A STUDY ON MARKETING STRATEGIES IN BRAND BUILDING ON THE INTERNET

Submitted in partial fulfillment of the requirements of Bangalore University for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION
By

Mr. NITIN THOMAS
Reg. No. 05JJCM6036

Under the Guidance of Prof. Rajesh S. Pillai

KRISTU JAYANTI COLLEGE
K.NARAYANAPURA, KOTHANUR POST BANGALORE- 560077

1

2005-2007

2

DECLARATION

I here by declare that this dissertation titled “A Study on Marketing Strategies in Brand Building on the Internet” is submitted by me to the Department of Management, Bangalore University in partial fulfillment of requirements of MBA programme is a bonafide work carried by me under the guidance of Prof. Rajesh S. Pillai. This has not been submitted earlier to any other university or Institution for the award of any degree/diploma/certificate or published any time before.

Place: Bangalore Date:

Nitin Thomas

3

KRISTU JAYANTI COLLEGE
K.NARAYANAPURA, KOTHANUR POST BANGALORE- 560077.

CERTIFICATE FROM THE INSTITUTION

Certified that this dissertation titled “A study on Marketing Strategies in Brand Building on the Internet” submitted in partial fulfillment for the award of MBA Degree of Bangalore University, was carried out by Nitin Thomas of IV Semester MBA under the guidance of Prof. Rajesh S. Pillai. This project work has not been submitted to any other university or Institution for the award of any degree/diploma/certificate

GUIDE

DEAN MBA DEPARTMENT

PRINCIPAL
4

5

ACKNOWLEDGEMENT
‘Behind every successful effort there lies contribution from numerous sources irrespective of their magnitude. My project is no exception and I take opportunity to thank those helping hands whole heartedly.’

At the outset, I would like to express my deep sense of gratitude and sincere thanks to Rev. Fr.Josekutty P.D, Principal, Kristu Jayanti College for providing an opportunity to discover the Corporate World, from a close perspective. I wish to express my indebtness and profound sense of gratitude to my guide, Prof. Rajesh S. Pillai, Kristu Jayanti College for their kind help, valuable guidance, advice and encouragement throughout the span of my work
Last but not least I also thank my parents and my relatives for their co-operation and support without whom my Project would not have being successful.

Nitin Thomas

6

CONTENTS
Executive Summary

Chapter 1: Introduction Chapter 2: Research Methodology 2.1 Brief Introduction 2.2 Statement of the Problem 2.3 Needs for the Study 2.4 Objectives of the Study 2.5 Scope of the Study 2.6 Methodology 2.7 Methodology Assumption 2.8 Limitations of the Study Chapter 3: Industrial Background & Company Profile 3.1 The Natures of Brands 3.2 Building a Brand 3.3 The Internet 3.4 Building brands on the Internet – a hypothesis 3.5 Profiles 3.5.1 Introduction 3.5.2 Case study: Yahoo! com 3.5.3 Case study: Amazon.com 3.5.4 Case study: Boo.com 3.5.5 Case study: eBay 3.5.6 Case study: CDnow 3.5.7 Case study: Gap.com Chapter 4: Analysis & Interpretation (Tables &Graphs) Chapter 5: Findings & Suggestion Conclusion Bibliography Appendices

1 4 5 6 7 7 8 9 11 12 13 14 20 26 30 37 37 37 43 50 54 60 65 70 82 87 92 94

7

TABLES & GRAPHS
Table No.1: What are people doing online 71 Figure 4.1: What are people doing online 72 Table No.2: Number of respondents who really carried out business transactions on Internet Figure 4.2: Number of respondents who really carried out business transactions on Internet Table No.3: Name of cyber companies that you actually dealt with Figure 4.3: Name of cyber companies that you actually dealt with Table No.4: Number of e-purchasers who want to come back for future transactions Figure 4.4: Number of e-purchasers who want to come back for future transactions Table No. 5: Standards for a good online company Figure 4.5: Standards for a good online Table No.6: Keys to Web brand Loyalty Figure 4.6: Keys to Web brand Loyalty Table No.7: Killers of Web brand Loyalty Figure 4.7: Killers of Web brand Loyalty Table No.8: Things you want to buy online Figure 4.8: Things you want to buy online Table No.9: Ranking the popularity of six below cyber companies Table No. 10: Do you usually read chain mails & bulk mails? Figure 4.10: Do you usually read chain mails & bulk mails? Table No. 11: Different approaches in brand-building Table No. 12: Popularity and effectiveness of brand building methods Figure c.1: Popularity of methods Figure c.2: Effectiveness of methods 73 73 74 74 75 75 76 76 77 77 78 78 79 79 80 81 81 88 89 90 90

8

EXECUTIVE SUMMARY
This dissertation set out to explore how the Internet is changing the brandbuilding environment, in order to identify the new sources of value, the new brandbuilding 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. This 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 Part 4, Chapter 3, the tools for building an online brand include the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication) These frameworks highlight the key components and sources of added value 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.

9

CHAPTER 1

Introduction

10

Introduction
Over the past few years, there has been an explosion in the online world - an explosion that is also a harbinger of how business will operate in the future. Supply chains are being rethought, products and services reconfigured, and business models revamped. As such, the Internet is having a profound impact on the way business is being conducted in ways that are often disruptive to traditional methods. This is creating new challenges and opportunities. The Internet provides the opportunity for companies to reach a wider audience and create compelling value propositions never before possible (e.g. Amazon.com's range of 4.5 million book titles), while providing new tools for promotion, interaction and relationship building. It is empowering customers with more options and more information to make informed decisions. The Internet also represents a fundamental shift in how buyers and sellers interact, as they face each other through an electronic connection, and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-on-one setting. As such, the Internet is changing fundamentals about customers, relationships, service and brands, and is triggering the need for new brand-building strategies and tools. In the midst of this, aggressive Internet start-ups have emerged, creating strong brands that are putting established brands at risk. Internet companies such as Yahoo!, Amazon.com, America Online (AOL) and eBay have been able to build powerful brands in a few years, whereas it has taken decades for traditional companies to achieve the client base, customer affiliation and level of sales, which these Internet start-ups have achieved. FIGUREAs a result, harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. For pure online players, who are essentially intangible, brands are even more critical as customers have little to go on other than a recognised brand. Given the tremendous clutter in today's e-commerce marketplace, and the high cost of acquiring online customers, the most successful sites will be those that can attract customers and build brand loyalty and enthusiasm that extends the brand-customer relationship beyond a single transaction. A Business Week
11

survey found out that 57% of Internet users go to the same sites over and over again, rather than drifting from site to site1. Therefore, building awareness, attracting traffic or “eyeballs”, turning browsers into buyers, and turning first-time buyers into loyal repeat customers has become the Holy Grail of online marketing strategies. However, as the need to build brand loyalty online is reaching a peak, there is a growing recognition that traditional methods are no longer suited to this new interactive environment. As such, companies lack a coherent framework and concrete methods to build an online brand. 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. During the last 3 years, there has been a rupture on the bubbles of the Dotcom industry. The disruption of the global Dotcom industry, the loss of investors’ confidence, the assailance from hackers and code-breakers, the bankruptcy of many start-up giants (including Boo.com and Goodsonline.com) made many pessimistic souls believe at the doomsday of the industry in a not-too-distant future. But according to experts, Dotcom industry is still a fledging and promising one. According to Hoffman, the online purchase will occupy up to 35% of the total figure in the next 30 years. By the way, the competition between the start-ups will be more fiercely than ever. In the era of digital technology, companies compete not only in price and quality, but also in brand name. Therefore, building a successful brand name on Internet is a vital task, especially to cyber companies.

12

CHAPTER 2

Research Methodology

13

2.1 Brief Introduction
In the past, they competed by price. At present, they are competing by quality. In the future, they will compete by brand name. Especially, within the Dotcom industry, a well-known and recognised brand is a skeleton key to the gate of success. Building up a successful brand name is synonymous to surviving the market. Online purchase and Brand building on the Internet are new business activities, and they have acquired a new dimension, with approaches are totally different from ones of the traditional industries. Online companies have different client base. They make promotion and advertisement strategies in different ways. They have different access to brand building strategies. Digging up and scrutinizing the way how a startups can build a successful brand name on Internet is the main purpose of this dissertation. During the last seven years, the world has eyewitnesses the fierce wax and wane of the Dotcom industry, from the fledging period of 1995, with the appearance of Amazon and AOL, to the zenith of Dotcom industry in 1999, and the nadir of 2000, when Boo.com and Goodsonline.com came into bankruptcy, and the newest resurrection of Dotcom industry since 2002, with Yahoo and eBay’s profit recovery. Recently, more than a dozen new cyber companies (e.g.: Vnemart.com, Baazee.com, Johnstark.com) either promoted by the banks or private industrial houses have come into existence with the hope of regaining the glamorous past to the industry. Looking at the future, one can not ignore the fact that Dotcom is still the industry of the future, with all promises and expectations one can hope.

14

2.2 Statement of the Problem
This project has been undertaken to study about the strategies of brand building within start-up industry. The study tries to analyse brand building strategies of 6 cyber companies, which attach to the success and failure of each and every of them, thereof bring out a lesson regarding how to build a successful brand on Internet. This study tries to extract to customers’ attitude and beware ness towards respective brands, and on what foundation a potential customer decides to join the mainstream of cyber purchase, and which factors cast influence on his or her decision of buying. This study also tried to bring out the perceptions that e-customers finding while carrying out an e-commerce transaction. In the study, I interviewed potential e-customers on certain significant points, such as basis of customer, level of beware ness towards a certain brand name, customer perception, level of transaction, frequency of e-purchasing monthly, level of satisfaction and convenience, factors of influence, etc. During the study, besides using my own market researching result, text books, and reference materials, I also carried out my analysis and interpretation based on unconventional sources of information like cyber reference materials, e-opinion poll.

15

2.3 Need for the Study
The study concentrates on the field of global Dotcom industry, the significance of brand name to a cyber company, and how to build up a successful brand. The study also shows the perception and awareness of people towards some brand names, and which brand they want to deal with most. The study reveals the dotcoms’ chance of viability in the market to tap the potential customers and to increase their market share, as well as its position in the customers’ mind. The need of the study emphasises on the market research of the brands. The study helps in analysing the viability of some brand names. During the study, I tried to find out the potential customers and collect relevant information, as well as to analyze the information which may help cyber companies to formulate their brand building strategies in accordance with customers’ mind and perception, therefore make contribution to their market share increase in the future.

2.4 Objectives of the Study
The objectives of this dissertation are as follows:

To gain an understanding of the role of brands and how they have traditionally been built. A review and analysis of leading academic thinking will be used to explore these issues.

To explore how the Internet is changing the brand-building environment, and to identify new sources of value, tools and strategies to build brands on the Internet. Academic literature and an analysis of the impacts of the Internet will be used to Investigate these factors, supported by secondary data related to aspects of online business from accredited and published sources.

To identify the key factors and characteristics that contributes to the development of successful Internet brands. This is based on the outcome of the primary research (in-depth case studies), with reference to the theoretical themes that emerge from the literature review and in terms of the practical implications for companies.

2.5 Scope of the Study
16

To understand what vital role a brand name might play in contributing to the success of a cyber company, it will be necessary to understand the context of current issues within the Dotcom industry and to identify the main players within the Dotcom industry, their brand building strategies, their successes and failures, and lessons from them. The project work covers brand building strategies with special reference to six typical cyber companies, including: Amazon.com Fashion mall.com CDnow EBay Gap.com Yahoo! And the survey has been conducted randomly selected respondents within the city of Bangalore.

2.6 Research Methodology
17

The methodology used in this dissertation is illustrated in Figure 2.1. Figure 2.1: Research Methodology caac.2 - RESEARCH METHODOL

Academic Research

Hypothesis

Case Studies

Conclusion

Secondary Data

The 7Cs Framework Primary & the Interactive Data Brand-Building Process Academic Research: Given that the Internet is such a new area, there is more work in popular rather than academic literature. Consequently, the literature review draws on leading academic thinking in more established areas such as brand management, relationship management, marketing, strategy and economics. The absence of academic literature on Internet branding posed a major obstacle; however, this also highlights the true value of the dissertation. While there is no attempt, nor desire, to provide an in-depth analysis of the psychological and social dimensions of brands, certain key factors are highlighted in their relevance to the dissertation. Secondary Data: This consists primarily of key facts and survey results quoted by leading consultancy and research firms, and is used to provide insight into some of the factors that contribute to the development of successful brands.

Hypothesis (Framework): This is based on the literature review and secondary data. 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. These are further
18

refined using the insight obtained through the case studies. Case Studies: The dissertation is essentially built on the in-depth analysis of the brand building efforts of six online companies. The case studies include born-onthe-web companies that are among the most recognised Internet Brands (Amazon.com, CDnow, eBay and Yahoo!), traditional “bricks-and-mortar” companies that rose to the challenge of taking their brands to the Internet (Gap.com), as well as a recent Internet failure (Boo.com). The combination of cases provides a useful and practical insight into brand-building issues and problems, and factors that contribute to a brand's success. Conclusion: Discusses the key findings and areas for further research.

