1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure


7 9 9 11

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8


13 13 14 15 16 18 19 20 22 22 23


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

3.1 3.2 3.3


25 25 26 27 28 30 31 32 32

3.4 3.5 3.6 3.7

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



4.1 4.2 4.3 4.4 4.5 4.6


34 34 35 35 39 40 43

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

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9


45 45 47 48 50 51 52 57 59 60

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

6.1 6.2


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


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


8.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.1 Company Overview 6.2 Value Proposition 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.6.2 Value Proposition 6.3 Sources of Value .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.com 6.2 Value Proposition 6.6.The 7Cs Framework 6.3 Sources of Value .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 6.2 Value Proposition 6.8 Case Study: Boo.5 6.5.1 Company Overview 6.1.8.The 7Cs Framework 6.4.com Company Overview 6.4 Brand-Building Strategy 6.3 Sources of Value .5.6 Conclusion Case Study: eBay 6.7 6.5.1 Company Overview 6.6.5 Other Factors That Contribute to their Brand Leadership 6.7.5 Conclusion Case Study: Gap.2 Value Proposition 6.3 Sources of Value .4 Brand-Building Strategy 6.The Failure of Boo.5 Other Factors that Contribute to their Brand Leadership 6.5.The 7Cs Framework 6.Extensive Integration Sources of Value .5 Conclusion Case Study: Yahoo! 6.5 Conclusion Case Study: CDnow 6.4 Brand-Building Strategy .5.7.1 Company Overview 6.5.com 6.The 7Cs Framework 6.1

7 Figure 5.2 Figure 2.8 Figure 3.4 Figure 4.5 Figure 6.3 Figure 5.2 Figure 3.4 Figure 2.5 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.6 Figure 6.7 Figure 6.6 Figure 2.4 Figure 5.7 Figure 5.3 Figure 2.2 Figure 4.5 Figure 2.5 Figure 4.4 Figure 4.6 Figure 5.com's Associates Programme Overview of BarnesandNoble.com's Website Overview of Boo.2 Figure 6.1 Figure 5.1 Figure 2.9 Years to Reach $100 million in Sales Research Methodology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Model of the Buying Process Steps Between Evaluation of Alternatives and a Purchase Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Brand Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Accelerated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) The Structure of an Online Company The Network Effect The Virtuous Spiral of Online Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community Hexagon Customer Access to Information The Interactive Brand-Building Model Website Promotion Methods .3 Figure 3.1 Figure 6.9 Figure 6.com's Website Amazon.1 Figure 1.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 .Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.1 Figure 4.6 Figure 4.7 Figure 2.3 Figure 6.8 Figure 5.8 Figure 6.1 Figure 3.4 Figure 6.2 Figure 2.3 Figure 4.2 Figure 5.

4 Table 6.5 Table 6.com .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.com .Timeline and Major Milestones CDnow .Timeline and Major Milestones Boo.Timeline and Major Milestones eBay .com .Timeline and Major Milestones BarnesandNoble.1 Table 6.Timeline and Major Milestones Yahoo! .6 Table 6.2 Table 6.Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .com .Timeline and Major Milestones Gap.7 The Emerging Brand-Building Environment Amazon.3 Table 6.


America Online (AOL) and eBay have been able to build powerful brands in a few years. The Internet also represents a fundamental shift in how buyers and sellers interact.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead. the Internet is changing fundamentals about customers.com) 7 .com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.g. Figure 1.com noble. customer affiliation and level of sales. Internet companies such as Yahoo!. Supply chains are being rethought. and business models revamped.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com Source: Securities and Exchange Commission Filings. and is triggering the need for new brand-building strategies and tools. that these Internet start-ups have achieved. creating strong brands that are putting established brands at risk. In the midst of this. This is creating new challenges and opportunities. while providing new tools for promotion. It is empowering customers with more options and more information to make informed decisions. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. interaction and relationship building. whereas it has taken decades for traditional companies to achieve the client base.9 2.YEARS TO REACH $100 MILLION IN SALES 6 5.1 . aggressive Internet start-ups have emerged.5 million book titles). products and services reconfigured. As such. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. Amazon. McKinsey Analysis (www.0 1.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.9 3. As such.com1 Amazon.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.5 2. Amazon. there has been an explosion in the online world .1 3. service and brands.an explosion that is also a harbinger of how business will operate in the future. as they face each other through an electronic connection. relationships.2 3.com's range of 4.1 OVERVIEW Over the past few years.mckinseyquarterly. FIGURE 1.

