A STUDY ON

MARKETING STRATEGIES IN BRAND

BUILDING ON THE INTERNETSubmitted in partial fulfillment of the requirements of Bangalore University for the Award

of the Degree of

MASTER OF BUSINESS ADMINISTRATION

By

Mr. NITIN THOMASReg. No. 05JJCM6036

Under the Guidance of

Prof. Rajesh S. Pillai

KRISTU JAYANTI COLLEGE

K.NARAYANAPURA, KOTHANUR POST

BANGALORE- 560077

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2005-2007

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DECLARATION

I here by declare that this dissertation titled “A Study on Marketing

Strategies in Brand Building on the Internet” is submitted by me to the

Department of Management, Bangalore University in partial fulfillment of

requirements of MBA programme is a bonafide work carried by me under the

guidance of Prof. Rajesh S. Pillai.

This has not been submitted earlier to any other university or Institution for

the award of any degree/diploma/certificate or published any time before.

Place: Bangalore Nitin Thomas

Date:

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KRISTU JAYANTI COLLEGE

K.NARAYANAPURA, KOTHANUR POST

BANGALORE- 560077.

CERTIFICATE FROM THE INSTITUTION

Certified that this dissertation titled “A study on Marketing Strategies in

Brand Building on the Internet” submitted in partial fulfillment for the award of

MBA Degree of Bangalore University, was carried out by Nitin Thomas of IV

Semester MBA under the guidance of Prof. Rajesh S. Pillai.

This project work has not been submitted to any other university or

Institution for the award of any degree/diploma/certificate

GUIDE DEAN

MBA DEPARTMENT

PRINCIPAL

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ACKNOWLEDGEMENT

‘Behind every successful effort there lies contribution from numerous sources irrespective of

their magnitude. My project is no exception and I take opportunity to thank those helping hands whole

heartedly.’

At the outset, I would like to express my deep sense of gratitude

and sincere thanks to Rev. Fr.Josekutty P.D, Principal, Kristu Jayanti

College for providing an opportunity to discover the Corporate World,

from a close perspective.

I wish to express my indebtness and profound sense of gratitude to

my guide, Prof. Rajesh S. Pillai, Kristu Jayanti College for their kind

help, valuable guidance, advice and encouragement throughout the span

of my work

Last but not least I also thank my parents and my relatives for their co-operation and support

without whom my Project would not have being successful.

Nitin Thomas

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CONTENTS

Executive Summary

Chapter 1: Introduction 1

Chapter 2: Research Methodology 4

2.1 Brief Introduction 52.2 Statement of the Problem 6 2.3 Needs for the Study 7 2.4 Objectives of the Study 72.5 Scope of the Study 8 2.6 Methodology 9 2.7 Methodology Assumption 11 2.8 Limitations of the Study 12

Chapter 3: Industrial Background & Company Profile 13

3.1 The Natures of Brands 14 3.2 Building a Brand 203.3 The Internet 26 3.4 Building brands on the Internet – a hypothesis 30 3.5 Profiles 373.5.1 Introduction 37 3.5.2 Case study: Yahoo! com 373.5.3 Case study: Amazon.com 433.5.4 Case study: Boo.com 50 3.5.5 Case study: eBay 543.5.6 Case study: CDnow 60 3.5.7 Case study: Gap.com 65

Chapter 4: Analysis & Interpretation (Tables &Graphs) 70

Chapter 5: Findings & Suggestion 82

Conclusion 87

Bibliography 92

Appendices 94

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TABLES & GRAPHSTable No.1: What are people doing online

71

Figure 4.1: What are people doing online

72

Table No.2: Number of respondents who really carried out business transactions on Internet 73

Figure 4.2: Number of respondents who really carried out business transactions on Internet 73

Table No.3: Name of cyber companies that you actually dealt with 74

Figure 4.3: Name of cyber companies that you actually dealt with 74

Table No.4: Number of e-purchasers who want to come back for future transactions 75

Figure 4.4: Number of e-purchasers who want to come back for future transactions 75

Table No. 5: Standards for a good online company 76

Figure 4.5: Standards for a good online 76

Table No.6: Keys to Web brand Loyalty 77

Figure 4.6: Keys to Web brand Loyalty 77

Table No.7: Killers of Web brand Loyalty 78

Figure 4.7: Killers of Web brand Loyalty 78

Table No.8: Things you want to buy online 79

Figure 4.8: Things you want to buy online 79

Table No.9: Ranking the popularity of six below cyber companies 80

Table No. 10: Do you usually read chain mails & bulk mails? 81

Figure 4.10: Do you usually read chain mails & bulk mails? 81

Table No. 11: Different approaches in brand-building 88

Table No. 12: Popularity and effectiveness of brand building methods 89

Figure c.1: Popularity of methods 90

Figure c.2: Effectiveness of methods 90

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EXECUTIVE SUMMARYThis dissertation set out to explore how the Internet is changing the brand-

building environment, in order to identify the new sources of value, the new brand-

building tools and strategies, and to outline the key factors that contribute to the

development of a successful online brand.

With power shifting to customers, the success of an online brand is largely

determined by customer choice. The repeated choice of a certain brand by customers

and business partners generates the transactions and repeat business that

counterbalances the costs of customer acquisition and infrastructure. Repeat

transactions provide the basis for a relationship that, when properly cultivated, creates

value for both the company and its customers. This relationship is the basis for the

customer loyalty that creates a successful online brand. The companies that are

successfully building relationships and fostering brand loyalty are those that recognise

that their brand's perceived value hinges on the total end-to-end customer experience,

from the promises made in the value proposition, to its delivery to the customer.

It is about enticing customers, gaining their trust, and making the experience so

satisfying that they are confident in their choice and will return again, and will tell others

about it. It aims to create “apostles”, instead of “terrorists”. As such, brand-building on

the Internet extends beyond the traditional focus of positioning, advertising, promotions,

catchy logos and slogans, to creating a business that can deliver complete, and

completely satisfying, experiences.

As outlined in Part 4, Chapter 3, the tools for building an online brand include

the 7Cs Framework (Convenience, Content, Customisation, Community, Connectivity,

Customer Care and Communication) These frameworks highlight the key components

and sources of added value for developing a high quality experience, and the process

of building a customer base and nurturing brand loyalty. The case studies provided a

useful and practical insight into the application of these tools.

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CHAPTER 1

Introduction

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Introduction

Over the past few years, there has been an explosion in the online world - an

explosion that is also a harbinger of how business will operate in the future. Supply

chains are being rethought, products and services reconfigured, and business models

revamped. As such, the Internet is having a profound impact on the way business is

being conducted in ways that are often disruptive to traditional methods. This is

creating new challenges and opportunities. The Internet provides the opportunity for

companies to reach a wider audience and create compelling value propositions never

before possible (e.g. Amazon.com's range of 4.5 million book titles), while providing

new tools for promotion, interaction and relationship building. It is empowering

customers with more options and more information to make informed decisions. The

Internet also represents a fundamental shift in how buyers and sellers interact, as they

face each other through an electronic connection, and its interactivity provides the

opportunity for brands to establish a dialogue with customers in a one-on-one setting.

As such, the Internet is changing fundamentals about customers, relationships, service

and brands, and is triggering the need for new brand-building strategies and tools.

In the midst of this, aggressive Internet start-ups have emerged, creating strong

brands that are putting established brands at risk. Internet companies such as Yahoo!,

Amazon.com, America Online (AOL) and eBay have been able to build powerful brands

in a few years, whereas it has taken decades for traditional companies to achieve the

client base, customer affiliation and level of sales, which these Internet start-ups have

achieved.

FIGUREAs a result, harnessing the reach and interactivity of the Internet to build and

maintain brands has become extremely important. For pure online players, who are

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essentially intangible, brands are even more critical as customers have little to go on

other than a recognised brand. Given the tremendous clutter in today's e-commerce

marketplace, and the high cost of acquiring online customers, the most successful sites

will be those that can attract customers and build brand loyalty and enthusiasm that

extends the brand-customer relationship beyond a single transaction. A Business Week

survey found out that 57% of Internet users go to the same sites over and over again,

rather than drifting from site to site1. Therefore, building awareness, attracting traffic or

“eyeballs”, turning browsers into buyers, and turning first-time buyers into loyal repeat

customers has become the Holy Grail of online marketing strategies. However, as the

need to build brand loyalty online is reaching a peak, there is a growing recognition that

traditional methods are no longer suited to this new interactive environment. As such,

companies lack a coherent framework and concrete methods to build an online brand.

In light of this, this dissertation seeks to explore how companies should go about

building a successful Internet brand and to identify the critical factors that must be

considered.

During the last 3 years, there has been a rupture on the bubbles of the Dotcom

industry. The disruption of the global Dotcom industry, the loss of investors’ confidence,

the assailance from hackers and code-breakers, the bankruptcy of many start-up giants

(including Boo.com and Goodsonline.com) made many pessimistic souls believe at the

doomsday of the industry in a not-too-distant future. But according to experts, Dotcom

industry is still a fledging and promising one. According to Hoffman, the online

purchase will occupy up to 35% of the total figure in the next 30 years. By the way, the

competition between the start-ups will be more fiercely than ever. In the era of digital

technology, companies compete not only in price and quality, but also in brand name.

Therefore, building a successful brand name on Internet is a vital task, especially to

cyber companies.

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CHAPTER 2

Research Methodology

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2.1 Brief Introduction

In the past, they competed by price. At present, they are competing by quality.

In the future, they will compete by brand name. Especially, within the Dotcom industry,

a well-known and recognised brand is a skeleton key to the gate of success. Building

up a successful brand name is synonymous to surviving the market.

Online purchase and Brand building on the Internet are new business activities,

and they have acquired a new dimension, with approaches are totally different from

ones of the traditional industries. Online companies have different client base. They

make promotion and advertisement strategies in different ways. They have different

access to brand building strategies. Digging up and scrutinizing the way how a start-

ups can build a successful brand name on Internet is the main purpose of this

dissertation.

During the last seven years, the world has eyewitnesses the fierce wax and

wane of the Dotcom industry, from the fledging period of 1995, with the appearance of

Amazon and AOL, to the zenith of Dotcom industry in 1999, and the nadir of 2000,

when Boo.com and Goodsonline.com came into bankruptcy, and the newest

resurrection of Dotcom industry since 2002, with Yahoo and eBay’s profit recovery.

Recently, more than a dozen new cyber companies (e.g.: Vnemart.com,

Baazee.com, Johnstark.com) either promoted by the banks or private industrial houses

have come into existence with the hope of regaining the glamorous past to the industry.

Looking at the future, one can not ignore the fact that Dotcom is still the industry of the

future, with all promises and expectations one can hope.

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2.2 Statement of the Problem

This project has been undertaken to study about the strategies of brand building

within start-up industry.

The study tries to analyse brand building strategies of 6 cyber companies, which

attach to the success and failure of each and every of them, thereof bring out a lesson

regarding how to build a successful brand on Internet.

This study tries to extract to customers’ attitude and beware ness towards

respective brands, and on what foundation a potential customer decides to join the

mainstream of cyber purchase, and which factors cast influence on his or her decision

of buying.

This study also tried to bring out the perceptions that e-customers finding while

carrying out an e-commerce transaction.

In the study, I interviewed potential e-customers on certain significant points,

such as basis of customer, level of beware ness towards a certain brand name,

customer perception, level of transaction, frequency of e-purchasing monthly, level of

satisfaction and convenience, factors of influence, etc.

During the study, besides using my own market researching result, text books,

and reference materials, I also carried out my analysis and interpretation based on

unconventional sources of information like cyber reference materials, e-opinion poll.

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2.3 Need for the Study

The study concentrates on the field of global Dotcom industry, the significance

of brand name to a cyber company, and how to build up a successful brand.

The study also shows the perception and awareness of people towards some

brand names, and which brand they want to deal with most. The study reveals the

dotcoms’ chance of viability in the market to tap the potential customers and to increase

their market share, as well as its position in the customers’ mind.

The need of the study emphasises on the market research of the brands. The

study helps in analysing the viability of some brand names.

During the study, I tried to find out the potential customers and collect relevant

information, as well as to analyze the information which may help cyber companies to

formulate their brand building strategies in accordance with customers’ mind and

perception, therefore make contribution to their market share increase in the future.

2.4 Objectives of the StudyThe objectives of this dissertation are as follows:

To gain an understanding of the role of brands and how they have traditionally

been built. A review and analysis of leading academic thinking will be used to

explore these issues.

To explore how the Internet is changing the brand-building environment, and to

identify new sources of value, tools and strategies to build brands on the

Internet.

Academic literature and an analysis of the impacts of the Internet will be used to

Investigate these factors, supported by secondary data related to aspects of

online business from accredited and published sources.

To identify the key factors and characteristics that contributes to the

development of successful Internet brands. This is based on the outcome of the

primary research (in-depth case studies), with reference to the theoretical

themes that emerge from the literature review and in terms of the practical

implications for companies.

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2.5 Scope of the Study

To understand what vital role a brand name might play in contributing to the

success of a cyber company, it will be necessary to understand the context of current

issues within the Dotcom industry and to identify the main players within the Dotcom

industry, their brand building strategies, their successes and failures, and lessons from

them.

The project work covers brand building strategies with special reference to six

typical cyber companies, including:

Amazon.com

Fashion mall.com

CDnow

EBay

Gap.com

Yahoo!

And the survey has been conducted randomly selected respondents within the

city of Bangalore.

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2.6 Research Methodology

The methodology used in this dissertation is illustrated in Figure 2.1.

Figure 2.1: Research Methodology

caac.2 - RESEARCH METHODOL

The 7Cs Framework Primary & the Interactive Data Brand-Building Process

Academic Research: Given that the Internet is such a new area, there is more

work in popular rather than academic literature. Consequently, the literature review

draws on leading academic thinking in more established areas such as brand

management, relationship management, marketing, strategy and economics. The

absence of academic literature on Internet branding posed a major obstacle; however,

this also highlights the true value of the dissertation. While there is no attempt, nor

desire, to provide an in-depth analysis of the psychological and social dimensions of

brands, certain key factors are highlighted in their relevance to the dissertation.

Secondary Data: This consists primarily of key facts and survey results quoted

by leading consultancy and research firms, and is used to provide insight into some of

the factors that contribute to the development of successful brands.

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AcademicResearch

SecondaryData

Hypothesis Case Studies Conclusion

Hypothesis (Framework): This is based on the literature review and secondary

data. The resulting 7Cs Framework and Interactive Brand-Building Model outline key

sources of added value and the tools available for companies to create a high-impact

customer experience that is critical in building an online brand. These are further

refined using the insight obtained through the case studies.

Case Studies: The dissertation is essentially built on the in-depth analysis of

the brand building efforts of six online companies. The case studies include born-on-

the-web companies that are among the most recognised Internet Brands

(Amazon.com, CDnow, eBay and Yahoo!), traditional “bricks-and-mortar” companies

that rose to the challenge of taking their brands to the Internet (Gap.com), as well as a

recent Internet failure (Boo.com). The combination of cases provides a useful and

practical insight into brand-building issues and problems, and factors that contribute to

a brand's success.

Conclusion: Discusses the key findings and areas for further research.

