DEFINITIONS & CONCEPTS
WHAT IS A BRAND?
According to Rita Clifton, CEO of Interbrand Newell and Sorrell - a leading specialist brand consultancy firm - a brand is: "A mixture of tangible and intangible attributes, symbolized in a trademark, which, if properly managed, creates influence and generates value"1.
Other common descriptions of a brand include - a "relationship", a "reputation", a "set of expectations", and a "promise". It is a company's promise to consistently deliver a specific set of features, benefits, and services to customers. Brands are richly endowed entities.
BRANDING & THE BUYING PROCESS
In order to understand the context and the role of brands, it is important to clarify customers' underlying buying behavior and the buying process. The buying process consists of five stages.
The process starts when the buyer recognizes a need. This can be triggered by internal or external stimuli (advertisements). Once aroused, a consumer will be inclined to search for more information, either through heightened attention or through an active information search. Through gathering information, the consumer learns about competing brands, and evaluates them in terms of the degree to which their benefits and bundle of attributes satisfy their needs. Consumers differ as to which product / service attributes they see as important, and pay the most attention to the brands that will deliver the sought benefits. Therefore, it is critical to understand what attributes consumer's value.
Consumers develop a set of brand beliefs about the attributes of competing brands. These brand beliefs make up the brand image (this concept is re-visited in next part of this chapter). 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, two factors can intervene between the purchase intention and the purchase decision - attitudes of others and unexpected situational factors.
If other people have had a negative experience with the brand, their negative attitude may influence the consumer's purchase intention or vice versa. A consumer's decision to modify, postpone, or avoid a purchase decision is heavily influenced by perceived risk. Expensive purchases involve some risk taking. A consumer tries to deal with this by gathering information from friends, and a preference for recognized brands they can trust.
After a consumer has actually purchased the product or service, they will evaluate their level of satisfaction - the customer will be highly satisfied, somewhat satisfied, or dissatisfied with the purchase decision. Satisfaction depends on how closely the brand's perceived performance matches the customer's expectations. If perceived performance and quality exceed their expectations then they are satisfied, even delighted. If performance falls below their expectations, they will be dissatisfied and look for alternative brands in the future.
Customers' expectations are particularly important when dealing with services, and especially important when dealing with purchases made through the Internet, as these services are intangible and therefore, customers make decisions purely on the basis of their expectations. These expectations are formed through a combination of past experiences, word-of-mouth, advertising and communication.
The level of customer satisfaction will influence whether they buy the brand again and talk favorably or unfavorably about it to others. Highly satisfied and loyal customers tend to move directly from the need recognition stage to the purchase decision, locking out potential competitors. Customer satisfaction and loyalty are essential to creating successful brands.
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 conceptualizing, 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.
Amazon.com has become synonymous with e-commerce, and is one of the few Internet brands that is recognized all over the world. It is the 57th most valuable brand in the world, and the most widely recognized 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.
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 customization 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 customization and customer service, Amazon has been able to differentiate itself from other online competitors.
SOURCES OF VALUE - THE 7Cs FRAMEWORK
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 minimize 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).
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.
Amazon provides customized 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.
Amazon has also added a community element to the purchasing process, and ingeniously turned booklovers' predilections into a source of differentiation by soliciting 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.
Amazon has built relationships with high traffic web portals and sites, converting them into a storefront for Amazon, and has developed an Associates Program, linking it to a large number of other sites. These are discussed in more detail later.
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.
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 personalized 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.
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 "cyberbuzz" 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 Program 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 Program 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 NetSearch, Yahoo!, and Geocities. These multimillion-dollar, multiyear deals involve exclusive book-selling rights, mutual links, and primary button placement on web portal search engines. The Yahoo! agreement was also linked to Amazon's entry into Europe - Amazon.de became the local provider for Yahoo! Germany and Amazon.co.uk the local provider for Yahoo! UK & Ireland. Amazon also established 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), 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 "monetizing" 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 analyzed (learning) and used to provide value-added services such as the introduction of new product categories, and improved customization 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.
OTHER FACTORS THAT CONTRIBUTE TO THEIR BRAND LEADERSHIPInnovation & 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 centers and expanding its distribution network to support high levels of service, establishing a reputation for excellence and fulfillment.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 realized 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 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.
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 recognized 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 centers and upgrading the site, with new products and value added content. In doing so, they have cultivated a reputation for excellence and fulfillment, 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.
- World Wide Web
The Internet, was used to collect information on Dotcom industry. In which the following websites were employed to be used: