Zappos is a marketer’s dream. They have a story. And the story is fun to tell! I have learned a huge amount from watching them tell their story. And their story is not just about being an online shoe retailer. (I know. I know. For people with a shoe fetish, that’s enough. But for everyone else, this story is so much fun to tell.)

Here’s a link to a video of their CEO Tony Hsieh revealing what took his company to $1B in sales from scratch. Before Zappos, Tony Hsieh sold his first company LinkExchange, because it started being, frankly, no fun to work there. Even though it was successful and profitable, with about a million different Web sites using their network, and 100 employees, he still decided to sell the company to Microsoft. He says he’d just stopped thinking about company culture. He had hired people with the right skill sets, but with the wrong company culture. After LinkExchange, he started a company called Venture Frogs that invested in other companies. One of those companies was Zappos.

If you listen to the presentation, listen to how often he says “we” and “our.” Not “me” and “mine.” I think this guy is the real thing!

If you don’t listen to the presentation (and I encourage you to do so) here are my notes.

Company Culture

At Zappos, everything starts with the company culture. Tony wanted Zappos to be a fun place to work. His #1 concern was with building great customer service, and a great customer experience.

Customer service is how they think of themselves. Not just as an online shoe company. But a great customer service company. They believe that 10 years from now, no one will remember they started with shoes. (Interesting to note, this is how Nordstroms started too. They pride themselves on customer service too.) Incidentally, Zappos is moving beyond shoes into apparel, bags, cookware and other goods. Because they have such great service, he says their customers ask them to start an airline or run the IRS! (Not in their business plan immediately, but won’t be ruled out.)

An example of a company they love: Virgin! They love how Virgin clearly aspires to be hip and cool in whatever of the many businesses they’re in. In the same way, Zappos aspires to be the best in customer service, whatever business they’re in.

Happy Customers = Repeat Customers

Zappos clearly shows that happy customers encourage word of mouth recommendations. Repeat customers spend more money. Zappos does have offline and online advertising budgets. But, when they look at their marketing spend, they believe that if it pays for itself in the first order, then great. Otherwise, most of the money they would have spent in paid advertising they have they put back into customer service instead of in marketing.

What Makes Great Service?

  • free shipping both ways
  • surprise upgrades so customers get their orders sooner
  • they run their warehouses in Kentucky 24/7, even though that’s not efficient!
  • 365-day return policy
  • 1 800 number clearly displayed on every Web page

Let’s talk about that 800 number.

Tony notes that it’s often hard to find an 800# on many Web sites. Zappos, however, wants to talk to their customers. They get about 5,000 calls a day and rather than looking at it as an expense, they look at it as a marketing opportunity. It’s a way to brand themselves as “above and beyond” with customer service.

Zappos has about 500 people in the call center. They run their center without using the ‘average call time’ model so commonly used. Agents do not get “written up” if they spend too long with a customer. And they don’t have sales/performance goals. They’re just required to go ‘above and beyond.’ Their agents can spend an hour with a customer and that’s OK.

So for example, if they don’t have the precise shoes in the right size that the customer wants, they are trained to look on competitor sites and refer the customer over to those competitive sites! Customers remember that. They come back.

What do Customers Experience?

What customers experience is very important. Fast and accurate shipping is the first quality indicator.

Originally, in 1999, Zappos main idea wasn’t customer service. It had a drop ship model. Manufacturers would drop ship for them, so Zappos wouldn’t have to carry inventory. Looked good on paper. But the problem was that the manufacturers were not accurate, and weren’t fast. And that reflected poorly on Zappos. After that, they had a hybrid drop ship/inventory model for a time, and drop-ship accounted for 25% of the business.

They realized they had to be brave and give up the drop ship revenue. This was hard. They weren’t profitable. But they were brave. They took control. They became true to their brand. It was both the hardest and easiest decision to make.

Since then, decisions became easier. Everything is decided through the prism of customer service and company culture.

Zappos is now on track for over $1B in annual sales.

Train the Staff

It’s important that everyone in the company understands the company culture. Every single person that’s hired — lawyer, accountant, warehouse person — goes through five weeks of customer loyalty training. They have to be on the phone for two weeks with customers. They have to go to the warehouse to see what goes on there.

Only after those five weeks do the employees start their real job for which they were hired! Employees must make that five week commitment, or they are let go.

When they are hired, there are two sets of interviews: the standard set with the hiring manager and team going over their skill sets. The second interview with the HR department to see if they are a cultural fit. Performance reviews are judged according to 50% fit with company culture, ane 50% on job performance. People are rewarded for inspiring culture with others.

A Customer Story

Tony tells a story about a woman who bought shoes for her husband. They fit. They were fine. But the husband was killed shortly after the purchase in a car accident. The woman called about the return policy and got her money back. The agent then took it upon herself to send flowers to the funeral. Everyone at the funeral heard about it. A great word of mouth story. There was no standard operating procedure for this circumstance. She just knew it was the right thing to do. She didn’t even need to check with her supervisor. She just went ahead and did it.

(A sidenote: would I be worrying about returning a pair of shoes the day after my husband got run over? I think not. But that’s beside the point.)

Another Customer Story

A woman ordered a wallet at Zappos. She didn’t like it and returned it. But she’d accidentally left $150 in cash inside the wallet. The minimum wage warehouse worker returned the money to her. Again, another opportunity for the woman to tell others her story.

The Vision Thing

Building a company vision is critical. Here’s Tony’s advice about vision:

  • Whatever you’re thinking, think bigger
  • Does your vision have meaning?
  • Chase the vision, not the money

Think of a vision that you’d be excited about, even if it made no money at all!

When you’re small, you can experiment and find out what it takes to get customers to come back again and again. You can really focus on getting conversions right, getting service right, getting the product right. Once you have that right, the rest of the stuff comes easier.

People and Core Values

Find people you trust with decision making. Force yourself to invest in teaching your people to do the things you may do better initially. It takes longer, but works in the long term.

But even with all the right people, those people must buy into the culture. Zappos has a “culture book” they put out. Every single employee writes something about what Zappos means to them. It’s unedited, except typos are fixed. Anyone can get a copy of that book. It’s clearly part of marketing the Zappos story.

What are Zappos’ core values?

  1. Deliver WOW through service
  2. Embrace and drive change
  3. Create fun and a little weirdness
  4. Be adventurous, creative and open minded
  5. Build open and honest relationships with communication
  6. Build a positive team and family spirit
  7. Do more with less
  8. Be passionate and determined
  9. Be humble

Having a list like this is really important when you’re small, because it saves you heartache and headache later.

Tour Zappos: Learn What You Need!

You can get your own free tour of the Zappos offices in Las Vegas. Just write to [email protected]. Recently, they hosted Southwest Airlines and Legos. In particlar, both companies wanted to get the in-depth tour of their phone center. Southwest also wanted to hear about their HR hiring practices. Zappos is happy to share what they’ve learned with others. They are open about their experiences.

I hope these notes helped you. Zappos has courage and chutzpah. I love telling their story.

(And yes, I’ve spent multiple hundreds of dollars on their site too!)

(And another thing? I’d beg for an interview to work at Zappos in a nanosecond. If they weren’t based in Las Vegas. I’m not a Las Vegas person I’m afraid.)