Insights About The Zappos Experience

When it comes to customer-centric culture, Zappos is one of the first companies that comes to mind. I still remember my interview with CEO Tony Hsieh from a few years ago, it’s an amazing story. So I am always interested in hearing what’s going on at Zappos, especially since it was acquired by Amazon.com.

I was recently approached to join the blog tour for Joseph Michelli’s new book, The Zappos ExperienceSince Joseph has done some nice work in the past, including writing about The Starbucks Experience, I decided to participate.

Actually, that’s only part of the reason. I also did it because Joseph is a good guy and he agreed to answer some questions for my blog readers. So, here’s my Q&A with Joseph:

What are the most effective things that Zappos does to…

…keep employees engaged with the company’s mission?
Michelli: “From the onset, Zappos socializes applicants so they understand they will be responsible for “defending and growing the Zappos culture.” Leadership at Zappos has culled 10 core values that are the foundation for all decisions made by the company. From orientation forward, employees are involved in projects to make the core values at Zappos more prominent. In the book, I offer an example of one of the new hire group projects called “you got faced.” In order to deliver the value “build a positive team and family spirit”, one group of new employees developed a mechanism for Zapponians to get to more easily get to know one another. Beyond initial onboarding projects, leaders demonstrate, talk about, and structure activities that enliven values like “be humble”, “create fun and a little weirdness,” and “do more with less.” Inexpensive, quick re-energizing, mini-play vacations in the middle of a work day (like Zappos parades, spontaneous karaoke, etc) are examples of living and stewarding a values based culture.”

…identify and respond to the needs of customers?
Michelli: “Zappos asks about, watches, infers, and tracks customer behavior and input. They are restlessly looking for scalable ways to make the customer experience quicker, easier, and more emotionally engaging. They are not content with satisfaction and as such strive to find “personal emotional connections” with customer that produce a “wow” reaction and that form the basis for customer loyalty and advocacy. At the individual level, staff are charged with and empowered to do what it takes (even if it means sending a customer to a competitor) to secure engagement as opposed to just a sale.”

…make sure that every interaction lives up to its brand promise?
Michelli: “Zappos leaders audit all their touch points with customers looking at them from the perspective of operational excellence and whether they deliver wowful happiness. Take a call to the Zappos call center for example. These calls answered by “customer loyalty team members” are reviewed by supervisors and evaluated for accuracy, rapport, and whether they connect and wow customers. In addition, customers are sent a post-call email that asks questions that get at whether customers were merely satisfied or truly “wow’d””

How does the management team operate differently from management teams at other companies?
Michelli: “The management team is hard to distinguish from the non-management staff at Zappos. Tony Hsieh the CEO and multi-millionaire sits in a cubicle easily accessible to all employees and that spirit of humility and availability is pervasive. Leaders are required to spend time with their people outside of work, to foster a family spirit beyond the walls of the office. This type of leadership approach is not for everyone but it works for the environment Zappos is seeking to create. Leaders at Zappos also work with staff to develop a true “pipeline” plan that helps employees grow at Zappos and acquire the skills needed for viable succession planning and the creation of a sustainable culture of service excellence.”

What limitations are there, if any, for a large established company to adopt some of Zappos practices?
Michelli: “I think there are several major hurdles to overcome. The first of which is the “that will never work here” mindset. While the exact values that drive Zappos should not be imposed everywhere, the passion for values-driven culture is directly applicable across all settings. Moreover, many large established companies have so much hubris and legacy that they are unwilling to drive change. They have lost the entrepreneurial hunger of companies like Zappos or Apple. A visionary leader at an established company can accomplish the crisp break from competitors that Zappos enjoys if he/she creates a compelling vision, anchors to defining values, selects for culture fit, inspires people to grow and change, and challenges people for significance beyond success.”

What’s the weirdest thing you found while doing the research that is NOT IN THE BOOK?
Michelli: “I saw customers and business people coming for a free tour of Zappos in Las Vegas and being oddly giddy. It was almost like they realized a spiritual quest or they were having dinner with their favorite celebrity. The strength of Zappos customer bond built through online videos, twitter, live chat, phone support, and lightening fast delivery has almost created a cult following. I’ve often said their is a fine line between cult and culture and some of the tour goers demonstrate that the Zappos internal culture is forging a powerful connection externally.”

