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


8.3 Sources of Value .7.5.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.1 Company Overview 6.4 6.8.8 Case Study: Boo.5 6.5.4.The 7Cs Framework Brand-Building Strategy .com 6.4.2 Value Proposition 6.1 7.The 7Cs Framework Brand-Building Strategy 6.8.com 6.5 Conclusion Case Study: CDnow 6.7.7 6.5.2 Value Proposition 6.3 Sources of Value .1 Company Overview 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Case Study: Gap.2 Value Proposition 6.2 Value Proposition 6.6.6 6.5 Other Factors That Contribute to their Brand Leadership 6.4 Brand-Building Strategy 6.6.com Sources of Value . Value Proposition 6.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5 Conclusion Case Study: Yahoo! 6.5 Other Factors that Contribute to their Brand Leadership 6.1 Company Overview 6.3 Sources of Value .Extensive Integration 6.1 Company Overview 6.The 7Cs Framework 6.5.1 Key Factors that Contribute to Building a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .8.6 Conclusion Case Study: eBay 6.4 Brand-Building Strategy 6.4 Brand-Building Strategy 6.3 Sources of Value .The Failure of Boo.1 Company Overview 6.The 7Cs Framework 6.

4 Figure 4.2 Figure 2.8 Figure 6.3 Figure 3.3 Figure 2.1 Figure 5.4 Figure 4.5 Figure 2.3 Figure 6.2 Figure 5.6 Figure 5.2 Figure 3.5 Figure 4.2 Figure 6.4 Figure 2.2 Figure 4.2 Figure 2.4 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 1.com's Website Overview of Boo.1 Figure 4.9 Figure 6.5 Figure 6.7 Figure 6.6 Figure 4.3 Figure 4.4 Figure 6.1 Figure 6.7 Figure 2.6 Figure 2.1 Figure 3.6 Figure 6.1 Figure 2.5 Figure 5.9 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 .7 Figure 5.Popularity & Effectiveness Categories Suitable for Interactive Marketing Overview of Amazon.8 Figure 3.com's Associates Programme Overview of BarnesandNoble.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 .8 Figure 5.7 Figure 5.3 Figure 5.com's Website Amazon.

7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones eBay .com .com .Timeline and Major Milestones Gap.com .4 Table 6.6 Table 6.Timeline and Major Milestones CDnow .3 Table 6.1 Table 6.5 Table 6.2 Table 6.1 Table 6.Timeline and Major Milestones BarnesandNoble.com .Timeline and Major Milestones 46 63 71 76 80 87 93 99 5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.Timeline and Major Milestones Yahoo! .Timeline and Major Milestones Boo.


whereas it has taken decades for traditional companies to achieve the client base. America Online (AOL) and eBay have been able to build powerful brands in a few years. customer affiliation and level of sales.5 2. the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods1. Supply chains are being rethought.com.YEARS TO REACH $100 MILLION IN SALES 6 5.1 shows the number of years it has taken some Internet brands to reach sales of $100 million.com noble.1 3. Figure 1.1 OVERVIEW Over the past few years. that these Internet start-ups have achieved. Amazon. creating strong brands that are putting established brands at risk. This is creating new challenges and opportunities.com MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com) 7 . The Internet also represents a fundamental shift in how buyers and sellers interact. and is triggering the need for new brand-building strategies and tools. interaction and relationship building. as they face each other through an electronic connection.1 . McKinsey Analysis (www.an explosion that is also a harbinger of how business will operate in the future.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.mckinseyquarterly.9 2.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale. relationships. products and services reconfigured.2 3.com's range of 4. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.g.com Source: Securities and Exchange Commission Filings. aggressive Internet start-ups have emerged. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. FIGURE 1.5 million book titles). It is empowering customers with more options and more information to make informed decisions. Internet companies such as Yahoo!.com1 Amazon.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. As such. In the midst of this. while providing new tools for promotion. the Internet is changing fundamentals about customers. there has been an explosion in the online world .0 1. As such. Amazon.9 3. and business models revamped. service and brands.

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

tools and strategies to build brands on the Internet. and to identify new sources of value.RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9 . 1.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1. with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies. supported by secondary data related to aspects of online business from accredited and published sources.2. • To identify the key factors and characteristics that contribute to the development of successful Internet brands. This is based on the outcome of the primary research (in-depth case studies). A review and analysis of leading academic thinking will be used to explore these issues.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.2 . • To explore how the Internet is changing the brand-building environment. FIGURE 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Academic literature and an analysis of the impacts of the Internet will be used to investigate these factors.