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

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

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

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


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

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

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

Consumers develop a set of brand beliefs about the attributes of competing brands.. and Control'. Implementation. In the evaluation stage. and pay the most attention to the brands that will deliver the sought benefits. 16 . Planning. These beliefs depend on their previous experiences with the brand. it is important to clarify customers' underlying buying behaviour and the buying process. and selective retention.3 . These brand beliefs make up the brand image (this concept is re-visited in Chapter 3).Analysis. P. the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer. it is critical to understand what attributes consumers value.4). two factors can intervene between the purchase intention and the purchase decision .FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler. This can be triggered by internal or external stimuli (advertisements). 1996. selective distortion. p. and the effect of selective perception. either through heightened attention or through an active information search. FIGURE 2.3).5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands.attitudes of others and unexpected situational factors (Figure 2. Once aroused.194 The process starts when the buyer recognises a need..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 'Marketing Management . However. (Europe: Prentice-Hall) 8th Ed. Through gathering information. a consumer will be inclined to search for more information. Consumers differ as to which product / service attributes they see as important. The buying process consists of five stages (Figure 2. and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Therefore. the consumer learns about competing brands.

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

and Johnson. Saturn. Nov-Dec 1995.5 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.. E. 'Why Satisfied Customers Defect' . E.. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney. Federal Express. D.those who actively attack the brand telling others not to buy from the company.Harvard Business Review. T. 6 7 Jones.. 'Growing the Trust Relationship'. 'Why Satisfied Customers Defect' .6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. W. M. p. and believe that it will always act in their best interest. & Sasser. At the opposite end of the satisfaction spectrum are "apostles" . Spring 1999 18 . customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services.5. Johnson & Johnson.Harvard Business Review.customers who are satisfied and loyal and talk favourably about the brand .. Hewlett-Packard. C. Nov-Dec 1995 Hart. This satisfaction encompasses the whole experience and not just a company's products or services. FIGURE 2. Marketing Management. The customers at the bottom end of the scale are "terrorists" . Trust is critical for a brand's success. & Sasser. T..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. 91 Loyalty is derived when customers are continuously satisfied over time. Customers that are passionately or emotionally loyal are those that have built trust in a company. Southwest Airlines and Xerox7.Figure 2.

Spring 2000 19 . 1993 McWilliam. The benefits of strong customer relationships are: The average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers tend to place frequent. M. G.Sloan Management Review. The consumer reaches emotional loyalty when membership in the brand's user community becomes an end in itself. In this way. Harley-Davidson motorcycle clubs). Emotional loyalty can be also created through the formation of a strong user community around the brand. Firstly.com.7 They are willing to pay premium prices to a supplier they know and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways.g. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e. consistent orders Satisfied customers are the best advertisement .BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and FortuneCity. 8 9 Peppers. emotional loyalty is born out of a consumer's personal relationship with a brand. 'The One to One Future'.. & Rogers. This relationship can actually start through the satisfaction of a functional need or expressiveness (self-image) need..they provide good word-of-mouth and are the best salespeople for the product / service 2. D. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand. Some established brands are successfully developing online communities around them such as Disney and Pentax (where professional and aspiring photographers can exchange tips and information on techniques and equipment). There is also clear evidence of this on the Internet. 'Building Stronger Brands through Online Communities' . 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.

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

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

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

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


1. highlighting important factors that contribute to the success of each step along the way. 3.1 . The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience. This chapter spells out the traditional brandbuilding process. If the offering is developed properly. and direct marketing. which are created through advertising. promotion. Through the combination of the stimulus of consistent communications and satisfactory usage and experience. The major characteristics of successful brands are also reviewed.1 INTRODUCTION Building a strong brand is a complex task.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. the next step is to get customers to try the brand. This is illustrated in Figure 3. public relations. and keep it turning.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 . To entice trial and repeat purchase requires triggering mechanisms.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. FIGURE 3. confidence and brand equity are built. selling. brand awareness. Once this has been established.

