Building an Internet Business At Breakneck Speed eBrands

Building an Internet Business At Breakneck Speed
eBrands
(Phil Carpenter/Harvard Business School Pr/May 2000/$25.95)
eBrands
Building an Internet Business At Breakneck Speed
MAIN IDEA
Creating a successful and enduring brand name in the Internet marketplace takes more
than having a nice logo, an exclusive trademark or a catchy brand name. It even takes
more than simply “building awareness” – the business activity most people naturally
equate with brand building.
Creating and crafting an online brand successfully means paying attention to an array of
activities, which include:
• Forming successful alliances with others who bring competitive advantages and
operational efficiencies to the mix.
• Generating intensively loyal customers, who will do business with you again and again
and tell others about you.
• Putting in place effective and logical distribution partnerships to provide real-world
execution power.
• Attracting first-time visitors to your online business – and converting them into satisfied
customers.
In other words, building a successful online business brand is more multi-dimensional
than its offline equivalent. There’s a little more to it. Consequently, Internet brand
building is a unique process which must be molded around the product or service
offered, rather than simply following a standard template approach.
That makes the process of successfully building an Internet brand harder to achieve –
and the rewards for doing so greater than they otherwise would be.
“Imagine that you’re walking down the aisle of the local grocery store on your weekly
shopping run. As you reach for the laundry detergent, you’re surprised to see the range
of options in front of you suddenly double. You attempt to grab the fabric softener. The
number of brands on the shelf doubles – then triples – in about thirty seconds. Choice
rapidly becomes overwhelming. Welcome to the Internet. Although the variety of
-2-
products available at your local Safeway or Star Market is clearly not increasing at warp
speed, the number of sites on the Web is. In an environment characterized by extreme
choice, perplexed customers will turn to the familiar.
They will establish relationships with specific Internet brands and do business with them
repeatedly. As the number of companies online multiplies, the increased choice will
strengthen customer / company relationships – not weaken them – for those
organizations that have built premier Internet brands.”
– Phil Carpenter
About of Author
PHIL CARPENTER is Director of Marketing for Critical Path. He was previously Director
of Corporate Marketing for RemarQ, involved in marketing roles with PointCast, Intuit
and Mozart Systems and a Senior Consultant with the McKenna Group. Mr. Carpenter
is the coauthor of Marketing Yourself to the Top Business Schools and writes articles for
more than two dozen publications. He holds an M.B.A. From the Harvard Business
School and a B.A. from Stanford University.
His Web site is located at http://www.ebrands.homestead.com.
-3-
Main Idea
The most successful Internet brand builders are intensely focused on building their
brands. They don’t leave things to chance – they plan and execute an intensive,
focused brand building program.
Supporting Ideas
Internet brand awareness starts with finding effective ways to differentiate a business
organization from everyone else. In other words, successful brand builders allocate the
money and management time required to make themselves known.
The tools used in creating awareness are diverse, and frequently include:
■ Offline advertising – to reach large audiences.
■ Guerrilla marketing tactics.
■ Public relations.
In effect, brand builders are the exact opposite of those
organizations who believe “if you build it, they will come”.
Main Idea
While acquiring new customers is great, the best Internet brand builders know
retaining their existing customers is essential to building profitability. They focus on
generating repeat business.
Supporting Ideas
To keep customers loyal, Internet brand builders are doing loads of innovative things,
like:
■ Sending customers regular updates of new products by e-mail.
■ Allowing their Web site to be personalized and tailored to the specific needs of each
customer.
■ Rewarding customers with frequent buyer bonuses and special offers unavailable to
first-time customers.
■ Creating an online community where customers can interact with and help each other.
■ Providing incentives for customers to introduce their friends, colleagues and
associates to the online business.
-4-
In other words, brand builders are obsessive about keeping customers happy and
finding new and different ways to do more business with existing customers. That focus,
in turn, translates into higher and greater profitability, since the costs of selling to an
existing customer are always lower than the costs of generating a new customer.
By focusing on doing whatever is required to keep customers coming through the virtual
doors again and again to do more business, the most successful Internet companies
build the equity and value of their online brands. They make their products and services
take on a higher perceived value in the eyes of their customers.
