2631025 Brand Building on the Internet

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.4 6.5 6.6 6.7 6.8 Case Study: Boo.com 6.4.1 Company Overview 6.4.2 Value Proposition 6.4.3 Sources of Value - The Failure of Boo.com 6.4.4 Brand-Building Strategy 6.4.5 Conclusio n Case Study: CDnow 6.5.1 Company Overview 6.5.2 Value Proposition 6.5.3 Sources of Value - The 7Cs Framework 6.5.4 Brand-Building Strategy 6.5.5 Other Factors that Contribute to their Brand Leadership 6.5.6 Conclusion Case Study: eBay 6.6. 1 Company Overview 6.6.2 Value Proposition 6.6.3 Sources of Value - The 7Cs Fram ework 6.6.4 Brand-Building Strategy 6.6.5 Conclusion Case Study: Gap.com 6.7.1 C ompany Overview 6.7.2 Value Proposition 6.7.3 Sources of Value - The 7Cs Framewo rk 6.7.4 Brand-Building Strategy - Extensive Integration 6.7.5 Conclusion Case S tudy: Yahoo! 6.8.1 Company Overview 6.8.2 Value Proposition 6.8.3 Sources of Val ue - The 7Cs Framework 6.8.4 Brand-Building Strategy 6.8.5 Other Factors That Co ntribute to their Brand Leadership 6.8.6 Conclusion 76 76 76 77 78 79 80 80 80 81 83 84 85 86 86 86 87 91 92 93 93 93 94 96 97 98 98 98 99 102 104 104 CHAPTER 7 7.1 7.2 CONCLUSION 105 106 107 110 Conclusion & Discussion of Key Findings 7.1.1 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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF FIGURES Figure 1.1 Figure 1.2 Figure 2.1 Figure 2.2 Figure 2.3 Figure 2.4 Figure 2.5 Fig ure 2.6 Figure 2.7 Figure 2.8 Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 4.1 Figure 4.2 Figure 4.3 Figure 4.4 Figure 4.5 Figure 4.6 Figure 4.7 Figure 5. 1 Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.5 Figure 5.6 Figure 5.7 Figure 5.8 F igure 5.9 Figure 6.1 Figure 6.2 Figure 6.3 Figure 6.4 Figure 6.5 Figure 6.6 Figu re 6.7 Figure 6.8 Figure 6.9 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 - Popularity & Effectiveness Categories Suitable for Interac tive Marketing Overview of Amazon.com's Website Amazon.com's Associates Programm e Overview of BarnesandNoble.com's Website Overview of Boo.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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET LIST OF TABLES Table 5.1 Table 6.1 Table 6.2 Table 6.3 Table 6.4 Table 6.5 Table 6.6 Table 6.7 The Emerging Brand-Building Environment Amazon.com - Timeline and Major Mileston es BarnesandNoble.com - Timeline and Major Milestones Boo.com - Timeline and Maj or Milestones CDnow - Timeline and Major Milestones eBay - Timeline and Major Mi lestones Gap.com - Timeline and Major Milestones Yahoo! - Timeline and Major Mil estones 46 63 71 76 80 87 93 99 5

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 1 INTRODUCTION 6

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.1 OVERVIEW Over the past few years, there has been an explosion in the online world - an ex plosion that is also a harbinger of how business will operate in the future. Sup ply chains are being rethought, products and services reconfigured, and business models revamped. As such, 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. This is creating new challenges and opportunities. The Internet provides t he opportunity for companies to reach a wider audience and create compelling val ue propositions never before possible (e.g. Amazon.com's range of 4.5 million bo ok titles), while providing new tools for promotion, interaction and relationshi p building. It is empowering customers with more options and more information to make informed decisions. The Internet also represents a fundamental shift in ho w buyers and sellers interact, as they face each other through an electronic con nection, and its interactivity provides the opportunity for brands to establish a dialogue with customers in a one-to-one setting. As such, the Internet is chan ging fundamentals about customers, relationships, service and brands, and is tri ggering the need for new brand-building strategies and tools. In the midst of th is, aggressive Internet start-ups have emerged, creating strong brands that are putting established brands at risk. Internet companies such as Yahoo!, Amazon.co m, America Online (AOL) and eBay have been able to build powerful brands in a fe w years, whereas it has taken decades for traditional companies to achieve the c lient base, customer affiliation and level of sales, that these Internet start-u ps have achieved. Figure 1.1 shows the number of years it has taken some Interne t brands to reach sales of $100 million. FIGURE 1.1 - YEARS TO REACH $100 MILLIO N IN SALES 6 5.1 3.2 3.9 2.9 3.5 2.0 1.7 5 4 3 2 1 0 CDnow DATE OF INCEPTION 1 Onsale.com1 Amazon.com JULY 1994 JULY 1994 Cyberian Outpost MARCH 1995 eBay SEPTEMBER 1995 Barnesand Priceline.com noble.com

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. A review and anal ysis of leading academic thinking will be used to explore these issues. • To explo re how the Internet is changing the brand-building environment, and to identify new sources of value, tools and strategies to build brands on the Internet. Acad emic literature and an analysis of the impacts of the Internet will be used to i nvestigate these factors, supported by secondary data related to aspects of onli ne business from accredited and published sources. • To identify the key factors a nd characteristics that contribute to the development of successful Internet bra nds. This is based on the outcome of the primary research (in-depth case studies ), with reference to the theoretical themes that emerge from the literature revi ew and in terms of the practical implications for companies. 1.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2. FIGURE 1 .2 - RESEARCH METHODOLOGY ACADEMIC RESEARCH HYPOTHESIS SECONDARY DATA The 7Cs Framework & The Interactive Brand-Building Process CASE STUDIES Primary Data CONCLUSION 9

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1.4 STRUCTURE The next chapter, Chapter 2, provides an analysis of leading academic literature in relation to branding, and introduces the core concepts that form the backbon e of the dissertation. The nature of brands, their purpose and value are discuss ed. Chapter 3 explores how brands have traditionally been built, highlighting so me key factors that have contributed to brand success. 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. This chapter sets the context within which online brands must be built , by outlining the impact of the Internet on the business and competitive enviro nment. 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, as well as the interactive approach to attracting customers and building loyalty. The limitations of the Internet in terms of brand-buildin g are also discussed. Chapter 6 examines the brand-building efforts of seven com panies. These case studies provide a detailed and practical insight into how lea ding online brands have actually built their brands. The final chapter, Chapter 7, summarises the key findings, and outlines the opportunities for further resea rch. 11

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.1 INTRODUCTION In this chapter, these layers are Brands are made up of many layers and dimensions. unravelled to reveal the nature of brands and their reason for existence. The ch apter proceeds to describe the influence of brands on the buying process, and th e importance of customer satisfaction and brand loyalty. The concept of brand eq uity is outlined, explaining the value of brands, both to customers, and to comp anies. These concepts are central to brands and brand-building, whether online o r offline, and they form the backbone of this dissertation. 2.2 WHAT IS A BRAND? According to Rita Clifton, CEO of Interbrand Newell and Sorrell - a leading spec ialist brand consultancy firm - a brand is: "a mixture of tangible and intangibl e attributes, symbolised in a trademark, which, if properly managed, creates inf luence and generates value4" This definition truly captures the essence of a bra nd, and highlights the importance of brand management. Branding is about creatin g 'value', both for customers, and for the company. This value stems from the pr oducts and services that companies create and bring to the market, but extends f urther to encompass added values derived from factors such as the brand-customer relationship, the brand's emotional benefits and its self-expressive benefits see Figure 2.1. FIGURE 2.1 - 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, D. A, 'Building Strong Brands', (New York: Free Pres s), 1996, p. 74 4 Clifton, R. & Maughan, E., 'The Future of Brands', (London: Macmillan Press Ltd. ), 2000, p. vii 13

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include - a 'relationship', a 'reputation', a 'set of expectations', and a 'promise'. It is a company's promise to consiste ntly deliver a specific set of features, benefits, and services to customers. Br ands are richly endowed entities. They start life as ideas, making their way int o planning and strategy documents, yet ultimately reside as consumer perceptions . For some companies, brands are their most valuable asset. The space a brand oc cupies inside a customer's head can create a 'mental' patent, which grows out of the cumulative memory and the experiences customers have of products or service s. As such, 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. 2.3 THE LAYERS OF A BRAND Brands are made up of four layers - the core product or service, the basic brand , the augmented brand and the potential brand - Figure 2.2. FIGURE 2.2 - 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., 'Marketing success through differentiation - of anything', Harvard Business Review, January-February, 1980, p.86 14

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Product / Service At the most basic level, customers buy products to meet certai n functional needs. However, most products and services cannot survive on functi onality alone as this is usually matched in time. The most common barrier to com petition is building a brand. The Basic Brand The basic brand consists of the "n ame, term, sign, symbol, or design, or a combination of them, intended to identi fy the goods and services of one seller or group of sellers and to differentiate them from those of competitors"5. Essentially, this should support the offering 's performance and differentiate the brand from those of competitors. The Augmen ted Brand Successful companies seek a competitive edge through the enlargement o f the core product or service, with supplementary products and services (e.g. in formation, quick delivery) that enhance the customer's total purchasing and use ex perience. These products and services add value and make the offering much more difficult for competitors to emulate. The Potential Brand A brand achieves its p otential when added values are so great that customers will not willingly accept substitutes, even when the alternatives are substantially cheaper or more readi ly available (e.g. Coca-Cola, Kodak, Levi's). 2.4 PRODUCT AND SERVICE BRANDS Product brands are the original brand carriers. They are the historical core of branding because they are the most prevalent, and because they most readily come to mind when consumers are asked to recall brands. Service Brands (intangible) are much less numerous than their product counter parts. Intangible services are also more challenging to "package" and sell to consumers who often have difficu lty conceptualising, preferring things they can see and touch. Certain service b rands, such as in retailing, actually sell products, but the brand itself is the store, not the products it sells - The Gap stores, Southwest Airlines and Amazo n.com are examples. In fact, this is the case with all Internet companies, as th ey essentially perform the function of a 'virtual' intermediary or 'infomediary' and are intangible. 5 Kotler, P., 'Marketing Management - Analysis, Planning, Implementation, & Contro l', (Europe: Prentice Hall) 1996, 8th Ed. 15

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.5 BRANDING & THE BUYING PROCESS In order to understand the context and the role of brands, it is important to cl arify customers' underlying buying behaviour and the buying process. The buying process consists of five stages (Figure 2.3). FIGURE 2.3 - FIVE-STAGE MODEL OF THE BUYING PROCESS NEED RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE DECISION POSTPURCHASE BEHAVIOUR Source: Kotler, P., 'Marketing Management - Analysis, Planning, Implementation, and Control', (Europe: Prentice-Hall) 8th Ed., 1996, p.194 The process starts when the buyer recognises a need. This can be triggered by in ternal or external stimuli (advertisements). Once aroused, a consumer will be in clined to search for more information, either through heightened attention or th rough an active information search. Through gathering information, the consumer learns about competing brands, and evaluates them in terms of the degree to whic h their benefits and bundle of attributes satisfy their needs. Consumers differ as to which product / service attributes they see as important, and pay the most attention to the brands that will deliver the sought benefits. Therefore, it is critical to understand what attributes consumers value. Consumers develop a set of brand beliefs about the attributes of competing brands. These brand beliefs make up the brand image (this concept is re-visited in Chapter 3). These beliefs depend on their previous experiences with the brand, and the effect of selectiv e perception, selective distortion, and selective retention. In the evaluation s tage, the consumer forms preferences among brands and may form a purchase intent ion to buy the brand they prefer. However, two factors can intervene between the purchase intention and the purchase decision - attitudes of others and unexpect ed situational factors (Figure 2.4). 16

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 2.4 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, their negative at titude may influence the consumer's purchase intent or vice versa. A consumer's decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. Expensive purchases involve some risk taking. A consumer tri es to deal with this by gathering information from friends, and a preference for recognised brands they can trust. After a consumer has actually purchased the p roduct or service, they will evaluate their level of satisfaction - the customer will be highly satisfied, somewhat satisfied, or dissatisfied with the purchase decision. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. If perceived performance and quality excee d their expectations then they are satisfied, even delighted. If performance fal ls below their expectations, they will be dissatisfied and look for alternative brands in the future. Customers' expectations are particularly important when de aling with services, and especially important when dealing with purchases made t hrough the Internet, as these services are intangible and therefore, customers m ake decisions purely on the basis of their expectations. These expectations are formed through a combination of past experiences, word-of-mouth, advertising and communication. The level of customer satisfaction will influence whether they b uy the brand again and talk favourably or unfavourably about it to others. Highl y satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision, locking out potential competitors. Customer sati sfaction and loyalty are essential to creating successful brands. 17

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.6 THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY According to Thomas Jones and Earl Sasser (1995)6, 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. The customers at the bottom end of the scale are "terrorists" - those who actively attack the brand telling others not to buy fro m the company. At the opposite end of the satisfaction spectrum are "apostles" customers who are satisfied and loyal and talk favourably about the brand - Fig ure 2.5. FIGURE 2.5 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, T., & Sasser, E., 'Why Satisfied Customers Defect' - Harvard Busi ness Review, Nov-Dec 1995, p. 91 Loyalty is derived when customers are continuously satisfied over time. This sat isfaction encompasses the whole experience and not just a company's products or services. Customers that are passionately or emotionally loyal are those that ha ve built trust in a company, and believe that it will always act in their best i nterest. Trust is critical for a brand's success. Some traditional companies ide ntified as having established a strong trust relationship with their customers i nclude: Disney, Federal Express, Hewlett-Packard, Johnson & Johnson, Saturn, Sou thwest Airlines and Xerox7. 6 7

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Loyal customers are assets. 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, consistent orders Satisfied customers are the best advertis ement - they provide good word-of-mouth and are the best salespeople for the pro duct / service 2.7 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. Firstly, emotional loya lty is born out of a consumer's personal relationship with a brand. This relatio nship can actually start through the satisfaction of a functional need or expres siveness (self-image) need. Consumers cross the threshold from a mere brand rela tionship into emotional loyalty when they "animate" the brand, 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. Emotional loyalty can be also created through the formation of a strong user community ar ound the brand. The consumer reaches emotional loyalty when membership in the br and's user community becomes an end in itself. In this way, the brand becomes a link for people for whom fulfilling similar aspirations is a major life theme (e .g. Harley-Davidson motorcycle clubs). There is also clear evidence of this on t he Internet, with the emergence of "community brands9" such as Geocities ('home' of more than 3 million community members 'living' in 41 'neighbourhoods') and F ortuneCity.com. 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). 8 9 Peppers, D. & Rogers, M., 'The One to One Future', 1993 McWilliam, G., 'Building Stronger Brands through Online Communities' - Sloan Management Review, Spring 2 000 19

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Emotional loyalty leads to a deeper, almost irreplaceable bond as well as potent ially to the negative feelings of betrayal. Emotionally loyal customers build a sense of trust and two-way commitment with the brand, which goes well beyond the satisfaction of a specific need. FIGURE 2.6 - 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, S., 'Consumers and Their Brands: Developing Relationship Theor y in Consumer Research', Journal of Consumer Research, March 1998, pp. 343-373. Satisfying customers and building loyalty (creating "apostles") is the ultimate objective behind building a brand, and understanding the needs and buying proces ses of the target market is essential. 2.8 THE CONCEPT OF BRAND EQUITY Brands vary in the amount of power and value they have in the marketplace (Figur e 2.7). FIGURE 2.7 - BRAND PROGRESSION UNKNOWN BRAND BRAND AWARENESS BRAND ACCEPTABILITY BRAND PREFERENCE BRAND LOYALTY At one extreme, there are brands that are unknown by most buyers. Some brands ha ve a fairly high degree of brand awareness (measured by brand recall and recogni tion). Beyond this, there are brands that customers perceive as acceptable and w ould not resist buying. A stronger brand enjoys a high degree of brand preferenc e over competing brands. However, a 'powerbrand' tends to have a high degree of brand loyalty, whereby customers would be unwilling to substitute it with compet itors' offers. 20

BUILDING SUCCESSFUL BRANDS ON THE INTERNET A strong brand is said to have high brand equity, which is the value of the bran d over and above its commodity value. According to David Aaker (1991), 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". Th e major brand assets are brand loyalty, name awareness, perceived quality, stron g brand associations, and other assets such as patents, trademarks, and relation ships with distributors and strategic partners. The benefits of each are outline d in Figure 2.8. FIGURE 2.8 - BRAND EQUITY BRAND LOYALTY • • • • Reduced Marketing Costs Trade Leverage Attracting New Customers - Create Awarene ss - 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, D., 'Managing Brand Equity: Capitalising on the Value of a Brand Name', (New York: Free Press), 1991 10 Aaker, D., 'Managing Brand Equity: Capitalising on the Value of a Brand Name', ( New York: Free Press), 1991 21

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.8.1 THE VALUE OF BRANDS TO CUSTOMERS According to Jean-Noel Kapferer (1992)11, brands perform several functions that add value and customer benefits: • Identification - To be clearly seen, to make se nse of the offer, to quickly identify sought after products • • Practicality - To sa ve time and energy through identical repurchasing and loyalty Guarantee - To be sure of finding the same quality no matter where or when you buy the product or service • Optimisation - To be sure of buying the best product in the category, th e best performer for a particular purpose • Characterisation - To have confirmatio n of your self-image or the image that you present to others • Continuity - Satisf action brought about through familiarity and intimacy with the brand that you ha ve been consuming for years • Hedonistic - Satisfaction linked to the attractivene ss of the brand, to its logo, to its communication • Ethical - Satisfaction linked to the responsible behaviour of the brand in its relationship with society 2.8.2 THE VALUE OF BRANDS TO COMPANIES Brands create value for companies, in the following ways: • Brands, market share a nd profits - Typically a brand leader obtains twice the market share of the numb er two brand, and the number two twice the share of the number three12. The bran d leader is the most profitable and all beyond number two are unprofitable13. • Br and Leverage - The brand leader benefits from two main leverage effects: Higher volume leads to economies of scale in development, production and marketing; Pre mium pricing increases revenue. 11 12 Kapferer, J., 'Strategic Brand Management', (New York: Free Press), er, R. & Downham, J., 'Consumer Market Research Handbook', (London: , 3rd Ed., 1986 13 Golder, P. N., & Tellis, G., 'Pioneer Advantage: gic or Marketing Legend?', Journal of Marketing Research, May 1993, 22

