Zappos: How Excellent Customer Service Can Drive Growth

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Abstract

Zappos.com is the largest online shoe retailer in America and it is owned by Amazon.com. The company is based in Henderson, Nevada. It was founded in 1999 by Nick Swinmurn. 1n 2009, the company was acquired by Amazon. Tony Hsier is the current CEO.

Zappos mission is “to provide the best customer service possible”. Its core values are captured by what it refers to as the “ten Commandments”, which employees are supposed to study, internalize, and practice. The company believes that the right corporate culture is the foundation of exceptional customer service.

Zappos is a rapidly growing company that is also profitable. It has made a significant contribution to Amazon’s profitability. Since 2005, Amazon had been toying with the idea of starting an online retailer of shoes and that is why it started endless.com. The company, however, decided to acquire Zappos. The decision to acquire Zappos was an inspired one because growth prospects are exceptionally bright under the leadership of Tony Hsier.

Zappos is a reputable company to work for. It was listed among the top companies that treat employees well. The company does not only treat employees well, it also it also compensates them handsomely. Employees are trained under a program of continuous self improvement and handed countless other challenges that are motivating.

Zappos is involved in number of activities aimed at protecting the environment. The company also provides direct job opportunities to almost 2000 employees and indirectly to hundreds. This is good for the American economy. When many companies in the US are outsourcing jobs to India, Zappos has made the conscious decision to locate its call centre in United States.

The company was not hugely affected by the 2007 financial crisis, but it had to offload 5% of its workers at some point. Looking at its revenue figures, Zappos growth has been impressive. This has been due to its commitment to exceptional customer service. Future prospects for the company are significant because it is now a trusted brand. Secondly, almost all of its first customer buyers make repeat purchases. As long Zappos maintain its excellent and innovative customer service, it will continue to gain more market share.

Organization and continuity

Operational process

A company such as Zappos that ships shoes and other accessories to clients once they buy online requires considerable operational processes to be reliable (DiJulius, 2008). For activities to be performed in a standard way, there is a need for operational processes and procedures. Common activities in a firm can be accomplished in several ways, but there that single way that is both cheap and efficient. Documenting operational processes help a firm avoid failures and other costly mistakes.

Training new employees includes educating them on operational processes. Most firms do not provide formal training as such, but new employees are put under more experienced workers to mentor and transfer the required knowledge on operational processes and procedures (DiJulius, 2008). Operational processes are essentially documented best practices that have been adapted from elsewhere or developed in-house.

Operations are harmonized by integrating processes and people to drive reliability and improve capacity. When Zappos was incorporated, it faced a number of operational challenges in their quest to ensure that they ship products to their customers successfully (Laseter & Rabinovich, 2012).

To deal with the problems, Zappos adopted a highly sophisticated computer system called Genghis. Gengis manages the operations of the company. It manages the following key areas of operations: order entry, warehouse management, e-commerce system, and inventory (Zappos.com). If a customer wants a certain size of a particular shoe, he can be able to check its availability and the total number of shoes in the store of that size and their colors.

The system also reminds employees to call back customers and also coordinates reboot system of the warehouse. The management gets reports on profit contribution of selling a certain product in their online store. This way, the management can be able to assess whether it’s profitable to sell a certain product or not before stocking.

Management style

Management style refers to ways decisions are made in an organization and relating to subordinates. Management styles can be autocratic, paternalistic, or democratic. According to management experts, management style should be adapted to fit the prevailing circumstances. In a modern organization, democratic management style has been found to give the best results.

Democratic or participative management style is suitable for employee motivation because they feel appreciated and part of the organization.

They also feel that they own the final decision reached, and this inspires them to cooperate towards the realization of what has been decided. This type of management style is best when working as a team. It is the best where quality of what will be produced is more essential than speed.

Tony Hsier has distinguished himself as a great manager. He realized that Zappos needed to offer a excellent service stay ahead of the competition.

Towards that end, he developed a work environment where employees work as a team all committed to offering delightful service to customers. One of the decisions Tony, together with his employees, made at Zappos was to adopt casual dressing style (DiJulius, 2008). Also, during the early days of the company, the whole team collectively developed organizational culture and key values.

One of the reasons that have made Zappos a dominant company is the management style of its CEO, Tony Hsier. The vision of the CEO was to make a successful company that, despite size, could still offer customers exceptional service. That is why the company invests so much on training new employees. New hires on training is given full salary and a $2000 for those who wish to opt out.

Employee involvement which contributed to their growth over the years

According Tony, zappos is a company that is committed to delivering happiness to all the stakeholders (Hsieh, 2011). He is focused on making customers happy. This singular focus on the customer’s happiness is largely responsible for the company enormous success. It is also from this focus that informs its corporate culture.

Tony Hsier believes that when a company is able to attract talented people who also enjoy their work, it is possible to offer exceptional service and develop a strong brand in the process (Hsieh, 2011). The people who are recruited by the company is committed to offering delightful service to customers. New Employees, who feel that they cannot cope, or lack sufficient motivation to work there, are encouraged to leave the company and are given a $2000 reward (Zappos.com).

During interviews, employees are sometimes asked to rate their weirdness on a scale of 10. Interviewers sometimes push job applicants to extreme situations so that they can gauge their reactions when under pressure (Laseter & Rabinovich, 2012). During the early days of the company, workers would stay late into the night to socialize.

The goal was to create an organization where everyone is friendly. A test of innovation is given to prospective employees. Innovation is critical to the company, and it is indeed its hallmark, since it was founded. It is now even more urgent because of emerging vendors who have copied Zappos strategy and business models. Zappos, therefore, has been able to reach this far by relying on the employee’s innovativeness and commitment to excellent service.

