Zappos is a benchmark in service. This e-commerce up-and-coming organisation that started off selling shoes, complemented their assortment with clothes, accessories, electronics and so on and was sold to Amazon for a little less than $1 billion. They are well known for their 365-day return policy. If the shoes are not worn, you can return them any time up to 365 days after purchase. You don’t even pay shipping to return or exchange the shoes. By simply going back to Zappos.com and logging into your account, you can easily print out a return label for UPS or USPS. Another great feature that sets Zappos apart from the crowd is their user surveys and reviews. When you find a shoe you’re considering purchasing, it certainly helps to know that 85 per cent of the people surveyed believed it to ‘feel a half size smaller than marked’, or whether or not it felt ‘true to width’, and Zappos provides this information through their user surveys.

When explaining Zappos.com’s almost obsessive dedication to customer service, the e-tailers’ employees always seem to turn to real-life tales.

‘That’s the Tony pizza story ...’ began Jane Judd, senior manager of the customer loyalty team, talking about a time when CEO Tony Hsieh asked his Skechers reps to call in after-hours to test his staffers and find out if they would track down late-night pizza places in their area. (They did, coming up with the names and phone numbers of the three closest options.)

‘One of the craziest stories,’ said Jerry Tidmore, who manages Zappos’ help-desk concierge service, ‘was that a guest checked in to the Mandalay Bay hotel [in nearby Las Vegas] and forgot her shoes.’

According to Tidmore, the guest called Zappos, where she had originally purchased the style, looking for a replacement, but they didn’t have any in stock. So the company found a pair in the right

size at the mall, bought them and delivered them to the hotel – all for free. Such anecdotes are a testament to the company’s central tenet, which is written right under the

Zappos logo on the website: ‘Powered by Service’. And while most customers don’t call the company looking for pizza, Zappos takes its commitment to service seriously – sacrificing short-term profits for it, investing a minimum of four weeks’ training for each employee and operating a 24-hour warehouse that is admittedly not cost-efficient.

The goal, Hsieh said, is to make Zappos’ customers very happy – and that leads to big cost savings elsewhere. ‘We let our customers do the marketing for us’, he said. What emerged was a plan to put customer service first.

The company’s 342-person, round-the-clock customer loyalty team in Henderson, Nevada, answers 5,000 calls a day, though that number grows significantly during the November and December busy season. They also answer 1,200 e-mails a week and monitor Twitter and social networking sites for mentions of Zappos, which they use to proactively reach out to potential shoppers.

Judd also oversees a resource desk team, which handles more complex requests such as getting the actual measurement of a heel or checking a colour, as well as Spanish-language and Canadian teams.

She said call-centre employees are given no time limits for their calls and are encouraged to ‘use their personal, emotional connection on every call’. For example, she said they might ask about the dog barking in the background or send flowers to a bride. 

To achieve that level of interaction, Zappos has made training a priority – for the entire company. Rachel Brown manages the Pipeline team, Zappos’ in-house training programme, which has

grown strongly. 

The first week of training includes everything from how to work the phones to special seminars on Zappos’ culture and core values. Seminars on customer service and in-depth call-centre training start in week two, and employees who will stay in the call centre get another three weeks of training on the phones.

The goal, Brown said, is to tell the new employees to ‘forget about all your other jobs, especially if it’s another call centre’, she said. ‘We have to restart the engine the Zappos way.’

All of this requires investment. Training doesn’t come cheap, even though, as Judd pointed out, the company-wide requirements mean that during the holiday rush staff members from every department can help out (including Hsieh, who, Judd said, worked three hours in the call centre last year).

‘The training and education, the free shipping both ways, the surprise [shipping] upgrades, that’s very expensive. Our warehouse is 24/7, which is purposely less [cost] effi- cient, but faster,’ Hsieh said. ‘Our whole point of view is [to look at it] as our marketing costs, but they all have extra costs.’

It’s a smart strategy, said Karen Leland, president of Sterling Consulting Group in Sausalito, California, and co-author of Customer Service for Dummies and Customer Service in an Instant. ‘It costs five times more to get a new customer than to retain an old one,’ Leland said. ‘Anytime you have to spend marketing dollars, the financial benefit is high to retaining an existing customer.’

In fact, Leland has her own Zappos story. A recent purchase of red patent peep-toe pumps she ordered from Zappos didn’t fit, and she exchanged them for the right size – a transaction she said the company has mastered. 

‘They made it easy when there was a problem. And the true measure of a company is how they handle it when things go wrong,’ Leland said. ‘They made a loyal customer out of me. A shoe is just a shoe, but they’re adding value to the shoe through the service.’

QUESTIONS

1. Zappos’ return policy may put the company at risk. How come the business case for this policy is none the less positive? Please provide arguments to support your answer..

2. Zappos customer contact department is situated next to the CEO’s office. Those are expensive square metres. How do you evaluate that choice?

3. Please indicate in your own words what the critical success factors of Zappos’ service strategy are.