1992 Worcest McGraw Hill) Marketing Lo pp. 158-170.

BUILDING SUCCESSFUL BRANDS ON THE INTERNET • The Value of Niche Brands - Dominating a niche market is usually more profitable than being fifth in a large market. • Brand Loyalty and Beliefs - Strong brands are more attractive to investors. Bran d loyalty also reduces marketing costs and enables firms to override occasional problems (e.g. Johnson & Johnson with Tylenol). • The Brand Barrier - Brand leaders usually have the financial strength to fend of f competitors. Potential competitors are usually reluctant to enter the market i f existing brands satisfy customers. In addition, brand leaders can exploit thei r superiority in the market (e.g. Coca-Cola “the real thing”). • Avenues for Growth - The product life cycle applies to products, not brands. Com panies can maintain a brand while modifying the underlying product to account fo r new technology, fashion or prevailing market conditions. The brand can also be used to penetrate new markets. • Motivating Stakeholders - Companies with strong brands attract good recruits. Th ey also tend to elicit community and government support. In trying to estimate the monetary value of brands, companies such as Interbrand (see Appendix A), and Young & Rubicam have created complex formulas, but there remains an ongoing controversy about how accurate and meaningful these measures are. 2.9 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. When a company creates this type of customer preferenc e and loyalty, it can build a strong market share, maintain good price levels an d generate strong cash flows. This, in turn, drives up share price and provides the basis for future growth. The next chapter describes the process of how brand s are built, the tools that are used, and the characteristics of successful bran ds. 23

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1 INTRODUCTION Building a strong brand is a complex task. This chapter spells out the tradition al brandbuilding process, highlighting important factors that contribute to the success of each step along the way. The major characteristics of successful bran ds are also reviewed. 3.2 OVERVIEW OF THE BRAND-BUILDING PROCESS The brand building process starts with the development of a strong value proposi tion. Once this has been established, the next step is to get customers to try t he brand. If the offering is developed properly, it should provide a satisfactor y experience and lead to a willingness to buy again. To entice trial and repeat purchase requires triggering mechanisms, which are created through advertising, promotion, selling, public relations, and direct marketing. The company needs to communicate the values of the brand and then reinforce brand associations to st art the wheel of usage and experience, and keep it turning. Through the combinat ion of the stimulus of consistent communications and satisfactory usage and expe rience, brand awareness, confidence and brand equity are built. This is illustra ted in Figure 3.1. FIGURE 3.1 - BRAND BUILDING MECHANISM PRESENTATIONS DISPLAY ADVERTISING BRAND EQUITY POTENTIAL BRAND SELLING PR PROMOTION TRIAL LOYALTY PRODUCT PRODUCT / OR SERVICE SERVICE DIFFERENTIATION ADDED VALUE SATISFIED CUSTOMERS 25

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3 THE VALUE PROPOSITION Brand-building starts with a clearly defined value proposition - a strong offer that a potential customer would find compelling and interesting. In order to do this, a company must develop a strong understanding of who their potential custo mers are, what they value and how the products or services should be optimised o r configured to deliver this value (Figure 3.2). The value proposition must be c ontinuously re-evaluated to respond to changes in the marketplace. FIGURE 3.2 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, a brand must deliver a quality product or ser vice that meets the functional needs of customers and differentiates itself from competitors. It should seek to augment its basic appeal with added value throug h the provision of additional products or services to delight customers. In this way, the brand can elicit feelings of confidence that it is of higher quality t han competitors'. As such, a compelling value proposition is the combination of an effective product or service (P), a distinctive brand identity (I), and added value (AV). BRAND = P X I X AV These three characteristics are multiplicative rather than additive - each is es sential. Without a good product or service, it is impossible to build a successf ul brand. Similarly, unless differentiation and awareness can be developed, it w ill never attract a strong client base. 26

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3.1 Added Value Most buying decisions are Added value is at the heart of building successful brands. influenced by brand values, which are additional to those based upon real perfor mance. The large number of decisions, the pace of technical change, the number o f competing alternatives and the large variety of advertising and selling messag es, mean that buyers look for short cuts. Reputable brand names provide confiden ce and allow customers to cut through the risks and complexity of choice. Added values also occur when brands are bought for emotional reasons to satisfy other needs besides functional needs. People use brands to express their lifestyles, i nterests, values or wealth. Customers choose brands, which they perceive as meet ing their needs. In today's affluent society, these needs are as likely to be ab out satisfying self-actualisation or esteem needs, or to gain a sense of belongi ng, as they are to be about satisfying basic physical and economic needs14. Bran d values derive from five major sources15: • Experience of Use - if a brand provid es good service over time, it acquires added values of familiarity and proven re liability. • User Associations - brands frequently acquire an image from the type of people who are seen as using them. Advertising and sponsorship are often used to convey images of prestige or success by associating the brand with glamorous personalities. • Belief in Efficacy - in many cases, if customers have faith that a brand will work, it is more likely to work effectively for them. For pharmace uticals, cosmetics and high-tech products, faith in brand generates satisfaction in use. Beliefs in efficacy can be created by comparative evaluations and ranki ngs from consumer associations, industry endorsements and newspaper editorials. • Brand Appearance - the design, layout and appearance of the brand can clearly af fect preference by offering cues to quality. • Manufacturers' Name and Reputation - In many situations a strong company name (e.g. Coca-Cola, Gillette, Sony, Hewl ett-Packard, Kellogg's) attached to a new product will transfer positive associa tions, providing confidence and incentive to trial. 14 15 Doyle, P., 'Marketing Management and Strategy', 2nd Ed. (Europe: Prentice-Hall), 1998, pp. 169 Jones, J. P., 'What's in a Name? Advertising and the Concept of B rands' (Lexington, MA, Lexington Books), 1986 27

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.3.2 Distinctive Brand Identity A brand identity is the message sent out by the brand through its name, features , visual appearance, and advertising. This may be different from the brand image , which depends on how the target market perceives the brand. A company should s eek to differentiate its brand through developing a distinctive identity. Jean-N oël Kapferer (1992) identified three levels of a brand identity16 - Figure 3.3: • Th e Brand Core - the fundamental or genetic code of the brand, which remains fixed over time. • The Brand Style - articulates the brand core in terms of the culture it conveys, its personality and its image or self-projection . • The Brand Theme - the way the brand communicates through its advertising, press releases, packag ing, etc. Themes include the physical appearance (logo, colour scheme, and visua l appearance), its reflection (e.g. type of spokesperson / customer image used t o advertise the brand), and the relationship expressed (e.g. glamour, prestige, friendly). Brand themes are the most flexible element and will tend to change wi th fashion, style or cultural differences from one country to another, however t he brand style and core tend to be less flexible. 16 Kapferer, J., 'Strategic Brand Management', (New York: The Free Press), 1992 28

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.3 - 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, J., 'Strategic Brand Management', (New York: Free Press), 1992 The brand prism enables management to understand the brand, its strengths and op portunities. Secondly, it helps in developing the brand strategy and the formula tion of a distinctive positioning in the market. It also facilitates consistency in the message being transmitted through presentation (e.g. website design, str ucture and ease of use), advertising, below-the-line activities, and through lin e and brand extensions. Finally, understanding the brand's core and style helps set the perimeters of brand extensions - how far the brand can be meaningfully s tretched to other products and market segments. 29

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.4 DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION Once the value proposition is clearly defined, the company must ensure that it d evelops the appropriate structure, systems, strategy (partnerships and alliances ), skills, management style, culture and staff needed to support, deliver and re inforce this value proposition (see Appendix B - The McKinsey 7-S Framework). Th e value proposition must then be articulated in terms of the 'marketing mix' - o ften referred to as the '4Ps' - Product and service features, Price, Promotion a nd Place (distribution strategy). The value proposition must be communicated to entice customers to try the product / service. If the offering is developed prop erly, it should lead to satisfaction and re-purchase. Before potential customers can buy a product / service, they must learn about it. This learning is called the adoption process17 - Figure 3.4. FIGURE 3.4 - INNOVATION-ADOPTION MODEL AWARENESS INTEREST EVALUATION TRIAL ADOPTION Source: Rogers, E., 'Diffusion of Innovations', (New York: Free Press), 1962, pp .79-86 The Innovation-Adoption Model consists of: • Awareness - The company has to create awareness of the brand, and its products / services. Advertising and PR are com mon tools for achieving awareness. • Interest - Customers need to be stimulated to seek information about the brand's uses, features and advantages. • Evaluation Customers consider whether the product / service will meet their particular need s. Personal sources such as word-of-mouth from friends, colleagues and opinion l eaders become important influences at this stage. • Trial - The customer tries the product / service for the first time and decides whether to adopt it based on t heir expectations, and the product / service's perceived performance. • Adoption The customer is satisfied and decides to make regular use of the product / serv ice. 17 Rogers, E., 'Diffusion of Innovations', (New York: Free Press), 1962, pp.79-86 30

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Traditionally, companies have used the tools of the promotions mix - advertising , direct marketing, sales promotion, personal selling and public relations / pub licity - to move customers through the adoption process. Advertising and public relations can be effective in generating awareness and interest. encouraging eva luation and trial. It is beneficial for companies to accelerate the adoption pro cess before competitors emulate the benefits they offer. Enticing customers to p urchase again and adopt the brand not only requires a successful trial experienc e, but enhanced customer interaction through relationship building. 3.5 BUILDING CUSTOMER RELATIONSHIPS Sales promotions and sampling are often used for Building relationships with customers extends beyond a single transaction. This is often referred to as Customer Relationship Management (CRM). This focuses on establishing a longterm, multi-transaction relationship, when each trusts the ot her to deal fairly and reliably. Over time, this process enables an exchange of information, providing insight into customers' needs and wants. This information is a key competitive advantage, allowing companies to communicate regularly wit h their customers and customise their interaction. In this way, companies can in crease buyers' satisfaction, making them less likely to switch to a competitor. Customer service is an important element of this relationship. Berry and Parasur aman (1991) identified three customer relationship-building approaches18: • • Financ ial Benefits - such as airline frequent flyer programmes, & loyalty / discount c ards. Social Benefits - by learning customers' individual needs and wants and in dividualising and customising service and contact with the customer. • Structural Ties - for example, the company may supply customers with special equipment or t ools (e.g. Internet linkages, software) to help customers interact with the comp any. Through building relationships with customers, companies can increase the v alue of each customer, while strengthening the position and value of the brand. 18 Berry, L. & Parasuraman, A., 'Marketing Services: Competing Through Quality', (N ew York: Free Press), 1991, pp.136-142 31

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.6 CHARACTERISTICS OF SUCCESSFUL BRANDS Several factors contributing to the success of brands have been identified19, in cluding: • A Quality Product / Service Experience - Satisfactory experience is the major determinant of brand values. If the quality of the experience deteriorate s, or if the brand is surpassed by superior offers from competitors, then its po sition will be undermined. • First-Mover Advantage - Being first into the market d oes not necessarily bring success, but it makes the task easier. It is easier to capture a share of the consumer's mind and build a customer base, when the bran d has no competitors to rival its position. • Unique Positioning Concept - If the brand is not the innovator, it must have a unique positioning concept - a segmen tation scheme, value proposition or augmented brand, which will add value and di stinguish it from competition. • Strong Communications Programme - A successful br and requires an effective selling, advertising or promotional campaign, which wi ll communicate the brand's existence, its function and psychological values, tri gger trial and reinforce commitment to it. Without building awareness, comprehen sion and intention to buy, the brand is meaningless. • Time and Consistency - Trad itionally, brands were not built quickly. It often takes years to build up the a dded values, and establish a trusting relationship. 3.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition . Once the framework has been established and the organisation configured to pro vide this proposition, companies must actively communicate it to the target audi ence to entice trial. As customers build trust in the brand through satisfaction of use and experience, companies have the opportunity to start building relatio nships with their customers, strengthening the brand further, and making it more difficult for competitors to emulate. The Internet provides the opportunity for companies to create compelling value propositions never before possible, while providing new tools for promotion, interaction and relationship building. As a r esult, it has a profound impact on the traditional brand-building process. As su ch, the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment. 19 Doyle, P., 'Marketing Management & Strategy', (Europe: Prentice-Hall), 1998, 2nd Ed., pp.176-177 32

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 4 THE INTERNET 33

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1 INTRODUCTION The Internet is transforming the business environment, creating new challenges a nd opportunities. This chapter provides an overview of the Internet and its defi ning characteristics, highlighting the key developments that have contributed to its explosive growth and its impact on the business environment. 4.2 OVERVIEW O F THE INTERNET The Internet is a world-wide network of networks. In essence, it is a common tec hnology platform that allows computing devices to communicate with each other. I n doing so, it offers a number of alternative channels that enable businesses an d people to communicate. The three core channels include e-mail (the most common ), news groups and mailing lists, and the 'world wide web' (www) - Figure 4.1. F IGURE 4.1 - THE THREE LEVELS OF THE INTERNET NEWS GROUPS & MAILING LISTS Allow users to communicate with each other, but in p ractice not in real time. E-MAIL Is the part of the Internet that most users use at present. 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, and provide the opportunity for the creation of Interactivity The world wide web (www) is a large network of documents, which contain hypertex t and pictures, and provides the opportunity for dynamic interaction. Hypertext allows information to be organised in a user-friendly way that is easily accessi ble. Information is becoming a major part of the products and services that peop le buy, and a critical source of added value. 34

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.2.1 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 - the cost of searching for information and the cost of the information itself is significantly reduced (and in many cases is free). • It Allo ws for Two-way Communication and Interactivity - this radically alters the proce ss of interaction between communicating parties, allowing both parties to identi fy each other and build one-to-one relationships - not previously available with mass medium forms of communication. • It Overcomes the Barriers of Time and Space - The Internet is a global network and can be reached from everywhere, regardle ss of where the computer or Internet access device is physically located. The In ternet can also be accessed at any time - 24 hours a day, 7 days a week. These q ualities eliminate the barriers of time and space that exist in the physical wor ld. These characteristics combine to create a very powerful medium. By allowing for direct, ubiquitous links to anyone, anywhere, the Internet lets individuals and companies build interactive relationships with customers and suppliers, and deliver new products and services at low cost. These defining characteristics ha ve fuelled its explosive growth. 4.3 THE GROWTH OF THE INTERNET The origins of the Internet date back to 1969, when the United States Defence De partment developed the 'ARPAnet', which was intended to link military networks t ogether. Graph is not drawn to scale). The context of the Internet and certain k ey developments are highlighted in the Figure 4.2 (Note: 35

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.2 - GROWTH IN INTERNET HOST COMPUTERS AND MAJOR DEVELOPMENTS 1995: 100,000,000 10,000,000 1,000,000 100,000 1969: 10,000 1,000 100 '82 '83 '8 4 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 Source: Network Wizards, 1998, as cited in 'E-Business Technology Forecast' - a PricewaterhouseCoopers Report, 2000 Internet / ARPAnet was created Dell, 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 - Figure 4.3. FIGURE 4.3 - 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.economist.com) 36

BUILDING SUCCESSFUL BRANDS ON THE INTERNET The number of Internet users is constantly increasing and by end-2000, there wil l be an estimated 375 million Internet users world-wide, increasing to 500 milli on users by 200220. 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. Easier access to these networks provided by point-and-click web browsers. Multimedia development tools that can be used to create rich content. The emergence of open standards in development tools and at the network protocol level (e.g. TCP/IP), making it more cost effective for software developers and other technology providers to create interoperable products. The growth in suppo rt services (e.g. web design, hosting, and gateway services). The development of critical processes (ordering, billing, payment, 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. As shown in Figure 4.4, the momentum created by all these forces has created a virtuous cycle of growth. FIGURE 4.4 - THE VIRTUOUS GROWTH CYCLE OF THE INTERNET INFRASTRUCTURE DEVELOPS - Low-cost networking alternatives - High-powered servers - Attractive infrastru cture and middleware software - Cheap bandwidth - Momentum toward open standards COMMUNITIES OF INTEREST PROLIFERATE - E-Marketplaces - Content Aggregators - Consumer Aggregators TECHNOLOGY AND SERVICE PROVIDERS MULTIPLY COMPUTING SERVICES BECOME MORE WIDESPREAD - Cheap microprocessors & RAM - Higher PC penetration among consumers and compan ies - New generation of PDAs and Internet appliances Web site designers Outsourced networks Web hosts Ancillary services Source: Harrington, L., Reed, G., 'Electronic Commerce (finally) Comes of Age', The McKinsey Quarterly, 1996, No.2 20 'World Online Populations' - CyberAtlas Internet Statistics and Market Research, 2000 (http://cyberatlas.internet.com) 37

BUILDING SUCCESSFUL BRANDS ON THE INTERNET A recent study by the Stanford Institute for the Quantitative Study of Society ( 2000), reveals the wide range of areas where people are embracing the Internet from communicating (90% use e-mail) and sourcing information, to interacting (e .g. chat rooms, entertainment) and purchasing (37%) - Figure 4.5. These activiti es highlight the adoption of the Internet as an interactive, communication and i nformation tool. FIGURE 4.5 - 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, as cited in th e Economist Intelligence Unit (EIU), April 13, 2000 (www.eiu.com) 38