The bottom line: Zappos service is an extension of its culture

Customer Experience Highlights From Monte Carlo

As I mentioned in the previous post, I enjoyed the Customer Experience Exchange 2010 in Monte Carlo earlier this week. I couldn’t go to all of the sessions, but here are highlights from some of the speakers that I saw:

  • Andrew Gerrie, Co-Founder and CEO at Lush. Andrew followed me on stage and dropped a bath bomb into a clear tub of water and we watched it fizz. I still remember the first Lush store that I went into. The salesperson came over with a bucket of water and dropped some of those bombs into it and water splashed on to the floor. She didn’t seem to mind. That was an experience! Andrew explained how those in-store demonstrations force employees to have conversations with customers. It also helps them attract employees who really like Lush products. Lush invests a lot in training its employees so that they can answer a wide range of questions about skin care; even beyond what their products can do. He also shared pictures from the company’s “Naked Products Campaign” where employees wear nothing but an apron to highlight the fact that Lush products are “naked” of preservatives and complex packaging. Click here to see some images on Google of that campaign.
  • Ingrid Lindberg, Chief Experience Officer at CIGNA. It’s always great to see my friend Ingrid. Although I keep close tabs on what she’s been up to at CIGNA, it was great to hear her talk about CIGNA’s customer experience story. They’ve done so many good things to make CIGNA more customer centric; including eliminating words that are confusing to customers (there’s a lot of them in the US healthcare system), making the call center accessible 24×7, and improving the usability of the website. These efforts haven’t just increased loyalty, they’ve also improved medical outcomes for their customers. Proof positive that good customer experience saves lives 🙂 I’ll be doing a case study on CIGNA — look for it in a few weeks.
  • Moira Dorsey, VP & Research Director at Forrester. I really enjoyed catching up with Moira, another friend who I sat next to for several years at Forrester. Her speech discussed how the future of online customer experience can be described with the acronym CARS: Customized, Aggregated, Relevant, and Social. To showcase what the future will be like, she highlighted some existing practices, noting this quote from the science fiction writer, William Gibson: “The future is already here – it’s just not very evenly distributed.”
  • Simon Glynn, Senior Partner at Lippincott. Simon’s presentation introduced a model of brands based on two dimensions: Authentic Stories (story power) and Inspiring Experiences (experience power). He showed how using these  in a 2×2 diagram leads to 4 quadrants of brands: Unattached (low on stories and experiences), Myths (high on stories, low on experiences), Tribal (low on stories, high on experiences), and Legends (high on stories and experiences). It turns out that Legends (like Amazon.com and O2) have an average 5-year growth rate of 8% compared to -4% for Unattached brands (like BT and Aldi).
  • Rob Siefker, Senior Manager Customer Loyalty at Zappos. After having interviewed CEO Tony Hsieh a few years ago, I’ve always been a fan of the Zappos story. The culture at Zappos is almost cult-like. And they can keep it that way, because as Rob described: It’s harder to get a job at Zappos than to get into Harvard; they only hire 1% of applicants. The interview process is tuned to find people who will buy-in to the culture; a couple of the questions they ask are “what would your theme song be, and why?” and “On a scale from 1 to 10, how weird are you?” The company replaced its standard reviews with cultural reviews, making it clear that it measures its managers in 4 key areas: driving the culture, inspiring new ideas and creative thinking, helping employees find their calling and reach their peak, and providing recognition.
  • Graham Webster, Director of Customer Experience at Telefonica O2 Europe. Graham discussed how the company’s vision helps engage employees in “something bigger than themselves” and how Telefonica is trying to go beyond satisfaction to turn customers into FANS. I loved when he said “If we look after our customers, they will take care of our brand. Customers complain, but FANS forgive.” The company researched the value of enthusiastic customers compared to detractors and found that they: have half the churn rate, deliver 9% more in average revenue per user, and generate less than one-fifth of the claims. Graham described a three-step evolutionary path: Random Experience to Predictable Experience to Branded Experience. What are the elements of a Branded Experience? Consistent, Intentional, Differentiated, Valuable, and Emotional Relationship.
  • Roger Sant, VP Research Solutions at Maritz. Roger talked about “making your customers fall in love with you.” He showcased results from a survey of 1,200 consumers that looked at emotional and functional attributes for banks, supermarkets, and mobile phones. The research pointed to three levels of relationship between a customer and the brand: Unfulfilled, Functionally Satisfied, and Emotionally Connected. Here’s the comparison of top box scores between Unfulfilled customers and Emotionally Connected customers: retention (9% to 58%), recommend (3% to 49%), and cross-sell (7% to 41%).
  • Frederico Cesconi, Director Of Business Intelligence at Cablecom. Frederico shared the companies model which looks at customer experience as a series of layers (going from inside to the outside): Systems, Processes, Touchpoints, Interactions, Customer, and Experience. The company focuses on 4 core processes: sales to activation, service assurance, incident handling, and billing to cash. He showed a wonderful report that they call a “Survival Analysis.” It charted churn rate against the number of negative incidents that a customer had run into — highlighting the cost of a bad experience. He also highlighted the need for customer feedback. Their internal metrics showed 83% first call resolution, but when they measured it with customers it turned out to be only 58%.