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2.7 Methodology Assumption

This section outlines the procedure followed in collecting data and analyzing it.

a). Method of collection:

The survey was conducted to collect primary data both quantitative and

qualitative. Data was sought from cyber companies and e-customers.

b). Type of data used:

Both primary data and secondary data where used. Primary data was obtained

from direct interviews with e-customers, web-users, and potential purchasers.

Secondary data was obtained from sources like brochures of cyber companies, Web

sites, Magazines, and Books etc.

c) Tools for data collection:

The primary data was collected with the help of questionnaire. The

questionnaire was designed to obtain necessary information that can help me to fulfill

this study. The questionnaire was administered by me through direct visit to institutes,

companies, administration offices, and residences, and by collecting them from the

respondents at a later date in some cases.

d) Sample size:

Keeping in mind the budgetary, time and manpower constraints, the total

sample selected was 100 all of them were conducted in Bangalore,

e) Assumption:

The information from the respondents has been treated as the correct

information. Though the sample size is limited to 100, I felt it is good enough to come to

conclusion about how to build a recognized brand name on Internet.

To analyze and interpret the primary data, I had used percentage analysis,

which suits the best.

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2.8 Limitations of the Study

1. This study was carried out in Bangalore city. Hence the results must not be extended

to the national level as the psychographics and demographics vary significantly across

the country. Thus the results are applicable only in Bangalore city.

2. Out of 1 lacks odd dotcoms in the world; only 6 companies are selected, so we can

not generalize the findings.

3. Some of the data are collected from word-of-mouth that can be biased.

4. Given suggestions and interpretations are limited to particular companies only.

5. Biased and concealed responses by the respondents can’t be averted.

6. Even though comparative analysis of different cyber companies is done, only some

aspects of their brand building strategies are taken into consideration. The data

available on this are limited and companies, because of their business secret, are not

willing to part with it.

7. The project is to be completed within 3 months, which is insufficient for a further in-

dept analysis. The limitation of time horizon therefore is another constraint of this study.

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CHAPTER 3

Industrial Background&

Company Profile

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3.1 THE NATURE OF BRANDS

INTRODUCTION

Brands are made up of many layers and dimensions. In this chapter, these

layers are unravelled to reveal the nature of brands and their reason for existence. The

chapter proceeds to describe the influence of brands on the buying process, and the

importance of customer satisfaction and brand loyalty. The concept of brand equity is

outlined, explaining the value of brands, both to customers, and to companies. These

concepts are central to brands and brand-building, whether online or offline, and they

form the backbone of this dissertation.

WHAT IS A BRAND?

“A mixture of tangible and intangible attributes, symbolised in a trademark,

which, if properly managed, creates influence and generates value”1

This definition truly captures the essence of a brand, and highlights the

importance of brand management. Branding is about creating “value”, both for

customers, and for the company. This value stems from the products and services that

companies create and bring to the market, but extends further to encompass added

values derived from factors such as the brand-customer relationship, the brand's

emotional benefits and its self-expressive benefits.

THE LAYERS OF A BRAND

Brands are made up of four layers - the core product or service, the basic brand,

the augmented brand and the potential brand.

The core Product / Service

At the most basic level, customers buy products to meet certain functional

needs. However, most products and services cannot survive on functionality alone as

this is usually matched in time. The most common barrier to competition is building a

brand.

The Basic Brand

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The basic brand consists of the “name, term, sign, symbol, or design, or a

combination of them, intended to identify the goods and services of one seller or group

of sellers and to differentiate them from those of competitors”2. Essentially, this should

support the offering's performance and differentiate the brand from those of

competitors.

The Augmented Brand

Successful companies seek a competitive edge through the enlargement of the

core product or service, with supplementary products and services (e.g. information,

quick delivery) that enhance the customer’s total purchasing and use experience.

These products and services add value and make the offering much more difficult for

competitors to emulate.

The Potential Brand

A brand achieves its potential when added values are so great that customers

will not willingly accept substitutes, even when the alternatives are substantially

cheaper or more readily available (e.g. Coca-Cola, Kodak, Levi's).

PRODUCT AND SERVICE BRANDS

Product brands are the original brand carriers. They are the historical core of

branding because they are the most prevalent, and because they most readily come to

mind when consumers are asked to recall brands. For instance: Ford, Motorola, Coke,

Honda, etc.

Service Brands (intangible) are much less numerous than their product counter

parts. Intangible services are also more challenging to “package” and sell to consumers

who often have difficulty conceptualising, preferring things they can see and touch.

Certain service brands, such as in retailing, actually sell products, but the brand itself is

the store, not the products it sells - The Gap stores, Southwest Airlines and

Amazon.com are examples. In fact, this is the case with all Internet companies, as they

essentially perform the function of a “virtual” intermediary or “infomediary” and are

intangible.

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THE IMPORTANCE OF CUSTOMER SATISFACTION AND LOYALTY

Customers at the lowest and highest ends of the satisfaction scale tend to have

intense feelings about a brand and its products / services. The customers at the bottom

end of the scale are "terrorists" - those who actively attack the brand telling others not

to buy from the company. At the opposite end of the satisfaction spectrum are

"apostles" - customers who are satisfied and loyal and talk favourably about the brand.

Loyalty is derived when customers are continuously satisfied over time. This

satisfaction encompasses the whole experience and not just a company's products or

services. Customers that are passionately or emotionally loyal are those that have built

trust in a company, and believe that it will always act in their best interest. Trust is

critical for a brand’s success.

Some traditional companies identified as having established a strong trust

relationship with their customers include: Disney, Federal Express, Hewlett-Packard,

Johnson & Johnson, Saturn, Southwest Airlines and Xerox.

Figure 3.2: Customer’s satisfaction scale

FIGUR IMPACT OF COMPETITIVE ENVIRONMENT

High

Loyalty

Low

Low Satisfaction High

Loyal customers are assets. The benefits of strong customer relationships are:

- The average cost of acquiring a new customer is five times more than it costs to retain

an existing one.

- Loyal customers tend to spend more.

- Regular customers tend to place frequent, consistent orders.

- Satisfied customers are the best advertisement - they provide good word-of-mouth

and are the best salespeople for the product / service.

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Hostages Apostles

Terrorists Mercenaries

- They are willing to pay premium prices to a supplier they know and trust.

- Gaining market entry or share becomes very difficult for competitors.

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

EMOTIONAL LOYALTY

Emotional loyalty can be brought about in two main ways. Firstly, emotional

loyalty is born out of a consumer's personal relationship with a brand. This relationship

can actually start through the satisfaction of a functional need or expressiveness (self-

image) need. Consumers cross the threshold from a mere brand relationship into

emotional loyalty when they "animate" the brand, giving quasi-human qualities and

relate to it as they would to humans - consider how Coke consumers felt betrayed when

Coca-Cola decided to change their formula in 1985.

Emotional loyalty can be also created through the formation of a strong user

community around the brand. The consumer reaches emotional loyalty when

membership in the brand’s user community becomes an end in itself. In this way, the

brand becomes a link for people for whom fulfilling similar aspirations is a major life

theme (e.g. Harley-Davidson motorcycle clubs).

THE CONCEPT OF BRAND EQUITY

Brands vary in the amount of power and value they have in the marketplace. At

one extreme, there are brands that are unknown by most buyers. Some brands have a

fairly high degree of brand awareness (measured by brand recall and recognition).

Beyond this, there are brands that customers perceive as acceptable and would not

resist buying. A stronger brand enjoys a high degree of brand preference over

competing brands. However, a “power brand” tends to have a high degree of brand

loyalty, whereby customers would be unwilling to substitute it with competitors’ offers.

Figure 3.3: Brand awareness process

A strong brand is said to have high brand equity, which is the value of the brand

over and above its commodity value. According to David Aaker (1991), brand equity “is

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UnknownBrand

BrandAwareness

BrandAcceptability

BrandPreference

BrandLoyalty

a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or

subtracts from) the value provided by a product or service3”.

The major brand assets are brand loyalty, name awareness, perceived quality,

strong brand associations, and other assets such as patents, trademarks, and

relationships with distributors and strategic partners.

The values of brand to customers

According to Jean-Noel Kapferer (1992)4, brands perform several functions that

add value and customer benefits:

Identification - To be clearly seen, to make sense of the offer, to quickly identify sought

after products

Practicality - To save time and energy through identical repurchasing and loyalty

Guarantee - To be sure of finding the same quality no matter where or when you buy

the product or service

Optimisation - To be sure of buying the best product in the category, the best performer

for a particular purpose

Characterisation - To have confirmation of your self-image or the image that you

present to others

Continuity - Satisfaction brought about through familiarity and intimacy with the brand

that you have been consuming for years

Hedonistic - Satisfaction linked to the attractiveness of the brand, to its logo, to its

communication

Ethical - Satisfaction linked to the responsible behaviour of the brand in its relationship

with society

The values of brand to companies

Brands create value for companies, in the following ways:

Brands, market share and profits - Typically a brand leader obtains twice the market

share of the number two brand, and the number two twice the share of the number

three. The brand leader is the most profitable and all beyond number two are

unprofitable.

Brand Leverage - The brand leader benefits from two main leverage effects: Higher

volume leads to economies of scale in development, production and marketing;

Premium pricing increases revenue.

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The Value of Niche Brands - Dominating a niche market is usually more profitable

than being fifth in a large market.

Brand Loyalty and Beliefs - Strong brands are more attractive to investors. Brand

loyalty also reduces marketing costs and enables firms to override occasional problems

(e.g. Johnson & Johnson with Tylenol).

The Brand Barrier - Brand leaders usually have the financial strength to fend off

competitors. Potential competitors are usually reluctant to enter the market if existing

brands satisfy customers. In addition, brand leaders can exploit their superiority in the

market (e.g. Coca-Cola “the real thing”).

Avenues for Growth - The product life cycle applies to products, not brands.

Companies can maintain a brand while modifying the underlying product to account for

new technology, fashion or prevailing market conditions. The brand can also be used to

penetrate new markets.

Motivating Stakeholders - Companies with strong brands attract good recruits. They

also tend to elicit community and government support. In trying to estimate the

monetary value of brands, companies such as Interbrand (see Appendix A), and Young

& Rubicam have created complex formulas, but there remains an ongoing controversy

about how accurate and meaningful these measures are.

CONCLUSION

Branding is essentially about creating value through the provision of a

compelling and consistent offering and customer experience that will satisfy customers

and keep them coming back. When a company creates this type of customer

preference and loyalty, it can build a strong market share, maintain good price levels

and generate strong cash flows. This, in turn, drives up share price and provides the

basis for future growth.

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3.2 BUILDING A BRAND

INTRODUCTION

Building a strong brand is a complex task. This part spells out the traditional

brand building process, highlighting important factors that contribute to the success of

each step along the way. The major characteristics of successful brands are also

reviewed.

OVERVIEW OF THE BRAND-BUILDING PROCESS

The brand building process starts with the development of a strong value

proposition. Once this has been established, the next step is to get customers to try the

brand. If the offering is developed properly, it should provide a satisfactory experience

and lead to a willingness to buy again. To entice trial and repeat purchase requires

triggering mechanisms, which are created through advertising, promotion, selling,

public relations, and direct marketing. The company needs to communicate the values

of the brand and then reinforce brand associations to start the wheel of usage and

experience, and keep it turning. Through the combination of the stimulus of consistent

communications and satisfactory usage and experience, brand awareness, confidence

and brand equity are built.

THE VALUE PROPOSITION

Brand-building starts with a clearly defined value proposition - a strong offer that

a potential customer would find compelling and interesting. In order to do this, a

company must develop a strong understanding of who their potential customers are,

what they value and how the products or services should be optimised or configured to

deliver this value. The value proposition must be continuously re-evaluated to respond

to changes in the marketplace.

Central to this value proposition, a brand must deliver a quality product or

service that meets the functional needs of customers and differentiates itself from

competitors. It should seek to augment its basic appeal with added value through the

provision of additional products or services to delight customers. In this way, the brand

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can elicit feelings of confidence that it is of higher quality than 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). These three characteristics are

multiplicative rather than additive - each is essential. Without a good product or service,

it is impossible to build a successful brand. Similarly, unless differentiation and

awareness can be developed, it will never attract a strong client base.

Added Value

Added value is at the heart of building successful brands. Most buying decisions

are influenced by brand values, which are additional to those based upon real

performance. The large number of decisions, the pace of technical change, the number

of competing alternatives and the large variety of advertising and selling messages,

mean that buyers look for short cuts. Reputable brand names provide confidence and

allow customers to cut through the risks and complexity of choice.

Added values also occur when brands are bought for emotional reasons to

satisfy other needs besides functional needs. People use brands to express their

lifestyles, interests, values or wealth. Customers choose brands, which they perceive

as meeting their needs. In today’s affluent society, these needs are as likely to be

about satisfying self-actualisation or esteem needs, or to gain a sense of belonging, as

they are to be about satisfying basic physical and economic needs. Brand values derive

from five major sources:

Experience of Use - if a brand provides good service over time, it acquires added

values of familiarity and proven reliability.

User Associations - brands frequently acquire an image from the type of people who

are seen as using them. Advertising and sponsorship are often used to convey images

of prestige or success by associating the brand with glamorous personalities or

celebrities. For instance: Britney Spear and David Beckham with Pepsi Cola, or Liz

Taylor with Channel 5.

Belief in Efficacy - in many cases, if customers have faith that a brand will work, it is

more likely to work effectively for them. For pharmaceuticals, cosmetics and high-tech

products, faith in brand generates satisfaction in use. Beliefs in efficacy can be created

by comparative evaluations and rankings from consumer associations, industry

endorsements and newspaper editorials.

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Brand Appearance - the design, layout and appearance of the brand can clearly affect

preference by offering cues to quality.

Manufacturers’ Name and Reputation - In many situations a strong company name

(e.g. Coca-Cola, Gillette, Sony, Hewlett-Packard, Kellogg’s) attached to a new product

will transfer positive associations, providing confidence and incentive to trial.

Distinctive Brand Identity

A brand identity is the message sent out by the brand through its name,

features, visual appearance, and advertising. This may be different from the brand

image, which depends on how the target market perceives the brand. A company

should seek to differentiate its brand through developing a distinctive identity. Jean-

Noël Kapferer (1992) identified three levels of a brand identity5 including:

The Brand Core - the fundamental or genetic code of the brand, which remains fixed

over time.

The Brand Style - articulates the brand core in terms of the culture it conveys, its

personality and its image or self-projection.

The Brand Theme - the way the brand communicates through its advertising, press

releases, packaging, etc. Themes include the physical appearance (logo, colour

scheme, and visual appearance), its reflection (e.g. type of spokesperson / customer

image used to advertise the brand), and the relationship expressed (e.g. glamour,

prestige, friendliness). Brand themes are the most flexible element and will tend to

change with fashion, style or cultural differences from one country to another; however

the brand style and core tend to be less flexible.

The brand prism enables management to understand the brand, its strengths

and opportunities. Secondly, it helps in developing the brand strategy and the

formulation of a distinctive positioning in the market. It also facilitates consistency in the

message being transmitted through presentation (e.g. website design, structure and

ease of use), advertising, below-the-line activities, and through line and brand

extensions. Finally, understanding the brand’s core and style helps set the perimeters

of brand extensions - how far the brand can be meaningfully stretched to other

products and market segments.

