Zappos Customer Service Case Study

Clarity: Know Where You’re Going

Zappos will take an order as late as midnight and deliver it to the customer’s doorstep before breakfast. It has the world’s largest selection of shoes, and its service includes free returns. If it doesn’t have the shoe you want in stock or in your size, a Zappos call center employee will go to three competitors’ sites to try to help you locate what you want to buy. Seventy-five percent of its business comes from repeat customers, despite the fact that its prices are far from the lowest. (Price is an area where Zappos has made a conscious trade-off in its service model in order to deliver exceptional service.)

It’s not surprising, then, that managers from other companies—including many from service and quality leaders like Southwest and Toyota—make regular pilgrimages to Zappos facilities to learn how the company pulls it off. Everyone wants to know what the heck is going on. A quick look around reveals that part of its success is the company’s IT strategy, including a real-time inventory management system that is 99 percent accurate, compared with accuracy rates as low as 40 percent in other areas of retail. But what gets visitors every time are the clues to Zappos’s true competitive advantage: its culture. And no one inside the company is surprised.

The most visible champion of Zappos’s culture, naturally enough, is president and CEO Tony Hsieh (pronounced “Shay”). Hsieh is crystal clear on the culture he needs to make the company thrive, and he and his team have broken it down into ten core company 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.

Hsieh embodies these values. He is passionate, positive, fun, humble. And a little weird. As the fearless leader of a high-profile shoe company, Hsieh unapologetically wore the same pair of shoes every single day for two years. He then replaced them with the exact same pair. Hsieh’s definition of weird, however, is closer to authentic or real. He’s betting that the “real you” will be more valuable to Zappos than the safe, watered-down version that usually shows up in a work environment. So go ahead, be a little weird.

Early in his career, Hsieh had a breakthrough about how much culture mattered to the performance and motivation of employees. He sold a software company he had founded when he realized that even he no longer wanted to come to work, primarily because of the culture. Now Hsieh does many things you’d expect from an enlightened CEO, like taking calls at the call center on holidays to give his employees a break and staying in direct touch with his customers.

But what really sets Hsieh and his team apart is their deep awareness that culture is the company’s most important asset. “Service is a by-product of culture,” says former chief financial officer Alfred Lin, as are things like supplier behavior and employee turnover. In 2005, when the company’s call center moved from the Bay Area to Las Vegas, an astonishing 80 percent of its California employees relocated—for a $13-an-hour job. In 2008, a year in which the average turnover at call centers was 150 percent, turnover at Zappos was 39 percent (including turnover owing to promotions). Managers attribute the loyalty to a culture that cultivates the passion, purpose, and humanity of its employees.

But it’s not just management that gets it. The conviction that culture is key is embraced throughout the ranks at Zappos. It’s so central to the company’s belief system, in fact, that the company publishes the Zappos Culture Book, which is updated regularly and contains hundreds of unscripted comments and essays written by Zappos employees and vendors about the company’s culture, why it matters, and how it affects what they do every day. It was conceived as a training tool for new hires and partners, but consumption of the book has gone way beyond that internal circle. Ringing in at 348 pages in the 2009 edition, it’s a moving and persuasive testament to the power of employee engagement (“happiness” in Zappos-speak), and the role of culture in eliciting it. We recommend buying it and just paging through.

Here’s a taste, from Abbie “Abster” M., an employee who had been working at the company for three-plus years:

The Zappos culture to me is unlike anything I’ve ever experienced before. It’s always fun and weird, we’re all creative and open-minded, passionate and determined, but most of all, we’re humble. I think it’s because most of us have worked in horrible dead-end jobs before and can cherish our Zappos culture for what it is. It’s what makes me want to come to work every day, even my weekends.

 . . . I hear so many horror stories from friends about the places they work and it only makes me feel that much more fortunate to be a part of the Zappos family. I can’t imagine my life without Zappos, and the amazing people that I work with.

The quote that moved us most was from Ryan A.: “At my last job I was afraid to be anything: right, wrong, smarter, dumber . . . At Zappos being yourself is the best thing you can do.” Perhaps the cultural feature we observe most often is unproductive fear, fear of looking bad or doing something wrong. If organizations did nothing else but address that part of their environment, we’re confi dent that the creativity and engagement of their people would have a real chance of being unleashed. Human beings are not at their best in a defensive, self-distracted crouch.

Hsieh named his book on building Zappos Delivering Happiness, but he and his team didn’t just deliver happiness for its own sake. Like IDEO’s relationship with creativity, Zappos understood that the happiness of its employees, partners, and customers was a deadly serious endeavor, the most reliable route to sustaining excellence in the industry in which Zappos chose to compete. Everyone inside Zappos, from the CEO to the front line, understood the link between its culture of happiness and the company’s daily performance. What’s the cultural analog in your own business? What’s your version of happy?