The bottom line: Monaco hosted the customer experience grand prix this week.

Will Amazon.com Kill Zappos’ Core Values?

Amazon.com just purchased Zappos, an up-and-coming online-centric shoe retailer, for $928 million. That’s right, Amazon.com spent nearly $1 billion on a company that earned only $40 million in 2008. Wow!

My take: I’ve been a big fan of Zappos, often writing about the company in this blog. As a matter of fact, my interview with Zappos CEO Tony Hsieh was one of my favorite research interviews over the past few years.

The company was built around, and maintains, a very strong customer-centric culture. At the cornerstone of its culture are Zappos 10 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

Hsieh told me that he hires, fires, and promotes people based on their embodiment of these values.

Hsieh has done a great job of embracing one of the 6 new management imperatives that I’ve defined called Invest in culture as a corporate asset. At the end of the day, Zappos’ key asset is its culture.

Amazon.com obviously expects to get more than $40 million in annual earnings for its $1 billion. If it’s looking for much faster growth, significantly more profitability, or a rapid expansion across categories, then how will these goals affect Zappos’ fanatical focus on in it’s 10 core values?

I hope that Zappos’ culture survives.

The bottom line: Will the Zappos culture thrive or die at Amazon.com?

Zappos Goes Robotic

I just ran into this video about how Zappos uses robots in its warehouse from a company called Kiva Systems. If you’re interested in some cool technology, take a look at the video. The robots are not just making the pick and pack process more efficient, but they also save a ton of energy costs. There are entire sections of the warehouse that don’t need any lighting or climate control (because humans don’t go there).

My take: The sea of robots reminded me of a scene from the movie I, Robot. But I don’t expect that Zappos will have to deal with any renegade robots.

Seriously, though, there are a couple of key lessons here. First of all, companies can not compete on customer experience alone. Firms need to look at their entire value proposition. While Zappos is known for it’s customer service, it won’t survive unless it invests in world-class operations that allows it to offer competitive prices. Even the most loyal Zappos customers will abandon the retailer if they can get shoes elsewhere for a much lower price.

It’s also interesting to note how the employees are reacting to the robots. Automation can be great in a warehouse setting, but it tends to fail if they’re not fully accepted by the employees. Why? Because employees will either sabotage the devices or start quitting because of poor working conditions.

The bottom line: Maybe there’s an opening for R2-D2 at Zappos.

Engaging Gen Y With Immediacy

We just published a report called Engage Gen Y Online With Immediacy which examines one of the four design approaches that we’ve outlined for reaching Gen Y: Immediacy (the others design approaches are Gen Y literacy, individualism, and interactivity). The research examined the online experiences of a handful of retailers, auto insurers, auto makers, and wireless carriers to find positive examples of the following three strategies for immediacy:

  1. Refresh and update content constantly. Changing content frequently and updating feature page elements on a regular basis give users a reason to return over time.
  2. Expose value immediately. Delivering clear calls to action and interactive cues help draw young visitors into experiences right away.
  3. Provide frequent feedback. Presenting notifications, rewards, and other feedback to users throughout an experience keeps them alert and engaged.

