9 9 11
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8
THE NATURE OF BRANDS
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Introduction What is a Brand? The Layers of a Brand Product and Service Brands Branding & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Customers 2.8.2 The Value of Brands to Companies Conclusion
3.1 3.2 3.3
25 25 26 27 28 30 31 32 32
3.4 3.5 3.6 3.7
Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Communicating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
4.1 4.2 4.3 4.4 4.5 4.6
34 34 35 35 39 40 43
Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9
BUILDING BRANDS ON THE INTERNET
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Introduction The New Dynamics of Brands The Importance of Customer Loyalty Online Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 The Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion
62 62 62 62 64 66 69 70 71 71 72 72 73 75
Introduction Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sources of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Factors that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: BarnesandNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Value - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion
6.1 Company Overview 6.The 7Cs Framework 6.4 Brand-Building Strategy 6.4.2 Value Proposition 188.8.131.52 7.3 Sources of Value .2 Value Proposition 6.com 6.7.3 Sources of Value .5.5 6.4 Brand-Building Strategy 6.com 6.6 6.7.Extensive Integration 184.108.40.206.8 Case Study: Boo.6 Conclusion Case Study: eBay 6.1 Company Overview 6.3 Sources of Value .1.2 Value Proposition 6.4.com 220.127.116.11 Sources of Value .18.104.22.168.8.5 Conclusion Case Study: Gap.5.6 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.The 7Cs Framework 6.2 Value Proposition 6.6.5 Conclusion Case Study: CDnow 6.5.1 Company Overview 6.4 6.4 Brand-Building Strategy 22.214.171.124.3 Sources of Value .5 Other Factors that Contribute to their Brand Leadership 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5 Other Factors That Contribute to their Brand Leadership 6.2 Value Proposition 6.8.5 Conclusion Case Study: Yahoo! 6.The 7Cs Framework 6.1 Company Overview 6.1 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 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6.The Failure of Boo.1 Company Overview 6.7 6.7.The 7Cs Framework 6.4 Brand-Building Strategy .
1 Figure 3.7 Figure 6.4 Figure 4.6 Figure 4.1 Figure 1.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.5 Figure 5.1 Figure 4.8 Figure 6.3 Figure 2.6 Figure 5.7 Figure 5.com's Website Overview of Boo.7 Figure 2.com's Website Amazon.6 Figure 2.9 Figure 6.2 Figure 6.5 Figure 4.8 Figure 5.5 Figure 6.5 Figure 2.4 Figure 4.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .6 Figure 6.4 Figure 5.1 Figure 6.2 Figure 4.1 Figure 2.com's Associates Programme Overview of BarnesandNoble.1 Figure 5.2 Figure 2.2 Figure 3.4 Figure 6.3 Figure 3.3 Figure 4.3 Figure 6.com's Website Overview of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overview of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .3 Figure 5.7 Figure 5.2 Figure 2.4 Figure 2.2 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.8 Figure 3.
5 Table 6.3 Table 6.com .com .Timeline and Major Milestones Gap.1 Table 6.6 Table 6.2 Table 6.1 Table 6.7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones CDnow .com .Timeline and Major Milestones Yahoo! .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.com .4 Table 6.Timeline and Major Milestones eBay .Timeline and Major Milestones BarnesandNoble.Timeline and Major Milestones Boo.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .
com noble. as they face each other through an electronic connection.1 3. interaction and relationship building.com's range of 4. customer affiliation and level of sales. Supply chains are being rethought.com. Amazon. that these Internet start-ups have achieved. products and services reconfigured. FIGURE 1.1 .com1 Amazon.0 1. service and brands. McKinsey Analysis (www. Amazon.an explosion that is also a harbinger of how business will operate in the future. relationships. while providing new tools for promotion. whereas it has taken decades for traditional companies to achieve the client base.9 2. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting.9 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.com) 7 . It is empowering customers with more options and more information to make informed decisions. In the midst of this.5 million book titles). the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.YEARS TO REACH $100 MILLION IN SALES 6 5.2 3.com Source: Securities and Exchange Commission Filings.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. and business models revamped.5 2. creating strong brands that are putting established brands at risk. As such.1 OVERVIEW Over the past few years. The Internet also represents a fundamental shift in how buyers and sellers interact.mckinseyquarterly. Figure 1. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e. the Internet is changing fundamentals about customers. America Online (AOL) and eBay have been able to build powerful brands in a few years. there has been an explosion in the online world . aggressive Internet start-ups have emerged.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. As such.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.g. and is triggering the need for new brand-building strategies and tools. This is creating new challenges and opportunities. Internet companies such as Yahoo!.
building awareness. there is a growing recognition that traditional methods are no longer suited to this new interactive environment. 'Meeting the Challenge of Disruptive Change'. T. attracting traffic or 'eyeballs'... companies lack a coherent framework and concrete methods to build an online brand. A New Class of Netizen is Settling Right In' Business Week. & Overdorf. 1997. Harvard Business Review. the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm. pp. & Elstrom. Harvard Business Review. May-June 2000 Hof.BUILDING SUCCESSFUL BRANDS ON THE INTERNET As a result. P. March . C. R. P.. 66-76 Hoffman. 'How to Acquire Customers on the Web'. D. A Business Week / Harris poll.April 2000. Browder. As such. as the need to build brand loyalty online is reaching a peak. Volume 78 Issue 2. that extends the brand-customer relationship beyond a single transaction.Forget Surfers. Therefore. May 5. and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. 1 2 3 Christensen. Given the tremendous clutter in today's e-commerce marketplace. However.. For pure online players. L. found that 57% of Internet users go to the same sites over and over again. brands are even more critical as customers have little to go on other than a recognised brand. rather than drifting from site to site3. turning browsers into buyers. p.66 8 . and the high cost of acquiring online customers2. 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. 'Internet Communities . who are essentially intangible... M. In light of this. and Novak. harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. S.
with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. A review and analysis of leading academic thinking will be used to explore these issues. supported by secondary data related to aspects of online business from accredited and published sources. 1.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . • To explore how the Internet is changing the brand-building environment. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors. tools and strategies to build brands on the Internet. • To identify the key factors and characteristics that contribute to the development of successful Internet brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. and to identify new sources of value.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. This is based on the outcome of the primary research (in-depth case studies).2 .2. FIGURE 1.
strategy and economics. Conclusion: Discusses the key findings and areas for further research. The combination of cases provides a useful and practical insight into brand-building issues and problems. relationship management. While there is no attempt.com and Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Academic Research: Given that the Internet is such a new area. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms. as well as a recent Internet failure (Boo. there is more work in popular rather than academic literature. CDnow. These are further refined using the insight obtained through the case studies. the literature review draws on leading academic thinking in more established areas such as brand management. Hypothesis (Framework): This is based on the literature review and secondary data. The case studies include born-on-the-web companies that are among the most recognised Internet Brands (Amazon. 10 . traditional 'bricks-and-mortar' companies that rose to the challenge of taking their brands to the Internet (Barnesandnoble. and is used to provide insight into some of the factors that contribute to the development of successful brands. to provide an in-depth analysis of the psychological and social dimensions of brands. this also highlights the true value of the dissertation. The resulting 7Cs Framework and Interactive Brand-Building Model outline key sources of added value and the tools available for companies to create a high-impact customer experience that is critical in building an online brand. Case Studies: The dissertation is essentially built on the in-depth analysis of the brandbuilding efforts of seven online companies. certain key factors are highlighted in their relevance to the dissertation.com. and factors that contribute to a brand's success. The absence of academic literature on Internet branding posed a major obstacle. Consequently.com). marketing.com). however. nor desire. eBay and Yahoo!).
Chapter 3 explores how brands have traditionally been built. provides an analysis of leading academic literature in relation to branding. The nature of brands. These case studies provide a detailed and practical insight into how leading online brands have actually built their brands. 11 . outlining the key developments that have contributed to the Internet's explosive growth and accelerated adoption. by outlining the impact of the Internet on the business and competitive environment. The final chapter. The limitations of the Internet in terms of brand-building are also discussed. Chapter 2. summarises the key findings.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. and introduces the core concepts that form the backbone of the dissertation. 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. highlighting some key factors that have contributed to brand success. Chapter 4 provides an overview of the Internet and its defining characteristics. Chapter 6 examines the brand-building efforts of seven companies. This chapter sets the context within which online brands must be built.4 STRUCTURE The next chapter. their purpose and value are discussed. Chapter 7. as well as the interactive approach to attracting customers and building loyalty. and outlines the opportunities for further research.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .
and they form the backbone of this dissertation. 1996. whether online or offline. both to customers. 'The Future of Brands'. and highlights the importance of brand management. This value stems from the products and services that companies create and bring to the market. E.. Branding is about creating 'value'.1 INTRODUCTION In this chapter. 'Building Strong Brands'. 74 4 Clifton. if properly managed. A.a leading specialist brand consultancy firm .1 . p. the brand's emotional benefits and its self-expressive benefits .A BRAND IS MORE THAN A PRODUCT OR SERVICE BRAND ORGANISATIONAL BRAND ASSOCIATIONS PERSONALITY COUNTRY OF ORIGIN PRODUCT OR SERVICE SCOPE ATTRIBUTES QUALITY USES SYMBOLS USER IMAGERY EMOTIONAL BENEFITS SELF-EXPRESSIVE BENEFITS BRAND-CUSTOMER RELATIONSHIPS Source: Adapted from Aaker. & Maughan. creates influence and generates value4" This definition truly captures the essence of a brand. p. D. which. 2.). (London: Macmillan Press Ltd.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 2000. unravelled to reveal the nature of brands and their reason for existence. The concept of brand equity is outlined. and for the company.2 WHAT IS A BRAND? According to Rita Clifton. and the importance of customer satisfaction and brand loyalty. symbolised in a trademark. vii 13 . and to companies. both for customers. explaining the value of brands. The chapter proceeds to describe the influence of brands on the buying process.a brand is: "a mixture of tangible and intangible attributes. R. these layers are Brands are made up of many layers and dimensions.1. CEO of Interbrand Newell and Sorrell .see Figure 2. but extends further to encompass added values derived from factors such as the brand-customer relationship. FIGURE 2. (New York: Free Press). These concepts are central to brands and brand-building.
2.3 THE LAYERS OF A BRAND Brands are made up of four layers . yet ultimately reside as consumer perceptions. It is a company's promise to consistently deliver a specific set of features.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include . As such. FIGURE 2. brand-building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.86 14 .Figure 2.a 'relationship'. 1980.. 2. the augmented brand and the potential brand . T. the basic brand. making their way into planning and strategy documents. January-February. a 'reputation'. a 'set of expectations'. 'Marketing success through differentiation . brands are their most valuable asset.2 . Brands are richly endowed entities. and services to customers. They start life as ideas. p. and a 'promise'. Harvard Business Review. The space a brand occupies inside a customer's head can create a 'mental' patent.the core product or service. benefits.of anything'. For some companies.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. which grows out of the cumulative memory and the experiences customers have of products or services.
Coca-Cola. These products and services add value and make the offering much more difficult for competitors to emulate. The Basic Brand The basic brand consists of the "name. Levi's). this should support the offering's performance and differentiate the brand from those of competitors.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. Essentially. with supplementary products and services (e. Kodak.g. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes. In fact.Analysis. as they essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. information. & Control'. such as in retailing. 'Marketing Management .g. quick delivery) that enhance the customer’s total purchasing and use experience.com are examples. 15 . preferring things they can see and touch. 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. or a combination of them. not the products it sells .The Gap stores. and because they most readily come to mind when consumers are asked to recall brands. this is the case with all Internet companies. P. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service. 5 Kotler. The most common barrier to competition is building a brand. However. most products and services cannot survive on functionality alone as this is usually matched in time. customers buy products to meet certain functional needs. They are the historical core of branding because they are the most prevalent. Planning. symbol. sign. (Europe: Prentice Hall) 1996. 8th Ed. 2. or design. term.. Implementation. but the brand itself is the store. Intangible services are also more challenging to "package" and sell to consumers who often have difficulty conceptualising. even when the alternatives are substantially cheaper or more readily available (e. Southwest Airlines and Amazon. Certain service brands. intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5.
3 . the consumer learns about competing brands. In the evaluation stage. either through heightened attention or through an active information search. Therefore. two factors can intervene between the purchase intention and the purchase decision . 1996. selective distortion. and Control'. Once aroused. Through gathering information. p. Consumers develop a set of brand beliefs about the attributes of competing brands.FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands. and pay the most attention to the brands that will deliver the sought benefits. Planning.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. This can be triggered by internal or external stimuli (advertisements). a consumer will be inclined to search for more information. These beliefs depend on their previous experiences with the brand. However. Implementation. 16 . Consumers differ as to which product / service attributes they see as important.194 The process starts when the buyer recognises a need.3). and selective retention. The buying process consists of five stages (Figure 2.. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).4)..Analysis. 'Marketing Management . and the effect of selective perception. it is important to clarify customers' underlying buying behaviour and the buying process. it is critical to understand what attributes consumers value. (Europe: Prentice-Hall) 8th Ed. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs.attitudes of others and unexpected situational factors (Figure 2. P. FIGURE 2.
locking out potential competitors. or dissatisfied with the purchase decision. somewhat satisfied. If performance falls below their expectations. Expensive purchases involve some risk taking. customers make decisions purely on the basis of their expectations. Customers' expectations are particularly important when dealing with services. After a consumer has actually purchased the product or service. word-of-mouth. as these services are intangible and therefore. A consumer's decision to modify. If perceived performance and quality exceed their expectations then they are satisfied. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. their negative attitude may influence the consumer's purchase intent or vice versa.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. The level of customer satisfaction will influence whether they buy the brand again and talk favourably or unfavourably about it to others. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. 17 . even delighted. A consumer tries to deal with this by gathering information from friends. Customer satisfaction and loyalty are essential to creating successful brands. they will be dissatisfied and look for alternative brands in the future.the customer will be highly satisfied. These expectations are formed through a combination of past experiences. or avoid a purchase decision is heavily influenced by perceived risk. postpone.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. they will evaluate their level of satisfaction . and a preference for recognised brands they can trust. and especially important when dealing with purchases made through the Internet. advertising and communication.