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

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

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

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

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

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

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


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

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

com) 36 .3.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.2 .000.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MILLION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist.000.000 1.economist.Figure 4.000 100.a PricewaterhouseCoopers Report.3 . FIGURE 4. 1996 (www.000 1969: 10.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100. 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. 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. as cited in 'E-Business Technology Forecast' .000.000 10.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. 1998.

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

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

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

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

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

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

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


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

'Adding Product Value Through Information'. .BUILDING SUCCESSFUL BRANDS ON THE INTERNET interact with individual consumers on a one-to-one basis26. understand and relate to customers. This creates the opportunity for companies to build stronger relationships than previously attainable. service approach Customised The Internet gives companies control over all their interactions with customers and therefore. In maximising the customer experience. 151-160 46 . D. learn.Fuqua School of Business. 'stimulus-response' approach Standardised • • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over time Intimate learning Genuine needs driven. However. Duke University.from the promises made in the value proposition.. this also poses a challenge as these relationships may take on a life and character of their own. 'Is Your Company Ready for One-to-One Marketing?' . brand-building must focus on the end-to-end customer experience . & Dorf. Rogers.edu) 26 Peppers. TABLE 5..THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL APPROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off transactions Remote Research Manipulative. Prof. The differences between the traditional approach and the one-to-one approach are outlined in Table 5.1 . In doing so. pp. companies have to find innovative ways of leveraging the information and 25 McCann. a company can listen. January-February. M. B. 1999.Harvard Business Review. January 28.1.. J. 1997 (www. relationship building characteristics of the Internet. rather than simply speaking at customers. to its delivery to the customer..duke.

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

(also referred to as 'viral economics'). (London: Harper & Row).. as the benefits of scale are overwhelmed by the disadvantages of size31. increases disproportionately as more people join the network. However. customisation for individual customers. Even more important. Similarly. FIGURE 5.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish. where the value of the network. 1989. this is not the case on the Internet. and other features can be added or changed at low marginal cost. 180-182 48 . pp.1. each additional unit sold does not cost more than the last to deliver. 7th Ed. additional customers and transactions can be managed with limited fixed cost investment.. businesses and online communities that rely on connectivity can enjoy 'network effects'. and in the case of information-based products. as illustrated in Figure 5.1 . G. and the value that each member realises.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. the costs approach zero32. 'Positive Economics'. As a result. R. Once the up-front investments are made (for research and development and technology infrastructure).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. additional products.

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

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

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

'The Value of Online Customer Loyalty and How You Can Capture it'. J.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. making customers 'click off' to another site. 2000 'The E-business Technology Forecast' . R. 2000 Convenience Convenience goes beyond the ability to conduct transactions around the clock. 2000 (www. 2000 37 Rigby. S.3). In essence. S.An A..THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' .. Rastogi. As 35 36 'Creating a High-Impact Digital Customer Experience' . Kearney White Paper. T.. March 17.6 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 5.3 . D. Chu. Kearney White Paper. Sites that are difficult to use can cause frustration. FIGURE 5.An A.A PricewaterhouseCoopers Report. Promotion. Price. .. the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product.A Mainspring Communication Report in collaboration with Bain & Co. C. 30% of potential customers leave sites because they cannot find what they are looking for... Place).com) 52 . The customers' ability to access and display information rapidly is extremely important36.bain.. and 66% of people who start a 'shopping basket' fail to complete the transaction37. Baveja. Zook. In fact. T. & Hancock.

