Happiness is a Business Model at Zappos

October 20, 2010Sparxoo

Zappos CEO Tony Hsieh recently spoke to American Marketing Association Tampa Bay and shared his journey in creating Zappos, which sold to Amazon for approximately $900 million in 2009.  The presentation was part of Tony Hsieh’s bus tour coinciding with the release of his best selling book, “Delivering Happiness.”

Tony shared the keys to building a customer service focused business that WOWs customers and has achieved 75% of its orders from repeat customers.  For Tony, the Zappos journey began in 1999 when the goal was to offer the largest selection of shoes.  4 years later, in 2003, the priority evolved to become great customer service.  Soon after, in 2005, the company began to transform itslef as it recognized its culture and core values were a platform to success.  Simply put, hire more great people with the right DNA and character and it will have spillover benefits across everything the company does.  As of 2007, the goal became creating a personal emotional connection.  And today, the goal has elevated once more to “Delivering Happiness.”  From an origin of shoes to its current inventory across clothing and retail categories, the future is wide open for the company to Deliver Happiness in new ways tomorrow.  Tony has deemed Happiness to be the Company’s business model.

For emerging leaders who are taught to focus on profits, Tony would say that profits are relevant more as an end state.  Passion and Purpose are key ingredients that will have more impact on long-term profit growth than just a focus on profits alone.  For Zappos, shoes and clothes are just one part of the equation.  As Tony puts it, Zappos is in the stories and memories business.  Think bigger!  “People will never forget how you make them feel.”

3 simple suggestions in making brand culture a priority:  1) figure out your core values, 2) commit to your core values, and 3) be willing to hire and fire based on core values.  This might seem easy, but for too many, there is a temptation to hire someone who “rubs people the wrong way” because they might be able to make an immediate impact.  Tony warns not to chase the money, but instead to chase the vision.  Passion is the ultimate motivator, so make sure that your team is inspired by passion and purpose.

Making customers feel an emotional connection, and ultimately happiness, starts with the brand culture that Tony has set for Zappos. Here are some specifics from the inside of Zappos:

  • Training on Day 1 through Day 25.  all employees take a 5 week traning course that includes a heavy does of being on the phone taking customer service calls.  For all those who like to outsource customer service and forget about it, notice that Zappos has made its customer service, including phone experience, a differentiator.
  • Be authentic.  No scripts!  It seems that the more complex business becomes, the more policies and scripts are in place.  Tony retorts that scripts and policies are intended for 1% of customers at the inconvenience of the other 99%.  If you are hiring great people, why not empower them to go unscripted and use their own judgment.
  • Brand Values for Performance Review.  Instead of focusing exclusively on a small set of tasks, performance review takes a holistic look at the employee’s ability to live and inspire Zappos brand values.  You want your employees to live your brand?  Then take a cue from Zappos and make it count for 50% of the review.
  • Respect Your Customer.  Sure, there are opportunities to cross-sell and up-sell, but Zappos has decided NOT to insert an upsell into its phone calls.  Likewise, Zappos has a 365 day return policy.  They give customers 1 freebie in abusing the policy.  Zappos gives the customer respect and expects it in return.  If customers abuse the freedoms that Zappos offers, than Zappos fires the customer.

You might be surprised to see so much attention to phone customer service for a company that does 95% of its orders online.  What Zappos realized is that on average, every customer calls into customer service at least once during their lifetime.  At that moment, the human touch wins out over high tech, and its an opportunity to get the cstomer to say, “Wow.  I like these guys.”  Zappos has even reported a call of 8 hours and 3 minutes.  Can you imagine what a manager would say if an employee spent an entire 8 hour shift on one phone call!  Every executive has to make tradeoffs.  In the case of Zappos, investing in world class customer service is more important that investing in a Super Bowl ad.

At Zappos, passion and purpose are the ingredients that lead to profits.  They’ve got a truly engaged team, a brand culture that embraces “weirdness” and inspired a spontaneous parade of pirates.  We know you want profits, but don’t lose site of greater purpose and happiness.  Your employees and customers will appreciate it.  For further inspiration courtesy of Zappos, you can tour the Zappos offices in Vegas (they’ll pick you up at the airport and drop you off at your hotel after your tour) or download an audio version of the book Tribal Leadership for free on the Zappos web site.