building successful brand on the internet

A DISSERTATION S UBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF A MASTERS IN BUSINESS ADMINISTRATION (MBA) AT THE UNIVERSITY OF CAMBRIDGE ROBIN S. CLELAND SEPTEMBER 2000 O N T H E I N T E R N E T S S S S U U U U C C C C C C C C E E E E S S S S S S S S F U F U F U F U L L L L BUILDING SUCCESSFUL BRANDS ON THE INTERNET 1 CONTENTS SUBJECT PAGE 1.1 Overview 7 1.2 Objectives 9 1.3 Methodology 9 1.4 Structure 11 2.1 Introduction 13 2.2 What is a Brand? 13 2.3 The Layers of a Brand 14 2.4 Product and Service Brands 15 2.5 Branding & the Buying Process 16 2.6 The Importance of Customer Satisfaction and Loyalty 18 2.7 Emotional Loyalty 19 2.8 The Concept of Brand Equity 20 2.8.1 The Value of Brands to Customers 22 2.8.2 The Value of Brands to Companies 22 2.9 Conclusion 23 3.1 Introduction 25 3.2 Overview of the Brand-Building Process 25 3.3 The Value Proposition 26 3.3.1 Added Value 27 3.3.2 Distinctive Brand Identity 28 3.4 Developing the Framework and Communicating the Value Proposition 30 3.5 Building Customer Relationships 31 3.6 Characteristics of Successful Brands 32 3.7 Conclusion 32 CHAPTER 1 INTRODUCTION 6 CHAPTER 2 THE NATURE OF BRANDS 12 CHAPTER 3 BUILDING BRANDS 24 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2 4.1 Introduction 34 4.2 Overview of the Internet 34 4.2.1 The Defining Characteristics of the Internet 35 4.3 The Growth of the Internet 35 4.4 The Internet & e-Commerce 39 4.5 The Impact of the Internet on Business 40 4.6 Conclusion 43 5.1 Introduction 45 5.2 The New Dynamics of Brands 45 5.3 The Importance of Customer Loyalty Online 47 5.4 Increasing Returns Economics and First-Mover Advantage 48 5.5 Viral Marketing 50 5.5.1 The Case of Hotmail.com 51 5.6 The Online Experience & The 7Cs Framework 52 5.7 The Interactive Brand-Building Model 57 5.8 Limitations of Brand-Building on the Internet 59 5.9 Conclusion 60 6.1 Introduction 62 6.2 Case Study: Amazon.com 62 6.2.1 Company Overview 62 6.2.2 Value Proposition 62 6.2.3 Sources of Value - The 7Cs Framework 64 6.2.4 Brand-Building Strategy 66 6.2.5 Other Factors that Contribute to their Brand Leadership 69 6.2.6 Conclusion 70 6.3 Case Study: BarnesandNoble.com 71 6.3.1 Company Overview 71 6.3.2 Value Proposition 72 6.3.3 Sources of Value - The 7Cs Framework 72 6.3.4 Brand-Building Strategy 73 6.3.5 Conclusion 75 CHAPTER 4 THE INTERNET 33 CHAPTER 5 BUILDING BRANDS ON THE INTERNET 44 CHAPTER 6 CASE STUDIES 61 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3 6.4 Case Study: Boo.com 76 6.4.1 Company Overview 76 6.4.2 Value Proposition 76 6.4.3 Sources of Value - The Failure of Boo.com 77 6.4.4 Brand-Building Strategy 78 6.4.5 Conclusion 79 6.5 Case Study: CDnow 80 6.5.1 Company Overview 80 6.5.2 Value Proposition 80 6.5.3 Sources of Value - The 7Cs Framework 81 6.5.4 Brand-Building Strategy 83 6.5.5 Other Factors that Contribute to their Brand Leadership 84 6.5.6 Conclusion 85 6.6 Case Study: eBay 86 6.6.1 Company Overview 86 6.6.2 Value Proposition 86 6.6.3 Sources of Value - The 7Cs Framework 87 6.6.4 Brand-Building Strategy 91 6.6.5 Conclusion 92 6.7 Case Study: Gap.com 93 6.7.1 Company Overview 93 6.7.2 Value Proposition 93 6.7.3 Sources of Value - The 7Cs Framework 94 6.7.4 Brand-Building Strategy - Extensive Integration 96 6.7.5 Conclusion 97 6.8 Case Study: Yahoo! 98 6.8.1 Company Overview 98 6.8.2 Value Proposition 98 6.8.3 Sources of Value - The 7Cs Framework 99 6.8.4 Brand-Building Strategy 102 6.8.5 Other Factors That Contribute to their Brand Leadership 104 6.8.6 Conclusion 104 7.1 Conclusion & Discussion of Key Findings 106 7.1.1 Key Factors that Contribute to Building a Successful Online Brand 107 7.2 Opportunities for Further Research 110 Appendix A Interbrand's Ranking of the Top 60 Brands 112 Appendix B The Mckinsey 7S Framework 113 CHAPTER 7 CONCLUSION 105 APPENDICES 111 BIBLIOGRAPHY 114 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4 Figure 1.1 Years to Reach $100 million in Sales 7 Figure 1.2 Research Methodology 9 Figure 2.1 A Brand is More Than a Product or Service 13 Figure 2.2 Layers of a Brand 14 Figure 2.3 Five-Stage Model of the Buying Process 16 Figure 2.4 Steps Between Evaluation of Alternatives and a Purchase Decision 17 Figure 2.5 The Satisfaction-Loyalty Relationship 18 Figure 2.6 Creating Emotional Loyalty 20 Figure 2.7 Brand Progression 20 Figure 2.8 Brand Equity 21 Figure 3.1 Brand-Building Mechanism 25 Figure 3.2 Define the Value Proposition 26 Figure 3.3 Kapferer's Brand Identity Prism 29 Figure 3.4 The Innovation-Adoption Model 30 Figure 4.1 The Three Layers of the Internet 34 Figure 4.2 Growth in Internet Host Computers and Major Developments 36 Figure 4.3 Accelerated Rate of New Technology Acceptance 36 Figure 4.4 The Virtuous Growth Cycle of the Internet 37 Figure 4.5 What are People Doing Online? 