International branding in e-commerce

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Master’s Thesis

Jemina Myllys

2017

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SKEMA Business School Department of Marketing

International Marketing and Business Development

Jemina Myllys

International Branding in E-commerce

1^st Supervisor: Olli Kuivalainen

2^nd Supervisor: Peter Spier

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Title:

Faculty:

Major:

Year:

Master’s Thesis:

Examiners:

International Branding in E-commerce School of Business and Management International Marketing Management &

International Marketing and Business Development 2017

Lappeenranta University of Technology &

SKEMA Business School

89 pages, 2 figures, 1 table, 4 appendices Professor Olli Kuivalainen, Professor Peter Spier Keywords: Brand, international branding, e-commerce, localization, online branding, brand communication, brand trust

This study examines international branding in the context of e-commerce companies.

The objective of the study is to increase the understanding and best practices of international branding in e-commerce companies. The research studies the role of branding in the e-commerce environment, the characteristics, opportunities and difficulties of branding in an international e-commerce context, and aims to answer what is the degree of localization and standardization needed in the branding activities of international e-commerce companies.

The study is conducted as a qualitative research with two case companies, and both interviews and content analysis are used as data collection methods. The study’s theoretical framework is based on combined theories of branding, international business and e-commerce. The findings of the study indicate that the role of branding is critical in the online environment, and that brand trust and differentiation are requisites for the success of online retailers. International e-commerce companies often standardize their brand’s identity along with visual identity, but localize brand communication. Based on the study’s findings, a framework for best practices in e-

commerce companies’ international branding is formed.

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Tutkielman nimi:

Tiedekunta:

Maisteriohjelma:

Vuosi:

Pro Gradu –tutkielma:

Tarkastajat:

Verkkokauppayritysten kansainvälinen brändäys School of Business and Management

International Marketing Management &

International Marketing and Business Development 2017

Lappeenrannan Teknillinen Yliopisto &

SKEMA Business School

89 sivua, 2 kaavaa, 1 taulukko, 4 liitettä

Professori Olli Kuivalainen, Professori Peter Spier

Hakusanat: brändi, kansainvälinen brändäys, brändin hallinta, verkkokauppa, lokalisaatio, brändiviestintä, brändiluottamus

Työ tutkii kansainvälistä brändäystä ja sen merkitystä verkkokauppayritysten kontekstissa. Tutkimuksen tavoitteena on kasvattaa ymmärrystä kansainvälisestä brändin hallinnasta verkkokauppayrityksissä ja tuoda esiin parhaita käytäntöjä. Työ tutkii brändin roolia verkkokauppaympäristössä, brändin hallinnan ominaisuuksia, mahdollisuuksia ja haasteita kansainvälisessä verkkokauppaympäristössä, sekä pyrkii vastaamaan mikä on ihanteellinen lokalisaation ja standardisoinnin suhde kansainvälisten verkkokauppojen brändäyksessä.

Työ pohjautuu kvalitatiiviseen tutkimukseen ja kahden case-yrityksen analyysiin.

Datan keräämiseen on käytetty sekä haastatteluja että sisällönanalyysiä. Työn teoreettinen viitekehys perustuu brändin hallinnan, kansainvälisen liiketoiminnan ja verkkokaupan teorioiden yhdistämiseen. Työn löydökset osoittavat, että brändin rooli on kriittinen verkkoympäristössä, ja että brändiluottamus ja brändin erottuminen ovat edellytyksiä verkkokaupan menestykselle. Kansainväliset verkkokaupan yritykset usein standardisoivat brändin identiteetin ja visuaalisen identiteetin, mutta lokalisoivat brändiviestinnän. Löydösten pohjalta rakennetaan viitekehys verkkokauppayritysten kansainvälisen brändäyksen parhaisiin käytäntöihin.

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moment. A lot has happened between the very first day of university and the day that I’m handing in my master’s thesis. I am grateful for it all. Grateful for all the learning and growing. Grateful for the wonderful friends I’ve met. Grateful for the life-changing adventures I got to make.

I am grateful for many people, but most of all for my family, for I would not be here without their support. Thank you for believing in me and giving me the wings to fly.

Thank you LUT, for teaching me to stay open-minded – I will continue to follow that advice for the rest of my life. Thank you Augustin, for all your love and support. Thank you Dad, for your continuous encouragement and advice during all my school years.

All my friends – thank you for making these study years so much more than studying.

And finally, thank you to everyone who I interviewed for this project – this thesis would have been nothing without your insights and inspiration.

It’s finally time to close this wonderful chapter of my life, and head on to the next one.

May it be a good one.