Case Study #1 - www.cdnow.com Background CDNOW is one of the most successful
online music retailers.
Started in 1995, CDNOW had revenues of $56.4 million in 1998. Well Executed Brand
Building Activities
■ CDNOW creates brand awareness around the concept of being a better, service
oriented store which helps people find the music they want.
■ CDNOW generates more than 50-percent of its sales from repeat visitors and existing
customers. It sends an e-mail newsletter, new product alerts, has a loyalty program and
offers Web site personalization.
■ CDNOW has forged strong alliances with Rolling Stone and high traffic Web sites –
like Yahoo! and GeoCities.
■ CDNOW researches clients regularly and has developed a digital dashboard of the
key business metrics and indicators – so executive decisions are made quickly.
■ CDNOW has a good reputation for quality based on a 30-day no-questions-asked
return policy.
■ CDNOW built strength by merging with N2K and Columbia House.
■ CDNOW was one of the first companies to launch an affiliate program to expand the
company’s marketing and sales reach and exposure.
■ CDNOW has used public relations very effectively. The company’s founders have
been positioned as “accidental entrepreneurs” to good effect.
■ CDNOW uses online advertising well to generate awareness and build traffic to its
Web site.
■ CDNOW has concentrated on building the value of just one brand and avoided the
temptation to spread its brand building activities too thin. Key Problems Encountered in
Brand Building
■ CDNOW is facing escalating customer acquisition costs as portals and television
broadcasters increase their advertising rates. Anticipated Challenges of the Future
■ New online merchants are likely to compete more directly with CDNOW. Also, as
traditional retailers set up their Internet businesses, the field is likely to become more
crowded.
■ CDNOW is already competing against Amazon.Com at the top end and niche-focused
Web merchants at the low end. The company has to aggressively cultivate long-term
relationships with its customers to offset those threats.
■ CDNOW’s music suppliers and distributors may go into the direct sales business
themselves – which would effectively disintermediate CDNOW.
■ There is growing tension between the Internet portals and merchants as to who gets
what share of the transactional revenues derived from these alliances.
■ CDNOW will face new technologies – from digital music distribution which may
supercede CDs to automated bots or intelligent search agents.
-5-
■ CDNOW’s existing clients are aging and the company has to replace them with the
next generation of teenagers – who are their prime market demographic.
Main Idea
Good Internet brand builders generate increasing amounts of momentum behind their
brands – and then make certain everyone in the market knows they’re gaining speed.
By doing that effectively, they almost become unstoppable.
Supporting Ideas
In the context of online brand building, momentum is generated whenever milestones
are reached successfully, new alliances are entered into or increased value is added
to the brand. Savvy Internet brand builders harness that increasing momentum to
overcome any barriers to success. For example, potential competitors will be reluctant
to compete against a brand which is rapidly gaining momentum. At the same time,
potential allies will be enthusiastic about becoming aligned with an Internet success
story, while customers feel more confident doing business with an organization that’s
progressive and successful.
Public relations is the key tactic in momentum growing. Smart Internet marketers make
announcements regularly to build that momentum – or at the very least, the appearance
of increasing momentum.
Main Idea
The Internet is an ideal environment for outsourcing non-essential activities. The most
successful Internet brands don’t try and do everything themselves.
Supporting Ideas
In essence, the Internet is the world’s most open interdependent business environment.
Sharp Internet brand builders use that fact to good effect – by building multiple alliances
with other specialist businesses.
These alliances allow brand builders to leverage the operational efficiencies of those
other businesses. That way, instead of trying to do everything themselves, they focus
instead on forming alliances with those who already have best-of-class efficiencies in
various fields. This is particularly important in the areas of distribution specialists and
the developers of original content.
In practice, by building broad alliances, Internet brand builders achieve unmatched
-6-
operational efficiencies. In the Internet business world, whichever organization can
create the most alliances wins.
Key Thoughts
“From the beginning, we were always building for the time when the Internet became a
mass medium. The core mission was to humanize cyberspace, so even in the beginning
when the available audience was early adopters, we were not just trying to create a
product for them – it’s just that that was who was there.”
