Zappos Company Business Analysis
Zappos, an online retailer, is proving that an unfamiliar approach to business can also help grow revenue. Zappos revenue grew from $1. 6 million in 2000 to $1. 64 billion in 2010. How can a company focused on happiness be successful? Zappos corporate culture and focus on customer satisfaction has made it both successful and a model for other companies. Zappos focus on stakeholder happiness contributed to its success. Tony Hseih in his book Delivering Happiness says, “It’s a brand about happiness, whether to customers or employees or even vendors” (Delivering Happiness) In 2000, entrepreneur Tony Hsieh became the company’s CEO.
Hsieh was 26 at the time and surprisingly was not sold on the idea of an Internet shoe store. He told Inc. magazine, “It sounded like the poster child of bad internet ideas… but I got sucked in. ” (Delivering Happiness) After becoming CEO, Hsieh made an unconventional decision to keep Zappos going, proving his commitment by selling his own home to pay for a new warehouse.
While the company was also struggling at first, his salary was set at $24. After the dot-com crash in 2002, Zappos was able to recover with sales of $32 million, but was still not profitable.
In 2003, the company decided that in order to offer the best customer service, it had to control the whole value chain, from order fulfillment to delivery. In 2004 Zappos made the move to Vegas, in an effort to use the larger pool of experienced call center employees to its advantage. In 2007 the company generated its first profit after reaching $840 million in annual sales.
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Zappos also started to be recognized for its unique work environment and approach to customer service. Today because of social media everyone quickly gets to see the values and drivers behind a company.
Marketers, managers, and all people in leadership positions need to change and adapt to this new world. When a company is able to deliver customers a certain “WOW” factor service, the company has reached an accomplishment and has gone above and beyond a customer’s expectations. As a consumer of many goods, it is more than fair to say that most would return to business when previous business has been fantastic. Zappos is an extremely successful company that has built its business on 10 core values. The “10 commandments” influence everything from hiring to merit raises and firing.
The company hires to these core values and 50% of every employee’s annual review is based on them. These values may come across as simple, such as “delivering wow service” but when executed in the right way build a strong company with a phenomenal reputation. Zappos does not consider itself to be an average company, and therefore strives to deliver their customers service that is anything but average. In conjunction with these beliefs, Zappo’s first core value is to “deliver wow through service”. The extraordinary service is not just provided to the customers, but to their co-workers, vendors, and partners.
This philosophy is strictly based on service, and does not correspond with anything through monetary value. The goal is to aim directly on the receiver’s emotions and build a strong relationship. Hsieh writes that “ It’s important to act with integrity in your relationships, to be compassionate, friendly, loyal, and to make sure that you do the right thing and treat your relationships well (P. 176). Although Zappos may not offer their customer’s promotional codes, great service is always being promoted with anyone in contact with the company to ensure a positive experience.
In this era of business, it is extremely crucial that companies are willing to adapt as the business world continues to change. Zappo’s second core value not only accepts that there is change but is to “embrace and drive change” but understands that “part of being in a growing company is that change is constant”. Not only does Zappo welcome the change, it does something more significant; it drives it. The CEO of Zappo has stated that “If changing our business model is what’s going to save us, then we need to embrace and drive change” (P. 100).
As the world and business tends to evolve, now more rapidly then ever, the company is able to stay ahead by driving the change and evolving faster then the competition. Changing and service are not the only keys to success as the third core value is to “create fun and a little weirdness”. This is another driving force that Zappo possesses that differentiates itself from other companies. The company culture embraces fun and humor. Zappos strives to have a unique and memorable personality. There company culture is what makes it successful, and they believe that embracing their diversity and each person’s individuality will help with creativity.
Through this culture a positive result has been the support of people to “think outside the box”. When you are combining weirdness and having a little fun at work, it is a win- win for everyone. Employees are more engaged in the work that they do, and the company as a whole becomes more innovative. Zappos is a risk taking organization where making mistakes is encouraged. You do not hear that too often, as we discussed in class mistakes are frown upon, at Apple the employees are sometimes beaten! At Zappos, call center workers are prompted to try new things to delight customers.
Managers are asked to take their team members out of the office as a way to get them to think about their jobs differently and create stronger bonds. There main goal is to be adventurous, creative and open minded. To encourage learning, the Zappos lobby has several bookshelves fully stocked with top business and management book ranging from “Peak” to “Made to Stick” and “Good to Great”. These are made free to employees, and they are also encouraged to enroll in the classes the company offers to learn new skills. If an employee does not want to follow the 5th value of “Pursue Growth and Leaning” they will not be at Zappos very long.
