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Synopsis Synopsis
Online has always taken a back seat to offline in brand building. Yet online offers the best options for building a meaningful brand, options that didn't exist only a few years ago. Companies without a solid digital brand strategy are literally being left behind as leaders build new digital brands.
Reflecting on the current state of online advertising, the majority of online marketers are doing a terrible job of building their digital brands. Advertisers are fighting tooth and nail to produce the world's worst advertising, actually destroying their existing offline brands in the digital realm. For the most part, if one looks at ads that run during top TV programs or that appear in top magazines, one will find quality in the advertising (even if the ads are a bit dry and boring). But if one looks at a top web site and views a few dozen ads, it will be very difficult to find quality advertising. In effect, the bulk of the ads online do more harm than good to the brands they are trying to build. In one industry after another, aggressive Internet upstarts are putting established brands at risk, creating very strong brand recognition and enjoying explosive visitor growth. The reason may have less to do with the established brands themselves than with their managers. Marketers know what a brand is in the physical world: the sum, in the consumers mind, of the personality, presence, and performance of a given product or service. These "3 Ps" are also essential on the World Wide Web. In addition, digital brand builders must manage the consumers on-line experience of the product, from first encounter through purchase to delivery and beyond. Digital brand builders should care about the consumers on-line experiences for the simple reason that all of
themgood, bad, or indifferentinfluence consumer perceptions of a products brand. To put it differently, on the Web, the experience is the brand. Consider an example. If a consumer buys lipstick from a retailer in the physical world and has an unpleasant in-store experience, she is more likely to blame the retailer than the manufacturer. But if the consumer purchases that same product from Procter & Gambles Reflect.com Web site, her wrath is more likely to be directed at P&G. Thus the on-line marketers objective shifts from creating brands at least as defined in the off-line worldto creating Internet businesses that can deliver complete, and completely satisfying, experiences. Yet many marketers, particularly those whose experience is limited to the off-line world, lack a coherent framework and concrete methods for achieving the broader objectives of on-line brand building. These marketers need an approach for aligning the promises they make to consumers, the Web design necessary to deliver those promises on-line, and the economic model required to turn a profit. These three elementsthe promise, the design, and the economic model together form the inseparable components of a successful Internet business, or what might be called a digital brand. This project is an attempt to propose to the industry the right approach to build and sustain their brand in an online environment.
attention to building a total customer relationship. Offering consumers value in return for information will become vital in eliciting their preferences, which in turn will be critical to customizing advertising. And companies entire marketing organizations will be progressively redesigned to reflect interactions with consumers on the Internet. For ad agencies, fees based on results will become standard. The economics of Internet advertising are likely to make current business models obsolete. New capabilities will be required as creative production speeds up and becomes more closely integrated with marketing activity. A deep understanding of enabling technologies will become a prerequisite for fresh forms of advertising. Our views on the evolution of Internet advertising and its impact on traditional marketing may seem provocative to some, premature to others. But the intriguing marketing experiments taking place on and off the Internet suggest it is time for consumer marketers to begin looking to networks for new ways of thinking about the marketing theories and approaches on which they have long relied and to begin capturing the lessons Internet advertising holds for all their advertising practices, online and conventional.
differ from todays in the shape they take, in the metrics available for gauging their effectiveness, and in the pricing structure that governs their purchase and sale.
New Shapes
The first and most obvious change in advertising will be in what consumers see on their screens. Ads are likely to change in terms of their content, the type of customization they employ, and their delivery to the consumer.
Content
Aspirations to transcend todays form of Internet advertising will first be realized in the content of ads. The development of new technologies such as virtual reality and chat, coupled with consumers growing preference for material that is directly valuable to them, is driving the emergence of new forms of content. Three main types are on the horizon: experiential, transaction-oriented, and sponsored content. Experiential content will allow consumers to "experience" the ownership of a product, service, or brand. The best current examples let the user test out a product. Sharps Web site offers a personal tour of the Zaurus personal digital assistant in which consumers can input calendar or address information exactly as they would if they used the product in real life. At The Gaps site, customers can "try on" outfits and mix and match separates from the current range. In the future, technologies such as virtual reality will make ads even more experiential: customers will feel as though they are test-driving a new car, or walking down the aisles of a grocery store. Transaction-oriented content will invite consumers to make a purchase directly from an ad. Advertising content will become increasingly oriented toward transactions. Indeed, the Internet may already be changing consumers buying
behavior, particularly for considered purchases such as cars. Prospective car buyers who are looking for product information before making a decision can obtain more information more quickly through the Internet than by any other means currently available. Having done their research in advance, they are more ready to buy at the point when they actually encounter a manufacturer or seller. The implication for marketers is simple: they need to make it possible for consumers to carry out transactions easily and seamlessly, or risk losing sales to competitors. Consider Casio, which uses Virtual Tag technology developed by First Virtual to enable customers to make purchases from an Internet banner ad. An Internet user can learn about Casio products, purchase a watch on line, and select the means of delivery without ever leaving the banner.
