Zappos Milestone: Customer Service

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 of 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.

As Hsieh tells it, a few years after Zappos’ debut, he and several coworkers reevaluated the goals of the company. “We asked ourselves, what do we want to be when we grow up?” he said. “Do we want to be about something with a bigger vision?”

What emerged was a plan to put customer service first. At the time, drop shipments represented 25 percent of the company’s sales, but relying on outside parties to ship often meant long waits and no communication with shoppers.

So after a few years, in what Hsieh characterized as a “tough and scary decision,” Zappos gave up drop shipments — especially significant considering the company was not yet profitable.

Today, Judd estimates the company’s 342-person, round-the-clock customer loyalty team in Henderson, Nev., 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 color, as well as Spanish-language and Canada teams.

She said call center 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 program, which has grown from one week in 2005 to four full weeks in 2008.

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 center training start in week two. And employees who will stay in the call center 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 center,” she said. “We have to restart the engine the Zappos way.”

All of this requires an investment. Training doesn’t come cheap, even though, as Judd pointed out, the companywide 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 center 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] efficient, 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, Calif., 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.” 

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