Zappos—A Customer Centered Company
Introduction
The ocean is vast; millions swim to find themselves in a pool of red gooey blood. This hyper-competitive red ocean holds millions of sharks craving to feed and end their hunger. Competitive markets are grandiose, and being above the caliber of well recognized brands becomes ruthlessly difficult. Many partake as spectators, but many wish to eat. Zappos, initially begun as a shoe company offering thousands of brands, styles, colors, sizes and widths, today the company has grown to not only specializing in shoes but sell clothing items to customers all over the world. The company makes note that, “regardless of their structure, their goal is to positions Zappos as the online service leader. If [they] can get customers to associate the Zappos brand with the absolute best service, then [they] can expand into other product categories beyond shoes. And, [they’re] doing just that. (Zappos)” This essay will aim to unravel and define Zappos’ target market while describing its strategy to serve the market; how their profitability can be attributed to their customer satisfaction; and, how they have developed long-term customer relationships that have provided them with a competitive advantage in the purchase of shoes and other products.
History
Zappos began in 1999 by the founder Nick Swinmurn. He was looking for a pair of shoes around the mall in San Francisco. Nick sees that one store had the correct style but the color was completely off. Another store had the correct color, but the size was absurd. He felt frustrated after realizing he would not be going home with the shoes he was looking for. As any customer interested in purchasing a product, Nick looked online, and again was unsuccessful. Now, there were many mom and pop stores selling shoes online, however there was not a major online retailer that specialized in shoes (Zappos). After finding a need, Nick decided to start his own company. Zappos.com was then born. In the year 2000, Tony Hsieh became the company CEO. He did not originally like the idea as it sounded like a poster child. As with many great things, it is said that high-risk yields high return. They initially did not do well, and although they gained revenue, their profit was extremely low. Hsieh took many risks even paying for a new warehouse set in San Francisco. The company finally decided to fulfill and deliver their own products, and this provided them with the long sought after profit. After being successful, the company was sold for 1.2 billion in 2010 to Amazon.
Target Market
The days of an 8 to 5 job aren’t necessarily over, however they are best targeted for older generations. Work-life balance is exceedingly important for the millennial age group, also considered generation Y. “Workers around the globe have been finding it harder to juggle the demands of work and the rest of life in the past five years, a new report shows, with many working longer hours, deciding to delay or forgo having children, discontinuing education, or struggling to pay tuition for their children. (Washington Post)” The Washington Post makes a note that the economy has a slowly worsened, salaries have stagnated and the cost of products continue to rise. Due to this, people are working longer hours and aren’t pleased with their jobs. Older generations believe that if they don’t see the employee, it means that they are not working hard enough, however “Younger workers see that technology frees them to work productively from anywhere. (Washington Post)” According to Forbes, A study was conducted in 2016 by Deloitte, and Millennial’s value a work life balance more than any other generational group (Forbes). Millennial’s value, “job progression, use of technology, and sense of meaning at work (Forbes)” According to the Harvard Business Review, millennial employees make the largest generation in the US. Millennial’s are dissatisfied with their job and 21% of them have left their job for one reason or another. “American workers are particularly engaged at work as a whole. And millennial sleep pack: 71% are either not engaged or actively disengaged at work, making them the least engage generation in the U.S. Moreover, engagement is essential to retaining employees. (Harvard Business Review)” The Harvard business review conducted a study in which they broke various myths. It is initially understood by many that Millennial’s desperately crave creativity in the workplace, however that may be left for baby boomers. According to a HBR infographic, entitled “What Different Generations Look for When Applying for a Job,” Millennial’s are invested in the opportunity to learn and grow, they’re interested in the type of work, they look for opportunity for advancement, and somewhat like an informal work environment. On the flip side, baby boomers are looking for the quality of managers, they expect good management, they care about compensation, they look for an organization that encourages creativity, and they’re looking for an organization that is a fun place to work. Generation X falls almost in the middle between the Millennial perspective and the baby boomer generation. The only difference that a person can necessarily infer from the information provided above is that Millennial’s are strongly technologically savvy, and since Zappos is an online shoe retailer hoping to be more in the future, it is best suited to market the Millennial generation when looking for customers.