In Paris, 4.12.2017 Jemina Myllys

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1.1 Background ... 1

1.2 Research Objectives and Questions ... 2

1.3 Literature Review ... 3

1.4 Theoretical Framework ... 5

1.5 Key Definitions ... 6

1.6 Research Methodology and Data Collection Plan ... 8

1.7 Delimitations... 9

1.8 Structure of the study ... 9

2 Introduction to E-commerce ... 11

2.1 Definition and History of E-commerce ... 11

2.2 International E-commerce ... 13

3 Branding ... 16

3.1 Role and Objectives ... 16

3.2 Brand Equity ... 17

3.3 Brand Awareness and Brand Image ... 18

3.4 Brand Identity and Brand Values ... 19

3.5 Brand Communication ... 20

3.6 International Branding ... 21

4 Branding in the E-commerce Environment ... 23

4.1 Online Branding ... 23

4.2 Online Brand Trust ... 26

4.3 Online Brand Experience ... 27

4.4 Online Brand Loyalty ... 29

4.5 Online Brand Communication ... 30

4.6 International Online Branding ... 32

5 Research Methodology ... 34

5.1 Research Approach ... 34

5.2 Case Companies ... 35

5.3 Data Collection and Analysis ... 35

5.4 Reliability ... 39

6 International Branding in E-commerce: Two Cases ... 40

6.1 Analysis of Case Company A ... 40

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6.1.4 International Branding ... 46

6.2 Analysis of Case Company B: Zalando SE ... 54

6.2.1 Background of the Company ... 54

6.2.2 Branding at Zalando ... 55

6.2.3 International Branding at Zalando ... 56

6.2.4 Content Analysis of Zalando’s International Brand Communication ... 60

6.2.5 Conclusion of Findings ... 65

7 Discussion and Conclusions ... 67

7.1 Summary of the Findings ... 67

7.2 Theoretical Contributions ... 74

7.3 Managerial Implications ... 75

7.4 Limitations and Future Research ... 75

8 References ... 77

9 Appendices ... 88

LIST OF FIGURES

Figure 1. Theoretical Framework

Figure 2. Elements of international branding in e-commerce

LIST OF TABLES

Table 1. Research Interviews – Case Company A

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1 Introduction

This thesis examines the ways international e-commerce companies should engage in international branding. The study’s ultimate goal is to enhance understanding of the role and purpose of international branding in a modern online business environment. The theoretical part of the study combines previous e-commerce and branding literature and draws a clear picture of the existing knowledge about branding in the e-commerce environment. The aim of the empirical part of the study is then to expand this knowledge into international context, which is achieved through a study of two case companies. This introductory chapter presents a general overview of the thesis. In order to explain the subject and its importance, the chapter introduces a background to the topic, presentation of the research questions, a short literature review, theoretical framework, definitions and delimitations and the study’s research methodology and overall structure.

1.1 Background

The explosive growth of the internet has inspired many novel ways of doing business and has enabled companies to do business around the world with a mere click of the mouse (Kumar, Eidem & Perdomo 2012). The spread of in-home internet connectivity and advanced search engine technology has led to a massive growth in online product research and acquisitions, which has then resulted in the evolution of the internet as a critical marketing and distribution channel for the sale of products and services (Pentina & Hasty 2009;; Kumar et al. 2012). As a result, online shopping and other forms of e-commerce have been emerging fast, and are now an important element of the business world (Pappas, Pateli, Giannakos & Chrissikopoulos 2014;;

Kumar et al. 2012). By the end of 2017, retail e-commerce sales will cover 10 percent of total retail sales worldwide, and the share is expected to surpass 16 percent in the next five years (eMarketer 2017)

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These technological advancements and new ways of doing business have allowed international business to become more and more common. Globalization has made the world smaller in a way that has allowed foreign business expansion to be easier than ever. Global expansion has thought to be especially easy for online businesses, since the internet makes national boundaries, borders and jurisdictions irrelevant for global e-commerce brands (Grant & Bakhru 2004).

However, globalized e-commerce is not as perfectly simple as it sounds. Local influences will always affect how business can be done internationally, forcing e-

commerce companies to adapt their business to meet the needs of local markets (Grant & Bakhru 2004). E-commerce companies are facing the complex challenge of having to adapt their brands to suit local needs and preferences in foreign markets, without having to compromise service quality standards and consistency of the brand’s image across different countries (Ibeh et al. 2005). The challenges in forming international branding strategies that are successfully adapted to local markets are difficult enough for traditional companies, but e-commerce companies also have to deal with the challenges related to the intangible nature of their business and its implications on consumer perceptions.

Both international branding and e-commerce have been widely studied as separate entities, but not much research can be found about how the principles of international branding can be applied in e-commerce companies. In the light of this background, it appears critical to increase the scientific and managerial understanding of international branding within the e-commerce field.

1.2 Research Objectives and Questions

The main objective of this research is to enhance the understanding about the role and importance of international branding in e-commerce companies that operate in multiple countries. The aim is to understand what are the different options for e-

commerce companies to engage in international branding, and out of those, what could be the most successful solutions in increasing global brand awareness and market share. This means studying the overall role of branding in the e-commerce

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environment, the specifics of international branding in e-commerce and also analyzing how much localization is necessary while branding an e-commerce site in multiple markets. In many ways, international branding comes down to communication, and therefore this study also aims to understand how e-commerce companies can communicate their brand across multiple different markets.

