AMA Dayton, OH 08/26/2010- Zappos Presentation

Extending the Customer Experience

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Aaron Magness – Sr. Director of Brand Marketing & Business Development

amagness@zappos.comtwitter.com/macknuttie

AMA – Dayton, OHAugust 26, 2010

Who is this Aaron character?

• Work– Sold trade show space

– Business Development for Williams-Sonoma, Inc

– Business Development & Marketing for Zappos.com

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• Play– Family/Friends

– Athletics

– Music

– Marathons (completed 8 so far)

– Triathlon (Escape from Alcatraz)

– Poker

Founded in 1999

2000 employees (half in NV, half in KY)

• #23 in FORTUNE MAGAZINE’s “100 Best Companies To Work For” 2009

• Highest debut for a newcomer in 2009

• #15 in FORTUNE MAGAZINE’s “100 Best Companies To Work For” 2010

Zappos.com is “Powered by Service”

•Providing the best online shopping experience possible.

•Fast, Free Shipping. Free return shipping. 365-day return policy.

•Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service.

Best selection

•Over 1,000 brands, over 200,000 styles, over 900,000 unique UPCs.

•5 million items in warehouse

•100% of products inventoried (no drop ship).

Zappos.com, Inc. is a service company that happens to sell clothing, handbags, shoes, accessories, housewares, ….

Corporate Background at a Glance

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Customer service value proposition in action…Committed to WOW’ing every customer

Customers come…

Over 10 million total purchasing customers

Over 4 million have purchased in the last

12 months

Customers come back…

On any given day, about 75% of

purchases from returning customers

Repeat customers order >2.5x in the next 12 months

Customers come back, order more and

order more often…

Repeat customers have higher average

order size

$123.86 – first time customers in Q407

$156.27 – returning customer in Q407

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Power of repeat customers and word of mouth...

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2000 2001 2002 2003 2004 2005 2006 2007 2008

Gross Sales 1.6 8.6 32 70 184 370 597 841 1014

$0

$200

$400

$600

$800

$1,000

Gro

ss S

ale

s $

M's

3 fundamental things we’ve learned are necessary for WOW service online:

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What Customers See First

What Customers Experience

What We Do

Internally

Customer Service:What customers see first

• 24/7 1-800 number on every page

• Free shipping

• Free return shipping

• 365-day return policy

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Customer Service:What customers experience

• Fast, accurate fulfillment

• Most customers are “surprise”-upgraded to overnight shipping• Create WOW

• Friendly, helpful “above and beyond” customer service

• Occasionally direct customers to competitors’ web sites

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Customer Service:What is done internally

• No call times

• The telephone is one of the best branding devices available

• No sales-based performance goals for reps

• Run warehouse 24/7

• Inventory all product (no drop-shipping)

• 5 weeks of culture, core values, customer service, and warehouse training for everyone in Las Vegas office

• We’ll pay you $2000 to quit

• Culture Book

• Interviews & performance reviews are 50% based on core values & culture fit

• Twitter/Facebook/YouTube/Blogs help build company culture

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2 things we’ve learned…

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Give your customers a voice on your site

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Customer Reviews

• Provide useful information

• Help lower return rates

• Wonderful SEO Value!

• Credibility!

Feedback Mechanism (VoC)

• Better user experience

• Build empathy

• SEO Value

• Builds community/repeat visits

Enable Product Sharing

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• “free” link backs

• High converting trigger

• Community engagement is high!

• Creates referrals that lead to customer acquisition

Times are changing!

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Customer experience extendsbeyond just your site!

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Customer experience extendsbeyond just your site!

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Customer experience extendsbeyond just your site!

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Time to figure out howto extend the experience!

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Social Media

What’s the on Social Media?

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•No social media strategy

•We have a COMMUNICATION strategy

Create more opportunities to communicate with your customers…

… and you enable more and engagement with them

(Brand longevity)!

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Why?

Because people want to be heard!

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Yeah, but why?

To gather information!

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Really, though, why?

To make better educated purchases!

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Come on, why?

To feel like they are part of it!

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Why won’t you tell me why?

To talk about their experiences!

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Why ask why?Probably all of the above, and more!

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That’s LOTS of people willing to help look out for your business, provide feedback and ideas, etc!

That is, if you are listening…

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Most peopledon’t pick up the phone and call us!

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Evolving Customer Connections

• Phone• 6,000+ Calls a day

• Live Chat• 400+ live chats per day

• Social Sites, Networks, etc…• 1,100,000+ opportunities to interact per day

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That’s right, 1,100,000 per dayin the social space… And Growing!

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Or you can annualize it:401,500,000+

invitations to interact per year

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How does a company engage in an organized predictive way?

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People!

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Is the new media planning?

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Don’t plan great media,plan great !

