Zappos lessons: Building a Customer-Focused Culture

Building a Customer-Focused Culture

Tony HsiehCEO

Zappos at a Glance

• Founded in 1999

• Zappos is powered by service• Providing the best service and online shopping experience possible.• Free shipping both ways. 365-day return policy.• Fast fulfillment. Expedited delivery. Fast, friendly & expert customer service.

• Best selection• Over 1100 brands.• Over 150,000 styles.• Over 800,000 unique UPCs.• 3 million pairs of shoes.• Photographed in multiple angles.• 100% of products inventoried (no drop ship).

• Zappos is a service company that happens to sell shoes, clothing, handbags, eyewear, watches (and eventually a bunch of other stuff).

Customer service value proposition in action…

Zappos is committed to WOWing each and every customer.

• Customers come…• 7.4M total purchasing customers (about 2.5% of US population)• 3.3M 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• $111.98 – first time customers in Q406• $143.22 – returning customer in Q406

Word of mouth in action…

Word of mouth enhances marketing investment significantly

• Advertising spending…• 85% Internet• 15% Print

• New customers acquired heard about Zappos…• 44% from Internet• 43% from word of mouth• 13% from other

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Power of Repeat Customers & Word of Mouth

2000A 2001A 2002A 2003A 2004A 2005A 2006A 2007A 2008F

Gross Sales 1.6 8.6 32 70 184 370 597 850 1,000

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What is customer service?

Customer Service:What Customers First See

• 24/7 1-800 number on every page

• Free shipping both ways

• 365-day return policy

Customer Service:What Customers Experience

• Fast, Accurate Fulfillment

• Friendly, helpful “above and beyond” customer service

• Refer customers to competitors’ web sites

Customer Service:What We Do Internally

• No call times

• No sales-based performance goals for reps

• Run warehouse 24/7

• Inventory all product (no drop-ship)

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

• Culture book

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

10 TIPS

for building a service-focused culture

TIP #1

Commit to customer service.

Make it part of your mission.

It’s not just a department…

Be true to your mission when making hard (or easy) decisions.

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Zappos.com Mission

To Live and Deliver WOW

• Internally, we have a saying:• We are a service company that happens to sell _____________________.

shoesand handbagsand clothingand eyewearand watchesand accessories(and eventually a bunch of

other stuff)

TIP #2

Come up with committable core values.

Do some soul searching.

Don’t come up with core values just because they sound good.

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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. Pursue Growth and Learning

6. Build Open and Honest Relationships With Communication

7. Build a Positive Team and Family Spirit

8. Do More with Less

9. Be Passionate and Determined

10. Be Humble

TIP #3

Actively manage your culturebased on your core values …

… for every single department.

TIP #4

Make “WOW” part of your company’s everyday vocabulary.

TIP #5

Remember that customer service is

an investment … … not an expense.

Don’t hide your 1-800 number.Don’t measure call times.

TIP #6

Trust and empower your customer service team.

Find people that are passionate about customer service.

TIP #7

Create a culture book.

TIP #8

Give great service to everyone:

CustomersEmployees

VendorsInvestors

TIP #9

Make culturepart of everyone’s

performance review.

TIP #10

Have the entire companycelebrate great service.

Tell stories.

Q&A

• Email me -- [email protected] for:

• Answers to any additional questions not answered today

• A copy of our culture book

• Tour of our offices when you’re next in Vegas

• Job opportunities