2.7 Methodology Assumption
This section outlines the procedure followed in collecting data and analyzing it.
19

a). Method of collection: The survey was conducted to collect primary data both quantitative and qualitative. Data was sought from cyber companies and e-customers. b). Type of data used: Both primary data and secondary data where used. Primary data was obtained from direct interviews with e-customers, web-users, and potential purchasers. Secondary data was obtained from sources like brochures of cyber companies, Web sites, Magazines, and Books etc. c) Tools for data collection: The primary data was collected with the help of questionnaire. The questionnaire was designed to obtain necessary information that can help me to fulfill this study. The questionnaire was administered by me through direct visit to institutes, companies, administration offices, and residences, and by collecting them from the respondents at a later date in some cases. d) Sample size: Keeping in mind the budgetary, time and manpower constraints, the total sample selected was 100 all of them were conducted in Bangalore, e) Assumption: The information from the respondents has been treated as the correct information. Though the sample size is limited to 100, I felt it is good enough to come to conclusion about how to build a recognized brand name on Internet. To analyze and interpret the primary data, I had used percentage analysis, which suits the best.

2.8 Limitations of the Study
1. This study was carried out in Bangalore city. Hence the results must not be extended to the national level as the psychographics and demographics vary significantly across the country. Thus the results are applicable only in Bangalore city.
20

2. Out of 1 lacks odd dotcoms in the world; only 6 companies are selected, so we can not generalize the findings. 3. Some of the data are collected from word-of-mouth that can be biased. 4. Given suggestions and interpretations are limited to particular companies only. 5. Biased and concealed responses by the respondents can’t be averted. 6. Even though comparative analysis of different cyber companies is done, only some aspects of their brand building strategies are taken into consideration. The data available on this are limited and companies, because of their business secret, are not willing to part with it. 7. The project is to be completed within 3 months, which is insufficient for a further indept analysis. The limitation of time horizon therefore is another constraint of this study.

21

CHAPTER 3

Industrial Background& Company Profile

3.1 THE NATURE OF BRANDS
22

INTRODUCTION Brands are made up of many layers and dimensions. In this chapter, these layers are unravelled to reveal the nature of brands and their reason for existence. The chapter proceeds to describe the influence of brands on the buying process, and the importance of customer satisfaction and brand loyalty. The concept of brand equity is outlined, explaining the value of brands, both to customers, and to companies. These concepts are central to brands and brand-building, whether online or offline, and they form the backbone of this dissertation. WHAT IS A BRAND? “A mixture of tangible and intangible attributes, symbolised in a trademark, which, if properly managed, creates influence and generates value”1 This definition truly captures the essence of a brand, and highlights the importance of brand management. Branding is about creating “value”, both for customers, and for the company. This value stems from the products and services that companies create and bring to the market, but extends further to encompass added values derived from factors such as the brand-customer relationship, the brand's emotional benefits and its self-expressive benefits.

THE LAYERS OF A BRAND
Brands are made up of four layers - the core product or service, the basic brand, the augmented brand and the potential brand. The core Product / Service At the most basic level, customers buy products to meet certain functional needs. However, most products and services cannot survive on functionality alone as this is usually matched in time. The most common barrier to competition is building a brand. The Basic Brand The basic brand consists of the “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors”2. Essentially, this should
23

support the offering's performance and differentiate the brand from those of competitors. The Augmented Brand Successful companies seek a competitive edge through the enlargement of the core product or service, with supplementary products and services (e.g. information, quick delivery) that enhance the customer’s total purchasing and use experience. These products and services add value and make the offering much more difficult for competitors to emulate. The Potential Brand A brand achieves its potential when added values are so great that customers will not willingly accept substitutes, even when the alternatives are substantially cheaper or more readily available (e.g. Coca-Cola, Kodak, Levi's).

PRODUCT AND SERVICE BRANDS
Product brands are the original brand carriers. They are the historical core of branding because they are the most prevalent, and because they most readily come to mind when consumers are asked to recall brands. For instance: Ford, Motorola, Coke, Honda, etc. Service Brands (intangible) are much less numerous than their product counter parts. Intangible services are also more challenging to “package” and sell to consumers who often have difficulty conceptualising, preferring things they can see and touch. Certain service brands, such as in retailing, actually sell products, but the brand itself is the store, not the products it sells - The Gap stores, Southwest Airlines and Amazon.com are examples. In fact, this is the case with all Internet companies, as they essentially perform the function of a “virtual” intermediary or “infomediary” and are intangible.

24

THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY
Customers at the lowest and highest ends of the satisfaction scale tend to have intense feelings about a brand and its products / services. The customers at the bottom end of the scale are "terrorists" - those who actively attack the brand telling others not to buy from the company. At the opposite end of the satisfaction spectrum are "apostles" - customers who are satisfied and loyal and talk favourably about the brand. Loyalty is derived when customers are continuously satisfied over time. This satisfaction encompasses the whole experience and not just a company's products or services. Customers that are passionately or emotionally loyal are those that have built trust in a company, and believe that it will always act in their best interest. Trust is critical for a brand’s success. Some traditional companies identified as having established a strong trust relationship with their customers include: Disney, Federal Express, Hewlett-Packard, Johnson & Johnson, Saturn, Southwest Airlines and Xerox. Figure 3.2: Customer’s satisfaction scale FIGUR IMPACT OF COMPETITIVE ENVIRONMENT High Loyalty Low
Hostages Apostles

Terrorists

Mercenaries

Low

Satisfaction

High

Loyal customers are assets. 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 one. - Loyal customers tend to spend more. - Regular customers tend to place frequent, consistent orders. - Satisfied customers are the best advertisement - they provide good word-of-mouth and are the best salespeople for the product / service. - They are willing to pay premium prices to a supplier they know and trust. - Gaining market entry or share becomes very difficult for competitors.
25

- It is easier to communicate with them on a regular basis.

EMOTIONAL LOYALTY
Emotional loyalty can be brought about in two main ways. Firstly, emotional loyalty is born out of a consumer's personal relationship with a brand. This relationship can actually start through the satisfaction of a functional need or expressiveness (selfimage) need. Consumers cross the threshold from a mere brand relationship into emotional loyalty when they "animate" the brand, giving quasi-human qualities and relate to it as they would to humans - consider how Coke consumers felt betrayed when Coca-Cola decided to change their formula in 1985. Emotional loyalty can be also created through the formation of a strong user community around the brand. The consumer reaches emotional loyalty when membership in the brand’s user community becomes an end in itself. In this way, the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e.g. Harley-Davidson motorcycle clubs).

THE CONCEPT OF BRAND EQUITY
Brands vary in the amount of power and value they have in the marketplace. At one extreme, there are brands that are unknown by most buyers. Some brands have a fairly high degree of brand awareness (measured by brand recall and recognition). Beyond this, there are brands that customers perceive as acceptable and would not resist buying. A stronger brand enjoys a high degree of brand preference over competing brands. However, a “power brand” tends to have a high degree of brand loyalty, whereby customers would be unwilling to substitute it with competitors’ offers. Figure 3.3: Brand awareness process
Unknown Brand Brand Awareness Brand Acceptability Brand Preference Brand Loyalty

A strong brand is said to have high brand equity, which is the value of the brand over and above its commodity value. According to David Aaker (1991), 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 service3”. The major brand assets are brand loyalty, name awareness, perceived quality, strong brand associations, and other assets such as patents, trademarks, and
26

relationships with distributors and strategic partners.

The values of brand to customers
According to Jean-Noel Kapferer (1992)4, brands perform several functions that add value and customer benefits: Identification - To be clearly seen, to make sense of the offer, to quickly identify sought after products Practicality - To save time and energy through identical repurchasing and loyalty Guarantee - To be sure of finding the same quality no matter where or when you buy the product or service Optimisation - To be sure of buying the best product in the category, the best performer for a particular purpose Characterisation - To have confirmation of your self-image or the image that you present to others Continuity - Satisfaction brought about through familiarity and intimacy with the brand that you have been consuming for years Hedonistic - Satisfaction linked to the attractiveness of the brand, to its logo, to its communication Ethical - Satisfaction linked to the responsible behaviour of the brand in its relationship with society

The values of brand to companies
Brands create value for companies, in the following ways: Brands, market share and profits - Typically a brand leader obtains twice the market share of the number two brand, and the number two twice the share of the number three. The brand leader is the most profitable and all beyond number two are unprofitable. Brand Leverage - The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development, production and marketing; Premium pricing increases revenue. The Value of Niche Brands - Dominating a niche market is usually more profitable than being fifth in a large market. Brand Loyalty and Beliefs - Strong brands are more attractive to investors. Brand loyalty also reduces marketing costs and enables firms to override occasional problems (e.g. Johnson & Johnson with Tylenol). The Brand Barrier - Brand leaders usually have the financial strength to fend off
27

competitors. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. In addition, brand leaders can exploit their superiority in the market (e.g. Coca-Cola “the real thing”). Avenues for Growth - The product life cycle applies to products, not brands. Companies can maintain a brand while modifying the underlying product to account for new technology, fashion or prevailing market conditions. The brand can also be used to penetrate new markets. Motivating Stakeholders - Companies with strong brands attract good recruits. They also tend to elicit community and government support. In trying to estimate the monetary value of brands, companies such as Interbrand (see Appendix A), and Young & Rubicam have created complex formulas, but there remains an ongoing controversy about how accurate and meaningful these measures are.

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. When a company creates this type of customer preference and loyalty, it can build a strong market share, maintain good price levels and generate strong cash flows. This, in turn, drives up share price and provides the basis for future growth.

28

3.2 BUILDING A BRAND
INTRODUCTION
Building a strong brand is a complex task. This part spells out the traditional brand building process, highlighting important factors that contribute to the success of each step along the way. The major characteristics of successful brands are also reviewed.

OVERVIEW OF THE BRAND-BUILDING PROCESS
The brand building process starts with the development of a strong value proposition. Once this has been established, the next step is to get customers to try the brand. If the offering is developed properly, it should provide a satisfactory experience and lead to a willingness to buy again. To entice trial and repeat purchase requires triggering mechanisms, which are created through advertising, promotion, selling, public relations, and direct marketing. The company needs to communicate the values of the brand and then reinforce brand associations to start the wheel of usage and experience, and keep it turning. Through the combination of the stimulus of consistent communications and satisfactory usage and experience, brand awareness, confidence and brand equity are built.

THE VALUE PROPOSITION
Brand-building starts with a clearly defined value proposition - a strong offer that a potential customer would find compelling and interesting. In order to do this, a company must develop a strong understanding of who their potential customers are, what they value and how the products or services should be optimised or configured to deliver this value. The value proposition must be continuously re-evaluated to respond to changes in the marketplace. Central to this value proposition, a brand must deliver a quality product or service that meets the functional needs of customers and differentiates itself from competitors. It should seek to augment its basic appeal with added value through the provision of additional products or services to delight customers. In this way, the brand can elicit feelings of confidence that it is of higher quality than competitors’. As such, a
29

compelling value proposition is the combination of an effective product or service (P), a distinctive brand identity (I), and added value (AV). These three characteristics are multiplicative rather than additive - each is essential. Without a good product or service, it is impossible to build a successful brand. Similarly, unless differentiation and awareness can be developed, it will never attract a strong client base.

Added Value
Added value is at the heart of building successful brands. Most buying decisions are influenced by brand values, which are additional to those based upon real performance. The large number of decisions, the pace of technical change, the number of competing alternatives and the large variety of advertising and selling messages, mean that buyers look for short cuts. Reputable brand names provide confidence and allow customers to cut through the risks and complexity of choice. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. People use brands to express their lifestyles, interests, values or wealth. Customers choose brands, which they perceive as meeting their needs. In today’s affluent society, these needs are as likely to be about satisfying self-actualisation or esteem needs, or to gain a sense of belonging, as they are to be about satisfying basic physical and economic needs. Brand values derive from five major sources: Experience of Use - if a brand provides good service over time, it acquires added values of familiarity and proven reliability. User Associations - brands frequently acquire an image from the type of people who are seen as using them. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities or celebrities. For instance: Britney Spear and David Beckham with Pepsi Cola, or Liz Taylor with Channel 5. Belief in Efficacy - in many cases, if customers have faith that a brand will work, it is more likely to work effectively for them. For pharmaceuticals, cosmetics and high-tech products, faith in brand generates satisfaction in use. Beliefs in efficacy can be created by comparative evaluations and rankings from consumer associations, industry endorsements and newspaper editorials. Brand Appearance - the design, layout and appearance of the brand can clearly affect preference by offering cues to quality.
30

Manufacturers’ Name and Reputation - In many situations a strong company name (e.g. Coca-Cola, Gillette, Sony, Hewlett-Packard, Kellogg’s) attached to a new product will transfer positive associations, providing confidence and incentive to trial.