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.4 THE INTERNET AND E-COMMERCE E-commerce describes the use of the Internet as a medium and as a market for com merce. The main difference between the Internet and other electronic media (i.e. fax, telephone) is that the Internet goes beyond just enabling transactions. Th e Internet becomes an information-rich 'virtual' market space through which buye rs and sellers interact. These 'virtual' marketplaces are not fixed in physical territory but are created by the combination of standards-based networks, web br owsers, software, content, and people. Conducting business over the Internet ('e -business') represents a fundamental shift in how buyers and sellers interact. T he buyer and seller 'face' each other through an electronic connection. There is no need to travel to a physical location, no order book, and no cash register. Instead there is a website. The value of e-commerce transactions and market fore casts vary widely among research firms and government agencies. However, they al l project the value e-commerce transactions to grow at unprecedented rates. proj ected by Gartner Group. FIGURE 4.6 - WORLD-WIDE COMMERCE ON THE INTERNET (1998-2 003) 5000 4500 4000 3500 Billions US$ 3000 2500 2000 1500 1000 500 0 1998 Figure 4.6 outlines the growth in the value of online Business-to-Business commerce (B2B) and Business-to-Consumer (B2C) transactions, as B2C B2B 1999 2000 Year 2001 2002 2003 Source: Gartner Group, April 2000 39

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.5 THE IMPACT OF THE INTERNET ON BUSINESS The Internet has had a profound impact on the way business is being conducted how companies operate, how they compete and how they serve their customers - and revolutionary new business models are emerging, which are often disruptive to t raditional business models21. Although the particular impact will differ between industries, 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, suppliers, partners and other c orporate constituencies. By allowing customers to talk knowledgeably and directl y to suppliers, the Internet is sidelining the role of many traditional intermed iaries, and transforming traditional distribution channels. This is threatening to undermine many old established brands. At the same time, the explosion of inf ormation is placing a premium on skilled information management. New brands and business models are emerging to seize this opportunity, some of which look set t o become the superbrands of the future (e.g. Yahoo!). Improved Core Business Pro cesses The use of Internet-based technologies as the platform over which the org anisation's processes flow, represents a level of efficiency and integration previ ously unattainable. For example, CISCO e-enabled its financial systems and now h as the capability to close its financial year within one day. Additionally, 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. operation (e.g. Dell Comp uters). Globalisation of Business The Internet facilitates the globalisation of business by providing access to a global audience. A 'virtual' presence can miti gate the cost of having to invest in physical facilities. The Internet also faci litates the development and co-ordination of global activities (e.g. through the use of extranets). 21 integration' have allowed companies to move from 'make-to-sell' to 'make-to-orde r' modes of Christensen, C., & Overdorf, M., 'Meeting the Challenge of Disruptive Change', H arvard Business Review, March - April 2000, Volume 78 Issue 2, pp. 66-76 40

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

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. Enhanced communication capabilit ies allow companies to build one-to-one relationships with their customers and s uppliers that were previously impossible. It allows companies to improve custome r service, achieve global reach and realise a new source of cost advantage. As s uch, it provides the opportunity to reach customers where they want, when they w ant, how they want and with the levels of customer service they demand. 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. Examples of emerging information age business structures include f lat versus hierarchical, extensive outsourcing, supply chain cooperation, and mu ltiple strategic alliances and partnerships. The opportunity of linking the comp lete supply chain 'virtually', combined with intense competitive pressures, and the need for speed and flexibility have accelerated the unbundling of business s ystems. Increasingly, companies are focusing on the part of the value chain that is most valued by customers or where their company has a core competence, and p artnering up with the best for the remaining activities. In this way, companies can provide customers with a strong value proposition by offering them the best in quality, variety, information, advice and convenience. The Strategic Importan ce of Alliances and Partnerships Although this point has already been touched up on, alliances and partnerships have taken on a new level of strategic importance . Traditionally, companies have looked upon alliances only as a means of filling gaps, and most traditional partnerships were vertical, linking companies with s uppliers and customers up and down a pre-defined value chain. However, most Inte rnet and e-commerce partnerships extend beyond this, linking companies with comp etitors and players from entirely different industries and business sectors, thu s creating a 'value net23'. The extent of this partnering is illustrated in Figu re 4.7, which highlights the typical structure and dynamics of an online company . 23 'The Future of E-Business' - A Research Report by TeslaGroup, 1999 - (www.teslag roup.com) 42

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 4.7 - THE STRUCTURE OF AN ONLINE COMPANY SUPPLIER CUSTOMER SUPPLIER SPECIALTY SUPPLIER FULFILMENT AND DISTRIBUTION PARTNERS PORTALS CUSTOMER STRATEGIC MARKETING ALLIANCES SPECIALTY SUPPLIER www.dot.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, D. G., & Stirton, S. 'Organising for e-Commerce' - a Boston Consulting Group (BCG) Analysis, April 2000 In an attempt to provide a rich customer experience, many online companies are b lending together the products and services of a wide range of companies. This pr ovides customers with added value, while making the offering hard to duplicate o ff-line. Partnering with portals and affiliate web sites is important in driving traffic to a web site. 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. 4.6 CONCLUSION The Internet and its strategic impact are not technological issues - they are bu siness issues. The Internet is transforming every business to some degree. New o pportunities for efficiency and co-ordination are emerging, competition is inten sifying, the pace of business is accelerating and power is shifting to the custo mer. As such, it is transforming the competitive landscape and brand-building en vironment, while triggering the emergence of new brandbuilding strategies, tools and opportunities. This is the substance of the next chapter. 43

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.1 INTRODUCTION The Internet is changing the brand environment or 'brandscape'. This chapter exp lores the new dynamics of brands and the critical importance of customer loyalty online. New strategies and tools for building brands on the Internet are identi fied, including the interactive approach to attracting customers and building lo yalty. The limitations of brand-building on the Internet are also discussed. 5.2 THE NEW DYNAMICS OF BRANDS Traditionally, in addition to providing added value, 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. However, the Internet makes searc h and comparison much easier. This threatens to undermine the value of brands. O n the other hand, the logic of the Internet cuts another way. Transactions on th e Internet require customers to provide detailed personal information - names, a ddresses, credit card numbers, etc. Generally, people have concerns about sharin g personal information. In addition, the intangible nature of the Internet, and the fact that customers are buying goods that, in most cases, they have never ha ndled or seen (except on-screen), has placed greater importance on trust and sec urity. People only tend to transact with sites they know and trust - sites that provide a wealth of information and make comparison shopping easy, where the use r feels a part of, and sites that understand the user's needs and preferences24. This highlights the surfacing of information and relationships as key sources o f added value in the Internet economy. Customers derive added value through the provision of information on the products or services they buy, as well as on top ics of interest related to the brand and product characteristics25. Traditionall y, brands have been developed in an environment whereby a company creates a bran d, and projects it onto a third party intermediary (the media). In response, man y unnamed customers develop a 'relationship' with the brand. The Internet, on th e other hand, offers interactivity, whereby the company can establish a dialogue and 24 Marathe, J., 'Internet Portals' - Durlacher Research, May 1999 (www.durlacher.co m) 45

BUILDING SUCCESSFUL BRANDS ON THE INTERNET

interact with individual consumers on a one-to-one basis26. In doing so, a compa ny can listen, learn, understand and relate to customers, rather than simply spe aking at customers. This creates the opportunity for companies to build stronger relationships than previously attainable. However, this also poses a challenge as these relationships may take on a life and character of their own. The differ ences between the traditional approach and the one-to-one approach are outlined in Table 5.1. TABLE 5.1 - THE EMERGING BRAND-BUILDING ENVIRONMENT TRADITIONAL AP PROACH • • • • • • • • • Monologue Public Mass Anonymous Adversarial Focused primarily on one-off tr tions Remote Research Manipulative, 'stimulus-response' approach Standardised • • • • • • • • ONE-TO-ONE APPROACH Dialogue Private Individual Named Collaborative Focused on relationship over tim e Intimate learning Genuine needs driven, service approach Customised The Internet gives companies control over all their interactions with customers and therefore, brand-building must focus on the end-to-end customer experience from the promises made in the value proposition, to its delivery to the custome r. relationship building characteristics of the Internet. In maximising the cust omer experience, companies have to find innovative ways of leveraging the inform ation and 25 McCann, Prof. J., 'Adding Product Value Through Information', - Fuqua School of Business, Duke University, January 28, 1997 (www.duke.edu) 26 Peppers, D., Roger s, M., & Dorf, B., 'Is Your Company Ready for One-to-One Marketing?' - Harvard B usiness Review, January-February, 1999, pp. 151-160 46

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.3 THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY According to a recent study27, 75% of senior executives believe the success of a n e-business initiative depends entirely on its ability to build customer loyalt y. In fact, it could be argued that customer loyalty is even more critical onlin e. This view is reinforced by in-depth studies carried out by Bain & Co. (2000) which identified the following factors28: Companies will not break-even on one-time shoppers - often, customer acquisition costs are high, and to recover their investment, companies need to retain custo mers so that they return to the site repeatedly. Many e-retailers ('e-tailers') are averaging more than $100 to acquire a new customer, and some are spending ov er $50029. Therefore, it is very unlikely that an online retailer can break even on a one-time shopper, unless they are selling high-price, high-margin items. Repeat purchasers spend more and generate larger transactions - due to more freq uent shopping and larger purchases. Repeat customers refer more people and bring in more business - word-of-mouth is the single most effective and economical way online businesses grow their sites . Loyal customers are more willing to buy other products from the company. For exa mple, almost 70% of The Gap online shoppers said that they would consider buying furniture from The Gap. Repeat purchasing not only binds trust, but also provid es more opportunities for cross-selling. These points stress the importance of online customer loyalty, and with customer s holding all the power, companies must ensure that they provide a completely sa tisfying end-to-end customer experience. This is further reinforced by the fact that, on average, a disgruntled online customer tells 10 people about a poor exp erience30. 27 'Electronic Business Outlook', - Research by PricewaterhouseCoopers / The Confer ence Board, 1999 (www.pwcglobal.com and www.converence-board.org) 28 Rigby, D., Baveja, S., Rastogi, S., Zook, C., Chu, J., & Hancock, R., 'The Value of Online Customer Loyalty and How You Can Capture it', - A Mainspring Communication Repor t in collaboration with Bain & Co., March 17, 2000 (www.bain.com) 29 Hoffman, D. L. and Novak, T. P., 'How to Acquire Customers on the Web', Harvard Business Re view, MayJune 2000 30 A Forrester Research Study, as cited in 'Creating a High-I mpact Digital Customer Experience' - An A. T. Kearney White Paper, 2000 47

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET These characteristics suggest there may be 'first-mover' advantages for business es that establish leadership positions. With no competitors around, being first into a market makes it easier to capture the consumer's share of mind. As the co mpany builds a customer base and develops a relationship with customers, its abi lity to track customer preferences and customise offerings improves, enhancing t he interaction. This makes it more efficient in improving product selection, cro ss-selling and up-selling33. It also allows online companies to tap supplementar y revenue streams, including direct marketing, advertising and referrals, delive ring increased margin per customer - Figure 5.2. FIGURE 5.2 - THE VIRTUOUS SPIRAL OF ONLINE GROWTH • Unique value added for customers • Scaleable customer service, fulfilment • Defensib le advantage against competitors SCALEABLE, 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, direct marketing, link revenues 32 33 Melnicoff, R. M., '5 Rules of the eEconomy', Outlook 1999, No. 21 - A Publicatio n by Andersen Consulting 'The State of Online Retailing' - A Shop.org Study in c ollaboration with The Boston Consulting Group, Nov 1998 49

BUILDING SUCCESSFUL BRANDS ON THE INTERNET In addition, the larger customer base provides online companies with more levera ge in attracting and negotiating with key content, commerce and distribution par tners. This, in turn, provides added value and strengthens the company's ability to build customer loyalty and instil switching costs. An expanding customer bas e enables retailers to amortise the cost of brand-building over a larger base. G iven the connectivity of the Internet among customers, larger sites can leverage more customer advocates to reduce customer acquisition costs. Larger sites can also negotiate better supplier discounts or product placement fees. This snowbal l effect favours first-movers, as once a strong lead is established, the leader will pick up momentum and will stand to gain an insurmountable advantage - unles s the leader makes a serious mistake, or until a competitor finds a way to chang e the game again. When a company reaches 'critical mass', the brand begins to ta ke hold, and the cost of switching to an alternative brand becomes quite high, l eading to the exponential expansion of the customer base. By the time a company has reached critical mass, its growth curve relative to a new entrant is somewha t daunting. As a result, the value of the company rises exponentially with marke t share. This is the logic behind some of the extraordinary valuations of Intern et companies. 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. New marketing strategies, such as 'viral' marketing, have emerged in attempts to exploit the network effect an d potential exponential growth of the customer base. 5.5 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, creating a potentially exponent ial growth (like a virus) in the message's visibility and effect. It is often re ferred to as "word-of-mouth", "creating a buzz", "leveraging the media", and "ne twork marketing". Word-of-mouth is a particularly powerful medium, as it carries the implied endorsement from a friend. The Internet, with its e-mail lists, web sites, chat rooms and bulletin boards, makes communication tighter, and word-of -mouth even more effective. As a result, viral marketing is an effective tool in getting a message out fast, with a minimal budget and maximum effect. 34 'The State of Online Retailing' - A Shop.org Study in collaboration with The Bos ton Consulting Group, Nov 1998 50

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.5.1 The Case of Hotmail.com The classic example of viral marketing is Hotmail. com, a company now owned by Microsoft. Hotmail.com was one of the first free web -based e-mail services, and they created a subscriber base more rapidly than any company in history. Today they are the largest e-mail provider in the world wit h over 40 million users. Their strategy was: • Give away free e-mail addresses and services • Attach a simple tag at the bottom of every free message sent out, sayi ng: • "Get Your Private, Free Email at http://www.hotmail.com" • Then stand back whi le people e-mail their network of friends and associates • These people then see t he message, sign up for their own free e-mail, and then propel the message even further to their own ever-increasing circles of friends and associates. • Each new user becomes a company salesperson, and the message spreads organically. In its first 1.5 years, Hotmail acquired over 12 million subscribers. A traditional pr int publication would hope to reach 100,000 subscribers within a few years of la unch, but Hotmail signs up more than 150,000 subscribers every day, seven days a week. Digital viruses can spread internationally more rapidly than biological v iruses that rely on the physical proximity of the host. In fact, Hotmail is used in over 160 countries and is the largest e-mail provider in countries such as S weden and India, where they have never carried out any promotional activities. Other companies have adopted viral marketing techniques such as Mirabilis (acqui red by AOL), eGroups and Geocities (both recently acquired by Yahoo!). friends t o visit it, and in doing so spread the word for Geocities. 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, they will have a powerful viral opportunity at their disposal. 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). Geocities enables people to create personal websites for free. When a user builds a website, they tell all their 51

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.6 THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK The 7Cs Framework35 outlines the major components that add value and contribute to the quality of an online experience (Figure 5.3). In essence, the 7Cs are a c ontinuation and restatement of marketing's traditional 4Ps (Product, Price, Prom otion, Place). FIGURE 5.3 - THE 7CS FRAMEWORK CONVENIENCE COMMUNICATION CONTENT The 7Cs CUSTOMER CARE CUSTOMISATION CONNECTIVITY COMMUNITY Source: Adapted from 'Creating a High-Impact Digital Customer Experience' - An A . T. Kearney White Paper, 2000 Convenience Convenience goes beyond the ability to conduct transactions around t he clock. The customers' ability to access and display information rapidly is ex tremely important36. Sites that are difficult to use can cause frustration, maki ng customers 'click off' to another site. In fact, 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. As 35 36 'Creating a High-Impact Digital Customer Experience' - An A. T. Kearney White Pa per, 2000 'The E-business Technology Forecast' - A PricewaterhouseCoopers Report , 2000 37 Rigby, D., Baveja, S., Rastogi, S., Zook, C., Chu, J., & Hancock, R., 'The Value of Online Customer Loyalty and How You Can Capture it', - A Mainsprin g Communication Report in collaboration with Bain & Co., March 17, 2000 (www.bai n.com) 52

BUILDING SUCCESSFUL BRANDS ON THE INTERNET shown in Figure 5.4, ease-of-use, ease-of-navigation, and fast response times ar e among the most important factors in establishing web brand loyalty38, whereas a slow response time and site downtime will have a significant negative impact. FIGURE 5.4 - 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. as cited in Business Week Magazine, 29th October 1999 (www.businessweek.com) Content Content is relevant and useful information directed at the needs and int erests of the targeted users. With almost infinite display space and inventory c apability, online companies have the opportunity to provide rich, up-to-date inf ormation, expert insights, and a wide range of products, which can enhance the c ompany's value proposition. Content is considered to be a 'sticky' application39 as it entices visitors to spend longer periods of time on the site. 38 39 Cognitiative Inc. as cited in Business Week, October 29, 1999 (www.businessweek. com) Davenport, T., 'Sticky Business', CIO Magazine, February 2000 Issue 53

BUILDING SUCCESSFUL BRANDS ON THE INTERNET A certain amount of 'commerce content' is important to support the purchase deci sion. According to Forrester Research40, 31% of online consumers use the Interne t for obtaining product information, even if they purchase offline, and nearly 2 0% use it for post-sales support. Good content can help to educate buyers and se llers and create a greater sense of control over the transaction. On the other h and, visitors should not be engulfed with too much information. Other content in cludes community-generated content, and advertising (if it is relevant and usefu l). Customisation Customisation involves tailoring the presentation of a web-sit e to individuals, based on profile information, demographics, or prior transacti ons. Online sites can track a customer's purchase history and modify its service accordingly. Often, sites allow 'surfers' to customise their experience by choo sing what type of information they view through personalised sites (such as My Y ahoo!), as well as through loyalty programmes that provide targeted benefits. 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). Customisa tion creates the feeling of a one-to-one relationship, which enhances the user's online experience. Community Online communities are emerging as new gathering p laces for consumers with similar interests (e.g. iVillage and Geocities). These sites allow members to interact with one another, share information and access a wide range of services. An important contribution of these communities is that they provide members with a medium to communicate with each other. Members can i nteract in chat rooms, use bulletin boards, and organise live events. 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. An online commun ity offers a compelling way to entice customers back to a site. It fosters a sen se of belonging41 among the members, which is facilitated by a combination of fa ctors (Figure 5.5). For a community to work, it needs a critical mass of members 42. 40 41 Morrisette, S., Clemmer, K., & Bluestein, W. - A Forrester Research Report, 1999 (www.forrester.com) McWilliam, G., 'Building Stronger Brands through Online Com munities' - Sloan Management Review, Spring 2000 42 Armstrong, A., & Hagel, J., 'Real Profits from Virtual Communities' - The McKinsey Quarterly, 1995, No. 3. 54

