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E-Business Brands and the implications of the net

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  1. E-Business Brandsand the implications of the net

  2. 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

  3. 1986 IBM $73 Exxon $50 G. E. $39 AT&T $27 G.M. $21 Total Market Capitalization

  4. Two Questions • What part do brands play in market capitalization? • What has been the record of the new “Internet Brands?”

  5. 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

  6. 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

  7. Coca-Cola 59% Microsoft 21% J&J 45% IBM 28% GE 10% Ford 58% Disney 61% Intel 21% McDonald’s 64% Brand as % of Market Cap • AT&T 24% • Marlboro 19% • Nokia 44% • Mercedes 37% • Nescafe 23% • H-P 31% • Gillette 37% • Kodak 60%

  8. 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

  9. 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?

  10. 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

  11. 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”

  12. 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

  13. 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”

  14. Matches • Apple “Close Friend” • McDonald’s “Childhood Buddy” • IBM “Teammate” • Harley Davidson “Best Friend” • Microsoft “Master/Slave” • J&J “Mother/Child”

  15. Brand Positionings • Ingredient Expectations (Hershey) • Performance Expectations (Sony) • Service Expectations (UPS) • Image Expectations (Rolls Royce) • Horizontal - Sears, Disney • Vertical - Campbell’s,Coke

  16. 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

  17. 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!”

  18. 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

  19. Would You Invest With This Group?

  20. “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.

  21. 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.”

  22. 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

  23. 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

  24. 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

  25. 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

  26. Three “Frees”

  27. 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

  28. 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

  29. 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

  30. 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

  31. 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

  32. 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

  33. 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

  34. 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.

  35. Distribution Margins • Four tier system = 50% • Wal-Mart system = 25% • Dell Computer = 10% • OnSale.com = Cost+$10 • Priceline.com = Your Price • Free PC = Nothing

  36. 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?

  37. Transaction Costs • 1900 - 25% • 1980 - 45% • 2010 - 25% • Paper Purchase Order - $85 • EDI/EFT - 10 cents • USPS - 3 billion invoices/checks

  38. 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

  39. Three Corners of Business Strategy Innovation Customer Focus Operational Excellence

  40. 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?

  41. Reasons to join Small Business Resource To get FREE marketing content To get free downloads To get discounts on our services To get access to our resource centre Many other Powerpoints in this series in the members area