Distinctive Brand Identity
A brand identity is the message sent out by the brand through its name, features, visual appearance, and advertising. This may be different from the brand image, which depends on how the target market perceives the brand. A company should seek to differentiate its brand through developing a distinctive identity. JeanNoël Kapferer (1992) identified three levels of a brand identity5 including: The Brand Core - the fundamental or genetic code of the brand, which remains fixed over time. The Brand Style - articulates the brand core in terms of the culture it conveys, its personality and its image or self-projection. The Brand Theme - the way the brand communicates through its advertising, press releases, packaging, etc. Themes include the physical appearance (logo, colour scheme, and visual appearance), its reflection (e.g. type of spokesperson / customer image used to advertise the brand), and the relationship expressed (e.g. glamour, prestige, friendliness). Brand themes are the most flexible element and will tend to change with fashion, style or cultural differences from one country to another; however the brand style and core tend to be less flexible. The brand prism enables management to understand the brand, its strengths and opportunities. Secondly, it helps in developing the brand strategy and the formulation of a distinctive positioning in the market. It also facilitates consistency in the message being transmitted through presentation (e.g. website design, structure and ease of use), advertising, below-the-line activities, and through line and brand extensions. Finally, 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.

31

DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION
Once the value proposition is clearly defined, the company must ensure that it develops the appropriate structure, systems, strategy (partnerships and alliances), skills, management style, culture and staff needed to support, deliver and reinforce this value proposition (see Appendix B - The McKinsey 7-S Framework). The value proposition must then be articulated in terms of the “marketing mix” - often referred to as the “4Ps” - Product features, Price, Promotion and Place (distribution strategy). In term of service, 3 more “Ps” must be attached: People, Process, and Physical evidence. The value proposition must be communicated to entice customers to try the product / service. If the offering is developed properly, it should lead to satisfaction and re-purchase. Before potential customers can buy a product / service, they must learn about it. This learning is called the adoption process6. Adoption process
Awareness Interest Evaluation Trial Adoption

The Innovation-Adoption Model consists of: Awareness - The company has to create awareness of the brand, and its products / services. Advertising and PR are common tools for achieving awareness. Interest - Customers need to be stimulated to seek information about the brand’s uses, features and advantages. Evaluation - Customers consider whether the product / service will meet their particular needs. Personal sources such as word-of-mouth from friends, colleagues and opinion leaders become important influences at this stage. Trial - The customer tries the product / service for the first time and decides whether to adopt it based on their expectations, and the product / service's perceived performance. Adoption - The customer is satisfied and decides to make regular use of the product / service. Traditionally, companies have used the tools of the promotions mix advertising, direct marketing, sales promotion, personal selling and public relations / publicity - to move customers through the adoption process. Advertising and public
32

relations can be effective in generating awareness and interest. Sales promotions and sampling are often used for encouraging evaluation and trial. It is beneficial for companies to accelerate the adoption process before competitors emulate the benefits they offer. Enticing customers to repurchase and adopt the brand not only requires a successful trial experience, but enhanced customer interaction through relationship building.

BUILDING CUSTOMER RELATIONSHIPS
Building relationships with customers extends beyond a single transaction. This is often referred to as Customer Relationship Management (CRM). This focuses on establishing a long-term, multi-transaction relationship, when each trusts the other to deal fairly and reliably. Over time, this process enables an exchange of information, providing insight into customers’ needs and wants. This information is a key competitive advantage, allowing companies to communicate regularly with their customers and customise their interaction. In this way, companies can increase buyers' satisfaction, making them less likely to switch to a competitor. Customer service is an important element of this relationship. Berry and Parasuraman (1991) identified three customer relationshipbuilding approaches7 Financial Benefits - such as airline frequent flyer programmes, & loyalty / discount cards. Social Benefits - by learning customers' individual needs and wants and individualising and customising service and contact with the customer. Structural Ties - for example, the company may supply customers with special equipment or tools (e.g. Internet linkages, software) to help customers interact with the company. Through building relationships with customers, companies can increase the value of each customer, while strengthening the position and value of the brand.

33

CHARACTERISTICS OF SUCCESSFUL BRANDS
Several factors contributing to the success of brands have been identified, including: Quality Product / Service Experience - Satisfactory experience is the major determinant of brand values. If the quality of the experience deteriorates, or if the brand is surpassed by superior offers from competitors, then its position will be undermined. First-Mover Advantage - Being first into the market does not necessarily bring success, but it makes the task easier. It is easier to capture a share of the consumer's mind and build a customer base, when the brand has no competitors to rival its position. Unique Positioning Concept - If the brand is not the innovator, it must have a unique positioning concept - a segmentation scheme, value proposition or augmented brand, which will add value and distinguish it from competition. Strong Communications Programme - A successful brand requires an effective selling, advertising or promotional campaign, which will communicate the brand's existence, its function and psychological values, trigger trial and reinforce commitment to it. Without building awareness, comprehension and intention to buy, the brand is meaningless. Time and Consistency - Rome was not built in a day. So is a brand name. It often takes years for a brand to build up the added values, and establish a trusting relationship.

34

3.3 THE INTERNET
INTRODUCTION The Internet is transforming the business environment, creating new challenges and opportunities. This chapter provides an overview of the Internet and its defining characteristics, highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. OVERVIEW OF THE INTERNET The Internet is a world-wide network of networks. In essence, it is a common technology platform that allows computing devices to communicate with each other. In doing so, it offers a number of alternative channels that enable businesses and people to communicate. The three core channels include e-mail (the most common), news groups and mailing lists, and the “world wide web” (www). The World Wide Web (www) is a large network of documents, which contain hypertext and pictures, and provides the opportunity for dynamic interaction. Hypertext allows information to be organised in a user-friendly way that is easily accessible. Information is becoming a major part of the products and services that people buy, and a critical source of added value

The Defining Characteristics of the Internet
The distinctive characteristics of the Internet can be summarised in three key points: It dramatically Reduces Information Costs - the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). It Allows for Two-way Communication and Interactivity - this radically alters the process of interaction between communicating parties, allowing both parties to identify each other and build one-to-one relationships - not previously available with mass medium forms of communication. It Overcomes the Barriers of Time and Space - The Internet is a global network and can be reached from everywhere, regardless of where the computer or Internet access device is physically located. The Internet can also be accessed at any time - 24 hours a day, 7 days a week. These qualities eliminate the barriers of time and space that exist
35

in the physical world. These characteristics combine to create a very powerful medium. By allowing for direct, ubiquitous links to anyone, anywhere, the Internet lets individuals and companies build interactive relationships with customers and suppliers, and deliver new products and services at low cost. These defining characteristics have fuelled its explosive growth.

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

THE IMPACT OF THE INTERNET ON BUSINESS
The Internet has had a profound impact on the way business is being conducted - how companies operate, how they compete and how they serve their customers - and revolutionary new business models are emerging, which are often disruptive to traditional business models. Although the particular impact will differ between industries, a number of sweeping impacts are identifiable:

36

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, suppliers, partners and other corporate constituencies. Improved Core Business Processes The use of Internet-based technologies as the platform, over which the organisation’s processes flow, represents a level of efficiency and integration previously unattainable. For example, CISCO e-enabled its financial systems and now has the capability to close its financial year within one day. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. A “virtual” presence can mitigate the cost of having to invest in physical facilities. The Internet also facilitates the development and co-ordination of global activities (e.g. through the use of extranets). The Balance of Power is shifting to the Customer The Internet empowers customers, as they have access to more information leading to more informed decision-making. It also provides easy access to competitors’ offers and allows customers to consider every available alternative. As a result, switching costs are much lower. Competition is intensifying Although the Internet removes the geographical constraints of reaching customers, it also removes the geographical protection from competitors, as they are just one 'click' away. This, combined with the emergence of electronic intermediaries, the diminishing barriers-to-entry and the lower switching costs, has resulted in a fierce competitive environment. Knowledge is becoming a Key Strategic Asset Many companies have recognised that if they want to succeed, their organisations must harness knowledge - internally and externally - in developing products, improving processes, getting closer to customers and ultimately staying ahead of competitors. Internet technology can be used to exploit collective learning and knowledge, allowing employees to share knowledge, collaborate more effectively and ultimately embed organisational intelligence within processes, products and services. The Pace of Business is Accelerating
37

With the fast pace of technological change, the globalisation of business, fierce competition, empowered customers, the development of a knowledge economy, and the 24 x 7 environment, the typical clock-speed at which companies need to operate has accelerated. Revolutionising Sales and Brand Management The Internet provides companies with a new channel to reach a new breed of customer. Enhanced communication capabilities allow companies to build one-to-one relationships with their customers and suppliers that were previously impossible. It allows companies to improve customer service, achieve global reach and realise a new source of cost advantage. 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. Examples of emerging information age business structures include flat versus hierarchical, extensive outsourcing, partnerships. The Strategic Importance of Alliances and Partnerships Although this point has already been touched upon, alliances and partnerships have taken on a new level of strategic importance. Traditionally, companies have looked upon alliances only as a means of filling gaps, and most traditional partnerships were vertical, linking companies with suppliers and customers up and down a predefined value chain. However, most Internet and e-commerce partnerships extend beyond this, linking companies with competitors and players from entirely different industries and business sectors, thus creating a “value net”. The extent of this partnering highlights the typical structure and dynamics of an online company. supply chain cooperation, and multiple strategic alliances and

38

3.4 BUILDING BRANDS ON THE INTERNET A HYPOTHESIS
INTRODUCTION
The Internet is changing the brand environment or “brandscape”. This chapter explores the new dynamics of brands and the critical importance of customer loyalty online. New strategies and tools for building brands on the Internet are identified, including the interactive approach to attracting customers and building loyalty. The limitations of brand-building on the Internet are also discussed.

THE NEW DYNAMICS OF BRANDS
Traditionally, in addition to providing added value, 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. However, the Internet makes search and comparison much easier. This threatens to undermine the value of brands. On the other hand, the logic of the Internet cuts another way. Transactions on the Internet require customers to provide detailed personal information - names, addresses, credit card numbers, etc. Generally, people have concerns about sharing personal information. In addition, the intangible nature of the Internet, and the fact that customers are buying goods that, in most cases, they have never handled or seen (except on-screen), has placed greater importance on trust and security. People only tend to transact with sites they know and trust - sites that provide a wealth of information and make comparison shopping easy, where the user feels a part of, and sites that understand the user's needs and preferences. This highlights the surfacing of information and relationships as key sources of added value in the Internet economy. Customers derive added value through the provision of information on the products or services they buy, as well as on topics of interest related to the brand and product characteristics. Traditionally, brands have been developed in an environment whereby a company creates a brand, and projects it onto a third party intermediary (the media). In response, many unnamed customers develop a “relationship” with the brand. The Internet, on the other hand, offers interactivity, whereby the company can establish a
39

dialogue and interact with individual consumers on a one-to-one basis. In doing so, a company can listen, learn, understand and relate to customers, rather than simply speaking at customers. This creates the opportunity for companies to build stronger relationships than previously attainable. However, this also poses a challenge as these relationships may take on a life and character of their own.

THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY
According to a recent study8, 75% of senior executives believe the success of an e-business initiative depends entirely on its ability to build customer loyalty. In fact, it could be argued that customer loyalty is even more critical online. which identified the following factors: - Companies will not break-even on one-time shoppers - often, customer acquisition costs are high, and to recover their investment, companies need to retain customers so that they return to the site repeatedly. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer, and some are spending over $500. Therefore, it is very unlikely that an online retailer can break even on a one-time shopper, unless they are selling high-price, high-margin items. - Repeat purchasers spend more and generate larger transactions - due to more frequent shopping and larger purchases. - Repeat customers refer more people and bring in more business - word-of-mouth is the single most effective and economical way online businesses grow their sites. - Loyal customers are more willing to buy other products from the company. For example, almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. Repeat purchasing not only binds trust, but also provides more opportunities for cross-selling. These points stress the importance of online customer loyalty, and with customers holding all the power, companies must ensure that they provide a completely satisfying end-to-end customer experience. This is further reinforced by the fact that, on average, a disgruntled online customer tells 10 people about a poor experience.