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DEVELOPING THE FRAMEWORK & COMMUNICATING THE VALUE PROPOSITION

Once the value proposition is clearly defined, the company must ensure that it

develops the appropriate structure, systems, strategy (partnerships and alliances),

skills, management style, culture and staff needed to support, deliver and reinforce this

value proposition (see Appendix B - The McKinsey 7-S Framework). The value

proposition must then be articulated in terms of the “marketing mix” - often referred to

as the “4Ps” - Product features, Price, Promotion and Place (distribution strategy). In

term of service, 3 more “Ps” must be attached: People, Process, and Physical

evidence.

The value proposition must be communicated to entice customers to try the

product / service. If the offering is developed properly, it should lead to satisfaction and

re-purchase. Before potential customers can buy a product / service, they must learn

about it. This learning is called the adoption process6.

Adoption process

The Innovation-Adoption Model consists of:

Awareness - The company has to create awareness of the brand, and its products /

services. Advertising and PR are common tools for achieving awareness.

Interest - Customers need to be stimulated to seek information about the brand’s uses,

features and advantages.

Evaluation - Customers consider whether the product / service will meet their particular

needs. Personal sources such as word-of-mouth from friends, colleagues and opinion

leaders become important influences at this stage.

Trial - The customer tries the product / service for the first time and decides whether to

adopt it based on their expectations, and the product / service's perceived

performance.

Adoption - The customer is satisfied and decides to make regular use of the product / service.

Traditionally, companies have used the tools of the promotions mix - advertising,

direct marketing, sales promotion, personal selling and public relations / publicity - to

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Awareness Interest Evaluation Trial Adoption

move customers through the adoption process. Advertising and public relations can be

effective in generating awareness and interest. Sales promotions and sampling are

often used for encouraging evaluation and trial.

It is beneficial for companies to accelerate the adoption process before

competitors emulate the benefits they offer. Enticing customers to repurchase and

adopt the brand not only requires a successful trial experience, but enhanced customer

interaction through relationship building.

BUILDING CUSTOMER RELATIONSHIPS

Building relationships with customers extends beyond a single transaction. This

is often referred to as Customer Relationship Management (CRM). This focuses on

establishing a long-term, multi-transaction relationship, when each trusts the other to

deal fairly and reliably.

Over time, this process enables an exchange of information, providing insight

into customers’ needs and wants. This information is a key competitive advantage,

allowing companies to communicate regularly with their customers and customise their

interaction. In this way, companies can increase buyers' satisfaction, making them less

likely to switch to a competitor. Customer service is an important element of this

relationship. Berry and Parasuraman (1991) identified three customer relationship-

building approaches7

Financial Benefits - such as airline frequent flyer programmes, & loyalty / discount

cards.

Social Benefits - by learning customers' individual needs and wants and individualising

and customising service and contact with the customer.

Structural Ties - for example, the company may supply customers with special

equipment or tools (e.g. Internet linkages, software) to help customers interact with the

company. Through building relationships with customers, companies can increase the

value of each customer, while strengthening the position and value of the brand.

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CHARACTERISTICS OF SUCCESSFUL BRANDS

Several factors contributing to the success of brands have been identified,

including:

Quality Product / Service Experience - Satisfactory experience is the major

determinant of brand values. If the quality of the experience deteriorates, or if the brand

is surpassed by superior offers from competitors, then its position will be undermined.

First-Mover Advantage - Being first into the market does not necessarily bring

success, but it makes the task easier. It is easier to capture a share of the consumer's

mind and build a customer base, when the brand has no competitors to rival its

position.

Unique Positioning Concept - If the brand is not the innovator, it must have a unique

positioning concept - a segmentation scheme, value proposition or augmented brand,

which will add value and distinguish it from competition.

Strong Communications Programme - A successful brand requires an effective

selling, advertising or promotional campaign, which will communicate the brand's

existence, its function and psychological values, trigger trial and reinforce commitment

to it. Without building awareness, comprehension and intention to buy, the brand is

meaningless.

Time and Consistency - Rome was not built in a day. So is a brand name. It often

takes years for a brand to build up the added values, and establish a trusting

relationship.

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3.3 THE INTERNET

INTRODUCTION

The Internet is transforming the business environment, creating new challenges

and opportunities. This chapter provides an overview of the Internet and its defining

characteristics, highlighting the key developments that have contributed to its explosive

growth and its impact on the business environment.

OVERVIEW OF THE INTERNET

The Internet is a world-wide network of networks. In essence, it is a common

technology platform that allows computing devices to communicate with each other. In

doing so, it offers a number of alternative channels that enable businesses and people

to communicate. The three core channels include e-mail (the most common), news

groups and mailing lists, and the “world wide web” (www).

The World Wide Web (www) is a large network of documents, which contain

hypertext and pictures, and provides the opportunity for dynamic interaction. Hypertext

allows information to be organised in a user-friendly way that is easily accessible.

Information is becoming a major part of the products and services that people buy, and

a critical source of added value

The Defining Characteristics of the Internet

The distinctive characteristics of the Internet can be summarised in three key

points:

It dramatically Reduces Information Costs - the cost of searching for information and

the cost of the information itself is significantly reduced (and in many cases is free).

It Allows for Two-way Communication and Interactivity - this radically alters the process

of interaction between communicating parties, allowing both parties to identify each

other and build one-to-one relationships - not previously available with mass medium

forms of communication.

It Overcomes the Barriers of Time and Space - The Internet is a global network and can

be reached from everywhere, regardless of where the computer or Internet access

device is physically located. The Internet can also be accessed at any time - 24 hours a

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day, 7 days a week. These qualities eliminate the barriers of time and space that exist

in the physical world.

These characteristics combine to create a very powerful medium. By allowing for

direct, ubiquitous links to anyone, anywhere, the Internet lets individuals and

companies build interactive relationships with customers and suppliers, and deliver new

products and services at low cost. These defining characteristics have fuelled its

explosive growth.

THE INTERNET AND E-COMMERCE

E-commerce describes the use of the Internet as a medium and as a market for

commerce. The main difference between the Internet and other electronic media (i.e.

fax, telephone) is that the Internet goes beyond just enabling transactions. The Internet

becomes an information-rich “virtual” market space through which buyers and sellers

interact. These 'virtual' marketplaces are not fixed in physical territory but are created

by the combination of standards-based networks, web browsers, software, content, and

people. Conducting business over the Internet (e-business) represents a fundamental

shift in how buyers and sellers interact. The buyer and seller “face” each other through

an electronic connection. There is no need to travel to a physical location, no order

book, and no cash register. Instead there is a website.

The value of e-commerce transactions and market forecasts vary widely among

research firms and government agencies. However, they all project the value e-

commerce transactions to grow at unprecedented rates.

THE IMPACT OF THE INTERNET ON BUSINESS

The Internet has had a profound impact on the way business is being conducted

- how companies operate, how they compete and how they serve their customers - and

revolutionary new business models are emerging, which are often disruptive to

traditional business models. Although the particular impact will differ between

industries, a number of sweeping impacts are identifiable:

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The Development of Electronic Intermediation

The Internet is enabling companies to break through organisational and

geographic boundaries to create new structures that link businesses “virtually”

(electronically) with customers, suppliers, partners and other corporate constituencies.

Improved Core Business Processes

The use of Internet-based technologies as the platform, over which the

organisation’s processes flow, represents a level of efficiency and integration previously

unattainable. For example, CISCO e-enabled its financial systems and now has the

capability to close its financial year within one day.

Globalisation of Business

The Internet facilitates the globalisation of business by providing access to a

global audience. A “virtual” presence can mitigate the cost of having to invest in

physical facilities. The Internet also facilitates the development and co-ordination of

global activities (e.g. through the use of extranets).

The Balance of Power is shifting to the Customer

The Internet empowers customers, as they have access to more information

leading to more informed decision-making. It also provides easy access to competitors’

offers and allows customers to consider every available alternative. As a result,

switching costs are much lower.

Competition is intensifying

Although the Internet removes the geographical constraints of reaching

customers, it also removes the geographical protection from competitors, as they are

just one 'click' away. This, combined with the emergence of electronic intermediaries,

the diminishing barriers-to-entry and the lower switching costs, has resulted in a fierce

competitive environment.

Knowledge is becoming a Key Strategic Asset

Many companies have recognised that if they want to succeed, their

organisations must harness knowledge - internally and externally - in developing

products, improving processes, getting closer to customers and ultimately staying

ahead of competitors. Internet technology can be used to exploit collective learning and

knowledge, allowing employees to share knowledge, collaborate more effectively and

ultimately embed organisational intelligence within processes, products and services.

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The Pace of Business is Accelerating

With the fast pace of technological change, the globalisation of business, fierce

competition, empowered customers, the development of a knowledge economy, and

the 24 x 7 environment, the typical clock-speed at which companies need to operate

has accelerated.

Revolutionising Sales and Brand Management

The Internet provides companies with a new channel to reach a new breed of

customer. Enhanced communication capabilities allow companies to build one-to-one

relationships with their customers and suppliers that were previously impossible. It

allows companies to improve customer service, achieve global reach and realise a new

source of cost advantage.

New Ways of Organising and Structuring Business

Transformed communications costs and capabilities are helping to drive a

fundamental rethink of how firms should organise themselves. Examples of emerging

information age business structures include flat versus hierarchical, extensive

outsourcing, supply chain cooperation, and multiple strategic alliances and

partnerships.

The Strategic Importance of Alliances and Partnerships

Although this point has already been touched upon, alliances and partnerships

have taken on a new level of strategic importance. Traditionally, companies have

looked upon alliances only as a means of filling gaps, and most traditional partnerships

were vertical, linking companies with suppliers and customers up and down a pre-

defined value chain. However, most Internet and e-commerce partnerships extend

beyond this, linking companies with competitors and players from entirely different

industries and business sectors, thus creating a “value net”. The extent of this

partnering highlights the typical structure and dynamics of an online company.

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3.4 BUILDING BRANDS ON THE INTERNET A HYPOTHESIS

INTRODUCTION

The Internet is changing the brand environment or “brandscape”. This chapter

explores the new dynamics of brands and the critical importance of customer loyalty

online. New strategies and tools for building brands on the Internet are identified,

including the interactive approach to attracting customers and building loyalty. The

limitations of brand-building on the Internet are also discussed.

THE NEW DYNAMICS OF BRANDS

Traditionally, in addition to providing added value, brands were a substitute for

information - a way for consumers to simplify the time-consuming process of search

and comparison before deciding what to buy. However, the Internet makes search and

comparison much easier. This threatens to undermine the value of brands.

On the other hand, the logic of the Internet cuts another way. Transactions on

the Internet require customers to provide detailed personal information - names,

addresses, credit card numbers, etc. Generally, people have concerns about sharing

personal information. In addition, the intangible nature of the Internet, and the fact that

customers are buying goods that, in most cases, they have never handled or seen

(except on-screen), has placed greater importance on trust and security. People only

tend to transact with sites they know and trust - sites that provide a wealth of

information and make comparison shopping easy, where the user feels a part of, and

sites that understand the user's needs and preferences. This highlights the surfacing of

information and relationships as key sources of added value in the Internet economy.

Customers derive added value through the provision of information on the products or

services they buy, as well as on topics of interest related to the brand and product

characteristics.

Traditionally, brands have been developed in an environment whereby a

company creates a brand, and projects it onto a third party intermediary (the media). In

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response, many unnamed customers develop a “relationship” with the brand. The

Internet, on the other hand, offers interactivity, whereby the company can establish a

dialogue and interact with individual consumers on a one-to-one basis. In doing so, a

company can listen, learn, understand and relate to customers, rather than simply

speaking at customers. This creates the opportunity for companies to build stronger

relationships than previously attainable. However, this also poses a challenge as these

relationships may take on a life and character of their own.

THE IMPORTANCE OF ONLINE CUSTOMER LOYALTY

According to a recent study8, 75% of senior executives believe the success of

an e-business initiative depends entirely on its ability to build customer loyalty. In fact, it

could be argued that customer loyalty is even more critical online. which identified the

following factors:

- Companies will not break-even on one-time shoppers - often, customer acquisition

costs are high, and to recover their investment, companies need to retain customers so

that they return to the site repeatedly. Many e-retailers ('e-tailers') are averaging more

than $100 to acquire a new customer, and some are spending over $500. Therefore, it

is very unlikely that an online retailer can break even on a one-time shopper, unless

they are selling high-price, high-margin items.

- Repeat purchasers spend more and generate larger transactions - due to more

frequent shopping and larger purchases.

- Repeat customers refer more people and bring in more business - word-of-mouth is

the single most effective and economical way online businesses grow their sites.

- Loyal customers are more willing to buy other products from the company. For

example, almost 70% of The Gap online shoppers said that they would consider buying

furniture from The Gap. Repeat purchasing not only binds trust, but also provides more

opportunities for cross-selling.

These points stress the importance of online customer loyalty, and with

customers holding all the power, companies must ensure that they provide a completely

satisfying end-to-end customer experience. This is further reinforced by the fact that, on

average, a disgruntled online customer tells 10 people about a poor experience.

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INCREASING RETURNS ECONOMICS & FIRST-MOVER ADVANTAGE

Economists have traditionally taught that businesses grow to the point where

returns to scale diminish, as the benefits of scale are overwhelmed by the

disadvantages of size. However, this is not the case on the Internet. Once the up-front

investments are made (for research and development and technology infrastructure),

additional products, customisation for individual customers, and other features can be

added or changed at low marginal cost. Similarly, additional customers and

transactions can be managed with limited fixed cost investment. As a result, each

additional unit sold does not cost more than the last to deliver, and in the case of

information-based products, the costs approach zero9.

Even more important, businesses and online communities that rely on

connectivity can enjoy “network effects”, (also referred to as “viral economics”), where

the value of the network, and the value that each member realises, increases

disproportionately as more people join the network. He number of user

These characteristics suggest there may be “first-mover” advantages for

businesses that establish leadership positions. With no competitors around, being first

into a market makes it easier to capture the consumer's share of mind. As the company

builds a customer base and develops a relationship with customers, its ability to track

customer preferences and customise offerings improves, enhancing the interaction.

This makes it more efficient in improving product selection, cross-selling and up-selling.

It also allows online companies to tap supplementary revenue streams, including direct

marketing, advertising and referrals, delivering increased margin per customer.

This snowball effect favours first-movers, as once a strong lead is established,

the leader will pick up momentum and will stand to gain an insurmountable advantage -

unless the leader makes a serious mistake, or until a competitor finds a way to change

the rule of the game again. When a company reaches 'critical mass', the brand begins

to take hold, and the cost of switching to an alternative brand becomes quite high,

leading to the exponential expansion of the customer base. By the time a company has

reached critical mass, its growth curve relative to a new entrant is somewhat daunting.

As a result, the value of the company rises exponentially with market share. This is the

logic behind some of the extraordinary valuations of Internet companies.