Derived from the aforementioned objectives, the main research question of the study is:

What are the best practices for international branding in e-commerce companies?

This study is exploratory in nature, and its research objective allows exploring the many different practices e-commerce companies have in engaging in international branding. The goal is then to recognize and analyze the patterns found from analysis and to understand which practices tend to lead to the most successful outcomes.

Success can be measured in many ways, but this study focuses on success through brand awareness and market share.

In order to answer the main research question, three supporting research questions are formed. These sub-questions are:

What is the role of branding in the e-commerce environment?

What are the characteristics, opportunities and difficulties of branding in an international e-commerce context?

What is the degree of localization and standardization needed in branding activities in international e-commerce companies?

1.3 Literature Review

Several studies have been conducted on the degree of standardization and adaptation in international companies’ online communication strategies across different countries and cultures (Okazaki & Rivas 2002;; Okazaki 2004;; Halliburton

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& Ziegfield 2009;; Nacar & Burnaz 2011). However, none of these studies address companies in the field of e-commerce, and overall focus is rather on web communications in general than on branding and brand communication.

In the studies of international branding, the focus has most often been on global brands with only a few exceptions. De Chernatony, Halliburton and Bernath (1995) studied international branding and formed a model for structuring the decision of whether to standardize or adapt international brands, which was based on the notion that companies should standardize the brand’s core essence, and adapt its local execution. Whitelock and Fastoso (2007) presented the first literature review of the international branding field, analysing the research on international branding and finally based on these patterns, provided a definition for international branding.

Wong and Merrilees (2007) have approached the role of branding in international marketing in a more comprehensive and strategic way, finally establishing the role of branding in international business.

Online branding has been widely studied (Rowley 2004;; Morgan & Veloutsou 2010;;

Christodoulides & de Chernatony 2004;; Simmons 2007), and these studies offer valuable insights that can be transferred into the research of international branding in the e-commerce context. Merrilees and Fry (2002) have studied corporate branding especially in the context of e-commerce and e-retailing, but they have not included the international aspect in the study. However, their research suggested two key elements driving successful e-brands: e-interactivity and e-trust (Merrilees

& Fry 2002). Chang and Chen (2008) have investigated how website quality and website brand affect customer purchase intention toward an online retailer, and their findings confirmed that the two factors do affect consumers’ trust and in turn, the purchase decision. Das (2016) has studied the antecedents and consequences of brand trust from the perspective of electronic retailers, and the outcome of this research confirmed that the principles of branding and brand management are applicable to e-tailing – meaning that the theory related to traditional branding is applicable to the purposes of this study as well.

International e-commerce itself has not been widely studied in the past. The internationalization process of traditional commerce companies has been

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inadequacy as regards to e-commerce companies (Daekwan 2003;; Wymbs 2000).

In the light of this research gap, Grochal-Brejdak and Szymura-Tyc (2013) have researched the prerequisites and barriers to internationalization of e-commerce companies. Grant and Bakhru (2004) have likewise studied the internationalization process within e-commerce companies, focusing especially on its difficulties and limitations.

Murphy and Scharl (2007) have started to integrate the topics of branding, e-

commerce and international business by investigating global versus local online branding. The research is focusing on whether companies prefer to promote global or local online identity. However, the study is not about e-commerce companies per se, but rather all companies that have some online presence. Ibeh, Luo and Dinnie (2005), on the other hand, have studied the e-branding strategies of internet companies, focusing on UK-based companies and covering extensively the e-

branding strategies of these companies in building and promoting their e-brands both in local and international markets. This study provides useful background in building the theory base on international branding in e-commerce. Singh, Kumar and Baack (2005) have as well researched the degree of adaptation of cultural content in the context of B2C e-commerce firms. Their research is well extending the understanding of the adaptation and standardization dilemma on the web, particularly related to B2C e-commerce firms, however it does not go further in detail into brand communication. Onojaefe, Bytheway and Erwin (2005) have also examined e-commerce companies’ Internet branding strategies and management actions and how those actions contribute to e-commerce success.

1.4 Theoretical Framework

The theoretical framework presented in the Figure 1 below illustrates the theoretical background of the study. The framework presents the study’s key topics and concepts and their relation to each other.

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Figure 1. Theoretical Framework

What can be seen from the framework is that the theory of international branding in e-commerce is a sum of three theoretical entities: branding, e-commerce, and international business. Some of the main branding concepts studied are brand’s equity, awareness, image, identity and values. Some of the core concepts from e-

commerce field are online branding, experience, trust, loyalty and communication.

The central element combining these two theory fields is the theory of international business, and in particular the choice of standardization and localization. The goal of the research is to find out which factors contribute to the success of international branding in e-commerce.