Sponsored content will blur the line between editorial matter and advertising. A lot of sponsored content already exists on the Internet for example, Nissan sponsors weekly soccer tips on Parent Soup in association with the American Youth Soccer Association but by and large it tends to resemble the "brought to you by ABC" model familiar from traditional media. The emergence of advanced forms of hybrid commercialeditorial content will be driven by consumers ability to "tune out" straightforward commercial messages, be they banners, interstitials (ads that pop up while users wait for a requested Web page to appear), or standard forms of sponsorship, and by advertisers desire to influence attitudes in more subtle ways. By way of analogy, consider the growing use of product placement in films and television (James Bond drives a BMW Z3 in his latest movie) as marketers seek to make their offerings stand out from the clutter of ads and break through the cognitive filters that allow consumers to discount ordinary commercials. The network environment offers ample scope for hybrid content: entire sites can be funded and co-managed by advertisers (as with Procter & Gamble and ParentTime), while avatar technologies bring advertisers into chat rooms. However, the issue of editorial independence and the possibility of consumer
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rejection or backlash may ultimately set limits on the pursuit of this approach.
Customization
Anyone who has been offered a credit card they already hold can appreciate the need for greater customization or "addressability" in mass-market advertising, and even in direct mail. Indeed, the level of response that advertisers receive largely depends on the accurate and timely targeting of messages, as do the number of transactions and the degree of loyalty that are generated. The Internet is supposed to enable marketers at last to target their offers to that elusive "segment of one." Yet advertising on the Internet has so far been targeted mainly on the basis of editorial content, just as it is in traditional media. Part of the reason is technical, though the development of tracking software that allows ads to be delivered only to target audiences is overcoming this obstacle. Consumers reticence has been a further barrier, but as Internet users grow more willing to provide information about themselves, two types of customized content will emerge. First, content will be customized by means of information inferred about users. The Ultramatch technology recently launched by Infoseek, to take one example, makes it possible to target those Web users who are most likely to respond to a given ad. Based on neural networking technology, Ultramatch observes users behavior when they put out queries and explore subjects, collecting the results in its database. Advertisers using the service can select individuals according to their interests and thus pitch their campaign to a receptive audience. Ultramatch also allows them to ascertain which individuals are responding to ads, and to move the ads to places where they will attract similar users. Second, ads will be customized on the basis of information voluntarily provided by users. The key to making this approach work will be to overcome consumers desire for privacy or anonymity by offering them rewards for personal details in the form of special information, discounts, or promotions. On ParentTime, for example,
users who enter the ages of their children receive relevant care information as well as Pampers ads geared to those age groups. Experience suggests that consumers are willing to release information about themselves as long as they are the prime beneficiaries. Organizations such as etrust (an initiative sponsored by leading companies to develop electronic commerce) and the Internet Marketing Council take a similar view. The IMC requires marketers to provide a "giveaway" or discount before they can gain certification. This scheme is specifically designed to prevent information provided by consumers from being misused in e-mail.
Delivery
The recent hype about "push" technology on the Internet might suggest that this will be the dominant vehicle for delivering advertising on the Web. We believe the reality will be more integrated, combining todays "pull" format Web sites with "push" technology such as PointCast to deliver ads to people according to their interests. Triggered banners (ads that appear when certain key words are mentioned) and interstitials are early examples that point the way. Consider how one automakers ads are pushed to chatroom participants when the topic of cars comes up, or how a user waiting for content to be downloaded is sent an ad related to that content. Marketers must ask themselves a number of questions: What is the right balance? Where can push technology be exploited most effectively? How much push are users willing to take before they begin to tune out? As online advertising develops, advertisers will
2.1 Internet Advertising Objectives
discover that the Internet is the only medium that can deliver certain types of message, such as multisensory and interactive ads. These new forms will allow
advertisers to achieve several objectives some of them unattainable via conventional media simultaneously (Exhibit 2.1). They are likely to make Internet advertising more important in the overall marketing mix as marketers capitalize on their unique capabilities. At the same time, our glimpse of the emerging future casts doubt on the merit of current heavy investments in big brand sites that require content to be "pulled," or in banner ads that like most on the Internet today merely replicate the forms of advertising that exist in the physical world.
New Metrics
The Internet affords marketers an unprecedented opportunity to measure the effectiveness of their advertising and learn about their viewers. The capacity to measure impact sets the Internet apart from other media. Measurements available for television, for example, estimate the total size of an audience; what they dont do is tell an advertiser how many people actually saw an ad, or what impact it had. On the Internet, by contrast, marketers are able to track click-throughs, page views, and leads generated in close to real time. The result: measurements that are more precise and meaningful than anything available in traditional media. The emergence of these new metrics will affect not only ads themselves, but also the way that marketers and agencies develop them. First, more precise measurements will yield better insights into the effectiveness of advertising spend. It will be easier to identify ads that dont work, and to find out why. Advertisers will also start to expect the content of ads to be renewed more frequently in response to audience reaction. A new product from Infoseek offers a hint of things to come. Copy Testing in a Box is a tool that combines the immediate feedback of the Internet with sophisticated targeting technology to allow marketers to refocus their Internet campaigns to the most responsive customer segments within a matter of days.
Second, advertisers will be able to assess the impact of their ads earlier in the spending cycle. As a result, they will have the flexibility to launch and roll out a campaign in such a way that it can be changed before most of the money is committed. This will affect the very process of creating Internet ads, and perhaps spur advertisers and agencies to devise new ways of organizing around it.
