SUCCESSFUL ON THE INTERNET A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA) AT THE UNIVERSITY

OF CAMBRIDGE ROBIN S. CLELAND SEPTEMBER 2000

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CONTENTS SUBJECT PAGE CHAPTER 1 1.1 1.2 1.3 1.4 Overview Objectives Methodology Structure INTRODUCTION 6 7 9 9 11 CHAPTER 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 THE NATURE OF BRANDS 12 13 13 14 15 16 18 19 20 22 22 23 2.9 Introduction What is a Brand? The Layers of a Brand Product and Service Brands B randing & the Buying Process The Importance of Customer Satisfaction and Loyalty Emotional Loyalty The Concept of Brand Equity 2.8.1 The Value of Brands to Cust omers 2.8.2 The Value of Brands to Companies Conclusion CHAPTER 3 3.1 3.2 3.3 BUILDING BRANDS 24 25 25 26 27 28 30 31 32 32 3.4 3.5 3.6 3.7 Introduction Overview of the Brand-Building Process The Value Proposition 3.3.1 Added Value 3.3.2 Distinctive Brand Identity Developing the Framework and Commun icating the Value Proposition Building Customer Relationships Characteristics of Successful Brands Conclusion 1

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 4.1 4.2 4.3 4.4 4.5 4.6 THE INTERNET 33 34 34 35 35 39 40 43 Introduction Overview of the Internet 4.2.1 The Defining Characteristics of the Internet The Growth of the Internet The Internet & e-Commerce The Impact of the Internet on Business Conclusion CHAPTER 5 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 BUILDING BRANDS ON THE INTERNET 44 45 45 47 48 50 51 52 57 59 60 Introduction The New Dynamics of Brands The Importance of Customer Loyalty Onlin e Increasing Returns Economics and First-Mover Advantage Viral Marketing 5.5.1 T he Case of Hotmail.com The Online Experience & The 7Cs Framework The Interactive Brand-Building Model Limitations of Brand-Building on the Internet Conclusion CHAPTER 6 6.1 6.2 Introduction CASE STUDIES 61 62 62 62 62 64 66 69 70 71 71 72 72 73 75 6.3 Case Study: Amazon.com 6.2.1 Company Overview 6.2.2 Value Proposition 6.2.3 Sour ces of Value - The 7Cs Framework 6.2.4 Brand-Building Strategy 6.2.5 Other Facto rs that Contribute to their Brand Leadership 6.2.6 Conclusion Case Study: Barnes andNoble.com 6.3.1 Company Overview 6.3.2 Value Proposition 6.3.3 Sources of Val ue - The 7Cs Framework 6.3.4 Brand-Building Strategy 6.3.5 Conclusion 2

5.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.Extensive Integration 6.8.3 Sources of Value .2 Value Proposition 6.5 Conclusion Case Study: Gap.4.1 Company Overview 6.7.2 Value Proposition 6.1 7.2 Value Proposition 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.com 6.3 Sources of Val ue .8 Case Study: Boo.7.5.5 6.4 Brand-Building Strategy 6.4.com 6.6.5.4 Brand-Building Strategy 6.7.7.6.The 7Cs Framewo rk 6. 1 Company Overview 6.1 Key Factors that Contribute to Bui lding a Successful Online Brand Opportunities for Further Research APPENDICES Appendix A Appendix B Interbrand's Ranking of the Top 60 Brands The Mckinsey 7S Framework 111 112 113 BIBLIOGRAPHY 3 114 .The 7Cs Framework 6.4.5 Other Factors that Contribute to their Brand Leadership 6.7.8.5.3 Sources of Value .4.8.5.6 6.5 Other Factors That Co ntribute to their Brand Leadership 6.1 Company Overview 6.3 Sources of Value .8.The 7Cs Fram ework 6.6 Conclusion Case Study: eBay 6.3 Sources of Value .5 Conclusio n Case Study: CDnow 6.The 7Cs Framework 6.2 Value Proposition 6.8.com 6.6.The Failure of Boo.4 6.7 6.6.2 Value Proposition 6.4 Brand-Building Strategy 6.5 Conclusion Case S tudy: Yahoo! 6.1 Company Overview 6.8.1 C ompany Overview 6.1.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.5.4.4 Brand-Building Strategy .4 Brand-Building Strategy 6.6.

2 Figure 2.7 Figure 5.1 Figure 1.Popularity & Effectiveness Categories Suitable for Interac tive Marketing Overview of Amazon.com's Website Overvie w of CDnow's Website Overview of eBay's Website Overview of Gap's Website Overvi ew of Yahoo!'s Website Overview of My Yahoo! 4 7 9 13 14 16 17 18 20 20 21 25 26 29 30 34 36 36 37 38 39 43 48 49 52 53 55 56 57 58 60 64 67 72 77 81 88 94 100 101 .7 Figure 5.1 Figure 6.3 Figure 3. 1 Figure 5.BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.3 Figure 5.7 Figure 2.com's Website Amazon.4 Figure 2.2 Figure 4.3 Figure 4.1 Figure 3.9 Figure 6.8 Figure 6.5 Fig ure 2.6 Figure 2.9 Years to Reach $100 million in Sales Research Metho dology A Brand is More Than a Product or Service Layers of a Brand Five-Stage Mo del of the Buying Process Steps Between Evaluation of Alternatives and a Purchas e Decision The Satisfaction-Loyalty Relationship Creating Emotional Loyalty Bran d Progression Brand Equity Brand-Building Mechanism Define the Value Proposition Kapferer's Brand Identity Prism The Innovation-Adoption Model The Three Layers of the Internet Growth in Internet Host Computers and Major Developments Acceler ated Rate of New Technology Acceptance The Virtuous Growth Cycle of the Internet What are People Doing Online? World-wide Commerce on the Internet (1998-2003) T he Structure of an Online Company The Network Effect The Virtuous Spiral of Onli ne Growth The 7Cs Framework Factors Affecting Web Brand Loyalty The Community He xagon Customer Access to Information The Interactive Brand-Building Model Websit e Promotion Methods .4 Figure 5.1 Figure 2.1 Figure 4.4 Figure 4.com's Website Overview of Boo.8 F igure 5.2 Figure 5.5 Figure 5.4 Figure 6.5 Figure 6.3 Figure 6.6 Figure 4.com's Associates Programm e Overview of BarnesandNoble.4 Figure 4.5 Figure 4.6 Figure 5.6 Figu re 6.2 Figure 6.7 Figure 6.2 Figure 3.8 Figure 3.3 Figure 2.2 Figure 2.

Timeline and Major Mi lestones Gap.Timeline and Major Milestones Yahoo! .com .Timeline and Major Mileston es BarnesandNoble.2 Table 6.Timeline and Major Mil estones 46 63 71 76 80 87 93 99 5 .7 The Emerging Brand-Building Environment Amazon.Timeline and Major Milestones Boo.1 Table 6.com .3 Table 6.Timeline and Maj or Milestones CDnow .com .Timeline and Major Milestones eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.4 Table 6.com .6 Table 6.5 Table 6.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6 .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1. Sup ply chains are being rethought. The Internet provides t he opportunity for companies to reach a wider audience and create compelling val ue propositions never before possible (e.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline. as they face each other through an electronic con nection. As such.1 shows the number of years it has taken some Interne t brands to reach sales of $100 million. the Internet is having a profound impact on the way b usiness is being conducted in ways that are often disruptive to traditional meth ods1. Figure 1. Internet companies such as Yahoo!. aggressive Internet start-ups have emerged.5 million bo ok titles). America Online (AOL) and eBay have been able to build powerful brands in a fe w years.0 1.com .9 3. while providing new tools for promotion.com1 Amazon.YEARS TO REACH $100 MILLIO N IN SALES 6 5. the Internet is chan ging fundamentals about customers. relationships.5 2.an ex plosion that is also a harbinger of how business will operate in the future. FIGURE 1.com noble. that these Internet start-u ps have achieved.1 3.co m. interaction and relationshi p building. there has been an explosion in the online world . whereas it has taken decades for traditional companies to achieve the c lient base.1 .7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com's range of 4.1 OVERVIEW Over the past few years. creating strong brands that are putting established brands at risk. As such.g. In the midst of th is. and business models revamped.9 2. customer affiliation and level of sales. It is empowering customers with more options and more information to make informed decisions. products and services reconfigured.2 3. service and brands. and is tri ggering the need for new brand-building strategies and tools. and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. This is creating new challenges and opportunities. Amazon. Amazon. The Internet also represents a fundamental shift in ho w buyers and sellers interact.

MARCH 1997 JULY 1997 FEBRUARY 1994 Since merged with Egghead.com Source: Securities and Exchange Commission Filings.mckin seyquarterly.com) 7 . McKinsey Analysis (www.

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

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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 .

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

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

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

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

customers m ake decisions purely on the basis of their expectations. or avoid a purchase decision is heavily influenced by perceived risk.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2. even delighted. These expectations are formed through a combination of past experiences. 17 . Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. The level of customer satisfaction will influence whether they b uy the brand again and talk favourably or unfavourably about it to others. Customer sati sfaction and loyalty are essential to creating successful brands. locking out potential competitors. Expensive purchases involve some risk taking.4 STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION ATTITUDES OF OTHERS (WORD-OF-MOUTH) EVALUATION OF ALTERNATIVES PURCHASE INTENTION UNEXPECTED SITUATIONAL FACTORS PURCHASE DECISION If other people have had a negative experience with the brand.the customer will be highly satisfied. advertising and communication. postpone. their negative at titude may influence the consumer's purchase intent or vice versa. somewhat satisfied. and a preference for recognised brands they can trust. as these services are intangible and therefore. Customers' expectations are particularly important when de aling with services. A consumer tri es to deal with this by gathering information from friends. Highl y satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision. If performance fal ls below their expectations. or dissatisfied with the purchase decision. After a consumer has actually purchased the p roduct or service. they will be dissatisfied and look for alternative brands in the future. A consumer's decision to modify. and especially important when dealing with purchases made t hrough the Internet. If perceived performance and quality excee d their expectations then they are satisfied. they will evaluate their level of satisfaction . word-of-mouth.

Fig ure 2. Johnson & Johnson. 91 Loyalty is derived when customers are continuously satisfied over time. p. Trust is critical for a brand's success. & Sasser. At the opposite end of the satisfaction spectrum are "apostles" customers who are satisfied and loyal and talk favourably about the brand . T.5 THE SATISFACTION-LOYALTY RELATIONSHIP & THE IMPACT OF COMPET ITIVE ENVIRONMENT HIGH NON COMPETITIVE ZONE “HOSTAGES” “APOSTLES” HIGHLY COMPETITIVE ZONE • • LOYALTY Regulated Proprietary technology • Few substitutes • High switching costs • • “TERRORISTS” LOW “MERCENARIES” 3 SATISFACTION 4 Commodity Consumer indifference • Many substitutes • Low switching costs 1 Completely Dissatisfied 2 5 Completely Satisfied Source: Jones. Hewlett-Packard. Sou thwest Airlines and Xerox7. 6 7 .those who actively attack the brand telling others not to buy fro m the company...6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6. FIGURE 2. This sat isfaction encompasses the whole experience and not just a company's products or services. and believe that it will always act in their best i nterest. E. customers at the lowest and h ighest ends of the satisfaction scale tend to have intense feelings about a bran d and its products / services.Harvard Busi ness Review. The customers at the bottom end of the scale are "terrorists" . Customers that are passionately or emotionally loyal are those that ha ve built trust in a company.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. Saturn. Nov-Dec 1995. Federal Express. Some traditional companies ide ntified as having established a strong trust relationship with their customers i nclude: Disney.5. 'Why Satisfied Customers Defect' .

D. M. C. T. Marketing Management. 'Growing the Trust Relationshi p'..Jones. 'Why Satisfied Customers Defect' . W..Harvard Business Rev iew. Spring 1999 18 . E. & Sasser. Nov-Dec 1995 Hart.. and Johnson.

Some established brands are successfully developing online commu nities around them such as Disney and Pentax (where professional and aspiring ph otographers can exchange tips and information on techniques and equipment). G. & Rogers. Emotional loyalty can be also created through the formation of a strong user community ar ound the brand. D.7 They are willing to pay premium prices to a supplier they kno w and trust Gaining market entry or share becomes very difficult for competitors It is easier to communicate with them on a regular basis EMOTIONAL LOYALTY Emotional loyalty can be brought about in two main ways. Spring 2 000 19 . M. 1993 McWilliam. This relatio nship can actually start through the satisfaction of a functional need or expres siveness (self-image) need. The consumer reaches emotional loyalty when membership in the br and's user community becomes an end in itself. Firstly. consistent orders Satisfied customers are the best advertis ement . Harley-Davidson motorcycle clubs).Sloan Management Review. emotional loya lty is born out of a consumer's personal relationship with a brand. The benefits of strong customer relationships are: T he average cost of acquiring a new customer is five times more than it costs to retain an existing one8 Loyal customers tend to spend more Regular customers ten d to place frequent. There is also clear evidence of this on t he Internet.they provide good word-of-mouth and are the best salespeople for the pro duct / service 2. the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e . 8 9 Peppers.com.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. In this way.. 'The One to One Future'.g. Consumers cross the threshold from a mere brand rela tionship into emotional loyalty when they "animate" the brand. 'Building Stronger Brands through Online Communities' .. with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and F ortuneCity. giving quasi-huma n 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.

Journal of Consumer Research. which goes well beyond the satisfaction of a specific need. 20 .7 . FIGURE 2.CREATING EMOTIONAL LOYALTY TRIGGE RS PATHWAYS Personal Relationship with the Brand THRESHOLDS Brand Personificatio n EMOTIONAL LOYALTY User Community Community as an End in itself • Congruence with Life Themes • Accomplishment of Life Projects • Resolution of Current Concerns Source: Fournier.6 .BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme. and understanding the needs and buying proces ses of the target market is essential. there are brands that customers perceive as acceptable and w ould not resist buying. 'Consumers and Their Brands: Developing Relationship Theor y in Consumer Research'. almost irreplaceable bond as well as potent ially to the negative feelings of betrayal. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand. Some brands ha ve a fairly high degree of brand awareness (measured by brand recall and recogni tion). FIGURE 2.7). pp. whereby customers would be unwilling to substitute it with compet itors' offers. March 1998. Beyond this. 343-373.. A stronger brand enjoys a high degree of brand preferenc e over competing brands. However. 2. a 'powerbrand' tends to have a high degree of brand loyalty.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figur e 2. there are brands that are unknown by most buyers. S. Emotionally loyal customers build a sense of trust and two-way commitment with the brand.

stron g brand associations. perceived quality.BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers . D. According to David Aaker (1991). and relation ships with distributors and strategic partners. brand equ ity "is a set of assets (and liabilities) linked to a brand's name and symbol th at adds to (or subtracts from) the value provided by a product or service10". name awareness. FIGURE 2. 1991 21 . Th e major brand assets are brand loyalty. The benefits of each are outline d in Figure 2. D.. trademarks. and other assets such as patents. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'.. which is the value of the bran d over and above its commodity value.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity. 'Managing Brand Equity: Capitalising on the Value of a Brand Name'. ( New York: Free Press).Create Awarene ss . 1991 10 Aaker.8 .Reassurance Time to Respond to Competitive Threats Anchor to which other as sociations can be attached Familiarity / Liking Signal of Substance / commitment Brand to be considered BRAND AWARENESS • • • BRAND EQUITY PERCEIVED QUALITY • • • • • • • • • • OTHER PROPRIETARY BRAND ASSETS Provides Value to Customer by Enhancing Customer's: • Interpretation / processing of information • Confidence & Trust in the purchase decision • Use satisfaction Prov ides Value to Firm by Enhancing: • Efficiency and effectiveness of marketing progr ams • Brand loyalty • Prices / margins • Brand extensions • Trade leverage • Competitive a dvantage Reason-to-Buy Differentiate / Position Price Channel Member Extensions Help Proc ess / Retrieve Information Reason-to-Buy Create Positive Attitude / Feelings Ext ensions BRAND ASSOCIATIONS • Competitive Advantage Source: Aaker. (New York: Free Press).8.

