SXSW – Tony Hsieh and Zappos

At Zappos.com, Tony Hsieh has fostered a culture where extraordinary customer service is the norm.

On Saturday, March 14, hear him talk about how good deeds can help you leverage the power of your audience to massively extend your brand. As a preview, you can read this story for a glimpse of a company that blazes its own trails, including paying its employees to quit.

Survey…lots of hands up who have bought from Zappos. it’s normally 2-1 female to male.

They do tours of the site..got someone from a major Music label….took him to the Customer Loyalty team. He got a team member to pull up his wife’s account – who had spent 62k (err, pretty sure they weren’t allowed to do that!)

They started off with a pizza delivery in college. His current CFO used to buy pizzas, 2 a night. He found out that he was taking the pizza and selling it off by the slice.  We did a .com, LinkExchange, sold off to Microsoft. One of the reasons for the sale was the culture – did not like it. they did not look for culture fit when employing. He hated going into the office.

We sold it, and created an investment company, one of the investments was Zappos. It was the most interesting for me, ended up joining. We sell a lot more than shoes – clothing housewear etc.  The focus is the best customer service, in 10 years time we hope our customers don’t realise we were shoes.  It is about the best customer service, what ever we do. Don’t rule out an airline or other things.   We re proud of what we do, loved we were in the Forbes list of best places to work.  

The focus on service is great. On any day, 75% of orders are repeat orders.  We take the marketing money and spend on service. 1999 was 0, in 2008, was over $1billion. Most is from repeat sales and word of mouth

What is customer service. First, it’s our 1800 number. It’s at the top of every page, we encourage people to call, even if they are not making a sale; most of our calls are not for sales.  The telephone is one of our best branding devices – you have attention for the call. Get it right and they love you. We get >5k calls a day, each call is a marketing opp. It is one of the best branding devices.

We offer free shipping. People buy, try them and send back the non-fits or the non-suits. We offer a year return policy. Some customers do take a year.

these are all policies and any company can copy, and they do. But what happens after you place an order.  This is where we focus. We only show items on site that are in warehouse.  There is value with putting things on site that aren;’t there – you can backorder them, we got 25% of sales. But this was not about customer service though, we gave up this revenue and focused on what we could actually sell…to be true to brand and what we wanted to do

With repeat customers, we often do surprise upgrades to overnight shipping. A lot of customers order late eastern, then it’s on their door the next morning. It is expensive..but we regard this as marketing dollars, not shipping. it gives the WOW factor. We run our services different; if someone wants something that we don’t have, we look on competitors sites and direct them there.  We about a lifelong relationship, not an individual sale. the telephone is not a costs, is is an investment, for branding.

We don’t have strips, average handle times, we don’t upsell. It is not about how quickly you can get them off the phone. We tell our reps to spend as much time as needed to wow the customer.  Our longest call was 4hrs.

We run warehouse 24/7, which is not the most efficient as there is not high picking density. It’s not about the most efficient warehouse, it’s about the service.

customer service is however not the no1 priority, Company culture is the focus. If we get that right, then much of the rest follows.  It starts with the hiring. the Hiring manager looks for relevance and experience, and then the HR team looks for culture fit. You have to pass both. the same things goes with firing. Even if doing the job brilliantly, they still have to fit the culture.  The other thing is training. Everyone goes through the same training. 5 weeks, first 4 weeks in the head office, includes 2 weeks on the phones. You also go for a week to the warehouse, to do all this stuff. Whatever is your role.  At the end of the time, we pay you for your time and offer an extra 2k. We wanted people who were there who believed int he vision, in the company.  Starting pay for call centre is $11/hr, so $2k is a lot. In 2007, 3% took offer, in 2008 2% took it. We think that not enough are not taking the offer, so looking at next level.

The biggest benefit came from people not taking the offer – people had to decide to commit to the company if they do not take the offer, they had to have thought about it.  We also have the Culture Book, we put it out every year. Everyone writes about the company culture and what it means to them. We give it to prospective employees for them to look at.  The other thing that has made a difference is Twitter. Started 2 yrs ago to find parties at SXSW, then personal, to keep things in touch, find out about friends.    We rolled it out to entire company; we have twitter class as part of orientation.  About 400 of the 700 in the Las Vegas office is on twitter. this connects everyone,t ehy meet up and they see people as people

Culture does drive your brand.  The brand may lag your culture, but it will catch up.  Look at the airline industry..most people think airlines has bad customer service. That is the brand, it’s not what they set out to be that.  A few years ago, someone ordered a wallet, tried it out, decided that it was not for her. She had put $150 in the wallet and forgot about it.  She had spent 2 days trying to find out which kid had taken it!  She then got a letter from the warehouse worked who wrote to her and sent her the money back.  He could have kept the money and no-one would have known, but the culture was there as well.  Customer service is the whole brand and company.  it’s not a department. 

In 2009, we want to own the 3Cs Clothing, Customer service and Culture. We want to get the message out about our clothing.   

So what is the Zappos Culture. We have 10 core values – committable core values.  That means we are willing to hire and fire on these values.   We have questions for each of these values.  One that trips us up is Be Humble..many people are brilliant at what they do, but have egos, so fail.  One hire like this won’t be a bad thing, but if you keep doing this it all goes downhill.

We have create a little fun and weirdness.  We ask how weird you are.  It’s about the reaction to the question, we celebrate individuality. They decorate cubes etc; you call the service centre different times, you’ll get different connections. we don’t have a fixed way of relating.

4 is be adventurous, and open minded.  We ask how lucky they are in life.  We try not to hire unlucky people.  It was inspired by a research study, which asked the question.  Then asked people to count photos in a fake newspaper…there was a headline telling the answer. the lucky people noticed it and got extra money. It is about how you see things, ot how lucky you are.

It;s primarily about alignment, getting people to think the same way. Which helps the company move forward.

So steps to success.

  • Step one is to DECIDE. you have to decide to do this.  Requires patience to build a long term sustainable brand, you have to make trade-offs to get there.  you may have to walk away from revenue and profit opps.
  • 2nd is to figure out VALUES and CULTURE. It’s for all companies, not just the big ones.   I wish we had done it from day 1.  We asked our employees. It was a year long process. the initial list was 37 items, we combined them BRAND POSITIONING. all our people know this. We hire for culture and fit, so all people can talk about the brand positioning, culture is brand,
  • Commit to TRANSPARENCY.  for all, we ask people to use your best judgement.  People can ask anything as well and they’ll get answers
  • VISION.  whatever you are thinking, think bigger.  It has to have meaning. We focused on customer service when deciding where to move after shoes.  Our employees got excited about our vision, it got them engaged. Chase the vision, not the money. Ask what people are happy doing, what they would be happy doing in 10yrs.  It’s about MOTIVATION vs INSPIRATION
  • BUILD YOUR TEAM. Hire slowly, fire quickly. make sure your team is right
  • THINK LONG TERM. it’s not the short term stuff, it’s the long term. Zappos have been at is for 10 yrs, plus his previous business.
  • So WHAT IS YOUR GOAL?  Do you know where you are going.  Of you ask people what they want, and keep asking why it boils down to HAPPINESS. that’s what people want.

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