– MacDara MacColl, vice president of member services and marketing, iVillage
Case Study #2 - www.ivillage.com
Background
iVillage offers online content focused on women’s issues delivered in a community
format. The company was founded in 1995 and achieved revenues of $15 million in
1998.
Well Executed Brand Building Activities
■ iVillage uses public relations extremely effectively to create awareness of the brand
(core attributes: utility, relevance and community) and a growing perception of
momentum in the marketplace.
■ iVillage has cultivated a rich online community – a network of sites which bring
together individuals with shared interests who can share insights and experiences.
■ iVillage pays close attention to its customers and learns about their needs – allowing
the company to sharpen the focus of its marketing initiatives.
■ iVillage has forged a number of strong content and distribution alliances to enhance
the quality and visibility of the company’s products and services.
■ iVillage has assumed a leadership position in building a virtual community by
exploiting a first-mover advantage and continuing ongoing development.
■ iVillage has worked hard to cultivate a reputation as a provider of high quality services
through responsive customer service, extensive self-help sections and community
interaction.
Key Problems Encountered in Brand Building
■ iVillage has built the brands of its individual Web properties effectively, but has failed
to develop an umbrella brand. Thus, the company’s credibility has lagged.
■ The company has a high rate of turnover amongst senior executives – which suggests
problems in the management style of the CEO.
■ iVillage has spent aggressively to establish the business – with accumulated losses
exceeding $65 million by September 1998. At the same time, the company’s future
sources of future revenue are not particularly attractive.
Anticipated Challenges of the Future
■ iVillage faces challenges from at least three Internet businesses targeting the same
customers. iVillage may have difficulties maintaining a clear differentiation.
■ The community members of iVillage may want to take the online community in
nonproductive directions – perhaps even forming online vigilante groups or
anti-company crusades.
■ iVillage uses volunteer workers to help run its communities. At some stage in the
future, the Labor Department may rule those volunteers should have been paid. That
might create a large financial liability.
■ As iVillage develops a more multi-faceted business plan, the online community
members may resist the company’s efforts to generate more revenues. In other words,
-7-
iVillage needs to move carefully to blend extended ecommerce efforts into the fabric of
the community in such a way community members feel comfortable with. That could
prove difficult.
■ iVillage will most likely struggle to maintain the delivery of high-quality personalized
service in the future as the number of community members increases.
Main Idea
The most successful Internet brand builders organize themselves to take advantage of
a business opportunity before anyone else notices it – and them keep moving forward
so rapidly nobody else can catch them.
Supporting Ideas
Quite simply, the Internet demands consistent, ongoing brand building activities. Even
those companies with a strong first-mover advantage cannot afford to rest on their
laurels because that will allow competitors to seize the initiative in driving that business
category forward.
Therefore, the best defense in this case is most certainly a strong offence. Companies
that launch online brands have to keep adding new content and new features
consistently, otherwise visitors won’t spend more time at their site.
Brand building efforts must evolve with the changing needs and demands of customers
if value is to be added to the brand over the long-term.
Main Idea
Effective Internet brand builders look outwards to their customer’s needs aggressively.
They make a point of understanding everything about their customers better than
anyone else.
Supporting Ideas
The common trait of all those organizations which have succeeded in building strong
Internet brands is a detailed and thorough understanding of the needs of their
customers and the dynamics of the marketplace.
That detailed understanding is usually acquired through the development of targeted
products and services nobody else has offered. Or it may result from the availability of
new forums, new processes or new bundles of products and services.
In summary, smart brand builders use the Internet effectively to learn more about their
customers than anyone else knows and to use that knowledge proactively.
Key Thoughts
“By executing more searches than anyone else, Yahoo! Is uniquely well-positioned to
listen to the Web and to learn about its user’s interests and fancies, and this helps it to
develop new sites and services that cater to emerging trends and interests long before
-8-
they become widely evident.”
– Robert Reid, author, Architects of the Web
“This will sound unsophisticated but our best form of product research is to actually put
the product up and see how it works. It’s like a living database. We can see what people
are clicking on and what they don’t click on, what they use and what they don’t use, and
we can tailor the product based on that feedback.”
