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E-Business Brands and the implications of the net. Some Thoughts On:. The Internet and: Brand building at warp speed: the fundamentals still count Three “frees” that are fueling the Net Implications of the Internet. 1986 IBM $73 Exxon $50 G. E. $39 AT&T $27 G.M. $21.

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E-Business Brands and the implications of the net

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E-Business Brandsand the implications of the net


Some Thoughts On:

  • The Internet and:

    • Brand building at warp speed: the fundamentals still count

    • Three “frees” that are fueling the Net

    • Implications of the Internet


1986

IBM $73

Exxon $50

G. E. $39

AT&T $27

G.M. $21

Total Market Capitalization


Two Questions

  • What part do brands play in market capitalization?

  • What has been the record of the new “Internet Brands?”


Valuing the Brand

  • Identify the total earnings stream associated with the brand.

  • Deduct from that the value of a fair return on the fixed assets used by the brand

  • Further deduct earnings attributed to other intangibles: unique processes, patents, proprietary systems

  • Evaluate the result as a contributor to market capitalization


Coca-Cola$84

Microsoft$57

J&J$48

IBM$44

GE$34

Ford$33

Disney$32

Intel$30

McDonald’s$26

Billion Dollar Brands

  • AT&T$24

  • Marlboro$21

  • Nokia$21

  • Mercedes$18

  • Nescafe$18

  • H-P$17

  • Gillette$16

  • Kodak$15


Coca-Cola59%

Microsoft21%

J&J45%

IBM28%

GE10%

Ford58%

Disney61%

Intel21%

McDonald’s64%

Brand as % of Market Cap

  • AT&T24%

  • Marlboro19%

  • Nokia44%

  • Mercedes37%

  • Nescafe23%

  • H-P31%

  • Gillette37%

  • Kodak60%


Cisco$271

AOL$163

Yahoo$51

Amazon$25

eBay$18

Etoys$6

HomeStore$3

Drugstore.com$2

USWeb$3

Bamboo.com$.3

Internet vs. Conventional Brands

  • AT&T$147

  • CBS$37

  • Gannett$20

  • Barnes&Noble$3

  • Knight Ridder$5

  • Toys R Us$3

  • Cendant$12

  • Avis


Internet Accounting

  • “Get Big Fast” has been the mantra

  • Suspension of any ROI requirements

  • Difficult for conventional firm to compete

  • New metric: ROT or ROB

  • How does Walgreen compete with Drugstore.com?


Conclusions:

  • Internet has created huge brands

  • First movers have gained major advantages

  • Incumbents have largely missed the Internet

  • Internet brands use conventional media to

    validate themselves

  • You can be “Amazoned” if you are not alert


What is a Brand?

What the Internet has not changed:

  • “Capitalized value of the trust between a consumer and a firm”

  • Powerful brands can be a company’s greatest asset

  • “A Brand is a Promise that When Kept Creates Preference”


Building Powerful Brands

  • Brand Positioning: the core promise to the consumer

  • Brand Personality: why the consumer

    should like the brand

  • Brand Attitude: what the consumer thinks

    the brand feels about them


Apple Computer

McDonald’s

IBM

Harley Davidson

Johnson & Johnson

Microsoft

New York Times/CBS PollJuly 17 -19, 1999

  • Teammate”

  • “Mother/Child”

  • “Best Friend”

  • “Close Friend”

  • “Childhood Buddy”

  • “Master/Slave”


Matches

  • Apple “Close Friend”

  • McDonald’s“Childhood Buddy”

  • IBM“Teammate”

  • Harley Davidson“Best Friend”

  • Microsoft“Master/Slave”

  • J&J“Mother/Child”


Brand Positionings

  • Ingredient Expectations (Hershey)

  • Performance Expectations (Sony)

  • Service Expectations (UPS)

  • Image Expectations (Rolls Royce)

  • Horizontal - Sears, Disney

  • Vertical - Campbell’s,Coke


Importance of Brand

“At the Coca-Cola Company, each employee has only one job — to protect and enhance the value of the Coca-Cola trademark . . . everything else is fluff!”

  • Donald R. KeoughPresident (retired)The Coca-Cola Company


Internet and Brands

  • Brand fundamentals still count

  • Competitors are often not traditional firms

  • First mover advantage magnified on the Web

  • Financial metrics of the .com companies are fundamentally different

  • “Lead, don’t join them or follow them!”


Innovation

  • What four great US corporations began in 1886?

  • Why was this year significant?

  • Coca-Cola, Sears, Kodak and J&J

  • By 1886 we had a national communication system and a national transportation system

  • Internet is the 1999 equivalent of both the railroad and the telegraph


Would You Invest With This Group?


“How e-commerce Will Trump Brand Management”Harvard Business Review J/A 99

  • Ad spending continues to climb

  • Quads, Pods and Optimizers but no real accountability

  • Where are the efficiency/productivity gains?