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.5 - 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, C., Mulcahy, M., O'Donnell & Gupta, A., 'Making Real Sense of Virt ual Communities' - A PricewaterhouseCoopers Study, 1999 Communities enhance the speed and value of information sharing, allowing custome rs to deepen their experience with a brand and build more personal connection, a nd can create emotional loyalty, when membership in the brand's community become s an end in itself43. Connectivity Connectivity is concerned with site-to-site c onnectivity and user-to-site connectivity. Site-tosite connectivity focuses on c onnecting users to other relevant sites. Companies can provide a selection of re lated links that complement the site's purpose and value proposition, as well as attracting traffic from other sites. Connectivity is enhanced by linking to sea rch engines / portals44 and popular sites where target customers are likely to b e browsing (see Figure 5.6). This is similar to placing offline stores in high t raffic areas. Once customers know of a site, they opt to input the URL (Internet address - www.brand-name.com) directly into the browser and access the site imm ediately. 43 Fournier, S., 'Consumers and Their Brands: Developing Relationship Theory in Con sumer Research', Journal of Consumer Research, March 1998, pp. 343-373. 44 Searc h engines / portals enable users to find information based on relevancy to a que ry or keywords. 55

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.6 - 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. The development of loyalty programmes, which provide targeted a nd unique (customised) benefits to the customer, serves this purpose and helps t o build customer loyalty. Other tools such as bookmarking the page can also faci litate connectivity. Customer Care Online customers often require assistance and reassurance. Customers share secur ity and privacy concerns, and a recent survey by MarketWatch45 revealed that 62% of surfers feel that giving out personal information on the Internet is unsafe. Therefore, customer support at all stages of the interaction is important, and can be provided through e-mail, online chat, toll-free telephone numbers, and FA Q pages (Frequently Asked Questions) to solve problems. In addition, customer ca re activities can involve providing a variety of payment, delivery and return op tions, as well as features such as gift-wrapping. Communication The Internet provides the opportunity to establish dialogue with customers throu gh e-mail, live chat, and online surveys. Communication can be tailored to speci fic user interests and should allow for two-way interaction. It is important in building relationships, as well as informing and reminding customers of special offers, news up-dates, activities, events and subjects of interest to the custom er. 45 MarketWatch, (www.marketwatch.com) 56

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5.7 THE INTERACTIVE BRAND-BUILDING MODEL The stages in building a loyal customer base are outlined in Figure 5.7, which i s basically a reformulation of the Innovation-Adoption Model (Chapter 3, Figure 3.4 - Awareness, Interest, Evaluation, Trial, Adoption), modified to take into a ccount of the interactive dynamics of the Internet. This model consists of five stages - Attract, Engage, Retain, Learn and Relate. FIGURE 5.7 - THE INTERACTIVE BRAND-BUILDING MODEL ATTRACT CONSUMERS TO THE APPLICATION T RES N TE TI O N TE I A ERA ICIP GEN PART CUS TO TOMI PR O S VID E INTE EU R NIQ ACTI O UE VAL N UE ATTRACT AGE ENG ATE R EL AND Source: Adapted from Kierzkowski, A., McQuade, S., Waitman, R., & Zeisser, M., ' Marketing to the Digital Consumer', McKinsey Quarterly, 1996, No.2, pp. 180-183 (www.mckinseyquarterly.com) Attract The critical first step of the digital customer experience is to attract 'eyebal ls', and bring people to the site for the first time. The company must build awa reness and communicate its value proposition to its target customers. This is mo re difficult online than offline, because there is no physical presence. Therefo re, visibility relies solely on Communication. The mechanisms to communicate ran ge from traditional media (TV, billboards, Magazines, Newspapers, etc.) to onlin e tools, including affiliate programmes with other websites, links from director y searches (Connectivity), e-mail notifications and banner advertisements. The p opularity and effectiveness of the different promotion methods are outlined in F igure 5.8. 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 '

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.8 - WEBSITE PROMOTION METHODS - 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 - 5) 2.8 4.3 3.2 4.1 3.4 3.3 2.6 3.4 3.4 4.0 3.5 3.7 4.3 Source: Forrester Research, as cited in 'Targeting Consumers via the Internet' Economist Intelligence Unit 2000 (www.ebusinessforum.com) The most effective methods are direct e-mail, affiliate programmes, public relat ions and television advertising. 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. Kapferer's Brand Prism (Ch. 3, Fig. 3.3) is useful to ens ure that a company develops a distinct and consistent brand identity. Creativity is also an important factor in gaining attention in today's cluttered marketpla ce. Attracting customers is only the first step in building online brands. Compa nies then need to engage customers to obtain their interest and participation. Engage With the multitude of choice available on the Internet, it is important to quick ly engage consumers' interest before they move on. The key factors at this stage are Convenience combined with interesting Content. 46 The Lifetime Value of a Customer (LVC) is an economic measure that is derived by calculating the average profit per transaction, multiplied by the expected rate of transactions, discounted over the expected duration of the brand-customer re lationship. 58

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Retain Maintaining ongoing contact is essential for building relationships. It is the e xtension of engaging and focuses on keeping a customer on the site through the u se of sticky applications. Content is the basic driver of retaining customers on a site, and must be continuously updated due to the multiple visit nature of cu stomers. The objective is to increase the conversion rate (% of browsers convert ed into buyers), 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, and forge closer relationships than any offlin e operator. Communities and Customisation are other sticky applications. Learn The Internet provides extensive opportunities to learn about consumers (demograp hics, attitudes and behaviour). The initial site registration provides an early opportunity to obtain useful information. Building up a knowledge database on ea ch customer - who they are and why they shop online, and what additional product s and services are they interested in provides companies with valuable informati on which, if used properly, 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, a company can create value by providing a personalised onl ine experience. This helps to create a customer base that spends more time and m oney at a site. Customisation and good Customer Care help to erect switching bar riers and encourages customers to return and repeat the cycle. 5.8 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.g. TV, Radio). • The Internet supports br and-building activities where there is a need to build a relationship. Certain p roduct categories, such as groceries and convenience goods, do not lend themselv es to a need for customers to build a relationship with the brand (Figure 5.9). 59

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 5.9 - 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, A., McQuade, S., Waitman, R., & Zeisser, M., 'Marketing to the Digital Consumer', McKinsey Quarterly, 1996, No.2, pp. 180-183 (www.mckinsey quarterly.com) • Not all product categories have a strong fit with interactive media as they stil l need real life interaction, and the need to stimulate the other senses (taste, touch, smell). • Brand-building favours products that can be sold online. However , it is not economically feasible to sell certain products, especially in small quantities, due to high delivery and transaction costs (relative to the value of the product). 5.9 CONCLUSION On the Internet, the experience is the brand. In order to create "apostles", com panies must provide a satisfying end-to-end customer experience - from the promi ses made in the value proposition, to its delivery to the customer. Given the hi gh acquisition costs of online customers, it is critical for companies to build relationships and foster brand loyalty. The 7Cs Framework outlines the key compo nents of the brand experience and the sources of added value. The interactive br and-building process involves attracting, engaging and retaining customers, and as the relationship develops, the interaction provides the ability for companies to learn from their customers and relate, providing further added value. The ne xt chapter analyses the brand-building efforts of seven companies. These case st udies provide a practical insight into how companies are building their online b rands. 60

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 6 CASE STUDIES 61

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.1 INTRODUCTION This chapter provides an analysis of seven companies. Each case is presented in the same format including, a company overview, its value proposition, the source s of added value (using the 7Cs Framework), its brand-building strategy (how it generates traffic), and other key factors that have contributed to its success ( or failure). The cases are presented in the following sequence - Amazon.com, Bar nesandnoble.com, Boo.com, CDnow, eBay, Gap.com and Yahoo!. 6.2 CASE STUDY: AMAZON.COM 6.2.1 Company Overview Amazon.com has become synonymous with e-commerce, 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, and the most widely recognised e-commerce brand name in the US (with 60% awareness48). Amazon serves over 23 million customers from 160 countr ies, and has sales of over $2 billion. In addition, it is the most visited e-com merce website in America, and one of the top two or three in Britain, France, Ge rmany and Japan49. In July 1995, Amazon.com launched with a mission to use the I nternet to transform book buying into a fast, easy, and enjoyable experience. Am azon.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, ranging fro m books and music to auctions and zShops (a portal / marketplace that online sel lers can use to sell their products), and has equity investments in several e-ta ilers. Figure 6.1 outlines Amazon's timeline and major milestones. 6.2.2 Value Proposition Amazon.com's success stems from its compelling value proposition. Amazon provide s increased added value on several dimensions, including: increased selection, d iscounted prices, more information, greater convenience, and higher levels of cu stomisation and service than the traditional shopping experience allows. In addi tion, Amazon has cultivated a reputation for excellence, innovation and deliveri ng on its promises. Through its provision of a one-stop shopping experience, com bined with its levels of customisation and customer service, Amazon has been abl e to differentiate itself from other online competitors. 47 48 Interbrand (www.interbrand.com) - see Appendix A. 'Amazon.com - It's an Ocean, N ot a River' - Goldman Sachs Report, November 11, 1999 49 'Amazon's Amazing Ambit ion' - The Economist, February 26, 2000 (www.economist.com) 62

BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.1 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 - TIMELINE AND MAJOR MILESTONES Amazon.com is founded by Jeff Bezos Amazon.com goes live Amazon launches Associa te Programme Amazon IPOs for $49million. 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 30,000 members Amazon.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. Amazon buys PlanetAll ad Junglee Corpo ration Amazon and Yahoo! Strike Global Merchant Agreement Amazon.com enters Euro pean book market Microsoft signs Amazon.com as Premier Merchant on MSN shopping Cyberian outpost joins product retailers on Amazon.com's new shopping referral s ervice Amazon opens third distribution centre to meet rapid growth Amazon invest s in DrugStore.com Amazon invests in Pets.com Amazon launches online Auction sit e Amazon agrees to purchase Live/bid.com, provider of live auctions Amazon adds Kansas distribution centre to handle rapid growth Amazon launches greeting-card service Amazon invests in HomeGrocer.com Amazon announces further plans to expan d distribution network to meet rapid growth. Amazon.com Electronics and Amazon.c om Toys & Games is launched Amazon announces strategic alliance and invests in G ear.com Amazon introduces "Purchase CirclesTM", featuring thousands of bestselle r lists for hometowns, workplaces, universities, and more Amazon launches "Amazo n.com Anywhere," providing shopping from wireless devices, such as the Palm VII organiser. Amazon opens another customer-service centre to meet rapid growth Ama zon launches 4 new stores: Home Improvement, Software, Video Games and Gift Idea s Amazon and Sotheby's launch www.sothebys.amazon.com Amazon acquires Back to Ba sics Toys to add to Amazon.com Toy Store Amazon announces a multi-million dollar marketing and strategic alliance with, and minority investment in, Ashford.com Amazon and Sprint First offer Internet shopping on wireless phones 2000 January February March April May - Amazon opens a customer service centre in Huntington, West Virginia, to meet r apid growth - Amazon and online car-buying service Greenlight.com Announce Strat egic Investment and Promotional Agreement - Amazon enters into a strategic partn ership with Drugstore.com - Amazon enters strategic alliance with living.com to create a "home living" store at amazon.com - Amazon.com Auctions and zShops prov ide new tools to its merchant community - Amazon launches www.toolcrib.amazon.co m, a tools and equipment store for professional tool users and woodworkers - Ama zon announces investment in kozmo.com - Amazon and eziba.com announce investment and strategic alliance - Amazon opens customer service centre in The Hague - Am azon launches lawn & patio store - Amazon launches health and beauty store - Ama zon.com invests in wineshopper.com - Customers can shop at Amazon.com via the ne w wireless pocket PC - Amazon surpasses 20 million cumulative customer accounts - Amazon launches new kitchen store - Amazon.com and NextCard launch co-branded

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2.3 Sources of Value - The 7Cs Framework Convenience Amazon provides value-added features to increase the ease of shopping, encourage repeat visits and drive higher conversion rates. The site is easy-to-use, offer ing multiple paths to a given book or product. The site is designed to minimise download time (limited graphics) for users on modems and despite the heavy traff ic, downloads quickly and services visitors adequately - Figure 6.1. FIGURE 6.1 - OVERVIEW OF AMAZON.COM'S WEBSITE Wide selection of product categories Immediate customer recognition and customis ation of product offering Simple, logically structured, easy-to-use, and quick-to-load pages Over time, Amazon has added other features for shopping convenience, such as the Amazon.com All Product search (searches the entire web), the 1-ClickTM express checkout, gift click, wish lists, gift reminders, and Amazon.com Anywhere to sup port access from wireless devices (i.e. mobile phones, Palm VII PDA device). Content Amazon provides content on several levels, including book jacket images, book su mmaries, expert reviews, customer testimonials, recommendations, interviews with authors, discussion boards, and customer Purchase CirclesTM. Customer purchase circles allow shoppers to cross-reference similarities such as where people work , live or study. This is an example of 64

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 - thereby incre asing conversion rates. therefore, creates a competitive advantage. By leveragin g its vast customer base, Amazon's content is not reproducible by competition, a nd Customisation Amazon provides customised features and services, from the customer recognition at the point of interface (Figure 6.1) to the content and recommendations based on consumers' purchase history and Purchase CirclesTM. In doing so, Amazon creat es one-to-one relationships with its customers, which helps to build loyalty and create switching costs, while driving up repeat purchases and cross-selling opp ortunities. Community Amazon has also added a community element to the purchasing process, and ingenio usly turned booklovers' predilections into a source of differentiation by solici ting and posting readers' comments with book displays. This builds the loyalty o f both the customers who write reviews and the customers who find community amon g like-minded people. More recently, Amazon introduced Amazon.com Discussion Boa rds to further enhancing the community feel by allowing customers to share infor mation on topics of interest. Connectivity Amazon has built relationships with high traffic web portals and sites, converti ng them into a storefront for Amazon, and has developed an Associates Programme, linking it to a large number of other sites. These are discussed in more detail in Section 6.2.4. Customer Care Amazon places great emphasis on satisfying customers and providing high levels o f customer service. This customer-centricity is evident in all Amazon's activiti es, from its shopping basket applications which lists the estimated time to deli very reliably, to the proactive notification of new items of interest, real-time shipping and backorder notices, and customer interaction. All these activities exploit the communications capability of the web and e-mail to offer greater cus tomer 'touch' and better customer service. 65

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication Amazon maintains close communication with customers. Once orders are placed, the y are subsequently confirmed by e-mail, and customers are also e-mailed when the items are shipped from the warehouse. In addition, two personalised services, E yes and Editors, help maintain contact and build traffic by e-mailing customers when desired products or books become available. As a result of all these factor s (7Cs), Amazon has been able to create a strong value proposition and compellin g online experience that engages and retains customers, enticing them to return to the site and purchase repeatedly. 6.2.4 Brand-Building Strategy Amazon has attracted traffic in a number of ways. Through the first half of 1996 , Amazon had primarily relied on word-of-mouth among tightly knit online communi ties (newsgroups and chat rooms) to create a 'cyberbuzz' and improve its visibil ity. In the second half of 1996, it began to advertise in print media and online - a move that along with the novelty of its business model and the newness of t he Internet, helped generate publicity and stories about the company in publicat ions such as The Wall Street Journal, The Financial Times, Business Week, Newswe ek, New Yorker and The Economist. In July 1996, Amazon inaugurated the Associate s Programme under which other websites could display the Amazon.com hot-link and offer specific books of interest to their visitors. This enabled Amazon to reac h more customer segments and niches (Figure 6.2). Instead of paying directly for this exposure, Amazon offered Associates referral fees of up to 15%, which only applied to sales that resulted from the initial click-through, and not subseque nt purchases. The Associates Programme has been phenomenally successful, attract ing member sites of all sizes, and by 1999 it had over 200,000 members, increasi ng to over 500,000 by August 2000. 66

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.2 - AMAZON.COM'S ASSOCIATES PROGRAMME Source: Amazon.com's website (www.amazon.com) Amazon has developed alliances and partnerships with high traffic web portals an d sites. From July 1997 to December 1998, Amazon closed deals with five of the s ix most visited Internet addresses, including: America Online (AOL), Netscape's Netcenter and NetSearch, Yahoo!, and Geocities. These multimillion-dollar, multiyear deals involve exclusive book-selling rights, mutual links, and primary button placement on web portal search engines. The Yahoo! agreement, was also linked to Amazon's entry into Europe Amazon.de became the local provider for Yahoo! Germany and Amazon.co .uk the local provider for Yahoo! UK & Ireland. Amazon also established agreemen ts with AltaVista, Excite, Prodigy and @home. In addition, Amazon has used viral marketing techniques through customer reviews , free eCards and gift certificates (which customers send to friends, thereby pr omoting Amazon.com). Interesting viral initiatives include: • Amazon.com Refer-A-F riend - customers are encouraged to provide e-mail addresses of friends. In retu rn, each friend is sent a $5 Amazon.com gift certificate (in your name), and you are given a $5 gift certificate for each customer you provide. Therefore, the c ustomer acquisition cost is only £10. • Amazon.com About Me - allows customers to cr eate a personal profile (with pictures) on the site. People tend to tell their f riends about it, spreading the word for Amazon.com. 67