W. D. Spring 1999 18 . 'Growing the Trust Relationship'. & Sasser.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Marketing Management. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. Saturn. Customers that are passionately or emotionally loyal are those that have built trust in a company. E.. & Sasser.customers who are satisfied and loyal and talk favourably about the brand . 'Why Satisfied Customers Defect' .Harvard Business Review.. Southwest Airlines and Xerox7. p.. This satisfaction encompasses the whole experience and not just a company's products or services. C.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6.Harvard Business Review. and believe that it will always act in their best interest. E.. 6 7 Jones. The customers at the bottom end of the scale are "terrorists" .5. T. 91 Loyalty is derived when customers are continuously satisfied over time. Nov-Dec 1995. and Johnson. M. 'Why Satisfied Customers Defect' . Hewlett-Packard.Figure 2.5 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. At the opposite end of the satisfaction spectrum are "apostles" . Johnson & Johnson.. Nov-Dec 1995 Hart. Trust is critical for a brand's success. FIGURE 2. T.those who actively attack the brand telling others not to buy from the company. Federal Express.
with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity.. emotional loyalty is born out of a consumer's personal relationship with a brand.g. Harley-Davidson motorcycle clubs). 1993 McWilliam. In this way. 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.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. 'Building Stronger Brands through Online Communities' .Sloan Management Review. 'The One to One Future'. 8 9 Peppers. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need. Spring 2000 19 . Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. There is also clear evidence of this on the Internet. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. giving quasi-human qualities and relate to it as they would to humans consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985.they provide good word-of-mouth and are the best salespeople for the product / service 2. M. Emotional loyalty can be also created through the formation of a strong user community around the brand.com. G.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself.. 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). D. consistent orders Satisfied customers are the best advertisement . & Rogers. Firstly.
343-373. there are brands that are unknown by most buyers.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figure 2. A stronger brand enjoys a high degree of brand preference over competing brands. Beyond this.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper. However. 2. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition).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. FIGURE 2.BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme.. there are brands that customers perceive as acceptable and would not resist buying.6 . whereby customers would be unwilling to substitute it with competitors' offers. and understanding the needs and buying processes of the target market is essential. which goes well beyond the satisfaction of a specific need.7). Journal of Consumer Research. pp. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. 20 . FIGURE 2. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.7 . almost irreplaceable bond as well as potentially to the negative feelings of betrayal. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. S. a 'powerbrand' tends to have a high degree of brand loyalty. March 1998.
The benefits of each are outlined in Figure 2. D. FIGURE 2.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.. 1991 10 Aaker. perceived quality. (New York: Free Press). According to David Aaker (1991).. trademarks.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. name awareness. D. strong brand associations.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity.8. The major brand assets are brand loyalty.8 .Create Awareness . and relationships with distributors and strategic partners. which is the value of the brand over and above its commodity value. (New York: Free Press). 1991 21 . brand equity "is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service10". 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. and other assets such as patents.
'Strategic Brand Management'.8. 'Consumer Market Research Handbook'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.. R.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. Premium pricing increases revenue.. to its communication • Ethical . 158-170.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2. to quickly identify sought after products • • Practicality . the best performer for a particular purpose • Characterisation .8. P. 'Pioneer Advantage: Marketing Logic or Marketing Legend?'.To have confirmation of your self-image or the image that you present to others • Continuity . (London: McGraw Hill). May 1993.Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years • Hedonistic .To be sure of buying the best product in the category.To be clearly seen. market share and profits .To save time and energy through identical repurchasing and loyalty Guarantee . J. (New York: Free Press).To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . 22 . & Tellis. The brand leader is the most profitable and all beyond number two are unprofitable13.Typically a brand leader obtains twice the market share of the number two brand.. to its logo. 1992 Worcester. brands perform several functions that add value and customer benefits: • Identification .. • Brand Leverage . Journal of Marketing Research.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. and the number two twice the share of the number three12. J.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. pp. in the following ways: • Brands. N. G. 11 12 Kapferer. 3rd Ed.. 1986 13 Golder.Satisfaction linked to the attractiveness of the brand. to make sense of the offer. production and marketing. & Downham.
brand leaders can exploit their superiority in the market (e. The next chapter describes the process of how brands are built. In addition. and Young & Rubicam have created complex formulas.g. 2. • Avenues for Growth .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. 23 . maintain good price levels and generate strong cash flows. Companies can maintain a brand while modifying the underlying product to account for new technology. in turn. • Motivating Stakeholders . companies such as Interbrand (see Appendix A). • Brand Loyalty and Beliefs . it can build a strong market share.Companies with strong brands attract good recruits. • The Brand Barrier .Brand leaders usually have the financial strength to fend off competitors.Strong brands are more attractive to investors. the tools that are used.The product life cycle applies to products. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e. drives up share price and provides the basis for future growth. Coca-Cola “the real thing”).g.Dominating a niche market is usually more profitable than being fifth in a large market.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands . The brand can also be used to penetrate new markets. and the characteristics of successful brands. This. but there remains an ongoing controversy about how accurate and meaningful these measures are. They also tend to elicit community and government support. fashion or prevailing market conditions. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. not brands. When a company creates this type of customer preference and loyalty. In trying to estimate the monetary value of brands. Johnson & Johnson with Tylenol).
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .
confidence and brand equity are built. This is illustrated in Figure 3.1 INTRODUCTION Building a strong brand is a complex task. This chapter spells out the traditional brandbuilding process. The major characteristics of successful brands are also reviewed. which are created through advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. public relations. 3. selling. and keep it turning. and direct marketing. the next step is to get customers to try the brand. promotion. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. brand awareness.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 . Once this has been established.1 . highlighting important factors that contribute to the success of each step along the way. To entice trial and repeat purchase requires triggering mechanisms. FIGURE 3.1.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposition. it should provide a satisfactory experience and lead to a willingness to buy again. If the offering is developed properly.
unless differentiation and awareness can be developed. it will never attract a strong client base. a company must develop a strong understanding of who their potential customers are. BRAND = P X I X AV These three characteristics are multiplicative rather than additive . Without a good product or service. As such.each is essential. FIGURE 3. In order to do this. it is impossible to build a successful brand. Similarly. a compelling value proposition is the combination of an effective product or service (P). what they value and how the products or services should be optimised or configured to deliver this value (Figure 3. the brand can elicit feelings of confidence that it is of higher quality than competitors'.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. In this way.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. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers.a strong offer that a potential customer would find compelling and interesting.2 . 26 .3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . a distinctive brand identity (I). and added value (AV).2).
these needs are as likely to be about satisfying self-actualisation or esteem needs. cosmetics and high-tech products. MA. faith in brand generates satisfaction in use. Hewlett-Packard.g. 1998. Lexington Books).. the number of competing alternatives and the large variety of advertising and selling messages.if a brand provides good service over time. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations. • User Associations .. 14 15 Doyle.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. People use brands to express their lifestyles. 1986 27 . Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. it acquires added values of familiarity and proven reliability. 'Marketing Management and Strategy'. as they are to be about satisfying basic physical and economic needs14.the design. layout and appearance of the brand can clearly affect preference by offering cues to quality.in many cases. P. • Belief in Efficacy .In many situations a strong company name (e. 2nd Ed. or to gain a sense of belonging. The large number of decisions. values or wealth. Customers choose brands. Kellogg's) attached to a new product will transfer positive associations. For pharmaceuticals. Gillette. 'What's in a Name? Advertising and the Concept of Brands' (Lexington. it is more likely to work effectively for them. interests. pp. which are additional to those based upon real performance. if customers have faith that a brand will work. Coca-Cola. the pace of technical change. influenced by brand values. (Europe: Prentice-Hall). providing confidence and incentive to trial. Sony.3. • Manufacturers' Name and Reputation . which they perceive as meeting their needs.brands frequently acquire an image from the type of people who are seen as using them. mean that buyers look for short cuts. Brand values derive from five major sources15: • Experience of Use . J. industry endorsements and newspaper editorials. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. In today's affluent society. • Brand Appearance .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. P. 169 Jones. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice.
Jean-Noël Kapferer (1992) identified three levels of a brand identity16 . its personality and its image or self-projection .Figure 3. J.3. Themes include the physical appearance (logo. This may be different from the brand image. • The Brand Theme . packaging. glamour.g.g. its reflection (e. and the relationship expressed (e. 1992 28 . • The Brand Style . press releases. etc. type of spokesperson / customer image used to advertise the brand). which depends on how the target market perceives the brand.the fundamental or genetic code of the brand. however the brand style and core tend to be less flexible.3: • The Brand Core . Brand themes are the most flexible element and will tend to change with fashion. colour scheme. 'Strategic Brand Management'. 16 Kapferer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. friendly). prestige. which remains fixed over time. and advertising. (New York: The Free Press). style or cultural differences from one country to another.articulates the brand core in terms of the culture it conveys.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. and visual appearance). A company should seek to differentiate its brand through developing a distinctive identity..the way the brand communicates through its advertising. features. visual appearance.
Secondly. advertising. It also facilitates consistency in the message being transmitted through presentation (e. its strengths and opportunities. 'Strategic Brand Management'. understanding the brand's core and style helps set the perimeters of brand extensions . 29 . 1992 The brand prism enables management to understand the brand. Finally. (New York: Free Press). and through line and brand extensions. it helps in developing the brand strategy and the formulation of a distinctive positioning in the market.3 . website design.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of the brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying What the brand says about the user (in the user's mind) Source: Adapted from Kapferer. structure and ease of use).g.how far the brand can be meaningfully stretched to other products and market segments.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. J. below-the-line activities..
4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. management style. • Trial . (New York: Free Press). skills. deliver and reinforce this value proposition (see Appendix B .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. FIGURE 3.The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. The value proposition must be communicated to entice customers to try the product / service. Before potential customers can buy a product / service. E. and the product / service's perceived performance.Customers need to be stimulated to seek information about the brand's uses.Customers consider whether the product / service will meet their particular needs. The value proposition must then be articulated in terms of the 'marketing mix' . • Interest .. 'Diffusion of Innovations'. 'Diffusion of Innovations'.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. and its products / services. E. If the offering is developed properly.Figure 3. 17 Rogers.4.often referred to as the '4Ps' .79-86 The Innovation-Adoption Model consists of: • Awareness . pp. 1962. it should lead to satisfaction and re-purchase. they must learn about it.4 . Promotion and Place (distribution strategy). colleagues and opinion leaders become important influences at this stage. strategy (partnerships and alliances). pp.The McKinsey 7-S Framework). (New York: Free Press). culture and staff needed to support. • Adoption . Personal sources such as word-of-mouth from friends. features and advantages. the company must ensure that it develops the appropriate structure..79-86 30 . 1962. Advertising and PR are common tools for achieving awareness. • Evaluation . This learning is called the adoption process17 . systems.The company has to create awareness of the brand.The customer is satisfied and decides to make regular use of the product / service. Price.Product and service features.
the company may supply customers with special equipment or tools (e. 18 Berry.by learning customers' individual needs and wants and individualising and customising service and contact with the customer. companies have used the tools of the promotions mix . making them less likely to switch to a competitor.such as airline frequent flyer programmes.. encouraging evaluation and trial. this process enables an exchange of information. software) to help customers interact with the company.g. while strengthening the position and value of the brand. A. Social Benefits . Advertising and public relations can be effective in generating awareness and interest. personal selling and public relations / publicity . multi-transaction relationship. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer.136-142 31 . direct marketing. allowing companies to communicate regularly with their customers and customise their interaction. when each trusts the other to deal fairly and reliably. This is often referred to as Customer Relationship Management (CRM). Internet linkages. & loyalty / discount cards. companies can increase buyers' satisfaction. Through building relationships with customers. 3. This information is a key competitive advantage. Berry and Parasuraman (1991) identified three customer relationship-building approaches18: • • Financial Benefits .advertising.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally. (New York: Free Press). sales promotion. providing insight into customers' needs and wants. 1991. Customer service is an important element of this relationship. This focuses on establishing a longterm. & Parasuraman. but enhanced customer interaction through relationship building.for example. companies can increase the value of each customer. In this way. L. 'Marketing Services: Competing Through Quality'.to move customers through the adoption process. Enticing customers to purchase again and adopt the brand not only requires a successful trial experience. • Structural Ties .5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. pp. Over time.
7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. As a result. but it makes the task easier. companies have the opportunity to start building relationships with their customers. 3. As customers build trust in the brand through satisfaction of use and experience. • Time and Consistency . 2nd Ed. comprehension and intention to buy. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.a segmentation scheme. the brand is meaningless.Satisfactory experience is the major determinant of brand values. then its position will be undermined. 19 Doyle. while providing new tools for promotion. which will communicate the brand's existence..If the brand is not the innovator. when the brand has no competitors to rival its position. • Unique Positioning Concept . If the quality of the experience deteriorates. and establish a trusting relationship. It often takes years to build up the added values. P. it has a profound impact on the traditional brand-building process.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. advertising or promotional campaign. It is easier to capture a share of the consumer's mind and build a customer base.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. interaction and relationship building. or if the brand is surpassed by superior offers from competitors. its function and psychological values. • First-Mover Advantage . strengthening the brand further.Being first into the market does not necessarily bring success. including: • A Quality Product / Service Experience . value proposition or augmented brand. brands were not built quickly. (Europe: Prentice-Hall). trigger trial and reinforce commitment to it.. The Internet provides the opportunity for companies to create compelling value propositions never before possible. which will add value and distinguish it from competition. Once the framework has been established and the organisation configured to provide this proposition. Without building awareness.A successful brand requires an effective selling. it must have a unique positioning concept .176-177 32 . and making it more difficult for competitors to emulate.Traditionally. 1998. companies must actively communicate it to the target audience to entice trial. • Strong Communications Programme . pp. 'Marketing Management & Strategy'. As such.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .
E-MAIL Is the part of the Internet that most users use at present. Information is becoming a major part of the products and services that people buy. but in practice not in real time. 4. it is a common technology platform that allows computing devices to communicate with each other. which contain hypertext and pictures.1 INTRODUCTION The Internet is transforming the business environment.1 .1. FIGURE 4. This chapter provides an overview of the Internet and its defining characteristics. The three core channels include e-mail (the most common). Hypertext allows information to be organised in a user-friendly way that is easily accessible. it offers a number of alternative channels that enable businesses and people to communicate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. In doing so. and a critical source of added value. news groups and mailing lists. 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. and the 'world wide web' (www) . creating new challenges and opportunities.2 OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks.THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other. 34 .Figure 4. and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents. In essence. and provides the opportunity for dynamic interaction.
The Internet is a global network and can be reached from everywhere. when the United States Defence Department developed the 'ARPAnet'.2. which was intended to link military networks together.24 hours a day. allowing both parties to identify each other and build one-to-one relationships . • It Overcomes the Barriers of Time and Space . the Internet lets individuals and companies build interactive relationships with customers and suppliers.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 . anywhere. These qualities eliminate the barriers of time and space that exist in the physical world. • It Allows for Two-way Communication and Interactivity .2 (Note: 35 . regardless of where the computer or Internet access device is physically located. Graph is not drawn to scale).the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free).3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969. 4. and deliver new products and services at low cost. 7 days a week. These characteristics combine to create a very powerful medium. The context of the Internet and certain key developments are highlighted in the Figure 4. ubiquitous links to anyone. These defining characteristics have fuelled its explosive growth.this radically alters the process of interaction between communicating parties. By allowing for direct.not previously available with mass medium forms of communication.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. The Internet can also be accessed at any time .