Have the people, have the voice

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Peter Piper picked peppers

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People planning produced experiences

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People PlanningTrain to be a customer service agent

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Good Customer Service =

People PlanningTrain to be a customer service agent

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•Customer Service •Marketing•IT•Finance•Facilities•Fulfillment Center•Legal•HR•etc

People PlanningRally the company behind the of proactively talking to customers

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People PlanningEmployees will want to engage customers, as often as possible

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Goal: Have as many employees as possible be a voice!

We believe People Planning is at the heart of our success

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How does one do that?

• Have the right culture and nurture it

• Have committable core values and aspire to live them

• INVEST in hiring and firing and pay people to leave ($$$)

• Stay focused and make people focused investments

• Education!

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Step #1

• Decide if you’re trying to build a long term sustainable brand

• Requires more patience with revenues & profits in order to lay the foundation

• Decide sooner rather than later

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DECIDE

Step #2

FIGURE OUT

VALUES & CULTURE

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VALUES & CULTURE

Figure out values & culture sooner rather than later

• What are your PERSONAL core values?

• What are the COMPANY’S core values?

• Start EARLY.

• It is surprisingly HARDER than you think.

• It doesn’t MATTER what the values are.

• The most important thing is ALIGNMENT.

• …LIVE the BRAND

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Step #3

COMMIT TO

“Be real and you have nothing to fear”

Your culture is your brand

Don’t try to be someone you are not

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Commitment to Transparency:Examples

• twitter.zappos.com

• “Ask Anything” newsletter

• Extranet for vendors

• Tours & reporter visits

• ZapposInsights.com

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Transparency Toolstwitter.zappos.com

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Get your partners involved!

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Transparency ToolsZappos.TV

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Transparency ToolsFacebook Page

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Transparency ToolsFacebook Page

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What does a Snuggiehave to do with Zappos.com?

Absolutely nothing, but it has everything to do with an engagement opportunity!

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Step #4

VISION

“Whatever you’re thinking, think bigger.”

Does the vision have meaning?

Chase the vision, not the money…

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ENTREPRENEURS:

“What would you be passionate about doing for 10 years even if you never

made a dime?”

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EMPLOYEES:

What’s the larger vision and greater purpose in their work beyond money or

profits?

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VISION

MOTIVATION

vs.

INSPIRATION

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Step #5

BUILD RELATIONSHIPS

(not networking or marketing)

Be INTERESTED rather than trying to be INTERESTING

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Step #6

BUILD YOUR TEAM

“If you want to go quickly, go alone.

If you want to go far, go together.”

(African proverb)

Hire slowly

Fire quickly

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Step #7

THINK LONG TERM

Repeat customers

Customer service

There is no “get rich quick” formula

“Overnight” successes are years in the making

(both personally and in business)

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What’s the ?

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What’s the eturn n being rrelevant?

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some links to check out…

http://twitter.zappos.com

• (public mentions, employees)

http://bit.ly/twitterbetter

• “How Twitter Can Make You a Better (And Happier) Person”

http://blogs.zappos.com

• (photos & videos of culture)

http://about.zappos.com

• (more information about us & core values)

http://jobs.zappos.com

• (job opportunities)

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Thank you for allowing me to be here!

Email amagness@zappos.com for a copy

of this presentation or a copy of the Culture Book (it’s a physical book, so I need a physical address).

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Legal and Financial DisclaimerP.S. You might be wondering why we need to have a legal and financial disclaimer in this presentation, but you are still reading, so our lawyers, auditors and accountants would really like to make sure we make the following clarifications.

Although an audit was underway and almost done, the financial information presented in this slide show was unaudited. We made every effort to present the best information we had at the time.

Gross merchandise sales is a non-GAAP metric. We use it to express the total demand across all of our web sites and stores. This number measures the dollar value of the orders placed in the year before accruing for certain items such as returns, and itignores certain timing cut-offs that are required by GAAP for revenue recognition purposes. If we were a public company, we would have to reconcile gross merchandise sales to the nearest GAAP metric (net sales), but we are currently a private company so the gross merchandise sales number should be viewed just as an interesting number that we want to share with our friends.

This presentation contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if theyever materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by the forward-looking statements and assumptions. These risks and uncertainties include, but are not limited to, the risk of economic slowdown, the risk of over or underbuying, the risk of consumers not shopping online or at our web site at the rate we expected, the risk of supplier shortages, the risk of new or growing competition, the risk of a natural or some other type ofdisaster affecting our fulfillment operations or web servers, and the risk of the world generally coming to an end. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements of expectation or belief; and any statement of assumptions underlying any of the foregoing. Zappos.com assumes no obligation and does not intend to update these forward-looking statements.

Congratulations on making it through all the fine print.