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VIRAL MARKETING

Viral Marketing is a marketing technique that induces web sites or users to pass

on a marketing message to other sites or users, creating a potentially exponential

growth (like a virus) in the message's visibility and effect. It is often referred to as “word-

of-mouth”, “creating a buzz”, “leveraging the media”, and “network 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.

Other companies have adopted viral marketing techniques such as Mirabilis

(acquired by AOL), eGroups and Geocities (both recently acquired by Yahoo!).

Geocities enables people to create personal websites for free. When a user builds a

website, they tell all their friends to visit it, and in doing so spread the word for

Geocities.

The classic example of viral marketing is Hotmail.com, a company now owned

by Microsoft. Hotmail.com was one of the first free web-based e-mail services, and they

created a subscriber base more rapidly than any company in history. Today they are

the largest e-mail provider in the world with over 40 million users. Their strategy was:

Give away free e-mail addresses and services

Attach a simple tag at the bottom of every free message sent out, saying:

"Get Your Private, Free Email at http://www.hotmail.com"

Then stand back while people e-mail their network of friends and associates

These people then see the message, sign up for their own free e-mail, and then propel

the message even further to their own ever-increasing circles of friends and associates.

Each new user becomes a company salesperson, and the message spreads

organically.

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THE ONLINE EXPERIENCE & THE 7CS FRAMEWORK

The 7Cs Framework outlines the major components that add value and

contribute to the quality of an online experience. In essence, the 7Cs are a continuation

and restatement of marketing's traditional 4Ps (Product, Price, Promotion, and Place).

Convenience

Convenience goes beyond the ability to conduct transactions around the clock. The

customers' ability to access and display information rapidly is extremely important. Sites

that are difficult to use can cause frustration, making customers “click off” to another

site. In fact, 30% of potential customers leave sites because they cannot find what they

are looking for, and 66% of people who start a “shopping basket” fail to complete the

transaction. Ease-of-use, ease-of-navigation, and fast response times are among the

most important factors in establishing web brand loyalty, whereas a slow response time

and site downtime will have a significant negative impact.

Content

Content is relevant and useful information directed at the needs and interests of

the targeted users. With almost infinite display space and inventory capability, online

companies have the opportunity to provide rich, up-to-date information, expert insights,

and a wide range of products, which can enhance the company's value proposition.

Content is considered to be a 'sticky' application as it entices visitors to spend longer

periods of time on the site.

Customisation

Customisation involves tailoring the presentation of a web-site to individuals,

based on profile information, demographics, or prior transactions. Online sites can track

a customer's purchase history and modify its service accordingly. Often, sites allow

'surfers' to customise their experience by choosing what type of information they view

through personalised sites (such as My Yahoo!); as well as through loyalty programmes

that provide targeted benefits.

Community

Online communities are emerging as new gathering places for consumers with

similar interests (e.g. iVillage and Geocities). These sites allow members to interact with

one another, share information and access a wide range of services. An important

contribution of these communities is that they provide members with a medium to

44

communicate with each other. Members can interact in chat rooms, use bulletin boards,

and organise live events. A unique characteristic of an online community is that the site

includes both editorial content (determined by the site owner) and member driven

content. An online community offers a compelling way to entice customers back to a

site. It fosters a sense of belongingness among the members, which is facilitated by a

combination of factors. For a community to work, it needs a critical mass of members.

Connectivity

Connectivity is concerned with site-to-site connectivity and user-to-site

connectivity. Site-to-site connectivity focuses on connecting users to other relevant

sites. Companies can provide a selection of related links that complement the site's

purpose and value proposition, as well as attracting traffic from other sites. Connectivity

is enhanced by linking to search engines / portals and popular sites where target

customers are likely to be browsing. This is similar to placing offline stores in high traffic

areas. Once customers know of a site, they opt to input the URL (Internet address -

www.brand-name.com) directly into the browser and access the site immediately.

Customer Care

Online customers often require assistance and reassurance. Customers share

security and privacy concerns, and a recent survey by Market Watch revealed that 62%

of surfers feel that giving out personal information on the Internet is unsafe. Therefore,

customer support at all stages of the interaction is important, and can be provided

through e-mail, online chat, toll-free telephone numbers, and FAQ pages (Frequently

Asked Questions) to solve problems. In addition, customer care activities can involve

providing a variety of payment, delivery and return options, as well as features such as

gift-wrapping.

Communication

The Internet provides the opportunity to establish dialogue with customers

through e-mail, live chat, and online surveys. Communication can be tailored to specific

user interests and should allow for two-way interaction. It is important in building

relationships, as well as informing and reminding customers of special offers, news up-

dates, activities, events and subjects of interest to the customer.

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LIMITATIONS OF BRAND-BUILDING ON THE INTERNET

It would be unrealistic not to acknowledge some of the limitations to what the

Internet can offer the brand-building process:

The Internet does not have the penetration of other promotional mediums (e.g.

TV, Radio).

The Internet supports brand-building activities where there is a need to build a

relationship. Certain product categories, such as groceries and convenience

goods, do not lend themselves to a need for customers to build a relationship

with the brand.

Not all product categories have a strong fit with interactive media as they still

need real life interaction, and the need to stimulate the other senses (taste,

touch, smell).

Brand-building favours products that can be sold online. However, it is not

economically feasible to sell certain products, especially in small quantities, due

to high delivery and transaction costs (relative to the value of the product).

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3.5 PROFILE

3.5.1 INTRODUCTION

This chapter provides an analysis of six companies. Each case is presented in

the same format including, a company overview, its value proposition, the sources of

added value (using the 7Cs Framework), its brand-building strategy (how it generates

traffic), and other key factors that have contributed to its success (or failure). The cases

are presented in the following sequence:

Yahoo!

Amazon.com

Fashion mall.com

EBay

CDnow

Gap.com

3.5.2 CASE STUDY: YAHOO!

COMPANY OVERVIEW

In April 1994, Yahoo! was founded by David Filo and Jerry Yang, two PhD

students at Stanford University, who started an online guide as a way to keep track of

their personal interests on the Internet. The concept exploded (through word-of-mouth)

and in less than six months, the site was receiving 1 million hits per day. Yahoo! has

since promoted from an ordinary search service into a global Internet communications,

commerce and media company that offers a comprehensive branded network of

services and information to more than 145 million individuals each month world-wide,

and is one of the few Internet companies to turn a profit early in the development of the

Internet.

As the first online navigational guide to the web, Yahoo! is a leading guide in

terms of traffic, advertising, household and business user reach. Yahoo! is one of the

47

most recognised brands on the Internet and is the 53 rd most valuable brand in the

world. The company's global web network includes 23 world properties outside the US.

VALUE PROPOSITION

At the core of Yahoo!'s value proposition, lies the directory - a hand tailored and

easy-to-use guide to the Internet that becomes more useful each day as Internet

penetration, the amount of information, and the number of websites continues to

explode. According to CEO of Yahoo!, “We've set out to make Yahoo! the only place

anyone needs to go to get connected to anything. There's nothing in the real world to

compare to that1”. As such, Yahoo! offers a range of supporting services that add value,

from e-mail services to stock quotes and much more, all in a single location.

SOURCES OF VALUE – THE 7Cs FRAMEWORK

Convenience

Central to Yahoo’s success, is the way it has structured and displayed

information. Their goal is not to list everything under the sun, but instead to be selective

and to display the best the web has to offer in a hierarchical framework that makes

sense to customers. They have kept the design of the site simple and clean to appeal

to customers and avoid slow-to-load graphics. More recently, Yahoo! extended its

convenience through its Yahoo! Everywhere service, to allow access, regardless of

platform (i.e. mobiles, TVs, Palm computers).

Content

Yahoo! has pursued a broad range of deals with content and commerce

companies. These have helped Yahoo! become the place to track down a broad range

of valuable information and resources, ranging from daily news and weather reports to

road maps and books, and has been at the heart of Yahoo!'s growth and development.

They have formed multiple alliances and partnerships with leading online companies

such as Amazon.com and CDnow. Their thrust has been to provide valuable content to

customers, while providing partners access to a large customer base. This creates a

48

win-win situation as its satisfies Yahoo!, the partner, and more importantly, the end-

user.

Customisation

My Yahoo! allows surfers to customise their view of Yahoo! and pick favourite

topics, from stocks and sports results to weather and air fares, and is similar to a

custom tailored newspaper. By tailoring the information to users' preferences, Yahoo!

has increased customer loyalty and retention rates.

Community

Yahoo! has developed customisable web communities called Yahoo! Clubs,

where groups of people with shared interests can communicate through chat, message

boards, and e-mail. In 1999, Yahoo! acquired GeoCities, (one of the largest online

communities) which provides easy-to-use and innovative tools to allow users to publish

content on the site. Yahoo!'s recent acquisition of eGroups (an e-mail group

communication service) will provide consumers with powerful new ways of

communicating one-to-one, one-to-many, and many-to-many.

One of the most recognized Yahoo! communities is the famous Yahoo!

Messenger. Built from 1995, with more than 100,000 chat rooms and widely varying

topics, from public health to movies, from sports to politics, Yahoo! Messenger attracts

more than 1 million chatters daily, and spreads its communication through word-of-

mouth faster than anything else. In some countries like Vietnam and China, Yahoo!

Messenger has become a cultural phenomenon, where an ordinary chatter spends no

less than 3 hours daily on Yahoo! Messenger to meet his or her e-pals.

Connectivity

Connectivity is Yahoo’s core product, and the nature of the navigation business,

and is driving Yahoo’s multiple partnerships and alliances, to provide its customer base

with access to useful links and content. In addition, Yahoo! has also implemented

campaigns to persuade users to bookmark the site, or to make it their home page.

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Customer Care

Yahoo! responds to customer inquiries via e-mail, fax, telephone and even

traditional mail, and plans to incorporate other features such as online chat to facilitate

communications. Yahoo! spends more on customer support than most companies,

reinforcing the brand customer relationship, and contributing to their reputation as a

quality service provider.

Communication

By positioning itself as a site that users frequently visit, and through

communications via email, Yahoo! maintains close contact with customers. Yahoo! also

encourages customers to e-mail ideas and feedback.

BRAND-BUILDING STRATEGY

Yahoo! is a marketing machine. It is often highly praised for its brand-building

ability and promotion strategies through the use of traditional (offline) media and

guerrilla marketing techniques to build awareness, and according to Intelliquest, 82% of

Internet users and 23% of people intending to go online, recognise the name Yahoo!.

Yahoo’s brand-building success starts with its name, and its implications of a

good time. Given the unease with which the average consumer approaches

technology, Yahoo! avoided characterising itself as a technology-oriented company,

and the company has always communicated the utility of its service in a way that

reinforces other

Core brand attributes – a sense of irreverence, an approachable nature, and an

inherent friendliness. While Internet companies were targeting existing Internet users

through the use of online promotion methods, Yahoo! extended beyond this to use

traditional offline media. At the time this was considered a breakthrough, and it formed

a critical link in Yahoo!'s brand building strategy. Their strategy was to target “near

surfers” - people who are not yet online but are likely to use the Internet in the near

future. These near surfers represented (and still do) a large and fast growing group

and, therefore, by building a recognised brand name, Yahoo! would be one of the first

sites that they visited. This was especially important, as experience surfers tend to be

loyal to their search engine. As a result, Yahoo! aggressively promoted the site through

public relations, TV commercials and radio spots during drive time. In 1996, they hired

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Black Rocket to create a brand awareness campaign that became very successful

through the development of the tag line “Do You Yahoo!?” which conveyed the brand's

irreverent personality.

In addition, Yahoo! adopted “guerrilla marketing” techniques - with its name

being plastered on everything, from the Zamboni ice-shaving machine of the San Jose

Sharks (Ice Hockey Team) to over 120 products, including backpacks, T-shirts, breath

mints, parachutes, snowboards, sailboats, and yo-yos, as well as TV shows (Ally

McBeal, ER) and Hollywood movies. They even have a barter deal with the San

Francisco 49ers, which has fans screaming Yahoo! to cheer their team as the Yahoo!'s

logo flashes across the football stadium screen. They also teamed up with publisher

Ziff-Davis Co. to create Yahoo! Internet Life, a monthly magazine guide to what's new

on the web and it has co-branded products, services and contests with well known

brands such as Ben & Jerry's, Visa and MCI. Yahoo! has paid little for this exposure,

which has been instrumental in establishing Yahoo! as a household name. Although

this seems like a shotgun approach, it is in fact a carefully orchestrated campaign that

requires each branding opportunity to meet one strict test - it must reinforce the image

of the company as “a service that is fun, a little wacky and inviting”. Once customers

access the site, customers quickly discover its value and through a high quality

experience (7Cs), Yahoo! has managed to cultivate high brand loyalty. According to a

recent study, 92% of Yahoo! users rate the service as “excellent” or “very good” which

is significantly higher than those of other sites, and 76% turned to Yahoo! before

visiting another search engine or navigational site. In addition, the research shows that

73% of Yahoo! users bookmark the service - higher than all other services.

According to Karen Edwards, VP-Brand Marketing, Yahoo's ability to quickly

pick up on users interests has been a key factor contributing to their success, stating

that “if we wait to hear about it in the news, it's too late. We need to be one step ahead

in order to have a better service than our competition”. Their innovation, new services

and customised features highlight their ability to relate to customers' needs.

OTHER FACTORS THAT CONTRIBUTE TO THEIR BRAND

LEADERSHIP

Innovation & First-Mover Advantage

Yahoo! was first to market with a detailed search engine, first to go public, first

to turn around an annual profit, and first to go mainstream by advertising its name using

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traditional media. To maintain its lead, Yahoo! has invested relentlessly in new services

and marketing programmes that have set it apart from the pack. In addition, they have

carried out extensive partnering, alliances and acquisitions to provide added value

services to their customers, while attracting new customers.

Customer Focus & Reputation for Excellence

Yahoo! has kept close tabs on the evolution of the market and the interests of

its customers, and has cultivated a reputation for excellence, from its convenient and

logical structure and display of information, to its simple design, its excellent customer

service, its choice of partners, and its openness (for example, if a user cannot find what

it is searching for, Yahoo! points them to its competitors by including links to AltaVista,

HotBot, GoTo.com, and other search engines at the bottom of its search results page).

CONCLUSION

Yahoo! is one of the most successful brands on the Internet. As the first online

navigational guide to the web, Yahoo! has benefited from a first-mover advantage.

They have maintained that lead through the creation of a high quality end-to-end

customer experience. This has been achieved through their relentless investment into

new services and extensive partnerships and alliances with leading brands. These

relationships have provided end-users with added-value, while also associating Yahoo!

with well known brands. Yahoo!'s intense focus on customer's needs and high quality

online experience has been instrumental in cultivating a reputation for excellence. In

addition, their innovative promotional and guerrilla marketing techniques, have created

a distinct brand identity that differentiates the brand and appeals to its target market. As

a result of all these factors, Yahoo! has built a strong brand, with a large customer base

and high levels of customer loyalty.

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3.5.3 CASE STUDY: AMAZON.COM

COMPANY OVERVIEW

Amazon.com has become synonymous with e-commerce, and is one of the few

Internet brands that are recognised all over the world. It is the 57 th most valuable brand

in the world, and the most widely recognised e-commerce brand name in the US (with

60% awareness). Amazon serves over 23 million customers from 160 countries, and

has sales of over $2 billion. In addition, it is the most visited e-commerce website in

America, and one of the top two or three in Britain, France, Germany and Japan.