1.5 Key Definitions

This chapter presents the key concepts of the study. These concepts are defined here with basic terms as an introduction to the topics that are later discussed in detail in this study.

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E-commerce

E-commerce, namely, electronic commerce, is simply defined as conducting business electronically (Corboy 1999). More precisely, electronic commerce describes a set of procedures and technologies that automate the tasks of financial transactions with electronic means. The term is not limited to only buying and selling, but it also includes the company’s ongoing pre-sales and after-sales activities.

(Slavko 2016).

Brand

“A brand is a name, term, sign, symbol, design, or combination of these which is used to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors (Kotler et al. 2002).”

International Branding

International branding exists within international marketing field and it consists of managing the challenges and opportunities that companies face when their brands expand beyond national borders (Whitelock & Fastoso 2007). International branding describes the process of developing a company’s brand equity in a way that it appeals to foreign customers’ positive attitudes towards the brand (Cheng, Blankson, Wu & Chen 2005).

Online Branding

In simple terms, an online brand is a brand that has an online presence. Online branding consists of the use of online channels in supporting brands, which in essence are the sum of the characteristics of a product, service or organization as perceived and understood by a user, customer or other stakeholder. (Rowley 2009)

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1.6 Research Methodology and Data Collection Plan

This study is conducted as a qualitative research. The data for the theoretical part of the study is collected from various academic articles, books, conferences and online articles, with careful attention paid to the credibility of the sources. The aim of the theoretical part of the study is to understand the characteristics, opportunities and challenges of branding in the online environment and international branding in the context of e-commerce. In order to support the research questions, it is necessary to study the concepts of online branding, e-commerce and international branding.

The empirical part of the study is based on two case studies. The first case company is a European B2C fashion e-commerce pure player that operates in multiple countries in Europe. The case company is studied both through observations and through semi-conducted interviews with readily prepared interview questions that were sent to the interviewees beforehand. The interviewees from the case company are both marketing communications specialists and branding professionals. The goal of the interviews is to understand what are the case company’s goals regarding brand communication and brand building in different markets, and what are the actual action measures the company does in order to act and communicate according to those goals.

In order to get a wider picture of international branding within e-commerce businesses, the second case company is studied with a web content analysis as a research method. The case company is another European B2C fashion e-

commerce company – Zalando SE. The second case company is chosen due to the similarity to the first case company, which makes both cases easy to compare, but also due to the fact that Zalando is the leading fashion e-commerce business in Europe, making it a relevant comparison to the first case company. The second case company is observed and analyzed through secondary data sources – mainly through websites, annual reports, online articles and marketing materials such as newsletters, focusing on brand communication in different country-markets. The goal of the content analysis is to understand how a successful e-commerce

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company is communicating its brand in different markets and cultures: in what degree is the brand content localized or standardized across countries?

1.7 Delimitations

This study examines international branding in e-commerce companies. Traditional companies with physical presence often expand their business by opening an online store and thus also engage in electronic commerce, but this study is limited only to pure player e-commerce companies that operate exclusively online. Moreover, this research will focus only on the business-to-consumer (B2C) sector of e-commerce.

The empirical part of the study is based on two case studies, and both of those case companies are e-commerce companies that operate only in the European market.

Due to the more complex issues related to international business that crosses continents, this study is limited to European e-commerce companies only, although some of the findings can be applicable to companies operating in other markets as well. Moreover, both case companies are retailer brands, which limits the results of this study to be most applicable only to electronic retailers.

1.8 Structure of the study

This study is organized into two main parts: the theoretical and empirical part.

Chapters from two to four form the content of the theoretical part, and chapters five and six contribute to the empirical part of the study. The two parts are not detached – instead, the theoretical contributions are largely visible in the empirical analysis, and finally, in the study’s final chapter, the theory and empirical findings are brought together to answer the study’s research questions and form final conclusions.

The study’s first chapter has introduced the research topic, its background, objectives and related main concepts, as well as described the methodology used in the study. In the following chapter, the first main concept of the study – e-

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commerce – is explained and reviewed in detail. In the third chapter, branding is reviewed in the light of brand equity, brand awareness, brand communication and other branding concepts that are relevant to the study. The fourth chapter brings these two major concepts together by discussing the role of branding in the e-

commerce environment.

The fifth chapter presents the study’s research approach and data collection methods in detail. Moreover, the two case companies are presented and the study’s overall reliability is analyzed. In the sixth chapter, the empirical findings from the two case companies are analyzed and connected to theory. Finally, in the last chapter, the study’s research questions are answered and final conclusions are given. The study’s theoretical contributions and managerial implications are also presented, and the study ends with a discussion of the limitations of the study and possible future research suggestions.

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2 Introduction to E-commerce

In this chapter, the concept of e-commerce is clearly defined. The chapter also describes the history of e-commerce’s emergence. Finally, e-commerce is studied in an international context, where all the critical details related to international e-

commerce are discussed.