New Pricing
Whereas marketers tend to have fairly uniform objectives in traditional media, such as shaping attitudes in television or obtaining responses in direct mail, the Internet, as we have seen, allows them to pursue several different goals simultaneously. In the same way, the standard types of pricing used in traditional media, such as CPM (the cost of exposing a message to a thousand viewers of TV or readers of print), will give way on the Internet to pricing that varies as widely as the objectives of the ads themselves. Indeed, the technology can support several pricing mechanisms at once: pay per click-through, lead, transaction, dollar spend, or conventional CPM. This kind of variegated pricing is already appearing in the marketplace: P&G has pushed for pricing per click-through; CD Now pays Web sites commissions on the transactions they generate; and Destination Florida pays according to leads generated. Similarly, DoubleClick is introducing an advertising network, DoubleClick Direct, whose rates are based on results, and has already signed up clients including Alta Vista and GTEs Internet service. Because of these factors, pricing for Internet advertising is likely to be multi-tiered, based on results, and tied to marketers objectives. At least three pricing mechanisms will coexist: pricing by exposure, response, and action (Exhibit 2.2).
2.2 Emerging Internet Pricing Models
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Pricing per exposure for instance, via a rate card based on CPM will prevail for ads placed on the Internet to generate awareness of a product or brand. Over time, this form of pricing should become more refined. As measurability and metering improve, advertisers will want to pay only for impressions on their target customers, while publishers will eagerly search for ways to extract premium exposure rates. The result is likely to be the establishment of an additional tier of "effective" CPM rates. Pricing per response will establish itself as the standard for simple consumer responses such as click-through. Prices will vary according to the types of user a site attracts and how much advertisers are willing to pay for access to them. Pricing per action is similar, but more elaborate. A site publisher might charge an advertiser more for a consumer who downloads a piece of software or provides some demographic information, say, than for one who merely clicks on a banner. We believe that the ability of Web publishers to charge advertisers for the true value they receive is likely to make the difference between profit and loss. The price for a lead generated, for instance, could reflect the prospects potential lifetime value; if it did, sites would charge automotive OEMs and white goods manufacturers different prices for prospect leads. As a result, a fee per action or sales commission is likely to emerge as a major pricing mechanism for Internet advertising over time. How quickly and how far these models take hold in the near term will depend on how risk is shared between marketers, agencies, and sites. Results-based pricing gives marketers the opportunity to shift some of the risk of failure to sites or agencies. Publishers and broadcasters in traditional media have usually been loath to take on this kind of risk. However, Internet publishers should find risk sharing attractive if it is appropriately priced, as it could boost the advertising revenues on which their success depends.
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Pricing in general is fraught with issues. Will site publishers demand a degree of control over the creative execution of ads to ensure quality, for instance? We believe that the sharing of risk in Internet advertising will ultimately be determined by the prevailing balance of power, which will vary from advertiser to advertiser and site to site, and shift over time. Large, well-known, "safe" advertisers may be able to secure results-based pricing more easily than others, particularly at times when site publishers are struggling to make their economics work.
It will be in the best interests of marketers, site publishers, and even agencies to prevent the lowest common denominator setting the industrys pricing standard. To settle for a simplistic, unsophisticated, "one size fits all" pricing scheme would mean leaving a lot of money on the table. The widespread acceptance of multitiered, performance-based pricing will make the Internet both distinctive and highly lucrative as an advertising medium.
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renewed frequently if consumers are to keep clicking. Their experience defies the conventional wisdom in advertising that any ad must be seen at least four times to make an impression. On the Internet, greater impact can be achieved by showing a wider range of ads that are repeated less often. Insights like this cast doubt on the effectiveness of current television campaigns, most of which are still based on old ideas of frequency.
Migration of this kind will reallocate the slices of the advertising pie. Interviews we conducted with marketers reveal that most believe their initial spending on the Internet did not come at the expense of other media (in other words, their overall advertising budget grew). But many expect that future increases in their Internet expenditure will be taken from other areas, probably print and/or direct marketing. They also see their Internet advertising budgets growing much faster than their traditional media budgets. Migration may also take place in nonaddressable media spending. Striking levels of media displacement are already evident among Internet users. Most notably, TV viewing has declined among a third of adult Internet users (Exhibit 2.3). Similarly, in a recent Wall Street Journal poll, 21 percent of respondents cited spending more time on their computer or in using online services as a reason for watching the major TV networks less than they did five years earlier. When
2.3 Decline in Usage of Traditional Media
marketers accept the idea that brand building can be accomplished on line, migrate to the Internet.
some spending on TV, radio, billboards, and other non-addressable media may
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effectiveness is harder to track. It is testing three concepts ultimately destined for conventional media: "On-line Lovers," "Dr Dilemma," and "The Nurse." By monitoring pages selected, click-throughs, responses generated, and other indicators, the company is able to discover which parts of a prospective campaign work and which dont, thereby reducing the risk of launching the equivalent of a box-office flop. Conducting market research and obtaining feedback from consumers can be expensive and difficult. The Internet offers cost-effective alternatives to conventional methods, and may yield more revealing information. Several of the marketers we interviewed said that their presence on the Web had taught them a tremendous amount about their customers views of their products and services. They maintain that the Web offers a non-judgmental way of providing feedback and ideas, and is less intimidating for consumers to use than standard toll-free numbers. Marketers at Fidelity, London International, and Coors found that users of toll-free numbers mainly called to ask questions about products. On the other hand, Internet users, even when given answers to the most frequently asked questions, would often provide feedback about the quality of a product, new variations on it, and ways that it might be changed. To be sure, some of the additional interaction may be down to the different demographic profile of Internet users, but gathering information of this kind is becoming an increasingly important way to use the Web.