In July 1995, Amazon.com launched with a mission to use the Internet to

transform book buying into a fast, easy, and enjoyable experience. Amazon.com has

since evolved from being an online bookseller into a one-stop shop with “Earth's

Biggest Selection” of more than 18 million products, ranging from books and music to

auctions and zShops (a portal / marketplace that online sellers can use to sell their

products), and has equity investments in several e-tailers.

VALUE PROPOSITION

Amazon.com’s success stems from its compelling value proposition. Amazon

provides increased added value on several dimensions, including: increased selection,

discounted prices, more information, greater convenience, and higher levels of

customisation and service than the traditional shopping experience allows. In addition,

Amazon has cultivated a reputation for excellence, innovation and delivering on its

promises. Through its provision of a one-stop shopping experience, combined with its

levels of customisation and customer service, Amazon has been able to differentiate

itself from other online competitors.

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SOURCES OF VALUE – THE 7Cs FRAMEWORK

Convenience

Amazon provides value-added features to increase the ease of shopping,

encourage repeat visits and drive higher conversion rates. The site is easy-to-use,

offering multiple paths to a given book or product. The site is designed to minimise

download time (limited graphics) for users on modems and despite the heavy traffic,

downloads quickly and services visitors adequately.

Over time, Amazon has added other features for shopping convenience, such

as the Amazon.com All Product search (searches the entire web), the 1-Click express

checkout, gift click, wish lists, gift reminders, and Amazon.com Anywhere to support

access from wireless devices (i.e. mobile phones, Palm VII PDA device).

Content

Amazon provides content on several levels, including book jacket images, book

summaries, expert reviews, customer testimonials, recommendations, interviews with

authors, discussion boards, and customer Purchase Circles. Customer purchase circles

allow shoppers to cross-reference similarities such as where people work, live or study.

This is an example of Amazon's ability to data its vast customer base of information to

learn and relate by making recommendations and presenting items on the web page

that have a high probability of being of interest to particular customers - thereby

increasing conversion rates. By leveraging its vast customer base, Amazon's content is

not reproducible by competition, and therefore, creates a competitive advantage.

Customisation

Amazon provides customised features and services, from the customer

recognition at the point of interface to the content and recommendations based on

consumers' purchase history and Purchase Circles. In doing so, Amazon creates one-

to-one relationships with its customers, which helps to build loyalty and create switching

costs, while driving up repeat purchases and cross-selling opportunities.

Community

Amazon has also added a community element to the purchasing process, and

ingeniously turned booklovers' predilections into a source of differentiation by soliciting

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and posting readers' comments with book displays. This builds the loyalty of both the

customers who write reviews and the customers who find community among like-

minded people. More recently, Amazon introduced Amazon.com Discussion Boards to

further enhancing the community feel by allowing customers to share information on

topics of interest.

Connectivity

Amazon has built relationships with high traffic web portals and sites, converting

them into a storefront for Amazon, and has developed an Associates Programme,

linking it to a large number of other sites. These are discussed in more detail later.

Customer Care

Amazon places great emphasis on satisfying customers and providing high

levels of customer service. This customer-centricity is evident in all Amazon's activities,

from its shopping basket applications which lists the estimated time to delivery reliably,

to the proactive notification of new items of interest, real-time shipping and backorder

notices, and customer interaction. All these activities exploit the communications

capability of the web and e-mail to offer greater customer 'touch' and better customer

service.

Communication

Amazon maintains close communication with customers. Once orders are

placed, they are subsequently confirmed by e-mail, and customers are also e-mailed

when the items are shipped from the warehouse. In addition, two personalised

services, Eyes and Editors, help maintain contact and build traffic by e-mailing

customers when desired products or books become available.

As a result of all these factors (7Cs), Amazon has been able to create a strong

value proposition and compelling online experience that engages and retains

customers, enticing them to return to the site and purchase repeatedly.

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BRAND-BUILDING STRATEGY

Amazon has attracted traffic in a number of ways. Through the first half of 1996,

Amazon had primarily relied on word-of-mouth among tightly knit online communities

(newsgroups and chat rooms) to create a “cyber buzz” and improve its visibility. In the

second half of 1996, it began to advertise in print media and online - a move that along

with the novelty of its business model and the newness of the Internet, helped generate

publicity and stories about the company in publications such as The Wall Street

Journal, The Financial Times, Business Week, Newsweek, New Yorker and The

Economist.

In July 1996, Amazon inaugurated the Associates Programme under which

other websites could display the Amazon.com hot-link and offer specific books of

interest to their visitors. This enabled Amazon to reach more customer segments and

niches. Instead of paying directly for this exposure, Amazon offered Associates referral

fees of up to 15%, which only applied to sales that resulted from the initial click-through,

and not subsequent purchases. The Associates Programme has been phenomenally

successful, attracting member sites of all sizes, and by 1999 it had over 200,000

members, increasing to over 500,000 by August 2000.

Amazon has developed alliances and partnerships with high traffic web portals

and sites. From July 1997 to December 1998, Amazon closed deals with five of the six

most visited Internet addresses, including: America Online (AOL), Netscape's Netcenter

and Net Search, Yahoo!, and Geocities. These multimillion-dollar, multiyear deals

involve exclusive book-selling rights, mutual links, and primary button placement on

web portal search engines. The Yahoo! agreement was also linked to Amazon's entry

into Europe - Amazon.de became the local provider for Yahoo! Germany and

Amazon.co.uk the local provider for Yahoo! UK & Ireland. Amazon also established

agreements with AltaVista, Excite, Prodigy and @home. In addition, Amazon has used

viral marketing techniques through customer reviews, free e-Cards and gift certificates

(which customers send to friends, thereby promoting Amazon.com). Interesting viral

initiatives include:

Amazon.com Refer-A-Friend - customers are encouraged to provide e-mail addresses

of friends. In return, each friend is sent a $5 Amazon.com gift certificate (in your name),

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and you are given a $5 gift certificate for each customer you provide. Therefore, the

customer acquisition cost is only £10.

Amazon.com About Me - allows customers to create a personal profile (with pictures)

on the site. People tend to tell their friends about it, spreading the word for

Amazon.com.

FIGURE The majority of customers continue to be attracted through word-of-mouth,

however, with the explosion of websites, Amazon has also incorporated traditional

offline media (TV, Magazines, billboards, newspapers) to generate awareness.

According to Jeff Bezos, “we had a world-class site the day we launched - but it was

only a tenth as good as the site we have now. And we relied on word-of-mouth to build

awareness, so we didn't have to do much advertising. That's not possible anymore3”.

Amazon's expansion into new e-tailing categories and non-e-tailing businesses

(auctions and zShops) has significantly increased product availability while leveraging

the site's enormous customer traffic to create additional revenue streams. This has also

helped to generate incremental traffic at no cost to Amazon's existing businesses,

resulting in increased sales for existing e-tailing sectors and therefore “monetising” their

customer base. This strategy has created an efficient traffic-generating machine by

creating virtual loops of traffic so that Amazon is top of mind when customers go online.

With this combination of promotional methods, Amazon has been able to

achieve average customer acquisition costs of less than $20 - significantly lower than

other online companies. Once customers are attracted to the site, Amazon's proven

online merchandise selling techniques including easy-to-use search options, clear

presentation, interesting content, community feel (as discussed previously), have been

instrumental in engaging and retaining customers' on the site and driving higher

conversion rates. As the relationship develops, Amazon maintains a database of

customer preferences, buying patterns and viewing habits, which is analysed (learning)

and used to provide value-added services such as the introduction of new product

categories, and improved customisation and recommendations (e.g. Purchase Circles).

By relating to customer needs, Amazon is building customer loyalty and encouraging

repeat business, which accounts for 66% of Amazon's sales.

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OTHER FACTORS THAT CONTRIBUTE TO THEIR BRAND LEADERSHIP

Innovation & First-Mover Advantage

As an early-mover on the Internet and a first-mover in online bookselling,

Amazon has been able to build a strong brand at relatively low cost; due to the hype

and coverage it was given. This has helped them attract customers and move up the

learning curve quickly, establishing Amazon as the leading online bookseller with a

large customer base. In addition, Amazon was able to secure partnerships and

alliances with key players, further enhancing their value proposition. Nevertheless,

Amazon is constantly seeking new ways of improving its offering, and according to Jeff

Bezos, “we're not a stationary target. We were blessed with a two-year head start, and

our goal is to increase that gap4”.

Customer Focus & Reputation for Excellence

Amazon's customer focus is evident throughout all its activities. According to

Jeff Bezos, “Online, the balance of power shifts away from the company and goes

towards the customer. Our secret is that we have not been competitor obsessed. We

have been customer obsessed, while our competitors have been Amazon.com

obsessed5”. As such, Amazon continually invests in re-working and improving its

technology infrastructure and software (80% in back office operations), developing

customer service centres and expanding its distribution network to support high levels

of service, establishing a reputation for excellence and fulfilment.

Distinct Brand Identity

Jeff Bezos chose the name 'Amazon', because he wanted it to be short,

memorable, to capture the spirit of the site, and to convey its vast size and offering. In

addition, he wanted the name to start with an 'A' so that it would appear at the top of

search engine lists. Amazon's understanding of its brand identity has been a critical

factor. Amazon received criticism for expanding its product line, thereby diluting the

value of its association with books. However, management realised that Amazon had

become more associated with other core brand values - a wide range of choice, good

value, and its safe and secure delivery. As such, Amazon has been successful in

stretching its brand to include new categories and non-e-tailing businesses. For

example, in June 1998, Amazon unveiled a music store, which within six months

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propelled Amazon to one of the leading online music retailers. According to Jeff Bezos,

“Brands to a certain degree are like quick-drying cement. When they're young, they're

stretchable and pliant, but over time they become more and more associated with a

particular thing and harder to stretch6”. Think about how impossible it is for Coca Cola

to make anything beside soft drink, like automobile, for instance.

CONCLUSION

Amazon has achieved a customer base of over 23 million people and an annual

revenue run rate of over $2 billion in less than five years. The key factors driving its

growth and high retention rates, stem from its compelling value proposition and high

quality end-to-end customer experience. Amazon has also benefited from a first-mover

advantage giving it an edge over competitors, however, Amazon's intense focus on

customer needs and continual innovation, have kept it ahead. This customer-centricity

is a key hallmark of a successful Internet brand.

Amazon also recognised that service quality is a perception, not necessarily a

reality. Amazon delivers on its promises of a wide inventory of products, secure

payment procedures, speedy delivery and good value. Quality is only measurable in the

minds of visitors to the site, and to sustain a positive image and satisfactory end-to-end

experience, Amazon has continuously invested in customer service, distribution centres

and upgrading the site, with new products and value added content. In doing so, they

have cultivated a reputation for excellence and fulfilment, which is critical on the

Internet.

Although Amazon has successfully built a strong brand and loyal customer

base, it has not recorded any profits to date, especially since the rupture of global

Dotcom bubble in 2000. Nevertheless, Amazon is claiming to be making profits on its

books and music categories, perhaps trying to defend its view that losses taken to build

market share can reap profits later. In July 2003, 1.5 million orders worldwide to

Amazon for the newest Kipling’s saga, “Harry Potter and the Order of Phoenix” may be

a good start. However, Amazon still incurs losses, and if it continues to do so, investors

will lose confidence; the drain on their cash resources will push them towards

bankruptcy. This raises a critical issue, as the true value of a brand lies in its

sustainability.

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3.5.4 CASE STUDY: Fashion mall.com

COMPANY OVERVIEW

Founded in 1999, Boo.com launched with the goal of being the world's “first truly

online retailer of sportswear and fashion”, and was billed as one of Europe's hottest 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, Chairman of LVMH (owns

Louis Vuitton and Christian Dior) and 21 Investimenti (Benetton Group), among others.

After a high profile launch, the company was hindered by technical problems

that delayed the site going live by five months (until November 1999). Once going live,

Boo.com entered six markets: US, England, Sweden, Finland, Germany and Denmark.

They intended to add France, Italy and Spain within a few months, and eventually

debut in Asia, as well as create a kid's site. However, within six months Boo.com

collapsed through lack of funds, due to its poor performance and inability to build a

customer base, and the resulting loss of investors' confidence.

VALUE PROPOSITION

According to Kajsa Leander, founder and Chief Marketing Officer of Boo.com,

“our marketing thrust is not based on prices; it's about range and convenience. If a

clothing brand is on the Boo site, it means all that brand's product line is available, not

the limited range you might get at most London fashion shops7”. Boo.com provided a

range of 18 fashion and footwear brands including DKNY, Puma, Everlast, Crocodile

and Converse. They believed that the limited launch of direct online sales operations by

fashion brands left room to establish a first-mover advantage and develop a market

leading online fashion hypermarket.

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SOURCES OF VALUE & THE FAILURE OF BOO.COM

Their strategy was to design an innovative website with interactive graphics to

appeal to both sport and fashion enthusiasts. Visitors could search items by sport,

brand, colour, price or style, with the ability to rotate products and zoom-in on fabrics,

stitching and colour. 3-D product images were accessible in all colours and styles,

ready to stock in a shopping cart and mix-n-match on a rotating sex-specific

mannequin. To transcend web shopping's impersonal stigma, the company devised a

personality called Miss Boo, an animated personal shopper who guides site visitors and

offers remarks. To build customer loyalty, they established the Player's Club (or Leisure

Lounge in the UK), a loyalty scheme to reward frequent buyers, and developed 24-hour

customer service teams in four world-wide offices.

Boo.com also published content in an online style magazine, including

interactive games to attract purchasers. All orders were to be delivered within 5 working

days in Northern Europe and the US from distribution centres in Munich, Germany and

Louisville, Kentucky. However, Boo made some fundamental mistakes. First, a large

portion of its potential market was unable to use Boo.com's site because the website

design (extensive graphics, pop-up windows, 3-D images) was too advanced for most

computers and access was frustratingly slow. It required a high bandwidth Internet

connection that was only available to 1% of European surfers and 2% in the US. In

addition, the site was poorly structured and difficult to navigate, and according to Jim

McNiven, CEO of Kerb, an award winning web design company, Boo.com was a “mish-

mash when it when live............ it didn't seem obvious what you were supposed to do8”.

In January 2000, Boo redesigned its website to make it easier to navigate, and

added a version devoid of pop-up windows and graphics. The changes also gagged

Miss Boo and a paper catalogue was printed for those who want to buy offline.

However, the early bad experience and negative word-of-mouth scared off many online

shoppers who lost confidence as Boo.com had developed a reputation as a

cumbersome and slow site, even though it had become simpler and faster.

There were also fulfilment and customer service problems. Although customers

received the purchased items within a few days, many complained that they received

the wrong items. In addition, these 'mistakes' could not be corrected easily. Customers

had to demand a refund, and then re-order the items again. Obviously, once the money

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was refunded customers did not risk going through the frustrating and inconvenient

process again.