In order to build strong relationships with their employees the company stresses communication. Zappos is big on transparency and having employees say what they think. If a confidential talk is needed, they supply a full- time life coach who will listen to any complaints, career advice, family advice, or anything else that might be bothering an employee. Employees work together, play together, and have come to think of each other as members of an extended family. Zappos 7th value is to “build a positive team and family spirit”.
Since most of our adult lives are spent working, they want a close group of people who can enjoy each other. After a lay off of 124 workers to cut expenses, Zappos began to look for other ways to watch expenses. It posted a “do more with less” attitude. After training sessions the company would have a “happy hour” to help new employees bond with existing employees. This would cost around $3,000. Today, the happy hour has become a $110 in house ice cream social, and has actually gotten more positive reviews from employees than the open bar. Zappos’ 9th value is to be passionate and determined, but not only about your job.
Employees are encouraged to bring all outside passions into the workplace. For example, if someone was running a charity event and wanted to get the company involved, the company stresses to bring the idea forward. In order for a company to stay on top, they have to realize there is always room for improvement. The 10th value “be humble” is key to what keeps Zappos at the top of the game. “Even though a ton of companies come to us to learn about how we do things, we always say, these are some things that we’re doing that are working, but what you guys doing?
We always recognize there’s more to do” (Zappos Website) The key to having a positive work environment depends on hiring the right people. Zappos is looking for people with a sense of humor who can work hard and play hard. They take a different approach to interviewing, asking cartoon questions and other different questions to find out a persons true personality. Potential employees also go through both cultural and technical interviews to make sure they will fit with the company. When hired, they attend a five week training program.
After the training program, all employees are offered $2,000 to $3,000 payment to leave the company and quit! Paying new hires to leave may seem like a waste of money, but to Zappos it makes simple sense. This is a way to them to weed out the people who are only there for a paycheck. For them, building culture is more about the money. Without question, Hsieh’s number one message in his book is that top notch customer service is a core competency and a big part of Zappos business model and success.
Many companies still believe that customer service is more of a cost than a gain. The cost of acquiring a new customer is often so high that concentrating on your current customer is far more rewarding. Zappos does not outsource its call center operations, and they employee representatives with a high Emotional Intelligence. Employees have free reign in their decision making and are expected to spend as much time as they need on any customers. They help customers shop, (even on competitor’s websites) and will do anything it takes to make the shopping experience memorable.
Zappos believes that great customer experiences encourage customers to use the online store again. Word of mouth marketing is the best way to reach new customers. The company has over 75 percent of purchases made by repeat customers. This shows that the mission to “provide the best customer service possible” is working well for the company. Each year a culture book is published. Inside the pages of this book, all stakeholders within the Zappos circle of influence are invited to give candid feedback on their experience. Hsieh insists that associates contribute honestly to this new process.
In his email to stakeholders to write in this book, he requests their responses in this way: “Remember there are no wrong answers. We want to know what the Zappos culture means to you specifically at this point in time, and we expect different responses from different people. ” The responses from every genre of stakeholder are a verification of the core values alive and well in the foundation of this company. Whether it’s selling shoes online or managing the next mission to Mars, having a clear understanding of your stakeholders is probably the biggest differentiator project leaders can bring to the table.
Zappos is an excellent example that demonstrates that providing superior value to stakeholders above and beyond what is expected can make the difference between a great and a mediocre outcome. The strength of Zappos beliefs were put test on May 21, 2010. A computer glitch caused a flaw in the website, putting the price of every product on the site to be reset to $49. 50. Within six hours of discovering the error, Zappos employees had fixed the glitch. When the glitch was fixed, Zappos surprisingly announced that they would honor every transaction. This decision cost Zappos over $1. 6 million.
To me, this served as another example of how Zappos stayed true to its culture and core values and deliver a “WOW through customer service. Delivering Happiness is further proof that the workplace doesn’t have to be hostile and ruthless in order for companies to succeed. Zappos has been able to build a successful brand because it created and developed a culture that was focused on treating customers and coworkers well. Tony Hsieh realized early on that in the competitive market of shoe retailing, he must make his employees happy in order to thrive. A happy employee is better equipped to provide great service to customers.
Zappos Company Business Analysis. (2017, May 29). Retrieved from https://paperap.com/paper-on-zappos/
