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Podcast: How Zappos made millions on Culture and Customer Service

We live in a time where the good guys can win — Tony Hsieh, CEO, Zappos (CLICK IMAGE ABOVE FOR HIS PODCAST)

I enjoyed this podcast discussing the extraordinarily successful online retailer Zappos. Why care about Zappos? Amazon bought them for a very cool $880 million in late 2009. Zappos was bought due to its success with CRM and good old fashioned customer service. Also note their success in a highly commoditised clothing retail industry segment. Not exactly a place that you would think first about buying shares in a company for future growth.

The Zappos success story is a confluence of entrepreneurship, clear brand values and autonomy given to line staff turning personal interactions over the phone, email or chat into real time acquisition and retention strategy. All three elements work together collectively or the system fails.

The autonomy, in particular, resonates with MyCMO’s portfolio management approach to marketing and customer service. Give employees the tools and the trust to make decisions, be accountable, and come up with creative ways to drive revenue. That is where Zappos separates itself from other conservative and risk averse business models.

Here are a few snippets I gleaned from a second podcast from Zappos employees. My notes below…

Home made CRM tool

Zappos developed their own home made CRM tool. It was further developed by user feedback from employees to make their lives easier to serve customers (not a purchase decision dictated from the ivory towers by someone not doing the work). Methods used include collected informal feedback from internal email, weekly dev team meetings to assess new ideas and trends. Keeping an ongoing communication pipeline maintains currency.

Customer Call Center

No quotas or call time limits. Want people to put own personalities to work. Good service = allowing natural speech.

Extensive hiring process picking right people. Once in the business, we show them trust, they don’t abuse time on call. The CEO prefers not hiring MBAs, “People with MBAs come from rigid academic perspectives and there is a lack of creativity we find with them. Many solutions are counter intuitive

Reason for encouraging customers to call when other businesses want to avoid calls? Phone is a branding device and relationship builder. Personal and emotional connections made via phone, email or chat…75% of business is repeat business from word of mouth or returning customers

Zappos encourages uninhibited chat. This goes against AHT call center best practice metrics. One call took 4 hours. They look at these metrics but do not obsess. One person with an overly long customer service call was recently promoted.

Management and Work Culture

Affects of economy on sentiment and on buyer mood. Zappos had a recent layoff. Accept this is part of business. Culture does not change despite layoffs. Zappos grew in 2009 vs. other retailers.

How does Zappos management handle the business? The CEO is passionate about culture and service. Shy person will not stick out in meeting. Maintains his brand values. Open to approach by staff. Has the trust of his staff.

Zappos CEO believes companies do not do enough to make employees happier with culture. One of the key indicators for bad culture, according to Tony Hsieh, is if you start thinking that you would not want anything to do with the people you work with outside of work. Yep, makes sense to me.

What are competitors doing wrong? We focus on ourselves primarily, but maintaining values and allowing autonomy of line staff to resolve customer needs in a timely manner.

In 2005, asked staff to vet 36 values and agree on a top 10. The whole company had a say on what core values should be.

Zappos (Brand) Values

Zappos attributes its customer engagement through its Zappos Core values that include:

  • Passion and determination
  • Embracing and driving change
  • Building a positive team and family spirit
  • Doing more with less
  • Pursuing growth and learning
  • Fun/weirdness
  • Adventure and open-mindedness
  • Being humble

…and if you want to read more on Tony Hsieh and the culture of happiness leading to profits here is another good article to checkout.

Enjoy,

Rick Speciale

MyCMO – Director

11 Comments


  1. Marc Lehmann
    Sep 12, 2010

    great summary rick, they’ll be writing text books about tony hsieh. for me it’s the possibility zappos has identified that you can still make it big in the most commoditised of markets. i.e. success isn’t about what you sell.


  2. Tony Mittelmark
    Sep 15, 2010

    For me the key point is autonomy. Most businesses I have worked for give their own staff very little autonomy to make decisions and as such decisions are diluted and destroyed by committees. This process also very much elongates the time it should take to make a commonsense or business critical decision. Especially in online staff autonomy is very important to keep the business moving at internet speed. Many media companies do not have the requisite IP at the senior level to support this kind of decision making and they compound the problem by micro managing decision making – if you do not trust staff then why make them go through 5 interviews to get a position?

    This micro management or analysis paralysis also affects confidence in decision making and usually yields a much less effective work force – instead of being lean and nimble much of the middle of companies becomes frozen


  3. Andrew Banks
    Sep 15, 2010

    I like this: “Zappos encourages uninhibited chat. This goes against AHT call center best practice metrics. One call took 4 hours. They look at these metrics but do not obsess. One person with an overly long customer service call was recently promoted.”

    Office culture and the opportunity to engage with both colleagues and customers instills a great work ethic in any place. Good piece, Rick!


  4. Abramo Ierardo
    Sep 16, 2010

    My favourite comments from the podcast were:

    “Focus on what is driving your business” and “People are bad at predicting what will make them happy”. These resonate well with me as I have always tried, in vain, to determine the key drivers of our business. I suspect that it is ME but the ability to clone what I do so that we can build our business is not easy. Also the experience that we give our customers is at times difficult to manage. Perhaps it is the understanding of these challenges that drives your energy towards a solution. You will never reach the happy state of nirvana, but it is the challenge of trying to get there that is the real story.

    There is an inherent power that comes through focus. Zappos have focused on the customer experience to a level that negates all the problems of not having a ‘bricks n mortar’ location. They have seen that the driving force of their business can only be the experience that the customer receives and then talks about with their peers. Most organisations talk of the value of ‘word of mouth’ but do little to generate positive customer exchange. I have long held the belief that CRM strategies have been “Cost Reduction Mechanics” rather than any real focus on the customer experience. Many companies have come to see their folly and and are now empowering their employees to get engaged with their customers and drive business through a better experience for their customers. Building a relationship with a customer requires focus on this experience and an understanding that straight line metrics to a profit result can not be achieved in the short term.


  5. Rick
    Sep 16, 2010

    Thanks for the comments from everyone!
    The success of Zappos in a commoditised product arena is really the big story, not just how they demonstrated a qualitative humanistic approach to connecting brand to revenue. Culture is a real beast to deal with so I hope to find more of these pieces that provide good case studies that will help people in their respective businesses influence change in their organisations.


  6. Mike SanClemente
    Sep 16, 2010

    Company culture drives success. When will other firms start to look at Zappos, or Southwest Airlines, etc. and realize the first customer you should please is your own employee? My company has taken some good steps in this direction: we are Mars Petcare, our other subsidiaries make M&Ms, Snickers, etc. and we not only get free candy every day, but can also bring our dogs to work. Talk about stress reducers….


  7. Walter Adamson
    Sep 20, 2010

    Nice post. I’ve read his book but don’t recall this great observation, which you picked up: “key indicators for bad culture, according to Tony Hsieh, is if you start thinking that you would not want anything to do with the people you work with outside of work” that makes a lot of sense to me!!! Experience!!

    I was also pleased to see that “creativity” wasn’t on their Values list. Driving change yes, but not the BS of “creativity” that we see being flogged by the “innovation industry” here and sucked up by the large corps particularly those who violate most just about every one of Zappos’ values i.e. the banks.

    Walter @g2m http://xeesm.com/walter


  8. Alan Jones
    Oct 11, 2010

    Personally I don’t think apparel is a commoditised sector, especially online, and would contend anyone who says it is doesn’t understand how most consumers shop for apparel.

    Where I *do* agree is in the value of building your own systems. Start with a spreadsheet while customer volumes allow and you’ll learn more about what you need than six months struggling with Salesforce.com.

  9. […] good example is Zappos which is known to encourage its staff to make decisions ‘beneficial to the company’s overall health and growth’. Zappos even developed their own CRM system based on customer […]

  10. […] good example is Zappos which is known to encourage its staff to make decisions ‘beneficial to the company’s overall health and growth’. Zappos even developed their own CRM system based on customer […]


  11. admin
    Sep 10, 2013

    Thanks for the link. Zappos has a great culture.

    Rick

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