Zappos sells happiness.
Well technically, they’re a company that sells shoes over the internet.
But they’re successful because they sell happiness.
Shoes may be their product. But they’re a basic commodity. Anyone can sell shoes.
The typical competitive advantage for any company that sells a commodity is low price. But being the low cost provider isn’t sustainable anymore.
Zappo’s product is shoes. But that’s not what they sell.
Image courtesy of TechCocktail
Sell the Experience
Zappo’s sells it’s people and culture.
Traditionally, companies have been defined as either a product or service company.
But that definition doesn’t work anymore.
Every company is a product and service company. Because if you want to escape competing on low price, then you have to sell the experience.
Zappos CEO Tony Hsieh attributes most of their success to word of mouth. It’s the most effective, yet elusive form of marketing.
In an interview on This Week In Start-Ups with Jason, he spoke about how every company talks about how difficult it is to “break through the noise” and get the attention of customers.
Yet every-time someone calls customer service, they’re given exactly that… undivided attention.
Zappos employees are given freedom to spend as much time as possible with each customer, and can even make unilateral decisions on how much to refund customers.
But that’s not how most company’s treat it.
A typical Customer Service operation is run like this:
- On average, there are X amount of calls, emails, etc. per hour.
- One person can handle X amount per hour.
- Therefore hire the least amount of people and have them work towards the greatest turnover possible (i.e. get you off the phone as soon as possible).
When you analyze how much money a business makes based on one sale, then this scenario may sound logical.
But Zappos knows that they’ll be successful by focusing on the lifetime value of a customer… not by maximizing the profit off one sale.
How Service is Defined
Your people and culture define the service of your organization.
Not mission statements, strategic plans or best intentions.
Traditional product companies don’t view themselves as a service company. So they staff the most important positions (i.e. the ones who interact directly and consistently with consumers) with the least qualified (and the least paid) people.
These are the people who deliver your furniture. Who help you at the counter. The person who checks your ticket. And finally, the customer service reps.
A company’s culture is one of the biggest factors in its success, and it’s defined by these individuals. It may not “make” a business… but it can surely kill one. And it’s the sum of it’s parts… the byproduct of a collection of people, idealogies and personal cultures.
You can influence it indirectly with money, but not directly. When you use money as a carrot, it creates unintended consequences or negative externalities on other parties.
And the biggest business mistakes, in both time and money, revolve around people.
So Zappo’s offers prospective employees during training $1000 immediately to quit. They want to filter out the best possible employees.
Because they know they don’t sell shoes.
They sell happiness.