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

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


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

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

strategy (partnerships and alliances). The value proposition must be communicated to entice customers to try the product / service. • Adoption .Figure 3. Price. colleagues and opinion leaders become important influences at this stage. The value proposition must then be articulated in terms of the 'marketing mix' . the company must ensure that it develops the appropriate structure. 'Diffusion of Innovations'. 17 Rogers. FIGURE 3.Product and service features. deliver and reinforce this value proposition (see Appendix B . skills. Advertising and PR are common tools for achieving awareness. If the offering is developed properly.79-86 30 . management style. systems.The company has to create awareness of the brand.The McKinsey 7-S Framework). Before potential customers can buy a product / service. and its products / services. features and advantages. pp..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined. 1962. Personal sources such as word-of-mouth from friends. This learning is called the adoption process17 . • Interest . • Evaluation . it should lead to satisfaction and re-purchase. • Trial .The customer is satisfied and decides to make regular use of the product / service. 'Diffusion of Innovations'. E. pp.4. they must learn about it. Promotion and Place (distribution strategy).Customers need to be stimulated to seek information about the brand's uses. 1962. culture and staff needed to support.79-86 The Innovation-Adoption Model consists of: • Awareness .4 ..The customer tries the product / service for the first time and decides whether to adopt it based on their expectations. E.Customers consider whether the product / service will meet their particular needs.often referred to as the '4Ps' . (New York: Free Press).INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. (New York: Free Press). and the product / service's perceived performance.

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

It is easier to capture a share of the consumer's mind and build a customer base. value proposition or augmented brand. it has a profound impact on the traditional brand-building process. companies must actively communicate it to the target audience to entice trial. As a result.. strengthening the brand further. but it makes the task easier. It often takes years to build up the added values.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19. while providing new tools for promotion. If the quality of the experience deteriorates. pp. • First-Mover Advantage . its function and psychological values. and making it more difficult for competitors to emulate. 2nd Ed. trigger trial and reinforce commitment to it. the brand is meaningless. interaction and relationship building. As customers build trust in the brand through satisfaction of use and experience. companies have the opportunity to start building relationships with their customers. Without building awareness. (Europe: Prentice-Hall). advertising or promotional campaign. • Unique Positioning Concept ..Traditionally. which will communicate the brand's existence. 1998.176-177 32 . comprehension and intention to buy.A successful brand requires an effective selling. and establish a trusting relationship. 19 Doyle.Satisfactory experience is the major determinant of brand values. when the brand has no competitors to rival its position. 'Marketing Management & Strategy'.a segmentation scheme. Once the framework has been established and the organisation configured to provide this proposition. • Time and Consistency . 3.If the brand is not the innovator. The Internet provides the opportunity for companies to create compelling value propositions never before possible.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition. or if the brand is surpassed by superior offers from competitors. it must have a unique positioning concept . • Strong Communications Programme . then its position will be undermined. brands were not built quickly.Being first into the market does not necessarily bring success. including: • A Quality Product / Service Experience . As such. P. which will add value and distinguish it from competition.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment.


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

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

3.000 1969: 10.000 1. as cited in 'E-Business Technology Forecast' .3 . 2000 Internet / ARPAnet was created Dell. FIGURE 4.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.000 100. 1996 (www.2 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 100 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.Figure 4. 1998.economist. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Internet The growth of personal computing technology in the 1980s.000.000. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies .a PricewaterhouseCoopers Report.com) 36 .000.000 1.000 10.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.