  • Contrast with proven improvements in productivity

    in other areas: manufacturing, transportation, communications, logistics, etc.


Phil Guarascio of GM

“Let me ask you a question about a serious matter: your livelihood. What would you do if your boss had the impression you were expensive, exempt from accountability and expendable? I know what I would do. I’d panic. That’s what we need to do about our collective livelihood, advertising. Because too many bosses - our clients - share that ‘triple-X’ point of view: that advertising is X-pensive, X-empt from accountability and X-pendable.”


1950

Network TV

Mainframe Computer

Self service retailing

Mass Marketing

Large brands/firms

Vertical monopolies

1950 vs 2000

  • 2000

    • Fragmented TV

    • Personal computer

    • E-commerce

    • One-to-one marketing

    • Mass customization & small firms


Predictions:

  • PC as we know is will be replaced

  • Reason: “three frees”

    • Bandwidth

    • Processing power

    • Storage costs

  • TV loses to PC and Info Appliance

  • Internet changes the marketing landscape: advertising and distribution


Prepare Yourself For:

  • IP kills switched circuits: AT&T vs Cisco

  • Internet advertising exceeds network TV levels within five years

  • Internet demands “integrated marketing”

  • Super “category killers” in e-commerce

  • Power shifts overwhelmingly to consumer

  • Accompany Inc. does “group bids” - Pilot at $347 vs. $316 if 21 people buy at once


Personal Computer

  • Desktop metaphor from PARC circa 1970’s

    • Overlapping windows, folders, point & click, files, directories, drives, OS’s, applications, fragmentation, crashes, viruses, etc.

    • Basis: expensive memory and expensive computing power

    • Outmoded and to be replaced


Three “Frees”


Free Bandwidth

  • See George Gilder

    • 1984 Mac 400 bits per second

    • 1998 Mac 56,000 bits per second

    • ISDN 128,000 bits per second

    • DSL 1,500,000 bits per second

    • Cable Modem: 3,500,000 bps

    • Wave Division Multiplexing: 1 trillion bits per second


Free Storage

  • Storage costs of 1MB of data

    • 1988 $11.52

    • 1998 10¢

    • 2001 2¢

  • PVR’s (Replay TV & TiVo) “intelligently” records up to 30 hours of TV; skips commercials


Free Processing Power

  • 1985 - Intel 386$120 MIPS

  • 1989 - Intel 486$48 MIPS

  • 1993 - Pentium$13 MIPS

  • 1995 - Pent. Pro$4.40 MIPS

  • 1998 - Pentium II$0.99 MIPS

  • 1999 - Motorola G4$0.25 MIPS


PC/Info Appliance vs. TV

  • “Three Frees” and the law of Telecom advantage the PC

  • Each PC household spends 15 hours/week online and 20 additional hours/week using PC -Odyssey Research 10/5/99


My Belief:

  • Internet is about to switch metaphors and change our lives

  • We have to manage this transition

  • Networking, processing power and free storage will result in a capability for stress reduction and simplicity for your customers


Clear Indicators

  • Information Technology in US (Software/Hardware/Telecommunications) has become the largest sector of the US economy. ($866 billion)

  • Larger than Housing, Automobiles or

    Grocery Products.

  • Santa Clara County: $26 billion in exports


E-commerce Hot List

  • Business to Business: MRO

  • Books, movies music gifts and flowers

  • Travel services

  • Automobiles & automotive services

  • Consumer electronics & toys

  • Prescription drugs/H&BA

  • Real estate sales and advertising

  • Banking and financial services

  • Employment services


E-tailing: Clicks and Mortar

  • Savvy retailers will adopt the Internet in association with their storefronts

  • Even if the purchase is not consummated on the Internet, the “pre-store” shopping will be done on the Net.


Distribution Margins

  • Four tier system = 50%

  • Wal-Mart system = 25%

  • Dell Computer= 10%

  • OnSale.com=Cost+$10

  • Priceline.com= Your Price

  • Free PC=Nothing


Allstate Insurance

  • One billion dollars to move to the Web

  • “The latest example of a traditional ‘bricks and mortar’ company being pulled onto the Web”

  • Slash 4,000 positions for an annual savings of

    $600 million

  • Who’s next? Your company?


Transaction Costs

  • 1900 - 25%

  • 1980 - 45%

  • 2010 - 25%

  • Paper Purchase Order - $85

  • EDI/EFT - 10 cents

  • USPS - 3 billion invoices/checks


Marketing in an Information Age

  • One to one; not mass marketing

  • Relationship not just “selling”

  • Lifetime value of the customer

  • Database mining

  • Reduce customer stress

  • Increase simplicity


Three Corners of Business Strategy

Innovation

Customer

Focus

Operational

Excellence


Did I Convince You?

  • Brands create shareowner wealth?

  • Internet accelerates this process?

  • E-businesses are changing the rules?

  • Attack your own business model before

    someone else does?


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