To gather deeper feedback, marketers are experimenting with Internet focus groups. LiveWorld has already hosted several sessions for NFO, a company specializing in this area. The advantage of conducting a focus group on line is that participants are anonymous and can speak their mind without worrying what others in the group think. In addition, geographically dis-persed participants can be assembled at a fraction of the usual cost. London International is planning to
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conduct an online focus group to assess the effectiveness of its Web efforts in the near future. Finally, the opportunities for testing new product ideas on the Internet are legion, particularly for electronic or intangible items such as magazine covers, entertainment concepts, and personal financial services. The possibilities are just beginning to be exploited .
Rising Expectations
Two features of Internet advertising the measurability of its impact and the probability of some form of results-based pricing emerging are likely to raise marketers expectations of traditional media. If they do, pressure may build for a more accurate measurement system or a shorter measurement cycle. The demand for greater accuracy in measurement is already coming from the broadcast networks in any case. The coding technology tests being carried out by SMART (the emerging competitor to Nielsen), by Nielsen itself, and by its joint effort with Lucent to develop Media TraX indicate that improvements are technically feasible. In fact, it would not be surprising if new measurement tools and tech-niques originally designed for the Internet were to spill over and be applied to traditional media in the not so distant future. Moreover, in those traditional media that are already more measurable, such as print, we foresee increasing pressure from advertisers for results-based or tiered pricing like that offered on the Internet. The developments we have described are necessarily speculative, and may not materialize as broadly or as quickly as we suggest. All the same, they are worth watching out for because of their implications. Most of the media industry is affected by the billions of dollars spent every year on consumer marketing. If key
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advertisers were to reallocate their media budgets, the impact on traditional media could be profound. As the aspirations, techniques, and expectations associated with Internet advertising spill over into traditional media, both marketers and advertising agencies will have to rethink the capabilities they bring to bear on selling products and services.
"Depth" reflects the degree of interaction with consumers at any given point in their experience of a product. The book retailer Amazon.com, for instance, is beginning to use the information it gleans from customers to create value-added services such as suggestions about books that a particular reader might enjoy. This raises
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the bar for competitors on the Internet and in the physical world, posing a challenge that other players must meet if they are to retain customers loyalty. The Internets role in consumer relationship management has important consequences for marketers. Network-based interactions must be integrated into the rest of a business, with all that this entails. If car purchasers make fewer trips to the showroom, say, doing their own online research into different models instead of talking to salespeople, dealers will need to rethink the way they manage the whole consumer relationship. Eventually, customers may go to them only to place an order; at this point, the role dealerships play may no longer justify their cost, and they will have to find new ways to offer buyers value if they are not to disappear. Moreover, as consumers behavior changes, so will the skills that salespeople need. And how are those salespeople going to be compensated when consumers make their purchases through channels other than dealerships? Design and funding is another key area. If the Internets role is to grow beyond advertising, the design of online activities should probably not be constrained by the priorities of a single functional area such as marketing, or by the limitations of the marketing communications budget.
This process of value exchange will become critical as new standards are created
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to protect consumers privacy. The proposal announced by Netscape in May 1997 to capture information on consumers hard drives rather than on marketers computers marks a step in a new direction with its implicit acknowledgement that consumers will "own" information about themselves and control the release of that information to marketers. The demand for value among consumers is likely to grow as they become aware of how highly marketers prize their demographic profiles, product preferences, and transaction histories. A few marketers are beginning to manage this process effectively. In exchange for basic information such as name, address, age, and income, Vogue provides readers with discounts, special offers, and previews of forthcoming articles. Saturns approach is to offer convenient access to information. Consumers who reveal a small amount of information about themselves are able to use Saturns interactive pricing center to research new cars, saving them trips to a showroom.
For a real-life example, take the insurance company USAA. Its customer center receives and manages all communications with consumers, whether direct via telephone, mail, and the Internet, or indirect via intermediaries. The rest of the organization revolves around the customer center. Sophisticated information systems help the company to process interactions and maximize their value. The benefits are many. Customers feel that USAA knows them better, and the company is quick to respond to a complaint or learn about important market
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changes such as a cut in a competitors price in a particular territory. As more and more companies reorganize themselves around their customers, intranets linked to the Internet will become crucial. They will make it economically feasible for managers within an organization to have more information about consumers and more interactions with them than ever before.
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results of their efforts in the shape of a commission on leads or sales generated. In future, agencies will increasingly share in the risk of their advertising instead of as they do today leaving all of it to be borne by marketers. Compensation models will be transformed. The measurability of Internet advertising makes results-based pricing more feasible than in any other media, as we have seen. Some examples are already in evidence. Site Specific is using performance-based contracts for clients including Duracell, CUC International, and Intuits TurboTax division. Though these arrangements are not yet making it any money, they are expected to do so as advertising effectiveness increases. In time, results-based compensation will probably spill over into traditional media as the measurement of advertising impact improves. It will then have its most profound impact, affecting agencies core business and revenue source.
New Capabilities
This vision of the future calls agencies current capabilities into question. Many have seen themselves as the guardian angel of the brands they represent. But agencies have a patchy record of orchestrating brand-building activities across the full range of marketing disciplines: media advertising, direct mail, promotions, and so on. The emergence of interactive media means that agencies must not only manage a broader and more complex mix of marketing tools, but also master radically different skills. Three main gaps will need to be filled:
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branding? How should you choose an Internet address? What is the optimal "linking" strategy for a particular marketer? While the answers to many of these issues will be specific to a given marketer, research is beginning to identify the factors that allow companies to get more from their digital marketing efforts. Over the next three to five years, digital marketing is likely to become an increasingly significant part of the consumer marketing landscape. For many marketers it will present formidable opportunities. For those who cannot keep pace, it might pose a serious threat. It is therefore imperative that marketers begin to think about the role of interactive media in their industry, and prepare to take appropriate action.
Avnish Bajaj & Suvir Bajaj Founders, Bazee.com This auction site lets you buy or sell a range of products. Revenue is not from ads, it is from fees for listing buyers and sellers on the site; cyberlaw complexity keeps it out of the actual transactions. It successfully applies B2B and C2C models; Bajaj claims, "Rs 10 crore worth of trading on the side. It follows the Retail Model.
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Marketers know what a brand is in the physical world: the sum, in the consumers mind, of the personality, presence, and performance of a given product or service. These "3 Ps" are also essential on the World Wide Web. In addition, digital brand builders must manage the consumers on-line experience of the product, from first encounter through purchase to delivery and beyond. Digital brand builders should care about the consumers on-line experiences for the simple reason that all of themgood, bad, or indifferentinfluence consumer
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perceptions of a products brand. To put it differently, on the Web, the experience is the brand. Consider an example. If a consumer buys lipstick from a retailer in the physical world and has an unpleasant in-store experience, she is more likely to blame the retailer than the manufacturer. But if the consumer purchases that same product from Procter & Gambles Reflect.com Web site, her wrath is more likely to be directed at P&G. Thus the on-line marketers objective shifts from creating brands at least as defined in the off-line worldto creating Internet businesses that can deliver complete, and completely satisfying, experiences.
Yet many marketers, particularly those whose experience is limited to the off-line world, lack a coherent framework and concrete methods for achieving the broader objectives of on-line brand building. These marketers need an approach for aligning the promises they make to consumers, the Web design necessary to deliver those promises on-line, and the economic model required to turn a profit. These three elementsthe promise, the design, and the economic model together form the inseparable components of a successful Internet business, or what might be called a digital brand.
the promise of achievement. E*trade, for example, promises to help consumers manage their finances successfully. It has gone beyond the basicsa portfolio of financial tools and researchto offer many helpful innovations, such as securitiestracking and -alert services. Games and other activities designed to engage (and even thrill) consumers offer the promise of fun and adventure. Often these activities make use of "immersive" technologies, which, for example, allow electronic spectators of a marathon to hear a runners heartbeat. Digital brands such as Quokka Sports are building their entire businesses around immersive technologies. Such companies as GeoCities (which helps consumers express themselves by building and displaying their own Web pages) offer the promise of selfexpression and recognition. Ralston Purina Dog Chows site allows consumers to create home pages that display pictures of and stories about their pets. Clubs or communities offer the promise of belonging, as well as concrete advantages. Women, for example, can exchange stories and tips with one another at the iVillage.com site. Mercata.com provides a more tangible benefit by aggregating the purchasing power of its community of users and thus helping them get better prices for a broad range of merchandise.
convenience; collaboration tools such as chat rooms or ratings functions make it possible to realize the promise of belonging. Managers shouldnt underestimate the challenges of this translation process. What, for instance, does it mean to build a digital brand around a promise of convenience in the grocery industry? What kind of content, if any, do you need? And how about chat rooms, personalization, one-click ordering, and collaborative filtering? Digital brand builders cant afford to fall short of what they have promised, since competitors are always a click away, but they waste capital if they offer more than is necessary to make sales and keep customers.
Technology dramatically differentiates digital brandsfor both customers and shareholdersin ways that will become increasingly clear as they enter their second and third generations. To be certain of identifying all of the designs that make it possible to deliver on a promise and to build a viable economic model, todays digital brand builders must explore at least six groups of design tools. These tools are sufficiently robust technologically to help create a distinctive and relevant user experience, and they are beginning to demonstrate their ability to make money for the digital brand builders using them.