Besides these issues, there continues to remain a doubt whether the basis of

Boo's value proposition was compelling enough in the first place. First of all, prices

were not discounted, and secondly, an Internet alternative to real-world shopping for

high fashion clothing, misses many aspects that tend to be valued by Boo.com's target

audience of the young and trendy shoppers. Traditional fashion shopping provides

sources of value through its social experience and entertainment, whereby people

enjoy wondering around shops, trying on different styles, getting their friends' opinions,

and the feeling and image associated with walking into a high fashion store. Boo's

value proposition failed to deal with these issues.

BRAND-BUILDING STRATEGY

Boo.com was quite successful in generating interest and creating awareness.

The name was chosen on the basis that it is "simple, catchy and easy to remember and

spell" and could be trademarked in 56 countries. There was a lot of hype surrounding

the start-up due to the amount of money invested in the company, and the high-profile

investors involved. Boo quickly burned cash on PR and advertising, spending $15

million on an advertising campaign with BMP DDB, which received a mixed response.

Adverts appeared on TV, cinemas and magazines such as GQ, ESPN Magazine,

Rolling Stone, Vogue, and Elle. Although they attracted traffic, customers soon

discovered the site's frustrating flaws, resulting in low conversion rates, and despite of

all the hype, negative word-of-mouth spread more quickly than the advertisements.

CONCLUSION

Boo.com failed to provide a compelling value proposition, and did not focus on

target customer benefits. Instead of overhyping the convenience they offer, Internet

companies must remind themselves what customers miss about in-person shopping

and compensate with true added value. Boo.com also failed to address basic customer

needs of a simple, easy-touch, quick-to-load site, and should have scaled back the

technology to ensure as many people as possible could browse the site. Instead, they

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focused on advertising the brand and not the less glamorous, but vital, areas of brand-

building, such as creating a positive end-to-end customer experience and making each

customer contact pleasurable and memorable, and ensuring goods are available and

delivered as promised. As a result, they were unable to build a critical mass of buying

members needed to generate revenue to offset the steep set-up costs.

Another important lesson is the need to be quick to market must be balanced

against a company's readiness. Boo was very ambitious to launch in six countries

simultaneously, without testing their business model. Unfortunately, this only served to

increase set-up costs as well as investors' expectations - both of which accelerated

Boo's downfall as things started to go wrong. As a result, Boo is “branded” as the

ultimate Internet failure.

Brand building includes all aspects of brand communications, including the

brand impression given by the implementation and experience. A poor brand

experience on the first visit drives potential customers to click off and not return, and

also leads to a lack of confidence on the part of employees (high-profile employees

defected, including Dean Hawkins – finance director) and investors, throwing everyone

into panic, which reflected on all aspects of the operations and eventually destroyed the

business.

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3.5.5 CASE STUDY: eBay

COMPANY OVERVIEW

EBay is the world's largest person-to-person online trading community and is

one of the few Internet companies that are profitable. EBay effectively created a new

business model never before possible - efficient one-to-one trading in an auction

format. Individuals use eBay to buy and sell items in more than 4,300 categories, from

novelties and antiques to electronics and toys. Sellers pay a nominal fee for placing an

item up for sale, and eBay receives a transaction fee that ranges from 1.25% to 5% of

the final sale price on any item sold. The buyer and the seller work out the logistics of

the transport (e.g. shipping, payment) between themselves, and eBay never takes

possession of the item being sold, or the payment for the item - removing the need for

inventory, transportation and other overhead costs.

Since its launch in September 1995, the eBay community has grown to include

more than 10 million registered users, with the number of unique daily visitors setting a

record of 1.782 million in January 2000. There are over half a million new auctions, and

450,000 new items joining the “for sale” list every 24 hours.

VALUE PROPOSITION

EBay offers consumers an efficient, 24 hour a day, global trading place for

buying and selling personal items in an entertaining auction format. This is a new

market - the closest thing in the offline world is trading forums such as classified ads,

collectable shows, garage sales, flea markets and auctions. People perceive the

auction format to offer better prices, and eBay provides added value through its

convenience, extensive selection and geographical reach, with emphasis being placed

on its unique community feel and culture. According to Meg Whitman, CEO of eBay, “at

its core, eBay is not about auctions. Auctions are an enabler. Auctions make it fun.

Auctions represent a platform. But eBay is really about a unique sense of community

that eBay users are creating for themselves”

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SOURCES OF VALUE – THE 7Cs FRAMEWORK

According to Meg Whitman, “the first brand-building strategy that we have is to

have a great customer experience. Still the vast majority of our new users come from

word-of-mouth. And you only get word-of-mouth if you have a great customer

experience. So brand-building job No. 1 is having a great customer experience.

Unlike the previous case studies discussed, the eBay customer experience is

based on how their customers deal with each other, as they rarely deal directly with the

company. This raises challenges in how to control and influence the customer

experience. Since eBay cannot control how one person treats (or cheats) another, they

try to influence customer behaviour by encouraging them to adopt certain values, and

in terms of the '7Cs', emphasis is placed on community development and customer

care.

Convenience

The site enables sellers to list items for sale and buyers to bid on items of

interest using eBay's fully automated, topically arranged, easy-to-use online service.

EBay has also expanded to accommodate access through wireless devices for added

convenience.

Unlike most websites that simply post content, eBay's site has to process

thousands of live bids simultaneously, which is much more demanding on the system,

increasing the risk of outages. EBay had a “wake up call” in July 1996, when the

website crashed for 8 hours, angering hundreds of thousands of eBay users, and since,

they have continually invested in system capacity. Nevertheless, they continue to face

challenges in scaling-up fast enough to accommodate their rapid growth.

Content

Content is primarily user generated through the items listed for sale. This

contributes to the community feel, and adds to the experience and the discovery of the

auction process. Other content includes the banner ads, which are narrowly targeted on

relevant subjects such shipping and transport companies and payment methods to aid

users.

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Customisation

EBay provides My eBay which allows users to customise the interface, and is

considered by many users as one of the best features on the website. They also

provide the ability for users to create their own home page free-of-charge through the

About Me feature (which promotes a viral effect).

Community

EBay attributes much of its success to a strong sense of community among its

users. For many 'eBayers' - as eBay users refer to themselves - eBay represents more

than just a place to buy and sell goods. It is a place where people can meet with similar

interests, discuss topics they care about, and share information. To encourage this

sense of community, eBay offers its users category-specific chat rooms, bulletin

boards, a monthly newsletter, e-mail, a “giving-board” for charitable donations to user-

identified causes. In addition, the community spirit and personal relationships also

transcend the online experience, and there are several reports of eBay users

vacationing together, working together and helping each other offline.

After a sale, each user is encouraged to submit feedback through eBay's

“Feedback Forum”, which is then added to the partner's trading profile, which is posted

to the site. This has created a self-regulating mechanism that encourages good

behaviour, and in doing so, has enabled eBay to foster a strong sense of community on

its site. This sense of community is their key differentiating factor and has encouraged

greater loyalty and repeat usage.

Connectivity

EBay has created an affiliate network, links to high traffic sites, banner ads and

links to supporting services such as payment options and transport companies to help

customers coordinate the logistics. EBay also engaged in marketing partnerships, the

largest of which was with AOL, but they have other partnerships with over 150 websites

of varying scales. They also introduced a PowerSellers Programme (loyalty scheme)

which gives special benefits and privileges to heavy users.

Customer Care

EBay controls neither end of the transaction, and the users' experience on eBay

is more driven by the seller or buyer than by eBay itself. As such, eBay has invested in

customer care and support to ensure people conduct safe transactions. EBay’s

approach to customer care has evolved over time. During the first two years, eBay

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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 worked from their homes, answering

e-mails and responding to questions posted on the site's bulletin boards. By using its

own enthusiastic, geographically dispersed users as customer support representatives,

eBay was able to cost-effectively offer 24x7 customer support early on. This also

reinforced the company's respect for, and willingness to empower, its user community.

This was later expanded to include customer support representatives who

worked out of eBay's headquarters, and the introduction of two specialised customer

support groups – the Community Watch group, which was dedicated to monitoring the

site for illegal and infringing activities, and the Safe Harbour group, which was

dedicated to investigating misuses of the system (e.g. fraud, shill bidding) and helping

to resolve user-to-user conflicts. Customer support activities were constantly upgraded

and expanded as the business developed.

Communication

EBay maintains close communication with its members. They encourage

members to take active role in the site and to provide feedback and advise them of and

problems through the Feedback Forum.

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BRAND-BUILDING STRATEGY

The majority of eBay's users have been attracted through word-of-mouth, as a

result of the high quality experience it provides. Early on, eBay identified that 20% of

the users represented 80% of the volume of the site (80/20 rule). Based on this, they

decided to target their marketing efforts on these heavy users, who tended to be

serious collectors. As a result, eBay decided that it would not enter into major portal

advertising deals in the short term, and instead focus on grassroots marketing initiatives

through print advertising in vertical publications (e.g. Mary Beth's Beanie World, Doll

Collector) and appearance in trade shows.

They appeared at over 90 collector trade shows and ran 14 different adverts in

90 vertical publications during 1998. EBay intends to use these same marketing levers

as they expand across different categories of merchandise as well as expand

internationally. In 1998, they spent $12.3 million in advertising, representing about 40%

of revenues, and maintained the same ratio for 1999.

EBay has since expanded its promotion efforts and engaged in marketing

partnerships, the largest of which was with AOL, but they have other partnerships with

over 150 websites of varying scales. The AOL partnership was one of the largest

strategic partnerships on the Internet - a four-year, $75 million joint marketing alliance

and development deal, whereby eBay is the exclusive auction site featured on AOL and

will jointly develop auction sites for AOL's flagship online service and all AOL's other

properties.

With the acquisition of Butterfield & Butterfield (one of the world's oldest and

most prestigious auction houses) and Kruse International (auctioneer of collector

automobiles) in 1999, eBay transformed from a pure online play into a “clicks-and-

mortar” company. These acquisitions further expanded their appeal to a wider market

(those interested in higher priced items) while providing added revenue due to higher

margins.

Recent promotional initiatives include its new publication, eBay Magazine, and

two books, The Official eBay Guide to Buying, Selling, and Collecting Just About

Anything and eBay for Dummies. These new publications appeal to the collecting spirit,

provide a wealth of information about the “ins and outs” of trading on eBay, and

highlight opportunities created by e-commerce. Through this combination of its

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advertising efforts and targeted promotions, eBay has been able to attract a large

customer base, and facilitate the spread of positive word-of-mouth.

EBay has continually added new features and services to its offering in order to

provide added value to build relationships and facilitate customer “lock-in”. This is

achieved by listening to their community (learning) and developing new improved

products and services (relating), such as the Feedback Form, the Personal Shopper

and the eBay Life Newsletter, which were all ideas of eBay users. However, eBay have

a policy of not looking at users’ pattern of buying habits for the purpose of generating

products on offer for customers. This has become part of the eBay culture, and

according to research carried out by eBay, is one of the factors that users value most

as they are not provided with junk mail and intrusive offers in a aggressive way (push

adverst strategy). EBay prefers the opt-in model whereby users have the option to

choose such services if they were interested.

CONCLUSION

eBay's compelling value proposition, their ability to create a new market using

Internet technology, and their first-mover advantage, have been key factors that have

contributed to the success of the brand, however, their ability to cultivate a distinct

“sense of community” has been the defining characteristic which differentiates them

from other online auctions. As a result, eBay attracts a broader selection of buyers,

which in turn attracts more sellers – the ultimate network effect - contributing to its

strong lead and competitive advantage. Their focus on heavy users and targeted

promotions, have been instrumental in building a 'quality' customer base, which has

established eBay above other online auction communities. EBay has also faced difficult

challenges in scaling the organisation fast enough, as they could not opt for a 'go slow'

strategy. The need to continually invest in ensuring adequate capacity and improving

the product offering is essential in order to keep ahead of competitors, and according to

Meg Whitman, “the devil in so much of this is in the detail. And while we have to move

very, very fast, I think you are not well served by moving incredibly rapidly and not

doing things well10”.

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3.5.6 CASE STUDY: CDNOW

COMPANY OVERVIEW

Founded in 1994, by twin brothers Jason and Matt Olim, CDnow is the leading

online music store, and one of the most popular shopping sites on the Internet. It has a

customer base of 4 million people, and an average daily audience of over 800,000

people. CDnow provides access to over 500,000 music-related products and 650,000

sound samples, as well as music reviews, cover art, daily music news, features, guides

to music genres, and exclusive interviews and reviews from CDnow's award-winning

editorial staff. CDnow is also driving the digital distribution of music, and was the first

site to offer the sale of music downloads and custom CDs. On 19 th July 2000, CDnow

was acquired by Bertelsmann AG.

VALUE PROPOSITION

CDnow offers consumers a high degree of choice (over 500,000 music related

items – ten times the selection of a conventional bricks-and-mortar music store),

convenience, good prices, customisation and a wealth of information and content to

help in the purchase decision. This unprecedented degree of access to music and

information is the core of CDnow's value proposition, and they aim to “make every visit

to the site, whether for browsing or buying, a valuable and rewarding experience11”.

SOURCES OF VALUE – THE 7Cs FRAMEWORK

Convenience

The CDnow site is very easy-to-navigate and quick-to-load. The whole process

of searching for albums or music titles to the actual purchase is very simple.

Content

CDnow has invested substantially in developing strong content alliances, and

has secured rights to music reviews, artists biographies, cover art, etc., to make it

easier for customers to explore new music and make informed purchasing decisions.

For example, CDnow's partnership with Rolling Stone Magazine enables customers to

access thirty years of Rolling Stone music coverage. CDnow has cultivated similar

relationships with MTV, VH1 and Media College (publisher of CMJ New Music Report

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and CMJ New Music Monthly). By partnering with well-known content providers, CDnow

has leveraged the reputation of their brands to reinforce its own.

Customisation

CDnow provides customisation on two fronts. It allows customers to purchase

customised CDs and also enables customers to develop their own personalised view of

the store through My CDnow. By customising the store to meets customers' needs, it

gives them a sense of ownership and a compelling reason for them to return. Other

features such as My CDnow's Wish List, allow customers to keep track of albums to

buy in the future. Customers can even maintain an Address Book online making it easy

to send music to friends and family (viral marketing promoter).

Community

CDnow has not exploited the potential of creating a community feel, and could

consider introducing customer reviews or set-up communities around different music

genres such as a Jazz Club or Classical Club offering members relevant content and

the option to chat with other club members.

Connectivity

CDnow has linked up with broad-based highly trafficked Internet sites - search

engines, Internet access providers, and key news and entertainment sites - such as

AOL, Yahoo!, Excite, and Geocities as well as more focused specialist sites. CDnow

also started an affiliate programme (called the Cosmic Credit Programme) that links

other websites to its site - from record labels to much smaller sites that discussed or

reviewed music (supplying valuable content). In addition, CDnow developed the Fast

Forward Rewards programme, an incentive programme that rewards customers and

encourages them to connect back to the site.

Whenever a customer makes a purchase they earn Fast Forward Reward

points, which accumulate and can be spent on a variety of music-related products.

Customer Care

CDnow's site can be viewed in English, German, French, Spanish, Portuguese,

Italian, Dutch and Japanese. Due to International interest, CDnow hired a group of

multilingual customer service representatives to handle questions. CDnow has also

developed feedback teams - groups of customer service representatives with deep

knowledge of certain musical subject areas, allowing them to respond to detailed

customer queries.