3 .2 .com) 36 . as cited in 'E-Business Technology Forecast' . FIGURE 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.economist.Figure 4. 1996 (www.3.000 10.000.000 100.000 100 '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. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .000 1.000. 1998.000 1969: 10. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.a PricewaterhouseCoopers Report.000.000 1.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.
g. Multimedia development tools that can be used to create rich content. increasing to 500 million users by 200220. No.Higher PC penetration among consumers and companies .CyberAtlas Internet Statistics and Market Research.). hosting. Easier access to these networks provided by point-and-click web browsers.4.Content Aggregators .E-Marketplaces .com) 37 . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.Cheap microprocessors & RAM . the momentum created by all these forces has created a virtuous cycle of growth. Reed. The emergence of open standards in development tools and at the network protocol level (e. 'Electronic Commerce (finally) Comes of Age'. payment. The development of critical processes (ordering. The McKinsey Quarterly. there will be an estimated 375 million Internet users world-wide. As shown in Figure 4. billing. 1996. L.Cheap bandwidth .2 20 'World Online Populations' . etc.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS . making it more cost effective for software developers and other technology providers to create interoperable products. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. The growth in support services (e.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington..internet.g. and gateway services)..High-powered servers .4 . G. web design. 2000 (http://cyberatlas.Attractive infrastructure and middleware software . offering inexpensive bandwidth.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .Low-cost networking alternatives . FIGURE 4.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . TCP/IP).
Figure 4. communication and information tool. April 13.5. FIGURE 4.com) 38 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society (2000).g. 2000 (www. entertainment) and purchasing (37%) .5 .from communicating (90% use e-mail) and sourcing information. These activities highlight the adoption of the Internet as an interactive.eiu. chat rooms. to interacting (e. as cited in the Economist Intelligence Unit (EIU).WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading Hobbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. reveals the wide range of areas where people are embracing the Internet .
6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. April 2000 39 . web browsers. However. The Internet becomes an information-rich 'virtual' market space through which buyers and sellers interact. and people.e. and no cash register. FIGURE 4. no order book. projected by Gartner Group. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. There is no need to travel to a physical location. The main difference between the Internet and other electronic media (i. content. Instead there is a website. 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. The value of e-commerce transactions and market forecasts vary widely among research firms and government agencies. Conducting business over the Internet ('e-business') represents a fundamental shift in how buyers and sellers interact. they all project the value e-commerce transactions to grow at unprecedented rates.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. fax.6 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. telephone) is that the Internet goes beyond just enabling transactions. software.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for commerce.
Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. For example.. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-order' modes of Christensen. operation (e. pp. Volume 78 Issue 2. At the same time. C. Additionally. This is threatening to undermine many old established brands.and revolutionary new business models are emerging. partners and other corporate constituencies. March . some of which look set to become the superbrands of the future (e.g. the explosion of information is placing a premium on skilled information management. Yahoo!). through the use of extranets).g. Improved Core Business Processes The use of Internet-based technologies as the platform over which the organisation’s processes flow. how they compete and how they serve their customers . 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. The Internet also facilitates the development and co-ordination of global activities (e. CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. 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. Dell Computers). Harvard Business Review. Although the particular impact will differ between industries. New brands and business models are emerging to seize this opportunity. represents a level of efficiency and integration previously unattainable. A 'virtual' presence can mitigate the cost of having to invest in physical facilities. 66-76 40 . the Internet is sidelining the role of many traditional intermediaries.g. M.how companies operate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. By allowing customers to talk knowledgeably and directly to suppliers. 'Meeting the Challenge of Disruptive Change'.. and transforming traditional distribution channels. & Overdorf. which are often disruptive to traditional business models21.April 2000.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted . suppliers.
as they have access to more information leading to more informed decision-making. little loyalty. 22 Colony. has resulted in a fierce competitive environment. 'Empowered Fruit Flies' . these new highly informed customers are "empowered fruit flies". Internet technology can be used to exploit collective learning and knowledge. ensuring the delivery of a satisfying customer experience. the development of a knowledge economy. quick evolution and all the power. Now companies need to move at warp-speed.forrester. The Pace of Business is Accelerating With the fast pace of technological change. fierce competition. commit and deploy resources. combined with the emergence of electronic intermediaries. They can move from one supplier to another searching for the best prices. Customers have more options than ever before . highest convenience and quickest satisfaction. G. Competition is Intensifying Although the Internet removes the geographical constraints of reaching customers. to capture new opportunities. their organisations must harness knowledge .Forrester Research. products and services. respond to competitive and market dynamics. improving processes. Knowledge is Becoming a Key Strategic Asset Many companies have recognised that if they want to succeed. the globalisation of business. This. it also removes the geographical protection from competitors.internally and externally . with no time.they can choose between traditional 'bricks-and-mortar' companies. as they are just one 'click' away. 2000 (www.. the typical clock-speed at which companies need to operate has accelerated. online stores. collaborate more effectively and ultimately embed organisational intelligence within processes. allowing employees to share knowledge. and reorganise as appropriate. and the 24 x 7 environment. As a result. getting closer to customers and ultimately staying ahead of competitors. CEO of Forrester Research22. This is forcing companies to become flexible and responsive to customer needs. or catalogues. It also provides easy access to competitors' offers and allows customers to consider every available alternative.in developing products. the diminishing barriers-to-entry and the lower switching costs. constantly innovate. switching costs are much lower. empowered customers.com) 41 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers. According to George Colony.
23 'The Future of E-Business' . 1999 . Examples of emerging information age business structures include flat versus hierarchical. supply chain cooperation. information. and the need for speed and flexibility have accelerated the unbundling of business systems. most Internet and e-commerce partnerships extend beyond this. companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence. when they want.A Research Report by TeslaGroup. and partnering up with the best for the remaining activities. Traditionally. Increasingly. which highlights the typical structure and dynamics of an online company. It allows companies to improve customer service. advice and convenience. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon. However. thus creating a 'value net23'. companies can provide customers with a strong value proposition by offering them the best in quality. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. and most traditional partnerships were vertical. combined with intense competitive pressures. As such. and multiple strategic alliances and partnerships. companies have looked upon alliances only as a means of filling gaps. linking companies with competitors and players from entirely different industries and business sectors. 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.7. The extent of this partnering is illustrated in Figure 4. achieve global reach and realise a new source of cost advantage.com) 42 . linking companies with suppliers and customers up and down a pre-defined value chain.(www. it provides the opportunity to reach customers where they want. variety. The opportunity of linking the complete supply chain 'virtually'. extensive outsourcing. how they want and with the levels of customer service they demand. In this way.teslagroup. alliances and partnerships have taken on a new level of strategic importance.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.
tools and opportunities.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. while making the offering hard to duplicate off-line. This provides customers with added value. D. New opportunities for efficiency and co-ordination are emerging.a Boston Consulting Group (BCG) Analysis.7 . S. many online companies are blending together the products and services of a wide range of companies. the pace of business is accelerating and power is shifting to the customer. it is transforming the competitive landscape and brand-building environment.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. competition is intensifying.they are business issues.dot. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishing a competitive advantage. 43 .. G. Partnering with portals and affiliate web sites is important in driving traffic to a web site. 4. while triggering the emergence of new brandbuilding strategies.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.6 CONCLUSION The Internet and its strategic impact are not technological issues . 'Organising for e-Commerce' . The Internet is transforming every business to some degree. This is the substance of the next chapter. As such. & Stirton. April 2000 In an attempt to provide a rich customer experience.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .
and the fact that customers are buying goods that. This threatens to undermine the value of brands. the logic of the Internet cuts another way.2 THE NEW DYNAMICS OF BRANDS Traditionally. In response. offers interactivity. 'Internet Portals' .com) 45 .1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. many unnamed customers develop a 'relationship' with the brand. in addition to providing added value. Generally. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy.. people have concerns about sharing personal information. and sites that understand the user's needs and preferences24. they have never handled or seen (except on-screen). brands have been developed in an environment whereby a company creates a brand. Customers derive added value through the provision of information on the products or services they buy. J.Durlacher Research. addresses. in most cases. the intangible nature of the Internet. including the interactive approach to attracting customers and building loyalty. The limitations of brand-building on the Internet are also discussed. People only tend to transact with sites they know and trust . and projects it onto a third party intermediary (the media). credit card numbers. New strategies and tools for building brands on the Internet are identified. etc. Traditionally. has placed greater importance on trust and security. In addition. 5. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. The Internet. where the user feels a part of. on the other hand. However. On the other hand.names.sites that provide a wealth of information and make comparison shopping easy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. the Internet makes search and comparison much easier. as well as on topics of interest related to the brand and product characteristics25. whereby the company can establish a dialogue and 24 Marathe. 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. May 1999 (www. Transactions on the Internet require customers to provide detailed personal information .durlacher.
J. to its delivery to the customer. B. This creates the opportunity for companies to build stronger relationships than previously attainable.edu) 26 Peppers. January 28.1 .THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. 151-160 46 .Harvard Business Review. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. pp. 'Adding Product Value Through Information'.. However. 1997 (www.from the promises made in the value proposition. TABLE 5. 'Is Your Company Ready for One-to-One Marketing?' . . & Dorf. M. understand and relate to customers. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven.1. Prof.Fuqua School of Business.. relationship building characteristics of the Internet. Rogers. companies have to find innovative ways of leveraging the information and 25 McCann. In maximising the customer experience. In doing so. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. this also poses a challenge as these relationships may take on a life and character of their own. 1999..duke. a company can listen. January-February. learn. rather than simply speaking at customers. D. Duke University. brand-building must focus on the end-to-end customer experience ..
2000 (www. Chu. - Repeat customers refer more people and bring in more business . D. T. Kearney White Paper. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. (2000) which identified the following factors28: - Companies will not break-even on one-time shoppers . and some are spending over $50029. P. but also provides more opportunities for cross-selling.due to more frequent shopping and larger purchases. 2000 47 . - Loyal customers are more willing to buy other products from the company. J. companies must ensure that they provide a completely satisfying end-to-end customer experience. & Hancock. For example. as cited in 'Creating a High-Impact Digital Customer Experience' . These points stress the importance of online customer loyalty. 27 'Electronic Business Outlook'. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. and Novak..word-of-mouth is the single most effective and economical way online businesses grow their sites. it is very unlikely that an online retailer can break even on a one-time shopper. S. T.org) 28 Rigby.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. D. . 'The Value of Online Customer Loyalty and How You Can Capture it'. and with customers holding all the power. unless they are selling high-price. Baveja. and to recover their investment. 'How to Acquire Customers on the Web'. In fact. March 17. Therefore. Harvard Business Review. it could be argued that customer loyalty is even more critical online. a disgruntled online customer tells 10 people about a poor experience30. - Repeat purchasers spend more and generate larger transactions .often.com) 29 Hoffman.. 1999 (www.. companies need to retain customers so that they return to the site repeatedly.Research by PricewaterhouseCoopers / The Conference Board. .. customer acquisition costs are high. This is further reinforced by the fact that. L. Repeat purchasing not only binds trust.A Mainspring Communication Report in collaboration with Bain & Co.. This view is reinforced by in-depth studies carried out by Bain & Co. C.converence-board.bain.com and www. S.pwcglobal.. high-margin items. R. MayJune 2000 30 A Forrester Research Study...An A. Rastogi. Zook. on average.
and other features can be added or changed at low marginal cost. Similarly. additional customers and transactions can be managed with limited fixed cost investment.. the costs approach zero32. and the value that each member realises. As a result. (also referred to as 'viral economics'). 7th Ed. 'Positive Economics'. 1989. (London: Harper & Row).4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish.1. pp.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 180-182 48 . FIGURE 5. and in the case of information-based products. as illustrated in Figure 5.1 . R.THE NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. Once the up-front investments are made (for research and development and technology infrastructure).. each additional unit sold does not cost more than the last to deliver. additional products. Even more important. where the value of the network. G. customisation for individual customers. However. as the benefits of scale are overwhelmed by the disadvantages of size31. this is not the case on the Internet. businesses and online communities that rely on connectivity can enjoy 'network effects'. increases disproportionately as more people join the network.
FIGURE 5. Nov 1998 49 .A Publication by Andersen Consulting 'The State of Online Retailing' .Figure 5. R. cross-selling and up-selling33. enhancing the interaction. 21 . Outlook 1999. As the company builds a customer base and develops a relationship with customers.2. its ability to track customer preferences and customise offerings improves. link revenues 32 33 Melnicoff.2 . delivering increased margin per customer . This makes it more efficient in improving product selection. With no competitors around.THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. It also allows online companies to tap supplementary revenue streams. 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. including direct marketing. No.org Study in collaboration with The Boston Consulting Group. being first into a market makes it easier to capture the consumer's share of mind. direct marketing. '5 Rules of the eEconomy'.A Shop. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for businesses that establish leadership positions.. fulfilment • Defensible advantage against competitors SCALEABLE. advertising and referrals.