38 39 Cognitiative Inc.com) Davenport. CIO Magazine. 'Sticky Business'.businessweek. as cited in Business Week Magazine.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Information 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. February 2000 Issue 53 . ease-of-navigation.com) Content Content is relevant and useful information directed at the needs and interests of the targeted users. online companies have the opportunity to provide rich. which can enhance the company's value proposition. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. ease-of-use. 1999 (www. T. and fast response times are among the most important factors in establishing web brand loyalty38. as cited in Business Week. October 29. With almost infinite display space and inventory capability. FIGURE 5.4. expert insights. and a wide range of products.businessweek.. up-to-date information.4 . whereas a slow response time and site downtime will have a significant negative impact. 29th October 1999 (www.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.

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

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

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

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

ebusinessforum.4 4.8 4. 58 .1 3. The key factors at this stage are Convenience combined with interesting Content. Fig.4 3. Engage With the multitude of choice available on the Internet.3) is useful to ensure that a company develops a distinct and consistent brand identity. multiplied by the expected rate of transactions.5 3.2 4. discounted over the expected duration of the brand-customer relationship.0 3.Economist Intelligence Unit 2000 (www. Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46. 3. it is important to quickly engage consumers' interest before they move on. Attracting customers is only the first step in building online brands.WEBSITE PROMOTION METHODS .3 2. Creativity is also an important factor in gaining attention in today's cluttered marketplace.3 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. 3. Kapferer's Brand Prism (Ch.POPULARITY & EFFECTIVENESS Method Banners E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspapers Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Programmes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 .6 3.3 Source: Forrester Research. public relations and television advertising. as cited in 'Targeting Consumers via the Internet' . affiliate programmes.7 4.4 3.5) 2. Companies then need to engage customers to obtain their interest and participation.8 .com) The most effective methods are direct e-mail.

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

engaging and retaining customers. to its delivery to the customer. McKinsey Quarterly. especially in small quantities. S. it is critical for companies to build relationships and foster brand loyalty. In order to create "apostles". The 7Cs Framework outlines the key components of the brand experience and the sources of added value.. 180-183 (www. However. pp.com) • Not all product categories have a strong fit with interactive media as they still need real life interaction. 60 .9 CONCLUSION On the Internet. Given the high acquisition costs of online customers. providing further added value. smell). M. • Brand-building favours products that can be sold online. No. the experience is the brand. Waitman.. The next chapter analyses the brand-building efforts of seven companies. companies must provide a satisfying end-to-end customer experience . the interaction provides the ability for companies to learn from their customers and relate.. and as the relationship develops.9 .mckinseyquarterly.. touch. due to high delivery and transaction costs (relative to the value of the product). it is not economically feasible to sell certain products. McQuade.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ESTATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski. The interactive brand-building process involves attracting. 5.2.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. These case studies provide a practical insight into how companies are building their online brands. 1996. and the need to stimulate the other senses (taste. 'Marketing to the Digital Consumer'. & Zeisser. R.from the promises made in the value proposition. A.


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

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

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

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

2). two personalised services.a move that along with the novelty of its business model and the newness of the Internet.com hot-link and offer specific books of interest to their visitors. The Associates Programme has been phenomenally successful.000 members.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. help maintain contact and build traffic by e-mailing customers when desired products or books become available.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. they are subsequently confirmed by e-mail. In July 1996.000 by August 2000. 66 . and not subsequent purchases. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. Eyes and Editors. New Yorker and The Economist. 6. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. it began to advertise in print media and online . As a result of all these factors (7Cs). In the second half of 1996. attracting member sites of all sizes. Instead of paying directly for this exposure. enticing them to return to the site and purchase repeatedly. This enabled Amazon to reach more customer segments and niches (Figure 6. and customers are also e-mailed when the items are shipped from the warehouse. Once orders are placed. Amazon offered Associates referral fees of up to 15%. increasing to over 500. Newsweek. The Financial Times. and by 1999 it had over 200. Business Week. which only applied to sales that resulted from the initial click-through. Through the first half of 1996. helped generate publicity and stories about the company in publications such as The Wall Street Journal.2. In addition. 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.