– Karen Edwards, vice president of brand management, Yahoo!
Case Study #3 - www.yahoo.com
Background
Yahoo! is the largest Web directory and portal. It began life in 1994, went public in
1996 and achieved revenues of $203.3 million in 1998.
Well Executed Brand Building Activities
■ Yahoo! has used public relations and media advertising exceptionally well to create
awareness of the brand. (The company’s ads are always simple and tightly focused).
■ Yahoo! uses fun, irreverent guerrilla programs and innovative, zany marketing
programs to enhance awareness.
■ Yahoo! has struck numerous content partnerships which build the brand by extending
the company’s reach.
■ Yahoo! has regularly added features and new services, to its Web site, encouraging
repeat online visits.
■ Yahoo! has always acted quickly and early to build on its own momentum.
■ Yahoo! offers personalization – users can develop their own versions of the main Web
site. That encourages loyalty.
■ The company makes a substantial effort to understand what its customers want –
supplemented by aggressive efforts to provide what customers want.
■ Yahoo! has built its business model around being able to provide end users with
high-quality services at no cost.
■ The founders of Yahoo! have been carefully and deliberately promoted by the
company as prototypes of success in the New Economy.
Key Problems Encountered in Brand Building
■ The key ongoing challenge for Yahoo! is to retain some differentiation from the other
portals. The company is responding by adding functionality and integrating services to
create a network of features and information sources.
■ The revenue stream from online advertisers is beginning to wane and is expected to
taper off in the future. That is causing a major realignment of the company’s business
plan.
Anticipated Challenges of the Future
■ As high speed broadband connections become more widespread, Yahoo! needs to
find ways to add richer content features without disenfranchising users with dial-up
modems.
■ Yahoo! is certain to face ongoing threats from new market entrants and the upgraded
offerings of current entrants. The company has to keep moving forward to remain
competitive.
■ Yahoo! will also face significant challenges from vertical portals – Web sites offering
rich content and functionality for tightly focused subjects and user groups.
■ As traditional media companies enter the online marketplace, they are likely to
challenge Yahoo’s market dominance.
-9-
■ Yahoo! is facing a new generation of search engines using such techniques as natural
language searching rather than the keyword searching strategy employed by Yahoo!
■ Yahoo! may decide to align itself with a traditional media company or a high-speed
Internet access provider.
■ There may be future conflicts of interest between Yahoo! advertisers and partners.
■ The company’s culture will need to retain the advantages of start-up thinking while
exploiting the economies of scale that become available.
Main Idea
Experienced brand builders understand the Internet is ideal for spreading
word-of-mouth recommendations. Therefore, they establish a reputation among existing
customers for providing world-class products and services.
Supporting Ideas
Word-of-mouth endorsements matter even more on the Internet than they do even in
the physical world – because it’s so easy for customers to communicate with each other.
The key to generating positive, first-rate endorsements is simple – exceed customer
expectations. That way, anything an existing customer has to say about their
experience with your brand can’t be anything but a glowing endorsement.
In effect, people may not believe what you say about yourself, but they always believe
what past customers have to say about your product or service. Create satisfied
customers and you unleash a growing wave of positive endorsements.
Main Idea
Savvy Internet brand builders deliver high quality products and services at the lowest
feasible prices. Their value proposition is compelling and all encompassing.
Supporting Ideas
Simply put, the most successful Internet brands are those that deliver the greatest value
to customers. Most often, that will be expressed in terms of richness and functionality at
the most competitive price.
Whichever company delivers the most value wins on the Internet.
Key Thoughts
“We’ve got to move fast. I go to sleep worrying someone is going to leave cleat marks
on my face before I wake up.”
- 10 -
– Candice Carpenter, founder, chairman and CEO, iVillage
“I’m having a great time. This is the best job I’ve ever had. Actually, it’s the only job I’ve
ever had.”
– Jerry Yang, cofounder, Yahoo!
“We offer the best there is. You build trust with a customer when you have the best ski
jacket available – that Marmot jacket that costs $400. That doesn’t mean that’s the only
thing you carry. You may also carry some middle-end products, as they offer a better
solution for some customers. But if you don’t carry the high-end stuff, you are never
going to win the trust of the serious athlete.”