By the time a company has reached critical mass. the value of the company rises exponentially with market share. with its e-mail lists. leading to the exponential expansion of the customer base. "leveraging the media". and "network marketing". and word-of-mouth even more effective. the leader will pick up momentum and will stand to gain an insurmountable advantage . provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. Given the connectivity of the Internet among customers. creating a potentially exponential growth (like a virus) in the message's visibility and effect. An expanding customer base enables retailers to amortise the cost of brand-building over a larger base. As a result. This snowball effect favours first-movers. This is the logic behind some of the extraordinary valuations of Internet companies. 34 'The State of Online Retailing' . When a company reaches 'critical mass'. This. such as 'viral' marketing. It is often referred to as "word-of-mouth". the larger customer base provides online companies with more leverage in attracting and negotiating with key content.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. as it carries the implied endorsement from a friend. viral marketing is an effective tool in getting a message out fast. and the cost of switching to an alternative brand becomes quite high. commerce and distribution partners. 5. As a result. the brand begins to take hold. makes communication tighter. larger sites can leverage more customer advocates to reduce customer acquisition costs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. its growth curve relative to a new entrant is somewhat daunting. or until a competitor finds a way to change the game again. New marketing strategies. The Internet.org Study in collaboration with The Boston Consulting Group. Nov 1998 50 . with a minimal budget and maximum effect. Larger sites can also negotiate better supplier discounts or product placement fees. in turn. web sites. 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.A Shop. as once a strong lead is established. "creating a buzz".unless the leader makes a serious mistake. Word-of-mouth is a particularly powerful medium. chat rooms and bulletin boards. have emerged in attempts to exploit the network effect and potential exponential growth of the customer base.
whether for communications or community. When a user builds a website. Free Email at http://www. eGroups and Geocities (both recently acquired by Yahoo!). Geocities enables people to create personal websites for free. Hotmail. and in doing so spread the word for Geocities. Hotmail acquired over 12 million subscribers. and the message spreads organically. but Hotmail signs up more than 150. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. • Each new user becomes a company salesperson. saying: • "Get Your Private. seven days a week. and they created a subscriber base more rapidly than any company in history.com.hotmail. friends to visit it. where they have never carried out any promotional activities. sign up for their own free e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL). In fact.000 subscribers every day. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. A good virus will look for prolific hosts (such as students) and tie into their high frequency social interactions (such as e-mail and messaging).com 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.1 The Case of Hotmail.000 subscribers within a few years of launch. In its first 1. a company now owned by Microsoft. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.com The classic example of viral marketing is Hotmail. Today they are the largest e-mail provider in the world with over 40 million users. they will have a powerful viral opportunity at their disposal. A traditional print publication would hope to reach 100.5 years.com" • Then stand back while people e-mail their network of friends and associates • These people then see the message.5. they tell all their 51 .
.com) 52 . Baveja. Kearney White Paper. S. 2000 (www. In essence. The customers' ability to access and display information rapidly is extremely important36. S.. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock.3)..An A. 30% of potential customers leave sites because they cannot find what they are looking for.. D..bain.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. Chu.. T. making customers 'click off' to another site. In fact. . Kearney White Paper. March 17. As 35 36 'Creating a High-Impact Digital Customer Experience' . Rastogi.A Mainspring Communication Report in collaboration with Bain & Co. & Hancock. Place). Sites that are difficult to use can cause frustration. R..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . T. Zook. and 66% of people who start a 'shopping basket' fail to complete the transaction37.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. FIGURE 5. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.A PricewaterhouseCoopers Report. 'The Value of Online Customer Loyalty and How You Can Capture it'. 2000 37 Rigby. 2000 'The E-business Technology Forecast' . J. C.3 .An A. Price. Promotion.
CIO Magazine. up-to-date information. 1999 (www. whereas a slow response time and site downtime will have a significant negative impact. and a wide range of products. and fast response times are among the most important factors in establishing web brand loyalty38.businessweek.businessweek. 38 39 Cognitiative Inc.. as cited in Business Week Magazine. With almost infinite display space and inventory capability.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.4. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. ease-of-navigation. expert insights. 'Sticky Business'. T.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. ease-of-use. FIGURE 5. which can enhance the company's value proposition. October 29.com) Davenport.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5. as cited in Business Week.4 . February 2000 Issue 53 . online companies have the opportunity to provide rich. 29th October 1999 (www.
G. & Bluestein. demographics. 31% of online consumers use the Internet for obtaining product information. . S. J.5). which enhances the user's online experience. No.forrester. 3.Sloan Management Review. Some companies have taken this a step further and customise the product or service on offer (Dell offers 'made-to-order' computers through Dell Online). as well as through loyalty programmes that provide targeted benefits. Customisation Customisation involves tailoring the presentation of a web-site to individuals. iVillage and Geocities).. Clemmer. sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!). even if they purchase offline. According to Forrester Research40. Online sites can track a customer's purchase history and modify its service accordingly.A Forrester Research Report. share information and access a wide range of services. 54 . 'Real Profits from Virtual Communities' . Other content includes community-generated content. A unique characteristic of an online community is that the site includes both editorial content (determined by the site owner) and member driven content. based on profile information. An online community offers a compelling way to entice customers back to a site. These sites allow members to interact with one another. it needs a critical mass of members42. A. and nearly 20% use it for post-sales support. W.. Often. use bulletin boards.. 40 41 Morrisette. Spring 2000 42 Armstrong. Customisation creates the feeling of a one-to-one relationship. and organise live events. & Hagel. K.com) McWilliam. For a community to work. visitors should not be engulfed with too much information.g. Good content can help to educate buyers and sellers and create a greater sense of control over the transaction. 'Building Stronger Brands through Online Communities' . 1999 (www. or prior transactions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase decision. and advertising (if it is relevant and useful). An important contribution of these communities is that they provide members with a medium to communicate with each other. 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... It fosters a sense of belonging41 among the members. 1995. Members can interact in chat rooms.The McKinsey Quarterly. On the other hand.
'Making Real Sense of Virtual Communities' . allowing customers to deepen their experience with a brand and build more personal connection.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. 'Consumers and Their Brands: Developing Relationship Theory in Consumer Research'. Mulcahy. as well as attracting traffic from other sites. 343-373. Once customers know of a site. O'Donnell & Gupta.www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. they opt to input the URL (Internet address .com) directly into the browser and access the site immediately. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. when membership in the brand's community becomes an end in itself43. This is similar to placing offline stores in high traffic areas. Connectivity is enhanced by linking to search engines / portals44 and popular sites where target customers are likely to be browsing (see Figure 5. S. 43 Fournier..A PricewaterhouseCoopers Study. 1999 Communities enhance the speed and value of information sharing. A. C. March 1998. and can create emotional loyalty...5 .brand-name. 55 . Companies can provide a selection of related links that complement the site's purpose and value proposition. Journal of Consumer Research. pp.6). Site-tosite connectivity focuses on connecting users to other relevant sites. M.. 44 Search engines / portals enable users to find information based on relevancy to a query or keywords.
Therefore. Communication can be tailored to specific user interests and should allow for two-way interaction. 45 MarketWatch.marketwatch. customer care activities can involve providing a variety of payment. live chat. Other tools such as bookmarking the page can also facilitate connectivity. customer support at all stages of the interaction is important. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail. Customer Care Online customers often require assistance and reassurance. Customers share security and privacy concerns.6 .com) 56 . news up-dates. delivery and return options. The development of loyalty programmes. as well as informing and reminding customers of special offers.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. online chat. (www. toll-free telephone numbers. which provide targeted and unique (customised) benefits to the customer. serves this purpose and helps to build customer loyalty. and online surveys. and can be provided through e-mail. and FAQ pages (Frequently Asked Questions) to solve problems. as well as features such as gift-wrapping.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. In addition. activities. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. It is important in building relationships. events and subjects of interest to the customer.
Figure 3.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. S. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. 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 ’ .2. e-mail notifications and banner advertisements.mckinseyquarterly.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.7.Attract.7 . which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. & Zeisser. modified to take into account of the interactive dynamics of the Internet. 1996. Trial. Therefore.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. FIGURE 5... McKinsey Quarterly. Evaluation. M. links from directory searches (Connectivity). Retain. This is more difficult online than offline..4 .8. Newspapers. Magazines. including affiliate programmes with other websites. Interest. R. billboards. Adoption). etc. A. The mechanisms to communicate range from traditional media (TV. because there is no physical presence. No.) to online tools. Engage.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. Learn and Relate. pp.. visibility relies solely on Communication. 'Marketing to the Digital Consumer'.Awareness. and bring people to the site for the first time. This model consists of five stages . 180-183 (www. McQuade. The company must build awareness and communicate its value proposition to its target customers. Waitman.
1 3. The key factors at this stage are Convenience combined with interesting Content.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 .Economist Intelligence Unit 2000 (www.3 2.5) 2. 58 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.ebusinessforum.0 3. affiliate programmes.7 4.4 4.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.8 . Creativity is also an important factor in gaining attention in today's cluttered marketplace.WEBSITE PROMOTION METHODS . Fig. discounted over the expected duration of the brand-customer relationship.3 Source: Forrester Research.2 4.4 3. 3. as cited in 'Targeting Consumers via the Internet' .4 3. Attracting customers is only the first step in building online brands.3) is useful to ensure that a company develops a distinct and consistent brand identity. Engage With the multitude of choice available on the Internet. Kapferer's Brand Prism (Ch.com) The most effective methods are direct e-mail.5 3. multiplied by the expected rate of transactions.6 3. 3.8 4. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.3 3. public relations and television advertising. Companies then need to engage customers to obtain their interest and participation. it is important to quickly engage consumers' interest before they move on.
if used properly. Radio). • The Internet supports brand-building activities where there is a need to build a relationship. and what additional products and services are they interested in provides companies with valuable information which. 5. The initial site registration provides an early opportunity to obtain useful information.g. Communities and Customisation are other sticky applications.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the Internet can offer the brand-building process: • The Internet does not have the penetration of other promotional mediums (e. The objective is to increase the conversion rate (% of browsers converted into buyers).BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. such as groceries and convenience goods. Certain product categories. Content is the basic driver of retaining customers on a site. Learn The Internet provides extensive opportunities to learn about consumers (demographics. do not lend themselves to a need for customers to build a relationship with the brand (Figure 5. can create value for the customer and help build the brand-customer relationship. and forge closer relationships than any offline operator. Customisation and good Customer Care help to erect switching barriers and encourages customers to return and repeat the cycle. It is the extension of engaging and focuses on keeping a customer on the site through the use of sticky applications. a company can create value by providing a personalised online experience.who they are and why they shop online. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. Building up a knowledge database on each customer . TV. This helps to create a customer base that spends more time and money at a site. attitudes and behaviour).9). and must be continuously updated due to the multiple visit nature of customers. 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. 59 .
180-183 (www. S. 'Marketing to the Digital Consumer'.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. touch. pp. R. • Brand-building favours products that can be sold online. companies must provide a satisfying end-to-end customer experience .. The next chapter analyses the brand-building efforts of seven companies. M.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. McKinsey Quarterly. and as the relationship develops. especially in small quantities... A. The interactive brand-building process involves attracting. McQuade. due to high delivery and transaction costs (relative to the value of the product). Given the high acquisition costs of online customers. it is not economically feasible to sell certain products.from the promises made in the value proposition. to its delivery to the customer. & Zeisser. engaging and retaining customers. smell).9 . and the need to stimulate the other senses (taste.9 CONCLUSION On the Internet. Waitman. These case studies provide a practical insight into how companies are building their online brands. the experience is the brand. the interaction provides the ability for companies to learn from their customers and relate. In order to create "apostles". 60 .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. it is critical for companies to build relationships and foster brand loyalty. 1996.mckinseyquarterly. 5. The 7Cs Framework outlines the key components of the brand experience and the sources of added value. However.2. No. providing further added value..
BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .
com. Amazon has cultivated a reputation for excellence. greater convenience.1 outlines Amazon's timeline and major milestones. its value proposition.1 Company Overview Amazon. including: increased selection. 6. and has sales of over $2 billion. easy. CDnow. and one of the top two or three in Britain.com. Not a River' . 47 48 Interbrand (www.2.com's success stems from its compelling value proposition. ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products).Amazon. 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. France. combined with its levels of customisation and customer service.2 CASE STUDY: AMAZON.Goldman Sachs Report.com) . a company overview. discounted prices. its brand-building strategy (how it generates traffic). and enjoyable experience. Germany and Japan49. Amazon serves over 23 million customers from 160 countries.COM 6. The cases are presented in the following sequence . February 26.com and Yahoo!. eBay. It is the 57th most valuable brand in the world47. Boo. In addition.2 Value Proposition Amazon.com has become synonymous with e-commerce. 2000 (www.com) 62 . the sources of added value (using the 7Cs Framework). and is one of the few Internet brands that is recognised all over the world.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.It's an Ocean. 6.com launched with a mission to use the Internet to transform book buying into a fast. it is the most visited e-commerce website in America. and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Figure 6.The Economist. 'Amazon. more information. Amazon. Barnesandnoble.interbrand. Each case is presented in the same format including.economist. innovation and delivering on its promises.com. November 11. Amazon has been able to differentiate itself from other online competitors. 1999 49 'Amazon's Amazing Ambition' .see Appendix A.com . and has equity investments in several e-tailers.2. Through its provision of a one-stop shopping experience.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. Amazon. In addition. Gap. Amazon provides increased added value on several dimensions. In July 1995.1 INTRODUCTION This chapter provides an analysis of seven companies.
Amazon buys PlanetAll ad Junglee Corporation Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com to create a "home living" store at amazon.amazon. and more Amazon launches "Amazon.Amazon and online car-buying service Greenlight.com Amazon announces further plans to expand distribution network to meet rapid growth. Amazon opens another customer-service centre to meet rapid growth Amazon launches 4 new stores: Home Improvement.Amazon. featuring thousands of bestseller lists for hometowns.000 members Amazon.com . Software.Amazon enters strategic alliance with living. Amazon.Amazon announces investment in kozmo.com .com Amazon introduces "Purchase CirclesTM".com announce investment and strategic alliance . Ashford.Amazon and eziba.Amazon surpasses 20 million cumulative customer accounts .com Electronics and Amazon. workplaces." providing shopping from wireless devices.com.Customers can shop at Amazon.Amazon opens a customer service centre in Huntington.com Amazon acquires Back to Basics Toys to add to Amazon.Amazon launches new kitchen store .Amazon enters into a strategic partnership with Drugstore.amazon. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Amazon launches online Auction site Amazon agrees to purchase Live/bid.com goes live Amazon launches Associate Programme Amazon IPOs for $49million. Video Games and Gift Ideas Amazon and Sotheby's launch www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.sothebys.Amazon opens customer service centre in The Hague .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon.com.com's new shopping referral service Amazon opens third distribution centre to meet rapid growth Amazon invests in DrugStore.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with.com Toys & Games is launched Amazon announces strategic alliance and invests in Gear.toolcrib.com enters European book market Microsoft signs Amazon.com Auctions and zShops provide new tools to its merchant community . West Virginia.Amazon.com 63 .com .com Anywhere. and minority investment in.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. universities.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.com .com is founded by Jeff Bezos Amazon.com opens its virtual doors at amazon.New home living store from living. such as the Palm VII organiser.Amazon launches www. a tools and equipment store for professional tool users and woodworkers .TIMELINE AND MAJOR MILESTONES Amazon.com invests in wineshopper.com Amazon invests in Pets.COM .com Announce Strategic Investment and Promotional Agreement . to meet rapid growth .com via the new wireless pocket PC .com and NextCard launch co-branded credit card .Amazon launches lawn & patio store .Amazon launches health and beauty store . Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive bookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Network Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape announce strategic online deal Amazon opens second distribution centre Amazon and Geocities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .
and quick-to-load pages Over time. mobile phones. gift click. Palm VII PDA device). This is an example of 64 .The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping.Figure 6.e. Content Amazon provides content on several levels. wish lists. gift reminders.1 .1. downloads quickly and services visitors adequately .2. Customer purchase circles allow shoppers to cross-reference similarities such as where people work. easy-to-use.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customisation of product offering Simple. the 1-ClickTM express checkout. live or study. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic. and Amazon.com All Product search (searches the entire web). expert reviews.com Anywhere to support access from wireless devices (i. FIGURE 6. logically structured. including book jacket images. such as the Amazon.OVERVIEW OF AMAZON. recommendations. offering multiple paths to a given book or product. customer testimonials. Amazon has added other features for shopping convenience. The site is easy-to-use. and customer Purchase CirclesTM.3 Sources of Value . book summaries. encourage repeat visits and drive higher conversion rates. discussion boards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. interviews with authors.