To be sure of buying the best product in the category. to quickly identify sought after products • • Practicality .1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11. (London: . G. P.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies. J. market share a nd profits . th e best performer for a particular purpose • Characterisation .. Pre mium pricing increases revenue. • Br and Leverage . Journal of Marketing Research.Satisf action brought about through familiarity and intimacy with the brand that you ha ve been consuming for years • Hedonistic . (New York: Free Press).. & Downham. 11 12 Kapferer..To have confirmatio n of your self-image or the image that you present to others • Continuity .Satisfaction linked to the attractivene ss of the brand. 158-170. . brands perform several functions that add value and customer benefits: • Identification . 1986 13 Golder. 22 1992 Worcest McGraw Hill) Marketing Lo pp. 'Pioneer Advantage: gic or Marketing Legend?'. and the number two twice the share of the number three12.To be clearly seen. N.. May 1993.Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.8. to its logo.8. R.To sa ve time and energy through identical repurchasing and loyalty Guarantee . to make se nse of the offer. 3rd Ed. J.The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development. production and marketing..To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation . 'Strategic Brand Management'. The bran d leader is the most profitable and all beyond number two are unprofitable13. & Tellis.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2. in the following ways: • Brands.Typically a brand leader obtains twice the market share of the numb er two brand. to its communication • Ethical . er. 'Consumer Market Research Handbook'.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 .

selling.1 . FIGURE 3.1. promotion. public relations. Through the combinat ion of the stimulus of consistent communications and satisfactory usage and expe rience. This is illustra ted in Figure 3. The major characteristics of successful bran ds are also reviewed.1 INTRODUCTION Building a strong brand is a complex task.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. This chapter spells out the tradition al brandbuilding process. it should provide a satisfactor y experience and lead to a willingness to buy again. brand awareness. Once this has been established. and keep it turning. To entice trial and repeat purchase requires triggering mechanisms. The company needs to communicate the values of the brand and then reinforce brand associations to st art the wheel of usage and experience. highlighting important factors that contribute to the success of each step along the way. confidence and brand equity are built. 3. If the offering is developed properly.BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25 . which are created through advertising. and direct marketing.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposi tion. the next step is to get customers to try t he brand.

a distinctive brand identity (I). unless differentiation and awareness can be developed. It should seek to augment its basic appeal with added value throug h the provision of additional products or services to delight customers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Similarly. 26 .3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition . In order to do this.a strong offer that a potential customer would find compelling and interesting. a brand must deliver a quality product or ser vice that meets the functional needs of customers and differentiates itself from competitors. BRAND = P X I X AV These three characteristics are multiplicative rather than additive .2). As such. what they value and how the products or services should be optimised o r configured to deliver this value (Figure 3. a compelling value proposition is the combination of an effective product or service (P). the brand can elicit feelings of confidence that it is of higher quality t han competitors'. and added value (AV). FIGURE 3. it is impossible to build a successf ul brand.each is es sential. Without a good product or service. it w ill never attract a strong client base. In this way. a company must develop a strong understanding of who their potential custo mers are.2 DEFINE THE VALUE PROPOSITION Who is your customer? What does your customer value? What is the optimal product or service offering that delivers this value? Central to this value proposition. The value proposition must be c ontinuously re-evaluated to respond to changes in the marketplace.

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

3.3: • Th e Brand Core .g. and the relationship expressed (e. • The Brand Style . and advertising. its personality and its image or self-projection .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name. which depends on how the target market perceives the brand. colour scheme. 16 Kapferer.. Jean-N oël Kapferer (1992) identified three levels of a brand identity16 . A company should s eek to differentiate its brand through developing a distinctive identity. friendly). which remains fixed over time. glamour.Figure 3. and visua l appearance). This may be different from the brand image . features . prestige. Brand themes are the most flexible element and will tend to change wi th fashion. etc.the fundamental or genetic code of the brand. visual appearance. Themes include the physical appearance (logo. its reflection (e.g. 1992 28 . packag ing.the way the brand communicates through its advertising. • The Brand Theme . press releases. style or cultural differences from one country to another. type of spokesperson / customer image used t o advertise the brand). 'Strategic Brand Management'. (New York: The Free Press). however t he brand style and core tend to be less flexible.articulates the brand core in terms of the culture it conveys. J.

below-the-line activities.KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER PHYSICAL PERSONALITY EXTERNALISATION INTERNALISATION RELATIONSHIP BRAND CORE CULTURE REFLECTION SELF-IMAGE BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical Personality Culture Relationship Reflection Self-Image The physical qualities and features of the product or service The character of t he brand and how it speaks of its products / services The set of values feeding the brand's inspiration and energy The intangible exchange between the brand and the customer The image of the buyer or user the brand seems to be portraying Wh at the brand says about the user (in the user's mind) Source: Adapted from Kapferer. Secondly.. and through lin e and brand extensions. its strengths and op portunities. 1992 The brand prism enables management to understand the brand. str ucture and ease of use). advertising. understanding the brand's core and style helps set the perimeters of brand extensions .g. it helps in developing the brand strategy and the formula tion of a distinctive positioning in the market.how far the brand can be meaningfully s tretched to other products and market segments.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3. It also facilitates consistency in the message being transmitted through presentation (e. Finally. J. 'Strategic Brand Management'. 29 . (New York: Free Press).3 . website design.

.The McKinsey 7-S Framework)..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3. Personal sources such as word-of-mouth from friends. culture and staff needed to support. If the offering is developed prop erly.INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers. colleagues and opinion l eaders become important influences at this stage.79-86 The Innovation-Adoption Model consists of: • Awareness . deliver and re inforce this value proposition (see Appendix B .o ften referred to as the '4Ps' . pp . and its products / services. features and advantages. systems. 1962. it should lead to satisfaction and re-purchase. and the product / service's perceived performance. Promotion a nd Place (distribution strategy). E.Product and service features. This learning is called the adoption process17 . 17 Rogers. the company must ensure that it d evelops the appropriate structure. Th e value proposition must then be articulated in terms of the 'marketing mix' . • Interest . 'Diffusion of Innovations'. strategy (partnerships and alliances ). • Adoption The customer is satisfied and decides to make regular use of the product / serv ice.4 . pp. Price. • Evaluation Customers consider whether the product / service will meet their particular need s. skills. • Trial . The value proposition must be communicated to entice customers to try the product / service. they must learn about it.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined.Figure 3.Customers need to be stimulated to seek information about the brand's uses. (New York: Free Press). management style.The company has to create awareness of the brand. FIGURE 3. 1962. Advertising and PR are com mon tools for achieving awareness. Before potential customers can buy a product / service. 'Diffusion of Innovations'. (New York: Free Press).The customer tries the product / service for the first time and decides whether to adopt it based on t heir expectations.79-86 30 . E.4.

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33 .

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

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

000 10.economist.000.3 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.000 1. Cisco and Amazon begin to aggressively use Internet for commercial transactions 1993: Mosaic browser invented at University of Illinois is released to public 1989: WWW HTML Language invented 1994: Netscape releases Navigator browser 1991: National Science Foundation (NSF) lifts restrictions on commercial use of Intern et The growth of personal computing technology in the 1980s. largely contributed to the accelerated adoption of the Internet and the world-wide web (www) which far outstrips that of previous technologies . 1998.000 100 '82 '83 '8 4 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards.3.000 1969: 10.000.com) 36 . 2000 Internet / ARPAnet was created Dell.000 100.000 1. as cited in 'E-Business Technology Forecast' .a PricewaterhouseCoopers Report.ACCELERATED RATE OF NEW TECHNOLOGY ACCEPTANCE YEARS TO REACH 10 MIL LION CUSTOMERS www PC VCR Fax Cable TV Pager 0 5 10 15 20 25 30 35 40 2 7 9 22 25 41 45 Source: The Economist. 1996 (www.GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100.Figure 4. FIGURE 4.000.2 .

. Easier access to these networks provided by point-and-click web browsers. billing. Reed. No. Multimedia development tools that can be used to create rich content.Higher PC penetration among consumers and compan ies .Content Aggregators . 'Electronic Commerce (finally) Comes of Age'. hosting. This boom has been the result of several underlying forces t hat have come together: The wider availability of the Internet. offering inexpen sive bandwidth.4.. The McKinsey Quarterly.THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS .Low-cost networking alternatives .Cheap bandwidth . the momentum created by all these forces has created a virtuous cycle of growth. L.Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE .com) 37 . As shown in Figure 4.Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD . The growth in suppo rt services (e. The emergence of open standards in development tools and at the network protocol level (e.New generation of PDAs and Internet appliances Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington.Cheap microprocessors & RAM .).High-powered servers . 2000 (http://cyberatlas. 1996. payment. and gateway services).E-Marketplaces . web design.4 .2 20 'World Online Populations' . making it more cost effective for software developers and other technology providers to create interoperable products. TCP/IP). FIGURE 4. The development of critical processes (ordering.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000.g. etc. The most important factor has been that users are becoming accustomed to the Int ernet and are rapidly overcoming any inhibitions concerning e-commerce. G. there wil l be an estimated 375 million Internet users world-wide.Attractive infrastru cture and middleware software . increasing to 500 milli on users by 200220.g.internet.CyberAtlas Internet Statistics and Market Research.

eiu.WHAT ARE PEOPLE DOING ONLINE? E-mail General Info Surfing Reading H obbies Product Info Travel Info Work / Business Entertainment Purchasing Stock Q uotes Job Search Chat Rooms Homework Auctions Banking Trading Stocks 0% 20% 40% 60% 80% 100% Source: Stanford Institute for the Quantitative Study of Society. April 13. 2000 (www. to interacting (e . entertainment) and purchasing (37%) .Figure 4.5 . reveals the wide range of areas where people are embracing the Internet from communicating (90% use e-mail) and sourcing information.com) 38 .5. communication and i nformation tool.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society ( 2000). as cited in th e Economist Intelligence Unit (EIU).g. These activiti es highlight the adoption of the Internet as an interactive. chat rooms. FIGURE 4.

These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks. and no cash register. content. software. April 2000 39 . T he buyer and seller 'face' each other through an electronic connection.6 . FIGURE 4. The value of e-commerce transactions and market fore casts vary widely among research firms and government agencies. they al l project the value e-commerce transactions to grow at unprecedented rates. fax.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions. telephone) is that the Internet goes beyond just enabling transactions. Instead there is a website. However. Conducting business over the Internet ('e -business') represents a fundamental shift in how buyers and sellers interact. The main difference between the Internet and other electronic media (i. as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group. There is no need to travel to a physical location.WORLD-WIDE COMMERCE ON THE INTERNET (1998-2 003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4. Th e Internet becomes an information-rich 'virtual' market space through which buye rs and sellers interact.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for com merce.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. no order book. web br owsers. proj ected by Gartner Group. and people.e.

suppliers. At the same time. New brands and business models are emerging to seize this opportunity. the Internet provides the opportunity for Improved business processes and 'virtual c ompanies to integrate with their suppliers and customers in real-time and create previously unachievable synergies at a very low cost.. The Internet also faci litates the development and co-ordination of global activities (e. M. Although the particular impact will differ between industries. March .g. operation (e. how they compete and how they serve their customers . A 'virtual' presence can miti gate the cost of having to invest in physical facilities. a number of sweeping impacts are identifiable: The Development of E lectronic Intermediation The Internet is enabling companies to break through org anisational and geographic boundaries to create new structures that link busines ses 'virtually' (electronically) with customers.g. Yahoo!). partners and other c orporate constituencies. 'Meeting the Challenge of Disruptive Change'. CISCO e-enabled its financial systems and now h as the capability to close its financial year within one day.g.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4. some of which look set t o become the superbrands of the future (e. 66-76 40 .and revolutionary new business models are emerging. pp. This is threatening to undermine many old established brands. Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. the Internet is sidelining the role of many traditional intermed iaries. Dell Comp uters). H arvard Business Review.. 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-orde r' modes of Christensen. Volume 78 Issue 2. For example.April 2000. Improved Core Business Pro cesses The use of Internet-based technologies as the platform over which the org anisation's processes flow. & Overdorf. Additionally. through the use of extranets). which are often disruptive to t raditional business models21. and transforming traditional distribution channels. By allowing customers to talk knowledgeably and directl y to suppliers. C. the explosion of inf ormation is placing a premium on skilled information management. represents a level of efficiency and integration previ ously unattainable.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted how companies operate.

online stores. collaborate more effectively and ultimately embe d organisational intelligence within processes. CEO of Forrester Research22. allowin g employees to share knowledge. getting closer to customers and ultimately staying ahead of competitors. respond to competitive and market dynamics. as they have access to more information leading to more informed decision-maki ng.. The Pace of Business is Accelerating With the fast pace of technological change. these new highly inf ormed customers are "empowered fruit flies". their organisations must harness kno wledge . 2000 (www. fierce competition. the development of a knowledge economy.forrester. the diminishing barriers-to-entry and the lower switching costs. commit and deploy resources. 'Empowered Fruit Flies' . ensuring the delivery of a satisfying customer experience. products and services. highest convenience and quickest satisfaction. Now companies need to move at wa rp-speed. Knowledge is Becoming a Key Strategic Asset Many companies ha ve recognised that if they want to succeed. It also provides easy access to competitors' offers and allows customers to consider every available alternative. Customers have more options than ever before . This is forcing companies to become flexible and responsive to customer needs. as they are just one 'click' away. improving processes . Inter net technology can be used to exploit collective learning and knowledge. and the 24 x 7 environment. According to George Colony. As a result. the typical clock-speed at w hich companies need to operate has accelerated.they can choose between traditional 'brick s-and-mortar' companies. combined with the emergence of electronic intermediaries. little loyalty. switching costs are much lowe r.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The Balance of Power is Shifting to the Customer The Internet empowers customers .Forrester Research. G. Competition is Intensifying Although the Intern et removes the geographical constraints of reaching customers. or catalogues.internally and externally . the glob alisation of business. empowered customers. They can move from one supplier to another searchi ng for the best prices. it also removes t he geographical protection from competitors. This.in developing products. has resulted in a fierce compet itive environment. 22 Colony. with no time. to capture new opportunities.co m) 41 . and reorganise as appropri ate. quick evolution and all the power. constantly innovate.