Personalization Tools
Tools such as the software that creates personalized interfaces between ebusinesses and customers, hold tremendous promise for value exchange and contextual commerce. To be sure, the value of personalization has yet to be fully demonstrated in practice. (Fewer than 15 percent of visitors to Yahoo! have chosen to set up a "My Yahoo!" page for themselves.) Personalization tools also present risks, as well as real operational challenges, such as managing privacy, intrusiveness, and opportunity costs. For that reason, many practitioners still question the short-term return on investments in personalization tools.
Collaborative Tools
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They facilitate word of mouth, or what might be called "branded person-to-person communications"for instance, the ratings that buyers offer sellers on eBay, the Lands End "shop with a friend" feature, Raging Bulls discussion boards, and Perts viral marketing (which encourages consumers to e-mail their friends instructions for obtaining free Pert Plus samples). Collaborative tools such as consumer ratings, though essential for content- and community-oriented digital brands, are underutilized.
Self-service Tools
They allow customers to obtain answers and results without the delays and inconsistencies that more often than not characterize human efforts to provide assistance. Such tools include software for tracking orders, preparing statements, and changing addresses on-line. Although incumbents often have difficulty integrating these Web-based tools with legacy systems, the tools are indispensable for banks, retailers, and other e-businesses that handle large volumes of transactions.
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single compact disc. But the need to create manufacture-to-order systems to capture the potential of these tools may make them uneconomical in industries that, unlike software and music, are not based on information.
Dynamic-pricing tools
They overthrow the tyranny of the fixed retail price, allowing prices to fit the particular circumstances of individual transactions. Such tools, which come in many forms, include eBays and uBids auctions and Pricelines offer to "name your own price." Dynamic pricing, a potential "killer application" in many categories, could permit customers to make a wider variety of trade-offs between price and value than is possible in the current world, where most sellers offer a single fixed price to all buyers.
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expected by off-line consumers, marketers must adopt several different economic models to succeed. There are six basic economic models (Exhibit 4.2). The success of an Internet brand rests on the skill with which it combines two or more of them.
1. Retail model: Vendors or products are aggregated to facilitate transactions for buyers. 2. Media model: A company aggregates audiences to generate revenue from third parties, such as advertisers, in the manner of the music channel MTV, the CBS television network, and Newsweek magazine. 3. Advisory model: An expert (such as an investment adviser or a personal shopper) offers consumers unbiased advice for a fee. 4. Made-to-order manufacturing model: A business manufactures customized products, such as locomotives, in one-time production runs.
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5. Do-it-yourself model: A business (such as McDonalds or IKEA) provides for or facilitates consumer self-service.
6. Information services model: A business (such as ACNielsen or J. D. Power and Associates) collects, processes, and sells information. Priceline, for example, combines the retail and media models and therefore enjoys economics that are vastly superior to those of other travel agencies, both on- and off-line. Applying the retail model, the company aggregates suppliers of travel services, such as airlines. Applying the media model, it "monetizes" its audience to third-party advertisers by suggesting products and services to its customers. Dell also combines two modelsthe made-to-order manufacturing and do-ityourself models. The company offers computer shoppers an unparalleled choice of features and permutations. In addition, its on-line menu and instructions guide consumers through a selection process that is speedier and less prone to error than one handled by live customer service representatives. For Dell, the superior process is also less costly.
Creating winning digital brands requires managers to reconsider how they view both the Internet and branding. Off-line brands have long thrived by delivering narrow solutions to limited customer needs. On-line, however, customers have learned to expect that the companies they patronize will meet a much fuller spectrum of their needs and desires. To succeed on-line, those companies will have to create full-fledged Internet businesses, or digital brands, that can fulfill this expectation.
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State-Of-The-Art Security
Use the best security measures on your site, and tell your consumers about them in easily understandable language. Shoppers at Netmarket are assured of "guaranteed safe shopping" with a no-compromises promise: "At Netmarket, you can shop with confidence. We use the latest encryption technology, digital certificates, secure commerce servers, and authentication to ensure that your personal information is secure on-line." Marketers at Lands End also understand how to reassure their customers on security issues. Its site states, "You have no credit card risk. Period."
Merchant Legitimacy
Brands are important on the Web. They help shoppers sort out their choices when they have a limited range of clues as to the quality and function of a product. Familiar names with established records of performance go a long way toward building trustso long as marketers continue to deliver that performance through their Web ventures. If your company lacks a recognizable consumer brand, three tactics can get you in the game:
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Fulfillment
Great security and brands can go only so far; a trust-building site must also fulfill orders efficiently and with minimal hassles. Nothing alienates a buyer more than getting thrown off-line, finding the site frozen, or making a wrong entry that causes the loss of pages of entered information. And at some sites, prospective buyers must slog through a lengthy registration process before discovering that sales taxes, shipping, and handling charges greatly increase the total price of their purchase. The best practice: explain all costs, and have an infrastructure that gets the right product to the right buyer in a reasonable period. Leading Web companies are streamlining the purchase and fulfillment process. Amazon.com has led the industry with a "1-click" mechanism, through which buyers enter an address and credit card information for the first sale only. After that, Amazon.com remembers the details. Marketers also are beefing up customer service to provide fast and accurate answers to queries arriving on-line and through call centers. In practice, even the best companies will sometimes stumble in fulfillment. But a mishap can be an opportunity for a company to show its best face and build trust with its clientele. Consider the experience of Hastings Entertainment and its gohastings.com site. The company announced its site with newspaper ads offering a package of three popular video movies for $9.99. The trouble was that buyers reaching the site found a notice saying it was still under construction. By afternoon, the message had been replaced with a toll-free number through which users could place an order for the videos. Buyers also got a T-shirt as part of
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gohastings.coms apology. What could have been a marketing meltdown was transformed into a reasonably happy story.