2.1 Definition and History of E-commerce

E-commerce, the ability to carry out commerce transactions electronically, has changed the way the business world works today (Kumar et al. 2012). Electronic commerce is often defined as buying and selling of goods and services through digital channels. By a definition, it therefore consists of two sides: the sell-side, which enables companies to sell its offering to consumers, and the buy-side, which allows companies to perform procurement activities. (Durfee & Chen 2002) This study will focus on the sell-side, as its context is B2C e-commerce.

During the 1990s, the development of information technologies and increasingly common access to the Internet resulted in the emerge of electronic commerce, which is among the key consequences of the Internet for today’s business world (Grochal-Brejdak & Szymura-Tyc 2013;; Onojaefe et al. 2005;; Shama 2005). E-

commerce was a radical and quickly spreading innovation that has since changed the way business in general and international business in particular is conducted today (Shama 2005). It has had an important role in the process of globalization and in the development of digital communication, by radically shifting the existing power relations on the global market (Slavko 2016).

The e-commerce evolution has had many consequences, one of them being the rise of internet retailing (Kumar et al. 2012). The intersection of e-commerce and retail is among the world’s quickest evolving business fields today (McCrea 2016). The landscape of internet retailing includes two main players: the pure e-retailers that only operate on the internet, and the clicks-and-mortars which are traditional

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retailers that in some extent include internet retailing into their business (Grewal, Gopalkrishnan & Levy 2004). Online retailers can be defined as retail companies that have at least 50 percent or more business online, while pure online retailers make all their sales online (Alemán, Brown & Griffiths 2014). Pure internet companies have grown with a speed that has far outpaced any other industry’s growth, causing great challenges for traditional brick-and-mortar retailers (Kumar et al. 2012;; Alemán et al. 2014). Some of the advantages of online retailers are that they are able to economically reach a very broad spectrum of customers and they have the technological capacity to accommodate multiple customer segments and serve customers with different needs and characteristics. Moreover, online retailers generally offer a more extensive product selection than brick-and-mortar stores.

(Kumar et al. 2012) This study exclusively focuses on pure online retailers.

The evolution of e-commerce has so far gone through three stages. In the first stage, websites included the same information for all customers, and those customers received material by clicking on links. In the following stage, e-commerce implied the use of the Internet as a channel to buy and sell products and services, using the internet channel to try to persuade consumers to buy. The third, still ongoing stage, is where e-commerce has become the ultimate manifestation of the whole marketing concept. This stage entails customizing and personalizing products and services to better suit individual needs. (Shama 2005) All this is now possible with the quick rise of data analytics tools, allowing companies to know basically everything about their customers and to use this data in order to communicate in the most efficient ways in all consumer touch points. Today, the game changing retail innovations are often offered by online retailers, such as Amazon that now promises one-hour delivery in some of its specific metropolitan market areas (McCrea 2016).

Internet retailing offers customers multiple benefits over traditional retailers, including: convenience of a store that is always open, greater access to price comparison information, fewer hassles, wider product selection and a different and unique shopping experience. Customers have the access and possibility to order goods anytime and anywhere they want, without wasting time traveling or waiting in line in physical stores. They can also access a lot more information about the company and its competitors, read product reviews and compare prices. (Kotler

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2000;; Janal 1998;; Shama 2005;; Grewal et al. 2004) However, some of the drawbacks of e-commerce for consumers are a lack of the ability to try a product, lack of interpersonal trust, lack of instant gratification, shipping and handling costs, impersonal customer service, fears over security and privacy, logistics trouble, and lack of an in-store shopping experience (Grewal et al. 2004). Customers today expect retailers to offer faster and faster service level, greater transparency and wider product selection (McCrea 2016).

Most e-retailers do not have physical locations dedicated to doing business with their customers, which means they resort to other means of delivery and service. A significant amount of them distribute their products only electronically. This means that also the marketing strategies of e-commerce enterprises ought to be unique and distinctive from traditional companies. (Shama 2005) Nowadays there are two kinds of distinct e-commerce businesses – those that can deliver their product electronically, and those that still deliver physical products (Grant & Bakhru 2004).

Today it can be concluded that e-commerce became not only a supplementary or alternative form of commerce, but it also influenced the rise of new types of businesses that use innovative e-business models in international trade (Grochal-

Brejdak & Szymura-Tyc 2013). New technologies have allowed such companies to have a rather immediate access to the global market with reduced costs and diversified offers and the possibility to be in touch with customers anytime (Chung-

Shing, 2001).

2.2 International E-commerce

By the year 2020, global e-commerce is expected to generate up to $4 trillion in revenues (eMarketer 2016). This ongoing industry growth will continue to create extensive market expansion opportunities abroad and will help to generate profits and early-mover advantages for those companies that can successfully internationalize their e-commerce activities (Singh et al. 2005;; Ibeh et al. 2005). In the light of harsh competition, growth-seeking e-commerce companies are

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increasingly enforced to actively explore overseas market opportunities and rapidly internationalize their e-brands (Ibeh et al. 2005).