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

it is transforming the competitive landscape and brand-building en vironment.THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.they are bu siness issues.. competition is inten sifying. 'Organising for e-Commerce' . many online companies are b lending together the products and services of a wide range of companies. The Internet is transforming every business to some degree. while making the offering hard to duplicate o ff-line. This pr ovides customers with added value. D.com CONTENT PARTNERS • Print Media • Broadcast • Online JOINT VENTURE PARTNERSHIP AFFILIATE PROGRAMME CUSTOMER CUSTOMER OUTSOURCING / TECH PARTNERS OFFLINE PRESENCE BACK OFFICE FRONT OFFICE • • • • Customer Services Creative Site Development Hosting CUSTOMER Source: Adapted from Freeland. while triggering the emergence of new brandbuilding strategies. As such.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4. 4. 43 .6 CONCLUSION The Internet and its strategic impact are not technological issues . Partnering with portals and affiliate web sites is important in driving traffic to a web site. New o pportunities for efficiency and co-ordination are emerging. & Stirton.dot.7 . April 2000 In an attempt to provide a rich customer experience. the pace of business is accelerating and power is shifting to the custo mer.a Boston Consulting Group (BCG) Analysis. This is the substance of the next chapter. S. Rapid and extensive partnering is also an effective way to achieve the first-mover advantage that can prove essential towards establishi ng a competitive advantage. tools and opportunities. G.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 .

Traditionall y. J. credit card numbers.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. and projects it onto a third party intermediary (the media).sites that provide a wealth of information and make comparison shopping easy. the Internet makes searc h and comparison much easier. etc. May 1999 (www. has placed greater importance on trust and sec urity. Customers derive added value through the provision of information on the products or services they buy. whereby the company can establish a dialogue and 24 Marathe. This chapter exp lores the new dynamics of brands and the critical importance of customer loyalty online.2 THE NEW DYNAMICS OF BRANDS Traditionally. brands were a substitute fo r information a way for consumers to simplify the time-consuming process of sear ch and comparison before deciding what to buy.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. as well as on top ics of interest related to the brand and product characteristics25. New strategies and tools for building brands on the Internet are identi fied. In addition. including the interactive approach to attracting customers and building lo yalty. brands have been developed in an environment whereby a company creates a bran d. 5. This threatens to undermine the value of brands. on th e other hand. and sites that understand the user's needs and preferences24.durlacher. people have concerns about sharin g personal information. However. 'Internet Portals' . Transactions on th e Internet require customers to provide detailed personal information . where the use r feels a part of. a ddresses.. they have never ha ndled or seen (except on-screen). The limitations of brand-building on the Internet are also discussed.names. man y unnamed customers develop a 'relationship' with the brand. O n the other hand. and the fact that customers are buying goods that. Generally.co m) 45 . the intangible nature of the Internet. The Internet.Durlacher Research. This highlights the surfacing of information and relationships as key sources o f added value in the Internet economy. the logic of the Internet cuts another way. in most cases. In response. in addition to providing added value. offers interactivity. People only tend to transact with sites they know and trust .

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

com and www. 27 'Electronic Business Outlook'. For exa mple.word-of-mouth is the single most effective and economical way online businesses grow their sites . 75% of senior executives believe the success of a n e-business initiative depends entirely on its ability to build customer loyalt y. T. These points stress the importance of online customer loyalty. March 17. companies must ensure that they provide a completely sa tisfying end-to-end customer experience. 'How to Acquire Customers on the Web'. and to recover their investment. unless they are selling high-price.due to more freq uent shopping and larger purchases. 2000 (www. Rastogi. it is very unlikely that an online retailer can break even on a one-time shopper. and some are spending ov er $50029. .A Mainspring Communication Repor t in collaboration with Bain & Co. Baveja. (2000) which identified the following factors28: Companies will not break-even on one-time shoppers . Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer. This view is reinforced by in-depth studies carried out by Bain & Co.bain..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.Research by PricewaterhouseCoopers / The Confer ence Board. Repeat customers refer more people and bring in more business . Chu. as cited in 'Creating a High-I mpact Digital Customer Experience' .. S. & Hancock.pwcglobal. 1999 (www.. MayJune 2000 30 A Forrester Research Study. This is further reinforced by the fact that. it could be argued that customer loyalty is even more critical onlin e. Harvard Business Re view.often. a disgruntled online customer tells 10 people about a poor exp erience30. S. L. R.. Kearney White Paper.com) 29 Hoffman. 2000 47 . high-margin items.. D. Repeat purchasing not only binds trust. 'The Value of Online Customer Loyalty and How You Can Capture it'. companies need to retain custo mers so that they return to the site repeatedly. Therefore. and Novak. .. J. on average. Repeat purchasers spend more and generate larger transactions . C.. T.. D. In fact. almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. P. customer acquisition costs are high.org) 28 Rigby.converence-board. and with customer s holding all the power. Zook. but also provid es more opportunities for cross-selling.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27. Loyal customers are more willing to buy other products from the company.An A.

Even more i mportant. 1989. R.4 INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE Economists have traditionally taught that businesses grow to the point where ret urns to scale diminish. pp. and other feat ures can be added or changed at low marginal cost. Similarly.TH E NETWORK EFFECT 2 PARTICIPANTS 1 POSSIBLE INTERACTION 3 PARTICIPANTS 3 POSSIBLE INTERACTIONS 4 PARTICIPANTS 6 POSSIBLE INTERACTIONS 6 PARTICIPANTS 15 POSSIBLE INTERACTIONS 8 PARTICIPANTS 28 POSSIBLE INTERACTIONS THE NETWORK EFFECT = N(N-1)/2 31 where N is the number of users Lipsey. increases disproportionatel y as more people join the network. as the benefits of scale are overwhelmed by the disadvan tages of size31.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5. 'Positive Economics'.1. As a resu lt. each additional unit sold does not cost more than the last to deliver. G. the costs approach zero32. additional custome rs and transactions can be managed with limited fixed cost investment. customisation for individual customers. businesses and online communities that rely on connectivity can enjoy 'network effects'. 180-182 48 .1 . (also referred to as 'viral economics'). Once the up-fron t investments are made (for research and development and technology infrastructu re). However. as illustrated in Figure 5. additional products. where the value of t he network.. FIGURE 5. 7th Ed. (London: Harper & Row). this is not the case on the Internet.. and the value that each member realises. and i n the case of information-based products.

THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service. its abi lity to track customer preferences and customise offerings improves. delive ring increased margin per customer .2 .Figure 5.A Shop. R. As the co mpany builds a customer base and develops a relationship with customers.2. direct marketing. It also allows online companies to tap supplementar y revenue streams.A Publicatio n by Andersen Consulting 'The State of Online Retailing' . Nov 1998 49 . being first into a market makes it easier to capture the consumer's share of mind. Outlook 1999. With no competitors around.. This makes it more efficient in improving product selection. cro ss-selling and up-selling33. No.BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for business es that establish leadership positions. link revenues 32 33 Melnicoff. enhancing t he interaction. including direct marketing. advertising and referrals. '5 Rules of the eEconomy'. 21 . M. DEFENSIBLE MODEL LONG-TERM COMPETITIVE ADVANTAGES INCREASED RICHNESS & REACH OF CUSTOMER RELATIONSHIPS • Brand experience • Customer loyalty / high switching costs • Sourcing and distributi on leverage from scale • Learning curve effects ENHANCED REVENUE STREAMS • Broad and deep customer insight • Personalisation and customisation offerings • Enha nced selection • Comprehensive convenience • Core transactional revenue cross-sell and up-sell • New items / categories • Supplem ental revenue advertising.org Study in c ollaboration with The Boston Consulting Group. fulfilment • Defensib le advantage against competitors SCALEABLE. FIGURE 5.

unles s the leader makes a serious mistake. When a company reaches 'critical mass'. New marketing strategies. These factors help to understand why many online companies are spe nding aggressively (up to 65% of their revenue34) on marketing and site developm ent to acquire customers and build critical mass.A Shop. commerce and distribution par tners. its growth curve relative to a new entrant is somewha t daunting. Nov 1998 50 . An expanding customer bas e enables retailers to amortise the cost of brand-building over a larger base. in turn. As a result. as it carries the implied endorsement from a friend. This. larger sites can leverage more customer advocates to reduce customer acquisition costs. with a minimal budget and maximum effect. web sites.org Study in collaboration with The Bos ton Consulting Group. The Internet. 34 'The State of Online Retailing' . 5. It is often re ferred to as "word-of-mouth".BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. Larger sites can also negotiate better supplier discounts or product placement fees. as once a strong lead is established. makes communication tighter.5 VIRAL MARKETING Viral Marketing is a marketing technique that induces web sites or users to pass on a marketing message to other sites or users. As a result. This snowbal l effect favours first-movers. viral marketing is an effective tool in getting a message out fast. and "ne twork marketing". l eading to the exponential expansion of the customer base. have emerged in attempts to exploit the network effect an d potential exponential growth of the customer base. provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. with its e-mail lists. "creating a buzz". G iven the connectivity of the Internet among customers. such as 'viral' marketing. the larger customer base provides online companies with more levera ge in attracting and negotiating with key content. chat rooms and bulletin boards. By the time a company has reached critical mass. and the cost of switching to an alternative brand becomes quite high. Word-of-mouth is a particularly powerful medium. creating a potentially exponent ial growth (like a virus) in the message's visibility and effect. This is the logic behind some of the extraordinary valuations of Intern et companies. the leader will pick up momentum and will stand to gain an insurmountable advantage . and word-of -mouth even more effective. or until a competitor finds a way to chang e the game again. the brand begins to ta ke hold. the value of the company rises exponentially with marke t share. "leveraging the media".

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

maki ng customers 'click off' to another site. March 17. 'The Value of Online Customer Loyalty and How You Can Capture it'.An A . 30% of potential customers le ave sites because they cannot find what they are looking for. and 66% of people who start a 'shopping basket' fail to complete the transaction37. D. & Hancock. Price.com) 52 .. 2000 'The E-business Technology Forecast' ... .6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5. As 35 36 'Creating a High-Impact Digital Customer Experience' . R. Rastogi. Chu. Kearney White Paper. the 7Cs are a c ontinuation and restatement of marketing's traditional 4Ps (Product..3). S.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.A PricewaterhouseCoopers Report .THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' . Prom otion. J. 2000 Convenience Convenience goes beyond the ability to conduct transactions around t he clock. Zook.A Mainsprin g Communication Report in collaboration with Bain & Co..3 . S. 2000 (www.. The customers' ability to access and display information rapidly is ex tremely important36. In fact. In essence. Kearney White Pa per. Sites that are difficult to use can cause frustration. T. 2000 37 Rigby. FIGURE 5. C. T.An A. Place).. Baveja.bai n.

ease-of-navigation. 1999 (www. com) Davenport. CIO Magazine. FIGURE 5. T. and fast response times ar e among the most important factors in establishing web brand loyalty38. February 2000 Issue 53 .businessweek.businessweek.FACTORS AFFECTING WEB BRAND LOYALTY KEYS TO WEB BRAND LO YALTY 40% 30% 20% 10% 0% Ease of Use & Navigation Fast Response Time Familiarity Relevant & Accurate Info rmation 37% 36% 36% 27% KILLERS O F WEB BRAND LO YALTY 40% 30% 20% 10% 0% Outdated Information Slow Site Downtime Response Time Poor Customer Service 26% 24% 22% 16% Source: Cognitiative Inc. expert insights. and a wide range of products.BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.4.4 . online companies have the opportunity to provide rich. which can enhance the c ompany's value proposition. 38 39 Cognitiative Inc. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. 'Sticky Business'. as cited in Business Week. 29th October 1999 (www. as cited in Business Week Magazine..com) Content Content is relevant and useful information directed at the needs and int erests of the targeted users. October 29. whereas a slow response time and site downtime will have a significant negative impact. up-to-date inf ormation. ease-of-use. With almost infinite display space and inventory c apability.

which is facilitated by a combination of fa ctors (Figure 5. and organise live events.Sloan Management Review. which enhances the user's online experience. Customisation Customisation involves tailoring the presentation of a web-sit e to individuals. or prior transacti ons. 54 .The McKinsey Quarterly.BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase deci sion. Community Online communities are emerging as new gathering p laces for consumers with similar interests (e. 1999 (www. 40 41 Morrisette. K.. and nearly 2 0% use it for post-sales support. It fosters a sen se of belonging41 among the members.5). and advertising (if it is relevant and usefu l).. G. Other content in cludes community-generated content. J. Clemmer.A Forrester Research Report. 'Real Profits from Virtual Communities' . & Bluestein. Spring 2000 42 Armstrong. as well as through loyalty programmes that provide targeted benefits.forrester. iVillage and Geocities).. 1995. 3. use bulletin boards. S. based on profile information. So me companies have taken this a step further and customise the product or service on offer (Dell offers 'made-to-order' computers through Dell Online). These sites allow members to interact with one another. demographics. share information and access a wide range of services. Online sites can track a customer's purchase history and modify its service accordingly. Good content can help to educate buyers and se llers and create a greater sense of control over the transaction. Members can i nteract in chat rooms.g. An online commun ity offers a compelling way to entice customers back to a site. 31% of online consumers use the Interne t for obtaining product information. A. sites allow 'surfers' to customise their experience by choo sing what type of information they view through personalised sites (such as My Y ahoo!). & Hagel. No. even if they purchase offline. it needs a critical mass of members 42. On the other h and. According to Forrester Research40.. . Customisa tion creates the feeling of a one-to-one relationship. Often. W. 'Building Stronger Brands through Online Com munities' .com) McWilliam. An important contribution of these communities is that they provide members with a medium to communicate with each other. visitors should not be engulfed with too much information. A unique c haracteristic of an online community is that the site includes both editorial co ntent (determined by the site owner) and member driven content.. For a community to work.

'Making Real Sense of Virt ual Communities' . allowing custome rs to deepen their experience with a brand and build more personal connection. 44 Searc h engines / portals enable users to find information based on relevancy to a que ry or keywords.THE COMMUNITY HEXAGON PRECISELY TAILORED CONTENT MUTUAL BENEFITS OF PARTICIPATION IDENTIFICATION WITH THE BRAND SENSE OF BELONGING OPPORTUNITY TO SHAPE THE DEVELOPMENT OF WEBSITE AWARENESS OF OTHER LIKE-MINDED U SERS ABILITY TO INTERACT WITH OTHERS ON WEBSITE Source: Mole. S. Connectivity is enhanced by linking to sea rch engines / portals44 and popular sites where target customers are likely to b e browsing (see Figure 5. 'Consumers and Their Brands: Developing Relationship Theory in Con sumer Research'. Mulcahy.com) directly into the browser and access the site imm ediately. A. 43 Fournier. M. C. when membership in the brand's community become s an end in itself43. they opt to input the URL (Internet address . This is similar to placing offline stores in high t raffic areas. Journal of Consumer Research. 343-373.6).. 1999 Communities enhance the speed and value of information sharing. Site-tosite connectivity focuses on c onnecting users to other relevant sites.. as well as attracting traffic from other sites.A PricewaterhouseCoopers Study. Companies can provide a selection of re lated links that complement the site's purpose and value proposition.www..5 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. pp.. Connectivity Connectivity is concerned with site-to-site c onnectivity and user-to-site connectivity.brand-name. O'Donnell & Gupta. 55 . Once customers know of a site. March 1998. a nd can create emotional loyalty.