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.2.5 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, Amazo n has been able to build a strong brand at relatively low cost, due to the hype and coverage it was given. This has helped them attract customers and move up th e learning curve quickly, establishing Amazon as the leading online bookseller w ith a large customer base. In addition, Amazon was able to secure partnerships a nd alliances with key players, further enhancing their value proposition. Nevert heless, Amazon is constantly seeking new ways of improving its offering, and acc ording to Jeff Bezos, "we're not a stationary target. We were blessed with a two -year head start, and our goal is to increase that gap51". Customer Focus & Reputation for Excellence Amazon's customer focus is evident throughout all its activities. According to J eff Bezos, "Online, the balance of power shifts away from the company and goes t owards the customer. Our secret is that we have not been competitor obsessed. We have been customer obsessed, while our competitors have been Amazon.com obsesse d52". As such, Amazon continually invests in re-working and improving its techno logy infrastructure and software (80% in backoffice operations), developing cust omer service centres and expanding its distribution network to support high leve ls of service, establishing a reputation for excellence and fulfilment. Distinct Brand Identity Jeff Bezos chose the name 'Amazon', because he wanted it to be short, memorable, to capture the spirit of the site, and to convey its vast size and offering. In addition, he wanted the name to start with an 'A' so that it would appear at th e top of search engine lists. Amazon's understanding of its brand identity has b een a critical factor. Amazon received criticism for expanding its product line, thereby diluting the value of its association with books. However, management r ealised that Amazon had become more associated with other core brand values - a wide range of choice, good value, and its safe and secure delivery. As such, Ama zon has been successful in stretching its brand to include new categories and no n-e-tailing businesses. For example, in June 1998, Amazon unveiled a music store , which within six months propelled Amazon to one of the leading online music re tailers. According to Jeff Bezos, 51 52 Hazleton, L., 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Co mpany Even Turned a Profit', Success, July 1998. Saunders, R., 'Business the Ama zon.com Way', (Oxford: Capstone Publishing), 1999 69

BUILDING SUCCESSFUL BRANDS ON THE INTERNET "Brands to a certain degree are like quick-drying cement. When they're young, th ey're stretchable and pliant, but over time they become more and more associated with a particular thing and harder to stretch53". 6.2.6 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 key factors driving its growth and high retention rates, stem from its compelling value proposition and high quality end-to-end customer experience. Amazon has also benefited from a first-mover advantage giving it an edge over competitors, however, Amazon's i ntense focus on customer needs and continual innovation, have kept it ahead. Thi s customer-centricity is a key hallmark of a successful Internet brand. Amazon a lso recognised that service quality is a perception, not necessarily a reality. Amazon delivers on its promises of a wide inventory of products, secure payment procedures, speedy delivery and good value. Quality is only measurable in the mi nds of visitors to the site, and to sustain a positive image and satisfactory en d-to-end experience, Amazon has continuously invested in customer service, distr ibution centres and upgrading the site, with new products and value added conten t. In doing so, they have cultivated a reputation for excellence and fulfilment, which is critical on the Internet. Although Amazon has successfully built a str ong brand and loyal customer base, it has not recorded any profits to date. Neve rtheless, Amazon is claiming to be making profits on its books and music categor ies, perhaps trying to defend its view that losses taken to build market share c an reap profits later. However, if it continues to incur losses, and investors l ose confidence, the drain on their cash resources will push them towards bankrup tcy. This raises a critical issue, as the true value of a brand lies in its sust ainability. 53 Warner, B., 'Marketers of the Year: Jeff Bezos, Volume Discounter' - Brandweek, October 12, 1998 70

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3 CASE STUDY: BARNESANDNOBLE.COM 6.3.1 Company Overview Barnesandnoble.com is the fourth largest e-commerce retailer54, and is the secon d largest online bookseller (after Amazon.com). Besides books, Barnesandnoble.co m provides other online categories offering software, magazines, music, prints & posters and related products. Launched in 1997, Barnesandnoble.com was able to 'hit the ground running', as it could capitalise on the infrastructure and backend operations (warehouses, contacts, book databases, etc.) established by its p arent company, Barnes & Noble Inc. Barnes & Noble Inc. is one of the best known traditional booksellers in the United States, and currently operates 520 Barnes & Noble superstores (located in cities and high traffic areas), and 470 B. Dalto n bookstores (located in shopping malls). However, all front-end operations (mar keting, promotion) between the online store and the retail stores have been kept separate. Currently, Barnesandnoble.com is approximately 40% owned by Barnes & Noble, Inc., 40% owned by Bertelsmann AG, and 20% owned by the public. Barnesand noble.com's timeline and major milestones is outlined in Figure 6.2. TABLE 6.2 1997 January BARNESANDNOBLE.COM - TIMELINE AND MAJOR MILESTONES - Barnes & Nobles announces plans to become the exclusive bookseller on America Online's (AOL's) Marketplace March - Barnes & Noble went online at AOL May - Bar nesandnoble.com launched its website (www.barnesandnoble.com) - Announces distri bution relationship with New York Times September - Launches Affiliate Network D ecember - Forges distribution deal with AOL November Develops distribution alliance with Wired Digital Launches revamped sit e, including software store Launches Business Solutions programme Sells 50% stak e to Bertelsmann for $200 million Adds used, rare, and out-of-print books to inv entory Attempts to buy Ingram Book Group $450 million IPO Price war erupts with Amazon.com Launches Music Store Announces plans to develop huge distribution cen tre Launches Prints & Posters Gallery and electronic greeting card service Unvei ls 'bn.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 - Barnesandnoble.com and Microsoft announce that they will create an eBook super store - Launches Internet Radio - Offers same day delivery in Manhatten - Acquir es minority stake in NotHarvard.com - Launches BNTV - Acquires equity stake in M ightwords - Barnes & Noble.com announces strategic relationship with Palm Comput ing - Barnes & Noble University opens registration for free online courses - Lau nches Video Store 71

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.3.2 Value Proposition Barnesandnoble.com offers customers an easy-to-search catalogue of virtually eve ry book currently in print, as well as an extended searchable catalogue of milli ons of out-of-print, previously-owned and rare books. In addition, they offer cu stomers fast delivery, good prices, easy and secure ordering, rich editorial con tent and a community experience. 6.3.3 Sources of Value - The 7Cs Framework With decades of experience in developing 'bricks-and-mortar' stores, Barnes & No ble planned to dominate online book-selling, but instead of developing an outsta nding interface to its inventory, the company created a site very similar to Ama zon.com's (Figure 6.3). FIGURE 6.3 - OVERVIEW OF BARNESANDNOBLE.COM'S WEBSITE Simple, logically structured, and easy-to-navigate site Categories focus on book s, software, music New Initiatives Barnesandnoble.com's virtual storefront is graphically richer than Amazon.com's and takes a bit longer to download, however, in terms of the 7Cs framework, the features are practically identical. Both Amazon.com and barnesandnoble.com let c ustomers sign up to receive email reviews and announcements of new titles. Both offer detailed bibliographic information, including title, author, edition, publ isher, etc. Both have expanded their convenience to offer 54 Media Metrix, as cited on Barnesandnoble.com's website (www.barnesandnoble.com o r www.bn.com) 72

BUILDING SUCCESSFUL BRANDS ON THE INTERNET access through wireless devices. Both offer customisation that permits users to personalise the experience. Both try to foster a community of readers by letting customers post reviews online. Both offer 'associate programmes' that let other websites link to their sites, and both are expanding globally. Although, Barnes andnoble.com has created a high quality website and customer experience, it lags behind first-mover Amazon.com. Barnesandnoble.com closed 1999 with 4 million cu stomers, while Amazon.com had over 17 million. Barnesandnoble.com's 1999 revenue s were $202.6 million, compared to Amazon.com's $1.64 billion. reasons for this are explained in the next section. Barnesandnoble.com's market capitalisation wa s $251 million, while Amazon.com was valued at $21.1 billion. The 6.3.4 Brand-Building Strategy Barnesandnoble.com has run extensive and effective online advertising and has us ed the full range of traditional media to build awareness and encourage trial. T hey have also signed exclusive and non-exclusive book-selling deals with major w ebsites including AOL (fouryear deal costing $40 million55), Lycos, Webcrawler, Yahoo!, Netscape and Microsoft Network, and have formed strategic partnerships with ten of the top twenty websi tes (others include ZDnet and CNN). They have developed an affiliate programme that links si tes to Barnesandnoble.com in return for a commission on any purchases that they originated - a replica of Amazon's Associates Programme. As of February 2000, th is programme had more than 300,000 affiliates in its referral network. These ini tiatives have generated traffic to the site, however, there is little mention of the online store in the traditional 'bricks-and-mortar' stores, and Barnes & No ble Inc, has yet to leverage its strong brand in cyberspace. Instead, 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, prevent canniba lisation of its existing business, and avoid charging sales tax in states where it has stores56. However, this decision to keep the relationship with the bricks -and-mortar stores at arm's length has had major repercussions. 55 56 'AOL is paid $40 Million in 4-Year Marketing Pact' - The Wall Street Journal, De cember 17, 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

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

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET European surfers and 2% in the US59. In addition, the site was poorly structured and difficult to navigate, and according to Jim McNiven, CEO of Kerb, an award winning web design company, Boo.com was a "mish-mash when it when live.......... .. it didn't seem obvious what you were supposed to do60". In January 2000, Boo redesigned its website to make it easier to navigate, and added a version devoid of pop-up windows and graphics. The changes also gagged Miss Boo and a paper ca talogue was printed for those who want to buy offline. However, the early bad ex perience and negative word-of-mouth scared off many online shoppers who lost con fidence as Boo.com had developed a reputation as a cumbersome and slow site, eve n though it had become simpler and faster. There were also fulfilment and custom er service problems. Although customers received the purchased items within a fe w days, many complained that they received the wrong items. In addition, these ' mistakes' could not be corrected easily. Customers had to demand a refund, and t hen re-order the items again. Obviously, once the money was refunded customers d id not risk going through the frustrating and inconvenient process again. Beside s these issues, there continues to remain a doubt whether the basis of Boo's val ue proposition was compelling enough in the first place. First of all, prices we re not discounted, and secondly, an Internet alternative to real-world shopping for high fashion clothing, misses many aspects that tend to be valued by Boo.com 's target audience of the young and trendy shoppers. Traditional fashion shoppin g provides sources of value through its social experience and entertainment, whe reby people enjoy wondering around shops, trying on different styles, getting th eir friends' opinions, and the feeling and image associated with walking into a high fashion store. Boo's value proposition failed to deal with these issues. 6.4.4 Brand-Building Strategy Boo.com was quite successful in generating interest and creating awareness. The name was chosen on the basis that it is "simple, catchy and easy to remember and spell61" and could be trademarked in 56 countries. There was a lot of hype surr ounding the start-up due to the 59 60 Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype' - Forrester Research, May 16, 2000 Ward, M., 'From Boo.com to Boo.gone' - BBC News Online, May 18, 20 00 (news6.thdo.bbc.co.uk) 61 J. Herratti, Boo.com President for North America, a s cited in 'Boo.com' - Sporting Goods Business, July 6,1999 78

BUILDING SUCCESSFUL BRANDS ON THE INTERNET amount of money invested in the company, and the high-profile investors involved . Boo quickly burned cash on PR and advertising, spending $15 million on an adve rtising campaign with BMP DDB, which received a mixed response. Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine, Rolling Stone, Vogue, a nd Elle. Although they attracted traffic, customers soon discovered the site's f rustrating flaws, resulting in low conversion rates, and with all the hype, nega tive word-of-mouth spread quickly. 6.4.5 Conclusion Boo.com failed to provide a compelling value proposition, and did not focus on t arget customer benefits. Instead of overhyping the convenience they offer, Inter net companies must remind themselves what customers miss about in-person shoppin g and compensate with true added value. Boo.com also failed to address basic cus tomer needs of a simple, easy-touse, quick-to-load site, and should have scaled back the technology to ensure as many people as possible could browse the site. Instead, they focused on advertising the brand and not the less glamorous, but v ital, areas of brand-building, such as creating a positive end-to-end customer e xperience and making each customer contact pleasurable and memorable, and ensuri ng goods are available and delivered as promised. As a result, they were unable to build a critical mass of buying members needed to generate revenue to offset the steep set-up costs. Another important lesson is the need to be quick to mark et must be balanced against a company's readiness. Boo was very ambitious to lau nch in six countries simultaneously, without testing their business model. Unfor tunately, this only served to increase set-up costs as well as investors' expect ations - both of which accelerated Boo's downfall as things started to go wrong. As a result, Boo is 'branded' as the ultimate Internet failure. Brand building includes all aspects of brand communications, including the brand impression giv en by the implementation and experience. A poor brand experience on the first vi sit drives potential customers to click off and not return, and also leads to a lack of confidence on the part of employees (high-profile employees defected, in cluding Dean Hawkins - finance director) and investors, throwing everyone into p anic, which reflected on all aspects of the operations and eventually destroyed the business. 79

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5 CASE STUDY: CDNOW 6.5.1 Company Overview Founded in 1994, by twin brothers Jason and Matt Olim, CDnow is the leading onli ne music store, and one of the most popular shopping sites on the Internet62. It has a customer base of 4 million people, and an average daily audience of over 800,000 people. CDnow provides access to over 500,000 music-related products and 650,000 sound samples, as well as music reviews, cover art, daily music news, f eatures, guides to music genres, and exclusive interviews and reviews from CDnow 's award-winning editorial staff. CDnow is also driving the digital distribution of music, and was the first site to offer the sale of music downloads and custo m CDs. On 19th July 2000, CDnow was acquired by Bertelsmann AG. TABLE 6.4 1994 August 1997 August 1998 February March April May June July 1999 March May J uly 2000 June July CDNOW - TIMELINE AND MAJOR MILESTONES - Site goes live - Partnership program with Geffen Records - Raises $10 million through private placement - Forges distribution partnership with Yahoo! $65.6 mi llion IPO Launches integrated Grammy promotion Signs content distribution partne rship with Rolling Stone Signs three-year, $18.5 million distribution deal with Lycos Signs three-year, $22.5 million advertising deal with MTV Enables customer s to create customised CDs Launches MTV / VH1 ad campaign - Merges with N2K, former arch rival - Launches merged CDnow/N2K site - Merges w ith Columbia Records - CDnow and Time Inc. announce marketing alliance - CDnow i s acquired by Bertelsmann and will become a wholly-owned subsidiary of Bertelsma nn e-Commerce Group (BeCG) 6.5.2 Value Proposition CDnow offers consumers a high degree of choice (over 500,000 music related items - ten times the selection of a conventional bricks-and-mortar music store), con venience, good prices, customisation and a wealth of information and content to help in the purchase decision. This unprecedented degree of access to music and information is the core of CDnow's value proposition, and they aim to "make ever y visit to the site, whether for browsing or buying, a valuable and rewarding ex perience"63. 62 Hoffman, D. & Novak, T., 'How to Acquire Customers on the Web' - Harvard Busines s Review, May-June 2000, pp.179-188 63 CDnow website (www.cdnow.com) 80

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.5.3 Sources of Value - The 7Cs Framework Convenience The CDnow site is very easy-to-navigate and quick-to-load. The whole process of searching for albums or music titles to the actual purchase is simple - Figure 6 .5. FIGURE 6.5 - OVERVIEW OF CDNOW'S WEBSITE Customisation options Simple, easy-tonavigate, and quick-to-load pages Interesting Content Content CDnow has invested substantially in developing strong content alliances, and has secured rights to music reviews, artists biographies, cover art, etc., to make it easier for customers to explore new music and make informed purchasing decisi ons. For example, CDnow's partnership with Rolling Stone Magazine enables custom ers to access thirty years of Rolling Stone music coverage. CDnow has cultivated similar relationships with MTV, VH1 a nd Media College (publisher of CMJ New Music Report and CMJ New Music Monthly). By partnering with well-known content providers, CDnow has leveraged the reputation of their brands to reinforce its own. 81

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation CDnow provides customisation on two fronts. It allows customers to purchase cust omised CDs and also enables customers to develop their own personalised view of the store through My CDnow. By customising the store to meets customers' needs, it gives them a sense of ownership and a compelling reason for them to return. O ther features such as My CDnow's Wish List, allow customers to keep track of alb ums to buy in the future. Customers can even maintain an Address Book online mak ing it easy to send music to friends and family (viral marketing promoter). Pers onalisation helps to strengthen loyalty and deepen customers' commitment to the brand. It also creates switching costs, for once the relationship starts to deve lop and customers have entered numerous addresses into their Address Book, they will be reluctant to visit another online store and enter the information again. 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, and could co reviews or set-up communities around different music or Classical Club offering members relevant content other club members.