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 . to the proactive notification of new items of interest. Amazon's content is not reproducible by competition. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. Amazon creates one-to-one relationships with its customers.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. In doing so. By leveraging its vast customer base. from its shopping basket applications which lists the estimated time to delivery reliably. and Customisation Amazon provides customised features and services. Amazon introduced Amazon. creates a competitive advantage. More recently. This builds the loyalty of both the customers who write reviews and the customers who find community among like-minded people. therefore. real-time shipping and backorder notices.2. and customer interaction. Community Amazon has also added a community element to the purchasing process. Connectivity Amazon has built relationships with high traffic web portals and sites. These are discussed in more detail in Section 6. This customer-centricity is evident in all Amazon's activities. while driving up repeat purchases and cross-selling opportunities. linking it to a large number of other sites.4. and has developed an Associates Programme.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. which helps to build loyalty and create switching costs. 65 .thereby increasing conversion rates. from the customer recognition at the point of interface (Figure 6. converting them into a storefront for Amazon. and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays.
Once orders are placed. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. As a result of all these factors (7Cs).000 by August 2000. 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. 66 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. 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. two personalised services. attracting member sites of all sizes.000 members. Newsweek. they are subsequently confirmed by e-mail.2). it began to advertise in print media and online .a move that along with the novelty of its business model and the newness of the Internet.2. Instead of paying directly for this exposure. Amazon offered Associates referral fees of up to 15%.com hot-link and offer specific books of interest to their visitors. and not subsequent purchases. In addition. Through the first half of 1996. enticing them to return to the site and purchase repeatedly. The Financial Times. which only applied to sales that resulted from the initial click-through. The Associates Programme has been phenomenally successful. In July 1996. 6. Business Week. increasing to over 500.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. New Yorker and The Economist. Eyes and Editors. and by 1999 it had over 200. helped generate publicity and stories about the company in publications such as The Wall Street Journal. This enabled Amazon to reach more customer segments and niches (Figure 6. help maintain contact and build traffic by e-mailing customers when desired products or books become available. In the second half of 1996.
Amazon closed deals with five of the six most visited Internet addresses. multiyear deals involve exclusive book-selling rights. • Amazon. 67 . thereby promoting Amazon. These multimillion-dollar.com Refer-A-Friend . Interesting viral initiatives include: • Amazon.com).uk the local provider for Yahoo! UK & Ireland. People tend to tell their friends about it.com) Amazon has developed alliances and partnerships with high traffic web portals and sites. and you are given a $5 gift certificate for each customer you provide.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. Prodigy and @home. From July 1997 to December 1998.amazon. Amazon has used viral marketing techniques through customer reviews.com gift certificate (in your name). and primary button placement on web portal search engines. was also linked to Amazon's entry into Europe Amazon. In addition.COM'S ASSOCIATES PROGRAMME Source: Amazon. Excite. the customer acquisition cost is only £10.AMAZON.allows customers to create a personal profile (with pictures) on the site. Therefore. In return. Netscape's Netcenter and NetSearch. free eCards and gift certificates (which customers send to friends. Amazon also established agreements with AltaVista. Yahoo!. including: America Online (AOL). The Yahoo! agreement.com.com's website (www.co. each friend is sent a $5 Amazon.de became the local provider for Yahoo! Germany and Amazon. mutual links.customers are encouraged to provide e-mail addresses of friends.com About Me . and Geocities. spreading the word for Amazon.2 .
. "we had a world-class site the day we launched . Amazon has also incorporated traditional offline media (TV. which accounts for 66% of Amazon's sales. Purchase CirclesTM). As the relationship develops.com Really Matter?' .significantly lower than other online companies. C. which is analysed (learning) and used to provide value-added services such as the introduction of new product categories. billboards. Amazon's proven online merchandise selling techniques including easy-to-use search options. clear presentation. buying patterns and viewing habits.but it was only a tenth as good as the site we have now. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base. Amazon maintains a database of customer preferences.Forbes. 50 Willis. 'Does Amazon. have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. And we relied on word-of-mouth to build awareness. By relating to customer needs. That's not possible anymore50".g. Once customers are attracted to the site.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses. interesting content. According to Jeff Bezos. With this combination of promotional methods. 1998 68 . newspapers) to generate awareness. 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. Amazon is building customer loyalty and encouraging repeat business. however. with the explosion of websites. community feel (as discussed previously). and improved customisation and recommendations (e. Amazon has been able to achieve average customer acquisition costs of less than $20 . April 6. 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. so we didn't have to do much advertising. Magazines.
Saunders. the balance of power shifts away from the company and goes towards the customer. In addition. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit'. establishing a reputation for excellence and fulfilment. while our competitors have been Amazon. developing customer service centres and expanding its distribution network to support high levels of service. In addition. This has helped them attract customers and move up the learning curve quickly. and its safe and secure delivery. and according to Jeff Bezos. L. he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. establishing Amazon as the leading online bookseller with a large customer base. Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. good value.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. "we're not a stationary target. For example. We have been customer obsessed. management realised that Amazon had become more associated with other core brand values . July 1998. According to Jeff Bezos.. because he wanted it to be short. 51 52 Hazleton. Amazon has been able to build a strong brand at relatively low cost. in June 1998. (Oxford: Capstone Publishing). "Online.2. Our secret is that we have not been competitor obsessed. 1999 69 . Amazon unveiled a music store. Amazon is constantly seeking new ways of improving its offering. R. thereby diluting the value of its association with books. Amazon continually invests in re-working and improving its technology infrastructure and software (80% in backoffice operations).. As such. due to the hype and coverage it was given. Success. We were blessed with a two-year head start. to capture the spirit of the site. which within six months propelled Amazon to one of the leading online music retailers.a wide range of choice.com Way'. Amazon was able to secure partnerships and alliances with key players.com obsessed52". and to convey its vast size and offering. 'Business the Amazon. Amazon received criticism for expanding its product line. As such. and our goal is to increase that gap51". Nevertheless.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. However. Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. According to Jeff Bezos. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. Amazon's understanding of its brand identity has been a critical factor. further enhancing their value proposition. memorable.
they're stretchable and pliant. not necessarily a reality. with new products and value added content. This raises a critical issue. 53 Warner. When they're young. if it continues to incur losses. stem from its compelling value proposition and high quality end-to-end customer experience. but over time they become more and more associated with a particular thing and harder to stretch53".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. The key factors driving its growth and high retention rates. Amazon has also benefited from a first-mover advantage giving it an edge over competitors.. Amazon's intense focus on customer needs and continual innovation. distribution centres and upgrading the site. However. Amazon is claiming to be making profits on its books and music categories. Volume Discounter' . Amazon also recognised that service quality is a perception. 1998 70 . In doing so. and to sustain a positive image and satisfactory end-to-end experience. October 12. Although Amazon has successfully built a strong brand and loyal customer base. which is critical on the Internet. Nevertheless. they have cultivated a reputation for excellence and fulfilment. as the true value of a brand lies in its sustainability. it has not recorded any profits to date. Amazon delivers on its promises of a wide inventory of products. 'Marketers of the Year: Jeff Bezos. Quality is only measurable in the minds of visitors to the site. the drain on their cash resources will push them towards bankruptcy. Amazon has continuously invested in customer service. and investors lose confidence. 6. however. perhaps trying to defend its view that losses taken to build market share can reap profits later.2. secure payment procedures. speedy delivery and good value. have kept it ahead. B. This customer-centricity is a key hallmark of a successful Internet brand.Brandweek.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement.
music. promotion) between the online store and the retail stores have been kept separate.com announces strategic relationship with Palm Computing .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March . Barnesandnoble. Inc.com provides other online categories offering software.Launches Internet Radio .Launches Video Store 71 .COM 6. Dalton bookstores (located in shopping malls). contacts. as it could capitalise on the infrastructure and back-end operations (warehouses. 40% owned by Bertelsmann AG.3 CASE STUDY: BARNESANDNOBLE. and 470 B. Barnesandnoble. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.Barnes & Noble. Barnes & Noble Inc.Barnes & Noble went online at AOL May .com's timeline and major milestones is outlined in Figure 6.Barnes & Noble University opens registration for free online courses . is one of the best known traditional booksellers in the United States.com was able to 'hit the ground running'. magazines. prints & posters and related products.Launches Affiliate Network December .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) .. and 20% owned by the public. Barnesandnoble.COM .TIMELINE AND MAJOR MILESTONES . Barnes & Noble Inc.com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn.2.Barnesandnoble. book databases. all front-end operations (marketing. Launched in 1997. rare.Offers same day delivery in Manhatten .com is the fourth largest e-commerce retailer54.com and Microsoft announce that they will create an eBook superstore .barnesandnoble. TABLE 6. Besides books.com launched its website (www. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).) established by its parent company.1 Company Overview Barnesandnoble. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.3.Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site. However. and is the second largest online bookseller (after Amazon.Acquires minority stake in NotHarvard.Launches BNTV .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com is approximately 40% owned by Barnes & Noble. etc.Acquires equity stake in Mightwords .2 1997 January BARNESANDNOBLE.Announces distribution relationship with New York Times September .com .Barnesandnoble. Barnesandnoble.com). Currently.
FIGURE 6.com's website (www. Both offer detailed bibliographic information.3). but instead of developing an outstanding interface to its inventory.3 Sources of Value . easy and secure ordering.com's virtual storefront is graphically richer than Amazon. they offer customers fast delivery.com and barnesandnoble. Both Amazon. logically structured.com's (Figure 6. publisher.3.com offers customers an easy-to-search catalogue of virtually every book currently in print.COM'S WEBSITE Simple.com's and takes a bit longer to download. 6. previously-owned and rare books.com) 72 . the features are practically identical. and easy-to-navigate site Categories focus on books. however.3.com or www. edition. as well as an extended searchable catalogue of millions of out-of-print. in terms of the 7Cs framework. Barnes & Noble planned to dominate online book-selling. etc.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Both have expanded their convenience to offer 54 Media Metrix. as cited on Barnesandnoble. including title. good prices. In addition. music New Initiatives Barnesandnoble.com let customers sign up to receive email reviews and announcements of new titles. the company created a site very similar to Amazon. software. rich editorial content and a community experience.3 .barnesandnoble.OVERVIEW OF BARNESANDNOBLE.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.2 Value Proposition Barnesandnoble. author.bn.
They have developed an affiliate programme that links sites to Barnesandnoble. however. it lags behind first-mover Amazon. this programme had more than 300. These initiatives have generated traffic to the site. Netscape and Microsoft Network. compared to Amazon.com in return for a commission on any purchases that they originated . and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). while Amazon. while Amazon.com.1 billion.The Wall Street Journal.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Barnesandnoble. prevent cannibalisation of its existing business.com's 1999 revenues were $202. The 6.com was valued at $21. As of February 2000. and both are expanding globally. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). Although. Yahoo!. has yet to leverage its strong brand in cyberspace.com has created a high quality website and customer experience. December 17. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com had over 17 million. reasons for this are explained in the next section.com closed 1999 with 4 million customers. Instead. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com's $1. Barnesandnoble.000 affiliates in its referral network.4 Brand-Building Strategy Barnesandnoble.64 billion. Barnesandnoble. and avoid charging sales tax in states where it has stores56. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. Both offer customisation that permits users to personalise the experience. Lycos.6 million.a replica of Amazon's Associates Programme. Both try to foster a community of readers by letting customers post reviews online.com's market capitalisation was $251 million.3. Webcrawler.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. Both offer 'associate programmes' that let other websites link to their sites. However. and Barnes & Noble Inc. 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. 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 .
provides access to valuable resources. In return.com. and its BMG Entertainment division includes music giants Arista Records and RCA Records. Barnesandnoble. Barnesandnoble. By failing to leverage it.com's key differentiator from Amazon. • In addition.com has changed its name to Barnes & Noble.com.com. Planetrx. and leverage its real-world presence. At any given point there are hundreds of customers browsing their aisles looking for something to read.com. LLbean. Under the seven separate agreements. and in recent months has aggressively sought new ways to differentiate itself.com created a new cross-marketing genre in February 2000.com. Recent Initiatives Barnesandnoble. This broke new ground in web-marketing relationships as no money is exchanged and no third party entity is involved.com has lost access to valuable customers. when it struck reciprocal marketing deals with Expedia.com should have aggressively cross-promoted their stores through advertising.com and VitaminShoppe.. • Barnesandnoble. as Bertelsmann's book division includes partners such as Random House. each partner offers a similar link to Barnesandnoble. and Internet terminals in the bookstores. Barnesandnoble. 74 . in the attempt to gain traction and build momentum. content and distribution opportunities. with a similar discount. 1-800Flowers. Barnes & Noble University (a free online education resource). Other synergies would include the ability to ship books ordered online to the stores closest to customers for added convenience. in-store displays.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shopping via the Internet). Unfortunately.com is its association with Barnes & Noble Inc.com. and a same-day delivery option in Manhattan. These include: • More effort is being focused on bringing the retailers in sync with barnesandnoble. people began using their stores as a physical showcase for online rivals such as Amazon. To signal its intentions. • Barnesandnoble. or deliver books directly from the retailers.com has begun to acknowledge some of these mistakes.com. Petsmart.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. and the retailers have distributed more than 10 million bags promoting the website and containing a coupon offering a discount on online purchases. Jcrew.com.com. Barnesandnoble.com offers links to each partner's site and a discount for visitors who click-through.com. and the tangibility that this provides. Barnesandnoble.com's link to Bertelsmann AG.