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Communication

From the moment a customer opens an account, CDnow reaches out to its

customers with personalised e-mails from Jason Olim (CEO) and e-mail newsletters

informing customer of news and releases relevant to their preferences. By keeping the

brand in front of the customer in this way, CDnow is doing everything it can to ensure

that the next time that customers buy music, they buy from CDnow.

BRAND-BUILDING STRATEGY

CDnow was one of the first companies to develop a multifaceted, integrated

customer acquisition strategy that reflects a sophisticated understanding of the

economics of an online business. CDnow's initiatives include:

Banner Ads - CDnow buys banner ads on the sites of major Internet content and

service providers including CNN Interactive and AOL, as well as more-targeted music-

related sites like Billboard.

Alliances and Partnerships - They have also stuck exclusive alliances with AOL,

Yahoo!, Excite and other powerful Internet content and service providers. These

alliances and partnerships have generated both traffic and brand visibility for CDnow

and have locked competitors out of valuable online real estate.

Affiliate Programme - Through the Cosmic Credit Programme, CDnow extended its

distribution reach to include more than 250,000 small, music-oriented websites,

covering the entire music spectrum. According to Jason Olim, this is their “most

successful customer building programme12”. It is a revenue-sharing arrangement, giving

websites an inducement to join the programme and in effect turns CDnow's affiliate-

marketing partners into a virtual commissioned sales force.

Traditional offline Media - CDnow's advertisements are targeted to some degree,

including national television commercials during the Grammy's and American Music

Awards and on MTV and VH1, print advertising is music-related publications such as

Rolling Stone, Spin, and Variety, and radio spots on the Howard Stern Show to build a

cult following among radio listeners, and spot radio to build reach.

Public Relations - CDnow made public relations a high priority brand-building tool.

Public relations efforts helped to generate word of mouth and influence sales. The story

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of how CDnow was founded in a basement, by two twin brothers with little 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 investments in

advertising and partnerships make sense, as a way to fuel very lucrative word of mouth,

both in the online and offline worlds.

CDnow's promotion strategies have attracted high levels of traffic, and

combined with the high quality customer experience (7Cs) they are successful in

engaging and retaining customers, resulting in increased conversion rates. This has

contributed to a 225% increase in sales (1997: $17.4 million, 1998: $56.4 million), and

to increases in the customer base of more than 30% quarter-to-quarter, with 44% of

sales coming from new customers. Their ability to learn and relate to customer's needs

through customising their offering (My CDnow) encourages brand loyalty and repeat

purchases, with repeat customers accounting for more than 50% of sales.

OTHER FACTORS THAT CONTRIBUTE TO THEIR BRAND LEADERSHIP

Innovation & First-Mover Advantage

CDnow started early on the Internet (1994) and has been able to maintain

momentum. The company continually pushed for new distribution partnerships to widen

its sphere of influence, and scaled it awareness-building efforts. It is constantly adding

new functionality to the site and has been innovative in its offering - they were the first

site to offer the sale of music downloads and custom CDs.

Customer Focus & Reputation for Excellence

According to Jason Olim, “your brand is not just what you say - it's what you

do13”, and the company's goes to great lengths to ensure that its activities reinforce this

view and it fulfils its promises. The company sends an automated order confirmation

note via e-mail as soon as the order has been placed. This gives the customer the

impression that the order is being handled quickly. They also provide the customer with

an order number and customer support contact information should they have questions.

CDnow has developed a relationship with Valley Records, a record distributor that

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handles the majority of CDnow's fulfilment logistics, to ensure quick delivery to

customers.

CONCLUSION

CDnow identified a market opportunity early and moved quickly to capitalise on

the potential it saw. It was able to create a strong value proposition and high quality

customer experience. According to Jason Olim, “he most important customer loyalty

tool is a great store” and CDnow has gone to great lengths to provide this, and ensure

that it exploits its early-mover advantage and keeps ahead of competition. It has

developed a detailed understanding of its customers' needs that has enabled the

company to create better products and more effective marketing campaigns.

The development of an extensive affiliate network, and innovative, well-targeted

marketing programmes both online and offline have driven large volumes of traffic to

the site and have exposed the brand to millions of potential customers. This, combined

with the high impact customer experience created - from how CDnow has personalised

its product offering to its capable customer service team - have been instrumental in

building a reputation for excellence that is a core factor of a successful Internet brand.

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3.5.7 CASE STUDY: GAP.COM

COMPANY OVERVIEW

Gap opened its first store in San Francisco in 1969, and today it is the 29 th most

valuable brand in the world. The Gap offers a balance of modern and seasonal styles

of clothing, from jeans and T-shirts to khakis and jackets. Its reach extends across

more than 1,800 stores in the US, Canada, UK, Germany and Japan. This success is

largely due to their simple formula – “to deliver style, service and value to everyone”. In

late 1997, Gap started selling items online - an early convert to the then-revolutionary

idea of clothes retailing on the Internet. Currently, online sales are only available to US

customers, and are still relatively small compared to Gap's $9 billion in annual sales,

however, the growth prospects are enormous. Gap's online sales tripled in 1998 alone,

and sales in 1999 amounted to $80 million, up from $20 million in 1998. Even the

collapse of the global Dotcom industry in middle 2000 showed a very little effect to

Gap.com. During the period of 2000-2001, Gap.com was the only cyber company who

could claim profit. Gap.com is an example of successful crossover marketing, and

provides useful insight into how traditional brands can leverage their strength online.

VALUE PROPOSITION

Gap's simple, standard styles are well suited to online shopping, and Gap online

provides access to the full range of items at Gap, GapKids, and BabyGap, from shirts

to accessories and hard-to-find sizes. In addition, Gap online exploits the accessibility

and convenience of the Internet, to provide customers with greater convenience and

options. According to Jeanne Jackson, head of Gap Online, “this is about being clicks-

and-mortar, letting customers access the Gap brands, whether in the store or online14”.

SOURCES OF VALUE – THE 7Cs FRAMEWORK

In terms of the 7Cs framework, Gap Online primarily focuses on Convenience,

Content, and Customer Care.

Unlike other companies that transform from “brick and mortar” to cyber, the

extensive integration of Gap's online and offline activities are clearly evident. Visiting

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the gap.com store one immediately notices the consistency between the online and

retail stores, from the blue and white colour scheme to the easy-to-shop format -

making visual references to its offline roots. Michael McCadden, Executive Vice

President of Global Marketing, describes the company's brand personality as “direct

and straightforward ........very easy, very efficient”15. This personality is reinforced online

through the simple structure and layout, making it convenient, and easy-to-use. The

site also offers sharp graphics, but provides customers with the option of viewing text-

only, making navigation even faster.

Gap.com's content consists of detailed information on its full range of products,

allowing shoppers to contrast different cuts and styles. The site's virtual style feature

also allows customers to mix-and-match combinations of clothing, and customers can

view their latest TV adverts for buying inspiration, as well as sample all of the latest

shades of fingernail polish on a virtual hand, which would not be possible in the store.

Unlike the case of Boo.com, Gap's simple, standard styles are well suited to

online clothes shopping, and goods bought online get returned at the same rate as

store purchases - as most Gap online shoppers have a good idea of how Gap clothes

fit. In order to integrate its offline and online operations and logistics, Gap made a

decision to charge sales tax on online sales. By doing so, customers can return goods

purchased online to their neighbourhood store, without causing complications. This

level of customer care is an important factor in making customers feels more

comfortable with online purchasing. In addition, Gap.com allows customers to track the

status of online purchases and provides contact information on the nearest store.

Gap does not provide any community features on its site. However, once

customers are registered online, Gap communicates with customers through

customised e-mails, twice a month, promoting its specials and including links directly to

items on Gap's website. Gap.com also provides a Gift Central feature which offers gift

suggestion from Gap, GapKids, and BabyGap, and customers can register to get e-mail

reminders of upcoming holidays and birthdays.

The Gap site connects to other Gap online stores including GapKids and

BabyGap. Gap has also developed an affiliate programme, and had recently

established marketing deals with AOL and CDnow.

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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 online at

www.gap.com" on the display screens between transactions.

Store clerks are also trained to look for products online for their customers if the

store does not have them in stock, or to refer shoppers to Gap's website. In certain high

traffic Gap and GapKids stores, the retailer has installed “Web lounges” that lure buyers

with comfortable couches and terminals hooked up to Gap.com. To convert walk-in

shoppers to cybershoppers, Gap has held in-store campaigns to get customers to

submit their e-mail addresses, by offering a 10% discount and free shipping on their

first online purchase. These efforts doubled the size of Gap's e-mail database,

providing a useful way to directly reach customers.

Most of Gap's online traffic is generated by leveraging its physical presence,

however, Gap has also supplemented this with online promotions:

In August 1999, Gap secured a 3-year commerce and marketing agreement with

AOL, that gives Gap more visibility on the Internet by linking to the world's largest

online shopping destination: Shop@AOL marketplace.

Gap.com has links with CDnow to cross promote websites. The idea emerged as

Gap was flooded with e-mails form customers asking how they could buy a recording of

the music played in Gap TV commercials.

Gap.com has also created an affiliate programme encouraging sites to establish

links to gap.com in return for a 5% commission on every sale referred through the site.

They offer online discounts and promotions such as the ShopCard, whereby for

every $100 a customer spends at Gap Online, they send the customer a $20 Gap

ShopCard, which can be used towards future purchases, either online or in stores.

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CONCLUSION

Gap.com is an example of successful crossover marketing. With their brand

awareness and network of retail outlets, Gap had a significant advantage over pure

online players in attracting customers and building critical mass. Pure online players

have to invest heavily in logistics, whereas established companies, such as Gap, have

already established the back-end operations and can use them as the cornerstone of

their online business. The Internet, on the other hand, provides existing customers with

added value through the convenience of purchasing online, and can also provide

access to different customer segments who may not usually buy the products at all -

thereby increasing the company's reach. By aggressively marketing both the stores and

the website, and allowing each to leverage the strengths of the other, Gap has been

able to significantly strengthen their brand-customer relationship, while reaping the

benefits of low customer acquisition costs and extended reach. A key factor has been

Gap's consistency and ability to deliver the same level of service quality that is

expected from the brand, thereby reinforcing its brand identity. This type of seamless

integration and symbiotic relationship is critical in building successful “clicks-and-mortar”

brands.

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CHAPTER 4

Analysis and Interpretation

79

Tables and Graphs

1. Total no of respondents = 100

2. Age group Break-up

SL. No. Age No. of Respondents Percentage

1 15-19 years 23 23%

2 20-24 years 47 47%

3 25 years above 30 30%

Total 100 100%

3. Qualification Break-up of Respondents

SL. No. Qualification No. of Respondents Percentage

1 Under graduate 33 33%

2 Graduate 51 51%

3 Post graduate 16 16%

Total 100 100%

4. Break-up of Computer and Internet Literate

Sl. No. Particulars No. of Respondents Percentage

1 Yes 71 71%

2 No 29 29%

Total 100 100%

5. The profession of respondents

Sl. No. Occupation No. of Respondents Percentage

1 Student 35 35%

2 Computer engineer 13 13%

3 Faculty 21 21%

4 Businessman 16 16%

5 Others 15 15%

Total 100 100%

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Table No.1: What are people doing online

SL. No. Particulars No. of Respondents Percentage

1 E-mail 91 91%

2 General Information 78 78%

3 Surfing 72 72%

4 Reading 70 70%

5 Hobbies 67 67%

6 Product Information 64 64%

7 Travel Information 55 55%

8 Business / Work 50 50%

9 Entertainment 35 35%

10 Purchasing 35 35%

11 Stock Quotes 29 29%

12 Job Search 26 26%

13 Chat Rooms 25 25 %

14 Homework 22 22%

15 Auctions 17 17%

16 Banking 15 15%

17 Trading stocks 9 9%

Source: Survey

Interpretation: From the above table, it is clear that the majority of respondents have

surfed on Internet to check their e-mail (91%), searched for general information (78%),

and attended recreational activities (reading, surfing, hobbies, chatting, entertainment,

etc). Out of 100respondents, only 70 logged on cyber companies for purchasing, and

only 36 had the real intention to buy or sell online.

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Figure 4.1: What are people doing online

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Table No.2: Number of respondents who really carried out business transactions on

Internet

SL. No. Particulars No. of Respondents Percentage

1 Yes 18 18%

2 No 82 82%

Total 100 100%

Source: Survey

Interpretation: It is evident from the above table that the minority 18% of the

respondents has actually bought or sold on Internet. The other majority 82% surfed on

the World Wide Web for other activities (reading, surfing, hobbies, chatting,

entertainment, product searching, etc). Advertisement should be aimed at this small

potion of customers rather than pursuing the whole vast market.

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

Internet

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Table No.3: Name of cyber companies that you actually dealt with

SL. No. Company No. of Respondents Percentage

1 Amazon.com 9 25%

2 Boo.com 0 0%

3 CDnow 2 5.6%

4 eBay 13 36%

5 Gap.com 0 0%

6 Yahoo! 10 27.8%

7 Others 2 5.4%

Total 36 100%

Source: Survey

Interpretation: The above table shows the degree of popularity and credibility among

different brands. Among six respective brand names, eBay has got the biggest number

of transactions, following by Yahoo! and Amazon.com. The fourth brand has only 2

customers, and Boo.com and Gap.com got none.

Figure 4.3: Name of cyber companies that you actually dealt with

Table No.4: Number of e-purchasers who want to come back for future transactions

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SL. No. Particulars No. of Respondents Percentage

1 Yes 34 94.4%

2 No 2 5.6%

Total 36 100%

Source: Survey

Interpretation: Among the real e-purchaser, the majority of 94.4% wants to come back

to respective cyber companies they dealt with before. It shows the solidity of business

transactions and relations on the Internet. Once customers are satisfied, they intend to

keep the nexus with the company they know, rather than shifting from company to

company. It highlights the significance of keeping up with customer’s standard and

perception right in the first transaction (the moment of truth)

Figure 4.4: Number of e-purchasers who want to come back for future transactions

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Table No. 5: Standards for a good online company

SL. No. Particulars No. of Respondents Percentage

1 Brand 30 30%

2 Cost 13 13%

3 Convenience 16 16%

4 Means of payment 5 5%

5 Variability 9 9%

6 Promotion & discount 16 16%

7 Others 11 11%

Total 100 100%

Source: Survey

Interpretation: Among the above factors (brand, cost, convenience, means of payment,

variability of goods and services, promotion and discount), brand name holds the most

significant position, with 60 out of 200 respondents claimed that is was the most

important factor to a company. The next important factors are convenience (16%),

promotion and discount (15.5%), cost (13%), variability (9%), and means of payment

(5%).

Figure 4.5: Standards for a good online

86

Table No.6: Keys to Web brand Loyalty

SL. No. Particulars No. of Respondents Percentage

1 Ease of use & navigation 37 37%

2 Fast response time 26 26%

3 Familiarity 20 20%

4 Relevant & accurate information 17 17%

Total 100 100%

Source: Survey

Interpretation: The above table shows the key factors that ensure web brand loyalty.