Connectivity CDnow has linked up with broad-based highly trafficked Internet sites - search e ngines, Internet access providers, and key news and entertainment sites - such a s AOL, Yahoo!, Excite, and Geocities as well as more focused specialist sites. CDnow also start ed an affiliate programme (called the Cosmic Credit Programme) that links other websit es to its site - from record labels to much smaller sites that discussed or revi ewed music (supplying valuable content). In addition, CDnow developed the Fast F orward Rewards programme, an incentive programme that rewards customers and enco urages them to connect back to the site. Whenever a customer makes a purchase th ey earn Fast Forward Reward points, which accumulate and can be spent on a varie ty of music-related products. Customer Care CDnow's site can be viewed in English, German, French, Spanish, Portuguese, Ital ian, Dutch and Japanese. Due to International interest, CDnow hired a group of m ultilingual customer service representatives to handle questions. CDnow has also developed feedback teams groups of customer service representatives with deep k nowledge of certain musical subject areas, allowing them to respond to detailed customer queries. 82

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication From the moment a customer opens an account, CDnow reaches out to its customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters informing customer of news and releases relevant to their preferences. customers buy musi c, they buy from CDnow. By keeping the brand in front of the customer in this wa y, CDnow is doing everything it can to ensure that the next time that 6.5.4 Brand-Building Strategy CDnow was one of the first companies to develop a multifaceted, integrated custo mer acquisition strategy that reflects a sophisticated understanding of the econ omics of an online business. CDnow's initiatives include: • Banner Ads - CDnow buy s banner ads on the sites of major Internet content and service providers includ ing CNN Interactive and AOL, as well as more-targeted music-related sites like B illboard. • Alliances and Partnerships - They have also stuck exclusive alliances with AOL, Yahoo!, Excite and other powerful Internet content and service providers. These alliances and partnerships have generated both traffic and brand visibility for CDnow and have locked competitors out of valuable online real estate. • Affiliate Programme - Through the Cosmic Credit Programme, CDnow extended its distribution reach to include more than 250,000 small, music-oriented websites, covering the entire music spectrum. According to Jason Olim, this is their "most successful customer building programme64". It is a revenue-sharing arrangement, giving webs ites an inducement to join the programme and in effect turns CDnow's affiliate-m arketing partners into a virtual commissioned salesforce. • Traditional offline Me dia - CDnow's advertisements are targeted to some degree, including national tel evision commercials during the Grammy's and American Music Awards and on MTV and VH1, print advertising is music-related publications such as Rolling Stone, Spin, and Variety, and radio spots on the Howard Stern Show to build a cult following among radio listeners, and spot radio to build reach. 83

BUILDING SUCCESSFUL BRANDS ON THE INTERNET • Public Relations - CDnow made public relations a high priority brand-building to ol. Public relations efforts helped to generate word of mouth and influence sale s. The story of how CDnow was founded in a basement, by two twin brothers with l ittle money reflects the 'American dream' and was quickly picked up. • Word-of-Mouth - As for many successful online retailers, word-of-mouth accounts for the lion's share of CDnow's customers. It is a powerful source of acquiring new customers at low cost. In fact, it is in this context that the large investm ents in advertising and partnerships make sense, as a way to fuel very lucrative word of mouth, both in the online and offline worlds. CDnow's promotion strategies have attracted high levels of traffic, and combined with the high quality customer experience (7Cs) they are successful in engaging and retaining customers, resulting in increased conversion rates. This has cont ributed to a 225% increase in sales (1997: $17.4 million, 1998: $56.4 million), and to increases in the customer base of more than 30% quarter-to-quarter, with 44% of sales coming from new customers65. Their ability to learn and relate to c ustomer's needs through customising their offering (My CDnow) encourages brand l oyalty and repeat purchases, with repeat customers accounting for more than 50% of sales. 6.5.5 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. The company continually pushed for new distribution partnerships to widen its sphere of influence, and scaled it awareness-building efforts. It is constantly adding new functionality to the site and has been innovative in its offering they were the first site to offer the sale of music downloads and custom CDs. 64 'CDnow Launches Next Generation of Highly Successful Cosmic Credit Program' - Pr ess Release, April 28, 1998 - (www.cdnow.com) 65 'Pioneering in Cyberspace' - Ha mpel & Stefanides (www.hsny.com/cdnow.htm) 84

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customer Focus & Reputation for Excellence According to Jason Olim, "your brand is not just what you say - it's what you do 66", and the company's goes to great lengths to ensure that its activities reinf orce this view and it fulfils its promises. The company sends an automated order confirmation note via e-mail as soon as the order has been placed. This gives t he customer the impression that the order is being handled quickly. They also pr ovide the customer with an order number and customer support contact information should they have questions. CDnow has developed a relationship with Valley Reco rds, a record distributor that handles the majority of CDnow's fulfilment logist ics, to ensure quick delivery to customers. 6.5.6 Conclusion CDnow identified a market opportunity early and moved quickly to capitalise on t he potential it saw. It was able to create a strong value proposition and high q uality customer experience. According to Jason Olim, "the most important custome r loyalty tool is a great store67" and CDnow has gone to great lengths to provid e this, and ensure that it exploits its early-mover advantage and keeps ahead of competition. It has developed a detailed understanding of its customers' needs that has enabled the company to create better products and more effective market ing campaigns. The development of an extensive affiliate network, and innovative , 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, combined with the high impact customer experience created - f rom how CDnow has personalised its product offering to its capable customer serv ice team - have been instrumental in building a reputation for excellence that i s a core factor of a successful Internet brand. 66 Jason Olim, CEO of CDnow, as cited in Carpenter, P, "eBrands - Building an Inter net Business at Breakneck Speed", (Boston: Harvard Business School Press), 2000 p.89 67 Jason Olim, CEO of CDnow, as cited in Carpenter, P, "eBrands - Building an Internet Business at Breakneck Speed", (Boston: Harvard Business School Press ), 2000 p.75 85

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6 CASE STUDY: EBAY 6.6.1 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. eBay effectively created a ne w business model never before possible - efficient one-to-one trading in an auct ion format. Individuals use eBay to buy and sell items in more than 4,300 catego ries, from collectibles and antiques to electronics and toys. Sellers pay a nomi nal fee for placing an item up for sale, and eBay receives a transaction fee tha t ranges from 1.25% to 5% of the final sale price on any item sold. The buyer an d the seller work out the logistics of the transport (e.g. shipping, payment) be tween themselves, and eBay never takes possession of the item being sold, or the payment for the item - removing the need for inventory, transportation and othe r overhead costs. Since its launch in September 1995, the eBay community has gro wn to include more than 10 million registered users, with the number of unique d aily visitors setting a record of 1.782 million in January 200068. There are ove r half a million new auctions, and 450,000 new items joining the "for sale" list every 24 hours69. 6.6.2 Value Proposition eBay offers consumers an efficient, 24 hour a day, global trading place for buyi ng and selling personal items in an entertaining auction format. This is a new m arket - the closest thing in the offline world are trading forums such as classi fied ads, collectable shows, garage sales, flea markets and auctions. People per ceive the auction format to offer better prices, and eBay provides added value t hrough its convenience, extensive selection and geographical reach, with emphasi s being placed on its unique community feel and culture. According to Meg Whitma n, CEO of eBay, "at its core, eBay is not about auctions. Auctions are an enable r. Auctions make it fun. Auctions represent a platform. But eBay is really about a unique sense of community that eBay users are creating for themselves70" 68 69 Media Metrix, as cited in 'eBay - Company Overview' - eBay website (www.ebay.com ) 'eBay - Company Overview' - eBay website (www.ebay.com) 70 'Meg Whitman at eBa y Inc. (A)' - A Harvard Business School Case Study, 1st October 1999 86

BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.5 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 goes live - eBay exceeds 21 million online auction bids and completes mor e than 5 million auctions since its inception in 1995 - eBay and First Auction s ign a partnership agreement - Launches "My eBay!" to customise the online auctio n experience - eBay acquires Jump Inc. and its online trading site (Up4Sale) - e Bay IPOed raising $58 million - eBay launches 'About Me' feature, allowing users to create personal homepages - Compaq Computer Corporation and eBay form a stra tegic U.S. co-marketing relationship. - eBay expands strategic relationship with Netscape - America Online and eBay announce strategic marketing alliance - eBay acquires Butterfield & Butterfield; and raises $700 million - eBay acquires Kru se International - eBay acquires alando.de - Germany's leading online person-toperson trading site - eBay introduces eBay Magazine in collaboration with Krause Publications, and two books -, The Official eBay Guide to Buying, Selling, and Collecting Just About Anything and eBay for Dummies. - eBay teams up with Carclu b.com to provide automotive service for eBay Users - eBay and AOL launch co-bran ded site - eBay goes wireless with Palm VII connected organiser - eBay goes live in Australia - eBay launches local websites in Baltimore & Washington DC, Bosto n, Las Vegas, Providence, Nashville, Norfolk & Virginia Beach, Seattle & Tacoma, Milwaukee, Dallas & Fort Worth, and Salt Lake City - eBay acquires Blackthorne Software GO.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 .com Create auction-style marketplace for used cars eBay launches Business Excha nge eBay and Keen.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 - eBay and Ultimatebid.Com form alliance 6.6.3 Sources of Value - The 7Cs Framework According to Meg Whitman, "the first brand-building strategy that we have is to have a great customer experience. Still the vast majority of our new users come from word-of-mouth. And you only get word-of-mouth if you have a great customer experience. So brand-building job No. 1 is have a great customer experience71". Unlike the previous case studies discussed, the eBay customer experience is base d on how their customers deal with each other, as they rarely deal directly with the company. This raises challenges in how to control and influence the custome r experience. Since eBay cannot control how one person treats another, they try to influence customer behaviour by encouraging them to adopt certain values, and in terms of the '7Cs', emphasis is placed on community development and customer care. 71 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Bo om at eBay' - Business Week, 21st May 1999 (www.businessweek.com) 87

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, topically arranged, easy-to-use online service (Figure 6.6). eBay has also expanded to accommodate access throu gh wireless devices for added convenience. FIGURE 6.6 - OVERVIEW OF EBAY'S WEBSITE Customisation Simple, categorically arranged, 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, eBay's site has to process thousa nds of live bids simultaneously, which is much more demanding on the system, inc reasing the risk of outages. eBay had a 'wake up call' when the website crashed for 8 hours, angering hundreds of thousands of eBay users, and since, they have continually invested in system capacity. Nevertheless, they continue to face cha llenges in scaling-up fast enough to accommodate their rapid growth. Content Con tent is primarily user generated through the items listed for sale. This contrib utes to the community feel, and adds to the experience and the discovery of the auction process. Other content includes the banner ads, which are narrowly targe ted on relevant subjects such shipping and transport companies and payment metho ds to aid users. 88

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Customisation eBay provides My eBay which allows users to customise the interfac e, and is considered by many users as one of the best features on the website. 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). Community eBay attributes much of its success to a strong sense of community among its users. For many 'eBayers' - as eBay users refer to themselves - eBay represents more th an just a place to buy and sell goods. It is a place where people can meet with similar interests, discuss topics they care about, and share information. To enc ourage this sense of community, eBay offers its users category-specific chat roo ms, bulletin boards, a monthly newsletter, e-mail, a "giving-board" for charitab le donations to user-identified causes. In addition, the community spirit and pe rsonal relationships also transcend the online experience, and there are several reports of eBay users vacationing together, working together and helping each o ther offline. eBay's community has a distinct culture based on trust, respect, a utonomy, empowerment and equality. Whitman describes eBay's community culture as a site "of the people, by the people, for the people". However, the culture has come under strain due to the company's rapid growth from a small community into a "big city". Recent initiatives such as the development of local websites in m ajor US cities (e.g. eBay Boston, 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. After a sale, each user is encouraged to submit feedback through eBay's 'Feedback Foru m', which is then added to the partner's trading profile, which is posted to the site. This has created a self-regulating mechanism that encourages good behavio ur, and in doing so, has enabled eBay to foster a strong sense of community on i ts site. This sense of community is their key differentiating factor and has enc ouraged greater loyalty and repeat usage. 89

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.6.4 Brand-Building Strategy The majority of eBay's users have been attracted through word-of-mouth, as a res ult of the high quality experience it provides. Early on, eBay identified that 2 0% of the users represented 80% of the volume of the site (80/20 rule). Based on this, they decided to target their marketing efforts on these heavy users, who tended to be serious collectors. As a result, eBay decided that it would not ent er into major portal advertising deals in the short term, and instead focus on g rassroots marketing initiatives through print advertising in vertical publicatio ns (e.g. Mary Beth's Beanie World, Doll Collector) and appearance in trade shows . They appeared at over 90 collector trade shows and ran 14 different adverts in 90 vertical publications during 1998. eBay intends to use these same marketing levers as they expand across different categories of merchandise as well as expa nd internationally. In 1998, they spent $12.3 million in advertising, representi ng about 40% of revenues, and maintained the same ratio for 1999. eBay has since expanded its promotion efforts and engaged in marketing partnerships, the large st of which was with AOL, but they have other partnerships with over 150 website s of varying scales. The AOL partnership was one of the largest strategic partne rships on the Internet - a four-year, $75 million joint marketing alliance and d evelopment deal, whereby eBay is the exclusive auction site featured on AOL and will jointly develop auction sites for AOL's flagship online service and all AOL 's other properties. With the acquisition of Butterfield & Butterfield (one of t he world's oldest and most prestigious auction houses) and Kruse International ( auctioneer of collector automobiles) in 1999, eBay transformed from a pure onlin e play into a 'clicks-and-mortar' company. 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. Recent promotional initiatives incl ude its new publication, eBay Magazine, and two books, The Official eBay Guide t o Buying, Selling, and Collecting Just About Anything and eBay for Dummies. Thes e new publications appeal to the collecting spirit, provide a wealth of informat ion about the 'ins and outs' of trading on eBay, and highlight opportunities cre ated by e-commerce. Through this combination of its advertising efforts and targ eted promotions, eBay has been able to attract a large customer base, and facili tate the spread of positive wordof-mouth. 91

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'. T his is achieved by listening to their community (learning) and developing new im proved products and services (relating), such as the Feedback Form, the Personal Shopper and the eBay Life Newsletter, which were all ideas of eBay users. Howev er, eBay have a policy of not looking at users pattern of buying habits for the purpose of generating products on offer for customers. This has become part of t he eBay culture, and according to research carried out by eBay, 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. eBay prefers the opt-in model whereby users have t he option to choose such services if they were interested. 6.6.5 Conclusion eBay's compelling value proposition, their ability to create a new market using Internet technology, and their first-mover advantage, have been key factors that have contributed to the success of the brand, however, their ability to cultiva te a distinct 'sense of community' has been the defining characteristic which di fferentiates them from other online auctions. As a result, eBay attracts a broad er selection of buyers, which in turn attracts more sellers - the ultimate netwo rk effect - contributing to its strong lead and competitive advantage. Their foc us on heavy users and targeted promotions, have been instrumental in building a 'quality' customer base, which has established eBay above other online auction c ommunities. eBay has also faced difficult challenges in scaling the organisation fast enough, as they could not opt for a 'go slow' strategy. The need to contin ually invest in ensuring adequate capacity and improving the product offering is essential in order to keep ahead of competitors, and according to Meg Whitman, "the devil in so much of this is in the detail. And while we have to move very, very fast, I think you are not well served by moving incredibly rapidly and not doing things well72". 72 Interview with Meg Whitman by Linda Himelstein as cited in 'What's Behind the Bo om at eBay' - Business Week, 21st May 1999 (www.businessweek.com) 92

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7.4 Brand-Building Strategy - Extensive Integration Gap.com has been able to piggy-back on The Gap's offline advertisements (in TV, Magazines, billboards, etc.) that also promote the online store. In addition, it is fully leveraging its offline presence to build awareness, by displaying the URL (www.gap.com) in store windows with the slogan "surf.shop.ship", on counter cards, on shopping bags and even on the cash register, which displays "Shop onli ne at www.gap.com" on the display screens between transactions. Store clerks are also trained to look for products online for their customers if the store does not have them in stock, or to refer shoppers to Gap's website. In certain high t raffic Gap and GapKids stores, the retailer has installed "Web lounges" that lur e buyers with comfortable couches and terminals hooked up to Gap.com. To convert walk-in shoppers to cybershoppers, Gap has held in-store campaigns to get custo mers to submit their e-mail addresses, by offering a 10% discount and free shipp ing on their first online purchase. These efforts doubled the size of Gap's e-ma il database, providing a useful way to directly reach customers. Most of Gap's o nline traffic is generated by leveraging its physical presence, however, Gap has also supplemented this with online promotions: • In August 1999, Gap secured a 3year commerce and marketing agreement with AOL, that gives Gap more visibility o n the Internet by linking to the world's largest online shopping destination: Sh op@AOL marketplace. • Gap.com has links with CDnow to cross promote websites. The idea emerged as Gap was flooded with e-mails form customers asking how they coul d buy a recording of the music played in Gap TV commercials. • Gap.com has also cr eated an affiliate programme encouraging sites to establish links to gap.com in return for a 5% commission on every sale referred through the site. • They offer O nline discounts and promotions such as the ShopCard, whereby for every $100 a cu stomer spends at Gap Online, they send the customer a $20 Gap ShopCard, which ca n be used towards future purchases, either online or in stores. 96

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.7.5 Conclusion Gap.com is an example of successful crossover marketing. With their brand awaren ess and network of retail outlets, Gap had a significant advantage over pure onl ine players in attracting customers and building critical mass. Pure online play ers have to invest heavily in logistics, whereas established companies, such as Gap, have already established the back-end operations and can use them as the co rnerstone of their online business. The Internet, on the other hand, provides ex isting customers with added value through the convenience of purchasing online, and can also provide access to different customer segments who may not usually b uy the products at all - thereby increasing the company's reach. By aggressively marketing both the stores and the website, and allowing each to leverage the st rengths of the other, Gap has been able to significantly strengthen their brandcustomer relationship, while reaping the benefits of low customer acquisition co sts and extended reach. 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, thereb y reinforcing its brand identity. This type of seamless integration and symbioti c relationship is critical in building successful 'clicks-and-mortar' brands. 97

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8 CASE STUDY: YAHOO! 6.8.1 Company Overview In April 1994, Yahoo! was founded by David Filo and Jerry Yang, two Ph.D student s at Stanford University, who started an online guide as a way to keep track of their personal interests on the Internet. The concept exploded (through word-ofmouth) and in less than six months, the site was receiving 1 million hits per da y. Yahoo! has since morphed from an ordinary search service into a global Intern et communications, 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, and is one of the few Internet companies to turn a profit earl y in the development of the Internet. As the first online navigational guide to the web, Yahoo! is a leading guide in terms of traffic, advertising, household a nd business user reach. Yahoo! is one of the most recognised brands on the Inter net and is the 53rd most valuable brand in the world78. The company's global web network includes 23 world properties outside the US. 6.8.2 Value Proposition At the core of Yahoo!'s value proposition, lies the directory - a hand tailored and easy-to-use guide to the Internet that becomes more useful each day as Inter net penetration, the amount of information, and the number of websites continues to explode. According to Timothy Koogle, CEO of Yahoo!, "We've set out to make Yahoo! the only place anyone needs to go to get connected to anything. There's n othing in the real world to compare to that79". As such, Yahoo! offers a range o f supporting services that add value, from e-mail services to stock quotes and m uch more, all in a single location. 78 79 Interbrand (www.interbrand.com) - see Appendix A 'Yahoo! - The Company, The Stra tegy, The Stock' - Business Week, September 7, 1998 (www.businessweek.com) 98