Here are some examples of immediacy best practices that we found:

  • AT&T displays updated lists of its newest and most popular phones.
  • Several insurers start the quoting process right on their homepages.
  • Old Navy provides an online only “sneak peak” at upcoming styles.
  • Victoria’s Secret’s “Dress Shop” section provides pictures of products as users roll over navigation options for dress types.
  • Zappos’ checkout highlights that some items are almost out of stock.
  • Scion’s “Tweaks Of The Week” showcases vehicle modifications submitted by actual Scion owners.
  • Old Navy engages users with recommendations to “complete the outfit.”
  • Allstate provides a quick path to value by offering the choice to “get ballpark estimates without giving your name.”
  • T-Mobile provides an interactive slider and buttons on its homepage to select plans.

I need to give a shout out to Andrew McInnes who was the researcher on this project (which means he did most of the work) and to Ross Popoff-Walker who worked with me on defining the Gen Y design strategies. 

The bottom line: Give Gen Y what they want: immediate gratification.

Apple, Not Obama, Is My Marketer Of The Year

Obama’s campaign just won “Marketer of the Year” from the Association of National Advertisers. Here’s how the group voted:

  1. Obama: 36.1%
  2. Apple: 27.3%
  3. Zappos: 14.1%
  4. Nike: 9.4%
  5. Coors: 8.7%
  6. McCain: 4.5%

You have to give Obama a lot of credit for successfully using social media and digital marketing techniques to reach the grass roots constituents and raise a ridiculous amount of money: $150 million in September!!! I outlined several good the things in the Obama campaign in my post Five Lessons From Clinton/Obama Battle.

But even with all of that cash flowing into the Obama campaign, it wouldn’t have been my first pick on the list. Who would have been my number 1? Apple.

Apple has done an amazing job with Mac and iPhone marketing. The Mac ads are fantastic; delivering clear, on-brand messages (Mac is fun, Vista is broken) in a fun and memorable way. The iPhone marketing campaign has created enormous buzz around the iPhone experience, pushing people to actually switch wireless carriers. In addition to the product-specific campaigns, Apple does a great job of blending its product design, store experience, and Genius service into the marketing mix.

And, we can’t forget that Apple is successfully outmarketing companies like Microsoft, HP, Dell, Verizon, and RIM (Blackberry). These are major consumer brands. Obama, on the other hand, is only out-marketing McCain who has significantly less resources.

The bottom line: Apple is my marketer of the year (P.S. I’m also a huge fan of Zappos)

A Look Back At My First Year Of Blogging

1st Year Aniversary For Customer Experience Matters

Today is a big day. It’s exactly one year after my first post “Lessons Learned From 1,001 Web Site Reviews.”

It’s hard for me to believe that I’ve been doing this for a whole year. Or as the song from Rent goes, for five hundred twenty five thousand six hundred minutes. But my measurement is not in daylight, sunsets, midnights, or cups of coffee. It’s in blog posts, 184 of them!

While blogging takes a ton of time (I’m constantly looking for interesting topics and drafting posts), it’s been a great experience. Why? Because of you! Readership continues to grow and this blog now has more than 10,000 visitors per month. So I want to say thank you to everyone who has been reading, linking to, writing about, and passing along my blog.

In honor of the 12 months of blogging, I’ve picked out 12 of my favorite posts (in no particular order):