Other tools such as bookmarking the page can also faci litate connectivity. as well as features such as gift-wrapping. and can be provided through e-mail. Customers share secur ity and privacy concerns. which provide targeted a nd unique (customised) benefits to the customer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. customer support at all stages of the interaction is important. and online surveys. Communication can be tailored to speci fic user interests and should allow for two-way interaction. (www. as well as informing and reminding customers of special offers.marketwatch. online chat. Therefore. events and subjects of interest to the custom er. customer ca re activities can involve providing a variety of payment. 45 MarketWatch. news up-dates.6 . In addition. activities. The development of loyalty programmes. toll-free telephone numbers. and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe.com) 56 . Communication The Internet provides the opportunity to establish dialogue with customers throu gh e-mail. serves this purpose and helps t o build customer loyalty. delivery and return op tions.CUSTOMER ACCESS TO INFORMATION CUSTOMER INTERNET ACCESS DEVICE SOFTWARE AND BROWSER PORTAL VERTICAL PORTAL WEBSITE CUSTOMER SIDE INTERNET SIDE User-to-site connectivity focuses on providing incentives for users to connect b ack to the site. Customer Care Online customers often require assistance and reassurance. live chat. It is important in building relationships. and FA Q pages (Frequently Asked Questions) to solve problems.

' Marketing to the Digital Consumer'. The mechanisms to communicate ran ge from traditional media (TV.7 .2. modified to take into a ccount of the interactive dynamics of the Internet. Evaluation. 180-183 (www. Adoption).8. This is mo re difficult online than offline.. which i s basically a reformulation of the Innovation-Adoption Model (Chapter 3. Interest. billboards. A.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5. e-mail notifications and banner advertisements.. No. 57 M UM NS K CO A C RE B SU M E O E AK C T RE ER N AI S' LE AR LE A RN A PR BO EU FE T C RE O NC NSU ES ME N RS ' . S. Waitman.4 .mckinseyquarterly. Learn and Relate. This model consists of five stages . Trial. Engage. Newspapers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.) to onlin e tools. & Zeisser.. visibility relies solely on Communication. Retain. Therefo re. McQuade. McKinsey Quarterly.Attract. R. links from director y searches (Connectivity). Magazines. The company must build awa reness and communicate its value proposition to its target customers.THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski. The p opularity and effectiveness of the different promotion methods are outlined in F igure 5. etc. pp.7. because there is no physical presence. Figure 3. 1996. including affiliate programmes with other websites.com) Attract The critical first step of the digital customer experience is to attract 'eyebal ls'. FIGURE 5. and bring people to the site for the first time.Awareness. M..

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2 4. multiplied by the expected rate of transactions.3 Source: Forrester Research.WEBSITE PROMOTION METHODS .ebusinessforum. public relat ions and television advertising.4 3. Fig.5) 2. 3.4 4.POPULARITY & EFFECTIVENESS Method Banne rs E-mails to Customers Buttons Public Relations Magazines Sponsorships Newspape rs Radio Direct Mail Television E-mail to opt-in lists Outdoor Affiliate Program mes Popularity 89 % 77 % 55 % 45 % 34 % 34 % 32 % 32 % 30 % 30 % 23 % 17 % 17 % Effectiveness (Scored 0 . The key factors at this stage are Convenience combined with interesting Content. Compa nies then need to engage customers to obtain their interest and participation. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction. discounted over the expected duration of the brand-customer re lationship.6 3.com) The most effective methods are direct e-mail.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5. Attracting customers is only the first step in building online brands. Online companies must ensure that the cost of a ttracting and acquiring customers is lower than the average lifetime value of th ese customers (LVC)46.1 3.8 4. Creativity is also an important factor in gaining attention in today's cluttered marketpla ce.8 . it is important to quick ly engage consumers' interest before they move on.7 4.3 3. 3.0 3.3 2. Engage With the multitude of choice available on the Internet. 58 .3) is useful to ens ure that a company develops a distinct and consistent brand identity.5 3. as cited in 'Targeting Consumers via the Internet' Economist Intelligence Unit 2000 (www.4 3. affiliate programmes. Kapferer's Brand Prism (Ch.

a company can create value by providing a personalised onl ine experience. and forge closer relationships than any offlin e operator. Learn The Internet provides extensive opportunities to learn about consumers (demograp hics.g. Building up a knowledge database on ea ch customer . The objective is to increase the conversion rate (% of browsers convert ed into buyers). Communities and Customisation are other sticky applications.8 LIMITATIONS OF BRAND-BUILDING ON THE INTERNET It would be unrealistic not to acknowledge some of the limitations to what the I nternet can offer the brand-building process: • The Internet does not have the pen etration of other promotional mediums (e. and what additional product s and services are they interested in provides companies with valuable informati on which. do not lend themselv es to a need for customers to build a relationship with the brand (Figure 5. such as groceries and convenience goods.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. TV. • The Internet supports br and-building activities where there is a need to build a relationship. attitudes and behaviour). The initial site registration provides an early opportunity to obtain useful information. if used properly. 59 . can create value for the customer and help build the brand-customer relationship. Relate By leveraging the multidimensional data gathered from ongoing interactions with individual customers. 5. and must be continuously updated due to the multiple visit nature of cu stomers.who they are and why they shop online. Radio). Customisation and good Customer Care help to erect switching bar riers and encourages customers to return and repeat the cycle. This helps to create a customer base that spends more time and m oney at a site. and retaining customers and engaging them on an ongoing basis r esults in increased product purchase opportunities and provides the opportunity to learn more about the customer.9). It is the e xtension of engaging and focuses on keeping a customer on the site through the u se of sticky applications. Certain p roduct categories. Content is the basic driver of retaining customers on a site.

it is not economically feasible to sell certain products.. R. In order to create "apostles".mckinsey quarterly..com) • Not all product categories have a strong fit with interactive media as they stil l need real life interaction. the interaction provides the ability for companies to learn from their customers and relate.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.. due to high delivery and transaction costs (relative to the value of the product). M. The 7Cs Framework outlines the key compo nents of the brand experience and the sources of added value. 'Marketing to the Digital Consumer'. engaging and retaining customers. pp.CATEGORIES SUITABLE FOR INTERACTIVE MARKETING HIGH FIT WITH INTERACTIVE MEDIA NEWS SOFTWARE SELECTED GROCERIES INSURANCE MUSIC BOOKS INTERACTIVE GAMES REAL ES TATE BROKERAGE TRAVEL SERVICES FINANCIAL SERVICES SPORTING GOODS TOYS WHITE GOODS HIGH-END APPAREL FINE JEWELLRY AUTOS MEDICAL SERVICES CONSUMER ELECTRONICS BABY PRODUCTS CONVENIENCE STORES GASOLINE LOW LOW POTENTIAL FOR RELATIONSHIP BUILDING HIGH Source: Kierzkowski.9 CONCLUSION On the Internet. Waitman. No. A. The interactive br and-building process involves attracting. McKinsey Quarterly. smell). and as the relationship develops. McQuade. • Brand-building favours products that can be sold online. 5.from the promi ses made in the value proposition.2. com panies must provide a satisfying end-to-end customer experience .. to its delivery to the customer. These case st udies provide a practical insight into how companies are building their online b rands. providing further added value. Given the hi gh acquisition costs of online customers. 180-183 (www. touch. the experience is the brand. The ne xt chapter analyses the brand-building efforts of seven companies. 1996. 60 . and the need to stimulate the other senses (taste. & Zeisser. especially in small quantities. it is critical for companies to build relationships and foster brand loyalty. S. However .9 .

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61 .

In addi tion. more information. In July 1995. Ge rmany and Japan49.2. and higher levels of cu stomisation and service than the traditional shopping experience allows.com launched with a mission to use the I nternet to transform book buying into a fast. com bined with its levels of customisation and customer service.economist. Amazon has cultivated a reputation for excellence.com has since evolved from being an online bookseller into a one-stop shop with "Earth's Biggest SelectionTM" of more than 18 million products. and one of the top two or three in Britain.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. a company overview. Figure 6.1 Company Overview Amazon. N ot a River' . November 11. CDnow.com's success stems from its compelling value proposition. 'Amazon.com. and enjoyable experience. innovation and deliveri ng on its promises. Am azon.It's an Ocean. Bar nesandnoble.com . 47 48 Interbrand (www.com has become synonymous with e-commerce.com. and is one of the few Internet brands that is recognised all over the world. It is the 57th most valuable bran d in the world47. February 26. d iscounted prices. and other key factors that have contributed to its success ( or failure).com. it is the most visited e-com merce website in America. The cases are presented in the following sequence .interbrand. greater convenience. 2000 (www. and has equity investments in several e-ta ilers.1 outlines Amazon's timeline and major milestones.com and Yahoo!. eBay. the source s of added value (using the 7Cs Framework). Amazon has been abl e to differentiate itself from other online competitors. Each case is presented in the same format including.Amazon. 6. and has sales of over $2 billion.2 Value Proposition Amazon. Amazon. Gap. easy. its value proposition.see Appendix A. France. Boo.2. Through its provision of a one-stop shopping experience.com) 62 .COM 6.1 INTRODUCTION This chapter provides an analysis of seven companies. Amazon serves over 23 million customers from 160 countr ies. including: increased selection.The Economist. Amazon provide s increased added value on several dimensions. ranging fro m books and music to auctions and zShops (a portal / marketplace that online sel lers can use to sell their products).2 CASE STUDY: AMAZON.com) . and the most widely recognised e-commerce brand name in the US (with 60% awareness48). 1999 49 'Amazon's Amazing Ambit ion' . 6. In addition.Goldman Sachs Report. its brand-building strategy (how it generates traffic).

Amazon.com Amazon launches online Auction sit e Amazon agrees to purchase Live/bid.com .com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.Amazon enters into a strategic partn ership with Drugstore. West Virginia.toolcrib.Amazon and online car-buying service Greenlight.TIMELINE AND MAJOR MILESTONES Amazon.com Amazon announces further plans to expan d distribution network to meet rapid growth.Am azon launches lawn & patio store .Amazon opens a customer service centre in Huntington.Amazon enters strategic alliance with living.sothebys.com Anywhere.com Kids goes online Amazon acquires Bookpages and Telebook to expand in the UK Ama zon opens Music Store Amazon establishes relationship with Intuit's personal fin ance website and select desktop software. Software.com Amazon acquires Back to Ba sics Toys to add to Amazon.com .Amazon surpasses 20 million cumulative customer accounts . and minority investment in. Amazon opens another customer-service centre to meet rapid growth Ama zon launches 4 new stores: Home Improvement. Ashford. Video Games and Gift Idea s Amazon and Sotheby's launch www.com to create a "home living" store at amazon.Amazon and eziba.com via the ne w wireless pocket PC . to meet r apid growth .com.Amazon.com Announce Strat egic Investment and Promotional Agreement .Amazon launches new kitchen store .000 members Amazon.Amazon launches www. Company has a market capitalisation of $561 million Amazon enters into agreement with Yahoo! Amazon becomes exclusive b ookseller for Excite Amazon becomes exclusive bookseller on Prodigy shopping Net work Amazon becomes exclusive bookseller on Alta Vista Amazon and Netscape annou nce strategic online deal Amazon opens second distribution centre Amazon and Geo cities strike exclusive bookseller agreement Amazon completes $74 million credit facility Amazon Associates Member Programme surpasses 30.com . a tools and equipment store for professional tool users and woodworkers . such as the Palm VII organiser.com Amazon invests in Pets.Amazon.com goes live Amazon launches Associa te Programme Amazon IPOs for $49million.Amazon launches health and beauty store .com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with. Amazon buys PlanetAll ad Junglee Corpo ration Amazon and Yahoo! Strike Global Merchant Agreement Amazon." providing shopping from wireless devices.com and NextCard launch co-branded .com enters Euro pean book market Microsoft signs Amazon.Amazon opens customer service centre in The Hague .c om Toys & Games is launched Amazon announces strategic alliance and invests in G ear. and more Amazon launches "Amazo n.com's new shopping referral s ervice Amazon opens third distribution centre to meet rapid growth Amazon invest s in DrugStore.com Amazon introduces "Purchase CirclesTM".com is founded by Jeff Bezos Amazon.amazon.Ama zon announces investment in kozmo.com Auctions and zShops prov ide new tools to its merchant community .1 1994 1995 1996 1997 July July July May July September October November December 1998 February March May June July August September October November December 199 9 January February March April May July August October November December AMAZON.com .com invests in wineshopper. provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.Ama zon.amazon.Customers can shop at Amazon.com Electronics and Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.co m.COM .com announce investment and strategic alliance . universities. workplaces. featuring thousands of bestselle r lists for hometowns.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May .

com 63 .credit card .com opens its virtual doors at a mazon.New home living store from living.

2. logically structured. mobile phones.The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping. The site is easy-to-use. Amazon has added other features for shopping convenience. Palm VII PDA device). gift reminders. FIGURE 6.1.com All Product search (searches the entire web).COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customis ation of product offering Simple. and quick-to-load pages Over time. Customer purchase circles allow shoppers to cross-reference similarities such as where people work . such as the Amazon. offer ing multiple paths to a given book or product. discussion boards. gift click. interviews with authors. downloads quickly and services visitors adequately . Content Amazon provides content on several levels. expert reviews. encourage repeat visits and drive higher conversion rates.com Anywhere to sup port access from wireless devices (i.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.OVERVIEW OF AMAZON. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traff ic. and Amazon. the 1-ClickTM express checkout. live or study.1 .e.3 Sources of Value . recommendations. This is an example of 64 . wish lists. and customer Purchase CirclesTM. easy-to-use. book su mmaries. customer testimonials.Figure 6. including book jacket images.

Amazon's content is not reproducible by competition.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. All these activities exploit the communications capability of the web and e-mail to offer greater cus tomer 'touch' and better customer service. Amazon creat es one-to-one relationships with its customers.com Discussion Boa rds to further enhancing the community feel by allowing customers to share infor mation on topics of interest. and has developed an Associates Programme. a nd Customisation Amazon provides customised features and services.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Amazon's ability to data mine its vast customer base of information to learn and relate by making recommendations and presenting items on the web page that have a high probability of being of interest to particular customers .2.4. Community Amazon has also added a community element to the purchasing process. to the proactive notification of new items of interest. real-time shipping and backorder notices. In doing so. and customer interaction. These are discussed in more detail in Section 6. which helps to build loyalty and create switching costs. from the customer recognition at the point of interface (Figure 6. linking it to a large number of other sites. and ingenio usly turned booklovers' predilections into a source of differentiation by solici ting and posting readers' comments with book displays. converti ng them into a storefront for Amazon. Amazon introduced Amazon.thereby incre asing conversion rates. from its shopping basket applications which lists the estimated time to deli very reliably. By leveragin g its vast customer base. creates a competitive advantage. Connectivity Amazon has built relationships with high traffic web portals and sites. therefore. while driving up repeat purchases and cross-selling opp ortunities. This builds the loyalty o f both the customers who write reviews and the customers who find community amon g like-minded people. 65 . More recently. This customer-centricity is evident in all Amazon's activiti es. Customer Care Amazon places great emphasis on satisfying customers and providing high levels o f customer service.

