Will the company continue to put customers first?
CASE 14
Zappos Does It with Humor
Zappos.com customers are known for their fierce loyalty, and it’s easy to see why. CEO Tony Hsieh has built a billion-dollar business providing happiness to his customers, employees, and even fellow businesspeople seeking to learn more about the company’s unique blend of humor, compassion, and high-quality customer service. How does Zappos do it?
Unusual Leader Faces Unusual Circumstances
No stranger to high-pressure conversations, Zappos CEO Tony Hsieh recently found himself discussing a very familiar topic under unusual circumstances.
Hsieh was the featured guest on The Colbert Report, where host Stephen Colbert grilled Hsieh to learn the secrets of Zappos’s phenomenal success and rabid customer loyalty. Hsieh simply replied that it’s Zappos’s goal to deliver WOW in every shoe or clothing box. When Colbert pressed him to explain, Hsieh elaborated that, among other tactics, loyal Zappos customers are sometimes treated to a complementary upgrade to overnight shipping. “A lot of people order as late as midnight Eastern, and the shoes show up on their doorstep eight hours later,” he explained.
Seemingly speechless, Colbert peered over his glasses and only said, “Wow.”1
From Start-up to One of Fortune’s Best Places to Work
The brainchild of Hsieh and founder Nick Swinmurn, Zappos.com launched in 1999, selling only shoes complemented with the unique premise to deliver happiness with every customer interaction. By 2001, gross sales had reached $8.6 million. That number nearly quadrupled to $32 million in 2002. A few years later, Zappos caught the eye of Amazon’s Jeff Bezos. He liked what he saw and spent $928 million to buy the firm for Amazon’s business stable in 2009.
Today, the company is one of Fortune’s 15 Best Companies to Work For and continues to earn more than $1 billion annually. Zappos fulfillment centers currently stock more than three million shoes, handbags, clothing items, and accessories from over 1,130 brands.2
Zappos Grows, Amazon Buys In
Zappos sees a lot of potential in continuing to expand beyond shoes. While footwear still constituted 80 percent to 85 percent of Zappos’s business last year, Hsieh wants Zappos’s clothing lineup to be another billion-dollar business, and he’s working hard to attain that goal within the next three years. “Hopefully, ten years from now, people won’t even realize that we started selling shoes,” he said.3
Under Amazon, Zappos has maintained its focus on customer service. For Hsieh, the Zappos brand is less about a particular type of product and more about providing good customer service. He remarked that he could see the Zappos name on things as large as airlines or hotels, as long as the service was up to his exacting standards. “We could be in any industry that we can differentiate ourselves through better customer service and better customer experience,” he said.4 This customer-first strategy is working out in a big way for the company: At last count, over 75 percent of its customers are repeat customers.5
Customers Get Special Handling
The blog search engine Land calls Zappos “the poster child for how to connect with customers online.” It uses Facebook and Twitter to connect with their customers, distributors, employees, and other businesses.
The company’s relentless pursuit of the ultimate customer experience is the stuff of legend. Zappos offers extremely fast shipping at no cost and will cover the return shipping if you are dissatisfied for any reason at any time.
Hsieh, who was unsurprisingly named “The Smartest Dude in Town” by business magazine Vegas Inc., feels employees have to be free to be themselves. That means no-call times or scripts for customer service representatives, regular costume parties, and parades and decorations in each department. Customer service reps are given a lot of leeway to make sure every customer is an enthusiastic customer.
A Culture to Thrive In
Zappos’s past success comes down to the company’s culture and the unusual amount of openness Hsieh encourages employees, vendors, and other businesses. “If we get the culture right,” he says, “most of the other stuff, like the brand and the customer service will just happen. With most companies, as they grow, the culture goes downhill. We want the culture to grow stronger and stronger as we grow.”
Like other CEOs in it for the long haul, Hsieh is forecasting Zappos’s success and the brand experience he intends to deliver years into the future. “Many companies think only one quarter ahead, or one year ahead,” he said. “We like to think about what we want our brand and culture to be like ten or even twenty years down the line. In general, with a ten-to twenty-year timeline versus a three-to five-year timeline, relationships are much more important. What you do after taking someone’s money, such as customer service, matters much more than what you do to get their money, such as marketing.”6
A Culture to Share
In fact, Hsieh believes so strongly in the organizational culture that encompasses Zappos’s desire to satisfy that he’s on a mission to share it with anyone who will listen via tours of their headquarters, leadership retreats, and even two new books.
It comes together in a program called Zappos Insights. The core experience is a tour of Zappos’s Las Vegas headquarters. “Company Evangelists” lead groups of twenty around the cubicles, which often overflow with kitschy action figures and brightly colored balloons, giving participants a glimpse of a workplace that prizes individuality and fun as much as satisfied customers. Staffers blow horns and ring cowbells to greet participants in the sixteen weekly tours, and each department tries to offer a more outlandish welcome than the last. “The original idea was to add a little fun,” Hsieh says, but it grew into a friendly competition “as the next aisle said, ‘We can do it better.’”7
The tours are free, but many visitors actually come for paid one- and two-day seminars that immerse participants in the Zappos culture. Want to learn how to recruit employees who are committed to your company culture? You’ll get face time with Zappos HR staff. Yearn to learn what keeps customers coming back? Ask their Customer Loyalty Team. Hungry for a home-cooked meal? The capstone of the two-day boot camp is dinner at Tony Hsieh’s house, with ample time to talk customer service with the CEO himself. Seminars range from $497 to $3,997.
“There are management consulting firms that charge really high rates,” says Hsieh. “We wanted to come up with something that’s accessible to almost any business.”8
Those who want to learn Zappos’s secrets without venturing to Las Vegas have a few options. For $39 a month, you can subscribe to a members-only community that grants access to video interviews and chats with Zappos management. Ask nicely, and the company will send you a free copy of its Zappos Family Culture Book, an annual compilation of every employee’s ideas about Zappos’s mission and core values. Hsieh has his own tome, too—Delivering Happiness.
They may be giving away hard-earned knowledge, but Zappos definitely isn’t losing money on the Insights project—profits from the seminars pay for the entire program, and Hsieh hopes it will someday represent 10 percent of Zappos’s operating profit.
“There’s a huge open market,” says Robert Richman, co-leader of Zappos Insights. “We were afraid that we’ve been talking about this for free for so long. ‘Are people going to be upset we are charging for it?’ Instead, the reaction is opposite.”9 Now that Zappos is part of Amazon, will it still prosper and grow? Will the company continue to put customers first?
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