New generation of PDAs and Internet appliances - Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.. there will be an estimated 375 million Internet users world-wide. The growth in support services (e.High-powered servers . The emergence of open standards in development tools and at the network protocol level (e. Multimedia development tools that can be used to create rich content. and gateway services).internet.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000. No. FIGURE 4.4. G. L. payment. 2000 (http://cyberatlas.E-Marketplaces . The development of critical processes (ordering.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Cheap bandwidth . Reed..com) 37 . offering inexpensive bandwidth. billing.Attractive infrastructure and middleware software .g. etc.4 . 1996.2 20 'World Online Populations' . hosting.Cheap microprocessors & RAM .Low-cost networking alternatives . This boom has been the result of several underlying forces that have come together: The wider availability of the Internet.CyberAtlas Internet Statistics and Market Research.). web design. making it more cost effective for software developers and other technology providers to create interoperable products.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . As shown in Figure 4. The most important factor has been that users are becoming accustomed to the Internet and are rapidly overcoming any inhibitions concerning e-commerce. TCP/IP). Easier access to these networks provided by point-and-click web browsers. increasing to 500 million users by 200220. the momentum created by all these forces has created a virtuous cycle of growth.Higher PC penetration among consumers and companies .Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .Content Aggregators . The McKinsey Quarterly. 'Electronic Commerce (finally) Comes of Age'.g.

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

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

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

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

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

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


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

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

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

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. pp. 1989. 'Positive Economics'. (London: Harper & Row). this is not the case on the Internet. Even more important. the costs approach zero32. Once the up-front investments are made (for research and development and technology infrastructure). as the benefits of scale are overwhelmed by the disadvantages of size31.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where returns to scale diminish.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. additional customers and transactions can be managed with limited fixed cost investment. increases disproportionately as more people join the network.. customisation for individual customers. and in the case of information-based products. businesses and online communities that rely on connectivity can enjoy 'network effects'. and other features can be added or changed at low marginal cost. where the value of the network. each additional unit sold does not cost more than the last to deliver. 7th Ed. (also referred to as 'viral economics'). additional products. Similarly. as illustrated in Figure 5.1 . As a result. and the value that each member realises. 180-182 48 .. However. G. R.1. FIGURE 5.

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

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

com. A traditional print publication would hope to reach 100. friends to visit it.hotmail. sign up for their own free e-mail.5 years. saying: • "Get Your Private. 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). whether for communications or community.5.1 The Case of Hotmail. • Each new user becomes a company salesperson.000 subscribers every day. In its first 1. and the message spreads organically. they tell all their 51 . Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL).com" • Then stand back while people e-mail their network of friends and associates • These people then see the message. Hotmail acquired over 12 million subscribers.com The classic example of viral marketing is Hotmail. a company now owned by Microsoft.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.000 subscribers within a few years of launch. Hotmail. Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as Sweden and India. eGroups and Geocities (both recently acquired by Yahoo!). they will have a powerful viral opportunity at their disposal. and then propel the message even further to their own ever-increasing circles of friends and associates. and they created a subscriber base more rapidly than any company in history. and in doing so spread the word for Geocities. Digital viruses can spread internationally more rapidly than biological viruses that rely on the physical proximity of the host. Free Email at http://www.com was one of the first free web-based e-mail services. In fact. where they have never carried out any promotional activities. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out. seven days a week. When a user builds a website. Today they are the largest e-mail provider in the world with over 40 million users. Geocities enables people to create personal websites for free. but Hotmail signs up more than 150. If a company can provide a strong enough incentive for customers to share their lists of personal contacts.

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

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

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

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

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

and bring people to the site for the first time. Engage. links from directory searches (Connectivity). The company must build awareness and communicate its value proposition to its target customers. S.Awareness.Attract.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. including affiliate programmes with other websites. e-mail notifications and banner advertisements. A.7 . McQuade. modified to take into account of the interactive dynamics of the Internet.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.. Interest. The mechanisms to communicate range from traditional media (TV. billboards. R.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 1996. because there is no physical presence.8. Therefore. Trial. McKinsey Quarterly. The popularity and effectiveness of the different promotion methods are outlined in Figure 5. etc.) to online tools. This is more difficult online than offline. visibility relies solely on Communication. 180-183 (www. which is basically a reformulation of the Innovation-Adoption Model (Chapter 3. Newspapers. Learn and Relate. No.7.com) Attract The critical first step of the digital customer experience is to attract 'eyeballs'. M. pp. Waitman. Figure 3... 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 ’ . Magazines. & Zeisser.mckinseyquarterly. 'Marketing to the Digital Consumer'. This model consists of five stages . Adoption).2. Evaluation. Retain.. FIGURE 5.4 .

