EBusiness Brands and the implications of the net

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
Total Market Capitalization

• 1986
• IBM 73
• Exxon 50
• G. E. 39
• ATT 27
• G.M. 21

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
Billion Dollar Brands

• Coca-Cola 84
• Microsoft 57
• JJ 48
• IBM 44
• GE 34
• Ford 33
• Disney 32
• Intel 30
• McDonalds 26

• ATT 24
• Marlboro 21
• Nokia 21
• Mercedes 18
• Nescafe 18
• H-P 17
• Gillette 16
• Kodak 15

7
Brand as of Market Cap

• Coca-Cola 59
• Microsoft 21
• JJ 45
• IBM 28
• GE 10
• Ford 58
• Disney 61
• Intel 21
• McDonalds 64

• ATT 24
• Marlboro 19
• Nokia 44
• Mercedes 37
• Nescafe 23
• H-P 31
• Gillette 37
• Kodak 60

8
Internet vs. Conventional Brands

• Cisco 271
• AOL 163
• Yahoo 51
• Amazon 25
• eBay 18
• Etoys 6
• HomeStore 3
• Drugstore.com 2
• USWeb 3
• Bamboo.com .3

• ATT 147
• CBS 37
• Gannett 20
• BarnesNoble 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 companys 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
New York Times/CBS PollJuly 17 -19, 1999

• Apple Computer
• McDonalds
• IBM
• Harley Davidson
• Johnson Johnson
• Microsoft

• Teammate
• Mother/Child
• Best Friend
• Close Friend
• Childhood Buddy
• Master/Slave

14
Matches

• Apple Close Friend
• McDonalds Childhood Buddy
• IBM Teammate
• Harley Davidson Best Friend
• Microsoft Master/Slave
• JJ Mother/Child

15
Brand Positionings

• Ingredient Expectations (Hershey)
• Performance Expectations (Sony)
• Service Expectations (UPS)
• Image Expectations (Rolls Royce)
• Horizontal - Sears, Disney
• Vertical - Campbells,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, dont 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 JJ
• 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
ManagementHarvard 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. Id panic. Thats 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 vs 2000

• 1950
• Network TV
• Mainframe Computer
• Self service retailing
• Mass Marketing
• Large brands/firms
• Vertical monopolies

• 2000
• Fragmented TV
• Personal computer
• E-commerce
• One-to-one marketing
• Mass customization small firms

23
(No Transcript)
24
(No Transcript)
25
(No Transcript)
26
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

27
Prepare Yourself For

• IP kills switched circuits ATT 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

28
Personal Computer

• Desktop metaphor from PARC circa 1970s
• Overlapping windows, folders, point click,
  files, directories, drives, OSs, applications,
  fragmentation, crashes, viruses, etc.
• Basis expensive memory and expensive computing
  power
• Outmoded and to be replaced

29
Three Frees
30
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

31
Free Storage

• Storage costs of 1MB of data
• 1988 11.52
• 1998 10
• 2001 2
• PVRs (Replay TV TiVo) intelligently records
  up to 30 hours of TV skips commercials

32
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

33
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

34
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

35
Clear Indicators

• Information Technology in US (Software/Hardware/Te
  lecommunications) 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

36
E-commerce Hot List

• Business to Business MRO
• Books, movies music gifts and flowers
• Travel services
• Automobiles automotive services
• Consumer electronics toys
• Prescription drugs/HBA
• Real estate sales and advertising
• Banking and financial services
• Employment services

37
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.

38
Distribution Margins

• Four tier system 50
• Wal-Mart system 25
• Dell Computer 10
• OnSale.com Cost10
• Priceline.com Your Price
• Free PC Nothing

39
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
• Whos next? Your company?

40
Transaction Costs

• 1900 - 25
• 1980 - 45
• 2010 - 25
• Paper Purchase Order - 85
• EDI/EFT - 10 cents
• USPS - 3 billion invoices/checks

41
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

42
(No Transcript)
43
Three Corners of Business Strategy
Innovation
Customer Focus
Operational Excellence
44
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?

45
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