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Word-of-Mouth Marketing 101, à la Zappos.com

  |  April 1, 2008   |  Comments

Zapped by the customer service company that happens to sell shoes.

Help! I've been zapped!

Yes, I've been zapped by the zervice (I mean "service") of Zappos.com. Trust me, I'm not doing a poor imitation of Dr. Seuss.

It started rather innocently. To round out a spirited "Advertising Age" conference panel I recently moderated entitled "Listenomics," I invited Tony Hsieh, Zappos founder and CEO, to participate. While I knew enough about Zappos to give it a few paragraphs in my upcoming book, it quickly became obvious I was barely scratching the surface.

Joining Hsieh on my panel were Rick Clancy, Sony VP of corporate communications, and Linnea Johnson, head of consumer relations for Unilever. We talked about the importance and challenge of listening, the fine and sometimes precarious art of conversation, and the growing importance of customer service in the new marketing. Clancy offered insightful commentary about his ambitious corporate blog, and Johnson offered punchy, spot-on insights about the value her groups bring to the table and why it deserves even more respect and attention -- even from media planners. (Her group is like air-traffic control for consumer conversation!)

But Hsieh took the prize for -- how shall I put it? -- zapping the crowd. Before I explain, let me first zing you with a little backdrop.

About Zappos

Zappos, with over $1 billion in sales, is one of the Web's fastest growing shopping sites. It offers over 1,000 brands in over 150,000 styles, with over 850,000 UPCs. Every single pair of shoes sits in inventory. The company has 7.4 million customers, nearly half of whom have purchased in the last 12 months.

Now it gets really interesting. On any given day, 75 percent of sales come from repeat customers, and those repeat customers spend much more the second and third times around. The average order size for returning customers is about $140, compared to about $110 for first-time customers.

This is a brand with extraordinarily high levels of customer loyalty. If you put a dipstick into the online CGM (define) currents, you'll find a brand with off-the-charts customer advocacy.

Service Begets Delight, Which Begets Word of Mouth

This customer advocacy stems from a unique combination of company culture and an unapologetic focus on customer service. In fact, Zappos's tagline is "Powered by Service." This means providing the best service and online shopping experience possible: free shipping both ways, a 365-day return policy, fast fulfillment, and expedited delivery.

For example, unlike the vast majority of big brands, Zappos promotes (rather than hides) its toll-free number visibly on the home page. You can talk to someone 24/7.

The table outlines more ways Zappos's customer service excels:

Key Variable Typical Brand Zappos.com
Service as marketing Low High
Traditional media spend High Low
Toll-free number Hidden Written on forehead
Invitation to interact Hard to find Everywhere
Openness to talk The clock is ticking; get lost Stick around; let's chat
Toll-free number hours 9:00 a.m.-5:00 p.m. 24/7
Outsourcing Common Unthinkable
Employees as advocates Medium Off the charts

"Zappos is touching a real nerve in the consumer affairs industry. The service is putting hard data behind what we all intuitively know and feel: great service and so-called 'feedback moments' are inseparable from marketing and brand building," explained Beth Thomas-Kim, head of consumer relations for Nestlé and chair of the Society of Consumer Affairs Professionals (SOCAP).

Hsieh and his team clearly get it. There's nothing touchy-feely about how well this works. Over 80 percent of his customers hear about Zappos through either word of mouth or online advertising. Print advertising amounts to a mere 15 percent of media spend.

The Role of Culture

There's a key piece of Zappos's strategy that you just can't crank out with a cookie-cutter marketing whitepaper: culture. Hsieh borders on fanatical about culture. Shortly after the panel, I received the Zappos "Culture Book," which opened up yet another fascinating window into the "service company that happens to sell shoes," as the CEO puts it.

The entire 300-page book is written by employees and partners. It's fat, visually appealing, and reads like a group hug. It also nicely complements the company's five-week Las Vegas training course for all employees in core values, customer service, and the warehouse.

"I have felt so proud to be part of a company," notes Laura T., an employee since May 22, 2005. "Zappos culture is electric!," writes Jon J., an employee since 2004. "Our goals are set, values clearly defined, and we all buy into it," notes Kris O., an employee since 2000.

The Final Word

But is it scalable? It's hard to tell. To fully answer that question, we may need to keep an eye on Howard Schultz's relentless pursuit of Starbuck's founding values, including its sense of authenticity, in his company's repositioning. Coincidentally, the centerpiece of his reinvention strategy -- My Starbucks Idea -- is grounded on the very principle of customer participation that's given Zappos such undeniable traction.

In the end, Zappos is powered not merely by service but by the internalization of a core truth as well. Loyal customers, even your own employees, are the heart of effective word of mouth. You don't need ROI analysis from my firm or any other one to connect those dots.

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Pete Blackshaw

Pete Blackshaw, whose professional background encompasses public policy, interactive marketing, and brand management, is executive vice president of strategic services for Nielsen Online, a combination of Nielsen BuzzMetrics, a firm Pete helped cofound, and Nielsen//NetRatings. One of Pete's key focuses is helping brands interpret, manage, and act on consumer-generated media (CGM). A former interactive marketing leader at P&G and founder of consumer feedback portal PlanetFeedback.com, Pete cofounded the Word of Mouth Marketing Association (WOMMA). He authors several blogs, including ConsumerGeneratedMedia.com, and is the author of an upcoming book from Random House, "Satisfied Customers Tell Three Friends, Angry Customers Tell 3000: Running a Business in Today's Consumer-Driven World."

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