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

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

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

2. 6.6 Conclusion Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. Amazon's intense focus on customer needs and continual innovation. which is critical on the Internet. The key factors driving its growth and high retention rates. if it continues to incur losses. 1998 70 . B. This raises a critical issue. with new products and value added content. the drain on their cash resources will push them towards bankruptcy. have kept it ahead. October 12. they're stretchable and pliant. they have cultivated a reputation for excellence and fulfilment. 'Marketers of the Year: Jeff Bezos. In doing so. However. Amazon has continuously invested in customer service. speedy delivery and good value. 53 Warner. Amazon has also benefited from a first-mover advantage giving it an edge over competitors. stem from its compelling value proposition and high quality end-to-end customer experience. not necessarily a reality. This customer-centricity is a key hallmark of a successful Internet brand. Amazon also recognised that service quality is a perception. as the true value of a brand lies in its sustainability. Volume Discounter' .Brandweek. but over time they become more and more associated with a particular thing and harder to stretch53".. and to sustain a positive image and satisfactory end-to-end experience. perhaps trying to defend its view that losses taken to build market share can reap profits later. however. and investors lose confidence. secure payment procedures. Although Amazon has successfully built a strong brand and loyal customer base. Nevertheless. Amazon is claiming to be making profits on its books and music categories. distribution centres and upgrading the site. Amazon delivers on its promises of a wide inventory of products. When they're young. Quality is only measurable in the minds of visitors to the site. it has not recorded any profits to date.BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement.

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

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

Instead.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. The 6.com's market capitalisation was $251 million. while Amazon.000 affiliates in its referral network. while Amazon. the largest US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.com was valued at $21.com's $1. Webcrawler. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .com closed 1999 with 4 million customers. and Barnes & Noble Inc. prevent cannibalisation of its existing business. Although. These initiatives have generated traffic to the site.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial.a replica of Amazon's Associates Programme. However. 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 . Netscape and Microsoft Network.64 billion. has yet to leverage its strong brand in cyberspace. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN). there is little mention of the online store in the traditional 'bricks-and-mortar' stores. Barnesandnoble. however. They have developed an affiliate programme that links sites to Barnesandnoble. reasons for this are explained in the next section. Both offer customisation that permits users to personalise the experience.com in return for a commission on any purchases that they originated . this programme had more than 300.com had over 17 million.com. Barnesandnoble. Both offer 'associate programmes' that let other websites link to their sites. Barnesandnoble. Yahoo!.com's 1999 revenues were $202. December 17.com has created a high quality website and customer experience.3.1 billion. compared to Amazon. Barnesandnoble. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. As of February 2000. and avoid charging sales tax in states where it has stores56.4 Brand-Building Strategy Barnesandnoble. it lags behind first-mover Amazon. Lycos. Both try to foster a community of readers by letting customers post reviews online.6 million. and both are expanding globally.The Wall Street Journal.

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

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

as well as create a kid's site.Multi-million pound advertising campaign created by BMP DDB .4 CASE STUDY: BOO.Marketing Week.3 1999 Mid year BOO. and eventually debut in Asia. and the resulting loss of investors' confidence. TABLE 6. "our marketing thrust is not based on prices.COM .First sign of problems . sack 20% of staff and sell stock at 40% discount .com entered six markets: US.Raises funding of $125 million .com provided a range of 18 fashion and footwear brands including DKNY. Everlast. receiving $125 million of funding. Puma. Germany and Denmark. If a clothing brand is on the Boo site. Morgan.4. They intended to add France.Announces it has only 500. November 2000 January February May 6.1 Company Overview Founded in 1999. June 10. Boo. CMO of Boo. Boo. due to its poor performance and inability to build a customer base.Site goes live .com collapsed through lack of funds. Boo. 1999 76 .com launched with the goal of being the world's "first truly online retailer of sportswear and fashion". However. On going live.they redesign site. the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group).4. and was billed as one of Europe's hottest e-commerce ventures.com had set the record as Europe's best-funded European Internet Start-up. founder and Chief Marketing Officer of Boo. within six months Boo.000 unique visitors . Boo. After a high profile launch.com. it means all that brand's product line is available.TIMELINE AND MAJOR MILESTONES . P.2 Value Proposition According to Kajsa Leander. it's about range and convenience. Italy and Spain within a few months. Finland.Appeals for $30 million more funding . and Converse. Sweden. 58 Kajsa Leander. Company is put up for sale. as cited in 'Boo.com opens its virtual doors' .COM 6. and included high profile investors such as Bernard Arnault. arranged through J. 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.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.fails and appoints KPMG as liquidator.com. England. among others. not the limited range you might get at most London fashion shops58".