– Tom Romary, vice president of marketing, Fogdog Sports
“If you are out there first, people will spread the brand by word of mouth. It’s incredibly
efficient and incredibly cheap. If you’re second, you’re lost.”
– Warren Packard, venture capitalist, Draper Fisher Jurvetson
Case Study #4 - www.fogdog.com
Background
Fogdog Sports was founded in 1998. The company is an online sporting goods retailer,
and is still in start-up mode. (At present, the Fogdo is a private company with 90
employees).
Well Executed Brand Building Activities
■ Fogdog has built up a good mix of suppliers – providing the company with a strong
and deep range of products to sell.
■ Fogdog has entered into some impressive distribution alliances – with companies like
AOL and women.com.
■ Fogdog has started its own affiliate network as a mechanism for driving traffic to its
Web site.
■ Fogdog is one of the first horizontally focused retailers in that it has chosen to focus
on sporting goods and is now racing to ramp up its business before competitors
emerge.
■ Fogdog has spent a good amount of time gathering market knowledge and
researching out the needs of its target customers.
■ Fogdog is cultivating a reputation for excellence by offering a wide selection of high
quality merchandise. The company also provides online shoppers with the background
information they need to make better buying decisions, and allows customers to post
their own product reviews.
■ Fogdog has a number of sports consultants who act as customer service
representatives answering customer requests.
■ Fogdog has a generous return policy, allowing customers broad discretion in returning
products which turn out to be unsuited to their needs or preferences.
Key Problems Encountered in Brand Building
■ Fogdog has struggled to create brand name awareness in a crowded marketplace.
■ Fogdog is finding it difficult to generate repeat purchases and constantly has to
generate new customers.
■ A number of sports are under-represented or missing altogether from Fogdog’s
product line.
■ The company is struggling to provide adequate supplemental information to assist the
- 11 -
purchase decision for each and every product available.
■ Some of Fogdog’s suppliers are not computer literate – making dealing with them
efficiently a technical challenge.
Anticipated Challenges of the Future
■ Fogdog will face increased competition from large, well-capitalized sports equipment
suppliers, manufacturers and traditional sporting goods retailers in their own
ecommerce applications.
■ Most of the sports sites on the Internet have online stores attached. Therefore, there
will be challenges in using these sites to drive traffic to Fogdog.
■ Price competition is sure to increase in the future as mainstream shoppers get used to
using intelligent shopping agents to search out the best available deals.
■ The company will struggle to expand beyond the U.S. domestic marketplace.
■ The company’s affiliate partners and others may end up cloning Fogdog’s business
plan and going into direct competition with the company.
“We’re creating a whole new way to sell goods that appeals to male hunting instincts, to
male gamesmanship, competition and skill. We’ve figured out a magical way to sell to
men.”
– Jerry Kaplan, co-founder, Onsale
“We are trying to inject signals into this process that communicate not only that the deal
is smart, but more importantly that the shopper is smart. We want to say to the customer,
‘You’re a smart guy – look how much you saved.’ You build a brand from the inside out,
not from the outside in, and it’s all about the customer experience.”
– Martha Greer, vice president of marketing, Onsale
As important as brand names are in the real world, they’re even more important in the
virtual one, because online, people have so few visual clues. If I’m walking down a
street and spot a local bookstore, I don’t even need to notice the name to have a pretty
good idea of what the experience will be like. But online, all Web sites look pretty much
the same. Is it a 40,000-square-foot Web site or a 2,000-square-foot Web site? Without
a clear sense of brand, I might never log on.”
– Jeff Bezos, founder and CEO, Amazon.com
“Newton’s law of brand building states that a brand at rest has a tendency to stay at rest,
and a brand in motion has a tendency to stay in motion. What we’re trying to do is to
create a brand in motion, and it requires outstanding marketing to do that.”
– Rod Parker, senior vice president, CDNOW
“It’s particularly important online for users to recognize and trust a brand name before
they are willing to transact at that site. And so while advertising online is generally seen
by online merchants as a direct response vehicle that drives the customer to take
immediate action, in reality it’s a hybrid between awareness generation and direct
response advertising.”