Forbes. The Press have also contributed.com. Barnesandnoble.Not a Best Seller' . feature for feature) has failed to differentiate Barnesandnoble. and allowed them to offer stock options as compensation and achieve a high market capitalisation. even if that means eating into their existing sales.com's experience is instructive.its key differentiating factors.com and has given them the image of a second rate 'me too' 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. 57 'Bn. In addition. by portraying them as slow and clumsy in comparison to the more nimble Amazon.forbes.com's late start in 1997. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness.6 Conclusion Although Barnesandnoble. and you shouldn't have to start from scratch when converting traditional shoppers to online shoppers57". customer relationships and offline presence . 2000 (www.com) 75 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promote the two ventures. a wellestablished Internet brand. significant market momentum. August 4. its failure to leverage its bricks-and-mortar stores to drive traffic to its site. it has not been able to establish itself as the leading online bookseller.com had made many of the same moves a few years earlier and had a sizeable and loyal customer base.com . The company failed to leverage its established brand. and was further up the growth curve. meant that Amazon. Barnesandnoble.3.com has been able to create a high impact and high-quality customer experience. it also caused a major setback. otherwise they risk losing out to other online competitors. and its lack of innovation (by copying Amazon.
the company was hindered by technical problems that delayed the site going live by five months (until November 1999).4 CASE STUDY: BOO. June 10. Puma.4. CMO of Boo.com opens its virtual doors' . Company is put up for sale. Boo.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. On going live. They believed that the limited launch of direct online sales operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket.COM . Everlast.TIMELINE AND MAJOR MILESTONES . and eventually debut in Asia. Morgan.1 Company Overview Founded in 1999. November 2000 January February May 6.Appeals for $30 million more funding .Site goes live .Marketing Week. Sweden. as well as create a kid's site. Boo. not the limited range you might get at most London fashion shops58". Finland. Italy and Spain within a few months. it means all that brand's product line is available.Announces it has only 500.com. and the resulting loss of investors' confidence. among others. Boo.First sign of problems . within six months Boo.com launched with the goal of being the world's "first truly online retailer of sportswear and fashion".4. 1999 76 . They intended to add France.fails and appoints KPMG as liquidator. However.com provided a range of 18 fashion and footwear brands including DKNY.com had set the record as Europe's best-funded European Internet Start-up.com. Germany and Denmark. P.3 1999 Mid year BOO. founder and Chief Marketing Officer of Boo.they redesign site. Boo. sack 20% of staff and sell stock at 40% discount .com collapsed through lack of funds.com entered six markets: US. After a high profile launch. and was billed as one of Europe's hottest e-commerce ventures. TABLE 6.Raises funding of $125 million . and Converse. If a clothing brand is on the Boo site. and included high profile investors such as Bernard Arnault. "our marketing thrust is not based on prices. arranged through J.000 unique visitors .2 Value Proposition According to Kajsa Leander. Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group). it's about range and convenience. as cited in 'Boo. 58 Kajsa Leander. receiving $125 million of funding.COM 6.Multi-million pound advertising campaign created by BMP DDB . due to its poor performance and inability to build a customer base. England.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
6.4.3 Sources of Value & The Failure of Boo.com
Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by sport, brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics, stitching and colour. 3-D product images were accessible in all colours and styles, ready to stock in a shopping cart and mix-n-match on a rotating sex-specific mannequin. To transcend web shopping's impersonal stigma, the company devised a personality called Miss Boo, an animated personal shopper who guides site visitors and offers remarks (Figure 6.4). To build customer loyalty, they established the Player's Club (or Leisure Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour customer service teams in four world-wide offices. Boo.com also published content in an online style magazine, including interactive games to attract purchasers. All orders were to be delivered within 5 working days in Northern Europe and the US from distribution centres in Munich, Germany and Louisville, Kentucky.
FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE
However, Boo made some fundamental mistakes. First, a large portion of its potential market was unable to use boo.com's site because the website design (extensive graphics, pop-up windows, 3-D images) was too advanced for most computers and access was frustratingly slow. It required a high bandwidth Internet connection that was only available to 1% of
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live............ it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper catalogue was printed for those who want to buy offline. However, the early bad experience and negative word-of-mouth scared off many online shoppers who lost confidence as Boo.com had developed a reputation as a cumbersome and slow site, even though it had become simpler and faster. There were also fulfilment and customer service problems. Although customers received the purchased items within a few days, many complained that they received the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers had to demand a refund, and then re-order the items again. Obviously, once the money was refunded customers did not risk going through the frustrating and inconvenient process again. Besides these issues, there continues to remain a doubt whether the basis of Boo's value proposition was compelling enough in the first place. First of all, prices were not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com's target audience of the young and trendy shoppers. Traditional fashion shopping provides sources of value through its social experience and entertainment, whereby people enjoy wondering around shops, trying on different styles, getting their friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues.
6.4.4 Brand-Building Strategy
Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the
Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, as cited in 'Boo.com' - Sporting Goods Business, July 6,1999
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
amount of money invested in the company, and the high-profile investors involved. Boo quickly burned cash on PR and advertising, spending $15 million on an advertising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon discovered the site's frustrating flaws, resulting in low conversion rates, and with all the hype, negative word-of-mouth spread quickly.
Boo.com failed to provide a compelling value proposition, and did not focus on target customer benefits. Instead of overhyping the convenience they offer, Internet companies must remind themselves what customers miss about in-person shopping and compensate with true added value. Boo.com also failed to address basic customer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but vital, areas of brand-building, such as creating a positive end-to-end customer experience and making each customer contact pleasurable and memorable, and ensuring goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to market must be balanced against a company's readiness. Boo was very ambitious to launch in six countries simultaneously, without testing their business model. Unfortunately, this only served to increase set-up costs as well as investors' expectations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression given by the implementation and experience. A poor brand experience on the first visit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, including Dean Hawkins - finance director) and investors, throwing everyone into panic, which reflected on all aspects of the operations and eventually destroyed the business.
& Novak. announce marketing alliance .Harvard Business Review.com) 80 .5. $18. former arch rival .000 music related items . TABLE 6. by twin brothers Jason and Matt Olim.5. guides to music genres.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW . and was the first site to offer the sale of music downloads and custom CDs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.Forges distribution partnership with Yahoo! $65. T.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . cover art. and one of the most popular shopping sites on the Internet62. daily music news. This unprecedented degree of access to music and information is the core of CDnow's value proposition..cdnow. whether for browsing or buying. CDnow is also driving the digital distribution of music. CDnow provides access to over 500.Merges with Columbia Records . 'How to Acquire Customers on the Web' . $22. and they aim to "make every visit to the site. On 19th July 2000. as well as music reviews.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. and an average daily audience of over 800.000 people.TIMELINE AND MAJOR MILESTONES . a valuable and rewarding experience"63. customisation and a wealth of information and content to help in the purchase decision.1 Company Overview Founded in 1994.Site goes live .Launches merged CDnow/N2K site .5 million distribution deal with Lycos Signs three-year. CDnow is the leading online music store. good prices. convenience. 62 Hoffman.Partnership program with Geffen Records . features.5 CASE STUDY: CDNOW 6. It has a customer base of 4 million people.Merges with N2K.CDnow and Time Inc.ten times the selection of a conventional bricks-and-mortar music store). pp. May-June 2000.Raises $10 million through private placement .000 music-related products and 650. D. and exclusive interviews and reviews from CDnow's award-winning editorial staff.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.000 sound samples.179-188 63 CDnow website (www.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6. CDnow was acquired by Bertelsmann AG.
CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. CDnow has cultivated similar relationships with MTV.Figure 6.5. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.. and has secured rights to music reviews. etc. The whole process of searching for albums or music titles to the actual purchase is simple . cover art. FIGURE 6. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). to make it easier for customers to explore new music and make informed purchasing decisions.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. CDnow has leveraged the reputation of their brands to reinforce its own.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. artists biographies.5. For example. 81 . By partnering with well-known content providers. easy-tonavigate.5 .3 Sources of Value .
allowing them to respond to detailed customer queries. Community CDnow has not exploited the potential of creating a community feel. Excite. it gives them a sense of ownership and a compelling reason for them to return.from record labels to much smaller sites that discussed or reviewed music (supplying valuable content). French. In addition. an incentive programme that rewards customers and encourages them to connect back to the site. Portuguese. Personalisation helps to strengthen loyalty and deepen customers' commitment to the brand. allow customers to keep track of albums to buy in the future. Customers can even maintain an Address Book online making it easy to send music to friends and family (viral marketing promoter). Internet access providers. Italian. CDnow developed the Fast Forward Rewards programme. Dutch and Japanese. and Geocities as well as more focused specialist sites. 82 . Yahoo!. Spanish.search engines. they will be reluctant to visit another online store and enter the information again. CDnow also started an affiliate programme (called the Cosmic Credit Programme) that links other websites to its site . which accumulate and can be spent on a variety of music-related products. It allows customers to purchase customised CDs and also enables customers to develop their own personalised view of the store through My CDnow. and could consider introducing customer reviews or set-up communities around different music genres such as a Jazz Club or Classical Club offering members relevant content and the option to chat with other club members. Whenever a customer makes a purchase they earn Fast Forward Reward points. Customer Care CDnow's site can be viewed in English. Due to International interest. It also creates switching costs. Connectivity CDnow has linked up with broad-based highly trafficked Internet sites . By customising the store to meets customers' needs. German. CDnow hired a group of multilingual customer service representatives to handle questions. Other features such as My CDnow's Wish List. CDnow has also developed feedback teams groups of customer service representatives with deep knowledge of certain musical subject areas. and key news and entertainment sites .such as AOL.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. for once the relationship starts to develop and customers have entered numerous addresses into their Address Book.
music-oriented websites. and spot radio to build reach.000 small. as well as more-targeted music-related sites like Billboard.They have also stuck exclusive alliances with AOL.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. customers buy music. • Traditional offline Media . this is their "most successful customer building programme64". • Affiliate Programme .Through the Cosmic Credit Programme. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. print advertising is music-related publications such as Rolling Stone. they buy from CDnow.5. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. and Variety. Spin. By keeping the brand in front of the customer in this way. and radio spots on the Howard Stern Show to build a cult following among radio listeners.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. 83 . CDnow's initiatives include: • Banner Ads . covering the entire music spectrum. According to Jason Olim.CDnow's advertisements are targeted to some degree. • Alliances and Partnerships . It is a revenue-sharing arrangement. Yahoo!. giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. Excite and other powerful Internet content and service providers.CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. CDnow extended its distribution reach to include more than 250. 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. CDnow is doing everything it can to ensure that the next time that 6. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business.
as a way to fuel very lucrative word of mouth. and scaled it awareness-building efforts.htm) 84 . It is a powerful source of acquiring new customers at low cost. April 28. by two twin brothers with little money reflects the 'American dream' and was quickly picked up.com) 65 'Pioneering in Cyberspace' . with repeat customers accounting for more than 50% of sales. resulting in increased conversion rates. • Word-of-Mouth . 1998: $56.Hampel & Stefanides (www.cdnow.5.4 million). The company continually pushed for new distribution partnerships to widen its sphere of influence.hsny. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 6. Public relations efforts helped to generate word of mouth and influence sales. It is constantly adding new functionality to the site and has been innovative in its offering . with 44% of sales coming from new customers65.As for many successful online retailers. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. and to increases in the customer base of more than 30% quarter-to-quarter. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. In fact.(www. word-of-mouth accounts for the lion's share of CDnow's customers.they were the first site to offer the sale of music downloads and custom CDs.Press Release.com/cdnow. it is in this context that the large investments in advertising and partnerships make sense. 1998 . both in the online and offline worlds. This has contributed to a 225% increase in sales (1997: $17. The story of how CDnow was founded in a basement.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .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. CDnow's promotion strategies have attracted high levels of traffic.CDnow made public relations a high priority brand-building tool.4 million.
This gives the customer the impression that the order is being handled quickly. It was able to create a strong value proposition and high quality customer experience. and innovative.Building an Internet Business at Breakneck Speed".BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim. P. (Boston: Harvard Business School Press). 2000 p. CEO of CDnow. The development of an extensive affiliate network. combined with the high impact customer experience created . CDnow has developed a relationship with Valley Records.from how CDnow has personalised its product offering to its capable customer service team . They also provide the customer with an order number and customer support contact information should they have questions.have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.Building an Internet Business at Breakneck Speed". 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. 2000 p. as cited in Carpenter.75 85 . This. 6. "your brand is not just what you say . "eBrands . a record distributor that handles the majority of CDnow's fulfilment logistics.it's what you do66".89 67 Jason Olim. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. as cited in Carpenter. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. "eBrands . CEO of CDnow.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. P. "the most important customer loyalty tool is a great store67" and CDnow has gone to great lengths to provide this. 66 Jason Olim.5. and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. According to Jason Olim. and ensure that it exploits its early-mover advantage and keeps ahead of competition. (Boston: Harvard Business School Press). to ensure quick delivery to customers.
and eBay provides added value through its convenience.A Harvard Business School Case Study. "at its core. with emphasis being placed on its unique community feel and culture. CEO of eBay. Sellers pay a nominal fee for placing an item up for sale. global trading place for buying and selling personal items in an entertaining auction format. with the number of unique daily visitors setting a record of 1.1 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. from collectibles and antiques to electronics and toys. Auctions represent a platform. the eBay community has grown to include more than 10 million registered users. and eBay never takes possession of the item being sold.com) 70 'Meg Whitman at eBay Inc. as cited in 'eBay . Auctions are an enabler. People perceive the auction format to offer better prices. collectable shows.6. eBay effectively created a new business model never before possible . transportation and other overhead costs.removing the need for inventory. 24 hour a day.000 new items joining the "for sale" list every 24 hours69.6 CASE STUDY: EBAY 6.2 Value Proposition eBay offers consumers an efficient. eBay is not about auctions.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. flea markets and auctions.Company Overview' .g. Auctions make it fun.eBay website (www.6. The buyer and the seller work out the logistics of the transport (e. and eBay receives a transaction fee that ranges from 1. payment) between themselves.eBay website (www. Since its launch in September 1995. (A)' . But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.efficient one-to-one trading in an auction format. This is a new market . garage sales. There are over half a million new auctions.com) 'eBay .the closest thing in the offline world are trading forums such as classified ads.300 categories.ebay.782 million in January 200068. Individuals use eBay to buy and sell items in more than 4. 6.Company Overview' . extensive selection and geographical reach. and 450. According to Meg Whitman. or the payment for the item . shipping.25% to 5% of the final sale price on any item sold.ebay. 1st October 1999 86 .