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


Miss Boo

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



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

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

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



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

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


CDnow was acquired by Bertelsmann AG. pp.Forges distribution partnership with Yahoo! $65.Harvard Business Review. former arch rival .1 Company Overview Founded in 1994. May-June 2000.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .5 CASE STUDY: CDNOW 6. 'How to Acquire Customers on the Web' . TABLE 6. customisation and a wealth of information and content to help in the purchase decision. whether for browsing or buying. by twin brothers Jason and Matt Olim.Merges with Columbia Records . announce marketing alliance . $22. & Novak.Partnership program with Geffen Records .com) 80 . daily music news. T.Raises $10 million through private placement . $18.2 Value Proposition CDnow offers consumers a high degree of choice (over 500. guides to music genres. and an average daily audience of over 800. CDnow provides access to over 500. and one of the most popular shopping sites on the Internet62.cdnow.TIMELINE AND MAJOR MILESTONES . and was the first site to offer the sale of music downloads and custom CDs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5. 62 Hoffman.CDnow and Time Inc..000 people.ten times the selection of a conventional bricks-and-mortar music store). CDnow is the leading online music store. a valuable and rewarding experience"63. This unprecedented degree of access to music and information is the core of CDnow's value proposition.5 million distribution deal with Lycos Signs three-year.000 music related items . CDnow is also driving the digital distribution of music.5. cover art.000 sound samples. and exclusive interviews and reviews from CDnow's award-winning editorial staff.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.000 music-related products and 650. D.Merges with N2K.Launches merged CDnow/N2K site .179-188 63 CDnow website (www. convenience.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year.Site goes live .5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign . and they aim to "make every visit to the site. good prices. as well as music reviews. features. On 19th July 2000. It has a customer base of 4 million people.

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

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

CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL. By keeping the brand in front of the customer in this way. • Traditional offline Media . CDnow is doing everything it can to ensure that the next time that 6. music-oriented websites. print advertising is music-related publications such as Rolling Stone. this is their "most successful customer building programme64".CDnow's advertisements are targeted to some degree.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. they buy from CDnow. It is a revenue-sharing arrangement. including national television commercials during the Grammy's and American Music Awards and on MTV and VH1. covering the entire music spectrum.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. 83 . Yahoo!. integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. CDnow's initiatives include: • Banner Ads . giving websites an inducement to join the programme and in effect turns CDnow's affiliate-marketing partners into a virtual commissioned salesforce. According to Jason Olim.000 small.They have also stuck exclusive alliances with AOL. customers buy music. • Alliances and Partnerships . 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. Excite and other powerful Internet content and service providers. as well as more-targeted music-related sites like Billboard. Spin. • Affiliate Programme . CDnow extended its distribution reach to include more than 250.5. and radio spots on the Howard Stern Show to build a cult following among radio listeners. 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.Through the Cosmic Credit Programme. and spot radio to build reach.

• Word-of-Mouth . It is constantly adding new functionality to the site and has been innovative in its offering .BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations . as a way to fuel very lucrative word of mouth.5. both in the online and offline worlds. word-of-mouth accounts for the lion's share of CDnow's customers.Hampel & Stefanides (www. This has contributed to a 225% increase in sales (1997: $17. and to increases in the customer base of more than 30% quarter-to-quarter. In fact. It is a powerful source of acquiring new customers at low cost. April 28.4 million). 6.com) 65 'Pioneering in Cyberspace' .htm) 84 . CDnow's promotion strategies have attracted high levels of traffic. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases. 1998 . resulting in increased conversion rates.Press Release.CDnow made public relations a high priority brand-building tool.cdnow. 1998: $56. Public relations efforts helped to generate word of mouth and influence sales.(www. The company continually pushed for new distribution partnerships to widen its sphere of influence. with repeat customers accounting for more than 50% of sales. with 44% of sales coming from new customers65. by two twin brothers with little money reflects the 'American dream' and was quickly picked up. and scaled it awareness-building efforts.As for many successful online retailers. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' .hsny.they were the first site to offer the sale of music downloads and custom CDs.4 million. The story of how CDnow was founded in a basement. it is in this context that the large investments in advertising and partnerships make sense.5 Other Factors that Contribute to their Brand Leadership Innovation & First-Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentum.com/cdnow.