Out of 200 respondents, 74 claimed that the Ease of use & navigation is the most

important element (37%), whereas 52 gave their vote to Fast response time (26%), 40

to Familiarity (20%), and 34 supported Relevant & accurate information (17%).

Figure 4.6: Keys to Web brand Loyalty

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Table No.7: Killers of Web brand Loyalty

SL. No. Particulars No. of Respondents Percentage

1 Outdated information 26 26%

2 Slow response time 24 24%

3 Site downtime 22 22%

4 Poor customer service 28 28%

Total 100 100%

Source: Survey

Interpretation: The above table shows the key factors that destroy web brand loyalty.

Out of 100 respondents, 26 claimed that outdated information is the key element that

demolishes customers’ belief (26%), whereas 24 attributed to slow response time

(24%), 22 to Site downtime (22%), and 28 to Poor customer service (28%).

Figure 4.7: Killers of Web brand Loyalty

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Table No.8: Things you want to buy online

SL. No. Particulars No. of Respondents Percentage

1 Consumable 75 75%

2 Luxury 16 16%

3 Interior 26 26%

4 Garments & footwear 67 67 %

5 Vehicle 24 24%

6 Real estate 7 7%

7 Antiquities 31 31%

8 Others 40 40%

Source: Survey

Interpretation: From the above table, we can see the tendency of what people want to

buy on Internet. Out of 100 respondents, most of them (75% & 67%) chose

consumable and

garments & footwear respectively. Whereas goods with high value like real estate,

vehicles, and luxury were hardly chosen.

Figure 4.8: Things you want to buy online

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Table No.9: Ranking the popularity of six below cyber companies

Rank Company

1st Yahoo!

2nd eBay

3rd Amazon.com

4th CDnow

5th Gap.com

6th Boo.com

Source: Survey

Interpretation: From the table No.3, we can see eBay has got the biggest number of

transactions among the lot, following by Yahoo! and Amazon.com. But with regard to

level of recognition and awareness, Yahoo! transcends eBay and Amazon.com. It

proves how effective Yahoo! is in creating community activities and spreading public

relationship, including viral effect and word-of-mouth.

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Table No. 10: Do you usually read chain mails & bulk mails?

SL. No. Particulars No. of Respondents Percentage

1 Yes 19 19%

2 No 81 81%

Total 100 100%

Source: Survey

Interpretation: Chain-mails and bulk-mails are often used to get customer awareness

and attention. But as time goes by, bulk-mails do not have the same significance like

before, and customers usually refer bulk-mails as “garbage” and try to delete them

without casting a single glance at. It is called as “self-protection reaction”. Cyber

companies should develop other kinds of promotion and brand building rather than

relying on chain-mails.

Figure 4.10: Do you usually read chain mails & bulk mails?

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CHAPTER 5

Findings &Suggestions

92

Key factors that contribute to building a successful online brand

There is no one-size-fits-all solution for building a successful brand on the

Internet, however, the extensive research and in-depth case studies provided in this

dissertation indicate certain common underlying characteristics which can be

summarised as follows:

A Compelling Value Proposition

Successful online brands are exploiting every capability offered by the Internet

to deliver compelling value propositions that appeal to customers, by offering more

value than attainable through traditional “bricks-and-mortar” establishments. They are

providing greater convenience (24x7), lower prices, wider selections, and access to

more information on the products or services being provided, and enhancing this with

layers of added-value through the '7Cs' - Convenience, Content, Customisation,

Community, Connectivity, Customer Care and Communication. Successful brands

recognise that the value proposition must more than compensate for the loss of in-

person contact.

A High Quality Online Experience

Strong Internet brands are those that create a high quality engaging online

customer experience. The 7Cs framework allows companies to deliver a tangible

customer experience. Successful online brands meet the demands inherent in each of

the 7C categories, by ingraining convenience and making the site easy-to-use, quick-

to-load and easy-to-navigate, delivering compelling content, customising the

experience, developing a community feel, making connectivity easy, integrating

customer care, and establishing two-way communication. By placing emphasis on

different 'Cs', they are differentiating their experience from those of competitors. A well

executed customer experience that satisfies customers, results in higher brand equity.

A Reputation for Excellence (Delivering on their e-Promises)

Fulfilment and delivering on e-promises is the acid test of online brands. The

successful brands are those who are investing heavily in logistics, distribution centres,

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and customer care to ensure a completely satisfying end-to-end customer experience.

In doing so, they are cultivating a reputation for excellence, which builds confidence

and trust that not only entices customers to do repeat business with the company, but

leads them to spread positive word-of-mouth, attracting other customers to the site.

Strong Communications Programme & Efficient Customer Acquisition Strategy

The key Internet brands have made major commitments to building awareness

and have developed multifaceted, integrated customer acquisition strategies, ranging

from online methods to traditional offline media. They are targeting their promotions to

attract quality customers and to keep customer acquisition costs down. Quality

customers who are heavy users of the brand are important as they not only offset the

cost of customer acquisition, but also provide added value to the brand community.

Properly orchestrated “guerrilla marketing” ploys can also be effective in building

awareness and reinforcing brand image.

Unique Positioning Concept & Distinct Brand Image

Strong brands are developing unique positioning concepts, to distinguish

themselves from competitors. Yahoo!'s success can be largely attributed to its unique

positioning strategy and distinct image that appeals to its target market. By

distinguishing their offering and focusing on unique sources of value-added, brands are

harder for competitors to emulate.

In addition, these companies must have an inherent understanding of their

brand identity and core values, to maintain consistency, as well as determine how far

the brand can be meaningfully stretched to other products and market segments,

before it fractures.

Strong Partnerships and Strategic Alliances

Rather than doing everything on their own, leading brands have focused on

building strong partnerships and alliances, particularly to secure content and widen

reach to new customer segments and niches. As a result, these companies are

creating even stronger value propositions, offering customers the best in quality,

variety, content, and convenience. Alliances and partnerships play an important role in

achieving speed and momentum, and by partnering with well-known brands, a

company can leverage the partner's brand and reputation to reinforce its own. Alliances

with leading portals and popular sites are important to generate traffic and brand

visibility, and exclusive alliances can lock out competitors from valuable content or

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online real estate. The most successful partnerships are symbiotic matches, whereby

each party benefits from the other's expertise or skills, while ultimately benefiting the

end-customers.

Intense Customer Focus

Leading online brands have an intense customer focus, and develop a detailed

understanding of their customers' needs. These brands are accumulating knowledge

about customers, through past transactions and solicited input, and by focusing on

customer needs, are leveraging this customer knowledge (learning) to nurture

relationships (relate), by providing better services, customisation and customer care.

Customer focus builds trust and credibility that is central to developing a strong brand-

customer relationship.

First-Mover & Early-Mover Advantage

Most of the successful online brands identified a market opportunity early and

moved quickly to capitalise on the potential they saw. A first-mover advantage is an

important asset for an online brand. By getting to market early, the company benefits

from the buzz, and traffic, that comes with innovation, and it can acquire customers

while it is still inexpensive to do so. It locks up important content and distribution

partnerships, and it aligns itself with the most influential venture capital sources. Getting

to market quickly can provide an Internet company with significant momentum and a

valuable boost over the competition. The challenge then lies in keeping up the

momentum. Many strong online brands were also early-movers on the Internet, and

benefited from additional hype, and extensive word-of-mouth due to its novelty. As

Internet penetration exploded, these well-publicised brands also took off.

Relentless Innovation

Successful Internet brands are continuously looking for new ways to wrap more

value around their core service and offering, and are continuously adding new services

and functionality to their sites. This type of relentless innovation is instrumental in

ensuring brands develop traction and build momentum to keep ahead of competitors. In

many cases, the innovations are the result of the company's ability to record its vast

database of customer information, to create new services and content that satisfies

customer needs. By leveraging unique customer information, these innovations are

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difficult for competitors to reproduce, giving the brand an edge, and differentiating it

from other brands.

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Ability to Leverage Offline Brand and Assets

Bricks-and-mortar brands are often well positioned to succeed on the Internet.

They possess critical assets that give them an advantage over pure online start-ups.

They have an established brand, established customer relationships, established

fulfilment systems and infrastructure, and a physical presence (tangibility) - factors that

clearly differentiate them from pure players. Strong clicks-and-mortar brands are

integrating their online and offline activities to leverage the strengths of each other. In

doing so, these brands must respect their core brand elements and maintain

consistency in the service quality that is expected, but at the same time, expand the

brand experience to meet customers' expectations in the online world. Through

extensive and seamless integration, clicks-and-mortar brands are providing customers

with true added-value, while reaping the benefits of lower customer acquisition costs

and extended reach. The Internet has radically changed the business and competitive

environments. Yet while everything is being turned upside down, one component

remains unchanged - value remains (and always will) the basic building block for every

successful brand.

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Conclusion

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The era of Internet brings a totally new approach to building a brand name. Let’s

have a glance at the different routes to brand building on the new dynamics of brands.

Table No. 11: Different approaches in brand-building

The Emerging Brand-building Environment

Traditional Approach One-to-One Approach

Monologue Dialogue

Public Private

Mass Individual

Anonymous Named

Adversarial Collaborative

Focus primarily on one-off transaction Focused on relationship over time

Remote research Intimate learning

Manipulative, “stimulus-response”

approach

Genuine needs driven, service approach

Standardised Customised

Given that the commercial Internet only began to take off in 1994, there has

been a limited time horizon to evaluate the durability of Internet brands. In addition, with

the emergence of wireless access and new platforms, new opportunities and dynamics

will emerge as companies develop innovative ways of acquiring customers, building

relationships and satisfying needs. Therefore, ongoing research would be necessary to

build on the findings of this dissertation. Nevertheless, it that the core concepts and key

factors identified that contributes to successful online brands are likely to persist.

Brands and brand-building tools tend to be associated with consumer markets,

however, they are equally important in business markets. As such, the concepts, tools

and key factors outlined in this dissertation are also applicable to business markets.

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Nevertheless, an in-depth analysis, drawing on several case studies from business

markets, would represent an exciting opportunity for further research.

Having established a strategic perspective on building online brands, this

dissertation would benefit from complementary in-depth research in the social and

psychological dynamics of the Internet and its impact on consumer behaviour.

Based on my own research and survey, I had recognised the often used brand

promotion method, their popularity, and their respective effectiveness.

Table No. 12: Popularity and effectiveness of brand building methods

Method Popularity Effectiveness (rank from 0.0 to 5.0)

Banners 89% 2.8

E-mails to customers 77% 2.3

Buttons 55% 3.2

Public relations 45% 4.1

Magazines 34% 3.4

Sponsorships 34% 3.3

Newspapers 32% 2.6

Radio 32% 3.4

Direct mail 30% 3.4

Television 30% 4.0

E-mail to opt-in lists 23% 3.5

Outdoor 17% 3.7

Affiliate programs 17% 4.3

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Figure c.1: Popularity of methods

Figure c.2: Effectiveness of methods

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From the above table, it is clear that some usually used promotion methods like

banners and e-mail showed little effect towards customers. Therefore, to enhance

awareness and brand image, company should increase the use of:

- Affiliate programs: with other already-recognised online companies like

Yahoo!, Amazon.com, or AOL. It is the way has been chosen by many successful ones

like Gap.com, or eBay.

- Public relation and outdoor activities.

- E-mail to op-in list: bulk-mails are sent to an interested group of customers

only, instead of viral chain-mails and bulk-mails. For instance: sending e-mails to

a regular patron informing about goods available in which he or she may be

interested.

Further, there are some more suggestions from this study to cyber companies

regarding how to create a strong brand name on Internet:

- Have a credible logistics with acceptable quality of goods and service. Make

sure that the availability of goods and variability of categories are ensured.

- Build a simple website with humble graphic and accessible info. Site must be

easily used and navigated. Avoid the mistake by Boo.com of building a

website that requires a powerful computer configuration and a wide Internet

runway. The result is website is too slow to load, and leads to nothing but

frustration of customers.

- Supply relevant and accurate info.

- When a customer posts his or her mail to ask some question with regard to

product info search, feedback must be given within 48 hours.

- When using credit card as the most popular means of payment, company

must ensure the privacy of customer. Beware o hackers at the top most

level.

- Don’t try to dig on valuable items like antiquities, luxury, or real estate.

Because of its particular risk and configuration, an online company should

focus on small value items like books, consumable, garments and footwear,

upholstery, cigarette and alcohol, etc.

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BIBLIOGRAPHY

World Wide Web

The Internet was used to collect information on Dotcom industry. In which the

following websites were employed to be used:

www.ac.com

www.amazon.com

www.atkearney.com

www.bain.com

www.bcg.com

www.boo.com

www.businessweek.com

www.cdnow.com

www.durlacher.com

www.ebay.com

www.ebusinessforum.com

www.economist.com

www.ey.com

www.forrester.com

www.gap.com

www.gapinc.com

www.interbrand.com

www.mckinseyquarterly.com

www.nua.com

www.pwcglobal.com

www.yahoo.com

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Magazines

Monthly business magazines in Bangalore:

The Economist

The Wall Street Journal

The Week

The Financial Times

Forbes

Business Week

Sales and Marketing Management

Computer World

Far Eastern Economic Review

Advertising Age

Books

Kotler, P., “Marketing Management –the Millennium Edition”

Aaker, D “Managing Brand Equity: Capitalising on the Value of a Brand Name”.

Aaker, D. “Building Strong Brands”

Clifton, R. & Maughan, E., “The Future of Brands”

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Appendix – Questionnaire

Name:

Address:

SECTION A

1. What best describes your age?

15-19 years

20-24 years

25 years & above

2. You are a:

Under graduate

Graduate

Post graduate

3. Are you a Computer and Internet Literate?

Yes

No

4. What is your profession?

Student

Computer engineer

Faculty

Businessman

Others

SECTION B

1. What are you usually doing on Internet?

Reading and writing email

Searching for general information

Surfing

Reading

Hobbies

Searching for product information

Travel information

Doing your business / work

Entertainment

Purchasing

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Stock quotes

Job search

Chatting

Doing your homework / assignment

Auctions

Banking

Trading stocks

2. How long you usually spend on Internet

Less than 7 hours per week

8-14 hours per week

15-28 hours per week

29 hours and above

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

Yes

No

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

Amazon.com

Boo.com

CDnow.com

eBay.com

Gap.com

Yahoo!.com

Others

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

Yes

No

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

company?

Brand

Cost

Convenience

Means of payment

Variability of items

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Promotion & discount

Others

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

Ease of use and navigation

Fast response time

Familiarity

Relevant and accurate information

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

Outdated information

Slow response time

Site downtime

Poor customer service

9. Things you want to buy online

Consumable

Luxury

Interior

Garments & footwear

Vehicles

Real estate

Antiquities

Others

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

brand

Yahoo!com

Amazon.com

Gap.com

Boo.com

CDnow

eBay.com

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

Yes

No

12. What kind of advertisement normally attracts your attention?

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Chain mail & bulk-mail

Direct mail

Television

Newspapers

Radio

Buttons

Banners

Ads featuring gifts and discounts

13. If you wish to add any other remark, please do so

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Thank you for your valuable time!

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