eBay and First Auction sign a partnership agreement . The Official eBay Guide to Buying. So brand-building job No. Still the vast majority of our new users come from word-of-mouth.com Create auction-style marketplace for used cars eBay launches Business Exchange eBay and Keen.eBay acquires Butterfield & Butterfield. co-marketing relationship. . allowing users to create personal homepages .Business Week.Compaq Computer Corporation and eBay form a strategic U. they try to influence customer behaviour by encouraging them to adopt certain values. "the first brand-building strategy that we have is to have a great customer experience. Boston. Unlike the previous case studies discussed.America Online and eBay announce strategic marketing alliance .eBay acquires Blackthorne Software GO.eBay acquires alando. emphasis is placed on community development and customer care. Dallas & Fort Worth.The 7Cs Framework According to Meg Whitman. and its online trading site (Up4Sale) .eBay expands strategic relationship with Netscape .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 . as they rarely deal directly with the company.eBay teams up with Carclub. Milwaukee.eBay goes live . and in terms of the '7Cs'.com form exclusive three-year relationship eBay and Wells Fargo launch electronic cheque as an alternative to credit card payments and traditional cheques .eBay goes wireless with Palm VII connected organiser . Providence. Nashville.eBay introduces eBay Magazine in collaboration with Krause Publications.com and eBay announce multi-year strategic marketing agreement eBay and NEC form a joint venture in Japan eBay launches in Japan eBay and Autotrader.eBay goes live in Australia .Launches "My eBay!" to customise the online auction experience . 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' .Com form alliance - 6.3 Sources of Value .S.eBay exceeds 21 million online auction bids and completes more than 5 million auctions since its inception in 1995 . This raises challenges in how to control and influence the customer experience.eBay IPOed raising $58 million . and two books -.eBay launches local websites in Baltimore & Washington DC. the eBay customer experience is based on how their customers deal with each other. And you only get word-of-mouth if you have a great customer experience.com to provide automotive service for eBay Users .eBay launches 'About Me' feature. .6.businessweek. Since eBay cannot control how one person treats another. and Collecting Just About Anything and eBay for Dummies. Seattle & Tacoma.eBay acquires Jump Inc. Norfolk & Virginia Beach. 1 is have a great customer experience71".eBay acquires Kruse International . Las Vegas. Selling. and raises $700 million .com) 87 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. and Salt Lake City . 21st May 1999 (www.eBay and Ultimatebid.Germany's leading online person-to-person trading site .eBay and AOL launch co-branded site .de .
and since. This contributes to the community feel. increasing the risk of outages. eBay had a 'wake up call' when the website crashed for 8 hours. eBay has also expanded to accommodate access through wireless devices for added convenience.6). FIGURE 6. Other content includes the banner ads. which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users. categorically arranged.6 . easy-to-use online service (Figure 6. topically arranged. Content Content is primarily user generated through the items listed for sale. they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. they have continually invested in system capacity.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.OVERVIEW OF EBAY'S WEBSITE Customisation Simple. angering hundreds of thousands of eBay users. Nevertheless. which is much more demanding on the system. eBay's site has to process thousands of live bids simultaneously. 88 . and adds to the experience and the discovery of the auction process. 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.
the culture has come under strain due to the company's rapid growth from a small community into a "big city". respect. which is then added to the partner's trading profile. and in doing so.as eBay users refer to themselves . autonomy. which is posted to the site. and share information. the community spirit and personal relationships also transcend the online experience. Whitman describes eBay's community culture as a site "of the people. e-mail. In addition. each user is encouraged to submit feedback through eBay's 'Feedback Forum'. eBay offers its users category-specific chat rooms. 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). Community eBay attributes much of its success to a strong sense of community among its users.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interface. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. bulletin boards. has enabled eBay to foster a strong sense of community on its site. and is considered by many users as one of the best features on the website. a monthly newsletter. After a sale. This has created a self-regulating mechanism that encourages good behaviour. for the people". working together and helping each other offline. It is a place where people can meet with similar interests. For many 'eBayers' . discuss topics they care about. eBay's community has a distinct culture based on trust. a "giving-board" for charitable donations to user-identified causes. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest. empowerment and equality. 89 . To encourage this sense of community. eBay Boston. eBay Salt Lake City) have helped them restore that community feel. However.g. Recent initiatives such as the development of local websites in major US cities (e. by the people. and there are several reports of eBay users vacationing together.eBay represents more than just a place to buy and sell goods.
and the introduction of two specialised customer support groups . which was dedicated to investigating misuses of the system (e. By using its own enthusiastic. This was later expanded to include customer support representatives who worked out of eBay's headquarters. its user community.g. shill bidding) and helping to resolve user-to-user conflicts. 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 was able to cost-effectively offer 24x7 customer support early on. and willingness to empower. These people worked from their homes. and the Safe Harbour group.the Community Watch group. eBay employed a "remote" customer support model. fraud. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum. This also reinforced the company's respect for. Customer support activities were constantly upgraded and expanded as the business developed. eBay's approach to customer care has evolved over time. and respected members of its own user community to serve as customer support representatives. answering e-mails and responding to questions posted on the site's bulletin boards. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Communication eBay maintains close communication with its members.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. geographically dispersed users as customer support representatives. in which the company hired active. links to high traffic sites. During the first two years. banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. Customer Care eBay controls neither end of the transaction. knowledgeable. 90 . but they have other partnerships with over 150 websites of varying scales. the largest of which was with AOL. eBay also engaged in marketing partnerships. As such.
eBay Magazine. Doll Collector) and appearance in trade shows. provide a wealth of information about the 'ins and outs' of trading on eBay. These new publications appeal to the collecting spirit.6. and maintained the same ratio for 1999. Based on this. 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. and Collecting Just About Anything and eBay for Dummies. and highlight opportunities created by e-commerce. The AOL partnership was one of the largest strategic partnerships on the Internet . and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e. Mary Beth's Beanie World.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. and two books. eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). the largest of which was with AOL. As a result. Selling. The Official eBay Guide to Buying. and facilitate the spread of positive wordof-mouth. eBay decided that it would not enter into major portal advertising deals in the short term. who tended to be serious collectors.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. Early on. eBay has since expanded its promotion efforts and engaged in marketing partnerships. Through this combination of its advertising efforts and targeted promotions. they spent $12. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. Recent promotional initiatives include its new publication. In 1998. but they have other partnerships with over 150 websites of varying scales. eBay transformed from a pure online play into a 'clicks-and-mortar' company. eBay has been able to attract a large customer base. 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.3 million in advertising. as a result of the high quality experience it provides. representing about 40% of revenues. $75 million joint marketing alliance and development deal. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. they decided to target their marketing efforts on these heavy users.a four-year. 91 .
This has become part of the eBay culture. As a result. eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. and according to research carried out by eBay. 6.the ultimate network effect .5 Conclusion eBay's compelling value proposition. very fast. However. This is achieved by listening to their community (learning) and developing new improved products and services (relating). as they could not opt for a 'go slow' strategy. and according to Meg Whitman. which has established eBay above other online auction communities. Their focus on heavy users and targeted promotions.com) 92 .Business Week.businessweek. 21st May 1999 (www. eBay attracts a broader selection of buyers. their ability to create a new market using Internet technology. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors. is one of the factors that users value most as they are not provided with junk mail and intrusive offers in a aggressive way.6.contributing to its strong lead and competitive advantage. "the devil in so much of this is in the detail. And while we have to move very. their ability to cultivate a distinct 'sense of community' has been the defining characteristic which differentiates them from other online auctions. 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Boom at eBay' . have been key factors that have contributed to the success of the brand. I think you are not well served by moving incredibly rapidly and not doing things well72". eBay prefers the opt-in model whereby users have the option to choose such services if they were interested. eBay has also faced difficult challenges in scaling the organisation fast enough.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'. however. the Personal Shopper and the eBay Life Newsletter. have been instrumental in building a 'quality' customer base. which in turn attracts more sellers . such as the Feedback Form. and their first-mover advantage. which were all ideas of eBay users.
letting customers access the Gap brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 73 74 Interbrand (www. GapKids.com is an example of successful crossover marketing. TABLE 6. service and value to everyone74". and analysts estimate that sales in 1999 amounted to $50 . and Gap online provides access to the full range of items at Gap. 6. the growth prospects are enormous. Germany and Japan. L. Gap online exploits the accessibility and convenience of the Internet. from shirts to accessories and hard-to-find sizes.com) . In late 1997.Business Week. October 8.interbrand. L. The Gap offers a balance of modern and seasonal styles of clothing.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco.7. Gap started selling items online .gapinc.7.COM .htm) 75 Jeanne Jackson. Inc.1 Company Overview Gap opened its first store in San Francisco in 1969.$100 million. head of Gap Online. to provide customers with greater convenience and options. 1999 93 .see Appendix A Gap.800 stores in the US.com. online sales are only available to US customers.COM 6.com' .babygap. whether in the store or online76".com and www. 'Clicks and Mortar at Gap. announce multi-year partnership. Gap's online sales tripled in 1998 alone. 'Clicks and Mortar at Gap. California GapKids opens its first store BabyGap is born Gap opens its online store at www. "this is about being clicks-and-mortar.'s website (www. as cited in Lee. Gap. Canada.7 CASE STUDY: GAP.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. This success is largely due to their simple formula . and BabyGap. surpasses $9 billion in net sales and increase earnings by 54% over previous year. America Online (AOL) and Gap Inc. from jeans and T-shirts to khakis and jackets. 1999 76 Jeanne Jackson."to deliver style. October 8. and are still relatively small compared to Gap's $9 billion in annual sales.gap. up from $20 million in 199875. standard styles are well suited to online shopping.com' .6 1969 1986 1989 1997 1998 1999 - GAP & GAP.com/about_us. however.an early convert to the then-revolutionary idea of clothes retailing on the Internet. and provides useful insight into how traditional brands can leverage their strength online. In addition.gapkids.Business Week. Gap Inc.2 Value Proposition Gap's simple. According to Jeanne Jackson. and today it is the 29th most valuable brand in the world73. UK. as cited in Lee. Its reach extends across more than 1. Currently.
Gap Online primarily focuses on Convenience.very easy. Executive Vice President of Global Marketing. This personality is reinforced online through the simple structure and layout. but provides customers with the option of viewing text-only. April 18.. Simple. Visiting the gap. very efficient"77..7. from the blue and white colour scheme to the easy-toshop format . the extensive integration of Gap's online and offline activities are clearly evident. feel and design of the site is consistent with the bricks-and-mortar stores. The site also offers sharp graphics. making it convenient. making navigation even faster. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.The 7Cs Framework In terms of the 7Cs framework.com store one immediately notices the consistency between the online and retail stores.com. and easy-to-use. 1998 94 . reinforcing its brand identity.7 .. 'Mind the Gap'. Content. Unlike Barnesandnoble.. D. and Customer Care. describes the company's brand personality as "direct and straightforward. The Observer..making visual references to its offline roots...3 Sources of Value .OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Michael McCadden.. FIGURE 6.
which would not be possible in the store.com also provides a Gift Central feature which offers gift suggestion from Gap. In order to integrate its offline and online operations and logistics. Gap. Gap communicates with customers through customised e-mails. The Gap site connects to other Gap online stores including GapKids and BabyGap. The site's virtual style feature also allows customers to mix-and-match combinations of clothing. and customers can view their latest TV adverts for buying inspiration.com allows customers to track the status of online purchases and provides contact information on the nearest store. and customers can register to get e-mail reminders of upcoming holidays and birthdays. Gap. Gap has also developed an affiliate programme.as most Gap online shoppers have a good idea of how Gap clothes fit. and goods bought online get returned at the same rate as store purchases . as well as sample all of the latest shades of fingernail polish on a virtual hand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gap. Gap's simple. once customers are registered online.com's content consists of detailed information on its full range of products. twice a month. promoting its specials and including links directly to items on Gap's website. and had recently established marketing deals with AOL and CDnow. Unlike the case of Boo. This level of customer care is an important factor in making customers feel more comfortable with online purchasing. standard styles are well suited to online clothes shopping. customers can return goods purchased online to their neighbourhood store. allowing shoppers to contrast different cuts and styles. GapKids. Gap made a decision to charge sales tax on online sales. However.com. without causing complications. In addition. By doing so. 95 . and BabyGap. Gap does not provide any community features on its site.
whereby for every $100 a customer spends at Gap Online. In addition. • Gap. • They offer Online discounts and promotions such as the ShopCard. on counter cards.com has also created an affiliate programme encouraging sites to establish links to gap. on shopping bags and even on the cash register.com) in store windows with the slogan "surf.Extensive Integration Gap. by displaying the URL (www. the retailer has installed "Web lounges" that lure buyers with comfortable couches and terminals hooked up to Gap. that gives Gap more visibility on the Internet by linking to the world's largest online shopping destination: Shop@AOL marketplace. or to refer shoppers to Gap's website. Store clerks are also trained to look for products online for their customers if the store does not have them in stock. Gap has also supplemented this with online promotions: • In August 1999. Gap has held in-store campaigns to get customers to submit their e-mail addresses.gap. Magazines. they send the customer a $20 Gap ShopCard.gap.) that also promote the online store.shop.com. either online or in stores. which displays "Shop online at www. which can be used towards future purchases. it is fully leveraging its offline presence to build awareness.ship". These efforts doubled the size of Gap's e-mail database. providing a useful way to directly reach customers. In certain high traffic Gap and GapKids stores.4 Brand-Building Strategy .com" on the display screens between transactions. 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. To convert walk-in shoppers to cybershoppers. 96 .7. 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 offering a 10% discount and free shipping on their first online purchase.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com in return for a 5% commission on every sale referred through the site.com has been able to piggy-back on The Gap's offline advertisements (in TV. however. • Gap. billboards. etc.
5 Conclusion Gap.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.thereby increasing the company's reach. Gap had a significant advantage over pure online players in attracting customers and building critical mass. while reaping the benefits of low customer acquisition costs and extended reach. whereas established companies. By aggressively marketing both the stores and the website. 97 . have already established the back-end operations and can use them as the cornerstone of their online business. provides existing customers with added value through the convenience of purchasing online. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. The Internet.7. and can also provide access to different customer segments who may not usually buy the products at all . With their brand awareness and network of retail outlets. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. such as Gap. Gap has been able to significantly strengthen their brand-customer relationship. thereby reinforcing its brand identity. and allowing each to leverage the strengths of the other. Pure online players have to invest heavily in logistics.com is an example of successful crossover marketing. on the other hand.