BUILDING SUCCESSFUL BRANDS ON THE INTERNET TABLE 6.7 YAHOO! - TIMELINE AND MAJOR MILESTONES 1994 April - Site goes live September - 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 - Receives $1 million in venture capital funding from Sequoia C apital $33.8 million IPO (2,600,000 shares at $13.00 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; 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.com; Launches Yahoo! Radio Acquires Online Anywhere Launches Yahoo! Resumes Introduces free e-greetings, and unveils Yahoo! Digital Introduces Bill Payment services - Yahoo! forms agreements with Palm Inc., to provide web-based services to PalmT M handheld computers - Yahoo! unveils Yahoo! Finance Vision - Yahoo! acquires Ar thas.com allowing them to offer person-person payment solutions - Yahoo! Launche s Business-to-Business Marketplace - Yahoo! launches the next wave of Yahoo! Eve rywhere service for consumers with Internet-ready mobile phones and wireless dev ices. - Yahoo! acquires eGroups - Yahoo! Shopping launches personalised shopping service 6.8.3 Sources of Value - The 7Cs Framework Convenience Central to Yahoo!'s success, is the way it has structured and displayed informat ion. Their goal is not to list everything under the sun, 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. They have kept the design of the site simple and cl ean to appeal to customers and avoid slow-to-load graphics (Figure 6.8). More re cently, Yahoo! extended its convenience through its Yahoo! Everywhere service, t o allow access, regardless of platform (i.e. mobiles, TVs, Palm computers). 99

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.8 - OVERVIEW OF YAHOO!'S WEBSITE Customisation options Simple, well structured, easy-touse, 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. T hese have helped Yahoo! become the place to track down a broad range of valuable information and resources, ranging from daily news and weather reports to road maps and books, and has been at the heart of Yahoo!'s growth and development. Th ey have formed multiple alliances and partnerships with leading online companies such as Amazon.com and CDnow. Their thrust has been to provide valuable content to customers, while providing partners access to a large customer base. This cr eates a win-win situation as its satisfies Yahoo!, the partner, and more importa ntly, the end-user. Customisation My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite to pics, from stocks and sports results to weather and air fares, and is similar to a custom tailored newspaper (Figure 6.9). By tailoring the information to users ' preferences, Yahoo! has increased customer loyalty and retention rates. 100

BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 6.9 - OVERVIEW OF MY YAHOO! Instant name recognition Customer's preferred categories of news and information Customisation is a 'sticky' application. It keeps customers on the site for long er periods, and encourages them to return frequently. Community Yahoo! has developed customisable web communities called Yahoo! Clubs, where gro ups of people with shared interests can communicate through chat, message boards , and e-mail. In 1999, Yahoo! acquired GeoCities, (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. 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, one-to-many, and many-to-many. Connectivity Connectivity is Yahoo!'s core product, and the nature of the navigation business , and is driving Yahoo!'s multiple partnerships and alliances, to provide its cu stomer base with access to useful links and content. In addition, Yahoo! has als o implemented campaigns to persuade users to bookmark the site, or to make it th eir home page. Customer Care Yahoo! responds to customer inquiries via e-mail, fax, telephone and even tradit ional mail, and plans to incorporate other features such as online chat to facil itate communications. Yahoo! spends more on customer support than most companies , reinforcing the brandcustomer relationship, and contributing to their reputati on as a quality service provider. 101

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Communication By positioning itself as a site that users frequent often, and through communica tions via email, Yahoo! maintains close contact with customers. Yahoo! also enco urages customers to e-mail ideas and feedback. 6.8.4 Brand-Building Strategy Yahoo! is a marketing machine. It is often highly praised for its brand-building ability and promotion strategies through the use of traditional (offline) media and guerrilla marketing techniques to build awareness, and according to Intelli quest80, 82% of Internet users and 23% of people intending to go online, recogni se the name Yahoo!. Yahoo!'s brand-building success starts with its name, and it s implications of a good time. Given the unease with which the average consumer approaches technology, Yahoo! avoided characterising itself as a technology-orie nted company, and the company has always communicated the utility of its service in a way that reinforces other core brand attributes - a sense of irreverence, an approachable nature, and an inherent friendliness. While Internet companies w ere targeting existing Internet users through the use of online promotion method s, Yahoo! extended beyond this to use traditional offline media. At the time thi s was considered a breakthrough, and it formed a critical link in Yahoo!'s brand building strategy. Their strategy was to target "near surfers" - people who are not yet online but are likely to use the Internet in the near future. These near surfers represented (and still do) a large and fast growing group and, therefor e, by building a recognised brand name, Yahoo! would be one of the first sites t hat they visited. This was especially important, as experience surfers tend to b e loyal to their search engine. As a result, Yahoo! aggressively promoted the si te through public relations, TV commercials and radio spots during drive time. I n 1996, they hired Black Rocket to create a brand awareness campaign that became very successful through the development of the tag line "Do You Yahoo!?", which conveyed the brand's irreverent personality. 80 'Web Survey Shows Yahoo! Tops', Intelliquest, (www.intelliquest.com) 102

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6.8.5 Other Factors that Contribute to their Brand Leadership Innovation & First -Mover Advantage Yahoo! was first to market with a detailed search engine, first to go public, fi rst to turn around an annual profit, and first to go mainstream by advertising i ts name using traditional media. To maintain its lead, Yahoo! has invested relen tlessly in new services and marketing programmes, that have set it apart from th e pack. In addition, they have carried out extensive partnering, alliances and a cquisitions to provide added value services to their customers, while attracting new customers. Customer Focus & Reputation for Excellence Yahoo! has kept close tabs on the evolution of the market and the interests of i ts customers, and has cultivated a reputation for excellence, from its convenien t and logical structure and display of information, to its simple design, its ex cellent customer service, its choice of partners, and its openness (for example, if a user cannot find what it is searching for, Yahoo! points them to its compe titors by including links to AltaVista, HotBot, GoTo.com, and other search engin es at the bottom of its search results page). 6.8.6 Conclusion Yahoo! is one of the most successful brands on the Internet. As the first online navigational guide to the web, Yahoo! has benefited from a first-mover advantag e. They have maintained that lead through the creation of a high quality end-toend customer experience. This has been achieved through their relentless investm ent into new services and extensive partnerships and alliances with leading bran ds. These relationships have provided end-users with added-value, while also ass ociating Yahoo! with well known brands. Yahoo!'s intense focus on customer's nee ds and high quality online experience has been instrumental in cultivating a rep utation for excellence. In addition, their innovative promotional and guerrilla marketing techniques, have created a distinct brand identity that differentiates the brand and appeals to its target market. As a result of all these factors, Y ahoo! has built a strong brand, with a large customer base and high levels of cu stomer loyalty. The essence of Yahoo!'s brand-building strategy is highlighted i n a simple statement made by Karen Edwards, VPBrand Marketing of Yahoo!, "we've really focused our marketing efforts on attracting new users and providing an ex perience that makes them stay83". 83 'Yahoo! Forges Strong Brand While Adding Meaty Content' - Advertising Age, May 3 , 1999, p. s4 104

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 7 CONCLUSION 105

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7.1 CONCLUSION & DISCUSSION OF KEY FINDINGS This dissertation set out to explore how the Internet is changing the brand-buil ding environment, in order to identify the new sources of value, the new brand-b uilding tools and strategies, and to outline the key factors that contribute to the development of a successful online brand. With power shifting to customers, the success of an online brand is largely determined by customer choice. The 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. Repeat transactions provide the basis for a relatio nship that, when properly cultivated, creates value for both the company and its customers. relationship is the basis for the customer loyalty that creates a su ccessful online brand. 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, from the promises made in the value proposition, to its delivery to the customer. It is about enti cing customers, gaining their trust, and making the experience so satisfying tha t they are confident in their choice and will return again, and will tell others about it. It aims to create "apostles", instead of "terrorists". As such, brand -building on the Internet extends beyond the traditional focus of positioning, a dvertising, promotions, catchy logos and slogans, to creating a business that ca n deliver complete, and completely satisfying, experiences. As outlined in Chapt er 5, the tools for building an online brand include the 7Cs Framework (Convenie nce, Content, Customisation, Community, Connectivity, Customer Care and Communic ation), and the Interactive Brand-Building Model (Attract, Engage, Retain, Learn , and Relate). These frameworks highlight the key components and sources of adde dvalue for developing a high quality experience, and the process of building a c ustomer base and nurturing brand loyalty. The case studies provided a useful and practical insight into the application of these tools. As such, the next sectio n concludes the dissertation with a discussion of the key factors that contribut e to building a successful online brand. This 106

BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7.1.1 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, however, 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, by offering more value than attainable through traditional 'bricks-and-mortar' establishment s. They are providing greater convenience (24x7), lower prices, wider selections , and access to more information on the products or services being provided, and enhancing this with layers of added-value through the '7Cs' - Convenience, Cont ent, Customisation, Community, Connectivity, Customer Care and Communication. Su ccessful brands recognise that the value proposition must more than compensate f or the loss of in-person contact. • A High Quality Online Experience Strong Internet brands are those that create a high quality engaging online cust omer experience. The 7Cs framework allows companies to deliver a tangible custom er experience. Successful online brands meet the demands inherent in each of the 7C categories, by ingraining convenience and making the site easy-to-use, quick -to-load and easy-to-navigate, delivering compelling content, customising the ex perience, developing a community feel, making connectivity easy, integrating cus tomer care, and establishing two-way communication. By placing emphasis on diffe rent 'Cs', they are differentiating their experience from those of competitors. A well executed customer experience that satisfies customers, results in higher brand equity. • A Reputation for Excellence (Delivering on their e-Promises) Fulfilment and delivering on e-promises is the acid test of online brands. The s uccessful brands are those who are investing heavily in logistics, distribution centres, and customer care to ensure a completely satisfying end-to-end customer experience. In doing so, they are cultivating a reputation for excellence, whic h builds confidence and trust that not only entices customers to do repeat busin ess with the company, but leads them to spread positive word-of-mouth, attractin g other customers to the site. 107

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

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

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 hey possess critical assets that give them an advantage over pure online start-u ps. They have an established brand, established customer relationships, establis hed fulfilment systems and infrastructure, and a physical presence (tangibility) - factors that clearly differentiate them from pure players. Strong clicks-andmortar brands are integrating their online and offline activities to leverage th e strengths of each other. In doing so, these brands must respect their core bra nd elements and maintain consistency in the service quality that is expected, bu t at the same time, expand the brand experience to meet customers' expectations in the online world. Through extensive and seamless integration, clicks-andmorta r brands are providing customers with true added-value, while reaping the benefi ts of lower customer acquisition costs and extended reach. The Internet has radically changed the business and competitive environments. Ye t while everything is being turned upside down, one component remains unchanged - value remains (and always will) the basic building block for every successful brand. 7.2 OPPORTUNITIES FOR FURTHER RESEARCH Given that the commercial Internet only began to take off in 1994, there has bee n a limited time horizon to evaluate the durability of Internet brands. In addit ion, with the emergence of wireless access and new platforms, new opportunities and dynamics will emerge as companies develop innovative ways of acquiring custo mers, building relationships and satisfying needs. Therefore, ongoing research w ould be necessary to build on the findings of this dissertation. Nevertheless, t he author believes that the core concepts and key factors identified that contri bute to successful online brands are likely to persist. Brands and brand-buildin g tools tend to be associated with consumer markets, however, they are equally i mportant in business markets. As such, the concepts, tools and key factors outli ned in this dissertation are also applicable to business markets. Nevertheless, an in-depth analysis, drawing on several case studies from business markets, wou ld represent an exciting opportunity for further research. Having established a strategic perspective on building online brands, this dissertation would benefit from complementary in-depth research in the social and psychological dynamics o f the Internet and its impact on consumer behaviour. 110

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDICES 111

BUILDING SUCCESSFUL BRANDS ON THE INTERNET APPENDIX A - Interbrand's Ranking of the Top 60 Brands (www.interbrand.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.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) 83,845 56,654 43,781 33,502 33,197 32,275 30,021 26,231 24,181 21,048 20,694 17, 781 17,595 17,132 15,894 14,830 14,766 14,231 12,550 12,310 11,806 11,281 11,225 11,101 9,147 9,043 8,510 8,155 7,909 7,052 6,603 5,932 4,602 4,404 4,329 4,283 4,076 3,792 3,643 3,596 3,568 3,527 3,464 3,143 2,985 2,895 2,806 2,804 2,681 2, 423 2,313 2,184 1,761 1,648 1,634 1,422 1,361 1,319 1,262 1,193 112

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

BUILDING SUCCESSFUL BRANDS ON THE INTERNET BIBLIOGRAPHY 114

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BUILDING SUCCESSFUL BRANDS ON THE INTERNET ARTICLES FROM BUSINESS & ACADEMIC JOURNALS Aaker, D., & Joachimsthaler, E., 'The Lure of Global Branding', Harvard Business Review, November-December 1999, pp.137-144 Berthon, P., Hulbert, J., & Pitt, L. , 'Brand Management Prognostications', Sloan Management Review, Winter 1999, pp. 53-65 Christensen, C. M., & Bower, J., 'Disruptive Technologies: Catching the W ave', Harvard Business Review, January-February 1995, pp. 43-53 Christensen, C. M., & Overdorf, M., 'Meeting the Challenge of Disruptive Change', Harvard Busine ss Review, March-April 2000, pp. 67-76 Evans, P., & Wurster, T., 'Getting Real a bout Virtual Commerce' - Harvard Business Review, November-December 1999, pp. 85 -94 Foley, M., 'Essentials of Word of Mouth Marketing', The Small Business Journ al (www.tsbj.com) Fournier, S., 'Consumers and Their Brands: Developing Relation ship Theory in Consumer Research', Journal of Consumer Research, March 1998 Garn er, R., 'The E-Commerce Connection', Sales and Marketing Management, January 199 9, pp. 40-46. Ghemawat, P. and Baird B., Leadership Online: Barnes & Noble vs. A mazon.com (A)', A Harvard Business School Case Study, December 4, 1998. Ghemawat , P. and Friedman G., ' Leadership Online: Barnes & Noble vs. Amazon.com (B)', A Harvard Business School Case Study, January 31, 2000. Ghosh, S., 'Making Busine ss Sense of the Internet', Harvard Business Review, March-April 1998, pp. 126-13 5 Golder, P. N., & Tellis, G., 'Pioneer Advantage: Marketing Logic or Marketing Legend?', Journal of Marketing Research, May 1993, pp. 158-170. Gulati, R., & Ga rino, J., 'Get the Right Mix of Bricks & Clicks', Harvard Business Review, May-J une 2000 Hart, C.W. & Johnson, M.D., 'Growing the Trust Relationship', Marketing Management, Spring 1999, pp. 9-19. Hoffman, D. & Novak T.P., 'How To Acquire Cu stomers on The Web', Harvard Business Review, May - June 2000, pp 179-188. Jones , T., & Sasser, W. E., 'Why Satisfied Customers Defect', Harvard Business Review , November-December 1995, pp. 88-99 Katz, L., 'Amazon.com - Going Public', A Har vard Business School Case Study, August 3, 1999. 116

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Keller, K. L., 'The Brand Report Card', Harvard Business Review, January-Februar y 2000, pp.147-175 Levitt, T., 'Marketing success through differentiation - of a nything' - Harvard Business Review, January-February 1980 Maruca, R. F., 'Mappin g the World of Customer Satisfaction', Harvard Business Review Vol. 78 (3), May - June 2000, p.30. McCann, Prof. J., 'Adding Product Value Through Information', - Fuqua School of Business, Duke University, January 28, 1997 (www.duke.edu) Mc William, G., 'Building Strong Brands through Online Communities', Sloan Manageme nt Review, Spring 2000, pp. 43-54 Ohmae, K., 'The Godzilla Companies of the New Economy', Issue 18, First Quarter 2000, pp.130-139 Peppers, D., Rogers, M., & Do rf, B., 'Is Your Company Ready for One-to-One Marketing?', Harvard Business Revi ew, January-February 1999, pp. 151-160 Prahalad, C. K., & Ramaswamy, V., 'Co-opt ing Customer Competence', Harvard Business Review, January-February 2000, pp. 79 -87 Tempest, N., 'Meg Whitman at eBay Inc. (A)' - A Harvard Business School Case Study, October 1, 1999 Tempest, N., 'Meg Whitman at eBay Inc. (B)' - A Harvard Business School Case Study, October 1, 1999 Venkatraman, N., 'Five Steps to a Do t-Com Strategy: How to Find your Footing on the Web', Sloan Management Review, S pring 2000, pp. 15-28 Ward, S., Light, L., Goldstein, J., 'What High-Tech Manage rs Need to Know About Brands', Harvard Business Review, July-August 1999, pp. 85 -95 117