Companies may be large, but it is real people that can give individual customers enjoyable and memorable service that they are able to identify with. Eighty per cent of all Zappos customers are repeat customers. They come back, again and again, due to the great service they get from employees. Therefore, by committing themselves to making customers happy, they have made Zappos the excellent company it is.

Marketing practices

Marketing is a crucial aspect of any business. Proper marketing involves not only physical goods but also puts into consideration services surrounding those goods. Proper marketing requires proper understanding of the key factors that would enable a business get customers and keep them. Keeping customers is as important as getting them. This is essential getting a new customer is more expensive than keeping an existing one.

Zappos is aware of what customers are looking for when they go online to shop. According to Tony, they are not only looking for a pair of shoes, but also after a pleasant buying experience. That experience can only be achieved by integrating personalized service and excellent operations management.

Good marketing practices include the following: developing a marketing plan, budget, securing necessary resources and; lastly, establishing metrics to assess the impact of marketing on business (Laseter & Rabinovich, 2012).

Zappos relies on, among other things, word of mouth marketing. This strategy has worked because stories of their superior customer service abound, and this drives customers to their website to make purchases. This has propelled the store to number one online shoe retailer.

Zappos strategy and motto is “customers are kings”. The company, therefore, goes out of its way to meet customer needs and ingratiate itself to buyers to retain their loyalty. Service helps Zappos standout from the crowd and differentiates itself. Although their shoes are not necessarily cheaper than what their competitors are offering, their efficiency, free shipping, and 365 day return policy is particularly attractive to prospective customers.

Zappos also incorporates hiring in its marketing strategy. The only people given the job are those whose personality fits the work culture at Zappos. Together with the four Ps of marketing, customer service complements marketing efforts and it’s what brings all the difference.

Area of focus they manage their operation under

Zappos, like other companies, is a complex organization. It has been able to grow at such a rate by adopting the right strategies in areas such as marketing, supply chain management, proper operational planning, good management, employing innovative human resource management, and making customers the central focus of all operations.

However, Zappos is totally committed to providing customers a excellent service. For instance, the company has adopted the following strategies to provide customers with a great service:

Call centre employees do not follow a preset script in dealing with customers queries. Zappos requires them use as much time as may be required to solve customers’ problem or make a positive impression.

Employees are allowed to send customers gifts and later bill the company. According to Tony Hsier, the company does not have a policy of dealing with customers (Hsieh, 2011). Employees are expected to make a decision based on the circumstances of their interactions with the client. The only guide an employee has is that they should offer outstanding service to the client.

All goods are shipped to customers free, and customers can return the products, if they are not happy, at the cost of the company.

Customers are provided with a 365 days warranty. This allows customers to return faulty items. The corporate culture and commandments are developed around the need for make customers happy. Tony elaborated more on Zappos philosophy of making customers in his recent book. What he has emphasized is the need to serve customers well and make them happy.

That has been Tony’s vision for the company since incorporation of Zappos (Hsieh, 2011). Amazon attempt to acquire the company in 2005 was rejected because the CEO felt that the company would lose its unique culture. As noted elsewhere in this paper, Genghis system was adopted to make it easier for customers to shop at Zappos.

How Zappos improved market share/Profits

Zappos was a pioneer online shoe retailer. Nick got the idea of starting an online shoe retailer after unsuccessfully trying to purchase a pair of shoes in his hometown (Hsieh, 2011). In 2001, Zappos posted 1.6million dollars in revenue. Ten years later, the company’s revenue has jumped to around 2 billion dollars.

By all accounts, the company’s growth has been extremely impressive. The shoe market is estimated to be around 40 billion dollars. Zappos, a shore retailer, therefore, controls around 5% share of the market (Laseter & Rabinovich, 2012). This is notable for a single company because the industry has all type of shoe vendors (small and large) operating offline and a few online.

Summary

The secret to Zappos success is customer service. Zappos commitment to customer service is becoming legendary. There is a story about a woman who had ordered a pair of shoes for her husband but, unfortunately, the man died shortly after the order for the pair of shoes was placed. The lady called the company to cancel the purchase. The following day, she received a bunch of flowers instead. Stories of exceptional service, such as this, have enhanced the reputation of the retailer.

Although it costs Zappos a lot of money to provide exceptional service, the company considers the expenses as marketing costs. As already noted, 80% of the company sales are to repeat customers. Clearly, customers notice and appreciate the good service they are given by Zappos.

The outstanding reputation Zappos has acquired is responsible for its growth. Right now, the company is expanding to include online sales of other products, such as shoes, in addition to shoes.

Zappos is a case study on how excellent customer service driven by robust corporate culture can drive growth. Indeed all managers who care about customer service have visited the company’s headquarters to understand how the company executes its happiness vision for its customers.

The success of the company also highlights the importance of leadership in laying the foundation for success. The incredible service that is behind the success of the company is the brainchild of one man, Tony Hsier. He has driven the company through changes in its operational process to achieve its current excellence.

References

DiJulius, J. R. (2008). What’s the secret?: to providing a world-class customer experience. Hoboken, N.J.: Wiley.

Hsieh, T. (2011). Delivering happiness: a path to profits, passion, and purpose.. New York: Grand Central Pub, 2011. Print.

Laseter, T. M., & Rabinovich, E. (2012). Internet retail operations: integrating theory and practice for managers. Boca Raton, FL: CRC Press.

“Zappos Milestone: Timeline | about.zappos.com.” Home | about.zappos.com. N.p., n.d. retrieved <https://www.zappos.com/about/?utm_campaign=zappos&utm_medium=zappos-home&utm_source=footer&utm_content=text>.

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