Work-life balance and some psychographic information is given to better explain why the Millennial generation best suits Zappos’ online interest. One needs to fully understand the internal structure of a company, to then be able to fully understand who the target market is. Zappos’ business model, an operating philosophy, has a couple core values which speak out, such as embracing and driving change, pursuing growth and learning, building positive teams and family spirits and to be passionate and determined, all which are millennial mindsets. The overall case makes note that the internal structure of a company needs to be well positioned where employees are happy and have a good work-life balance, to better provide their customers with good customer service. The CEO decided to sell the company to Amazon because Sequoia Capital was not in agreement with focusing on the employee as opposed to focusing more on sales. Zappos’ strategy becomes evident, an employee needs to be happy and positive in the workplace to provide excellent customer service to anybody. Their strategy is to focus on the internal structure first, to better suit their customer needs and build company values, while sustaining a strong brand in the mind of the consumers.
Customer Satisfaction & Long-Term Relationships
In terms of customer satisfaction, it’s important to note that not every customer is going to be the same. There is a large spectrum of customers, with grand differences in their demographics and psychographics. The VALS consumer profiles tries to explain this. The profiles are innovators, thinkers, achievers, experiencers, believers, strivers, makers, and survivors. To meet customer satisfaction, Zappos has potentially naively made strategic decisions to better suit the different customers relating to these profiles. Zappos is targeting Thinkers, as these consumers “like to be as well-informed about the products they buy as they are about world and national events. (Marketing Strategy)” Zappos’ customer service has gone as far as staying on the phone with a customer for four hours when the customer has had questions. This appeals to Thinkers because of their well-informed nature. They are also targeting Experiencers as these consumers are “young, enthusiastic, and impulsive consumers were motivated by self-expression. (Marketing Strategy)” These consumers look for a cool products and Zappos’ customer service tries to use their internal value system of fun and exciting to perpetuate this idea of cool. Zappos tries to wow customers, and although they are primarily an online retail company, they have customer service representatives who actively use social media sites to respond to customer issues and truly engage with their customers on a fun and exciting level to spark a higher customer-return rate and purchasing rate. Since their customer service goes as far as providing free shipping, period, even with a 100% satisfaction guaranteed return policy, customers know they are safe from future error. “The average industry merchandise return rate is 35%, but Zappos’ most profitable customers tend to return 50% of what they purchased, and although this initially seems bad, those customers with a higher return rate also have a higher purchasing rate. This profitability can be explained because “they have experienced Zappos’ customer service and return policy, which create loyalty to the company. (Case 2, Marketing Strategy)” So yes— they’re emphasis on customer satisfaction greatly contributed to its profitability.
It has happened time and time again where customers have been distressed about return policies. Walmart and most stores have a 60-day return policy. Customers get upset when they cannot return something and Zappos’ ability to have a 365-day return policy is astounding and in every way customer centered. Transparency and easy availability, whether on the phone or online, develops a long-term customer relationship. Zappos’ ability to focus on the internal structure of the company, hiring people that best suit their company’s brand personality, is only a fragment of how strongly customer centered this company is. This strong desire to know the customer, has provided them with a competitive advantage that other companies cannot even come close to. This company has made it exceedingly difficult to compete against because of their immensely fast shipping rate as well. They go the extra mile to make sure consumers are satisfied, even if it means losing a penny or two. Although the company focuses primarily on shoes, attribution of other products becomes equally as important. Since Zappos has built customer satisfaction on a whole new level, one can infer customer service will be the same regardless of the products bought. Integration of other products becomes easier to manage when a large customer base already loves the brand and has brand affinity. Zappos has slowly built an empire, placing the customer service at the Zenith point of their profitability.
References
Adkins, B. R. (2016, May 11). What Millennials Want from a New Job. Retrieved April 16,2017, from https://hbr.org/2016/05/what-millennials-want-from-a-new-job
Bacon, N. (2017, January 11). Can Millennials In Corporate Jobs Achieve Work-Life Balance?Retrieved April 16, 2017, from
https://www.forbes.com/sites/nataliebacon/2017/01/11/can-millennials-in-corporate-jobsachieve-work-life-balance/#2c744f67216f
Belch, G. E., & Belch, M. A. (2018). Advertising and promotion: an integrated marketing communications perspective. New York, NY: McGraw-Hill Education.
Ferrell, O. C. (2016). Marketing strategy. S.l.: Cengage Learning.
Schulte, B. (2015, May 05). Millennials want a work-life balance. Their bosses just don't get why. Retrieved April 16, 2017, from https://www.washingtonpost.com/local/millennialswant-a-work-life-balance-their-bosses-just-dont-get-why/2015/05/05/1859369e-f376-11e4-84a6-6d7c67c50db0_story.html?utm_term=.00fcacd83dd5