BUILDING SUCCESSFUL BRANDS ON THE INTERNET CONSULTING AND RESEARCH REPORTS Abela, A.V. & Sacconaghi, A.M. Jr., 'Value Exchange: The Secret of Building Cust omer Relationships On Line', The McKinsey Quarterly, 1997, No. 2, pp. 216-219. A nonymous, 'Amazon.com: It's an Ocean, Not A River', A Report by Goldman Sachs In vestment Research, November 11, 1999 Anonymous, 'Amazon.com: The Power of an "In ternet Franchise" Emerges!', A Report by Goldman Sachs Investment Research, Febr uary 4, 2000 Anonymous, 'Building the B2B Foundation - Positioning Net Market Ma kers for Success' An A.T. Kearney Report - 2000. Anonymous, 'Competing in the Di gital Age', Economist Intelligence Unit, 1999 Anonymous, 'Creating a High-Impact Digital Customer Experience', An A. T. Kearney Report, 2000 Anonymous, 'Creatin g Loyalty Out of Chaos: The Inevitability of E-Business' - A Report by Pricewate rhouseCoopers, 1999 Anonymous, 'Dotcom Advertising is Confusing the Public', The Economist Intelligence Unit, June 1, 2000 - (www.ebusinessforum.com) Anonymous, 'Electronic Business Outlook', - Research by PricewaterhouseCoopers / The Confe rence Board, 1999 (www.pwcglobal.com and www.converence-board.org) Anonymous, 'H ow the Internet will Transform Global Business', The Economist Intelligence Unit , January 21, 2000 (www.eiu.com) Anonymous, 'Snapshots of Sale Innovations on th e Web', An A. T. Kearney Report, 2000 Anonymous, 'Targeting Consumers via the In ternet', The Economist Intelligence Unit, April 13, 2000 (www.eiu.com) Anonymous , 'The E-business Technology Forecast' - A PricewaterhouseCoopers Report, 2000 A nonymous, 'The Era of the Virtual Customer', A Report by Deloitte Consulting, Ju ne 29, 1999 (www.deloitteconsulting.com) Anonymous, 'The Future of E-Business' A Research Report by TeslaGroup, 1999 (www.teslagroup.com) Anonymous, 'The Role of Digital Brands in the Digital Economy' - An A. T. Kearney Report, 1998 Anony mous, 'The State of Online Retailing', A Shop.org Study by Boston Consulting Gro up, November 1998 118

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Bentley, J., Embury, A., & Shaw, D., 'Organising for the Digital Economy', A Pri cewaterhouseCoopers Report, 2000 Bernoff, J., Morrisette, S. and Clemmer, K., 'T he Forrester Report' - A Report by Forrester Research Inc. - April 17, 2000 Berr yman, K., Harrington, L., Layton-Rodin, D., & Rerolle, V., 'Electronic Commerce: Three Emerging Strategies', The McKinsey Quarterly, 1998, No.1, pp. 152-159 Bhi se, H., Farrell, D., Miller, H., 'The Duel for the Doorstep' - The McKinsey Quar terly 2000, No.2, pp. 33-41 Calkins, J., Farello, M., Smith-Shi, C., 'From Retai ning to E-tailing', The McKinsey Quarterly, 2000, No.1, pp. 140-147 Cartellieri, C., Parsons, A., Rao, V., & Zeisser, M., 'The Real Impact of Internet Advertisi ng', The McKinsey Quarterly, 1997, No.3, pp. 45-62 Cohen, A., Jordan, J., 'Elect ronic Commerce: The Next Generation', An Ernst & Young Report, 2000 Colony, G., 'Empowered Fruit Flies' - Forrester Research, 2000 (www.forrester.com) Cook, M., Rigby, D., Chu, J., & Morrison, G., 'Order Fulfilment: Delivering on the EPromi se', A Bain & Co. Report, March 17, 2000 (www.bain.com) Court, D., Freeling, A., Leiter, M., & Parsons, A., 'If Nike can "Just Do it", Why Can't We?', The McKin sey Quarterly, 1997, No.3, pp.24-34 Court, D., French, T., McGuire, T., Partingt on, M., 'Marketing in 3-D', The McKinsey Quarterly 1999, No.4, pp.6-17 Court, D. , Leiter, M., & Loch, M., 'Brand Leverage', The McKinsey Quarterly, 1999, No.2, pp. 100-110 Dayal, S., Landesberg, H., & Zeisser, M., 'Building Digital Brands', The McKinsey Quarterly, 2000, No.2, pp. 42-51 Desmet D., Francis T., Hu A., Kol ler T., Riedel G., 'Valuing Dot-coms', The McKinsey Quarterly 2000, No.1, pp.149 -157 Epperson, T., 'Guerrilla Marketing: Innovative Brand Building on the Intern et', A Mainspring Communications Report, January 22, 1999 (www.mainspring.com) F orsyth, J., Gupta, S., Haldar, S., Kaul, A., & Kettle, K., 'A Segmentation you c an Act On', The McKinsey Quarterly, 1999, No.3, pp. 7-15 Freeland, D. G., & Stir ton, S. 'Organising for e-Commerce' - A Boston Consulting Group Report, April 20 00 Goff, J., Harding, D., Shah, R. and Singer, M., 'A New Way to Reach Small Bus inesses', The McKinsey Quarterly, 1998, No. 3, pp.172-176. 119

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Hagel, J., & Armstrong, A., 'Net Gain: Expanding Markets through Virtual Communi ties', The McKinsey Quarterly 1997, No.2, pp.140-153 Hagel, J., & Armstrong, A., 'Real Profits from Virtual Communities', The McKinsey Quarterly, 1995, No.3, pp .127-141 Hagel, J., & Rayport, J., 'The New Infomediaries', The McKinsey Quarter ly 1997, No.4, pp.54-70 Harrington, L., & Reed, G., 'Electronic Commerce (Finall y) Comes of Age', The McKinsey Quarterly, 1996, No.2, pp. 68-77 Henderson, T., & Mihas, E., 'Building Retail Brands', The McKinsey Quarterly, 2000, No.3, pp. 11 0-117 Jordan, J.M., 'Web Commerce at Amazon.com', An Ernst & Young Report - (www .ey.com) Kierzkowski, A., McQuade, S., Waitman, R., & Zeissr, M., 'Marketing to the Digital Consumer', The McKinsey Quarterly, 1996, No.2, pp. 180-183 Marathe, J., 'Creating Community Online', A Durlacher Report, 2000, (www.durlacher.com) M arathe, J., 'Internet Portals' - A Durlacher Report, May 1999 (www.durlacher.com ) Melnicoff, R. M., '5 Rules of the eEconomy', Outlook 1999, No. 21 - A Publicat ion by Andersen Consulting (www.ac.com) Mole, C., Mulcahy, M., O'Donnell, K., Gu pta, A., 'Making Real Sense of Virtual Communities' - A PricewaterhouseCoopers R eport, 1999 Morrisette, S., Clemmer, K. and Bluestein, W.M., 'The Forrester Repo rt' - A Report by Forrester Research Inc., April 1998. Parsons, A., Zeisser, M., Waitman, R., 'Organising for Digital Marketing', The McKinsey Quarterly, 1996, No.4, pp. 185-192 Pecaut, D., & Vogtle, J., 'E-Commerce: Advantage Incumbent', A Boston Consulting Group Report, 1999 Purk, M., 'Relationship Marketing - Levera ging Customer Information to Build Customer Equity' - An A. T. Kearney Report, 1 998 Rhodes, D., Dea, J., & Hemerling, J., 'Building a Successful Experience Bran d', A Boston Consulting Group Report, 1999 (www.bcg.com) Rigby, D., Baveja, S., Rastogi, S., Zook, C., Chu, J., & Hancock, R., 'The Value of Online Customer Loy alty and How You Can Capture it', - A Mainspring Communication Report in collabo ration with Bain & Co., March 17, 2000 (www.bain.com) Rutstein, C., 'The (www.fo rrester.com) Digital Business', The Forrester Report, October 1999 120

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Shaw, D., 'Organising for the 21st Century', A PricewaterhouseCoopers Report, 19 99 Silverstein, M., 'Creating a Flawless Brand Experience', A Boston Consulting Group Report, 1998 (www.bcg.com) Simcoe, T., 'Innovations in Behavioural Marketi ng and Electronic Commerce', An Ernst & Young Report, 2000 Torris, T., 'Boo.com: Fashion Site Must Overcome Own Hype', The Forrester Brief, May 16, 2000 - (www. forrester.com) Torris, T., 'Boo.com's Demise: A Good Wake-Up Call', The Forreste r Brief, May 19, 2000 (www.forrester.com) ARTICLES FROM NEWSPAPERS AND MAGAZINES Anonymous, 'Amazon's Amazing Ambition', The Economist, February 26, 2000 (www.ec onomist.com) Anonymous, 'AOL is paid $40 Million in 4-Year Marketing Pact' - The Wall Street Journal, December 17, 1997. Anonymous, 'Bn.com - Not a Best Seller' - Forbes, August 4, 2000 (www.Forbes.com) Anonymous, 'Boo.com' - Sporting Goods Business, July 6,1999 Anonymous, 'Boo.com Collapses as Investors Refuse Funds: Online Sports Retailer Becomes Europe's First Big Internet Casualty', The Financ ial Times, May 18, 2000 - (www.ft.com) Anonymous, 'Boo.com opens its virtual doo rs', Marketing Week, June 10, 1999 Anonymous, 'Boo.com Snags Delay Launch', The Financial Times, August 19, 1999 (www.ft.com) Anonymous, 'E-Commerce: Something Old, Something New', The Economist, Feb 26, 2000 Anonymous, 'E-Tailers', The Fin ancial Times, January 4, 2000 - (www.ft.com) Anonymous, 'Future Shop: Apparel', Forbes, April 6, 1998 Anonymous, 'In Net Advertising, The Customer is Still King ', Business Week, 1998 (www.businessweek.com) Anonymous, 'It's Got Brand', Chief Executive, CEO Report, 1999 Anonymous, 'Mind the Gap: Dave Hill Discovers the C asual Clothing Store Adept at Dressing Up Its Image', The Financial Times, April 18, 1998 - (www.ft.com) Anonymous, 'My Bout with Boo.com', BBC News Online, May 18, 2000 (http://news6.thdo.bbc.co.uk) 121

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Anonymous, 'On the Web, Experience is the Brand', Business Week, October 29, 199 9 (www.businessweek.com) Anonymous, 'Online Fashion Retailer Sets European Start -up Record: Arnault and Benettons Back $125 million Launch of Boo.com', The Fina ncial Times, May 10, 1999 - (www.ft.com) Anonymous, 'The Be-All and Do-All of th e Net', Business Week - (www.businessweek.com) Anonymous, 'Top Web Retailer Coll apses', BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) Anonymous, 'What is Yahoo. Really?', Fortune, June 22, 1998, p. 168 Anonymous, 'What's Behind the B oom at eBay', Business Week, May 21, 2000 Anonymous, 'Yahoo! - The Company, The Strategy, The Stock' - Business Week, September 7, 1998 Anonymous, 'Yahoo! Forge s Strong Brand While Adding Meaty Content' - Advertising Age, May 3, 1999 Auton, F., 'Brands Still Stay Centre Stage in the Dotcom Era', Marketing, April 27, 20 00 Berger, M., 'Rewarding the Frequent Surfer', Sales and Marketing Management, January 1998, pp 86-87. Brady, D., 'How Barnes & Noble Misread The Web', Busines s Week, Issue 3667, February 7, 2000. Breen, B., ' Building Stronger Internet Id entities', Marketing, September 16, 1999, pp. 25-26. Cole-Gomolski, B., 'Target: Customer Loyalty', Computerworld, May 4, 1998, p.25. Davenport, T., 'Sticky Bus iness', CIO Magazine, February 1, 2000 Dye, R., 'How to Create Explosive Self-Ge nerating Demand', Advertising Age, November 8, 1999. Eads, S., 'Dot.com TV Ads: The Good, the Bad, and the Left-Us-Clueless' - Business Week, December 1999 (www .businessweek.com) Ebenkamp, B., 'Boo.com sets $10m Brand Effort Focusing on Ath letically Challenged', Brandweek, Volume 40 (29), July 19, 1999. Green, H., 'Sha keout E-Tailers', Business Week, May 15, 2000, (www.businessweek.com) Green, H., 'The Deadest Aim in the Branding Shootout', Business Week, July 9, 1998 (www.bu sinessweek.com) Grish, K., Powell, M. and Harris, K., 'Boo.com', Sporting Goods Business, Vol. 32 (11), July 6, 1999, p. 61. 122

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Gross, N., 'Building Global Communities', Business Week, March 22, 1999 (www.bus inessweek.com) Guerin, M., 'Make that Web site work for your Brand', Marketing N ews, February 28, 2000 Guglielmo, C., 'Don't Write Off Barnes & Noble', Upside, Vol. 12 (6), June 2000, p. 132. Hartnett, M., 'The Future of Brands', Advertisin g Age, November 8, 1999 Hazleton, L., 'Jeff Bezos: How he Built a Billion-Dollar Net Worth Before his Company Even Turned a Profit', Success, July 1998. Himelst ein, L., 'Yahoo! The Company, The Strategy, The Stock', Business Week (www.busin essweek.com) Hof, R., Browder, S., & Elstrom, P., 'Internet Communities - Forget Surfers. A New Class of Netizen is Settling Right In' - Business Week, May 5, 1 997, p.66 Jurvetson, S. & Draper, T., 'Viral Marketing' - December 16, 1998 - (w ww.dfj.com) Klein, S. & Lemmey, T., 'Customer Relationships: The Net's New Curre ncy', The Standard, March 6, 2000 (www.thestandard.com) Kuchinskas, S., 'The E-C ommerce Cometh', Brandweek, September 21, 1998, pp. 8-12. Lee, L., 'Clicks and M ortar at Gap.com', Business Week, Issue 3651, October 18, 1999, p.150. Lehman, D ., 'Customer Loyalty is E-Commerce King', The Standard, March 31, 2000 (www.thes tandard.com) Lovelace, H.W., ' Barnes & Noble: Hit Back!', Informationweek, Augu st 30, 1999, p. 168. Marshall, C., 'Dot-com Brand-Building Runs Wild', Forbes, O ctober 18, 1999 (www.forbes.com) McLuhan, R., 'A Lesson in Online Brand Promotio n', Marketing, March 23, 2000, pp 31-32. Milliot, J., 'Billion-Dollar Booksellin g: The Path of Kahn, Where B&N's Physical and Virtual Worlds Meet', Publishers W eekly, January 3, 2000, pp. 48-49. Milliot, J., 'BN.com Has Sales of $202m, loss es of $102m', Publishers Weekly, Volume 247 (7), February 14, 2000 p.75 Moran, N ., 'Brand and Trust on the Internet, Chemical Week, August 19, 1999 Nakache, P., 'Secrets of the New Brand Builders', Fortune, June 22, 1998 Neuborne, E., & Hof , R., 'Branding on the Net', Business Week, October 29, 1998 (www.businessweek.c om) Neuborne, E., 'Dot.com Marketers Need to Kick the TV Habit', Business Week, January 24, 2000 - (www.businessweek.com) 123

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Neuborne, E., 'Why Boo Really Went Bust', Business Week, June 12, 2000 Neuborne, E., 'Why Famous Brands Often "Fracture" When They Hit the Web', Business Week, April 12, 1999, (www.businessweek.com) Pack, T., 'All About Books Online: Chapte r Two.' Econtent, Volume 22 (5), October / November 1999, pp. 26-32. Patsuris, P ., 'BN.com Not A Best Seller', Forbes (www.Forbes.com) Peters, T., 'Great Age of the Brand', Advertising Age, November 8, 1999 Ratliff, D., 'Read All About It', Discount Merchandiser, Volume 38 (1), January 1998, pp. 81-82. Reid, C., 'Berte lsmann Creates Global e-Commerce Group', Publishers Weekly, June 19, 2000, p.17. Riedman. P., 'Yahoo! Forges Strong Brand While Adding Meaty Content', Advertisi ng Age, May 3, 1999. Robinson, E., 'The $20 Million Company...And It's $40 Milli on Ad Campaign', Fortune, November 8, 1999, pp315-316. Rosen, N., 'Interaction w ith the Right Style', Marketing, May 16, 1996, pp 39-42. Rosier, B., 'What went so horribly wrong with Boo.com?', Marketing, May 25, 2000. Sacharow, A., ' Disne y -B&N Deal Signals in Online Sales Business', Adweek, Volume 39 (5), February 2 , 1998. p. 32. Stepanek, M., 'You'll Wanna Hold Their Hands' - Business Week, Ma rch 22, 1999 (www.businessweek.com) Stone, A., 'What Could Give eBay a Booster S hot', Business Week, June 22, 2000 (www.businessweek.com) Stone, A., 'Will Amazo n Become a Takeover Target?', Business Week, August 3, 2000 (www.businessweek.co m) Vizard, M., 'Focus Should Be on Business Integration', InfoWorld, February 1, 1999, p.3 Wallace, B., ' The Internet Unplugged', Informationweek, December 13, 1999, pp. 22-24. Ward, M., 'From Boo.com to Boo.gone', BBC News Online, May 18, 2000 (news6.thdo.bbc.co.uk) Warner, B., 'Marketers of the Year: Jeff Bezos, Vol ume Discounter' - Brandweek, October 12, 1998 Weintraub, A., 'Dot-Coms (www.busi nessweek.com) Get Physical' - Business Week, May 22, 2000 124

BUILDING SUCCESSFUL BRANDS ON THE INTERNET Willis, C., 'Does Amazon.com Really Matter?' - Forbes, April 6, 1998 Wilson, T., 'New Page for Web Marketing: Barnes & Noble.Com Deals Aimed At Acquiring Custom ers Cheaply', Internetweek, February 28, 2000, p. 9. WEBSITES www.ac.com www.adl.com www.amazon.com www.atkearney.com www.bain.com www.barnesa ndnoble.com www.bcg.com www.boo.com www.businessweek.com www.cdnow.com www.deloi tteconsulting.com www.durlacher.com www.ebay.com www.ebusinessforum.com www.econ omist.com www.eiu.com www.ey.com www.forrester.com www.ft.com www.gap.com www.ga pinc.com www.interbrand.com www.mckinseyquarterly.com www.nua.com www.pwcglobal. com www.yahoo.com 125