In my last entry, I reviewed one of two seemingly contradictory articles in the July-August issue of the Harvard Business Review. In this entry, I will provide a summary of the second article, “Zappos’s CEO on Going to Extremes for Customers.” For the third (and final) installment of this series, I will provide some thoughts on what we can learn from these articles, including if they really contradict one another.
This article describes the process by which Zappos addressed a problem that I suspect every company with telephone support has faced – how to recruit and retain call center employees. It was 2004, and this was a vexing problem for the five-year old company – particularly difficult given the culture of customer focus that the firm was reinforcing both internally and externally. The Bay Area was proving to be suboptimal in terms of offering a suitable resource pool for customer service; while some of this was cultural, there was certainly an economic reality - customer service reps could not live affordably in the Bay Area.
The key decision that Zappos made was to relocate the entire company to Las Vegas. The alternative, of course, was to move only the call center. This idea was rejected when the firm reflected on its objective of being customer-focused – that is, having a customer-focused culture meant that everyone played a role in customer service; it would, therefore, be counterintuitive to isolate the customer service function from the rest of the company.
The remainder of the article provides stories that illustrate the key learnings that Zappos has realized over their journey. I would summarize these learnings as follows:
1) Decide early on what you are going to be – Zappos decided that they were going to be fanatical about customer service; once they made that decision, then other decisions (i.e., where to locate the operation, how to invest in employees, etc.) were easier to make. This should remind us of the value of having well-articulated mission, vision and values statements – the value in having these is not in the talking points, but the extent to which they provide a framework for making decisions.
2) Outsourcing would not work – While it would have offered cost benefits, outsourcing customer support would have eroded the firm’s image and value proposition. The reason is that they needed to be close to customer service reps to reinforce the firm’s core values; additionally, Zappos’ reps do not use scripts when dealing with customers, so it was important that the reps understand the company, be a part of its culture, and know what customers wanted.
Interestingly, Zappos made the same determination on inventory management – they carry inventory as opposed to having their suppliers drop-ship on their behalf. This is designed to ensure that they are listening to customers, are able to address consumer demand and can reliably set expectations regarding delivery – in essence, they did not want the perceived value of Zappos constrained by their suppliers’ inventory.
3) Cheapest isn’t always best – This is a theme throughout the article. From the outsourcing decision, to where to relocate the operation, to their return policy, cost was not the primary concern. Rather, Zappos recognized that compromising their core competency for the sake of a short-term ROI would jeopardize not only long-term ROI, but the company’s long-term viability.
4) You have to make it easy for customers – Zappos offers 24-hour support, free shipping, and a liberal return policy (including free return shipping); the key theme here is making it easy for customers to do business with them. This includes having their contact information readily available at the top of every page on their site – and the contact information is a telephone number, which is fairly unique for an internet pure-play.
5) Customer support is a marketing investment – Zappos sees its customer service operation as a key way in which they market – they clearly are leveraging the power of word-of-mouth that tends to yield results in the B2C space. In viewing support as an investment, they take a decidedly different operational approach – for example, they do not measure average call handling time, they don’t attempt to upsell customers in the support process, and they do not use a scripted approach to customer service. This helps reinforce the brand promise and the firm’s customer-focused image.
6) There is a link between loyal employees and loyal customers – While the article does not overtly make this link, it is telling that 78% of the employee base chose to relocate with the company and the firm has an applicant-to-hire ratio of 100:1 while maintaining an image of being extraordinarily customer-focused.
So – we have two different articles with two different conclusions. The first maintains that targeting delight is over-reaching, while the second demonstrates the benefits of building customer delight. In the final entry of this series, I will outline what we should take away from these seemingly opposing views.
Mark A. Ratekin
Sr. Vice President, Consulting Services & Resource Management
Source: Hsieh, Tony. “How I Did It…Zappos’s CEO on Going to Extremes for Customers.” Harvard Business Review, Volume 88 (July-August 2010).41.