Amazon offered Associates referral fees of up to 15%. and by 1999 it had over 200. In July 1996. E yes and Editors. The Associates Programme has been phenomenally successful.com hot-link and offer specific books of interest to their visitors. 66 . New Yorker and The Economist. enticing them to return to the site and purchase repeatedly. Instead of paying directly for this exposure.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. As a result of all these factor s (7Cs).000 by August 2000. Amazon has been able to create a strong value proposition and compellin g online experience that engages and retains customers. help maintain contact and build traffic by e-mailing customers when desired products or books become available.2.2). the y are subsequently confirmed by e-mail. In addition. The Financial Times. and not subseque nt purchases. Once orders are placed. which only applied to sales that resulted from the initial click-through. it began to advertise in print media and online . and customers are also e-mailed when the items are shipped from the warehouse. Amazon had primarily relied on word-of-mouth among tightly knit online communi ties (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibil ity. two personalised services. Through the first half of 1996 . In the second half of 1996. Newswe ek. helped generate publicity and stories about the company in publicat ions such as The Wall Street Journal. Business Week.000 members. Amazon inaugurated the Associate s Programme under which other websites could display the Amazon. 6. increasi ng to over 500.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. attract ing member sites of all sizes.a move that along with the novelty of its business model and the newness of t he Internet. This enabled Amazon to reac h more customer segments and niches (Figure 6.

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

buying patterns and viewing habits. Amazon's expansion into new e-tailing categories and non-e-tailing busi nesses (auctions and zShops) have significantly increased product availability w hile leveraging the site's enormous customer traffic to create additional revenu e streams. "we had a world-class site the day we launched . howeve r. Amazon has been able to achieve average customer acquisitio n costs of less than $20 . newspapers) to generate awareness.Forbes. which is analysed (learning) and used t o provide value-added services such as the introduction of new product categorie s. Amazon has also incorporated traditional offl ine media (TV. Once customers are attracted to the site. 'Does Amazon. C. have been instrumental in e ngaging and retaining customers' on the site and driving higher conversion rates . This has also helped to generate incremental traffic at no cost to Am azon's existing businesses. Amazon is building customer loyalty and encouraging repeat business. April 6. Accordi ng to Jeff Bezos. Purchase CirclesTM). Amazon's proven online merchandise selling techniques including easy-to-use search options. As the relationship develops. 50 Willis. Amazon maintains a database of customer preferen ces.com Really Matter?' . And we relied on word-of-mouth to bu ild awareness. community feel (as discussed previously). 1998 68 . and improved customisation and recommendations (e.but it was on ly a tenth as good as the site we have now. with the explosion of websites.g. resulting in increased sales for existing e-tailing sectors and therefore 'monetising' their customer base.. With this combination of promotional methods. so we didn't have to do much advertising. interestin g content. Magazines. billboards.BUILDING SUCCESSFUL BRANDS ON THE INTERNET The majority of customers continue to be attracted through word-of-mouth. clear presentation. This strategy has create d an efficient traffic-generating machine by creating virtual loops of traffic s o that Amazon is top of mind when customers go online. By relating to customer needs. which accounts for 66% of Amazon's sales.significantly lower than other online companies. That's not possible any more50".

Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. July 1998. and its safe and secure delivery. This has helped them attract customers and move up th e learning curve quickly. We were blessed with a two -year head start. 1999 69 .2. due to the hype and coverage it was given. As such. Our secret is that we have not been competitor obsessed. Amazon is constantly seeking new ways of improving its offering. Saunders. For example. According to Jeff Bezos. memorable. In addition..BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. establishing Amazon as the leading online bookseller w ith a large customer base. to capture the spirit of the site. "Online. management r ealised that Amazon had become more associated with other core brand values . Distinct Brand Identity Jeff Bezos chose the name 'Amazon'. In addition. (Oxford: Capstone Publishing).com Way'. and acc ording to Jeff Bezos. 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Co mpany Even Turned a Profit'. Ama zon has been successful in stretching its brand to include new categories and no n-e-tailing businesses. Amazon's understanding of its brand identity has b een a critical factor. However.. the balance of power shifts away from the company and goes t owards the customer. Amazon was able to secure partnerships a nd alliances with key players. further enhancing their value proposition. Nevert heless. developing cust omer service centres and expanding its distribution network to support high leve ls of service. and to convey its vast size and offering. thereby diluting the value of its association with books. he wanted the name to start with an 'A' so that it would appear at th e top of search engine lists. establishing a reputation for excellence and fulfilment. Success. and our goal is to increase that gap51". Amazon received criticism for expanding its product line. We have been customer obsessed. 'Business the Ama zon. because he wanted it to be short.a wide range of choice. which within six months propelled Amazon to one of the leading online music re tailers. Amazon unveiled a music store .com obsesse d52". As such. while our competitors have been Amazon.5 Other Factors that Contribute to their Brand Leadership Innovation & First -Mover Advantage As an early-mover on the Internet and a first-mover in online bookselling. According to J eff Bezos. 51 52 Hazleton. in June 1998. Amazon continually invests in re-working and improving its techno logy infrastructure and software (80% in backoffice operations). "we're not a stationary target. L. Amazo n has been able to build a strong brand at relatively low cost. R. good value.

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

Acquires equity stake in M ightwords .3.com announces strategic relationship with Palm Comput ing .com was able to 'hit the ground running'.3 CASE STUDY: BARNESANDNOBLE.Acquir es minority stake in NotHarvard. Inc. etc.Launches Internet Radio . promotion) between the online store and the retail stores have been kept separate. and is the secon d largest online bookseller (after Amazon.Offers same day delivery in Manhatten .. and 470 B.Barnes & Noble University opens registration for free online courses . Dalto n bookstores (located in shopping malls).co m provides other online categories offering software. TABLE 6.com). Currently.) established by its p arent company.TIMELINE AND MAJOR MILESTONES .com is approximately 40% owned by Barnes & Noble.Barnes & Noble.COM 6.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. rare. is one of the best known traditional booksellers in the United States.2.com Launches Music Store Announces plans to develop huge distribution cen tre Launches Prints & Posters Gallery and electronic greeting card service Unvei ls 'bn. including software store Launches Business Solutions programme Sells 50% stak e to Bertelsmann for $200 million Adds used.barnesandnoble. However. Barnesandnoble. music.Barnesandnoble. Barnesand noble. Barnes & Noble Inc. and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas).Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped sit e.Lau nches Video Store 71 .com) . book databases.Barnes & Noble went online at AOL May .2 1997 January BARNESANDNOBLE. and out-of-print books to inv entory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com . prints & posters and related products.com launched its website (www. and 20% owned by the public.com is the fourth largest e-commerce retailer54.Announces distri bution relationship with New York Times September .com on the Go' to provide access to wireless devices 1998 March May July October 1999 May July August October December 2000 January February May June July . contacts. Besides books. all front-end operations (mar keting.Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March .com and Microsoft announce that they will create an eBook super store . 40% owned by Bertelsmann AG. Barnes & Noble Inc. Barnesandnoble. magazines.Launches BNTV . Launched in 1997.com's timeline and major milestones is outlined in Figure 6.Launches Affiliate Network D ecember .1 Company Overview Barnesandnoble. as it could capitalise on the infrastructure and backend operations (warehouses. Barnesandnoble.Bar nesandnoble.COM .

com's and takes a bit longer to download. however.3. etc.bn.com's (Figure 6. they offer cu stomers fast delivery.com) 72 . the features are practically identical. and easy-to-navigate site Categories focus on book s.com's virtual storefront is graphically richer than Amazon. as well as an extended searchable catalogue of milli ons of out-of-print.The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 Sources of Value . FIGURE 6. 6. rich editorial con tent and a community experience. including title. In addition.com's website (www.3. Both offer detailed bibliographic information.OVERVIEW OF BARNESANDNOBLE.3 . previously-owned and rare books. in terms of the 7Cs framework. author.com let c ustomers sign up to receive email reviews and announcements of new titles. but instead of developing an outsta nding interface to its inventory. software.barnesandnoble.com offers customers an easy-to-search catalogue of virtually eve ry book currently in print. easy and secure ordering. the company created a site very similar to Ama zon. Barnes & No ble planned to dominate online book-selling. logically structured.3).com and barnesandnoble.com o r www.COM'S WEBSITE Simple. music New Initiatives Barnesandnoble. Both have expanded their convenience to offer 54 Media Metrix. good prices. publ isher. Both Amazon. as cited on Barnesandnoble. edition.2 Value Proposition Barnesandnoble.

However. however. De cember 17.3.com has run extensive and effective online advertising and has us ed the full range of traditional media to build awareness and encourage trial.com was valued at $21. As of February 2000.64 billion. Both try to foster a community of readers by letting customers post reviews online. Barnesandnoble.000 affiliates in its referral network. prevent canniba lisation of its existing business. this decision to keep the relationship with the bricks -and-mortar stores at arm's length has had major repercussions. 1997 Internet and mail order companies are only required to collect s ales taxes in states or localities where they have a physical presence such as a store or a warehouse 73 . T hey have also signed exclusive and non-exclusive book-selling deals with major w ebsites including AOL (fouryear deal costing $40 million55). Both offer 'associate programmes' that let other websites link to their sites. compared to Amazon. reasons for this are explained in the next section. and both are expanding globally. Barnesandnoble.a replica of Amazon's Associates Programme. Barnes andnoble. while Amazon.com closed 1999 with 4 million cu stomers. Although. Both offer customisation that permits users to personalise the experience. Webcrawler. the larges t US bookseller has rigorously kept its 40% owned net operations separate in an attempt to tap into the investor frenzy for pure online players.BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. while Amazon.4 Brand-Building Strategy Barnesandnoble. Lycos.com's market capitalisation wa s $251 million. and Barnes & No ble Inc. Instead. and avoid charging sales tax in states where it has stores56. Barnesandnoble.com in return for a commission on any purchases that they originated . it lags behind first-mover Amazon. Netscape and Microsoft Network.com has created a high quality website and customer experience. has yet to leverage its strong brand in cyberspace.com.com's 1999 revenue s were $202.The Wall Street Journal. The 6. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' . and have formed strategic partnerships with ten of the top twenty websi tes (others include ZDnet and CNN).6 million. They have developed an affiliate programme that links si tes to Barnesandnoble.1 billion. th is programme had more than 300. Yahoo!.com's $1. These ini tiatives have generated traffic to the site.com had over 17 million. there is little mention of the online store in the traditional 'bricks-and-mortar' stores.

The se include: • More effort is being focused on bringing the retailers in sync with barnesandnoble.com created a new cross-marketing genre in Febru ary 2000. or deliver books directly from the retailers. in-store displays.com has begun to acknowledge some of these mistakes. By failing to lever age it.com's key differentiator from Amazon. Under the seven separate agreements. Jcrew. • In ad dition.com has changed its name to Barnes & Noble. LLbean.com. 74 . in the attempt to gain traction and build momentum.com offers links to each pa rtner's site and a discount for visitors who click-through. and leverage its real-world presence..com. and Intern et terminals in the bookstores. This b roke new ground in web-marketing relationships as no money is exchanged and no t hird party entity is involved.com has introduced new innovative features such as Barnes & Noble Television (a web broadcast initiative that provides content and shoppi ng via the Internet). 1-800Flowers. as Be rtelsmann's book division includes partners such as Random House.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Barnesandnoble. • Barnesandnoble. Barnesandnoble. • Barnesandnoble. Barnesandnoble. Barnesandnoble.com. In return. and its BMG En tertainment division includes music giants Arista Records and RCA Records.com.com. prov ides access to valuable resources.com should have aggressivel y cross-promoted their stores through advertising. when it struck reciprocal marketing deals with Expedia.com is its association with Barnes & Noble Inc. Recent Initiatives Barnesandnoble.com. and in recen t months has aggressively sought new ways to differentiate itself. Unfortunately. with a similar discount. Petsmart. and a same-day delivery option in Manhattan. content and distribution opportunities. Barnesandnoble.com. Other synergies would include the ability to shi p books ordered online to the stores closest to customers for added convenience. each part ner offers a similar link to Barnesandnoble.com's link to Bertelsmann AG. Planetrx. and the tangibility that this provides. people began using their stores as a physical showcase for online rivals such as Amazon.com has lost access to valuable customers. Barnesandnoble. At any given p oint there are hundreds of customers browsing their aisles looking for something to read.com and VitaminShoppe. and the retailers have distributed more than 10 mil lion bags promoting the website and containing a coupon offering a discount on o nline purchases.com. To signal its intentions.com. Barnes & Noble University (a free online education resourc e).com.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3.6 Conclusion Although Barnesandnoble.com has been able to create a high impact and high-quali ty customer experience, it has not been able to establish itself as the leading online bookseller. Barnesandnoble.com's late start in 1997, meant that Amazon.co m had made many of the same moves a few years earlier and had a sizeable and loy al customer base, a wellestablished Internet brand, significant market momentum, and was further up the growth curve. In addition, its failure to leverage its b ricks-and-mortar stores to drive traffic to its site, and its lack of innovation (by copying Amazon, feature for feature) has failed to differentiate Barnesandn oble.com and has given them the image of a second rate 'me too' brand. The Press have also contributed, by portraying them as slow and clumsy in comparison to t he more nimble Amazon.com. Although the decision to keep the online operations s eparate from the retail outlets freed the start-up from bureaucracy and from cha rging sales tax, and allowed them to offer stock options as compensation and ach ieve a high market capitalisation, it also caused a major setback. The company f ailed to leverage its established brand, customer relationships and offline pres ence - its key differentiating factors. Barnesandnoble.com's experience is instr uctive. Bricks-and-mortar stores looking to translate their brand strength online must be willing to vigorously cross promot e the two ventures, even if that means eating into their existing sales, otherwi se they risk losing out to other online competitors. According to Goldman Sachs' Anthony Noto "If you have a brand you shouldn't have to spend as much to build awareness, and you shouldn't have to start from scratch when converting traditio nal shoppers to online shoppers57". 57 'Bn.com - Not a Best Seller' - Forbes, August 4, 2000 (www.forbes.com) 75

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 CASE STUDY: BOO.COM 6.4.1 Company Overview Founded in 1999, Boo.com launched with the goal of being the world's "first trul y online retailer of sportswear and fashion", and was billed as one of Europe's hottest e-commerce 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, Chair man of LVMH (owns Louis Vuitton and Christian Dior) and 21 Investimenti (Benetto n 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 Novem ber 1999). On going live, Boo.com entered six markets: US, England, Sweden, Finl and, 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. Howeve r, within six months Boo.com collapsed through lack of funds, due to its poor pe rformance and inability to build a customer base, and the resulting loss of inve stors' confidence. TABLE 6.3 1999 Mid year BOO.COM - TIMELINE AND MAJOR MILESTONES - Raises funding of $125 million - Site goes live - Multi-million pound advertis ing campaign created by BMP DDB - First sign of problems - they redesign site, s ack 20% of staff and sell stock at 40% discount - Announces it has only 500,000 unique visitors - Appeals for $30 million more funding - fails and appoints KPMG as liquidator. Company is put up for sale. November 2000 January February May 6.4.2 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 av ailable, not the limited range you might get at most London fashion shops58". Bo o.com provided a range of 18 fashion and footwear brands including DKNY, Puma, E verlast, and Converse. They believed that the limited launch of direct online sa les operations by fashion brands left room to establish a first-mover advantage and develop a market leading online fashion hypermarket. 58 Kajsa Leander, CMO of Boo.com, as cited in 'Boo.com opens its virtual doors' - M arketing Week, June 10, 1999 76

