Online opportunities are not going away. In fact, the Web still offers one of the best opportunities for future growth for both dot-com start-ups and bricks-and-mortar firms in the retail and B2B sectors. Not only are more consumers buying online, but they're buying more. In the B2B sector, ecommerce continues to thrive with estimates of online commerce in this sector doubling within the next few years alone.
Part of the failure of many dot-coms was founded on the level playing field argument (i.e., the belief that small start-ups could design professional Web sites and compete with any large player). While new dot-corn start-ups can often design Web sites similar in quality to an established firm, Web site design does not necessarily translate into comparable brand equity, which is built on consumer loyalty, brand awareness, perceived quality, brand associations, and other proprietary brand assets.
For example, if you're thinking of buying books online you may consider purchasing from Amazon.com or traditional retailers turned brick and clicks, like Barnes and Noble. However, other booksellers, such as smartbooks.com and booksforbusiness.com, are available. Would you buy from one of these relatively unknown retailers? Wouldn't buying the latest brand management book from Amazon.com be the same as buying from booksforbusiness.com? Of course not. Online shoppers are more attracted toAmazon.com because it inspires confidence through its brand equity. Alternatively, retailers with lower brand equity have higher perceived risks for consumers.
But how did Amazon.com create its brand equity in a highly competitive bookseller industry? Amazon.com was an innovator in online bookselling when traditional retailers with established brand equity were still standing on the sidelines. As such, these companies allowed Amazon.com to build its brand equity in the online marketplace unfettered. Amazon promoted itself widely and developed a Web site design, inclusive of its one-click ordering technology, that set the industry standard. However, times have changed. New online firms, or regional firms expanding nationally or globally online, must establish their brands in a highly competitive marketplace that includes established national and/or global brands. They must go beyond simply making consumers aware of the brand to giving them brand-specific information, developing perceived quality and credibility, thus enhancing their brand equity.
Branding by Design
A firm's brand equity comes from its brand-building actions. David Aaker, a leading thinker on branding, notes that a firm's brand is more than a simple identifier for consumers. Brands provide critical evaluative information relating to the product and the organization, conveying product attributes (e.g., quality) as well as organizational attributes (e.g., credibility and believability).
For established firms, a well-designed Web site helps reinforce the firm's brand equity, while a poorly designed Web site can devalue its established brand equity. For new firms, whether dot-coms or local/regional traditional firms going nationally or globally online, a well-designed Web site can help start the process of building brand equity. A poorly designed Web site may not engage the consumer, causing them to move to another Web site without evaluating the site's content.
A common mistake in Web site design is to not consider the content and navigation as part of the design. Web site design refers to the representational richness of a Web site, which includes content, navigation, graphic design, and functionality. It can range from extremely simple sites that employ basic text, links, and menus to highly complex sites that offer graphical links with rollovers, streaming audio and video, Flash, DHTML, and the like. Simply stated, Web site design refers to the look, feel, and functionality of the site. When browsing the Web, it's typically the design of a firm's site that influences the consumer's perception of the company. Web sites that only use textlinks with low quality images and awkward navigation leave the impression of a less "professional" Web site.
What's a Manager to Do?
How should a firm invest its resources to build brand equity and its Web site? A well-designed Web site can enhance brand equity, but, without previously established brand equity, a consumer may perceive too much risk involved in a purchase decision. Managers can evaluate their firm's ability to successfully compete in an online environment by employing a series of assessment steps. (See Exhibit 1.) We'll use two retail categories, general apparel and specialty apparel, to help illustrate how to implement the assessment model.
Step 1: Assess importance of branding in the industry. Brand equity is not equally important across product categories and industries. As such, firms should first assess brand importance in the markets where they compete. Using multiple proxy measures (e.g., brand loyalty), a firm can gain a general sense of the importance of branding in the product category or industry. For example, general industry surveys can provide a rough measure of the proportion of consumers who are brand-loyal. In product categories and industries with a low proportion of brand-loyal customers, brand may play a less important role than other product attributes. For a general apparel retailer carrying a broad selection of product lines, overall brand loyalty (to the retailer) may be relatively low. Consumers wishing to purchase a pair of Levi's jeans may be indifferent to purchasing them at JCPenney as opposed to Macy's. As such, the overall importance of the brand (i.e., retail name) may be relatively low, even when the product brand loyalty is high. Alternatively, for a specialty apparel retailer such as The Limited, consumers may tend to be more brand-loyal because of the private-label branding strategy.
If brand equity is an important competitive aspect in the firm's marketplace, as in the case of the specialty apparel retailer, it should proceed to the next assessment step to determine the competitive brand intensity. However, if branding is less important in the product category or industry, as in the case of the general apparel retailer, the firm should invest less heavily in brand-building strategies and allocate more resources to Web site design. This would require assessing elements of competitive Web site design to direct managerial action.
Step 2: Assess virtual/traditional brand intensity. To assess brand intensity, a firm should examine the number of brands dominating the product category or industry. In some product categories or industries, two brands can account for as much as 90%, while in others two brands account for only 40% of the market (with the remaining market share widely dispersed). A general rule of thumb is that any single brand accounting for more than 33% of the market is considered strong, and markets where fewer than five brands account for more than 66% of the market are highly competitive.
To calculate current brand intensity, a firm should assess current online and traditional market shares. For example, let's assume the following market shares exist: