Amazon and Zappos: A Savvy Deal

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CEO of Internet superstar A week or so ago, Hsieh passed the one-million-follower mark on Twitter — putting him in the company of Martha Stewart, Miley Cyrus, and 50 Cent. And just yesterday, accounted it would spend more than $800 million worth of […]</p> ">
CEO of Internet superstar A week or so ago, Hsieh passed the one-million-follower mark on Twitter — putting him in the company of Martha Stewart, Miley Cyrus, and 50 Cent. And just yesterday, accounted it would spend more than $800 million worth of […]</p> ">

It’s been one heck of a July for Tony Hsieh, CEO of Internet superstar A week or so ago, Hsieh passed the one-million-follower mark on Twitter — putting him in the company of Martha Stewart, Miley Cyrus, and 50 Cent. And just yesterday, accounted it would spend more than $800 million worth of its stock to buy Zappos — even as it promised to keep its hands off the company, so Hsieh and his colleagues could keep doing things their own way. So good for Tony! Congratulations.

Good for Jeff Bezos, too. Not only is he adding a huge new category of products — shoes, handbags, and other fashion items — to Amazon’s ever-growing collection of offerings, but he is adding a different sensibility about customer service. Sure, Amazon is highly regarded for the way it serves customers. But the power of its model is largely driven by muscle: huge warehouses, smart software, reliable delivery. Zappos does all that, but what makes it special is the psychological, even emotional, connections it has with its customers — connections that go beyond offering great value to sharing deeply held values.

I’ve posted about Zappos before, with an emphasis on the company’s one-of-a-kind culture and its now-famous “Offer” that pays new recruits to quit if they don’t share the zeal of their fellow Zapponians. But the real power of the Zappos business model — and one reason Amazon paid so dearly to bring it into the fold — is the fact that many of Zappos’s customers are as zealous about the company as its employees are.

Everything about how Zappos does business is meant to reassure, surprise, amuse, and otherwise engage customers — even as it attends to the basics of price, selection, and shipping.

For example, the company’s celebrated free-delivery policy guarantees that orders will arrive within four or five business days — a perfectly reasonable timetable, other than in a severe fashion emergency. But since its Louisville warehouse sits just down the road from the UPS sorting hub, shoes can leave as late as 1:00 am and arrive the next morning. So for repeat customers, Zappos almost always provides free next-day delivery as a “surprise upgrade” — an unexpected benefit that leaves a lasting impression.

“Some customers order as late as midnight and get free delivery by eight o-clock the next morning,” Hsieh says. “People ask me if it is expensive to do that. It is very expensive. But we are willing to invest to create a ‘wow’ experience that generates customer loyalty. Our whole philosophy is to take most of the money we would spend on marketing, put it into the customer experience, and let word of mouth be our true form of marketing. Repeat customers buy more and become our best advocates.”

Moreover, unlike virtually any other Internet retailer on the planet (including Amazon), Zappos encourages its customers to communicate by telephone. It publishes its 1-800 number at the top of every page of the website, populates its call center with highly trained employees (no outsourcing), imposes no scripts or time limits on its agents, and injects a large dose of personality into the process. According to Hsieh, cutting-edge Zappos handles five thousand old-fashioned telephone calls per day. Almost every one of its Internet-savvy customers makes a call at some point during their history with the company. Why? Because Zappos makes it so easy to pick up the phone, reach a human being, and ask for help.

“We want to talk to our customers,” the CEO argues. “We encourage them to call. As unsexy and low-tech as it sounds, the telephone is really powerful. Most companies look at the telephone as an expense. We look at it as one of the best branding devices out there. You have your customer’s undivided attention. If you get the interaction right, if you focus not on ‘closing the sale’ but on doing exactly what’s best for the customer, it’s something they’ll remember and tell their friends and family about.”

The Zappos blend of unconventional strategy, exceptional service, and one-of-a-kind culture has created a deeply felt connection with customers who are eager to share their sense of enthusiasm. One case in point among many: A much-buzzed-about testimonial called “I Heart Zappos” from a blogger named Zaz Lamarr. A few weeks after her mother died, Lamarr posted an entry about an unexpected encounter with Zappos. Her mother had lost lots of weight during a long illness, and her old shoes were all too big. So Lamarr, in an effort to lift her mom’s spirits, ordered seven pairs of shoes online. Only two pairs fit, but Lamarr, who was busy attending to her sick mother, never got around to returning the others.

After her mother died, Lamarr received an email from Zappos about the unreturned shoes. She explained her situation, and a Zappos employee offered to send a UPS driver to her house so she wouldn’t have to bother with boxes, labels, and the rest. It was a thoughtful gesture. But then that same employee made an even more thoughtful gesture — here’s how Lamarr described it:

“When I came home from town, a florist delivery man was just leaving. It was a beautiful arrangement in a basket with white lilies and roses and carnations. Big and lush and fragrant. I opened the card, and it was from Zappos. I burst into tears. I’m a sucker for kindness, and if that isn’t one of the nicest things I’ve ever had happen to me, I don’t know what is. So… IF YOU BUY SHOES ONLINE, GET THEM FROM ZAPPOS. With hearts like theirs, you know they’re good to do business with.”

No org chart or policy manual could have inspired this authentic bit of human interaction. It was a front-line employee, moved by a customer’s loss, and guided by the company’s relentless focus on service, who chose to do something special without asking permission. That small gesture sent a big signal about the kind of organization Zappos aspires to be. Lamarr’s post rocketed around the Web, led to countless links from other bloggers, and became the subject of approving accounts in online news sites. Months after the post, a Google search for “Zappos” turned up Lamarr’s tribute among the top-ranked links — a word-of-mouth message of untold value, another piece of folklore that separates the company from the competition.

“We don’t have a process or procedure for this,” Tony Hsieh explains. “How can we? But if you get the culture right, these things happen on their own. You create thousands of stories, and those stories spread the word about Zappos. We’re not trying to maximize every transaction. We’re trying to build a lifelong relationship with each of our customers, one call at a time.”

Now Zappos gets to pursue its unique way of doing business with a big, stable, state-of-the-art owner. And powerful Amazon gets to learn some big lessons from all the little touches that Zappos puts on the customer experience. I call that a savvy deal, from A(mazon) to Z(appos).

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