40

INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE
Economists have traditionally taught that businesses grow to the point where returns to scale diminish, as the benefits of scale are overwhelmed by the disadvantages of size. However, this is not the case on the Internet. Once the up-front investments are made (for research and development and technology infrastructure), additional products, customisation for individual customers, and other features can be added or changed at low marginal cost. Similarly, additional customers and transactions can be managed with limited fixed cost investment. As a result, each additional unit sold does not cost more than the last to deliver, and in the case of information-based products, the costs approach zero9. Even more important, businesses and online communities that rely on connectivity can enjoy “network effects”, (also referred to as “viral economics”), where the value of the network, and the value that each member realises, increases disproportionately as more people join the network. He number of user These characteristics suggest there may be “first-mover” advantages for businesses that establish leadership positions. With no competitors around, being first into a market makes it easier to capture the consumer's share of mind. As the company builds a customer base and develops a relationship with customers, its ability to track customer preferences and customise offerings improves, enhancing the interaction. This makes it more efficient in improving product selection, cross-selling and up-selling. It also allows online companies to tap supplementary revenue streams, including direct marketing, advertising and referrals, delivering increased margin per customer. This snowball effect favours first-movers, as once a strong lead is established, the leader will pick up momentum and will stand to gain an insurmountable advantage unless the leader makes a serious mistake, or until a competitor finds a way to change the rule of the game again. When a company reaches 'critical mass', the brand begins to take hold, and the cost of switching to an alternative brand becomes quite high, leading to the exponential expansion of the customer base. By the time a company has reached critical mass, its growth curve relative to a new entrant is somewhat daunting. As a result, the value of the company rises exponentially with market share. This is the logic behind some of the extraordinary valuations of Internet companies.

41

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, creating a potentially exponential growth (like a virus) in the message's visibility and effect. It is often referred to as “wordof-mouth”, “creating a buzz”, “leveraging the media”, and “network marketing”. Word-ofmouth is a particularly powerful medium, as it carries the implied endorsement from a friend. The Internet, with its e-mail lists, web sites, chat rooms and bulletin boards, makes communication tighter, and word-of-mouth even more effective. As a result, viral marketing is an effective tool in getting a message out fast, with a minimal budget and maximum effect. Other companies have adopted viral marketing techniques such as Mirabilis (acquired by AOL), eGroups and Geocities (both recently acquired by Yahoo!). Geocities enables people to create personal websites for free. When a user builds a website, they tell all their friends to visit it, and in doing so spread the word for Geocities. The classic example of viral marketing is Hotmail.com, a company now owned by Microsoft. Hotmail.com was one of the first free web-based e-mail services, and they created a subscriber base more rapidly than any company in history. Today they are the largest e-mail provider in the world with over 40 million users. Their strategy was: Give away free e-mail addresses and services Attach a simple tag at the bottom of every free message sent out, saying: "Get Your Private, Free Email at http://www.hotmail.com" Then stand back while people e-mail their network of friends and associates These people then see the message, sign up for their own free e-mail, and then propel the message even further to their own ever-increasing circles of friends and associates. Each new user becomes a company salesperson, and the message spreads organically.

THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK
42

The 7Cs Framework outlines the major components that add value and contribute to the quality of an online experience. In essence, the 7Cs are a continuation and restatement of marketing's traditional 4Ps (Product, Price, Promotion, and Place). Convenience Convenience goes beyond the ability to conduct transactions around the clock. The customers' ability to access and display information rapidly is extremely important. Sites that are difficult to use can cause frustration, making customers “click off” to another site. In fact, 30% of potential customers leave sites because they cannot find what they are looking for, and 66% of people who start a “shopping basket” fail to complete the transaction. Ease-of-use, ease-of-navigation, and fast response times are among the most important factors in establishing web brand loyalty, whereas a slow response time and site downtime will have a significant negative impact. Content Content is relevant and useful information directed at the needs and interests of the targeted users. With almost infinite display space and inventory capability, online companies have the opportunity to provide rich, up-to-date information, expert insights, and a wide range of products, which can enhance the company's value proposition. Content is considered to be a 'sticky' application as it entices visitors to spend longer periods of time on the site. Customisation Customisation involves tailoring the presentation of a web-site to individuals, based on profile information, demographics, or prior transactions. Online sites can track a customer's purchase history and modify its service accordingly. Often, sites allow 'surfers' to customise their experience by choosing what type of information they view through personalised sites (such as My Yahoo!); as well as through loyalty programmes that provide targeted benefits. Community Online communities are emerging as new gathering places for consumers with similar interests (e.g. iVillage and Geocities). These sites allow members to interact with one another, share information and access a wide range of services. An important contribution of these communities is that they provide members with a medium to communicate with each other. Members can interact in chat rooms, use bulletin boards, and organise live events. A unique characteristic of an online community is that the site
43

includes both editorial content (determined by the site owner) and member driven content. An online community offers a compelling way to entice customers back to a site. It fosters a sense of belongingness among the members, which is facilitated by a combination of factors. For a community to work, it needs a critical mass of members. Connectivity Connectivity is concerned with site-to-site connectivity and user-to-site connectivity. Site-to-site connectivity focuses on connecting users to other relevant sites. Companies can provide a selection of related links that complement the site's purpose and value proposition, as well as attracting traffic from other sites. Connectivity is enhanced by linking to search engines / portals and popular sites where target customers are likely to be browsing. This is similar to placing offline stores in high traffic areas. Once customers know of a site, they opt to input the URL (Internet address www.brand-name.com) directly into the browser and access the site immediately. Customer Care Online customers often require assistance and reassurance. Customers share security and privacy concerns, and a recent survey by Market Watch revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. Therefore, customer support at all stages of the interaction is important, and can be provided through e-mail, online chat, toll-free telephone numbers, and FAQ pages (Frequently Asked Questions) to solve problems. In addition, customer care activities can involve providing a variety of payment, delivery and return options, as well as features such as gift-wrapping. Communication The Internet provides the opportunity to establish dialogue with customers through e-mail, live chat, and online surveys. Communication can be tailored to specific user interests and should allow for two-way interaction. It is important in building relationships, as well as informing and reminding customers of special offers, news updates, activities, events and subjects of interest to the customer.

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:
44

• •

The Internet does not have the penetration of other promotional mediums (e.g. TV, Radio). The Internet supports brand-building activities where there is a need to build a relationship. Certain product categories, such as groceries and convenience goods, do not lend themselves to a need for customers to build a relationship with the brand.

Not all product categories have a strong fit with interactive media as they still need real life interaction, and the need to stimulate the other senses (taste, touch, smell).

Brand-building favours products that can be sold online. However, it is not economically feasible to sell certain products, especially in small quantities, due to high delivery and transaction costs (relative to the value of the product).

45

3.5 PROFILE
3.5.1 INTRODUCTION
This chapter provides an analysis of six companies. Each case is presented in the same format including, a company overview, its value proposition, the sources of added value (using the 7Cs Framework), its brand-building strategy (how it generates traffic), and other key factors that have contributed to its success (or failure). The cases are presented in the following sequence: Yahoo! Amazon.com Fashion mall.com EBay CDnow Gap.com

3.5.2 CASE STUDY: YAHOO!
COMPANY OVERVIEW In April 1994, Yahoo! was founded by David Filo and Jerry Yang, two PhD students at Stanford University, who started an online guide as a way to keep track of their personal interests on the Internet. The concept exploded (through word-of-mouth) and in less than six months, the site was receiving 1 million hits per day. Yahoo! has since promoted from an ordinary search service into a global Internet communications, commerce and media company that offers a comprehensive branded network of services and information to more than 145 million individuals each month world-wide, and is one of the few Internet companies to turn a profit early in the development of the Internet. As the first online navigational guide to the web, Yahoo! is a leading guide in terms of traffic, advertising, household and business user reach. Yahoo! is one of the most recognised brands on the Internet and is the 53 rd most valuable brand in the world. The company's global web network includes 23 world properties outside the US.
46

VALUE PROPOSITION At the core of Yahoo!'s value proposition, lies the directory - a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Internet penetration, the amount of information, and the number of websites continues to explode. According to CEO of Yahoo!, “We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. There's nothing in the real world to compare to that1”. As such, Yahoo! offers a range of supporting services that add value, from e-mail services to stock quotes and much more, all in a single location.

SOURCES OF VALUE – THE 7Cs FRAMEWORK
Convenience Central to Yahoo’s success, is the way it has structured and displayed information. Their goal is not to list everything under the sun, but instead to be selective and to display the best the web has to offer in a hierarchical framework that makes sense to customers. They have kept the design of the site simple and clean to appeal to customers and avoid slow-to-load graphics. More recently, Yahoo! extended its convenience through its Yahoo! Everywhere service, to allow access, regardless of platform (i.e. mobiles, TVs, Palm computers). Content Yahoo! has pursued a broad range of deals with content and commerce companies. These have helped Yahoo! become the place to track down a broad range of valuable information and resources, ranging from daily news and weather reports to road maps and books, and has been at the heart of Yahoo!'s growth and development. They have formed multiple alliances and partnerships with leading online companies such as Amazon.com and CDnow. Their thrust has been to provide valuable content to customers, while providing partners access to a large customer base. This creates a win-win situation as its satisfies Yahoo!, the partner, and more importantly, the enduser.

47

Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite topics, from stocks and sports results to weather and air fares, and is similar to a custom tailored newspaper. By tailoring the information to users' preferences, Yahoo! has increased customer loyalty and retention rates. Community Yahoo! has developed customisable web communities called Yahoo! Clubs, where groups of people with shared interests can communicate through chat, message boards, and e-mail. In 1999, Yahoo! acquired GeoCities, (one of the largest online communities) which provides easy-to-use and innovative tools to allow users to publish content on the site. Yahoo!'s recent acquisition of eGroups (an e-mail group communication service) will provide consumers with powerful new ways of communicating one-to-one, one-to-many, and many-to-many. One of the most recognized Yahoo! communities is the famous Yahoo! Messenger. Built from 1995, with more than 100,000 chat rooms and widely varying topics, from public health to movies, from sports to politics, Yahoo! Messenger attracts more than 1 million chatters daily, and spreads its communication through word-ofmouth faster than anything else. In some countries like Vietnam and China, Yahoo! Messenger has become a cultural phenomenon, where an ordinary chatter spends no less than 3 hours daily on Yahoo! Messenger to meet his or her e-pals. Connectivity Connectivity is Yahoo’s core product, and the nature of the navigation business, and is driving Yahoo’s multiple partnerships and alliances, to provide its customer base with access to useful links and content. In addition, Yahoo! has also implemented campaigns to persuade users to bookmark the site, or to make it their home page.

Customer Care Yahoo! responds to customer inquiries via e-mail, fax, telephone and even traditional mail, and plans to incorporate other features such as online chat to facilitate
48

communications. Yahoo! spends more on customer support than most companies, reinforcing the brand customer relationship, and contributing to their reputation as a quality service provider. Communication By positioning itself as a site that users frequently visit, and through communications via email, Yahoo! maintains close contact with customers. Yahoo! also encourages customers to e-mail ideas and feedback.

BRAND-BUILDING STRATEGY
Yahoo! is a marketing machine. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness, and according to Intelliquest, 82% of Internet users and 23% of people intending to go online, recognise the name Yahoo!. Yahoo’s brand-building success starts with its name, and its implications of a good time. Given the unease with which the average consumer approaches technology, Yahoo! avoided characterising itself as a technology-oriented company, and the company has always communicated the utility of its service in a way that reinforces other Core brand attributes – a sense of irreverence, an approachable nature, and an inherent friendliness. While Internet companies were targeting existing Internet users through the use of online promotion methods, Yahoo! extended beyond this to use traditional offline media. At the time this was considered a breakthrough, and it formed a critical link in Yahoo!'s brand building strategy. Their strategy was to target “near surfers” - people who are not yet online but are likely to use the Internet in the near future. These near surfers represented (and still do) a large and fast growing group and, therefore, by building a recognised brand name, Yahoo! would be one of the first sites that they visited. This was especially important, as experience surfers tend to be loyal to their search engine. As a result, Yahoo! aggressively promoted the site through public relations, TV commercials and radio spots during drive time. In 1996, they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line “Do You Yahoo!?” which conveyed the brand's irreverent personality. In addition, Yahoo! adopted “guerrilla marketing” techniques - with its name being plastered on everything, from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products, including backpacks, T-shirts, breath
49

mints, parachutes, snowboards, sailboats, and yo-yos, as well as TV shows (Ally McBeal, ER) and Hollywood movies. They even have a barter deal with the San Francisco 49ers, which has fans screaming Yahoo! to cheer their team as the Yahoo!'s logo flashes across the football stadium screen. They also teamed up with publisher Ziff-Davis Co. to create Yahoo! Internet Life, a monthly magazine guide to what's new on the web and it has co-branded products, services and contests with well known brands such as Ben & Jerry's, Visa and MCI. Yahoo! has paid little for this exposure, which has been instrumental in establishing Yahoo! as a household name. Although this seems like a shotgun approach, it is in fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test - it must reinforce the image of the company as “a service that is fun, a little wacky and inviting”. Once customers access the site, customers quickly discover its value and through a high quality experience (7Cs), Yahoo! has managed to cultivate high brand loyalty. According to a recent study, 92% of Yahoo! users rate the service as “excellent” or “very good” which is significantly higher than those of other sites, and 76% turned to Yahoo! before visiting another search engine or navigational site. In addition, the research shows that 73% of Yahoo! users bookmark the service - higher than all other services. According to Karen Edwards, VP-Brand Marketing, Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success, stating that “if we wait to hear about it in the news, it's too late. We need to be one step ahead in order to have a better service than our competition”. Their innovation, new services and customised features highlight their ability to relate to customers' needs.