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4.3 Sources of Value & The Failure of Boo.com Their strategy was to design an innovative website with interactive graphics to appeal to both sport and fashion enthusiasts. Visitors could search items by spo rt, brand, colour, price or style, with the ability to rotate products and zoomin on fabrics, stitching and colour. 3-D product images were accessible in all c olours and styles, ready to stock in a shopping cart and mix-n-match on a rotati ng sex-specific mannequin. To transcend web shopping's impersonal stigma, the co mpany devised a personality called Miss Boo, an animated personal shopper who gu ides site visitors and offers remarks (Figure 6.4). To build customer loyalty, t hey established the Player's Club (or Leisure Lounge in the UK), a loyalty schem e to reward frequent buyers, and developed 24-hour customer service teams in fou r world-wide offices. Boo.com also published content in an online style magazine , including interactive games to attract purchasers. All orders were to be deliv ered within 5 working days in Northern Europe and the US from distribution centr es in Munich, Germany and Louisville, Kentucky. FIGURE 6.4 - OVERVIEW OF BOO.COM'S WEBSITE Miss Boo However, Boo made some fundamental mistakes. First, a large portion of its poten tial market was unable to use boo.com's site because the website design (extensi ve 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 77

Sporting Goods Business.BBC News Online.com was a "mish-mash when it when live. trying on different styles. The name was chosen on the basis that it is "simple. May 16. an Internet alternative to real-world shopping for high fashion clothing. CEO of Kerb.com to Boo. the site was poorly structured and difficult to navigate. an award winning web design company. whe reby people enjoy wondering around shops. However. eve n though it had become simpler and faster.com was quite successful in generating interest and creating awareness. The changes also gagged Miss Boo and a paper ca talogue was printed for those who want to buy offline. First of all. . Boo. there continues to remain a doubt whether the basis of Boo's val ue proposition was compelling enough in the first place.BUILDING SUCCESSFUL BRANDS ON THE INTERNET European surfers and 2% in the US59. In January 2000.uk) 61 J.. and t hen re-order the items again.com: Fashion Site Must Overcome Own Hype' . Boo redesigned its website to make it easier to navigate.com President for North America.. it didn't seem obvious what you were supposed to do60". and added a version devoid of pop-up windows and graphics. misses many aspects that tend to be valued by Boo. many complained that they received the wrong items.gone' . and secondly. July 6.4 Brand-Building Strategy Boo.. Obviously..com 's target audience of the young and trendy shoppers. There were also fulfilment and custom er service problems. Boo's value proposition failed to deal with these issues. catchy and easy to remember and spell61" and could be trademarked in 56 countries. a s cited in 'Boo. 'Boo...1999 78 . 6. the early bad ex perience and negative word-of-mouth scared off many online shoppers who lost con fidence as Boo. In addition..com had developed a reputation as a cumbersome and slow site. prices we re not discounted.. In addition.com' . 2000 Ward.. Boo. these ' mistakes' could not be corrected easily. 'From Boo..Forrester Research. getting th eir friends' opinions. and according to Jim McNiven. May 18. Although customers received the purchased items within a fe w days.bbc. There was a lot of hype surr ounding the start-up due to the 59 60 Torris. Beside s these issues. Herratti.thdo. M.. and the feeling and image associated with walking into a high fashion store.co. once the money was refunded customers d id not risk going through the frustrating and inconvenient process again. Traditional fashion shoppin g provides sources of value through its social experience and entertainment. 20 00 (news6.4.. Customers had to demand a refund. T.

Vogue. Rolling Stone. areas of brand-building. As a result. including the brand impression giv en by the implementation and experience. but v ital. 6. which received a mixed response. easy-touse. Boo was very ambitious to lau nch in six countries simultaneously. 79 . nega tive word-of-mouth spread quickly.both of which accelerated Boo's downfall as things started to go wrong. customers soon discovered the site's f rustrating flaws.4.finance director) and investors. without testing their business model.5 Conclusion Boo. Brand building includes all aspects of brand communications. spending $15 million on an adve rtising campaign with BMP DDB. cinemas and magazines such as GQ. and did not focus on t arget customer benefits. which reflected on all aspects of the operations and eventually destroyed the business.com also failed to address basic cus tomer needs of a simple. Instead of overhyping the convenience they offer.BUILDING SUCCESSFUL BRANDS ON THE INTERNET amount of money invested in the company. Adverts appeared on TV. in cluding Dean Hawkins . and with all the hype. Boo quickly burned cash on PR and advertising. they focused on advertising the brand and not the less glamorous. Although they attracted traffic. and ensuri ng goods are available and delivered as promised. Another important lesson is the need to be quick to mark et must be balanced against a company's readiness. A poor brand experience on the first vi sit drives potential customers to click off and not return. and should have scaled back the technology to ensure as many people as possible could browse the site. throwing everyone into p anic. resulting in low conversion rates. and also leads to a lack of confidence on the part of employees (high-profile employees defected. Inter net companies must remind themselves what customers miss about in-person shoppin g and compensate with true added value. and the high-profile investors involved . Unfor tunately.com failed to provide a compelling value proposition. quick-to-load site. Boo is 'branded' as the ultimate Internet failure. Instead. ESPN Magazine. they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. this only served to increase set-up costs as well as investors' expect ations . As a result. Boo. such as creating a positive end-to-end customer e xperience and making each customer contact pleasurable and memorable. a nd Elle.

a valuable and rewarding ex perience"63.000 sound samples. and one of the most popular shopping sites on the Internet62.ten times the selection of a conventional bricks-and-mortar music store). May-June 2000.TIMELINE AND MAJOR MILESTONES . by twin brothers Jason and Matt Olim.5 million distribution deal with Lycos Signs three-year. TABLE 6.4 1994 August 1997 August 1998 February March April May June July 1999 March May J uly 2000 June July CDNOW . and an average daily audience of over 800. and they aim to "make ever y visit to the site. CDnow is also driving the digital distribution of music.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. former arch rival . T.CDnow i s acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsma nn e-Commerce Group (BeCG) 6. $22. con venience.. & Novak. CDnow provides access to over 500.5. cover art. customisation and a wealth of information and content to help in the purchase decision. 62 Hoffman.000 music related items .000 people. 'How to Acquire Customers on the Web' . This unprecedented degree of access to music and information is the core of CDnow's value proposition. guides to music genres.Raises $10 million through private placement . CDnow is the leading onli ne music store.5 million advertising deal with MTV Enables customer s to create customised CDs Launches MTV / VH1 ad campaign . pp. and exclusive interviews and reviews from CDnow 's award-winning editorial staff.Launches merged CDnow/N2K site .6 mi llion IPO Launches integrated Grammy promotion Signs content distribution partne rship with Rolling Stone Signs three-year. announce marketing alliance .5.2 Value Proposition CDnow offers consumers a high degree of choice (over 500.Merges with N2K.000 music-related products and 650. On 19th July 2000.Forges distribution partnership with Yahoo! $65. and was the first site to offer the sale of music downloads and custo m CDs. D. daily music news. as well as music reviews.Harvard Busines s Review.5 CASE STUDY: CDNOW 6.Partnership program with Geffen Records . whether for browsing or buying.com) 80 . CDnow was acquired by Bertelsmann AG.CDnow and Time Inc.Merges w ith Columbia Records . It has a customer base of 4 million people.Site goes live . $18.1 Company Overview Founded in 1994. f eatures.cdnow. good prices.179-188 63 CDnow website (www.

VH1 a nd Media College (publisher of CMJ New Music Report and CMJ New Music Monthly).BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5.5. FIGURE 6. For example. and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances. CDnow's partnership with Rolling Stone Magazine enables custom ers to access thirty years of Rolling Stone music coverage. easy-tonavigate. 81 . CDnow has leveraged the reputation of their brands to reinforce its own. cover art. etc. to make it easier for customers to explore new music and make informed purchasing decisi ons..OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple. and has secured rights to music reviews. The whole process of searching for albums or music titles to the actual purchase is simple . CDnow has cultivated similar relationships with MTV.The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. By partnering with well-known content providers.Figure 6 . artists biographies.5 .3 Sources of Value .

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

By keeping the brand in front of the customer in this wa y. and radio spots on the Howard Stern Show to build a cult following among radio listeners. this is their "most successful customer building programme64". Yahoo!.000 small. covering the entire music spectrum.Through the Cosmic Credit Programme.CDnow's advertisements are targeted to some degree. giving webs ites an inducement to join the programme and in effect turns CDnow's affiliate-m arketing partners into a virtual commissioned salesforce. Spin. and spot radio to build reach. integrated custo mer acquisition strategy that reflects a sophisticated understanding of the econ omics of an online business. Excite and other powerful Internet content and service providers. customers buy musi c. print advertising is music-related publications such as Rolling Stone.They have also stuck exclusive alliances with AOL.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account. • Alliances and Partnerships . • Traditional offline Me dia . music-oriented websites. as well as more-targeted music-related sites like B illboard.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted. including national tel evision commercials during the Grammy's and American Music Awards and on MTV and VH1.5. According to Jason Olim. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. It is a revenue-sharing arrangement. CDnow is doing everything it can to ensure that the next time that 6. CDnow extended its distribution reach to include more than 250. CDnow's initiatives include: • Banner Ads . and Variety. • Affiliate Programme .CDnow buy s banner ads on the sites of major Internet content and service providers includ ing CNN Interactive and AOL. 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. they buy from CDnow. 83 .

• Word-of-Mouth .hsny.As for many successful online retailers.4 million). In fact. 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. The company continually pushed for new distribution partnerships to widen its sphere of influence. Their ability to learn and relate to c ustomer's needs through customising their offering (My CDnow) encourages brand l oyalty and repeat purchases.htm) 84 .5.Pr ess Release.com/cdnow.cdnow. Public relations efforts helped to generate word of mouth and influence sale s.4 million. it is in this context that the large investm ents in advertising and partnerships make sense. and scaled it awareness-building efforts. The story of how CDnow was founded in a basement. and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers.(www. by two twin brothers with l ittle money reflects the 'American dream' and was quickly picked up.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations .5 Other Factors that Contribute to their Brand Leadership Innovation & First -Mover Advantage CDnow started early on the Internet (1994) and has been able to maintain momentu m. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' . 1998: $56.Ha mpel & Stefanides (www. resulting in increased conversion rates.CDnow made public relations a high priority brand-building to ol. with 44% of sales coming from new customers65. and to increases in the customer base of more than 30% quarter-to-quarter. 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. as a way to fuel very lucrative word of mouth. 1998 . April 28. This has cont ributed to a 225% increase in sales (1997: $17.com) 65 'Pioneering in Cyberspace' . with repeat customers accounting for more than 50% of sales. CDnow's promotion strategies have attracted high levels of traffic. 6. both in the online and offline worlds.

"your brand is not just what you say . and the company's goes to great lengths to ensure that its activities reinf orce this view and it fulfils its promises.f rom how CDnow has personalised its product offering to its capable customer serv ice team . They also pr ovide the customer with an order number and customer support contact information should they have questions. "eBrands . 2000 p. P. It was able to create a strong value proposition and high q uality customer experience. CDnow has developed a relationship with Valley Reco rds. 6. "the most important custome r loyalty tool is a great store67" and CDnow has gone to great lengths to provid e this. to ensure quick delivery to customers.89 67 Jason Olim. "eBrands . CEO of CDnow.Building an Inter net Business at Breakneck Speed". well-targeted marketing programmes both online and offline have driven large v olumes of traffic to the site and have exposed the brand to millions of potentia l customers. This gives t he customer the impression that the order is being handled quickly. The development of an extensive affiliate network. (Boston: Harvard Business School Press).have been instrumental in building a reputation for excellence that i s a core factor of a successful Internet brand.5. P.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on t he potential it saw. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective market ing campaigns. and innovative . The company sends an automated order confirmation note via e-mail as soon as the order has been placed. combined with the high impact customer experience created . CEO of CDnow.it's what you do 66". and ensure that it exploits its early-mover advantage and keeps ahead of competition.Building an Internet Business at Breakneck Speed". 2000 p. This. as cited in Carpenter. 66 Jason Olim. a record distributor that handles the majority of CDnow's fulfilment logist ics.75 85 . (Boston: Harvard Business School Press ). According to Jason Olim. as cited in Carpenter.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim.

garage sales. (A)' .removing the need for inventory. "at its core.782 million in January 200068. as cited in 'eBay .eBay website (www.A Harvard Business School Case Study.6. Individuals use eBay to buy and sell items in more than 4. the eBay community has gro wn to include more than 10 million registered users. extensive selection and geographical reach. Sellers pay a nomi nal fee for placing an item up for sale.g.com ) 'eBay .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6. Auctions make it fun.Company Overview' . with the number of unique d aily visitors setting a record of 1. or the payment for the item .25% to 5% of the final sale price on any item sold. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix.6 CASE STUDY: EBAY 6.ebay. payment) be tween themselves.ebay. 1st October 1999 86 .the closest thing in the offline world are trading forums such as classi fied ads. flea markets and auctions. This is a new m arket . eBay is not about auctions. from collectibles and antiques to electronics and toys. shipping.eBay website (www. People per ceive the auction format to offer better prices. and eBay receives a transaction fee tha t ranges from 1. collectable shows. Auctions are an enable r. There are ove r half a million new auctions. CEO of eBay. and eBay provides added value t hrough its convenience.com) 70 'Meg Whitman at eBa y Inc. eBay effectively created a ne w business model never before possible . Auctions represent a platform.300 catego ries. with emphasi s being placed on its unique community feel and culture.000 new items joining the "for sale" list every 24 hours69. The buyer an d the seller work out the logistics of the transport (e.Company Overview' .efficient one-to-one trading in an auct ion format.2 Value Proposition eBay offers consumers an efficient. 24 hour a day. According to Meg Whitma n.1 Company Overview eBay is the world's largest person-to-person online trading community and is one of the few Internet companies that is profitable. transportation and othe r overhead costs.6. 6. Since its launch in September 1995. and eBay never takes possession of the item being sold. and 450. global trading place for buyi ng and selling personal items in an entertaining auction format.