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

eBay is not about auctions. garage sales.000 new items joining the "for sale" list every 24 hours69. According to Meg Whitman. payment) between themselves. People perceive the auction format to offer better prices. extensive selection and geographical reach.Company Overview' . (A)' . 6. Sellers pay a nominal fee for placing an item up for sale.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. CEO of eBay. with the number of unique daily visitors setting a record of 1.ebay.2 Value Proposition eBay offers consumers an efficient.ebay. Auctions represent a platform. Since its launch in September 1995.removing the need for inventory. shipping.g.com) 70 'Meg Whitman at eBay Inc. This is a new market .A Harvard Business School Case Study. collectable shows. "at its core.com) 'eBay .6.300 categories.25% to 5% of the final sale price on any item sold. eBay effectively created a new business model never before possible . and 450. 1st October 1999 86 . 24 hour a day. the eBay community has grown to include more than 10 million registered users. Individuals use eBay to buy and sell items in more than 4. global trading place for buying and selling personal items in an entertaining auction format.eBay website (www.eBay website (www. There are over half a million new auctions.6 CASE STUDY: EBAY 6.6. flea markets and auctions.the closest thing in the offline world are trading forums such as classified ads.Company Overview' . as cited in 'eBay . or the payment for the item . and eBay provides added value through its convenience. Auctions are an enabler. from collectibles and antiques to electronics and toys. Auctions make it fun.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. The buyer and the seller work out the logistics of the transport (e. transportation and other overhead costs. and eBay never takes possession of the item being sold. and eBay receives a transaction fee that ranges from 1. with emphasis being placed on its unique community feel and culture. 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.782 million in January 200068.

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

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

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

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

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

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

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

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

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

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

com is an example of successful crossover marketing. Gap has been able to significantly strengthen their brand-customer relationship. while reaping the benefits of low customer acquisition costs and extended reach.thereby increasing the company's reach.5 Conclusion Gap. thereby reinforcing its brand identity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7. have already established the back-end operations and can use them as the cornerstone of their online business. Pure online players have to invest heavily in logistics. on the other hand. 97 . 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. and allowing each to leverage the strengths of the other. provides existing customers with added value through the convenience of purchasing online. This type of seamless integration and symbiotic relationship is critical in building successful 'clicks-and-mortar' brands. By aggressively marketing both the stores and the website. such as Gap. Gap had a significant advantage over pure online players in attracting customers and building critical mass. 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. whereas established companies.

The company's global web network includes 23 world properties outside the US. The Strategy. household and business user reach.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration. the amount of information. Yahoo! offers a range of supporting services that add value. Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.8. and is one of the few Internet companies to turn a profit early in the development of the Internet. Yahoo! has since morphed from an ordinary search service into a global Internet communications.D students at Stanford University.Business Week. As the first online navigational guide to the web. lies the directory . 1998 (www.see Appendix A 'Yahoo! . September 7. There's nothing in the real world to compare to that79".com) 98 . the site was receiving 1 million hits per day.businessweek. The Stock' . advertising. As such. 78 79 Interbrand (www. According to Timothy Koogle.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and the number of websites continues to explode. Yahoo! is a leading guide in terms of traffic. The concept exploded (through word-of-mouth) and in less than six months. Yahoo! was founded by David Filo and Jerry Yang. 6.interbrand.8. from e-mail services to stock quotes and much more.8 CASE STUDY: YAHOO! 6.2 Value Proposition At the core of Yahoo!'s value proposition.com) . all in a single location.The Company. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. two Ph. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. CEO of Yahoo!. who started an online guide as a way to keep track of their personal interests on the Internet.1 Company Overview In April 1994.

Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July .TIMELINE AND MAJOR MILESTONES 1994 April . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. mobiles.Yahoo! Launches Business-to-Business Marketplace .Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.7 YAHOO! . Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquires Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Secures distribution agreement with Hewlett-Packard Signs distribution agreement with IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broadcast.Yahoo! Shopping launches personalised shopping service 6. is the way it has structured and displayed information.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.3 Sources of Value ..Yahoo! acquires eGroups . regardless of platform (i. Yahoo! extended its convenience through its Yahoo! Everywhere service.Yahoo! unveils Yahoo! Finance Vision . to provide web-based services to PalmTM handheld computers . TVs.00 per share) Launches My Yahoo! (allowing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures distribution agreement with Compaq Acquires Four11 Secures Distribution agreement with Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing with AT&T Acquires Viaweb.8).8.Yahoo! acquires Arthas.000 shares at $13. Their goal is not to list everything under the sun. to allow access.Receives $1 million in venture capital funding from Sequoia Capital $33.600. Palm computers). 99 .e.com. . and unveils Yahoo! Digital Introduces Bill Payment services .Site goes live September .The 7Cs Framework Convenience Central to Yahoo!'s success.Yahoo! forms agreements with Palm Inc.8 million IPO (2. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. More recently.com allowing them to offer person-person payment solutions .

OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple. 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. By tailoring the information to users' preferences. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics. easy-touse. well structured. They have formed multiple alliances and partnerships with leading online companies such as Amazon. Their thrust has been to provide valuable content to customers. and has been at the heart of Yahoo!'s growth and development. the end-user. from stocks and sports results to weather and air fares. Yahoo! has increased customer loyalty and retention rates. and is similar to a custom tailored newspaper (Figure 6. This creates a win-win situation as its satisfies Yahoo!.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9). the partner. and more importantly. 100 .com and CDnow. ranging from daily news and weather reports to road maps and books.8 . while providing partners access to a large customer base. These have helped Yahoo! become the place to track down a broad range of valuable information and resources.

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

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

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

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








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



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

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

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

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

Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. but also provide added value to the brand community. In addition. a company can leverage the partner's brand and reputation to reinforce its own. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. variety. As a result. The most successful partnerships are symbiotic matches. Alliances and partnerships play an important role in achieving speed and momentum. these companies must have an inherent understanding of their brand identity and core values. and exclusive alliances can lock out competitors from valuable content or online real estate. as well as determine how far the brand can be meaningfully stretched to other products and market segments. ranging from online methods to traditional offline media. while ultimately benefiting the end-customers.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. to maintain consistency. By distinguishing their offering and focusing on unique sources of value-added. content. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. and convenience. offering customers the best in quality. before it fractures. 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. leading brands have focused on building strong partnerships and alliances. 108 . particularly to secure content and widen reach to new customer segments and niches. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. brands are harder for competitors to emulate. Alliances with leading portals and popular sites is important to generate traffic and brand visibility. to distinguish themselves from competitors. Properly orchestrated 'guerrilla marketing' ploys can also be effective in building awareness and reinforcing brand image. integrated customer acquisition strategies. and by partnering with well-known brands. whereby each party benefits from the other's expertise or skills.

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

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


048 20.021 26.895 2.422 1.596 3.313 2.231 12.231 24.595 17.193 112 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .184 1.761 1.043 8.985 2.502 33.423 2.766 14.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlboro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toyota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colgate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.830 14.329 4.527 3.275 30.602 4.052 6.681 2.464 3.806 11.603 5.283 4.654 43.781 33.781 17.568 3.181 21.404 4.197 32.550 12.076 3.143 2.643 3.510 8.909 7.319 1.147 9.interbrand.132 15.648 1.361 1.101 9.694 17.804 2.845 56.634 1.806 2.932 4.894 14.792 3.155 7.310 11.Interbrand's Ranking of the Top 60 Brands (www.262 1.225 11.281 11.

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





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