A Shoe-In for Best Retailer

Zappos.com steps up the online customer experience.

By
Samantha Oller, Senior Editor/Special Projects Coordinator

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Awise man once said, “If you make customers unhappy in the physical world, they might each tell six friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends.”

That man, Jeff Bezos, president and CEO of Amazon.com, hit on the fact that e-commerce is an amplifi ed version of retail: open whenever you want it, everything available for a price and to everyone in the world. At the same time, the ease of sharing a poor customer experience is infi nitely easier and faster. All it takes for good and bad is an Internet connection.

Perhaps it’s not surprising, then, that consumer surveys continue to rank e-retailers among the tops in delivering great customer service. Consider the latest National Retail Federation (NRF)/American Express Customers’ Choice survey, an annual poll that asks consumers one question: “Thinking of all the different retail formats (store, catalog, Internet or home shopping), which retailer delivers the best customer service?”

The poll, conducted by BIGresearch, ranked Zappos. com fi rst, followed by Amazon.com at second and Overstock.com at fourth. All three e-retailers have made the top fi ve for the past four years, outranking admired brick-and-mortars such as Nordstrom and supermarket chain Wegmans. Martin P. Block, Ph.D., a professor in the Integrated Marketing Communications division of the Medill School of Journalism at Northwestern University in Evanston, Ill., oversaw the survey results. He says the perception that these online retailers provide great “customer service” is thanks in part to technology—for example, their ability to immediately show how much inventory is in stock while a consumer is making a selection, and the ease of returning a purchase. Indeed, most Internet retailers have taken Amazon. com’s approach to creating a great customer experience: Let technology lubricate the transaction and minimize the involvement of people, minimizing the cost of supporting the transaction.

But there’s a phenomenon that as consumers transact more often online, the more they desire “at least a backstop of human involvement,” says loyalty marketing expert Bill Hanifi n, president of Hanifi n Loyalty LLC, Pompano Beach, Fla.

One online retailer that has successfully merged the technological and human sides of e-commerce is Zappos. com of Henderson, Nev. The online shoe and fashion retailer—whose tagline is “powered by service”—has an approach that demands constant human involvement, is likely more expensive in the long term and can be tough for lesser companies to sustain, says Hanifi n. But for Zappos.com, it’s the differentiator.

 “They’ve made it really clear in their brand promise that ‘You can get to us,’ ” he says. “The warmth of customer service—you could even call it ‘high touch,’ even though they’re in an online environment.”

Investing in employees’ happiness provides the catalyst for a great customer experience, which in turn rings up the sales. Repeat sales provide 75% of Zappos.com’s revenue, which grew from zilch to more than $1.2 billion in only 10 years.

It’s this “flywheel” that many c-store retailers who have built—or who are in the process of building— a strong company culture take such pains to perfect. Examining how Zappos.com does it in the pressure cooker of online retail provides some useful best practices.

‘HIRE SLOWLY, FIRE QUICKLY’

When you are a subsidiary of Amazon. com and have access to its considerable technological resources, success should be all but guaranteed. But for Zappos. com, success came before Bezos and Zappos’ CEO Tony Hsieh struck a $1.2-billion bargain in 2009.

Hsieh—a 37-year-old business and technology savant who also cofounded LinkExchange—has always believed happy employees held the secret to business success. He just wrapped up a promotional book tour for “Delivering Happiness: A Path to Profits, Passion and Purpose,” a record of his personal and business life lessons. The book’s main message: A strong company culture leads to happier, more productive employees, which leads to happier customers and, ultimately, increased profi ts.

 “Tony says it best: If you treat employees correctly, everything else falls in place, and we all strongly believe that,” says Jane Judd, senior manager of Zappos’ customer loyalty team.

For Zappos—ranked sixth on Fortune’s 100 Best Companies to Work For list—this path starts with hiring employees who are a strong match with the company culture, which can be summed up by 10 core values, led by “deliver ‘wow’ through service.” (See “Zappos’ 10 Steps to Greatness,” p. 94.) They act as a touchstone in the employee selection process.

“Making them commitable, and really aligning around those core values, fi lters into whatever business you’re doing, whether you’re brickand- mortar or online,” says Judd. “Even with our core values, it’s not something dictated by Tony on down. It’s up to everyone, when hired here, to maintain our culture and core values.”

The hiring process is divided into three stages. The first two are conducted by phone, with a recruiter checking for fi t to the core values and familiarity with Zappos; then a hiring manager determines technical fi t. Last comes an on-site interview, which includes a tour of Zappos’ headquarters; a more intensive review of basic and technical skills, and cultural fit; and lunch with the team.

The ability of a potential hire to mesh socially with his or her coworkers is paramount at Zappos; the company evaluates how engaging and friendly an interviewee is not only during the tour and lunch, but also—if they are fl ying in from out of town—on the ride from the airport in the Zappos shuttle bus.

All new hires, regardless of their position—from customer service reps to senior vice presidents— undergo customer loyalty training, which includes how to interact with customers and ensure a good retail experience. During Christmas and other high call times, employees from other departments of the company are asked to help field customer calls, live texts from Zappos.com and e-mails. It’s simply an expression of the company culture: Everyone serves the customer.

“It doesn’t matter what department; we all work in tandem,” says Judd. “In the customer loyalty department, we have to be helpful, fast and effi cient on the phones. But our great merchandisers have to have the brand and styles people want to shop for, and marketing has to make sure they’re branding well. Then our warehouse has to be very effi cient, and pick, pack and ship very quickly. We all know how to support each other and depend on each other so much for making sure the experience is wonderful and the customer is really satisfi ed.”