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

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

a utonomy. working together and helping each o ther offline. respect. Whitman describes eBay's community culture as a site "of the people. This has created a self-regulating mechanism that encourages good behavio ur. For many 'eBayers' . which is posted to the site. 89 . This sense of community is their key differentiating factor and has enc ouraged greater loyalty and repeat usage. a monthly newsletter. each user is encouraged to submit feedback through eBay's 'Feedback Foru m'. To enc ourage this sense of community. eBay Salt Lake City) have helped them restore that community feel. while adding value by providing users' with the ability to source items located close-by and browse through items of local interest.as eBay users refer to themselves . which is then added to the partner's trading profile. and is considered by many users as one of the best features on the website. a "giving-board" for charitab le donations to user-identified causes.g. and share information. eBay Boston. T hey also provide the ability for users to create their own home page free-of-cha rge through the About Me feature (which promotes a viral effect). e-mail. Recent initiatives such as the development of local websites in m ajor US cities (e. and in doing so. In addition. by the people. eBay's community has a distinct culture based on trust. eBay offers its users category-specific chat roo ms. Community eBay attributes much of its success to a strong sense of community among its users. the culture has come under strain due to the company's rapid growth from a small community into a "big city". It is a place where people can meet with similar interests. empowerment and equality. However. After a sale.eBay represents more th an just a place to buy and sell goods. and there are several reports of eBay users vacationing together.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interfac e. for the people". bulletin boards. the community spirit and pe rsonal relationships also transcend the online experience. has enabled eBay to foster a strong sense of community on i ts site. discuss topics they care about.

and willingness to empower. This was later expanded to include customer support representatives who worked out of eBay's headquarters. knowledgeable. This also reinforced the company's respect for. in which the company hired active. These people wo rked from their homes. and the Safe Harbour group. its user community. They also introduced a Power Sellers Programme (loyalty scheme) which gives special benefits and privileges t o heavy users. which was dedicated to monitoring the site for illegal and infring ing activities. and respected members of its own user community to serve as customer support representatives. They encourage members to take active role in the site and to provide feedback and advise them of and problems through the Feedback Forum.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Connectivity eBay has created an affiliate network. and the introduction of two specialised customer support groups . fraud. eBay's approach to customer care has evolved over ti me. banner ads and links to supporting services such as payment options and transpo rt companies to help customers coordinate the logistics. Customer Care eBay controls neither end of the transaction. Customer support activities were constantly upgraded and expan ded as the business developed. shill bidding) and helping to resolve user-t o-user conflicts. which was dedicated to investigating misuses of the system (e. geographically dispers ed users as customer support representatives. eBay also engaged in ma rketing partnerships.g. the largest of which was with AOL. eBay has invested in customer care and support to ensure people conduct safe transactions. links to high traffic sites. answering e-mails and responding to questions posted on t he site's bulletin boards. 90 . Communication eBay maintains close communication with its members. During the first two years. but they have other par tnerships with over 150 websites of varying scales. By using its own enthusiastic.the Community Watch group. eBay employed a "remote" customer support model. As such. and t he users' experience on eBay is more driven by the seller or buyer than by eBay itself. eBay was able to cost-effectively offer 24x7 customer support early on.

but they have other partnerships with over 150 website s of varying scales. Doll Collector) and appearance in trade shows . Based on this.a four-year. they spent $12. and maintained the same ratio for 1999. The Official eBay Guide t o Buying. As a result. 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. The AOL partnership was one of the largest strategic partne rships on the Internet . and instead focus on g rassroots marketing initiatives through print advertising in vertical publicatio ns (e. as a res ult of the high quality experience it provides. eBay has since expanded its promotion efforts and engaged in marketing partnerships. and Collecting Just About Anything and eBay for Dummies. eBay transformed from a pure onlin e play into a 'clicks-and-mortar' company. and facili tate the spread of positive wordof-mouth.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 million in advertising. Through this combination of its advertising efforts and targ eted promotions. eBay identified that 2 0% of the users represented 80% of the volume of the site (80/20 rule). eBay has been able to attract a large customer base.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth. and two books. These acquisitions further expanded t heir appeal to a wider market (those interested in higher priced items) while pr oviding added revenue due to higher margins. In 1998.6. eBay Magazine. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expa nd internationally.g. 91 . eBay decided that it would not ent er into major portal advertising deals in the short term. they decided to target their marketing efforts on these heavy users. They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. representi ng about 40% of revenues. Thes e new publications appeal to the collecting spirit. who tended to be serious collectors. the large st of which was with AOL. Recent promotional initiatives incl ude its new publication. provide a wealth of informat ion about the 'ins and outs' of trading on eBay. Selling. With the acquisition of Butterfield & Butterfield (one of t he world's oldest and most prestigious auction houses) and Kruse International ( auctioneer of collector automobiles) in 1999. $75 million joint marketing alliance and d evelopment deal. Early on. and highlight opportunities cre ated by e-commerce. Mary Beth's Beanie World.

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7 CASE STUDY: GAP.COM 6.7.1 Company Overview Gap opened its first store in San Francisco in 1969, and today it is the 29th mo st valuable brand in the world73. The Gap offers a balance of modern and seasona l styles of clothing, from jeans and T-shirts to khakis and jackets. Its reach e xtends across more than 1,800 stores in the US, Canada, UK, Germany and Japan. T his success is largely due to their simple formula - "to deliver style, service and value to everyone74". In late 1997, Gap started selling items online - an ea rly convert to the then-revolutionary idea of clothes retailing on the Internet. Currently, online sales are only available to US customers, and are still relat ively small compared to Gap's $9 billion in annual sales, however, the growth pr ospects are enormous. Gap's online sales tripled in 1998 alone, and analysts est imate that sales in 1999 amounted to $50 - $100 million, up from $20 million in 199875. Gap.com is an example of successful crossover marketing, and provides us eful insight into how traditional brands can leverage their strength online. TABLE 6.6 1969 1986 1989 1997 1998 1999 GAP & GAP.COM - TIMELINE AND MAJOR MILESTONES The first Gap store opens in San Francisco, California GapKids opens its first s tore BabyGap is born Gap opens its online store at www.gap.com to make shopping even easier for US customers GapKids and BabyGap launch their online stores at w ww.gapkids.com and www.babygap.com. Gap Inc. surpasses $9 billion in net sales a nd increase earnings by 54% over previous year. America Online (AOL) and Gap Inc . announce multi-year partnership. 6.7.2 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 s hirts to accessories and hard-to-find sizes. In addition, Gap online exploits th e accessibility and convenience of the Internet, to provide customers with great er convenience and options. According to Jeanne Jackson, head of Gap Online, "th is is about being clicks-and-mortar, letting customers access the Gap brands, wh ether in the store or online76". 73 74 Interbrand (www.interbrand.com) - see Appendix A Gap, Inc.'s website (www.gapinc .com/about_us.htm) 75 Jeanne Jackson, as cited in Lee, L. 'Clicks and Mortar at Gap.com' - Business Week, October 8, 1999 76 Jeanne Jackson, as cited in Lee, L. 'Clicks and Mortar at Gap.com' - Business Week, October 8, 1999 93

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7.3 Sources of Value - The 7Cs Framework In terms of the 7Cs framework, Gap Online primarily focuses on Convenience, Cont ent, and Customer Care. Unlike Barnesandnoble.com, the extensive integration of Gap's online and offline activities are clearly evident. Visiting the gap.com st ore one immediately notices the consistency between the online and retail stores , from the blue and white colour scheme to the easy-toshop format - making visua l references to its offline roots. Michael McCadden, Executive Vice President of Global Marketing, describes the company's brand personality as "direct and stra ightforward........very easy, very efficient"77. This personality is reinforced online through the simple structure and layout, making it convenient, and easy-t o-use. The site also offers sharp graphics, but provides customers with the opti on of viewing text-only, making navigation even faster. FIGURE 6.7 - OVERVIEW OF GAP'S WEBSITE Immediate customer recognition The look, feel and design of the site is consiste nt with the bricks-and-mortar stores, reinforcing its brand identity. Simple, easy-to-use site with option to view text-only (no graphics) to allow qu ick loading 77 Hill, D., 'Mind the Gap', The Observer, April 18, 1998 94

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 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 st yle 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 s ample all of the latest shades of fingernail polish on a virtual hand, which wou ld not be possible in the store. Unlike the case of Boo.com, Gap's simple, stand ard styles are well suited to online clothes shopping, and goods bought online g et returned at the same rate as store purchases - as most Gap online shoppers ha ve a good idea of how Gap clothes fit. In order to integrate its offline and onl ine 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 neighbo urhood store, without causing complications. This level of customer care is an i mportant factor in making customers feel 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, G ap communicates with customers through customised e-mails, twice a month, promot ing 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, Gap Kids, and BabyGap, and customers can register to get e-mail reminders of upcomin g holidays and birthdays. The Gap site connects to other Gap online stores inclu ding GapKids and BabyGap. Gap has also developed an affiliate programme, and had recently established marketing deals with AOL and CDnow. 95

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

A key factor has been Gap's consistency and ability to d eliver the same level of service quality that is expected from the brand. 97 . Gap has been able to significantly strengthen their brandcustomer relationship.thereby increasing the company's reach. By aggressively marketing both the stores and the website. have already established the back-end operations and can use them as the co rnerstone of their online business. Pure online play ers have to invest heavily in logistics. With their brand awaren ess and network of retail outlets. such as Gap. while reaping the benefits of low customer acquisition co sts and extended reach. Gap had a significant advantage over pure onl ine players in attracting customers and building critical mass. The Internet. and can also provide access to different customer segments who may not usually b uy the products at all .7. whereas established companies.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Conclusion Gap. thereb y reinforcing its brand identity.com is an example of successful crossover marketing. and allowing each to leverage the st rengths of the other. This type of seamless integration and symbioti c relationship is critical in building successful 'clicks-and-mortar' brands. on the other hand. provides ex isting customers with added value through the convenience of purchasing online.

There's n othing in the real world to compare to that79". 6. the amount of information. household a nd business user reach.com) . "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything.businessweek. Yahoo! is one of the most recognised brands on the Inter net and is the 53rd most valuable brand in the world78. 78 79 Interbrand (www. commerce and media company that offers a comprehensive brande d network of services and information to more than 145 million individuals each month world-wide.8. and is one of the few Internet companies to turn a profit earl y in the development of the Internet.1 Company Overview In April 1994. 1998 (www. Yahoo! was founded by David Filo and Jerry Yang. advertising. Yahoo! has since morphed from an ordinary search service into a global Intern et communications. two Ph. from e-mail services to stock quotes and m uch more.D student s at Stanford University. The company's global web network includes 23 world properties outside the US. As the first online navigational guide to the web. The Stock' . The concept exploded (through word-ofmouth) and in less than six months. According to Timothy Koogle. September 7. all in a single location. Yahoo! is a leading guide in terms of traffic. Yahoo! offers a range o f supporting services that add value.see Appendix A 'Yahoo! . CEO of Yahoo!. As such.8.interbrand. lies the directory . and the number of websites continues to explode.8 CASE STUDY: YAHOO! 6.com) 98 .BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Inter net penetration. who started an online guide as a way to keep track of their personal interests on the Internet.Business Week. The Stra tegy. the site was receiving 1 million hits per da y.2 Value Proposition At the core of Yahoo!'s value proposition.The Company.

Launches Yahoo! Real Estate Opens Yahoo! Auctions Acquir es Yoyodyne Launches Yahoo! Shopping (offering more than 2 million products) Sec ures distribution agreement with Hewlett-Packard Signs distribution agreement wi th IBM Acquires Geocities Secures distribution on PagerNet pagers Acquires Broad cast.8.00 per share) Launches My Yahoo! (all owing customisation of site) Launches Yahoo! UK & Ireland Launches Yahoo! France and Yahoo! Germany Launches Yahoo! Chat Launches Yahoo! Classifieds Secures dis tribution agreement with Compaq Acquires Four11 Secures Distribution agreement w ith Gateway Launches Yahoo! Sports Launches Yahoo! Computers Cross-marketing wit h AT&T Acquires Viaweb. but instead to be selec tive and to display the best the web has to offer in a hierarchical framework th at makes sense to customers.Yahoo! Launche s Business-to-Business Marketplace . . mobiles.The 7Cs Framework Convenience Central to Yahoo!'s success.8 million IPO (2.Yahoo! forms agreements with Palm Inc..Receives $1 million in venture capital funding from Sequoia C apital $33.600. t o allow access.Yahoo! unveils Yahoo! Finance Vision .Yahoo! acquires Ar thas. Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings. is the way it has structured and displayed informat ion.e.8).3 Sources of Value . to provide web-based services to PalmT M handheld computers .BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6. Palm computers).Yahoo! acquires eGroups .TIMELINE AND MAJOR MILESTONES 1994 April .Yahoo! Shopping launches personalised shopping service 6. regardless of platform (i.000 shares at $13.Site goes live September . They have kept the design of the site simple and cl ean to appeal to customers and avoid slow-to-load graphics (Figure 6. 99 .Yahoo! launches the next wave of Yahoo! Eve rywhere service for consumers with Internet-ready mobile phones and wireless dev ices.Traffic reaches 1 million hits per day 1 995 April 1996 April July September October 1997 January February October Octobe r October December 1998 April May June September October November 1999 January J anuary January March April June July August September 2000 March March March Mar ch May June July .com allowing them to offer person-person payment solutions .com. More re cently. Their goal is not to list everything under the sun.7 YAHOO! . TVs. and unveils Yahoo! Digital Introduces Bill Payment services . Yahoo! extended its convenience through its Yahoo! Everywhere service.

the end-user. easy-touse. ranging from daily news and weather reports to road maps and books. T hese have helped Yahoo! become the place to track down a broad range of valuable information and resources. the partner. and more importa ntly. while providing partners access to a large customer base. Yahoo! has increased customer loyalty and retention rates. By tailoring the information to users ' preferences.9). well structured. from stocks and sports results to weather and air fares.com and CDnow. 100 . This cr eates a win-win situation as its satisfies Yahoo!. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite to pics. and has been at the heart of Yahoo!'s growth and development.8 . and quick-toload webp ages Important contact point to search information on any subject Content Yahoo! has pursued a broad range of deals with content and commerce companies. Their thrust has been to provide valuable content to customers. Th ey have formed multiple alliances and partnerships with leading online companies such as Amazon.BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6. and is similar to a custom tailored newspaper (Figure 6.OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple.