38 Figure 4.6 World-wide Commerce on the Internet (1998-2003) 39 Figure 4.7 The Structure of an Online Company 43 Figure 5.1 The Network Effect 48 Figure 5.2 The Virtuous Spiral of Online Growth 49 Figure 5.3 The 7Cs Framework 52 Figure 5.4 Factors Affecting Web Brand Loyalty 53 Figure 5.5 The Community Hexagon 55 Figure 5.6 Customer Access to Information 56 Figure 5.7 The Interactive Brand-Building Model 57 Figure 5.8 Website Promotion Methods - Popularity & Effectiveness 58 Figure 5.9 Categories Suitable for Interactive Marketing 60 Figure 6.1 Overview of Amazon.com's Website 64 Figure 6.2 Amazon.com's Associates Programme 67 Figure 6.3 Overview of BarnesandNoble.com's Website 72 Figure 6.4 Overview of Boo.com's Website 77 Figure 6.5 Overview of CDnow's Website 81 Figure 6.6 Overview of eBay's Website 88 Figure 6.7 Overview of Gap's Website 94 Figure 6.8 Overview of Yahoo!'s Website 100 Figure 6.9 Overview of My Yahoo! 101 LIST OF FIGURES BUILDING SUCCESSFUL BRANDS ON THE INTERNET 5 Table 5.1 The Emerging Brand-Building Environment 46 Table 6.1 Amazon.com - Timeline and Major Milestones 63 Table 6.2 BarnesandNoble.com - Timeline and Major Milestones 71 Table 6.3 Boo.com - Timeline and Major Milestones 76 Table 6.4 CDnow - Timeline and Major Milestones 80 Table 6.5 eBay - Timeline and Major Milestones 87 Table 6.6 Gap.com - Timeline and Major Milestones 93 Table 6.7 Yahoo! - Timeline and Major Milestones 99 LIST OF TABLES BUILDING SUCCESSFUL BRANDS ON THE INTERNET 6 CHAPTER 1 INTRODUCTION BUILDING SUCCESSFUL BRANDS ON THE INTERNET 7 1.1 OVERVIEW 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 re- thought, 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 1 . 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-to-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, that these Internet start-ups have achieved. Figure 1.1 shows the number of years it has taken some Internet brands to reach sales of $100 million. Source: Securities and Exchange Commission Filings; McKinsey Analysis (www.mckinseyquarterly.com) 5.1 3.2 3.9 3.5 2.0 1.7 2.9 0 1 2 3 4 5 6 CDnow Onsale.com 1 Amazon.com Cyberian Outpost eBay Barnesand noble.com Priceline.com FEBRUARY 1994 JULY 1994 MARCH 1995 SEPTEMBER 1995 MARCH 1997 JULY 1997 JULY 1994 DATE OF INCEPTION 1 Since merged with Egghead.com FIGURE 1.1 - YEARS TO R EACH $100 MILLION IN SALES BUILDING SUCCESSFUL BRANDS ON THE INTERNET 8 As a result, harnessing the reach and interactivity of the Internet to build and maintain brands has become extremely important. For pure online players, who are essentially intangible, brands are even more critical as customers have little to go on other than a recognised brand. Given the tremendous clutter in today's e-commerce marketplace, and the high cost of acquiring online customers 2 , 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 / Harris poll, found that 57% of Internet users go to the same sites over and over again, rather than drifting from site to site 3 . Therefore, building awareness, attracting traffic or 'eyeballs', turning 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. 1 Christensen, C., & Overdorf, M., 'Meeting the Challenge of Disruptive Change', Harvard Business Review, March - April 2000, Volume 78 Issue 2, pp. 66-76 2 Hoffman, D. L. and Novak, T. P., 'How to Acquire Customers on the Web', Harvard Business Review, May-June 2000 3 Hof, R., Browder, S., & Elstrom, P., 'Internet Communities - Forget Surfers. A New Class of Netizen is Settling Right In' - Business Week, May 5, 1997, p.66 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 9 1.2 OBJECTIVES The objectives of this dissertation are as follows: • To gain an understanding of the role of brands and how they have traditionally been built. A review and 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 contribute 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. 