It's not about shoes, it's about customer service. At least that was the gist of Zappos  CEO Tony Hsieh opening keynote at SXSW this year. Although the hoodie-wearing entrepreneur—#20  on the 2009 Fast Company 50—does sell about a billion dollars worth of shoes and accessories a year, what's more important is their platinum customer loyalty record. Could they be an airline someday, maybe a bank? They're not ruling it out, he says. Hmmm, Zappos Air? We like the sound of that.
Hsieh started out with a pizza delivery company in 1994 where he learned the value of making people happy (Zappos COO Alfred Lin was his #1 customer). No doubt you've heard from an ecstatic shoe fetishist about their one-year grace period for exchanging and returning goods; Zappos is laser-focused on cultivating repeat customers. Forget marketing (one notable exception are those brilliantly-placed Zappos ads in the bottom of the trays our shoes use to glide through airport security), Hsieh is way more focused on creating the "wow" experience for repeat customers by upgrading their shipping—some customers get their shoes the same day—even though it's "ridiculously expensive." And they'll only display products on the site that are physically in stock, even though by not showing those products they lose 25% of their potential business. Their warehouse also operates 24/7, certainly not the most efficient way to manage it, but an investment in being able to say they're always open.
And for a web company, their phone skills are impeccable. "The telephone is one of the best branding devices out there," he says. "If you get the interaction right." At the Zappos call center there are no scripts, no upselling, no call times. The longest call in their history was four hours--we have to imagine that one went a little beyond helping someone locate the right color of Uggs. "Some people are just lonely," Hsieh says with a shrug: Most Zappos customers call HQ at least once during their lifetime.
But here's the real secret to customer loyalty, he says: It's actually making corporate culture a priority. "if you get that right, you won't have to work so hard to get the rest of the stuff." When they interview, they ask questions directly related to the Zappos Core Values , including asking candidates to gauge their own weirdness, open-mindedness and sense of family. New hires spend five weeks training in their Vegas headquarters, taking phone calls, and doing fulfillment in the Louisville facility. The now-famous policy is that at any time during the training they can take $2,000 to quit. (They keep upping the amount, too (it used to be $400), and still only 1% take the offer.)
Zappos also produces a 500-page Culture Book  where they ask every employee to write a few paragraphs about working at Zappos, good and bad. Twitter class has become a standard part of their employee training, which Hsieh believes allows employees to personally connect in another way, strengthening the team. Check out their aggregated employee Tweets at their dedicated Twitter site  (after checking this, we note that #zappos just rocketed to the top of Twitter's trending topics). Want more on any of this, including a copy of his presentation or the culture book? Hsieh says, just shoot him an email: tony AT Zappos.com
But Hsieh's also got a very interesting side project: He's been studying happiness. When people ask for more money or more responsibility, he says, if you keep asking them why they want it, it all boils down to wanting more happiness. He's isolated happiness into four entities: Perceived control, Perceived progress, Connectedness and Vision. Zappos promotes people faster within the company and asks them to articulate their personal visions to instill those feelings of joy in the workplace.
If that wasn't enough, he's also isolated three types of happiness-inducing activities. Pleasure, which he equates to the "rock star" happiness, always looking for the next high. There's engagement, or flow, when you're so absorbed in something that time is meaningless. And finally, meaning, the feeling that you're working towards a higher purpose. Find the perfect combination of those, Hsieh says, and you're on your way to long-term happiness. The audience is nodding enthusiastically. Looks like Zappos could just as easily go into the self-improvement business.
Walking In Zappos' Footsteps
Hsieh says his focus for 2009 are the Three C's: clothing, customer service and culture. Seven ways you can bring Zappos' core values into your company:
1) Decide: If you're going to build a sustainable brand, it will require more patience at the outset to lay the foundation.
2) Figure Out Values & Culture: When your personal values are in line with your company values, you don't have to worry.
3) Commit to Transparency: From Twitter, an "Ask Anything" newsletter, extranet for vendors, tours and reporter visits, keep practices open and accessible.
4) Vision: Whatever you're thinking, think bigger. Chase the value not the money. And that includes your employees' vision as well.
5) Build Relationships: Not networking. Meeting interesting people.
6) Build Your Team: Hire more slowly and fire more quickly.
7) Think Long Term: Overnight successes were a long time in the making.