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Founded in 1999 and acquired by Amazon in 2009, Zappos has long been admired for its attitude to staff and customers. 

This focus is all about retention of customers and staff. And it saves the company a fortune on marketing and recruitment. 

Indeed, Zappos can boast customer retention rates of 75%, while staff rates are 85%, figures not many other firms can match. 

Companies are often more focused on acquisition than retention, but Zappos has turned this on its head, looking to market itself through quality of service.

It's worked too, with Zappos reaching $1bn in annual sales before the Amazon acquisition. 

Here are just a few lessons that can be applied to other businesses...

I've divided this post into points on staff and customer retention, but there is a lot of crossover.

For example, empowerment of staff makes for better customer service, which means happier customers and greater retention rates. You get the picture... 

Staff retention lessons

A great work environment

Offices full of computers, phones and desks can be pretty dull places. As Paul Boag explains, the workplace is vitally important for staff retention and effective collaboration. 

Zappos tries to make its office fun for employees, allowing them to customise desks and pretty much turn it into a jungle.

It may look crazy but there is a serious purpose behind this. 

Giving employees responsibility

One of the biggest gripes when calling customer services is the fact that, no matter how they may understand your issue, the staff have their hands tied and can only work within certain limits. 

This means frustration for the customer, and the inevitable demands to speak to a manager. It's not good for employees either (I've been that call centre agent in the past) as they simply can't do the job properly. 

The solution is simple: trust your employees and give them the responsibilty. The best staff will respect you for it and customer service will improve. 

That's what Zappos does: staff can give people a free pair of shoes if they feel the situation merits it. No need to have people waiting for a call from their team leader. 

Free lunches

This may seem a trivial point, but this and the other employee benefits offered by Zappos have a positive effect on staff morale.

Also, though some hot meals come with a small charge, healthier options like salads and cereals are free. All staff also receive a generous 40% discount on any purchases from the site. And there are more. 

Benefits like this show staff that the company cares about them and wants them to enjoy their jobs and the company culture. 

Of course, there are costs associated with providing these benefits, but Zappos has taken the view that happy employees make for better service, and that higher staff retention rates means less spent on recruitment and training. 

Recognition for staff

Staff want to be rewarded financially, but recognition from managers and colleagues for good work can be just as important. 

In addition to the 'Desk of epic glory' there's a monthly parade to recognise employee 'heroes' and a Zollar Store, where staff can redeem zollars earned by achieving work-related goals. 

Customer retention lessons

Size information

Shoes can be tricky to buy online. Since you can't try them on, it's hard to know exactly whether they'll fit when the package arrives. 

To avoid this, Zappos provides as much information about the fit of shoes as possible.

In addition to this survey summary, there's lots of related information among the reviews. You can't be 100% certain, but increasing the likelihood of finding the right fit makes for happy customers. 

Easy returns

And, if shoes don't fit, reassuring customers that they can return them easily is the next best step. 

More importantly perhaps, returns are free so customers don't incur any costs if shoes just don't fit. 

According to Craig Adkins of Zappos:

Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers. Zappos' modus operandi is not to give its purchasers the cheapest footwear on the block, but to give them the best service: hence, a 365-day returns policy, and free two-way shipping.

The personal touch

This is a great example, in which the employee has gone the extra mile to ensure the customer is happy. She didn't need to do this, but the result is an even more happy customer, and one that will be a brand advocate. 

It also leads to lots of positive stories online, which further reinforce the brand image. 

Getting the last mile right

This is vitally important, as delivery issues are guaranteed to deter repeat purchases, but Zappos focuses on getting the last mile right

In a nutshell, it's about under-promising and over-delivering. While Zappos promises delivery within five business days, the majority of orders are shipped overnight. 

Looking at the right customer service metrics

In the past, I've worked at call centres where team leaders and management spent more time worrying about service levels and call metrics rather than whether or not customers actually received good service, which is what really matters. 

In fact, staff were often told to manually note down customer details for a later callback rather than actually dealing with the problem there and then. That may mean targets are met, but it does nothing at all for the customer. 

Instead, Zappos focuses on metrics which measure whether the customer's problem has been dealt with, and whether agents have made a connection with the caller.  

This is better for customers and staff alike. 

A focus on customer service

Providing excellent customer service is central to the company culture, with the aim to 'deliver WOW through service'

Good customer service means happy customers who are more likely to buy again, and to become advocates. It's a great marketing strategy when you get it right. 

 

Our Festival of Marketing event in November is a two day celebration of the modern marketing industry, featuring speakers from brands including LEGO, Tesco, Barclays, FT.com and more. 

Graham Charlton

Published 19 August, 2014 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

Comments (2)

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Mike in Providence

I am one of those famously retained Zappo customers. There is no beating Zappos, one can only hope to join them! Yes I spend more with them and never 'net-shop' them as I do for every other purchase because I know they are consistent, fast delivery, unbelievably easy returns, and excellent complaint resolution.

over 1 year ago

Rebecca Scully

Rebecca Scully, Managing Director at Smarts Illuminate

Zappos has taken satisfying customer needs to the next level. They've created a truly agile offering that anticipates and addresses technical issues that might reduce bounce rates well before any negative impact is felt. Complementing this with excellent customer service, delivery rates and after sales means that ‘one-hit-wonders’ are reduced and customers are retained on a long-term basis – the key to successfully navigating the choppy waters of online retail

over 1 year ago

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