– Arielle Dorros, account manager, i-traffic
“When you are a community-based site, customer support is business development.
These are the people who will have a good experience or not and will talk about that
experience. So every time we touch a customer directly – which is every second of the
day – it is important to us that we take a lot of care with that interaction.”
- 12 -
– MacDara MacColl, vice president of member services and marketing, iVillage
“The ability to launch a product, gather feedback and immediately relaunch it is distinct
to the Internet. An Internet-based company can – and should – be less dependent on
complex, drawn-out research studies. The market provides better feedback than any
such study ever can.”
– Phil Carpenter
“The rewards for those firms that craft major online brands will be impressive. Global
consumer ecommerce is projected to generate $1.3 trillion by 2003.
Business-to-business sales will reach $1.5 trillion that same year. The Internet
advertising sector should hit close to $22 billion in annual revenues by 2004. These are
large, promising markets. Already, power is flowing to those companies with brand
cachet. In the Internet advertising category, for example, 75-percent of all advertising
revenues currently goes to the top ten advertising-supported sites. For companies that
want to profit from the growth of the Internet, the time to invest in Internet branding is
now.”
– Phil Carpenter
Case Study #5 - www.onsale.com
Background
Onsale (founded in 1994) was the Internet’s first online auction
business. It now specializes in computer products, and recently merged with Egghead
Inc. The company went public in 1997 and achieved 1998 sales revenues of $207.8
million.
Well Executed Brand Building Activities
■ Onsale has used focused, highly effective online marketing to build awareness and
generate traffic – approx. 3.1 million visitors each month.
■ Onsale has forged very strong supplier and distribution alliances, providing the
company with a broad range of merchandise at attractive prices.
■ Onsale has a high number of repeat users – reflecting success in providing quality
service. It also reflects the fact Onsale customers are getting good deals.
■ Onsale generated good media coverage by virtue of being the first online auction site.
■ Onsale’s managers study the needs of their customers intensively, and have made
the interface between customers and the company simple and easy to navigate.
■ Onsale has developed a reputation for excellence by cultivating the trust of its
customers, and by providing them with large amounts of supplemental information. Its
customer service is typically prompt and thorough.
Key Problems Encountered in Brand Building
■ Merging the brand equity of the onsale.com brand and the newly acquired
egghead.com brand name is going to be difficult in the immediate future.
■ The company has supply constraints to work with. There is a limited availability of
excess merchandise which can be sold off at prices that will appeal to value buyers.
■ Competitors such as eBay, Amazon.com, outpost.com and buy.com have tended to
capture public attention more than Onsale. The company has lost momentum in public
awareness and public relations.
Anticipated Challenges of the Future.
■ There are a number of aggressive competitors targeting the same small business
market segment – like Cyberian Outpost and Buy.com, for example. These are savvy,
- 13 -
street smart competitors who will compete vigorously and on the basis of radically
different business plans.
■ There are now hundreds of Internet auction sites. Differentiating Onsale will be a
challenge. In this field, eBay has become a superstar, while Amazon.com is also making
serious inroads into the small business market. Both of these companies can exploit
substantial cross-selling opportunities unavailable to Onsale.
■ As more computer retailers and computer product manufacturers establish proprietary
ecommerce operations, Onsale’s supply of products is likely to be impeded still further.
■ Providing high quality customer service for products that are sold at very thin margins
will be a challenge of the future.
■ Onsale will most likely need to strengthen and add to its strategic alliances and
partnerships if it is to continue to grow in the future. Whether the company will be able to
enter into suitable alliances remains to be seen.
Main Idea
Companies that understand what makes their brands distinctive and replicate those
features when they go online do best. Supporting Ideas Naturally, smart online brand
builders will take everything that works offline and build on that. In other words,
distinctive brand elements will be replicated in the online Web site. This may include the
use of the same colors, the availability of similar features or even hybrid activities which
are part-online and part-offline. Whatever is at the core of the offline brand needs to be
duplicated.
By doing this:
• Customers feel comfortable.