OTHER

FACTORS

THAT

CONTRIBUTE

TO

THEIR

BRAND

LEADERSHIP
Innovation & First-Mover Advantage Yahoo! was first to market with a detailed search engine, first to go public, first to turn around an annual profit, and first to go mainstream by advertising its name using traditional media. To maintain its lead, Yahoo! has invested relentlessly in new services and marketing programmes that have set it apart from the pack. In addition, they have carried out extensive partnering, alliances and acquisitions to provide added value services to their customers, while attracting new customers.

Customer Focus & Reputation for Excellence
50

Yahoo! has kept close tabs on the evolution of the market and the interests of its customers, and has cultivated a reputation for excellence, from its convenient and logical structure and display of information, to its simple design, its excellent customer service, its choice of partners, and its openness (for example, if a user cannot find what it is searching for, Yahoo! points them to its competitors by including links to AltaVista, HotBot, GoTo.com, and other search engines at the bottom of its search results page). CONCLUSION Yahoo! is one of the most successful brands on the Internet. As the first online navigational guide to the web, Yahoo! has benefited from a first-mover advantage. They have maintained that lead through the creation of a high quality end-to-end customer experience. This has been achieved through their relentless investment into new services and extensive partnerships and alliances with leading brands. These relationships have provided end-users with added-value, while also associating Yahoo! with well known brands. Yahoo!'s intense focus on customer's needs and high quality online experience has been instrumental in cultivating a reputation for excellence. In addition, their innovative promotional and guerrilla marketing techniques, have created a distinct brand identity that differentiates the brand and appeals to its target market. As a result of all these factors, Yahoo! has built a strong brand, with a large customer base and high levels of customer loyalty.

51

3.5.3 CASE STUDY: AMAZON.COM
COMPANY OVERVIEW Amazon.com has become synonymous with e-commerce, and is one of the few Internet brands that are recognised all over the world. It is the 57 th most valuable brand in the world, and the most widely recognised e-commerce brand name in the US (with 60% awareness). Amazon serves over 23 million customers from 160 countries, and has sales of over $2 billion. In addition, it is the most visited e-commerce website in America, and one of the top two or three in Britain, France, Germany and Japan. In July 1995, Amazon.com launched with a mission to use the Internet to transform book buying into a fast, easy, and enjoyable experience. Amazon.com has since evolved from being an online bookseller into a one-stop shop with “Earth's Biggest Selection” of more than 18 million products, ranging from books and music to auctions and zShops (a portal / marketplace that online sellers can use to sell their products), and has equity investments in several e-tailers. VALUE PROPOSITION Amazon.com’s success stems from its compelling value proposition. Amazon provides increased added value on several dimensions, including: increased selection, discounted prices, more information, greater convenience, and higher levels of customisation and service than the traditional shopping experience allows. In addition, Amazon has cultivated a reputation for excellence, innovation and delivering on its promises. Through its provision of a one-stop shopping experience, combined with its levels of customisation and customer service, Amazon has been able to differentiate itself from other online competitors.

52

SOURCES OF VALUE – THE 7Cs FRAMEWORK
Convenience Amazon provides value-added features to increase the ease of shopping, encourage repeat visits and drive higher conversion rates. The site is easy-to-use, offering multiple paths to a given book or product. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traffic, downloads quickly and services visitors adequately. Over time, Amazon has added other features for shopping convenience, such as the Amazon.com All Product search (searches the entire web), the 1-Click express checkout, gift click, wish lists, gift reminders, and Amazon.com Anywhere to support access from wireless devices (i.e. mobile phones, Palm VII PDA device). Content Amazon provides content on several levels, including book jacket images, book summaries, expert reviews, customer testimonials, recommendations, interviews with authors, discussion boards, and customer Purchase Circles. Customer purchase circles allow shoppers to cross-reference similarities such as where people work, live or study. This is an example of Amazon's ability to data 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 - thereby increasing conversion rates. By leveraging its vast customer base, Amazon's content is not reproducible by competition, and therefore, creates a competitive advantage. Customisation Amazon provides customised features and services, from the customer recognition at the point of interface to the content and recommendations based on consumers' purchase history and Purchase Circles. In doing so, Amazon creates oneto-one relationships with its customers, which helps to build loyalty and create switching costs, while driving up repeat purchases and cross-selling opportunities. Community Amazon has also added a community element to the purchasing process, and ingeniously turned booklovers' predilections into a source of differentiation by soliciting and posting readers' comments with book displays. This builds the loyalty of both the
53

customers who write reviews and the customers who find community among likeminded people. More recently, Amazon introduced Amazon.com Discussion Boards to further enhancing the community feel by allowing customers to share information on topics of interest. Connectivity Amazon has built relationships with high traffic web portals and sites, converting them into a storefront for Amazon, and has developed an Associates Programme, linking it to a large number of other sites. These are discussed in more detail later. Customer Care Amazon places great emphasis on satisfying customers and providing high levels of customer service. This customer-centricity is evident in all Amazon's activities, from its shopping basket applications which lists the estimated time to delivery reliably, to the proactive notification of new items of interest, real-time shipping and backorder notices, and customer interaction. All these activities exploit the communications capability of the web and e-mail to offer greater customer 'touch' and better customer service. Communication Amazon maintains close communication with customers. Once orders are placed, they are subsequently confirmed by e-mail, and customers are also e-mailed when the items are shipped from the warehouse. In addition, two personalised services, Eyes and Editors, help maintain contact and build traffic by e-mailing customers when desired products or books become available. As a result of all these factors (7Cs), Amazon has been able to create a strong value proposition and compelling online experience that engages and retains customers, enticing them to return to the site and purchase repeatedly.

54

BRAND-BUILDING STRATEGY
Amazon has attracted traffic in a number of ways. Through the first half of 1996, Amazon had primarily relied on word-of-mouth among tightly knit online communities (newsgroups and chat rooms) to create a “cyber buzz” and improve its visibility. In the second half of 1996, it began to advertise in print media and online - a move that along with the novelty of its business model and the newness of the Internet, helped generate publicity and stories about the company in publications such as The Wall Street Journal, The Financial Times, Business Week, Newsweek, New Yorker and The Economist. In July 1996, Amazon inaugurated the Associates Programme under which other websites could display the Amazon.com hot-link and offer specific books of interest to their visitors. This enabled Amazon to reach more customer segments and niches. Instead of paying directly for this exposure, Amazon offered Associates referral fees of up to 15%, which only applied to sales that resulted from the initial click-through, and not subsequent purchases. The Associates Programme has been phenomenally successful, attracting member sites of all sizes, and by 1999 it had over 200,000 members, increasing to over 500,000 by August 2000. Amazon has developed alliances and partnerships with high traffic web portals and sites. From July 1997 to December 1998, Amazon closed deals with five of the six most visited Internet addresses, including: America Online (AOL), Netscape's Netcenter and Net Search, Yahoo!, and Geocities. These multimillion-dollar, multiyear deals involve exclusive book-selling rights, mutual links, and primary button placement on web portal search engines. The Yahoo! agreement was also linked to Amazon's entry into Europe - Amazon.de became the local provider for Yahoo! Germany and Amazon.co.uk the local provider for Yahoo! UK & Ireland. Amazon also established agreements with AltaVista, Excite, Prodigy and @home. In addition, Amazon has used viral marketing techniques through customer reviews, free e-Cards and gift certificates (which customers send to friends, thereby promoting Amazon.com). Interesting viral initiatives include: Amazon.com Refer-A-Friend - customers are encouraged to provide e-mail addresses of friends. In return, each friend is sent a $5 Amazon.com gift certificate (in your name), and you are given a $5 gift certificate for each customer you provide. Therefore, the customer acquisition cost is only £10.
55

Amazon.com About Me - allows customers to create a personal profile (with pictures) on the site. People tend to tell their friends about it, spreading the word for Amazon.com. FIGURE The majority of customers continue to be attracted through word-of-mouth, however, with the explosion of websites, Amazon has also incorporated traditional offline media (TV, Magazines, billboards, newspapers) to generate awareness. According to Jeff Bezos, “we had a world-class site the day we launched - but it was only a tenth as good as the site we have now. And we relied on word-of-mouth to build awareness, so we didn't have to do much advertising. That's not possible anymore3”. Amazon's expansion into new e-tailing categories and non-e-tailing businesses (auctions and zShops) has significantly increased product availability while leveraging the site's enormous customer traffic to create additional revenue streams. This has also helped to generate incremental traffic at no cost to Amazon's existing businesses, resulting in increased sales for existing e-tailing sectors and therefore “monetising” their customer base. 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. With this combination of promotional methods, Amazon has been able to achieve average customer acquisition costs of less than $20 - significantly lower than other online companies. Once customers are attracted to the site, Amazon's proven online merchandise selling techniques including easy-to-use search options, clear presentation, interesting content, community feel (as discussed previously), have been instrumental in engaging and retaining customers' on the site and driving higher conversion rates. As the relationship develops, Amazon maintains a database of customer preferences, buying patterns and viewing habits, which is analysed (learning) and used to provide value-added services such as the introduction of new product categories, and improved customisation and recommendations (e.g. Purchase Circles). By relating to customer needs, Amazon is building customer loyalty and encouraging repeat business, which accounts for 66% of Amazon's sales.

56

OTHER FACTORS THAT CONTRIBUTE TO THEIR BRAND LEADERSHIP Innovation & First-Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling, Amazon has been able to build a strong brand at relatively low cost; due to the hype and coverage it was given. This has helped them attract customers and move up the learning curve quickly, establishing Amazon as the leading online bookseller with a large customer base. In addition, Amazon was able to secure partnerships and alliances with key players, further enhancing their value proposition. Nevertheless, Amazon is constantly seeking new ways of improving its offering, and according to Jeff Bezos, “we're not a stationary target. We were blessed with a two-year head start, and our goal is to increase that gap4”. Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. According to Jeff Bezos, “Online, the balance of power shifts away from the company and goes towards the customer. Our secret is that we have not been competitor obsessed. We have been customer obsessed, while our competitors have been Amazon.com obsessed 5”. As such, Amazon continually invests in re-working and improving its technology infrastructure and software (80% in back office operations), developing customer service centres and expanding its distribution network to support high levels of service, establishing a reputation for excellence and fulfilment. Distinct Brand Identity Jeff Bezos chose the name 'Amazon', because he wanted it to be short, memorable, to capture the spirit of the site, and to convey its vast size and offering. In addition, he wanted the name to start with an 'A' so that it would appear at the top of search engine lists. Amazon's understanding of its brand identity has been a critical factor. Amazon received criticism for expanding its product line, thereby diluting the value of its association with books. However, management realised that Amazon had become more associated with other core brand values - a wide range of choice, good value, and its safe and secure delivery. As such, Amazon has been successful in stretching its brand to include new categories and non-e-tailing businesses. For example, in June 1998, Amazon unveiled a music store, which within six months propelled Amazon to one of the leading online music retailers. According to Jeff Bezos,
57

“Brands to a certain degree are like quick-drying cement. When they're young, they're stretchable and pliant, but over time they become more and more associated with a particular thing and harder to stretch 6”. Think about how impossible it is for Coca Cola to make anything beside soft drink, like automobile, for instance. CONCLUSION Amazon has achieved a customer base of over 23 million people and an annual revenue run rate of over $2 billion in less than five years. The key factors driving its growth and high retention rates, stem from its compelling value proposition and high quality end-to-end customer experience. Amazon has also benefited from a first-mover advantage giving it an edge over competitors, however, Amazon's intense focus on customer needs and continual innovation, have kept it ahead. This customer-centricity is a key hallmark of a successful Internet brand. Amazon also recognised that service quality is a perception, not necessarily a reality. Amazon delivers on its promises of a wide inventory of products, secure payment procedures, speedy delivery and good value. Quality is only measurable in the minds of visitors to the site, and to sustain a positive image and satisfactory end-to-end experience, Amazon has continuously invested in customer service, distribution centres and upgrading the site, with new products and value added content. In doing so, they have cultivated a reputation for excellence and fulfilment, which is critical on the Internet. Although Amazon has successfully built a strong brand and loyal customer base, it has not recorded any profits to date, especially since the rupture of global Dotcom bubble in 2000. Nevertheless, Amazon is claiming to be making profits on its books and music categories, perhaps trying to defend its view that losses taken to build market share can reap profits later. In July 2003, 1.5 million orders worldwide to Amazon for the newest Kipling’s saga, “Harry Potter and the Order of Phoenix” may be a good start. However, Amazon still incurs losses, and if it continues to do so, investors will lose confidence; the drain on their cash resources will push them towards bankruptcy. This raises a critical issue, as the true value of a brand lies in its sustainability.

