Do Business Well

Some companies, particularly in the financial services sector, have established new online brands rather than use the Internet to reinforce existing brands. In the UK, examples include Egg (www.egg.com), which is owned by the Prudential, and Smile (www.smile.co.uk), which is owned by the Co-operative Bank. Egg has been particularly successful in attracting customers, and enjoys high levels of brand awareness, but the attractive rates of interest that it offers to savers and the high level of advertising expenditure have resulted in a perilous financial position. The bank hopes to achieve profitability by cross-selling more lucrative products to its savings account customers. Establishing new brands for online activity offers traditional banks — which often have a rather staid image the opportunity to ’start again’ and develop a more modern style to appeal to new customer segments online. However, one drawback is the increasingly high cost of establishing an online brand as the marketplace gets ever more crowded. Another is the increasing tendency for customers to expect a choice of channels, and not be forced to conduct all their banking online. Consequently, it is rumoured that Egg is now looking to set up a physical branch network. It has also been suggested that in the early days of the Internet, the strategy of brand creation was a ’safety net’ so that if the online venture failed, the established brand would not suffer by association with it.

Brand followers

Brand followers copy successful ‘early adopters’ of online marketing. The high degree of visibility online means that this strategy is increasingly easy to achieve, as innovations can be easily copied. Many traditional booksellers have attempted to follow Amazon’s approach to online trading, and while this might be a low-risk strategy, it sends a clear signal to the market that the company is just a `me too’. Such companies, by making no attempt to distinguish their offering from competitors’, make it appear that they are not really committed to Internet channels.

Brand repositioning

Developing an Internet presence can be a timely opportunity to reposition the brand. The courier company UPS (www.ups.com) took advantage of Internet technology to add value to its brand by including a tracking service so that customers could tell whereabouts their package was in the delivery schedule at any time. Willcocks and Sauer (2000) note that such new features enabled the company to reposition itself in the marketplace as an information provider rather than as a courier company.

Co-branding

According to Strauss and Frost (2001), co-branding occurs when two different companies put their brand name on the same product. This is done in the competitive chase for innovation offline as well as online. Banks, for example, are under strong pressure to capture customer lifetime value as new technology and varying distribution channels enable online market entrants to gain ground. One solution has been strategic alliances such as that between British Airways and the Royal Bank of Canada in 1999. The companies teamed up to provide financial services to frequent travellers, expatriates and members of the British Airways Executive Club. According to The Banker, ‘For both bank and airline there is a win—win situation in which the strategic alliance helps expand the bank’s customer base and both brand values can be reinforced’ (1999: 72).

Co-branding is quite a common practice on the Internet as it is a good way for firms to build synergy through expertise and brand recognition. An excellent example was the barter arrangement between Yahoo! and Pepsi, whereby Pepsi plastered the portal’s address on 1.5 million cans. In return, Yahoo! took Pepsi‘ already established loyalty programme ‘Pepsi Stuff’ online. www.PepsiStuff.com is a co-branded Web site that lets consumers collect points from bottle caps. The loyalty points are redeemable for prizes ranging from electronic goods to concert tickets. Three million consumers logged on and registered on the Pepsi Stuff Web site, providing Pepsi with detailed consumer information that would have been very difficult and expensive to obtain through market research or from focus groups. According to Neuborne (2001), information was available in days that once took months to get. Sales rose by 5 per cent during the online promo. tion and the cost was 20 per cent of what it had been as a mail-in project. From this experience, Pepsi learned that while banner advertisements and other more traditional advertising have had some success, it is the creation of creative and interactively engaging Web sites like this that has given the brand the most impetus online.

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