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Nov 7, 2013 (3 years and 9 months ago)

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E
-
Business Brands

and the implications

of the net

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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

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Total Market Capitalization

1986

IBM

$73

Exxon

$50

G. E.

$39

AT&T

$27

G.M.

$21


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Two Questions

What part do brands play in market capitalization?

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

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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

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Billion Dollar Brands

Coca
-
Cola


$84

Microsoft


$57

J&J



$48

IBM



$44

GE



$34

Ford



$33

Disney


$32

Intel



$30

McDonald’s


$26


AT&T


$24


Marlboro


$21


Nokia


$21


Mercedes


$18


Nescafe


$18


H
-
P



$17


Gillette


$16


Kodak


$15


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Brand as % of Market Cap

Coca
-
Cola


59%

Microsoft


21%

J&J



45%

IBM



28%

GE



10%

Ford



58%

Disney


61%

Intel



21%

McDonald’s


64%


AT&T


24%


Marlboro


19%


Nokia


44%


Mercedes


37%


Nescafe


23%


H
-
P



31%


Gillette


37%


Kodak


60%


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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

AT&T


$147

CBS



$37

Gannett


$20

Barnes&Noble

$3

Knight Ridder

$5

Toys R Us


$3

Cendant


$12

Avis


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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?


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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

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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”

What is a Brand?

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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

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New York Times/CBS Poll

July 17
-
19, 1999

Apple Computer

McDonald’s

IBM

Harley Davidson

Johnson & Johnson

Microsoft

Teammate”

“Mother/Child”

“Best Friend”

“Close Friend”

“Childhood Buddy”

“Master/Slave”


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Matches

Apple



“Close Friend”

McDonald’s



“Childhood Buddy”

IBM




“Teammate”

Harley Davidson


“Best Friend”

Microsoft



“Master/Slave”

J&J




“Mother/Child”

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Ingredient

Expectations (Hershey)

Performance

Expectations (Sony)

Service

Expectations (UPS)

Image

Expectations (Rolls Royce)

Horizontal
-

Sears, Disney

Vertical
-

Campbell’s,Coke

Brand Positionings

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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. Keough

President (retired)

The Coca
-
Cola Company

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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!”

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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

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Would You Invest With This
Group?

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“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.

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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.”

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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

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The Evolution of Marketing
1899 to 1999
1 : 1
1 : Few
1 : Many
1 : Millions
1 : Many
1 : Few
Marketer Driven
Consumer Driven
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Traditional Marketing
Awareness &
Interest
Education
Conceptual Trial
Purchase
Experience
Support
Consumers
Network TV
Radio
Spot TV
Newspaper
Outdoor
Magazines
Direct Mail
Internet
Public Relations
Market
Research
Graphic Design
Seminars
Brochures
Tradeshows
Presentations
Telemarketing

Leads
Video
Kiosks
Word of Mouth
Samples
Limited Demos

Distribution
Slotting
Allowances
Out of Stock
Displays
Point of Sale
Detail Persons
Sweepstakes
Instructional
Manuals
800 Numbers
Returns
Guarantees
Repair
Upgrades
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Internet Marketing
Awareness
& Interest
Education
Conceptual
Trial
Purchase
Experience &
Support
Internet
Consumers
"The Internet for us is like a wonderful dream come true. It's like
zero-variable cost transactions. The only thing better would be
mental telepathy."

Michael Dell
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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

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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

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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


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Three “Frees”

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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

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Free Storage

Storage costs of 1MB of data

1988



$11.52

1998


10¢

2001




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


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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




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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

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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

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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

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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

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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.

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Distribution Margins

Four tier system


=

50%

Wal
-
Mart system


=

25%

Dell Computer


=

10%

OnSale.com


=

Cost+$10

Priceline.com


=

Your Price

Free PC



=

Nothing

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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?

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Transaction Costs

1900
-

25%

1980
-

45%

2010
-

25%

Paper Purchase Order
-

$85

EDI/EFT
-

10 cents

USPS
-

3 billion invoices/checks

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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


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Profit =
Differentiation X Efficiency
Time
Leaders
High Risk
Failing
Competitive
Efficiency
Differentiation
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Three Corners of Business Strategy

Innovation

Customer

Focus

Operational

Excellence

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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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