  • Experience-Based Differentiation. This is the core idea which drives my research; it also  won the best research award at Forrester. Experience-Based Differentiation, or EBD as I fondly call it, is based on three principles: Obsess about customer needs, reinforce the brand with every interaction, and treat customer experience as a competency. This remains a powerful blueprint for customer experience excellence. If you’re interested in customer experience (who isn’t?!?), then you may want to use the EBD self-test as a starting point. You can also find many other posts about EBD on this blog.
  • My Manifesto: Great Customer Experience Is Free. This post summarizes my perspective on customer experience; it’s a lot like the quality problems of the 1980s. While customer experience is not an easy situation to deal with, it can DEFINITELY be improved with a systematic effort; it just takes discipline (see EBD above). There was also a follow-on to this post called Great Customer Experience Is Free, Part II.
  • Don’t Let Profits Replace Purpose. Companies need to make profits, but here’s the dilemma: if they just focus on making profits, then they lose sight of what makes them special. Firms that lack a strong raison d’être have a hard time aligning the efforts of their employees. In a related post, I discussed how Firms Need Some Soul Searching.
  • The Holy Grail: A Link Between Customer Experience And Loyalty. I’ve been hoping to do this for a while: use data to provide the connection between customer experience and loyalty. And I finally did it. My analysis shows a high degree of correlation across the 9 industries that I examined, with the the strongest linkage for banks. That finding fits nicely with an earlier post which said that banks need to prepare for customer experience wars.
  • Trend Watch 2008 Wrap-Up. I really enjoyed writing a series of posts over the New Years break that examined trends published in The Economist, The McKinsey Quarterly, Advertising Age, Business Week, and Trendswatch.com. While I discussed 52 trends across all of the posts, this wrap-up looked at 14 that covered 4 areas: Consumer needs, online opportunities, required skills, and strategy & culture. 
  • Learning From The Good Fortune Advice Of Others. Fortune Magazine published advice from 25 famous people, and I commented on 8 of them that I really liked. There was great advice from big names like HP’s CEO Mark Hurd, Disney’s CEO Bob Iger, and Ford’s CEO Alan Mulally. But my favorite person on the list is Indra Nooyi, Chairman and CEO of Pepsico (who I found out about in a Time Magazine article). Her advice: “Whatever anybody says or does, assume positive intent.”  
  • Discussing Zappos’ Culture With Tony Hsieh. As a researcher, I get to interview a lot of people. But my discussion with Tony Hsieh, the CEO of Zappos was really memorable. It started a few minutes before our call when Tony twittered that he was waking up early (7:00 AM on Memorial Day) and needed a Red Bull before he spoke with me. Tony was great and I’ve become an even bigger fan of Zappos after the call. I also wrotr about another CEO that really understands customer experience, Wachovia’s Ken Thompson.
  • JetBlue’s “Happy Jetting” Is More Than Empty Promises. After a series of posts that looked at companies trying to change their customer experience through advertising efforts (JP Morgan Chase, Circuit City, and John Hancock) it was great to see that JetBlue was engaging its employees in its Happy Jetting efforts. I also wrote about how Ford is starting to view employees as potential brand ambassadors
  • Forrester’s 2007 Customer Experience Rankings. We used responses from nearly 5,000 consumers to rate the customer experience of 112 US firms. Our customer experience index (CxPi) examined three areas:meeting customer needs, being easy to work with, and being enjoyable. The three organizations with the highest CxPi were Costco, Borders, and Barnes & Nobles. The bottom three: Charter Communications, Medicaid, and Cablevision.  
  • Amex CEO Gains Insights From Napoleon. Kenneth Chenault, Amex CEO, used a quote from Napoleon that I really liked: “The role of the leader is to define reality and give hope.” This gave me an opportunity to discuss key leadership attributes: Deal with the reality of the world, engage your employees, provide a clear vision, and maintain a sense of purpose. While I’m discussing quotes, I really liked this one from Mackey McDonald, Chairman of VF Corp: “We realized we didn’t have to come up with brilliant ideas – we needed brilliant ways of executing good ideas.” 
  • Mashup: Halloween + Red Sox + CxP. This was a unique opportunity for me to combine three of my favorite things: my family, Red Sox, and customer experience. We had a great interaction with Jason Varitek on Halloween that ended up with my kids getting his autograph. You can see where he signed my son’s World Series ticket in this post. In another mashup of my interests, I my posted about how The Colorado Rockies Embraces Its Guests.
  • The Best Of CxP Matters: Volume #1Volume #2, and Volume #3. It’s amazing how quickly time (and many blog posts) just flies by. That’s why I’ve been writing “The Best Of Customer Experience Matters” to summarize every 50 posts; they also give me a reason to reflect on what I’ve written. So I decided to bundle all three of these as one of my favorites. 