46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction.com) The most effective methods are direct e-mail. multiplied by the expected rate of transactions.4 3.1 3. 3. 3.WEBSITE PROMOTION METHODS .ebusinessforum. Engage With the multitude of choice available on the Internet. 58 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.2 4. Attracting customers is only the first step in building online brands.4 4.8 4.3) is useful to ensure that a company develops a distinct and consistent brand identity. Creativity is also an important factor in gaining attention in today's cluttered marketplace. The key factors at this stage are Convenience combined with interesting Content.4 3.7 4. it is important to quickly engage consumers' interest before they move on.3 2.Economist Intelligence Unit 2000 (www. affiliate programmes.5) 2.3 Source: Forrester Research.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 . discounted over the expected duration of the brand-customer relationship.5 3. Fig. Companies then need to engage customers to obtain their interest and participation. Kapferer's Brand Prism (Ch. public relations and television advertising.3 3.6 3. as cited in 'Targeting Consumers via the Internet' .8 . Online companies must ensure that the cost of attracting and acquiring customers is lower than the average lifetime value of these customers (LVC)46.0 3.

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

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


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

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

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

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

In addition. 66 . Business Week. help maintain contact and build traffic by e-mailing customers when desired products or books become available. enticing them to return to the site and purchase repeatedly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. attracting member sites of all sizes.com hot-link and offer specific books of interest to their visitors. 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. Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibility. and not subsequent purchases. New Yorker and The Economist.2). helped generate publicity and stories about the company in publications such as The Wall Street Journal. In July 1996. 6. Once orders are placed. increasing to over 500. The Financial Times. Eyes and Editors.000 by August 2000. In the second half of 1996.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. which only applied to sales that resulted from the initial click-through. it began to advertise in print media and online . As a result of all these factors (7Cs). Instead of paying directly for this exposure. Amazon offered Associates referral fees of up to 15%. Newsweek. Through the first half of 1996. two personalised services.a move that along with the novelty of its business model and the newness of the Internet. Amazon inaugurated the Associates Programme under which other websites could display the Amazon. The Associates Programme has been phenomenally successful. Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers. they are subsequently confirmed by e-mail. and by 1999 it had over 200.2.000 members.

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

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

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

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

TIMELINE AND MAJOR MILESTONES .Barnesandnoble. and is the second largest online bookseller (after Amazon. Barnesandnoble. prints & posters and related products.2 1997 January BARNESANDNOBLE. including software store Launches Business Solutions programme Sells 50% stake to Bertelsmann for $200 million Adds used.barnesandnoble.Offers same day delivery in Manhatten .com) . all front-end operations (marketing. music. as it could capitalise on the infrastructure and back-end operations (warehouses. promotion) between the online store and the retail stores have been kept separate. Barnes & Noble Inc. Launched in 1997. Inc.Launches Affiliate Network December .com Launches Music Store Announces plans to develop huge distribution centre Launches Prints & Posters Gallery and electronic greeting card service Unveils 'bn. contacts.com).com was able to 'hit the ground running'. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).com and Microsoft announce that they will create an eBook superstore .Barnes & Noble University opens registration for free online courses .Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped site.com . Barnes & Noble Inc. rare.Acquires equity stake in Mightwords .Barnesandnoble. However. and out-of-print books to inventory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon. Besides books. and 20% owned by the public.3 CASE STUDY: BARNESANDNOBLE. book databases. Currently. and 470 B..Barnes & Noble.Launches Internet Radio .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 . 40% owned by Bertelsmann AG.COM 6.3.Announces distribution relationship with New York Times September .com provides other online categories offering software. is one of the best known traditional booksellers in the United States. Barnesandnoble.com launched its website (www.Barnes & Noble went online at AOL May .Acquires minority stake in NotHarvard.2. etc.com announces strategic relationship with Palm Computing . magazines.1 Company Overview Barnesandnoble.COM . Barnesandnoble.Launches Video Store 71 .com is the fourth largest e-commerce retailer54.com is approximately 40% owned by Barnes & Noble. Barnesandnoble. Dalton bookstores (located in shopping malls). TABLE 6.Launches BNTV .Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com's timeline and major milestones is outlined in Figure 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.) established by its parent company.