E-commerce has been argued to represent the ultimate manifestation of the globalization of business. The Internet is oblivious to national boundaries, borders and jurisdictions, rendering geography irrelevant and representing immense possibilities for global brands. (Grant & Bakhru 2004) Rapid technological development and interconnected global communities have lead to an increasing homogenization of consumer preferences, which might justify the standardization of online advertising and promotional campaigns (Okazaki & Rivas 2002). However, two issues tend to complicate the simple picture of globalized e-commerce. First, the Internet, as its particular possibilities, is only one element of e-commerce.

Second, local influences are always affecting the way business is done internationally, forcing firms to adapt to the particular requirements of national markets. (Grant & Bakhru 2004)

The start and advancement of the internationalization process of e-commerce companies is influenced by a range of perquisites that can enable and encourage companies to start operations on foreign markets. There are two types of prerequisites that especially promote the initiation of the internationalization process in e-businesses: technological and economic prerequisites. Technological advancements have made it possible to overcome geographic barriers and reduced the psychic distance arising from language and culture differences. (Grochal-

Brejdak & Szymura-Tyc 2013)

E-commerce companies have a huge diversity of goods and services that they sell across the Internet, which means that there is also a massive variety in the need for national or local differentiation. (Grant & Bakhru 2004) To be able to effectively target and reach consumers around the world on the web, companies need to determine what degree of adaptation is necessary (Singh et al. 2005). What is remarkable is that the Internet reflects a global technology, making it possible for e-

retailers to customize their marketing offers to meet the specific needs of customers in different countries (Shama 2005).

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Language is the most basic form of national differentiation in e-commerce, and also one of the most important, since all electronic transactions requite verbal communication (Grant & Bakhru 2004). According to the empirical research of Shama (2005), e-commerce websites often begin their international operations using only English language, and as their presence in the international market grows, some of them adapt the language according to the markets that they serve.

Adapting to different language naturally requires the creation of separate webpages for different languages. Usually also the sold goods and services need to be somewhat adapted to meet differences in customer preferences. (Grant & Bakhru 2004) Through an empirical research Singh et al. (2005) found out that e-commerce companies do adapt their international web sites to meet the cultural values of the target country, but that the adaptation is not very extensive.

For businesses selling physical products, the Internet with its e-commerce activities only represent a part of the value chain. The Internet provides a channel for marketing, product information, ordering, paying and customer support services, but distribution is still taking place through conventional channels. These distribution channels are naturally dependent upon local logistical resources. (Grant & Bakhru 2004)

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3 Branding

In this chapter, branding and its role and objectives within marketing are defined in general terms, focusing on traditional branding. The most important branding concepts are presented in the chapter. These are: brand equity, brand awareness, brand image, brand identity and brand values. Brand communication and international branding are also discussed in detail. The purpose of this chapter is to give an overview of the general branding principles, so that they can later be applied in studying branding in the online environment.

3.1 Role and Objectives

Brands are essentially intangible and among the most valuable assets a firm can have (Zehir, Sahin, Kitapçı & Özúahinb 2011). Brands are built on the combination of the company or its product or service, the accompanying marketing activity, and the contribution of customers and other parties. A brand therefore reflects the whole experience that customers have with the company or its product or service. (Keller

& Lehmann 2006) Brands are strategically positioned to provide points of differentiation between competitive offerings, and that is why they can be very critical to the success of companies (Wood 2000).

When defining brands, it is important to understand the difference between product brands and retailer brands, since their branding principles can vary (Ailawadi &

Keller 2004). This study focuses on retailer brands, since the research context is to understand how electronic retailers can best brand their corporate brands internationally. Retailer brands are multi-sensory compared to product brands, relying on rich consumer experiences to impact their brand equity and creating their brand images by attaching value from service, product offering, pricing and credit policy (Ailawadi & Keller 2004).

A few of the advantages of brands for customers are that they can simplify choice, guarantee a certain quality level, reduce risk and increase trust (Keller & Lehmann

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2006). In order to have this effect on customers and create a successful brand, companies need to understand their customers, communicate with them and maintain a continuous interactive relationship with them (Simmons 2007).

The success of strong brands can be seen through a growing market share, increased customer loyalty, higher profit margins and a strategic protection against competitors (Steenkamp 2013). Communication and consumer behavior theories suggest that a strong brand can increase marketing communication effectiveness, making consumers more keen and willing to attend to a brand’s communications, process them more favorably, have a better ability to later recall the communications or their affective reactions and also independently search information about the brand (Keller 2009;; Simmons 2007). Brands enable companies to establish a unique identity and to attract an increased amount of repeat business (Ibeh et al. 2005).

3.2 Brand Equity

The term brand equity emerged from an attempt to define the relationship between customers and brands (Wood 2000). There are several different ways to define brand equity, but one factor is at the heart of each of those definitions: the consumer.