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

and through communica tions via email. 82% of Internet users and 23% of people intending to go online. As a result. Yahoo!'s brand-building success starts with its name.8. Yahoo! avoided characterising itself as a technology-orie nted company. and it formed a critical link in Yahoo!'s brand building strategy. 6. (www. TV commercials and radio spots during drive time. I n 1996.4 Brand-Building Strategy Yahoo! is a marketing machine. as experience surfers tend to b e loyal to their search engine.intelliquest. recogni se the name Yahoo!.people who are not yet online but are likely to use the Internet in the near future. Yahoo! also enco urages customers to e-mail ideas and feedback. an approachable nature. Yahoo! maintains close contact with customers. While Internet companies w ere targeting existing Internet users through the use of online promotion method s. and an inherent friendliness. Given the unease with which the average consumer approaches technology. Yahoo! extended beyond this to use traditional offline media. These near surfers represented (and still do) a large and fast growing group and. This was especially important.BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often. therefor e.com) 102 . Intelliquest. by building a recognised brand name. Yahoo! aggressively promoted the si te through public relations. they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?". 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. 80 'Web Survey Shows Yahoo! Tops'. Their strategy was to target "near surfers" . and it s implications of a good time. and the company has always communicated the utility of its service in a way that reinforces other core brand attributes . Yahoo! would be one of the first sites t hat they visited. and according to Intelli quest80. which conveyed the brand's irreverent personality. At the time thi s was considered a breakthrough.a sense of irreverence.

breath mints.it must reinforce the image of the company as 'a serv ice that is fun. a little wacky and inviting'. which has fans screaming Yahoo! to cheer their te am as the Yahoo!'s logo flashes across the football stadium screen. services and contests with well known brands such as Ben & Jerry's. May 3. sailboats. Yahoo! has managed to cultivate high brand loyalty. s4 103 . o rganisers. new services and customised features highlight their ability to relate to customers' needs. ER) and Hollywood movies. it's too late. a monthly magazine guide to what's new on the web and it has co-branded products. Th eir innovation. Once customers access the site. According to a recent study .Advertising Age. August 26. 81 'NPD Findings Show Yahoo! Ranked Highest in User Opinion' . snowboards. Yahoo! adopted 'guerrilla marketing' techniques . p.com) 82 'Yahoo! Forges Strong Brand While Adding Me aty Content' . VP-Brand Marketing. Although this seems like a shotgun approach. 1997 (www. to create Yahoo! Internet Life. as well as TV shows (Ally McBeal. In addition. Visa and MCI. We need to be one step ahead in order to have a better service than our competition82". Yahoo! has paid little for this exposure. T-shirts. from the Zamboni ice-shaving machine of the San Jose Sharks (Ice Hockey Team) to over 120 products. They also te amed up with publisher Ziff-Davis Co.BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition. parachutes. 1999. 92% of Yahoo! users rate the service as "excellent" or "very good" which is si gnificantly higher than those of other sites. c ustomers quickly discover its value and through a high quality experience (7Cs).yahoo. and 76% turned to Yahoo! before vi siting another search engine or navigational site. They even have a barter deal with the San Francisco 49ers. According to Karen Edwards. the research sho ws that 73% of Yahoo! users bookmark the service . stating that "if we wait to hear about it in the news.with its name bei ng plastered on everything.Yahoo! Press Release . and yo-yos. including backpacks. which has been instrumental in establishing Yahoo! as a household name.higher than all other service s81. Yahoo's ability to quickly pick up on users interests has been a key factor contributing to their success. it is i n fact a carefully orchestrated campaign that requires each branding opportunity to meet one strict test .

May 3 . and its openness (for example. they have carried out extensive partnering. "we've really focused our marketing efforts on attracting new users and providing an ex perience that makes them stay83". These relationships have provided end-users with added-value. to its simple design. and other search engin es at the bottom of its search results page). The essence of Yahoo!'s brand-building strategy is highlighted i n a simple statement made by Karen Edwards. In addition. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of i ts customers. They have maintained that lead through the creation of a high quality end-toend customer experience. and first to go mainstream by advertising i ts name using traditional media. 6. s4 104 . 1999. alliances and a cquisitions to provide added value services to their customers. with a large customer base and high levels of cu stomer loyalty.8. As a result of all these factors. Yahoo! has invested relen tlessly in new services and marketing programmes. Yahoo! has benefited from a first-mover advantag e. Yahoo!'s intense focus on customer's nee ds and high quality online experience has been instrumental in cultivating a rep utation for excellence. and has cultivated a reputation for excellence. As the first online navigational guide to the web.Advertising Age. while also ass ociating Yahoo! with well known brands. In addition. its choice of partners. first to go public. Y ahoo! has built a strong brand.6 Conclusion Yahoo! is one of the most successful brands on the Internet. GoTo. 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' . fi rst to turn around an annual profit. VPBrand Marketing of Yahoo!. from its convenien t and logical structure and display of information. its ex cellent customer service. that have set it apart from th e pack. their innovative promotional and guerrilla marketing techniques. while attracting new customers.com. have created a distinct brand identity that differentiates the brand and appeals to its target market. HotBot. This has been achieved through their relentless investm ent into new services and extensive partnerships and alliances with leading bran ds. if a user cannot find what it is searching for.8. Yahoo! points them to its compe titors by including links to AltaVista.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 Other Factors that Contribute to their Brand Leadership Innovation & First -Mover Advantage Yahoo! was first to market with a detailed search engine. To maintain its lead. p.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 7 CONCLUSION 105 .

experiences. relationship is the basis for the customer loyalty that creates a su ccessful online brand.1 CONCLUSION & DISCUSSION OF KEY FINDINGS This dissertation set out to explore how the Internet is changing the brand-buil ding environment. the new brand-b uilding tools and strategies. It aims to create "apostles". the tools for building an online brand include the 7Cs Framework (Convenie nce. catchy logos and slogans. promotions. The case studies provided a useful and practical insight into the application of these tools. Community. a dvertising. brand -building on the Internet extends beyond the traditional focus of positioning. As such. and making the experience so satisfying tha t they are confident in their choice and will return again. the success of an online brand is largely determined by customer choice. With power shifting to customers. from the promises made in the value proposition. to creating a business that ca n deliver complete. in order to identify the new sources of value. It is about enti cing customers. Connectivity. and will tell others about it. Learn . The rep eated choice of a certain brand by customers and business partners generates the transactions and repeat business that counterbalances the costs of customer acq uisition and infrastructure. and to outline the key factors that contribute to the development of a successful online brand. These frameworks highlight the key components and sources of adde dvalue for developing a high quality experience. the next sectio n concludes the dissertation with a discussion of the key factors that contribut e to building a successful online brand. Repeat transactions provide the basis for a relatio nship that. when properly cultivated. and the process of building a c ustomer base and nurturing brand loyalty. As outlined in Chapt er 5. and the Interactive Brand-Building Model (Attract. Customer Care and Communic ation). As such. and completely satisfying. The companies that are successfully building relationship s and fostering brand loyalty are those that recognise that their brand's percei ved value hinges on the total end-to-end customer experience. and Relate). Customisation. This 106 . instead of "terrorists". Content. Engage.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7. Retain. to its delivery to the customer. gaining their trust. creates value for both the company and its customers.

Community. and enhancing this with layers of added-value through the '7Cs' . delivering compelling content. making connectivity easy. developing a community feel. In doing so. The 7Cs framework allows companies to deliver a tangible custom er experience.1. however. By placing emphasis on diffe rent 'Cs'. wider selections .Convenience. results in higher brand equity.BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7. The s uccessful brands are those who are investing heavily in logistics. and customer care to ensure a completely satisfying end-to-end customer experience. Customisation. Su ccessful brands recognise that the value proposition must more than compensate f or the loss of in-person contact. • A Reputation for Excellence (Delivering on their e-Promises) Fulfilment and delivering on e-promises is the acid test of online brands. and establishing two-way communication. A well executed customer experience that satisfies customers. They are providing greater convenience (24x7). Customer Care and Communication. the extensive research and in-depth case studies provided in th is 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. and access to more information on the products or services being provided. Successful online brands meet the demands inherent in each of the 7C categories. integrating cus tomer care. Connectivity. quick -to-load and easy-to-navigate. whic h builds confidence and trust that not only entices customers to do repeat busin ess with the company. lower prices. they are cultivating a reputation for excellence. Cont ent. by offering more value than attainable through traditional 'bricks-and-mortar' establishment s. customising the ex perience. 107 .1 KEY FACTORS THAT CONTRIBUTE TO BUILDING A SUCCESSFUL ONLINE BRAND There is no one-size-fits-all solution for building a successful brand on the In ternet. distribution centres. attractin g other customers to the site. by ingraining convenience and making the site easy-to-use. • A High Quality Online Experience Strong Internet brands are those that create a high quality engaging online cust omer experience. they are differentiating their experience from those of competitors. but leads them to spread positive word-of-mouth.

va riety. brands are harder for competitors to emulate. as well as determine how far the brand can be meaningfully stretched to other products and market segments. these companies are creat ing even stronger value propositions. • Unique Positioning Concept & Distinct Brand Image Strong brands are developing unique positioning concepts. whereby each party benefits from the other's expertise or skills. leading brands have focused on buildi ng strong partnerships and alliances. They are targeting their promot ions to attract quality customers and to keep customer acquisition costs down. ranging f rom online methods to traditional offline media. Al liances with leading portals and popular sites is important to generate traffic and brand visibility. 108 . to distinguish themsel ves from competitors. and by partnering with well-known brands. a company can leverage the partner's brand and reputation to reinforce its own. In addition. and exclusive alliances can lock out competitors from valu able content or online real estate. particularly to secure content and widen r each to new customer segments and niches. offering customers the best in quality. Q uality customers who are heavy users of the brand are important as they not only offset the cost of customer acquisition. As a result. and convenience. before it fractures. The most successful partnerships are symbiot ic matches. content. but also provide added value to the br and community. Yahoo!'s success can be largely attributed to its unique p ositioning strategy and distinct image that appeals to its target market. Alliances and partnerships play an important ro le in achieving speed and momentum. these companies must have a n inherent understanding of their brand identity and core values. • Strong Partnerships and Strategic Alliances Rather than doing everything on their own. wh ile ultimately benefiting the end-customers. Properly orchestrated 'guerrilla marketing' ploys can also be eff ective in building awareness and reinforcing brand image.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Strong Communications Programme & Efficient Customer Acquisition Strategy The key Internet brands have made major commitments to building awareness and ha ve developed multifaceted. integrated customer acquisition strategies. to maintain co nsistency. By dis tinguishing their offering and focusing on unique sources of value-added.

are leveraging this customer knowledge (learning) to nurture re lationships (relate). to create new serv ices and content that satisfy customer needs. giving th e brand an edge. The c hallenge then lies in keeping up the momentum. through past transactions and solicited input. It locks up important con tent and distribution partnerships. • First-Mover & Early-Mover Advantage Most of the successful online brands identified a market opportunity early and m oved quickly to capitalise on the potential they saw. Many strong online brands were al so early-movers on the Internet. the company benefits from the buzz. • Relentless Innovation Successful Internet brands are continuously looking for new ways to wrap more va lue around their core service and offering. In many cases. and benefited from additional hype. Getting to market quickly can provide an Internet co mpany with significant momentum and a valuable boost over the competition. and differentiating it from other brands. customisation and customer c are. that comes with innovation. A first-mover advantage is an important asset for an online brand. and extensi ve word-of-mouth due to its novelty. and it can acq uire customers while it is still inexpensive to do so. the innovations are the result of the company's ab ility to data mine its vast database of customer information. and it aligns itself with the most influenti al venture capital sources. and develop a detailed und erstanding of their customers' needs. This type of relentless innovation is ins trumental in ensuring brands develop traction and build momentum to keep ahead o f competitors. and traffic. and by focusing on customer needs.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Intense Customer Focus Leading online brands have an intense customer focus. By getting to market early. These brands are accumulating knowledge ab out customers. 109 . these innovations are difficult for competitors to reproduce. and are continuously adding new serv ices and functionality to their sites. Customer focus builds trust and credibility that is central to developing a strong brand-customer relationship. By leveraging unique customer info rmation. these wel l-publicised brands also took off. by providing better services. As Internet penetration exploded.

building relationships and satisfying needs. clicks-andmorta r brands are providing customers with true added-value. there has bee n a limited time horizon to evaluate the durability of Internet brands. ongoing research w ould be necessary to build on the findings of this dissertation. Nevertheless. established customer relationships. tools and key factors outli ned in this dissertation are also applicable to business markets. drawing on several case studies from business markets. Ye t while everything is being turned upside down. As such. and a physical presence (tangibility) . while reaping the benefi ts of lower customer acquisition costs and extended reach.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994. an in-depth analysis. however. The Internet has radically changed the business and competitive environments. they are equally i mportant in business markets. expand the brand experience to meet customers' expectations in the online world. Having established a strategic perspective on building online brands. new opportunities and dynamics will emerge as companies develop innovative ways of acquiring custo mers.BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Ability to Leverage Offline Brand and Assets Bricks-and-mortar brands are often well positioned to succeed on the Internet. t he author believes that the core concepts and key factors identified that contri bute to successful online brands are likely to persist. They have an established brand. In doing so. establis hed fulfilment systems and infrastructure. this dissertation would benefit from complementary in-depth research in the social and psychological dynamics o f the Internet and its impact on consumer behaviour. T hey possess critical assets that give them an advantage over pure online start-u ps. 7. Nevertheless. wou ld represent an exciting opportunity for further research.factors that clearly differentiate them from pure players. these brands must respect their core bra nd elements and maintain consistency in the service quality that is expected. Strong clicks-andmortar brands are integrating their online and offline activities to leverage th e strengths of each other. the concepts. Through extensive and seamless integration. one component remains unchanged . 110 . bu t at the same time. Therefore.value remains (and always will) the basic building block for every successful brand. Brands and brand-buildin g tools tend to be associated with consumer markets. with the emergence of wireless access and new platforms. In addit ion.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111 .

654 43.310 11.894 14. 423 2.502 33.422 1.845 56.602 4.596 3.225 11.895 2.648 1.568 3.184 1.275 30.132 15.909 7.048 20.147 9.806 2.781 33.550 12.510 8.com Hilton Guinness Marriot Country of Origin US US US US US US US US US US Finland Germany Switzerland US US US Sweden Japan US Japan US Germany US Japan US US US US US US Germany US US US US US France US US Germany US US Sweden France UK Cuba US France UK Switzerland Russia Holland U S US UK US US US Ireland US Industry Beverages Software Computers Diversified Automobiles Entertainment Computers Foo d Telecoms Tobacco Telecoms Automobiles Beverages Computers Personal Care Imagin g Telecoms Electronics Financial Services Automobiles Food Automobiles Office Eq uipment Automobiles Financial Services Computers Alcohol Sports Goods Clothing F ood Automobiles Beverages Personal Care Food Software Computers Fashion Toys Tel ecoms Sports Goods Personal Care Car Hire Housewares Fashion Oil Alcohol Food Al cohol Oil Luxury Alcohol Alcohol Software Fashion Alcohol Personal Care Books Le isure Leisure Leisure Brand Value ($US mln) 83.283 4.361 1.404 4.Interbrand's Ranking of the Top 60 Brands (www.806 11.681 2.155 7.985 2.595 17.com) Brand Name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 5 7 58 59 60 Coca-Cola Microsoft IBM General Electric Ford Disney Intel McDonald's AT&T Marlb oro Nokia Mercedes Nescafe Hewlett-Packard Gillette Kodak Ericsson Sony Amex Toy ota Heinz BMW Xerox Honda Citibank Dell Budweiser Nike Gap Kellogg's Volkswagen Pepsi-Cola Kleenex Wrigley's AOL Apple Louis Vuitton Barbie Motorola Adidas Colg ate Hertz IKEA Chanel BP Bacardi Burger King Moet & Chandon Shell Rolex Smirnoff Heineken Yahoo! Ralph Lauren Johnnie Walker Pampers Amazon.932 4.313 2.643 3. 781 17.021 26.231 24.197 32.464 3.281 11.694 17.761 1.BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A .634 1.329 4.319 1.193 112 .830 14.101 9.043 8.052 6.143 2.766 14.interbrand.804 2.181 21.603 5.792 3.076 3.231 12.527 3.262 1.

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

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