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

while Amazon.com closed 1999 with 4 million customers. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.com's $1.com's market capitalisation was $251 million. and have formed strategic partnerships with ten of the top twenty websites (others include ZDnet and CNN).64 billion. this decision to keep the relationship with the bricks-and-mortar stores at arm's length has had major repercussions. The 6. Lycos. Both offer customisation that permits users to personalise the experience. however.com has created a high quality website and customer experience.1 billion.4 Brand-Building Strategy Barnesandnoble. Barnesandnoble. Webcrawler. Netscape and Microsoft Network. 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. 1997 Internet and mail order companies are only required to collect sales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 .com was valued at $21.6 million.The Wall Street Journal. and Barnes & Noble Inc. Yahoo!. compared to Amazon.com in return for a commission on any purchases that they originated . it lags behind first-mover Amazon.com has run extensive and effective online advertising and has used the full range of traditional media to build awareness and encourage trial. reasons for this are explained in the next section. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' .000 affiliates in its referral network.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both try to foster a community of readers by letting customers post reviews online.com. this programme had more than 300. They have also signed exclusive and non-exclusive book-selling deals with major websites including AOL (fouryear deal costing $40 million55). has yet to leverage its strong brand in cyberspace. They have developed an affiliate programme that links sites to Barnesandnoble. and both are expanding globally. Barnesandnoble. Barnesandnoble. Instead. Although. while Amazon. and avoid charging sales tax in states where it has stores56.3. Both offer 'associate programmes' that let other websites link to their sites.a replica of Amazon's Associates Programme. As of February 2000.com had over 17 million. Barnesandnoble. However. December 17.com's 1999 revenues were $202. prevent cannibalisation of its existing business. These initiatives have generated traffic to the site.

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

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

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


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.


$18. convenience. good prices. as well as music reviews.com) 80 . May-June 2000.TIMELINE AND MAJOR MILESTONES . daily music news. cover art.1 Company Overview Founded in 1994.5 million advertising deal with MTV Enables customers to create customised CDs Launches MTV / VH1 ad campaign .5. It has a customer base of 4 million people.CDnow is acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsmann e-Commerce Group (BeCG) 6.Launches merged CDnow/N2K site . CDnow provides access to over 500. On 19th July 2000.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.179-188 63 CDnow website (www.5 million distribution deal with Lycos Signs three-year. CDnow is the leading online music store.Partnership program with Geffen Records .Harvard Business Review. & Novak. CDnow is also driving the digital distribution of music. and was the first site to offer the sale of music downloads and custom CDs. T.4 1994 August 1997 August 1998 February March April May June July 1999 March May July 2000 June July CDNOW .CDnow and Time Inc. former arch rival ..5 CASE STUDY: CDNOW 6.Merges with Columbia Records . by twin brothers Jason and Matt Olim.5. D.Raises $10 million through private placement .000 people. features.Site goes live .ten times the selection of a conventional bricks-and-mortar music store). guides to music genres.000 sound samples. TABLE 6. and exclusive interviews and reviews from CDnow's award-winning editorial staff.6 million IPO Launches integrated Grammy promotion Signs content distribution partnership with Rolling Stone Signs three-year. CDnow was acquired by Bertelsmann AG.000 music-related products and 650.Forges distribution partnership with Yahoo! $65.cdnow. announce marketing alliance . a valuable and rewarding experience"63. whether for browsing or buying. and an average daily audience of over 800.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. and they aim to "make every visit to the site. pp. 'How to Acquire Customers on the Web' .000 music related items . customisation and a wealth of information and content to help in the purchase decision. and one of the most popular shopping sites on the Internet62. 62 Hoffman. This unprecedented degree of access to music and information is the core of CDnow's value proposition. $22.Merges with N2K.

. 81 .5.5 .3 Sources of Value . CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. artists biographies.5. For example. By partnering with well-known content providers. and has secured rights to music reviews. The whole process of searching for albums or music titles to the actual purchase is simple . to make it easier for customers to explore new music and make informed purchasing decisions. VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). etc. FIGURE 6.Figure 6. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. CDnow has cultivated similar relationships with MTV. CDnow has leveraged the reputation of their brands to reinforce its own. easy-tonavigate.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. cover art.OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple.