58

3.5.4 CASE STUDY: Fashion mall.com
COMPANY OVERVIEW Founded in 1999, Boo.com launched with the goal of being the world's “first truly online retailer of sportswear and fashion”, and was billed as one of Europe's hottest ecommerce ventures. Boo.com had set the record as Europe's best-funded European Internet Start-up, receiving $125 million of funding, arranged through J. P. Morgan, and included high profile investors such as Bernard Arnault, Chairman of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group), among others. After a high profile launch, the company was hindered by technical problems that delayed the site going live by five months (until November 1999). Once going live, Boo.com entered six markets: US, England, Sweden, Finland, Germany and Denmark. They intended to add France, Italy and Spain within a few months, and eventually debut in Asia, as well as create a kid's site. However, within six months Boo.com collapsed through lack of funds, due to its poor performance and inability to build a customer base, and the resulting loss of investors' confidence. VALUE PROPOSITION According to Kajsa Leander, founder and Chief Marketing Officer of Boo.com, “our marketing thrust is not based on prices; it's about range and convenience. If a clothing brand is on the Boo site, it means all that brand's product line is available, not the limited range you might get at most London fashion shops 7”. Boo.com provided a range of 18 fashion and footwear brands including DKNY, Puma, Everlast, Crocodile and Converse. 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.

SOURCES OF VALUE & THE FAILURE OF BOO.COM Their strategy was to design an innovative website with interactive graphics to
59

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. 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. 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 US. 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 “mishmash when it when live............ it didn't seem obvious what you were supposed to do8”. 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
60

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.

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 spell" and could be trademarked in 56 countries. There was a lot of hype surrounding the start-up due to the 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 despite of all the hype, negative word-of-mouth spread more quickly than the advertisements.

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-touch, 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 brandbuilding, 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.
61

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.

62

3.5.5 CASE STUDY: eBay
COMPANY OVERVIEW EBay is the world's largest person-to-person online trading community and is one of the few Internet companies that are profitable. EBay effectively created a new business model never before possible - efficient one-to-one trading in an auction format. Individuals use eBay to buy and sell items in more than 4,300 categories, from novelties and antiques to electronics and toys. Sellers pay a nominal fee for placing an item up for sale, and eBay receives a transaction fee that ranges from 1.25% to 5% of the final sale price on any item sold. The buyer and the seller work out the logistics of the transport (e.g. shipping, payment) between themselves, and eBay never takes possession of the item being sold, or the payment for the item - removing the need for inventory, transportation and other overhead costs. Since its launch in September 1995, the eBay community has grown to include more than 10 million registered users, with the number of unique daily visitors setting a record of 1.782 million in January 2000. There are over half a million new auctions, and 450,000 new items joining the “for sale” list every 24 hours. VALUE PROPOSITION EBay offers consumers an efficient, 24 hour a day, global trading place for buying and selling personal items in an entertaining auction format. This is a new market - the closest thing in the offline world is trading forums such as classified ads, collectable shows, garage sales, flea markets and auctions. People perceive the auction format to offer better prices, and eBay provides added value through its convenience, extensive selection and geographical reach, with emphasis being placed on its unique community feel and culture. According to Meg Whitman, CEO of eBay, “at its core, eBay is not about auctions. Auctions are an enabler. Auctions make it fun. Auctions represent a platform. But eBay is really about a unique sense of community that eBay users are creating for themselves”

63

SOURCES OF VALUE – THE 7Cs FRAMEWORK According to Meg Whitman, “the first brand-building strategy that we have is to have a great customer experience. Still the vast majority of our new users come from word-of-mouth. And you only get word-of-mouth if you have a great customer experience. So brand-building job No. 1 is having a great customer experience. Unlike the previous case studies discussed, the eBay customer experience is based on how their customers deal with each other, as they rarely deal directly with the company. This raises challenges in how to control and influence the customer experience. Since eBay cannot control how one person treats (or cheats) another, they try to influence customer behaviour by encouraging them to adopt certain values, and in terms of the '7Cs', emphasis is placed on community development and customer care. Convenience The site enables sellers to list items for sale and buyers to bid on items of interest using eBay's fully automated, topically arranged, easy-to-use online service. EBay has also expanded to accommodate access through wireless devices for added convenience. Unlike most websites that simply post content, eBay's site has to process thousands of live bids simultaneously, which is much more demanding on the system, increasing the risk of outages. EBay had a “wake up call” in July 1996, when the website crashed for 8 hours, angering hundreds of thousands of eBay users, and since, they have continually invested in system capacity. Nevertheless, they continue to face challenges in scaling-up fast enough to accommodate their rapid growth. Content Content is primarily user generated through the items listed for sale. This contributes to the community feel, and adds to the experience and the discovery of the auction process. Other content includes the banner ads, which are narrowly targeted on relevant subjects such shipping and transport companies and payment methods to aid users.

64

Customisation EBay provides My eBay which allows users to customise the interface, and is considered by many users as one of the best features on the website. They also provide the ability for users to create their own home page free-of-charge through the About Me feature (which promotes a viral effect). Community EBay attributes much of its success to a strong sense of community among its users. For many 'eBayers' - as eBay users refer to themselves - eBay represents more than just a place to buy and sell goods. It is a place where people can meet with similar interests, discuss topics they care about, and share information. To encourage this sense of community, eBay offers its users category-specific chat rooms, bulletin boards, a monthly newsletter, e-mail, a “giving-board” for charitable donations to useridentified causes. In addition, the community spirit and personal relationships also transcend the online experience, and there are several reports of eBay users vacationing together, working together and helping each other offline. After a sale, each user is encouraged to submit feedback through eBay's “Feedback Forum”, which is then added to the partner's trading profile, which is posted to the site. This has created a self-regulating mechanism that encourages good behaviour, and in doing so, has enabled eBay to foster a strong sense of community on its site. This sense of community is their key differentiating factor and has encouraged greater loyalty and repeat usage. Connectivity EBay has created an affiliate network, links to high traffic sites, banner ads and links to supporting services such as payment options and transport companies to help customers coordinate the logistics. EBay also engaged in marketing partnerships, the largest of which was with AOL, but they have other partnerships with over 150 websites of varying scales. They also introduced a PowerSellers Programme (loyalty scheme) which gives special benefits and privileges to heavy users. Customer Care EBay controls neither end of the transaction, and the users' experience on eBay is more driven by the seller or buyer than by eBay itself. As such, eBay has invested in customer care and support to ensure people conduct safe transactions. EBay’s approach to customer care has evolved over time. During the first two years, eBay employed a "remote" customer support model, in which the company hired active,
65

knowledgeable, and respected members of its own user community to serve as customer support representatives. These people worked from their homes, answering e-mails and responding to questions posted on the site's bulletin boards. By using its own enthusiastic, geographically dispersed users as customer support representatives, eBay was able to cost-effectively offer 24x7 customer support early on. This also reinforced the company's respect for, and willingness to empower, its user community. This was later expanded to include customer support representatives who worked out of eBay's headquarters, and the introduction of two specialised customer support groups – the Community Watch group, which was dedicated to monitoring the site for illegal and infringing activities, and the Safe Harbour group, which was dedicated to investigating misuses of the system (e.g. fraud, shill bidding) and helping to resolve user-to-user conflicts. Customer support activities were constantly upgraded and expanded as the business developed. Communication EBay maintains close communication with its members. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum.

66

BRAND-BUILDING STRATEGY
The majority of eBay's users have been attracted through word-of-mouth, as a result of the high quality experience it provides. Early on, eBay identified that 20% of the users represented 80% of the volume of the site (80/20 rule). Based on this, they decided to target their marketing efforts on these heavy users, who tended to be serious collectors. As a result, eBay decided that it would not enter into major portal advertising deals in the short term, and instead focus on grassroots marketing initiatives through print advertising in vertical publications (e.g. Mary Beth's Beanie World, Doll Collector) and appearance in trade shows. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. EBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expand internationally. In 1998, they spent $12.3 million in advertising, representing about 40% of revenues, and maintained the same ratio for 1999. EBay has since expanded its promotion efforts and engaged in marketing partnerships, the largest of which was with AOL, but they have other partnerships with over 150 websites of varying scales. The AOL partnership was one of the largest strategic partnerships on the Internet - a four-year, $75 million joint marketing alliance and development deal, 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. With the acquisition of Butterfield & Butterfield (one of the world's oldest and most prestigious auction houses) and Kruse International (auctioneer of collector automobiles) in 1999, eBay transformed from a pure online play into a “clicks-andmortar” company. These acquisitions further expanded their appeal to a wider market (those interested in higher priced items) while providing added revenue due to higher margins. Recent promotional initiatives include its new publication, eBay Magazine, and two books, The Official eBay Guide to Buying, Selling, and Collecting Just About Anything and eBay for Dummies. These new publications appeal to the collecting spirit, provide a wealth of information about the “ins and outs” of trading on eBay, and highlight opportunities created by e-commerce. Through this combination of its advertising efforts and targeted promotions, eBay has been able to attract a large
67

customer base, and facilitate the spread of positive word-of-mouth. EBay has continually added new features and services to its offering in order to provide added value to build relationships and facilitate customer “lock-in”. This is achieved by listening to their community (learning) and developing new improved products and services (relating), such as the Feedback Form, the Personal Shopper and the eBay Life Newsletter, which were all ideas of eBay users. However, eBay have a policy of not looking at users’ pattern of buying habits for the purpose of generating products on offer for customers. This has become part of the eBay culture, and according to research carried out by 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 (push adverst strategy). EBay prefers the opt-in model whereby users have the option to choose such services if they were interested. CONCLUSION eBay's compelling value proposition, their ability to create a new market using Internet technology, and their first-mover advantage, have been key factors that have contributed to the success of the brand, however, their ability to cultivate a distinct “sense of community” has been the defining characteristic which differentiates them from other online auctions. As a result, eBay attracts a broader selection of buyers, which in turn attracts more sellers – the ultimate network effect - contributing to its strong lead and competitive advantage. Their focus on heavy users and targeted promotions, have been instrumental in building a 'quality' customer base, which has established eBay above other online auction communities. EBay has also faced difficult challenges in scaling the organisation fast enough, as they could not opt for a 'go slow' strategy. The need to continually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors, and according to Meg Whitman, “the devil in so much of this is in the detail. And while we have to move very, very fast, I think you are not well served by moving incredibly rapidly and not doing things well10”.

68

3.5.6 CASE STUDY: CDNOW
COMPANY OVERVIEW Founded in 1994, by twin brothers Jason and Matt Olim, CDnow is the leading online music store, and one of the most popular shopping sites on the Internet. It has a customer base of 4 million people, and an average daily audience of over 800,000 people. CDnow provides access to over 500,000 music-related products and 650,000 sound samples, as well as music reviews, cover art, daily music news, features, guides to music genres, and exclusive interviews and reviews from CDnow's award-winning editorial staff. CDnow is also driving the digital distribution of music, and was the first site to offer the sale of music downloads and custom CDs. On 19 th July 2000, CDnow was acquired by Bertelsmann AG. VALUE PROPOSITION CDnow offers consumers a high degree of choice (over 500,000 music related items – ten times the selection of a conventional bricks-and-mortar music store), convenience, good prices, customisation and a wealth of information and content to help in the purchase decision. This unprecedented degree of access to music and information is the core of CDnow's value proposition, and they aim to “make every visit to the site, whether for browsing or buying, a valuable and rewarding experience11”. SOURCES OF VALUE – THE 7Cs FRAMEWORK Convenience The CDnow site is very easy-to-navigate and quick-to-load. The whole process of searching for albums or music titles to the actual purchase is very simple. Content CDnow has invested substantially in developing strong content alliances, and has secured rights to music reviews, artists biographies, cover art, etc., to make it easier for customers to explore new music and make informed purchasing decisions. For example, CDnow's partnership with Rolling Stone Magazine enables customers to access thirty years of Rolling Stone music coverage. CDnow has cultivated similar relationships with MTV, VH1 and Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). By partnering with well-known content providers, CDnow has leveraged the reputation of their brands to reinforce its own.
69

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

70

Communication From the moment a customer opens an account, 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, CDnow is doing everything it can to ensure that the next time that customers buy music, they buy from CDnow.