Consumers’ purchase decisions define which brands have more equity and value than others. (Hoeffler & Keller 2003) A company’s brand equity is displayed in how consumers respond more favorably to its marketing actions than they do to competitors (Keller 2003). Therefore, a strong brand equity can ensure a long-term profitability and sustainability of a company (Das 2016).

In B2C industries, the image and equity of a retailer brand also depends on the quality and quantity of manufacturer brands that they sell. Manufacturer brands are a way to generate consumer interest, patronage and loyalty in the store, typically causing more consumer pull than the retailer’s own brands do. Retailers generally are what they sell, and manufacturer brands help retailers to create an attractive brand image and establish a positioning for the store. (Ailawadi & Keller 2004)

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Creating brand awareness, brand image and perceived brand quality with favorable and unique associations are essential parts of building equity of a brand (Das 2016).

These associations are formed through a continuous relationship between a company and its customers. With the rise of numerous social and digital media, the number of touch points that brands can use to connect with consumers has grown significantly (Swaminathan 2016).

3.3 Brand Awareness and Brand Image

In order to create brand equity, companies first need to build brand knowledge in the minds of consumers. Brand knowledge can be seen to be composed of two major dimensions: brand awareness and brand image. (Keller 1993) Brand awareness signifies consumers’ ability to recall or recognize a certain brand. The more there is awareness, the more there is familiarity with the brand. (Das 2016) Brand image on the other hand is composed of consumers’ various associations with the brand, and it is the basis of brand equity (Chang & Chen 2008;; Ailawadi &

Keller 2004).

Brand awareness describes the strength of the brand trace in memory – it reflects how well consumers are able to remember a brand under varying conditions (Keller 2009). It is an important factor in differentiating the company and its offerings, facilitating emotional connections with customers and enhancing customer loyalty (Ibeh et al. 2005). Brand awareness helps consumers make decisions, and a strong awareness is positively linked to a consumer preference (Huang & Sarigöllü 2012).

Without brand awareness, there cannot be brand image in consumers’ minds.

Brand image is the recreation of the brand in the minds of consumers, and it does not necessarily reflect the company’s intended brand identity (Mooij 2010). Brand image has three contributing sub-images: that of the company, that of the product or service and that of the users (Biel 1992). This image is built of consumer associations that can come from various sources, such as consumer experience, marketing communications and word of mouth (Romaniuk and Sharp, 2003).

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In the end, much of the brand image-building is co-created with consumers. Today, social media allows consumers to exchange publicly their thoughts and ideas about brands, shaping the brands’ meanings without much control from the companies to maintain the intended brand image (Swaminathan 2016). Often the brand image that consumers develop is in conflict with the image the company itself wishes to convey (Christodoulides 2009).

3.4 Brand Identity and Brand Values

Brand identity and brand values are internal brand characteristics that the company itself inserts into the brand (Mooij 2010). Brand identity describes the unique set of brand associations that a company plans to create or maintain (Keller 2003). Brand identity represents how firms wish to be perceived, whereas brand image described in the previous chapter refers to how the brand actually is perceived (Sääksjärvi &

Samiee 2011). According to a conceptual model of de Chernatony (1999), brand identity is composed of brand personality, brand vision, positioning, culture and relationships. Company culture is an important part of brand identity, and it influences the brand’s values. (de Chernatony 1999) Brand identity is generally tailored to meet the needs and wants of a target market by using the marketing mix tools (Wood 2000).

International companies generally aim to inject consistent values across countries, but it is also possible to select different brand values for different cultures as long as those values are not contradictory between each other. It is also possible for companies to develop an international brand identity with local variations making it culturally relevant locally. After all, regular consumers do not likely notice if a brand communicates different values in different countries. (Mooij 2010) Some, however, think that with the great frequency of international travel and the growth of international media, consumers expect brands to have the same values everywhere (de Chernatory 1995).

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3.5 Brand Communication

As described before, in order to build a strong brand, the company should make sure that their customers have the right knowledge structures in their minds in order for them to respond more favorably to the company’s marketing actions and programs. In shaping that knowledge, communications play an important role.

(Keller 2009) And in the end, branding is mainly a communication function (Koumpis 2014). It is not enough just to create a brand around an effective product or service, but instead it needs to be communicated and positioned for the relevant audience to ever become successful (Simmons 2007).

Through marketing communications companies attempt to inform, persuade and remind consumers about their brands. Marketing communications serve as the voice of the company and the brand, and represent means by which the company can establish a relationship between the brand and its customers. This way consumers get to learn about the company and what the brand stands for. (Keller 2009) The objective of brand communication is to expose the brand to a wider audience, maximizing awareness and recall and satisfying customers to an optimal level (Zehir et al. 2011).

Exposure to brand communication results in improved consumer response, which can be measured through brand awareness variables such as recall and recognition, favourability, strength and uniqueness of the brand in the minds of consumers. Brand communication is also studied to have positive effects on brand trust by creating a trust-based relationship between the brand and the customer.