In case you’re interested, here are the 10 posts that have been read the most:

  1. Experience-Based Differentiation
  2. My Manifesto: Great Customer Experience is free
  3. Forrester’s 2007 Customer Experience Rankings
  4. USAA: A Positive Example Of Customer Experience
  5. Trend Watch #5: Trendwatch.com “8 Important consumer trends for 2008”
  6. Webkinz: An example of a disruptive customer experience strategy
  7. Five Disruptive Customer Experience Strategies
  8. Are you listening to the voice of the customer?
  9. Apple’s Truly Genius Service
  10. Trend Watch #4: Business Week “Innovation Predictions 2008″

The bottom line: If you’d like to celebrate this anniversary, send a link to this blog to five of your friends.

More About Tony Hsieh And Zappos

If you enjoyed my post Discussing Zappos’ Culture With Tony Hsieh, then you should definitely read an article in Forbes called “A Step Ahead.” It provides a great sense of Tony as well as the Zappos culture . Here’s one of my favorite parts of the article:

Not long ago Hsieh created a “cultural fit interview” for prospective hires. It includes questions such as: “On a scale of one to 10, how weird are you?” “If they say ‘one,’ we won’t hire them,” says Hsieh. “If they’re a 10, they’re probably too psychotic for us. We like 7s or 8s.”

The bottom line: I guess it’s accurate to say that Zappos is a little wierd.

Discussing Zappos’ Culture With Tony Hsieh

As I mentioned in my post about popular customer experience topics, I’m currently researching best practices for the 3rd principle of Experience-Based Differentiation: Treat customer experience as a competence, not a function. It’s a topic that I sometimes call customer-centric DNA.

As part of that research, I’m interviewing a number of executives. So I reached out to Tony Hsieh, the CEO of Zappos, a company that’s renown for its great customer service.

Given our schedules, Tony and I ended up speaking on Monday (Memorial Day) morning at 10:30 AM EDT (7:30 AM his time). I checked out Tony’s twitter right before we spoke and found this tweet:

About to do a conference call. Way too early to be awake, couldn’t find another time to do it. Getting out of bed was not easy. Red Bull!

So let me start by thanking Tony for getting on the phone so early on a holiday. That shows his commitment to getting the Zappos word out!

How good is Zappos’ customer experience? Well, my wife loves Zappos. And my mother-in-law, after finding out about my discussion with Tony, excitedly told me that she loved Zappos because “it is so easy it use.” She once ordered a pair of shoes at 10:00 PM and was amazed to receive them before noon the next day.

Those are not isolated impressions about Zappos; the retailer has a lot of adoring customers. As a matter of fact, Tony shared an interesting fact with me: the company’s Net Promoter Scores (NPS) are so high that they do not provide any guidance on areas for improvement.

Well, the interview was great. Tony was open, informative, and inspiring. Here are some of the interesting factoids from our discussion:

  • The company’s culture is defined in its ten core values that include items like “deliver WOW through service” and “be humble.”
  • Tony felt funny when the company codified those core values, because it felt a bit too corporate. But he realized that it needed to happen given the company’s growth.
  • Tony doesn’t want to prescribe actions for employees that show how much Zappos cares about customers; he wants employees to do things because they genuinely care about customers. 
  • Zappos uses its culture as a reason to hire and fire people. All new hire candidates have a separate interview with the HR department that focuses just on cultural fit.
  • New employees go though 4-5 weeks of training that includes education about the culture and spending time on the phone with customers.
  • To ensure that employees have a strong fit with the culture, new employees are offered $1,000 to quit after their first week of training. That way they weed out the people who aren’t committed to working at Zappos. Hsieh didn’t feel like enough people were taking the company up on its offer, so he discussed raising the bonus to $1,500.
  • Every year Zappos publishes its “Culture Book” in which all employees are encouraged to write about what the culture means to them.
  • Tony recognizes that cultures often go downhill when companies scale. He wants Zappos’ culture to get stronger as it grows.
  • Tony offers this advice to Zappos employees: It’s completely up to you guys. I can’t force the culture to happen; so part of your job description is to display and inspire the culture.

I asked Tony if I could share some of our discussion in my blog. He said yes. Why? It met his basic principle for deciding what he’s willing to share:

Would sharing it make the world a better place?

The bottom line: Most firms would be a better place if they were more like Zappos.

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