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. payment) between themselves.6 CASE STUDY: EBAY 6. There are over half a million new auctions. Auctions are an enabler.eBay website (www. and eBay never takes possession of the item being sold.Company Overview' . with emphasis being placed on its unique community feel and culture. extensive selection and geographical reach. People perceive the auction format to offer better prices. The buyer and the seller work out the logistics of the transport (e.000 new items joining the "for sale" list every 24 hours69.A Harvard Business School Case Study. the eBay community has grown to include more than 10 million registered users.ebay.2 Value Proposition eBay offers consumers an efficient. global trading place for buying and selling personal items in an entertaining auction format. flea markets and auctions. Individuals use eBay to buy and sell items in more than 4.efficient one-to-one trading in an auction format. According to Meg Whitman. eBay effectively created a new business model never before possible . (A)' . This is a new market . 1st October 1999 86 . from collectibles and antiques to electronics and toys.com) 70 'Meg Whitman at eBay Inc. collectable shows. Sellers pay a nominal fee for placing an item up for sale. or the payment for the item . as cited in 'eBay . garage sales. Auctions make it fun. 24 hour a day.782 million in January 200068. transportation and other overhead costs.25% to 5% of the final sale price on any item sold. with the number of unique daily visitors setting a record of 1.300 categories.removing the need for inventory.the closest thing in the offline world are trading forums such as classified ads. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix. and eBay provides added value through its convenience.com) 'eBay .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. CEO of eBay.6. Since its launch in September 1995. eBay is not about auctions. shipping.ebay. 6.6. "at its core.g. Auctions represent a platform. and 450.eBay website (www.Company Overview' . and eBay receives a transaction fee that ranges from 1.

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

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

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

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

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

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

Business Week. as cited in Lee. from jeans and T-shirts to khakis and jackets.gapkids.COM . 73 74 Interbrand (www.gapinc. online sales are only available to US customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. 6.com' . the growth prospects are enormous. as cited in Lee. This success is largely due to their simple formula .com and www.1 Company Overview Gap opened its first store in San Francisco in 1969.7 CASE STUDY: GAP. service and value to everyone74". head of Gap Online. to provide customers with greater convenience and options.com."to deliver style.com/about_us.Business Week. from shirts to accessories and hard-to-find sizes. October 8. 1999 76 Jeanne Jackson. whether in the store or online76".6 1969 1986 1989 1997 1998 1999 - GAP & GAP. and Gap online provides access to the full range of items at Gap. Its reach extends across more than 1. Currently. however. UK. 'Clicks and Mortar at Gap.TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco. surpasses $9 billion in net sales and increase earnings by 54% over previous year. California GapKids opens its first store BabyGap is born Gap opens its online store at www. L. up from $20 million in 199875. Canada. and analysts estimate that sales in 1999 amounted to $50 . Gap Inc.7.gap. America Online (AOL) and Gap Inc. Gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at www. Gap's online sales tripled in 1998 alone. GapKids. and today it is the 29th most valuable brand in the world73.babygap. announce multi-year partnership. Gap started selling items online . In late 1997. L.com' . TABLE 6.'s website (www.2 Value Proposition Gap's simple. According to Jeanne Jackson. Germany and Japan. October 8. "this is about being clicks-and-mortar.an early convert to the then-revolutionary idea of clothes retailing on the Internet.7.htm) 75 Jeanne Jackson. Inc. The Gap offers a balance of modern and seasonal styles of clothing. standard styles are well suited to online shopping.800 stores in the US.com) . letting customers access the Gap brands. Gap online exploits the accessibility and convenience of the Internet.COM 6.interbrand. and BabyGap. 1999 93 . In addition.com is an example of successful crossover marketing. and are still relatively small compared to Gap's $9 billion in annual sales. and provides useful insight into how traditional brands can leverage their strength online.see Appendix A Gap.$100 million. 'Clicks and Mortar at Gap.

FIGURE 6. 'Mind the Gap'. Gap Online primarily focuses on Convenience..com store one immediately notices the consistency between the online and retail stores. D.. reinforcing its brand identity. 1998 94 . Visiting the gap.7.. April 18.3 Sources of Value . very efficient"77.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. describes the company's brand personality as "direct and straightforward.OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look.making visual references to its offline roots.The 7Cs Framework In terms of the 7Cs framework.. Simple. Unlike Barnesandnoble. from the blue and white colour scheme to the easy-toshop format .. and Customer Care.. Michael McCadden. The Observer.. This personality is reinforced online through the simple structure and layout. the extensive integration of Gap's online and offline activities are clearly evident.com. Executive Vice President of Global Marketing. making navigation even faster. The site also offers sharp graphics. making it convenient. but provides customers with the option of viewing text-only.very easy. Content.7 . feel and design of the site is consistent with the bricks-and-mortar stores. easy-to-use site with option to view text-only (no graphics) to allow quick loading 77 Hill.. and easy-to-use.