Brand trust then again has positive effects on brand loyalty. (Zehir et al. 2011) By establishing brand recognition and brand image, marketing communications can contribute to brand equity, drive sales and affect shareholder value (Luo & Donthu 2006).

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3.6 International Branding

Branding has an enormously important role in establishing a company’s visibility and position in international markets and integrating the firm’s activities worldwide (Wong & Merrilees 2007;; Douglas, Craig & Nijssen 2001). In today’s rapid globalization of markets, brands are increasingly synonymous to global brands (Steenkamp 2013). There are many ways to define a global brand, but the recent literature acknowledges the fact that international branding applies to the multitude of decisions involved in the management of a brand in an international level (Whitelock & Fastoso 2007). Steenkamp (2013) describes global brand as a “brand that is known with the same name and logo, and has awareness, availability and acceptance in multiple regions of the world, derives at least five percent of its sales from foreign markets and is managed in an internationally coordinated manner”.

International branding is a part of international marketing, and by its core essence, it is about managing the challenges that companies face when their brands cross national borders, whether it be the challenges related to the brand name, brand visual, brand personality or other essential part of the brand that makes it special and unique and needs to be transferred to another market. Moreover, international branding focuses on managing the specific challenges that derive from internationality, such as the effects of local environments and their culture.

(Whitelock & Fastoso 2007)

Having a globally similar brand positioning and image is not a realistic goal for international branding. Brand image is created in the minds of consumers, which means that a company can have a very different image in its home market and in other countries. (Steenkamp 2013) Therefore, many global brands that seek for a consistent brand identity and consistent brand image eventually end up with different brand images across cultures. On the contrary, the strongest global brands tend to have different, culturally relevant brand characteristics in different cultures.

These different, culturally relevant images across different countries are a likely reflection of success. (Mooij 2010)

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De Chernatony et al. (1995) argue that the international brand building process should be considered in two consecutive steps. The first step involves a decision about the brand’s core essence: all that the brand stands for in terms of its added value positioning. The second step is concerned with planning and implementing the international execution of the brand’s benefits, meaning issues such as product or service contents, promotions and creative policies. When companies start to wonder which elements of an international brand they should standardize or adapt, they should consider the brand’s two elements: the core concept and its execution.

What should remain unchanged is the brand’s core essence, but its execution should be adapted according to the specific foreign market needs. (de Chernatony 1995)

According to the study of Wong & Merrilees (2007), firms investing in international marketing should especially consider their approach to brand repositioning and brand orientation, if they seek higher international performance. Brand repositioning means modifying the domestic brand to suit an international market, and refers not only to adapting the marketing mix but to adapting the whole representation of the brand. (Wong & Merrilees 2007) However, according to de Chernatony (1995), successful brands seem to be associated with a management philosophy that seeks to identify similarities in consumer behavior between countries, rather than looking for differences.

Developing international brands offers opportunities for benefiting from economies of scale (de Chernatony 1995). There is a link between branding and improved international performance, and brand performance is also significantly influencing the overall financial performance (Wong & Merrilees 2007).

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4 Branding in the E-commerce Environment

In this chapter, branding is studied in the e-commerce context. The concepts of online branding, online brand trust, online brand experience and online brand loyalty are explained in detail. International online branding and communication are also studied. The purpose of this chapter is to further deepen the branding theory that was started in the previous chapter, and to link it to the theory of online businesses.

4.1 Online Branding

The landscape of global branding has changed dramatically through the internet and related technologies. Online brands have emerged as a result of advancements in information and communication technologies. (Morgan-Thomas & Veloutsou 2010) According to Halliburton and Ziegfeld (2009), “online branding is the electronically communicated branding strategy on the Internet”. In many ways, online brand is very similar to an offline brand: it incorporates a name or a symbol and a set of features that are associated with that particular name (Christodoulides

& de Chernatony 2004). A key distinguisher of the two types of brands is the context in which the consumer experiences the brand (Christodoulides 2009;; Hoffman &

Novak 1996). This context brings out other differences as well, such as the speed of branding execution, interactivity, union of marketing and sales in the same channel, the importance of trust and relationships and customer loyalty challenges (Ibeh et al. 2005). As this study is focusing on e-commerce brands, it can be argued that in general, the name of the e-retailer’s website is also its brand name (Chang

& Chen 2008).

In the recent branding literature, there are two dominant opinions about the importance of brands in the online environment. According to the first view, the internet and its information overload, coupled with intelligent agents and search engines enabling consumers to locate and compare information and products they want means that users no longer need to rely on brands, and thus the importance of branding and brand appeal among consumers is significantly decreasing (Rowley

International branding in e-commerce

1 Introduction

2 Introduction to E-­commerce

3 Branding

4 Branding in the E-­commerce Environment

2 Introduction to E-commerce

4 Branding in the E-commerce Environment