• Customers are reassured by their past business dealings.
• Customers equate the online brand with the same attributes.
By attempting to one-up their offline brands, good Internet business builders are leading
customers to increase their experience and familiarity with the brand. In effect, they’re
increasing the level of intimacy, which will have a desired flow-on effect of more
business in the future.
Main Idea
As well as being consistent with their historical roots, good online brands add value
- 14 -
–they do new things the offline brand never did. Supporting Ideas Good online brands
expand the brand experience by offering new services and features. They go above and
beyond what the brand has historically stood for. Take, for example, what an online
book store can offer that is not readily available in traditional stores:
■ Instant access to recommended reading lists – arranged in a broad variety of different
classifications.
■ A new book section – which describes the latest releases, including those featured in
the various media lists.
■ The ability to ask specific questions of the authors of all kinds of books.
■ The ability to read what other customers are saying about the book you’re considering
purchasing.
In practice, the Internet brand has to build on and expand the experience customers are
already having with the brand in innovative ways.
Key Thoughts
“Brand building is operational excellence. In my opinion, the customer experience is
affected significantly by the sum of myriad details which have to be right.”
– Martha Greer, vice president of marketing, Onsale
Case Study #6 - www.Barnesandnoble.com
Background
A subsidiary of Barnes and Noble Inc. which was spun off in 1997, Barnesandnoble.com
went public in 1997. The company has in excess of 700 employees and generated 1998
sales revenues of $61.8 million.
Well Executed Brand Building Activities
■ The company has created brand awareness through extensive online advertising and
links to its established network of stores.
■ Barnesandnoble.com sold a 50-percent stake to Bertelsmann AG, one of the largest
publishers in the world, strengthening its supplier network.
■ The company has made extensive use of print, television and radio advertising to
further build awareness.
■ Barnesandnoble.com focuses on personalization with e-mail delivered
e-nnouncements of new releases, online discussion communities and forums for
customer reviews of books.
■ The company has structured a large number of content and distribution alliances with
the goal of enhancing the richness and utility of the service offered. This includes a link
with The New York Times which drives traffic to the Barnesandnoble.com Web site.
■ Barnesandnoble.com has worked closely with customers to enhance the usability of
its Web site. In other words, the company has made several attempts to increase its
awareness of and intimacy with customer preferences.
■ The company has attempted to generate a reputation for excellence in everything it
does, and to embed a number of clues which link the experience of shopping at a real
world Barnes and Noble store with a visit to Branesandnoble.com.
Key Problems Encountered in Brand Building
■ Barnesandnoble.com is going head to head against Amazon.com and a number of
similar businesses. Amazon.com, in particular, has built a strong and robust online
brand.
■ The company also faces competition from “category killers” – niche focused
- 15 -
specialists and experts in specialized markets. These competitors are multiplying
rapidly.
■ Many of the major online distribution partners are already locked into exclusive
arrangements with its competitors. That means Barnesandnoble.com has to be more
creative.
Anticipated Challenges of the Future
■ As Barnesandnoble.com targets the international marketplace, it will face numerous
cultural issues and logistical challenges.
■ To improve on its customer service level, Barnesandnoble.com will need to develop a
larger, more expensive customer support network. Possibly, the company will need to
add voice- or phone-based support services.
■ The advent of digital content distribution will cause major realignments within the
publishing industry. Barnesandnoble.com will need to find its way through this upcoming
minefield.
■ There will be a natural tendency to extend the brand beyond books to other
merchandise. Whether this will ultimately strengthen brand equity remains to be seen.
Main Idea
Savvy Internet brand builders use cross-promotions well. They create awareness and
acceptance of their new online brands by leveraging the assets available through their
existing offline brands.
Supporting Ideas
Whether this involves something simple like printing the URL of the Web site on all its
shopping bags or something more complex, good Internet brand builders generate
visitors. They encourage existing offline customers to also become online customers.
Other crossover brand companies – such as Playboy Enterprises and the Gap –
leverage the assets of their offline brand assets to enhance the value of their new online
brands through initiatives such as:
■ Using remnant advertising space in Playboy Magazine to build awareness of and
drive traffic to playboy.com.