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

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

thereby increasing the company's reach.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. whereas established companies. 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.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.5 Conclusion Gap. such as Gap. A key factor has been Gap's consistency and ability to deliver the same level of service quality that is expected from the brand. and allowing each to leverage the strengths of the other. By aggressively marketing both the stores and the website. With their brand awareness and network of retail outlets. and can also provide access to different customer segments who may not usually buy the products at all . thereby reinforcing its brand identity. The Internet.7. on the other hand. have already established the back-end operations and can use them as the cornerstone of their online business. 97 . Pure online players have to invest heavily in logistics. Gap had a significant advantage over pure online players in attracting customers and building critical mass.

The company's global web network includes 23 world properties outside the US. commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide. who started an online guide as a way to keep track of their personal interests on the Internet. Yahoo! was founded by David Filo and Jerry Yang. the amount of information. The Strategy. 1998 (www. "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. from e-mail services to stock quotes and much more. all in a single location. household and business user reach. CEO of Yahoo!.1 Company Overview In April 1994. Yahoo! has since morphed from an ordinary search service into a global Internet communications.see Appendix A 'Yahoo! . Yahoo! is one of the most recognised brands on the Internet and is the 53rd most valuable brand in the world78.8.The Company.com) .interbrand.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration.D students at Stanford University.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. The concept exploded (through word-of-mouth) and in less than six months. and the number of websites continues to explode. the site was receiving 1 million hits per day. and is one of the few Internet companies to turn a profit early in the development of the Internet. 78 79 Interbrand (www. two Ph.Business Week. The Stock' . As such. Yahoo! offers a range of supporting services that add value. advertising.com) 98 . September 7.8. Yahoo! is a leading guide in terms of traffic. As the first online navigational guide to the web. There's nothing in the real world to compare to that79".businessweek. 6. According to Timothy Koogle.8 CASE STUDY: YAHOO! 6.2 Value Proposition At the core of Yahoo!'s value proposition. lies the directory .

. . 99 .3 Sources of Value .Yahoo! Launches Business-to-Business Marketplace . Their goal is not to list everything under the sun.8.com. regardless of platform (i. 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.600. is the way it has structured and displayed information. to allow access.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. mobiles. Yahoo! extended its convenience through its Yahoo! Everywhere service.Traffic reaches 1 million hits per day 1995 April 1996 April July September October 1997 January February October October October December 1998 April May June September October November 1999 January January January March April June July August September 2000 March March March March May June July . to provide web-based services to PalmTM handheld computers .Receives $1 million in venture capital funding from Sequoia Capital $33.8 million IPO (2. and unveils Yahoo! Digital Introduces Bill Payment services . but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers.Yahoo! acquires Arthas.Yahoo! unveils Yahoo! Finance Vision .The 7Cs Framework Convenience Central to Yahoo!'s success.Yahoo! acquires eGroups .000 shares at $13.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. TVs. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics (Figure 6. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings.Yahoo! Shopping launches personalised shopping service 6.Yahoo! launches the next wave of Yahoo! Everywhere service for consumers with Internet-ready mobile phones and wireless devices.TIMELINE AND MAJOR MILESTONES 1994 April .8).7 YAHOO! .Yahoo! forms agreements with Palm Inc.e.Site goes live September .com allowing them to offer person-person payment solutions . Palm computers). More recently.

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

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

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

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

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








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

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

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

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


681 2.806 2.181 21.643 3.595 17.193 112 .932 4.648 1.197 32.761 1.830 14.510 8.464 3.806 11.845 56.281 11.132 15.502 33.792 3.781 33.909 7.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.895 2.985 2.804 2.319 1.766 14.076 3.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland US US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Food Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imaging Telecoms Electronics Financial Services Automobiles Food Automobiles Office Equipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing Food Automobiles Beverages Personal Care Food Software Computers Fashion Toys Telecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Alcohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Leisure Leisure Leisure Brand Value ($US mln) 83.043 8.568 3.781 17.021 26.602 4.225 11.310 11.147 9.654 43.422 1.052 6.527 3.423 2.143 2.694 17.184 1.313 2.Interbrand's Ranking of the Top 60 Brands (www.894 14.231 12.048 20.155 7.361 1.404 4.101 9.interbrand.231 24.634 1.275 30.283 4.596 3.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .603 5.550 12.329 4.262 1.

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





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