BRAND-BUILDING STRATEGY
CDnow was one of the first companies to develop a multifaceted, integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an online business. CDnow's initiatives include: Banner Ads - CDnow buys banner ads on the sites of major Internet content and service providers including CNN Interactive and AOL, as well as more-targeted musicrelated sites like Billboard. Alliances and Partnerships - They have also stuck exclusive alliances with AOL, Yahoo!, Excite and other powerful Internet content and service providers. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. Affiliate Programme - Through the Cosmic Credit Programme, CDnow extended its distribution reach to include more than 250,000 small, music-oriented websites, covering the entire music spectrum. According to Jason Olim, this is their “most successful customer building programme12”. It is a revenue-sharing arrangement, giving websites an inducement to join the programme and in effect turns CDnow's affiliatemarketing partners into a virtual commissioned sales force. Traditional offline Media - CDnow's advertisements are targeted to some degree, including national television commercials during the Grammy's and American Music Awards and on MTV and VH1, print advertising is music-related publications such as Rolling Stone, Spin, and Variety, and radio spots on the Howard Stern Show to build a cult following among radio listeners, and spot radio to build reach. Public Relations - CDnow made public relations a high priority brand-building tool. Public relations efforts helped to generate word of mouth and influence sales. The story of how CDnow was founded in a basement, by two twin brothers with little money reflects the “American dream” and was quickly picked up.
71

Word-of-Mouth - As for many successful online retailers, word-of-mouth accounts for the lion's share of CDnow's customers. It is a powerful source of acquiring new customers at low cost. In fact, it is in this context that the large investments in advertising and partnerships make sense, as a way to fuel very lucrative word of mouth, both in the online and offline worlds. CDnow's promotion strategies have attracted high levels of traffic, and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers, resulting in increased conversion rates. This has contributed to a 225% increase in sales (1997: $17.4 million, 1998: $56.4 million), and to increases in the customer base of more than 30% quarter-to-quarter, with 44% of sales coming from new customers. Their ability to learn and relate to customer's needs through customising their offering (My CDnow) encourages brand loyalty and repeat purchases, with repeat customers accounting for more than 50% of sales. 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. The company continually pushed for new distribution partnerships to widen its sphere of influence, and scaled it awareness-building efforts. 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. Customer Focus & Reputation for Excellence According to Jason Olim, “your brand is not just what you say - it's what you do ”, and the company's goes to great lengths to ensure that its activities reinforce this view and it fulfils its promises. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. This gives the customer the impression that the order is being handled quickly. They also provide the customer with an order number and customer support contact information should they have questions. CDnow has developed a relationship with Valley Records, a record distributor that handles the majority of CDnow's fulfilment logistics, to ensure quick delivery to customers. CONCLUSION
72
13

CDnow identified a market opportunity early and moved quickly to capitalise on the potential it saw. It was able to create a strong value proposition and high quality customer experience. According to Jason Olim, “he most important customer loyalty tool is a great store” and CDnow has gone to great lengths to provide this, and ensure that it exploits its early-mover advantage and keeps ahead of competition. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective marketing campaigns. The development of an extensive affiliate network, and innovative, 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. This, combined with the high impact customer experience created - from how CDnow has personalised its product offering to its capable customer service team - have been instrumental in building a reputation for excellence that is a core factor of a successful Internet brand.

73

3.5.7 CASE STUDY: GAP.COM
COMPANY OVERVIEW Gap opened its first store in San Francisco in 1969, and today it is the 29th most valuable brand in the world. The Gap offers a balance of modern and seasonal styles of clothing, from jeans and T-shirts to khakis and jackets. Its reach extends across more than 1,800 stores in the US, Canada, UK, Germany and Japan. This success is largely due to their simple formula – “to deliver style, service and value to everyone”. In late 1997, Gap started selling items online - an early convert to the then-revolutionary idea of clothes retailing on the Internet. Currently, online sales are only available to US customers, and are still relatively small compared to Gap's $9 billion in annual sales, however, the growth prospects are enormous. Gap's online sales tripled in 1998 alone, and sales in 1999 amounted to $80 million, up from $20 million in 1998. Even the collapse of the global Dotcom industry in middle 2000 showed a very little effect to Gap.com. During the period of 2000-2001, Gap.com was the only cyber company who could claim profit. Gap.com is an example of successful crossover marketing, and provides useful insight into how traditional brands can leverage their strength online. VALUE PROPOSITION Gap's simple, standard styles are well suited to online shopping, and Gap online provides access to the full range of items at Gap, GapKids, and BabyGap, from shirts to accessories and hard-to-find sizes. In addition, Gap online exploits the accessibility and convenience of the Internet, to provide customers with greater convenience and options. According to Jeanne Jackson, head of Gap Online, “this is about being clicksand-mortar, letting customers access the Gap brands, whether in the store or online14”. SOURCES OF VALUE – THE 7Cs FRAMEWORK In terms of the 7Cs framework, Gap Online primarily focuses on Convenience, Content, and Customer Care. Unlike other companies that transform from “brick and mortar” to cyber, the extensive integration of Gap's online and offline activities are clearly evident. Visiting the gap.com store one immediately notices the consistency between the online and retail stores, from the blue and white colour scheme to the easy-to-shop format 74

making visual references to its offline roots. Michael McCadden, Executive Vice President of Global Marketing, describes the company's brand personality as “direct and straightforward ........very easy, very efficient”15. This personality is reinforced online through the simple structure and layout, making it convenient, and easy-to-use. The site also offers sharp graphics, but provides customers with the option of viewing textonly, making navigation even faster. Gap.com's content consists of detailed information on its full range of products, allowing shoppers to contrast different cuts and styles. The site's virtual style feature also allows customers to mix-and-match combinations of clothing, and customers can view their latest TV adverts for buying inspiration, as well as sample all of the latest shades of fingernail polish on a virtual hand, which would not be possible in the store. Unlike the case of Boo.com, Gap's simple, standard styles are well suited to online clothes shopping, and goods bought online get returned at the same rate as store purchases - as most Gap online shoppers have a good idea of how Gap clothes fit. In order to integrate its offline and online operations and logistics, Gap made a decision to charge sales tax on online sales. By doing so, customers can return goods purchased online to their neighbourhood store, without causing complications. This level of customer care is an important factor in making customers feels more comfortable with online purchasing. In addition, Gap.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. However, once customers are registered online, Gap communicates with customers through customised e-mails, twice a month, promoting its specials and including links directly to items on Gap's website. Gap.com also provides a Gift Central feature which offers gift suggestion from Gap, GapKids, and BabyGap, and customers can register to get e-mail reminders of upcoming holidays and birthdays. The Gap site connects to other Gap online stores including GapKids and BabyGap. Gap has also developed an affiliate programme, and had recently established marketing deals with AOL and CDnow.

BRAND-BUILDING STRATEGY – EXTENSIVE INTEGRATION
Gap.com has been able to piggy-back on The Gap's offline advertisements (in
75

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

76

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

77

CHAPTER 4

Analysis and Interpretation

Tables and Graphs
1. Total no of respondents = 100
78

2. Age group Break-up SL. No. 1 2 3 Total 3. Qualification Break-up of Respondents SL. No. 1 2 3 Total Qualification Under graduate Graduate Post graduate No. of Respondents 33 51 16 100 Percentage 33% 51% 16% 100% Age 15-19 years 20-24 years 25 years above No. of Respondents 23 47 30 100 Percentage 23% 47% 30% 100%

4. Break-up of Computer and Internet Literate Sl. No. 1 2 Total 5. The profession of respondents Sl. No. 1 2 3 4 5 Occupation Student Computer engineer Faculty Businessman Others Total No. of Respondents 35 13 21 16 15 100 Percentage 35% 13% 21% 16% 15% 100% Particulars Yes No No. of Respondents 71 29 100 Percentage 71% 29% 100%

Table No.1: What are people doing online SL. No. 1 2 3 4 5 6 7 8 9 Particulars E-mail General Information Surfing Reading Hobbies Product Information Travel Information Business / Work Entertainment No. of Respondents 91 78 72 70 67 64 55 50 35
79

Percentage 91% 78% 72% 70% 67% 64% 55% 50% 35%

10 11 12 13 14 15 16 17

Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading stocks

35 29 26 25 22 17 15 9

35% 29% 26% 25 % 22% 17% 15% 9%

Source: Survey Interpretation: From the above table, it is clear that the majority of respondents have surfed on Internet to check their e-mail (91%), searched for general information (78%), and attended recreational activities (reading, surfing, hobbies, chatting, entertainment, etc). Out of 100respondents, only 70 logged on cyber companies for purchasing, and only 36 had the real intention to buy or sell online.

Figure 4.1: What are people doing online

E-mail

100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

General Information Surfing Reading Hobbies Product Information Travel Information Business / Work Entertainment Purchasing Stock Quotes Job Search Chat Rooms Homework Auctions Banking Trading stocks

80

Table No.2: Number of respondents who really carried out business transactions on Internet SL. No. 1 2 Total Source: Survey Interpretation: It is evident from the above table that the minority 18% of the respondents has actually bought or sold on Internet. The other majority 82% surfed on the World Wide Web for other activities (reading, surfing, hobbies, chatting, entertainment, product searching, etc). Advertisement should be aimed at this small potion of customers rather than pursuing the whole vast market. Particulars Yes No No. of Respondents 18 82 100 Percentage 18% 82% 100%

Figure 4.2: Number of respondents who really carried out business transactions on Internet

81

Real E-purchaser Ordinary surfer

Table No.3: Name of cyber companies that you actually dealt with SL. No. 1 2 3 4 5 6 7 Total Source: Survey Interpretation: The above table shows the degree of popularity and credibility among different brands. Among six respective brand names, eBay has got the biggest number of transactions, following by Yahoo! and Amazon.com. The fourth brand has only 2 customers, and Boo.com and Gap.com got none. Figure 4.3: Name of cyber companies that you actually dealt with Company Amazon.com Boo.com CDnow eBay Gap.com Yahoo! Others No. of Respondents 9 0 2 13 0 10 2 36 Percentage 25% 0% 5.6% 36% 0% 27.8% 5.4% 100%

82

Amazon.com Boo.com Cdnow eBay Gap.com Yahoo! Others

Table No.4: Number of e-purchasers who want to come back for future transactions SL. No. 1 2 Total Source: Survey Interpretation: Among the real e-purchaser, the majority of 94.4% wants to come back to respective cyber companies they dealt with before. It shows the solidity of business transactions and relations on the Internet. Once customers are satisfied, they intend to keep the nexus with the company they know, rather than shifting from company to company. It highlights the significance of keeping up with customer’s standard and perception right in the first transaction (the moment of truth) Figure 4.4: Number of e-purchasers who want to come back for future transactions Particulars Yes No No. of Respondents 34 2 36 Percentage 94.4% 5.6% 100%

83

Yes No

Table No. 5: Standards for a good online company SL. No. 1 2 3 4 5 6 7 Particulars Brand Cost Convenience Means of payment Variability Promotion & discount Others Total No. of Respondents 30 13 16 5 9 16 11 100 Percentage 30% 13% 16% 5% 9% 16% 11% 100%

Source: Survey Interpretation: Among the above factors (brand, cost, convenience, means of payment, variability of goods and services, promotion and discount), brand name holds the most significant position, with 60 out of 200 respondents claimed that is was the most important factor to a company. The next important factors are convenience (16%), promotion and discount (15.5%), cost (13%), variability (9%), and means of payment
84

(5%). Figure 4.5: Standards for a good online
30% 25% 20% 15% 10% 5% 0%
B rand C ost C onvenience M eans o f payment Variability P ro motion & discount Others

Table No.6: Keys to Web brand Loyalty SL. No. 1 2 3 4 Particulars Ease of use & navigation Fast response time Familiarity Relevant & accurate information Total No. of Respondents 37 26 20 17 100 Percentage 37% 26% 20% 17% 100%

Source: Survey Interpretation: The above table shows the key factors that ensure web brand loyalty. Out of 200 respondents, 74 claimed that the Ease of use & navigation is the most important element (37%), whereas 52 gave their vote to Fast response time (26%), 40 to Familiarity (20%), and 34 supported Relevant & accurate information (17%). Figure 4.6: Keys to Web brand Loyalty

85

40% 35% 30% 25% 20% 15% 10% 5% 0%

Ease of use & navigation Fast response time Familiarity

Relevant & accurate information

Table No.7: Killers of Web brand Loyalty SL. No. 1 2 3 4 Particulars Outdated information Slow response time Site downtime Poor customer service Total No. of Respondents 26 24 22 28 100 Percentage 26% 24% 22% 28% 100%

Source: Survey Interpretation: The above table shows the key factors that destroy web brand loyalty. Out of 100 respondents, 26 claimed that outdated information is the key element that demolishes customers’ belief (26%), whereas 24 attributed to slow response time (24%), 22 to Site downtime (22%), and 28 to Poor customer service (28%). Figure 4.7: Killers of Web brand Loyalty

86

30% 25% 20% 15% 10% 5% 0% Outdated information Slow response time Site downtime Poor customer service

Table No.8: Things you want to buy online SL. No. 1 2 3 4 5 6 7 8 Source: Survey Interpretation: From the above table, we can see the tendency of what people want to buy on Internet. Out of 100 respondents, most of them (75% & 67%) chose consumable and garments & footwear respectively. Whereas goods with high value like real estate, vehicles, and luxury were hardly chosen. Figure 4.8: Things you want to buy online Particulars Consumable Luxury Interior Garments & footwear Vehicle Real estate Antiquities Others No. of Respondents 75 16 26 67 24 7 31 40 Percentage 75% 16% 26% 67 % 24% 7% 31% 40%