Reprinted by permission of Harvard Business Review Press. Excerpted from Uncommon Service: Hot to Win by Putting Customers at the core of Your Business. Copyright 2012 Frances Frei and Anne Morris. All right reserved.

Zappos has a customer experience strategy that works. The retailer has risen 39 places in the US Customer Experience Excellence rankings, placing it in the United States top 10 alongside other high-achieving companies such as Amazon, Publix and H-E-B. This kind of success takes hard work and focus. Often, it can be best for organisations to put the customer at the heart of every decision, and Zappos does just this. And yet it also places a significant emphasis on the employee, recognising that a successful CX strategy can only be properly implemented when a company is underpinned by a team of passionate workers.

Zappos was founded in 1999 and has gone on to become one of the world’s largest online shoe stores. Although its overall product range is wider than this, with the company’s ‘raison d’être’ being to act as “a service company that happens to sell shoes. And handbags. And more…”, as its strapline attests. Zappos was acquired by Amazon in 2009, in a deal that was reported to be worth $1.2 billion, although its product range has adhered to fashion retail and hasn’t branched out into the wider world of the Amazon offering.

One of the things the company focused on cultivating, though, is its customer experience strategy. Zappos wanted to see things from the shoppers’ point of view, and to give them the best possible experience. This approach manifested itself in many ways, but one of the most interesting of these was in the company’s handling of telephone conversations. Zappos made it clear that it didn’t mind how long these customer interactions lasted, so long as the problem or query was resolved satisfactorily. In fact, the longest conversation on record went on for an incredible eight hours, with the employee staying with the customer until the issue had been worked through. It is not surprising, therefore, that Zappos’ subsequent scores across The Six Pillars were particularly strong in the areas of Resolution and Empathy, with the brand scoring 14 per cent higher than the US average in both instances.

One shopper had a particularly memorable experience when they telephoned to discuss exchanging an unwanted item. “The rep and I got to talking about other things because she had mentioned that she was new to the West Coast and just loved the mountains,” they explained. “We traded recommendations about places to visit and ended up talking about my new baby and her pregnancy… It was so nice that she took the time to have a fun personal conversation…”

Behind these interactions, though, are dedicated employees that Zappos is keen to look after and nurture. It expects them to spend at least 80 per cent of their time in customer-facing situations, but it does not pressure them into reducing their call times. In addition, they are able to accrue paid time off depending on how many hours they’ve put in, meaning that they are arguably more motivated and energised. And energy levels are important to the brand, as Zappos believes that well-rested workers are happy workers, and that happy workers give the best level of service.

It also operates a democratic environment. Zappos has embraced a philosophy of ‘Holocracy,’ which means that management positions have been scrapped and that the employees are allowed to decide for themselves how to approach tasks. In practice, this means that the operational decisions are made by those workers who are closest to the front line. There is little risk of anarchy, though, as the company is led by a set of principles and rules from a Holacracy constitution, and these offer guidance on customer and organisational resource issues. The thinking behind this approach is that, if a problem arises more than once, a different team of people will address it each time, meaning that there is a greater likelihood for discovering the best, most innovative solution to each challenge.

This sits alongside the internal ‘Zappos Labs,’ which are focussed on solving people’s pain points and creating optimised customer experiences across all channels. An example of this can be seen in the brand’s mobile app, which allows consumers to shop and ‘favourite’ items across a range of different devices. They can also take photographs of items they see on the street, and then send these pictures to Zappos employees – via text, email or Instagram – who will then find the item and send the relevant link back to the customer, so that they can purchase it online.

In addition, the retailer takes the time to train its workers in the art of building a personal emotional connection with the shopper. As part of its customer experience strategy, it created a Happiness Experience Form, which encouraged employees to try at least twice to connect with the customer on an individual level. The form also stated that this connection should be sustained throughout the interaction, and that the worker should also address any unstated customer needs, whilst providing an overall “wow experience.”

It’s an initiative that paid off for Zappos, with its score in the pillar of Personalisation standing six per cent higher than the overall US average. In fact, few companies in the 2016 US CEE analysis took such a meticulous and deep approach when it came to the physical and emotional needs of its employees and shoppers. It’s a strategy that enabled Zappos to become a top 10 customer brand, and it’s a strategy that will doubtless take the retailer even further as it heads into 2017.

0 thoughts on “Zappos Customer Service Case Study”


Leave a Comment

Your email address will not be published. Required fields are marked *