1.3 METHODOLOGY The methodology used in this dissertation is illustrated in Figure 1.2. ACADEMIC RESEARCH SECONDARY DATA CASE STUDIES CONCLUSIONHYPOTHESIS The 7Cs Framework & The Interactive Brand-Building Process FIGURE 1.2 - R ESEARCH METHODOLOGY Primary Data [...]... outlines the opportunities for further research 11 BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 2 THE NATURE OF BRANDS 12 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 2.1 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. .. generate strong cash flows This, in turn, drives up share price and provides the basis for future growth The next chapter describes the process of how brands are built, the tools that are used, and the characteristics of successful brands 23 BUILDING SUCCESSFUL BRANDS ON THE INTERNET CHAPTER 3 BUILDING BRANDS 24 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 3.1 INTRODUCTION Building a strong brand is a... attributes of competing brands These brand beliefs make up the brand image (this concept is re-visited in Chapter 3) These beliefs depend on their previous experiences with the brand, and the effect of selective perception, selective distortion, and selective retention In the evaluation stage, the consumer forms preferences among brands and may form a purchase intention to buy the brand they prefer However,... SYMBOLS EMOTIONAL BENEFITS BRAND- CUSTOMER RELATIONSHIPS Source: Adapted from Aaker, D A, 'Building Strong Brands', (New York: Free Press), 1996, p 74 4 Clifton, R & Maughan, E., 'The Future of Brands', (London: Macmillan Press Ltd.), 2000, p vii 13 BUILDING SUCCESSFUL BRANDS ON THE INTERNET Other common descriptions of a brand include - a 'relationship', a 'reputation', a 'set of expectations', and a... out the traditional brandbuilding process, highlighting important factors that contribute to the success of each step along the way The major characteristics of successful brands are also reviewed 3.2 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. .. 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 2.2 WHAT IS A BRAND? According to Rita Clifton, CEO of Interbrand Newell and Sorrell... Free Press), 1992 28 BUILDING SUCCESSFUL BRANDS ON THE INTERNET FIGURE 3.3 - KAPFERER'S BRAND IDENTITY PRISM PICTURE OF SENDER RELATIONSHIP PERSONALITY BRAND CORE CULTURE INTERNALISATION EXTERNALISATION PHYSICAL SELF-IMAGE REFLECTION BRAND STYLE BRAND THEMES PICTURE OF RECIPIENT Physical The physical qualities and features of the product or service Personality The character of the brand and how it speaks... intention to buy, the brand is meaningless • Time and Consistency - Traditionally, brands were not built quickly It often takes years to build up the added values, and establish a trusting relationship 3.7 CONCLUSION Building strong brands stems from the creation of a compelling value proposition Once the framework has been established and the organisation configured to provide this proposition, companies... promotion, interaction and relationship building As a result, it has a profound impact on the traditional brand -building process As such, the next chapter explores the characteristics of the Internet and its impact on the business and competitive environment 19 Doyle, P., 'Marketing Management & Strategy', (Europe: Prentice-Hall), 1998, 2nd Ed., pp.176-177 32 BUILDING SUCCESSFUL BRANDS ON THE INTERNET. .. THE INTERNET 33 BUILDING SUCCESSFUL BRANDS ON THE INTERNET 4.1 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 4.2 OVERVIEW OF THE INTERNET . outlines the opportunities for further research. BUILDING SUCCESSFUL BRANDS ON THE INTERNET 12 CHAPTER 2 THE NATURE OF BRANDS BUILDING SUCCESSFUL BRANDS ON THE INTERNET. Characteristics of Successful Brands 32 3.7 Conclusion 32 CHAPTER 1 INTRODUCTION 6 CHAPTER 2 THE NATURE OF BRANDS 12 CHAPTER 3 BUILDING BRANDS 24 BUILDING SUCCESSFUL BRANDS ON THE INTERNET . 5.5.1 The Case of Hotmail.com 51 5.6 The Online Experience & The 7Cs Framework 52 5.7 The Interactive Brand -Building Model 57 5.8 Limitations of Brand -Building on the Internet 59 5.9 Conclusion