Customer Retention: The Zappos Case

How important are empathy and customer relationship in a digital business? Can the human factor determine the success of an eCommerce business? The answer to this question lies in the history of Zappos.

This company — which was born to sell shoes online — has soon become a model of Customer Service and an example of how to put the customer’s happiness at the center of one’s own business. A successful model which has been adopted by many other eCommerce companies — starting with Amazon, which acquired it for 1.2 billion dollars.

The secret of this success? Customer Retention. But let’s go in order.

How did Zappos come to be?

It all started with Nick Swinmurn. In 1999, Swinmurn was looking for a specific model of boots in a San Franscico’s mall, but with no luck: either the color or the size was not right.

Hence the idea of setting up a business that would allow customers to find online the shoes they could not find in local stores. Shoesite.com was thus born, which soon changed its name to Zappos.com (from Spanish zapatos, “shoes”).

The turning point, however, came with Co-Founder and Co-CEO Tony Hsieh. He had the idea that, if Zappos really wanted to satisfy customers’ needs, it had to develop an impeccable Customr Service. One that was able not only to meet customers’ expectations, but go beyond.

“WOW” was the key word: the goal was to deliver a memorable experience that could amaze consumers.

What is Zappos’ Customer Service founded upon?

“People will not choose your business if you don’t provide them great service”, says Rob Siefker, Senior Director of Customer Loyalty Team — the team behind Zappos’ Customer Service. But how does this work?

Even though it is also provided via chat and email, the preferred channel is stille phone calls. It is easy to understand why: it is the most suitable channel to create human, emotional connection with the customer.

As a matter of fact, team members are selected on the basis of personality and closeness to Zappos’ values, which are focused on Customer Care. This was something Tony Hsieh hold particularly dear, as he wrote in his book Delivering Happiness — a very interesting title indeed!

Corporate culture was paramount for Hsieh, so much so that in 2009 he accepted Amazon’s acquisition offer (which he had previously refused) only on the condition that Zappos retained its independent culture.

Examples of a “WOW Experience”

Besides free shipping and return policies, Zappos aims at meeting consumers’ needs thanks to a Customer Loyalty Team available 24/7. Calls do not have a predefined length, but mai take quite long depending on the customer’s need and/or the relationship built. The longest call a Zapponian ever had lasted 10 hours and 51 minutes!

Phone representatives are in fact encouraged to connect on a personal level with the customer and thus talk about personal topics during a call.

This was the case for Kelli Frantik. In 2016, the Phone representative took a call from Tommy, a customer contacting her to exchange a pair of shoes. During the conversation, Kelli found out that Tommy was a soldier and asked him to tell her more about himself. When he said that his nickname in his unit was “Gummy bear”, she revealed that one of her hobbies was to make teddy bears.

After the call, not only did Kelli take care of the exchange, but she also sent him a package with some treats, including gummy bears and a handmade teddy bear named Tommy.

A simple gesture that made the connections between the two even stronger, so much so that Kelli received a letter from Tommy and, some days later, even a thank you letter from the Commander of his base commander (who also received a package by Zappos afterwards).

Zappos’ employees, indeed, are given a budget to send gifts to their customers. Besides, they are also encouraged to send handwritten letters on special occasions.

Retaining customers by taking care of them

Considering that Zappos’ products are 20% more expensive than those sold by competitors, the benefits of a positive experience must be so great that customers are willing to pay more.

A memorable experience positively influences retention: 75% of Zappos’ business is connected with customers purchasing again. In addition, it fuels word of mouth.

Of course, a strategy based on Customer Retention bears fruit in the long term. What Hsieh noticed is that only between the 24th and the 30th month of a customer’s relationship with Zappos the purchase volumes become significantly bigger (doubling those of the first six months).

It is, however, undoubtedly a successful strategy considering that acquiring a new customer is on average 7 times more expensive than retaining existing ones.

Besides, why not take the chance to “deliver happiness” — other than products — to customers?