Fancy seeing a billion in revenues in 2014? It’s not wishful thinking. Zappos, now a major online shoe and fashion store, made it years ago by simply crafting a great company culture even though the company invested almost nothing in marketing and sales.
So here are a few things that you can learn from Zappos' company culture and the reasons behind their choices in order to boost the revenues for your ecommerce business.
Zappos' philosophy is to “Deliver WOW through service”. First of all, they worked on having flawless fulfillment operations to cover expectations, and secondly they came up with nice surprises. For example, they always ensured on-time delivery, but they were delivering earlier as much as possible.
The main reason behind these efforts was to secure long-term customers and make every one of them ambassadors of the brand that brings in new customers.
Zappos didn’t invest much in marketing and sales, so their strategy was to make customers so happy that they would always come back to shop more and tell others about it.
Your customers are your best marketing and sales team. By focusing on customer retention and satisfying them over expectations, they will be lifetime customers and bring you even more customers from among their friends, family and colleagues.
The CEO of Zappos has his own theory about what drives happiness: it involves establishing a balance between an employee’s perceived progress, perceived control, relatedness, and connection to a larger vision.
Zappos was not “buying” employees happiness - salaries were often below market rates and there were not many perks. Instead, the company culture was used to keep people happy, motivated and productive.
For example, the CEO was encouraging people to hang out together, and took his employees to restaurants and bars to set an example himself. Even more, managers at Zappos (back when managerial functions existed there) were supposed to spend 20% of their time “goofing” with their employees.
Moreover, Zappos was also investing in employees development, unlocking hidden potential and eliminating high turnovers. They offered different types of classes, given access to life coaches etc. The idea behind it was to promote long-term growth.
At Zappos, prospective hires must pass an hour-long "culture interview" before being handed off to whatever department they are applying to.
Zappos was growing very quickly and managers who were not around for too long were hiring new people. So the CEO emailed all of them a list of 10 core values, like “Be humble”, “Create fun and a little weirdness”, and “Deliver WOW through service”. Then he assigned and collected short essays from every employee on the subject of the company's culture and published them, unedited, in a book that he distributed to the staff.
All new Zappos employees receive two weeks of training. Then they spend two weeks learning how to answer customer calls. Afterwards, they are offered a sum of money to quit.
"Our training team had gotten good at figuring out who wasn't going to make it, and we were thinking, How do you get rid of those people?" says Hsieh, the CEO.
Paying them to quit saves the company money by getting rid of people who would jump ship quite soon and allows those who remain to prove their commitment to their new employer.
Posters or TV screens showing numbers like total sales in a month or day, number of products in the stock etc. were always available for all eyeballs at Zappos.
Full transparency at all times ensures a better sense of the big picture and enables employees to see how their efforts are contributing to the whole.
They also have a very transparent communication with their suppliers over sales status. That helped Zappos have better supplier relationship management and have faster stock replenishment.
By the end of 2014, Zappos is planning to get rid of job titles as we know them, meaning there will be no more managers, no more decisions running from manager to manager.
It is like an entire organization of intrapreneurs - each person fulfilling specific roles for which they are responsible, while being accountable to the larger organization and sharing the same higher purpose.
At the moment, Zappos has about 1500 employees organized in 400 “circles” that are run democratically.
Even with the care Zappos was putting into their services, there were still issues arising. It is very important to have a call center available for your customers all the time.
Zappos operators don’t follow scripts, they have natural discussions with the customers, connect on emotional level and are completely free to decide on the action to be taken for each case.
Zappos chose after a few years to stop drop-shipping because 20% of their customers encountered inventory problems, finding out days after ordering that their wanted products were not in stock.
Although drop-shipping was producing 25% of their revenues at that point, Zappos decided not to compromise their customer happiness. And it paid off eventually.
Zappos ran some experiments at some point, offering discounts and coupons and fighting the other players that were competing on price. They realized that this method attracted mostly once-off customers, those who never shop loyal and will always go for the cheapest products.
As long as they couldn’t get long-term customers, they decided to not compete on prices and focus on competing on service and selection instead.
Having a good inventory management, proper warehouses, and a great call center could turn into high numbers in accounting. While most managers try to lower these operational costs, Zappos was trying to increase them.
That was because they saw operational costs as marketing costs - great inventory, swift delivery, and customer service was what made their customers happy and their revenues high. Free shipping and free returns were there from the beginning and they were the best marketing techniques.
So don’t hesitate to invest a bit more here and there to have your operations run smooth.
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