The Strategy.8 CASE STUDY: YAHOO! 6. CEO of Yahoo!. Yahoo! is a leading guide in terms of traffic.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. The Stock' . Yahoo! has since morphed from an ordinary search service into a global Internet communications. 78 79 Interbrand (www. lies the directory . the site was receiving 1 million hits per day.D students at Stanford University. September 7.businessweek.The Company. As the first online navigational guide to the web. advertising. The concept exploded (through word-of-mouth) and in less than six months.8. Yahoo! was founded by David Filo and Jerry Yang.see Appendix A 'Yahoo! . the amount of information. from e-mail services to stock quotes and much more. 1998 (www.interbrand.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78. who started an online guide as a way to keep track of their personal interests on the Internet. two Ph. According to Timothy Koogle. 6. There's nothing in the real world to compare to that79". As such. and the number of websites continues to explode. all in a single location. The company's global web network includes 23 world properties outside the US.com) . Yahoo! offers a range of supporting services that add value.2 Value Proposition At the core of Yahoo!'s value proposition.1 Company Overview In April 1994. household and business user reach.com) 98 .8. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. and is one of the few Internet companies to turn a profit early in the development of the Internet. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.Business Week.
regardless of platform (i.8. TVs. Palm computers).Yahoo! forms agreements with Palm Inc. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July . 99 .Site goes live September . Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. mobiles.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.com allowing them to offer person-person payment solutions . Their goal is not to list everything under the sun.600.The 7Cs Framework Convenience Central to Yahoo!'s success. but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. and unveils Yahoo! Digital Introduces Bill Payment services .7 YAHOO! .e.com.3 Sources of Value .TIMELINE AND MAJOR MILESTONES 1994 April . to allow access.8).Yahoo! Launches Business-to-Business Marketplace . 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.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! Shopping launches personalised shopping service 6. Yahoo! extended its convenience through its Yahoo! Everywhere service.8 million IPO (2..Yahoo! unveils Yahoo! Finance Vision . More recently. is the way it has structured and displayed information.Yahoo! acquires eGroups . . to provide web-based services to PalmTM handheld computers .000 shares at $13.Receives $1 million in venture capital funding from Sequoia Capital $33.Yahoo! acquires Arthas.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.
the end-user. the partner. 100 .OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. Yahoo! has increased customer loyalty and retention rates. while providing partners access to a large customer base. 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. Their thrust has been to provide valuable content to customers.com and CDnow. and more importantly. ranging from daily news and weather reports to road maps and books. easy-touse. and is similar to a custom tailored newspaper (Figure 6. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics.8 . By tailoring the information to users' preferences. They have formed multiple alliances and partnerships with leading online companies such as Amazon. from stocks and sports results to weather and air fares.9). This creates a win-win situation as its satisfies Yahoo!. and has been at the heart of Yahoo!'s growth and development. well structured. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.
9 . It keeps customers on the site for longer periods. and many-to-many. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one. Yahoo! has also implemented campaigns to persuade users to bookmark the site. message boards. Community Yahoo! has developed customisable web communities called Yahoo! Clubs. telephone and even traditional mail. and encourages them to return frequently. In addition. In 1999. fax.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. 101 . (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. Yahoo! spends more on customer support than most companies. where groups of people with shared interests can communicate through chat. and plans to incorporate other features such as online chat to facilitate communications.OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. one-to-many. and is driving Yahoo!'s multiple partnerships and alliances. Yahoo! acquired GeoCities. Connectivity Connectivity is Yahoo!'s core product. reinforcing the brandcustomer relationship. Customer Care Yahoo! responds to customer inquiries via e-mail. and e-mail. or to make it their home page. to provide its customer base with access to useful links and content. and contributing to their reputation as a quality service provider. and the nature of the navigation business.
Yahoo!'s brand-building success starts with its name. 82% of Internet users and 23% of people intending to go online. therefore. which conveyed the brand's irreverent personality. Intelliquest. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . 80 'Web Survey Shows Yahoo! Tops'. and it formed a critical link in Yahoo!'s brandbuilding strategy. and through communications via email. In 1996.4 Brand-Building Strategy Yahoo! is a marketing machine. As a result.8.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often.com) 102 . Their strategy was to target "near surfers" . Yahoo! aggressively promoted the site through public relations. an approachable nature. Yahoo! also encourages customers to e-mail ideas and feedback. Yahoo! avoided characterising itself as a technology-oriented company. by building a recognised brand name. Given the unease with which the average consumer approaches technology. and an inherent friendliness. TV commercials and radio spots during drive time. recognise the name Yahoo!. Yahoo! would be one of the first sites that they visited. (www. While Internet companies were targeting existing Internet users through the use of online promotion methods.intelliquest. At the time this was considered a breakthrough.a sense of irreverence. 6. Yahoo! extended beyond this to use traditional offline media. This was especially important. and its implications of a good time. and according to Intelliquest80. as experience surfers tend to be loyal to their search engine. Yahoo! maintains close contact with customers. 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. These near surfers represented (and still do) a large and fast growing group and.people who are not yet online but are likely to use the Internet in the near future. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?".
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. May 3.com) 82 'Yahoo! Forges Strong Brand While Adding Meaty Content' . Yahoo! has paid little for this exposure. 92% of Yahoo! users rate the service as "excellent" or "very good" which is significantly higher than those of other sites. and yo-yos. According to a recent study. breath mints. which has been instrumental in establishing Yahoo! as a household name. We need to be one step ahead in order to have a better service than our competition82". as well as TV shows (Ally McBeal. In addition. VP-Brand Marketing. new services and customised features highlight their ability to relate to customers' needs. s4 103 . p. to create Yahoo! Internet Life.yahoo.Advertising Age. According to Karen Edwards. Yahoo! adopted 'guerrilla marketing' techniques . a little wacky and inviting'.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. 1997 (www. Once customers access the site. which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success.with its name being plastered on everything. T-shirts. including backpacks. Their innovation. They even have a barter deal with the San Francisco 49ers. ER) and Hollywood movies. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . They also teamed up with publisher Ziff-Davis Co. a monthly magazine guide to what's new on the web and it has co-branded products. snowboards. 1999. sailboats. Although this seems like a shotgun approach. it's too late. stating that "if we wait to hear about it in the news. the research shows that 73% of Yahoo! users bookmark the service . Visa and MCI. August 26. Yahoo! has managed to cultivate high brand loyalty.it must reinforce the image of the company as 'a service that is fun. it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test . customers quickly discover its value and through a high quality experience (7Cs). parachutes.higher than all other services81. organisers. and 76% turned to Yahoo! before visiting another search engine or navigational site.Yahoo! Press Release.
while also associating Yahoo! with well known brands. As a result of all these factors. s4 104 . Yahoo! has benefited from a first-mover advantage. and first to go mainstream by advertising its name using traditional media. 6. VPBrand Marketing of Yahoo!. In addition. first to go public. alliances and acquisitions to provide added value services to their customers. while attracting new customers.Advertising Age. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . have created a distinct brand identity that differentiates the brand and appeals to its target market. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. These relationships have provided end-users with added-value. They have maintained that lead through the creation of a high quality end-to-end customer experience. In addition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Yahoo! has invested relentlessly in new services and marketing programmes.com. May 3. if a user cannot find what it is searching for. 1999. they have carried out extensive partnering. from its convenient and logical structure and display of information. to its simple design. To maintain its lead. its choice of partners. and has cultivated a reputation for excellence. and its openness (for example. with a large customer base and high levels of customer loyalty. GoTo. p. HotBot.8. its excellent customer service.6 Conclusion Yahoo! is one of the most successful brands on the Internet. 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. and other search engines at the bottom of its search results page). Yahoo! has built a strong brand. that have set it apart from the pack. The essence of Yahoo!'s brand-building strategy is highlighted in a simple statement made by Karen Edwards.8.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine. "we've really focused our marketing efforts on attracting new users and providing an experience that makes them stay83". As the first online navigational guide to the web. their innovative promotional and guerrilla marketing techniques. first to turn around an annual profit. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of its customers.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
CONCLUSION & DISCUSSION OF KEY FINDINGS
This dissertation set out to explore how the Internet is changing the brand-building environment, in order to identify the new sources of value, the new brand-building tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The repeated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acquisition and infrastructure. Repeat transactions provide the basis for a relationship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a successful online brand. The companies that are successfully building relationships and fostering brand loyalty are those that recognise that their brand's perceived value hinges on the total end-to-end customer experience, from the promises made in the value proposition, to its delivery to the customer. It is about enticing customers, gaining their trust, and making the experience so satisfying that they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand-building on the Internet extends beyond the traditional focus of positioning, advertising, promotions, catchy logos and slogans, to creating a business that can deliver complete, and completely satisfying, experiences. As outlined in Chapter 5, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn, and Relate). These frameworks highlight the key components and sources of addedvalue for developing a high quality experience, and the process of building a customer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next section concludes the dissertation with a discussion of the key factors that contribute to building a successful online brand. This
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
7.1.1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: •
A Compelling Value Proposition
Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional 'bricks-and-mortar' establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of in-person contact.
A High Quality Online Experience
Strong Internet brands are those that create a high quality engaging online customer experience. The 7Cs framework allows companies to deliver a tangible customer experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick-to-load and easy-to-navigate, delivering compelling content, customising the experience, developing a community feel, making connectivity easy, integrating customer care, and establishing two-way communication. By placing emphasis on different 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity.
A Reputation for Excellence (Delivering on their e-Promises)
Fulfilment and delivering on e-promises is the acid test of online brands. The successful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, which builds confidence and trust that not only entices customers to do repeat business with the company, but leads them to spread positive word-of-mouth, attracting other customers to the site. 107
particularly to secure content and widen reach to new customer segments and niches. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. integrated customer acquisition strategies. whereby each party benefits from the other's expertise or skills. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. these companies are creating even stronger value propositions. to maintain consistency. ranging from online methods to traditional offline media. 108 . these companies must have an inherent understanding of their brand identity and core values. and convenience. while ultimately benefiting the end-customers. offering customers the best in quality. a company can leverage the partner's brand and reputation to reinforce its own. before it fractures. brands are harder for competitors to emulate. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. leading brands have focused on building strong partnerships and alliances. as well as determine how far the brand can be meaningfully stretched to other products and market segments. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. content. variety. The most successful partnerships are symbiotic matches.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. but also provide added value to the brand community. By distinguishing their offering and focusing on unique sources of value-added. Alliances and partnerships play an important role in achieving speed and momentum. In addition. and exclusive alliances can lock out competitors from valuable content or online real estate. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. to distinguish themselves from competitors. and by partnering with well-known brands. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. As a result.
• Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering. these well-publicised brands also took off. As Internet penetration exploded. • 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. 109 . and by focusing on customer needs. and it aligns itself with the most influential venture capital sources. and extensive word-of-mouth due to its novelty. It locks up important content and distribution partnerships. that comes with innovation. to create new services and content that satisfy customer needs. The challenge then lies in keeping up the momentum. In many cases. A first-mover advantage is an important asset for an online brand. and traffic. and benefited from additional hype. by providing better services. These brands are accumulating knowledge about customers. and develop a detailed understanding of their customers' needs. giving the brand an edge. customisation and customer care.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. the innovations are the result of the company's ability to data mine its vast database of customer information. and are continuously adding new services and functionality to their sites. are leveraging this customer knowledge (learning) to nurture relationships (relate). Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. Many strong online brands were also early-movers on the Internet. and differentiating it from other brands. By leveraging unique customer information. By getting to market early. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. through past transactions and solicited input. the company benefits from the buzz. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. these innovations are difficult for competitors to reproduce. and it can acquire customers while it is still inexpensive to do so.
110 . established customer relationships. they are equally important in business markets. Through extensive and seamless integration. an in-depth analysis. As such.value remains (and always will) the basic building block for every successful brand. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. tools and key factors outlined in this dissertation are also applicable to business markets. clicks-andmortar brands are providing customers with true added-value. one component remains unchanged . building relationships and satisfying needs. The Internet has radically changed the business and competitive environments. Yet while everything is being turned upside down. expand the brand experience to meet customers' expectations in the online world. They have an established brand. the author believes that the core concepts and key factors identified that contribute to successful online brands are likely to persist. In addition. Therefore. while reaping the benefits of lower customer acquisition costs and extended reach. would represent an exciting opportunity for further research. established fulfilment systems and infrastructure. there has been a limited time horizon to evaluate the durability of Internet brands.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. drawing on several case studies from business markets. with the emergence of wireless access and new platforms. the concepts. Having established a strategic perspective on building online brands.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Ability to Leverage Offline Brand and Assets Bricks-and-mortar brands are often well positioned to succeed on the Internet. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers. Nevertheless. however. these brands must respect their core brand elements and maintain consistency in the service quality that is expected. Brands and brand-building tools tend to be associated with consumer markets. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other.factors that clearly differentiate them from pure players. 7. and a physical presence (tangibility) . In doing so. ongoing research would be necessary to build on the findings of this dissertation. They possess critical assets that give them an advantage over pure online start-ups. but at the same time. Nevertheless.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .
329 4.132 15.550 12.043 8.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.985 2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .634 1.804 2.281 11.310 11.845 56.761 1.792 3.603 5.147 9.275 30.596 3.313 2.781 17.909 7.568 3.231 12.806 11.193 112 .361 1.048 20.681 2.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.interbrand.262 1.527 3.Interbrand's Ranking of the Top 60 Brands (www.648 1.423 2.654 43.101 9.595 17.231 24.225 11.052 6.932 4.464 3.602 4.894 14.766 14.143 2.181 21.422 1.021 26.830 14.895 2.197 32.283 4.076 3.781 33.694 17.502 33.643 3.155 7.404 4.806 2.184 1.319 1.510 8.
from the culture of the organisation and how employees are compensated (stock options) to the flexible and virtual structure. They must move quickly to capture new opportunities. However. and as the business environment changes. whereas entrepreneurial Internet companies must focus on 'managing for change'.. commit and deploy resources. constantly innovate. companies operated at a steady pace and were essentially geared up for repetitive transactions and routine activities. and the emergence of a knowledgebased economy. with the fast pace of technological change. global competition. R. 'In Search of Excellence'. all these dimensions must change accordingly. (Harper & Row). the approach that was successful for traditional companies is not suitable for new entrepreneurial Internet companies. the informal management style and the constant strategy re-calibration. activities. all their operations. and reorganise as appropriate. The fundamental difference is that traditional companies have focused on 'managing for efficiency'. customer empowerment.The McKinsey 7S Framework The McKinsey 7-S Framework* (see diagram below) outlines the dimensions of a business.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX B . 1982 113 . respond to competitive and market dynamics. showing how they are interrelated. It is critical that all these dimensions come together and are re-enforcing. T. Internet companies must be able to move at warp-speed. THE MCKINSEY 7S FRAMEWORK STRUCTURE STRATEGY SYSTEMS SHARED VALUES SKILLS STYLE STAFF Traditionally. and structures are aligned differently. As such. As a result. * Peters. & Waterman.
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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BUILDING SUCCESSFUL BRANDS ON THE INTERNET
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