■ Including references to playboy.com in the editorial material contained in the print
magazine.
■ Putting the Gap’s Web site URL in store windows, on counter cards and even printed
on the cash register receipts for all sales made at the Gap’s physical stores.
Key Thoughts
“We get about 25 million visitors to our Web site a quarter. The goal is to be able to sell
those customers anything they buy that goes along with their PC – printers, software,
modems, networking cards, add-ons – and to have one common shopping cart between
dell.com and Gigabuys.com.”
– Michael Dell, CEO, Dell Computers
- 16 -
“The way I try to describe us is if Barnes & Noble is the Chair of the English Department,
a tenured professor at Harvard, then we at Barnesandnoble.com are the newest
addition to the staff – very intelligent, very articulate, the hip new addition to the team.
It’s that same credibility, just a different presentation.”
– Ben Boyd, director of communications, Barnesandnoble.com
“Time and again we have seen AOL help companies to develop online brands. Their
ability to channel their customers and the sheer number of impressions that have to play
with allows AOL to lend a lot of branding power to their merchant and content partners.”
– Nicole Vanderbilt, group director, Jupiter Communications
“Premier online real estate on high-traffic sites is especially important for latecomers to
the Web.”
– Phil Carpenter
“Our goal is to be the Web destination where consumers can find the information
content they desire in whatever format they could dream possible.”
– Ben Boyd, director of communications, Barnesandnoble.com
“It’s one thing to be a big brand. It’s another to be a brand in another category. You can
damage your reputation if you stretch it too far.”
– David Aaker, professor of marketing, University of California at Berkeley’s Haas
School of Business
“Bad service can kill fledgling Web brands, and it may not be a slow, agonizing death. In
a recent Forrester study, more than half the consumers who had a bad online buying
experience said they had abandoned the offending merchant, and fully half abandoned
e-commerce altogether.”
– Charles Piller, journalist, LA Times
“There’s nothing about our model that can’t be copied over time. But you know,
McDonald’s got copied. And it still built a multibillion-dollar company. A lot of it comes
down to the brand name.”
– Jeff Bezos, founder and CEO, Amazon.com
“Barnes and Noble Inc. prides itself on its relationship with authors and the idea that at
any store in the country, we always have different author readings going on. When we
launched Barnesandnoble.com, we focused on the live author chats in our virtual
auditorium. We still emphasize this, and it has been very successful. The idea was to
recreate this important aspect of the store environment, to have people come in, relax.”
– Matt Kelleher, marketing manager, Barnesandnoble.com
“Traditional businesses have multiyear planning cycles. We have multimonth planning
cycles. For us, speed is God. For us to survive in the space and continue to thrive, we
have to be ready to move faster than the world around us. Sitting around and
deliberating for weeks or months means that by the time you come to your conclusions,
things will have changed again.”
– Jason Olim, co-founder and CEO, CDNOW
“Technological leads are ephemeral; a well-nurtured brand has staying power.”
- 17 -
– Phil Carpenter
“The development of an Internet brand is a holistic process. Building awareness – is
just one aspect of brand development. Crafting a powerful online brand requires paying
just as much attention to developing other facets of the brand as well, such as customer
loyalty and influential distribution partnerships. There is no silver-bullet solution for the
development of a substantial Internet brand. Instead, dominant ebrands emerge when
companies invest in a rich mixture of marketing and business practices.”
– Phil Carpenter
* * *
[세계 베스트셀러(NBS) 서비스는 영문의 경제·경영 및 정치 서적의 베스트셀러, 스테디셀러의 핵심 내용을 간략하게 정리한
요약(Summary) 서비스입니다. 영문 서비스는 단순히 서적을 소개하거나 광고를 위한 Book Review가 아니라 세계의 베스
트셀러 도서의 핵심을 체계적으로 정리한 도서 정보로써, 이 서비스를 통해 세계의 정치·경제·문화의 흐름을 빠르게 파악할
수 있습니다. 세계 지도층이 읽는 세계 베스트셀러 도서를 가장 빠르고 효율적으로 접해보시기 바랍니다.]
- 18 -