During the four-week customerloyalty training process, new recruits are educated on the history of Zappos, undergo soft skills and technical training, and bone up on the core values. Employees from different departments of the company discuss each core value and share a story that illustrates how it relates to his or her job. Next they enter the “incubation” period, where, for the next three weeks, they receive one-on-one coaching.

Only then—after more than a month and a half of training—are customer loyalty reps released to “the floor” to man the phones by themselves.

Even after a recruit receives an offi - cial job offer and tackles training, Zappos. com continues to sound out that culture fit. The company is famous for offering new hires $3,000 to quit, if they don’t feel they are a good match. The offer comes up three times: during the second week of training, before “graduation” and then after the incubation period. “So we’ve given them a lot of opportunities to really understand that this is the passion and culture you want to be a part of,” says Judd. Last year, only 1% to 2% of recruits took the money and ran.

 “One thing we’ve learned over the years is to hire slowly and fi re quickly,” she says. “We want to make sure we have the best candidates.” In theory, it also prevents the thousands of dollars in pay and benefi ts—Zappos provides free health coverage and lunch to all employees—that would have been wasted on a hire who’s not dedicated.

EDUCATION AS REWARD

A specific turnover figure for the customer loyalty team at Zappos isn’t available, although Judd says it is below the national industry average. That said, “We always feel we can do better,” she says, which is partly why the company focuses so much on employee training and development.

Zappos has a “pipeline team”— essentially, a corporate training department— that offers free courses to all employees, ranging from grammar basics to fi nance 101. In the corporate lobby, employees and visitors can pick from a free library of business bibles, such as Jim Collins’ “Good to Great” and Spencer Johnson’s “Who Moved My Cheese?”

Continuing the theme, Zappos does not offer bonuses to customer loyalty reps based on the amount of merchandise they sell, but it does recognize achievements such as perfect attendance. Rather than reward these employees upfront with money, Zappos offers them the chance to burnish their education by learning a new skill set. Customer loyalty alone has 20 different ones, including the ability to conduct a live chat, which then results in a small bump in salary.

Co-workers in each department toast their high performers in quarterly recognition happy hours. Employee cohesiveness is so important that managers are encouraged to spend 10% to 20% of their time outside the offi ce socializing with their subordinates. According to the company, this practice has helped increase productivity by 20% to 100%, simply by building greater trust.

This spirit of bonhomie trickles down into employee interactions with customers.

“Reps try to make a personal and emotional connection and really build those long-term relationships,” says Judd. “If a dog’s barking, we’d say, ‘Oh my gosh, I have a dog. What kind of dog do you have?’ and really capitalize on building a relationship with that customer.”

Unlike the typical contact center, Zappos has no talk time limits or call quotas for its customer loyalty reps, because both prevent them from fully “engaging with the customer,” says Judd.

 Just recently, the department fi elded its longest customer call on record: 8 hours and 26 minutes. In addition, each rep is empowered to satisfy any disgruntled customer through a variety of means, including sending flowers, cookies or giving out a free pair of shoes.

Hanifin of Hanifin Loyalty says this generosity of time wins e-retailers such as Zappos competitive leeway. He cites another online retailer, a California-based nutritional supplement provider, Hammer Nutrition Ltd., for its similar practice of spending as much time as necessary with customers to resolve their questions. “It makes you less price-sensitive,” he says, “but the only way a company works that way is if the owners have a passion for their customer base.”

It’s an approach, he acknowledges, that won’t exactly translate at a brick-and-mortar business such as a c-store, where manpower is limited. But the concept of connecting with customers on a meaningful personal level, whenever possible, does.

Measuring the customer loyalty team’s ability to deliver “wow”—an invented term and an ambiguous concept— seems dicey, but Zappos tackles it by following the Net Promoter score system from Satmetrix Systems Inc., which asks customers, on a scale of one to 10, to rate how likely they would be to recommend the service to a colleague or friend.

Separately, the company asks customers how likely, if they owned their own service company, they would be to hire that customer loyalty rep. Finally, it conducts “fullcircle feedback,” during which the loyalty team listens to past calls and provides feedback and coaching.

Interestingly, Zappos and Amazon.com’s customer service teams do not formally collaborate on best practices such as this. As Judd explains, “We look to Amazon being more of the science, and Zappos being the art. They have a lot of great experience with technology, and so it’s been great to pick their brains and collaborate on different things. They do the same for us with the personal and emotional connection we create with our customers.”

The Zappos culture continues to serve as the company’s “compass and navigation system,” says Judd, leading it— one shoe in front of the next—to greater rewards. 


Zappos’ 10 Steps to Greatness  

At one time, the number of core values that defined Zappos’ company culture numbered 37. To simplify this, employees agreed on 10 values that power the retailer’s engine; they are listed below, along with sample questions from Zappos’ interview assessment guide to determine cultural fi t.

  1. Deliver wow through service. “Give an example of a time you went above and beyond, and why did you do it? Any regrets?”
  2. Embrace and drive change. “Did you ever have an unpopular or minority viewpoint and, if so, did you stand up for it?” Create fun and a little weirdness. “On a scale of one to 10, how weird are you?”
  3. Be adventurous, creative and openminded. “What was the best mistake you made on the job?”
  4. Pursue growth and learning. “What is the last book you read? Would you recommend it to me?”
  5. Build open and honest relationships with communication. “Describe a time you had to present unpleasant information to someone.”
  6. Build a positive team and family spirit. “When was a time you ‘took one for the team’ even though it wasn’t your responsibility?”
  7. Do more with less. “Give me an example of a time you took on more than what was required to improve a process.”
  8. Be passionate and determined. “If all jobs paid the same, what would you be doing?”
  9. Be humble. “What was your last position called? Was that an appropriate title?” Source: Zappos.com

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