Control
Even with credit card security assured, consumers learn to trust the marketers they deal with only when they know that theynot the marketerscontrol access to personal information. Marketers who ask permission for personal details are taking the smart approach. E*trade, for example, discusses the benefits provided by cookies on a users hard drive (the cookie ensures that preferred settings appear without the customer logging in each time), then asks the user for permission to place a cookie. Some marketers are recruiting consumers to serve on panels that independently audit privacy policies. Others use third-party audit services such as those of the Council of Better Business Bureaus (BBB). Sites may qualify for the BBBOnLine seal when they adopt robust privacy policies and agree to consumer-friendly dispute settlement procedures. More broadly, consumers like to feel that they are in control of the buying process. Accordingly, marketers at the GMBuyPower site provide consumers with comparative information on competitors cars. After all, consumers will go somewhere to find that information. GM builds trust by letting consumers know that it understands that they have a choice and that they control the buying decision.
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this issue on its Landsend.com site, stating, "Well never misuse the information you provide us." Design and content are other critical elements. "E-Commerce Trust," a January 1999 study by Cheskin Research and Studio Archetype/Sapient, points to the importance of ease of site navigation as one influence. A sites appearance also says a great deal about a marketer. Value America, a virtual retailer, stresses the importance of "white space" and presents products in an uncluttered, friendly setting that shoppers find appealing. Drawing on the next wave of personalization technologies, marketers will be able to customize the on-line store ambience for each consumer. For example, on a music site, a classical music aficionado might receive an audio selection and visual merchandising that would reflect that sensibility; a heavy-metal fan would enjoy a more raucous presentation. Marketers set the right tone with their customers when they are straight about all aspects of the relationship, such as how they deliver services. Amazon.com now lists all its "publisher-supported placements" and explains its acceptance of co-op funds after controversy over its unstated policies. Other marketers carefully indicate that pricing may vary according to the channel through which a product is sold. The home page of Tower Records notes, "Pricing at towerrecords.com applies for on-line purchases only. Sale pricing may not apply in Tower retail stores."
Collaboration
A site nurtures trust when it encourages its customers to inform each other about the companys product and service offerings. A Yankelovich Partners survey reveals that consumers consider other users of a product to be the most trusted source of advice when considering a purchase of that product. Thus, chat groups let consumers query each other about their purchases and experiences.
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Amazon.com customers, for example, have posted hundreds of wildly divergent opinions about a single book. One site that built an entire business and brand by innovatively collaborating with consumers is eBay. Its governing model of trust is its feedback forum, where buyers and sellers rate each other. The detailed records of transaction histories show eBay users what they can expect from other users. The Web site also uses its network of users to spread the word about its activities, a tactic known as "viral marketing." That is, users can e-mail auction notices to their friends. Corporations also can choose to separate themselves from the opinion process by linking customers to external sites. Auto manufacturer Saturn has links to auto magazines and price and ratings guides.
Attraction
At the first stage, the consumer browses the site and even makes a transaction. No real relationship exists between the marketer and the consumer, and none may be warranted. The best strategy is to provide the consumer with information, without demanding any in return. At first blush, this may seem like an imbalance between what marketers give and what they get back. But what the consumer is
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giving the marketer is something quite valuable: time and attention, along with a view of how the site is traversed. The time and attention translates into the "mind share" needed to create a brand preference. The average consumer on Ralston Purinas Dog Chow Web site, which offers no product for sale, spends more than six minutes per session learning how to care for pets. Thats far more timeand concentrationthan consumers devote to a 30-second TV ad.
User-Driven Personalization
At the second stage, consumers start shaping Web pages to their specific tastes. For example, CDnow customers can personalize their home pages with favorite artists and wish lists. The company shows that it is willing to deliver some value to the consumer before gaining financially. Charles Schwab now invites users to set up a personal page through the MySchwab service, where users can not only track stocks but also get customized sports news, weather information, and even cartoons. Users arent required to open a Schwab account to do so.
Marketer-Driven Personalization
In the third stage, marketers begin using insights provided by consumers to beam information back to them. Thus, CDnow uses its knowledge of consumers developed at the earlier stages of trustto suggest products they might like, which consumers then rate as either on- or off-target. As the process continues, CDnow learns consumers preferences and zeroes in on what they really like. It is worth emphasizing that marketers should rein in their urge to make immediate use of data and personalization technologies. This approach takes patience, a trait lacking at many marketing organizations. Too often they bombard consumers with promotional offers as soon as they get their hands on an e-mail address. We
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suggest a gradual approach, as nothing aggravates many Internet users more than unsolicited e-mail. A best practice is to let the user set the pace of personalization and contact from marketers. User-driven personalization should precede marketer-driven offers. Recent research by Professor Youngme Moon of the Harvard Business School has shown that premature personalization can backfire. Moon found that consumers were less likely to buy products pitched to them through messages if the messages were based on information they had not given to the marketer themselves. According to "Is Your Web Site Socially Savvy?" a MayJune 1999 Harvard Business Review article, consumers were more likely to buy when the message was personalized and based on information they had volunteered.