87

80% 70% 60% 50% 40% 30% 20% 10% 0% Consumable Luxury Interior Garments & footwear Vehicle Real estate Antiquities Others

Table No.9: Ranking the popularity of six below cyber companies Rank 1st 2nd 3rd 4th 5th 6th Source: Survey Interpretation: From the table No.3, we can see eBay has got the biggest number of transactions among the lot, following by Yahoo! and Amazon.com. But with regard to level of recognition and awareness, Yahoo! transcends eBay and Amazon.com. It proves how effective Yahoo! is in creating community activities and spreading public relationship, including viral effect and word-of-mouth. Company Yahoo! eBay Amazon.com CDnow Gap.com Boo.com

88

Table No. 10: Do you usually read chain mails & bulk mails? SL. No. 1 2 Total Source: Survey Interpretation: Chain-mails and bulk-mails are often used to get customer awareness and attention. But as time goes by, bulk-mails do not have the same significance like before, and customers usually refer bulk-mails as “garbage” and try to delete them without casting a single glance at. It is called as “self-protection reaction”. Cyber companies should develop other kinds of promotion and brand building rather than relying on chain-mails. Figure 4.10: Do you usually read chain mails & bulk mails? Particulars Yes No No. of Respondents 19 81 100 Percentage 19% 81% 100%

89

Yes No

CHAPTER 5

Findings &Suggestions
90

Key factors that contribute to building a successful online brand
There is no one-size-fits-all solution for building a successful brand on the Internet, however, the extensive research and in-depth case studies provided in this dissertation indicate certain common underlying characteristics which can be summarised as follows: A Compelling Value Proposition Successful online brands are exploiting every capability offered by the Internet to deliver compelling value propositions that appeal to customers, by offering more value than attainable through traditional “bricks-and-mortar” establishments. They are providing greater convenience (24x7), lower prices, wider selections, and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Content, Customisation, Community, Connectivity, Customer Care and Communication. Successful brands recognise that the value proposition must more than compensate for the loss of inperson 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
91

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, quickto-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. Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and have developed multifaceted, integrated customer acquisition strategies, ranging from online methods to traditional offline media. They are targeting their promotions to attract quality customers and to keep customer acquisition costs down. Quality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition, but also provide added value to the brand community. Properly orchestrated “guerrilla marketing” ploys can also be effective in building awareness and reinforcing brand image. Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts, to distinguish themselves from competitors. Yahoo!'s success can be largely attributed to its unique positioning strategy and distinct image that appeals to its target market. By distinguishing their offering and focusing on unique sources of value-added, brands are harder for competitors to emulate. In addition, these companies must have an inherent understanding of their brand identity and core values, to maintain consistency, as well as determine how far the brand can be meaningfully stretched to other products and market segments, before it fractures. Strong Partnerships and Strategic Alliances
92

Rather than doing everything on their own, leading brands have focused on building strong partnerships and alliances, particularly to secure content and widen reach to new customer segments and niches. As a result, these companies are creating even stronger value propositions, offering customers the best in quality, variety, content, and convenience. Alliances and partnerships play an important role in achieving speed and momentum, and by partnering with well-known brands, a company can leverage the partner's brand and reputation to reinforce its own. Alliances with leading portals and popular sites are important to generate traffic and brand visibility, and exclusive alliances can lock out competitors from valuable content or online real estate. The most successful partnerships are symbiotic matches, whereby each party benefits from the other's expertise or skills, while ultimately benefiting the end-customers. Intense Customer Focus Leading online brands have an intense customer focus, and develop a detailed understanding of their customers' needs. These brands are accumulating knowledge about customers, through past transactions and solicited input, and by focusing on customer needs, are leveraging this customer knowledge (learning) to nurture relationships (relate), by providing better services, customisation and customer care. Customer focus builds trust and credibility that is central to developing a strong brandcustomer relationship. 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. A first-mover advantage is an important asset for an online brand. By getting to market early, the company benefits from the buzz, and traffic, that comes with innovation, and it can acquire customers while it is still inexpensive to do so. It locks up important content and distribution partnerships, and it aligns itself with the most influential venture capital sources. Getting to market quickly can provide an Internet company with significant momentum and a valuable boost over the competition. The challenge then lies in keeping up the momentum. Many strong online brands were also early-movers on the Internet, and benefited from additional hype, and extensive word-of-mouth due to its novelty. As Internet penetration exploded, these well-publicised brands also took off. Relentless Innovation
93

Successful Internet brands are continuously looking for new ways to wrap more value around their core service and offering, and are continuously adding new services and functionality to their sites. This type of relentless innovation is instrumental in ensuring brands develop traction and build momentum to keep ahead of competitors. In many cases, the innovations are the result of the company's ability to record its vast database of customer information, to create new services and content that satisfies customer needs. By leveraging unique customer information, these innovations are difficult for competitors to reproduce, giving the brand an edge, and differentiating it from other brands.

94

Ability to Leverage Offline Brand and Assets Bricks-and-mortar brands are often well positioned to succeed on the Internet. They possess critical assets that give them an advantage over pure online start-ups. They have an established brand, established customer relationships, established fulfilment systems and infrastructure, and a physical presence (tangibility) - factors that clearly differentiate them from pure players. Strong clicks-and-mortar brands are integrating their online and offline activities to leverage the strengths of each other. In doing so, these brands must respect their core brand elements and maintain consistency in the service quality that is expected, but at the same time, expand the brand experience to meet customers' expectations in the online world. Through extensive and seamless integration, clicks-and-mortar brands are providing customers with true added-value, while reaping the benefits of lower customer acquisition costs and extended reach. The Internet has radically changed the business and competitive environments. Yet while everything is being turned upside down, one component remains unchanged - value remains (and always will) the basic building block for every successful brand.

95

Conclusion

96

The era of Internet brings a totally new approach to building a brand name. Let’s have a glance at the different routes to brand building on the new dynamics of brands. Table No. 11: Different approaches in brand-building The Emerging Brand-building Environment Traditional Approach One-to-One Approach Monologue Dialogue Public Private Mass Individual Anonymous Named Adversarial Collaborative Focus primarily on one-off transaction Focused on relationship over time Remote research Intimate learning Manipulative, “stimulus-response” Genuine needs driven, service approach approach Standardised Customised

Given that the commercial Internet only began to take off in 1994, there has been a limited time horizon to evaluate the durability of Internet brands. In addition, with the emergence of wireless access and new platforms, new opportunities and dynamics will emerge as companies develop innovative ways of acquiring customers, building relationships and satisfying needs. Therefore, ongoing research would be necessary to build on the findings of this dissertation. Nevertheless, it that the core concepts and key factors identified that contributes to successful online brands are likely to persist. Brands and brand-building tools tend to be associated with consumer markets, however, they are equally important in business markets. As such, the concepts, tools and key factors outlined in this dissertation are also applicable to business markets. Nevertheless, an in-depth analysis, drawing on several case studies from business markets, would represent an exciting opportunity for further research. Having established a strategic perspective on building online brands, this dissertation would benefit from complementary in-depth research in the social and psychological dynamics of the Internet and its impact on consumer behaviour. Based on my own research and survey, I had recognised the often used brand
97

promotion method, their popularity, and their respective effectiveness. Table No. 12: Popularity and effectiveness of brand building methods Method Banners E-mails to customers Buttons Public relations Magazines Sponsorships Newspapers Radio Direct mail Television E-mail to opt-in lists Outdoor Affiliate programs Popularity 89% 77% 55% 45% 34% 34% 32% 32% 30% 30% 23% 17% 17% Effectiveness (rank from 0.0 to 5.0) 2.8 2.3 3.2 4.1 3.4 3.3 2.6 3.4 3.4 4.0 3.5 3.7 4.3

98

Figure c.1: Popularity of methods

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Banners E-mails to customers Buttons Public relations Magazines Sponsorships Newspapers Radio Direct mail Television E-mail to opt-in lists Outdoor Affiliate programs

Figure c.2: Effectiveness of methods
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0
Banners E-mails to customers Buttons Public relations Magazines Sponsorships Newspapers Radio Direct mail Television E-mail to opt-in lists Outdoor Affiliate programs

99

From the above table, it is clear that some usually used promotion methods like banners and e-mail showed little effect towards customers. Therefore, to enhance awareness and brand image, company should increase the use of: - Affiliate programs: with other already-recognised online companies like Yahoo!, Amazon.com, or AOL. It is the way has been chosen by many successful ones like Gap.com, or eBay. - Public relation and outdoor activities. - E-mail to op-in list: bulk-mails are sent to an interested group of customers only, instead of viral chain-mails and bulk-mails. For instance: sending e-mails to a regular patron informing about goods available in which he or she may be interested. Further, there are some more suggestions from this study to cyber companies regarding how to create a strong brand name on Internet: Have a credible logistics with acceptable quality of goods and service. Make sure that the availability of goods and variability of categories are ensured. Build a simple website with humble graphic and accessible info. Site must be easily used and navigated. Avoid the mistake by Boo.com of building a website that requires a powerful computer configuration and a wide Internet runway. The result is website is too slow to load, and leads to nothing but frustration of customers. Supply relevant and accurate info. When a customer posts his or her mail to ask some question with regard to product info search, feedback must be given within 48 hours. When using credit card as the most popular means of payment, company must ensure the privacy of customer. Beware o hackers at the top most level.
-

Don’t try to dig on valuable items like antiquities, luxury, or real estate. Because of its particular risk and configuration, an online company should focus on small value items like books, consumable, garments and footwear, upholstery, cigarette and alcohol, etc.

100

BIBLIOGRAPHY
World Wide Web The Internet was used to collect information on Dotcom industry. In which the following websites were employed to be used: www.ac.com www.amazon.com www.atkearney.com www.bain.com www.bcg.com www.boo.com www.businessweek.com www.cdnow.com www.durlacher.com www.ebay.com www.ebusinessforum.com www.economist.com www.ey.com www.forrester.com www.gap.com www.gapinc.com www.interbrand.com www.mckinseyquarterly.com www.nua.com www.pwcglobal.com www.yahoo.com

101

Magazines Monthly business magazines in Bangalore: The Economist The Wall Street Journal The Week The Financial Times Forbes Business Week Sales and Marketing Management Computer World Far Eastern Economic Review Advertising Age Books Kotler, P., “Marketing Management –the Millennium Edition” Aaker, D “Managing Brand Equity: Capitalising on the Value of a Brand Name”. Aaker, D. “Building Strong Brands” Clifton, R. & Maughan, E., “The Future of Brands”

102

Appendix – Questionnaire
Name: Address: SECTION A 1. What best describes your age?
  

15-19 years 20-24 years 25 years & above Under graduate Graduate Post graduate Yes No Student Computer engineer Faculty Businessman Others

2. You are a:
  

3. Are you a Computer and Internet Literate?
 

4. What is your profession?
    

SECTION B 1. What are you usually doing on Internet?
          

Reading and writing email Searching for general information Surfing Reading Hobbies Searching for product information Travel information Doing your business / work Entertainment Purchasing Stock quotes
103

     

Job search Chatting Doing your homework / assignment Auctions Banking Trading stocks Less than 7 hours per week 8-14 hours per week 15-28 hours per week 29 hours and above Yes No Amazon.com Boo.com CDnow.com eBay.com Gap.com Yahoo!.com Others Yes No

2. How long you usually spend on Internet
   

3. Have you ever carried out your business transaction(s) on Internet?
 

4. If yes, name the company that you dealt with
      

5. Do you want to come back to those companies for further transactions?
 

6. According to you, what is/are the most important element(s) for a good online company?
      

Brand Cost Convenience Means of payment Variability of items Promotion & discount Others
104

7. According to you, what is the key to Web brand loyalty?
   

Ease of use and navigation Fast response time Familiarity Relevant and accurate information Outdated information Slow response time Site downtime Poor customer service Consumable Luxury Interior Garments & footwear Vehicles Real estate Antiquities Others

8. According to you, what is the killer of Web brand loyalty?
   

9. Things you want to buy online
       

10. Rank six below companies from 1 to 6 in order of the most to the least recognized brand
     

Yahoo!com Amazon.com Gap.com Boo.com CDnow eBay.com Yes No Chain mail & bulk-mail Direct mail Television
105

11. Do you usually read chain mail or bulk-mail?
 

12. What kind of advertisement normally attracts your attention?
  

    

Newspapers Radio Buttons Banners Ads featuring gifts and discounts

13. If you wish to add any other remark, please do so ……………………………………………………………………………………………………… ……………………………………………………………………………………… ……………………………………………………………………………………………… Thank you for your valuable time!

106

Sign up to vote on this title
UsefulNot useful