Trust-Based Collaboration
At the final stage, the marketer and the consumer work together closely. The consumer gives the marketer access to the most sensitive personal information (family, finances, or health) and in turn gains customized experiences and consultative problem-solving assistance. In our view, very few on-line marketers have reached this level of trust with their consumers. The pace of value exchange varies by industry and situation. For example, mortgage shoppers may provide financial information in their very first interaction if they need a quick answer. In other situations, the process moves more slowly. And because costs rise as marketers go up the trust staircase, they must decide just how far they need to go to create the most profitable relationships. Trust building at a basic level may be enough for some marketers, particularly if greater trust does not bring greater spending by consumers. Only by sustaining trust can marketers expect to establish enduring relationships with consumers, and it is by keeping a central focus on that idea that marketers build a value exchange that delivers consistent and progressive mutual benefits.
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With the six building blocks of trust in place, marketers should be able to chart a course for building great on-line businesses.
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levels of customer satisfaction. The store is designed on the find what you need fast policy. Take the bookstore, for instance. A shopper can use the option of searching either by title, or first/last name of the author. There is also an additional facility of advanced search for those who would like to search by combining two or three options. The search options are similar for the Fabmart music store. Once the customer has selected the items to be purchased, he/she then clicks on the add to shopping cart icon and goes through the entire shopping process. At the time of confirming his/her order, the shopper is given a reference number that can be used to track order status. Fabmart is banking on the virtual stores depth in offerings and customer satisfaction initiatives to add value to its e-tailing business. And this, it hopes, will be the final differentiating factor.
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Sourcing involves collecting various customer orders from wholesaler/distributor/ production agencies on an ongoing basis. At the consolidation stage, the sourced items from the wholesaler are segregated according to individual orders and finally packed on the basis of individual consignments. Once the allocation of each order is completed, shipments are made through Blue Dart couriers. The key element here is Fabmarts completely automated and Web-based solution, which works on a virtual inventory model where Fabmart does not hold any inventory at all. The store is still able to meet the delivery commitment within 72 hours typically. Fabmart claims to ship about 95 per cent of its orders within 48 hours, a feat it can achieve because of its rapport with the big book and music companies in India. Fabmart also has a seven-day, noquestions- asked return policy under which customers can return any items, with a small note stating the reason for dissatisfaction, and Fabmart bears all shipping expenses.
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A jewellery store was launched recently, while a grocery shop is on the anvil, with the ultimate aim to emerge as a focused virtual superstore. The jewellery store, which went online in June with about 5,000 items, targets the impulsive buyer. And jewellery transactions are expected to drive up the average value of an online transaction. The grocery shop will attract online customers for need-based purchases. Fabmarts aim is to achieve a mix in customer demographic profile with both impulsive and need-based consumers. Fabmart would also need to gear up for competition from players such as Shoppers Stop and eCrosswords (ecommerce portals of Shoppers Stop and Crosswords, expected to be online by October). With a customer base of over 25,000, Fabmart hopes not too many will switch loyalties. The e-tailer hopes to consolidate further in the time that competitors will take to adapt to the dynamics of the Net business. Says Vaitheeswaran: Theres nothing like time gained.
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Case Study Case Study C2W & Hungama C2W & Hungama
The first full-fledged website in the Indian market to start broadcasting to cater to this need was Contest2Win (www.contest2win.com), now simply c2w.com, keeping in mind the impatience levels of users online. C2W edged its way slowly but steadily into the minds and onto the fingertips of Indian users by striking barter deals which involved their URL (Internet address) being mentioned in traditional media in exchange for hosting contests and promotions on their site. With enthusiasm that ran deep, but pockets that didn't, Alok Kejriwal, CEO, did not spend on the traditional advertising and PR channels from the time they went live in November 1998. On the other hand, Hungama.com took the other route, living upto its name when it launched in March 99. Online advertising, professional PR, and attractive promotions in prominent net-savvy community hangouts like night clubs and cybercafes in Bombay, Bangalore and Delhi all went towards literally raising a hungama about this new website in almost no time at all! The business model of sites like C2W and Hungama is simple - they believe in the Internet maxim: "content is king". And they keep that content fresh. Of course, content for them is not news and features, but contests, promotions and incentives rewarding users for spending time on their sites. And there are four steps involved in making this business model pay off for them:
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to offer. Contests and promotions are either created exclusively for the Net, or are online adaptations of existing traditional world contests.
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portal - a one-stop site for contests and promotions. "Free" seems to be a four lettered f-word for Neeraj Roy, CEO, Hungama.com who emphatically states that his site is not a contest freebie site - it is an ePromotions site that will continue helping brands get their message to online customers through incentives. Whatever tag you put on them - be it freebies, incentives, contests, promotions, or brand-building exercises in cyberspace, there are more eyeballs being attracted, and slowly but steadily, more brands being attracted by these eyeballs.
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