Tanya Hemphill from Ti22Digital, a growth hacking agency, explains how businesses can complete in a highly competitive marketplace via culture.
Business Growth via Culture
I recently had a conversation with a client about how an e-commerce company that sells brands that can be bought via other online (and offline) stores can differentiate itself in the marketplace. How can a sustainable business model be created?
Competing on price alone erodes margins and can create issues with suppliers.
Soon after this conversation, I was writing a case study for a book I’m updating called ‘Digital Business & E-Commerce Management’ (due to be published next year) and I started researching the success of the online shoe retailer Zappos.
The story behind the e-retailer is interesting and demonstrates how culture can become a key competitive differentiator.
Tony Hsieh became a multi-millionaire at 24 when he sold a start-up he had co-founded to Microsoft for $265m.
He initially joined online shoe retailer Zappos as an advisor and investor, later becoming its chief executive. When he became involved in 1999, the online retailer’s annual gross sales were $1.6m – Tony had two goals for the first 10 years: reach $1nb in annual sales and get on the list for the best companies to work for.
Most consumer-orientated online businesses focus on acquisition, rather than retention. However, Zappos focuses on the retention of both customers and staff – generating customer retention rates of 75% and staff retention rates of 85%.
These impressive retention metrics are because Hsieh took the view that company culture came first, to maintain passion and excitement.
He viewed culture-building as an investment and delivering ‘wow’ customer service was a core part of this – Zappos employees do not have scripts or call-time metrics; they are empowered to act, let their true personalities shine during each call and to keep customers happy.
Zappos want their representatives to develop a personal emotional connection with each customer – they refer to this as a PEC.
According to a Harvard Business Review article Hsieh wrote in 2010, “As unsexy and low-tech as it may sound, the telephone is one of the best branding devices out there”.
The company’s culture is shaped by 10 core values:
- Deliver WOW through service
- Embrace and drive change
- Create fun and a little weirdness
- Be adventurous, creative and open-minded
- Pursue growth and learning
- Build open and honest relationships with communication
- Build a positive team and family spirit
- Do more with less
- Be passionate and determined
- Be humble
The company has a unique recruitment process – potential employees have two interviews; one to assess if they can do the job and another to assess their cultural fit with the company.
All successful candidates then attend a five-week training course, including two weeks on the phones in the call centre.
To test enthusiasm, everyone is offered $2,000 to quit (only 3% accept the offer). The company even has its own 480-page ‘Culture Book’ (this can be downloaded at: http://www.zapposinsights.com/culture-book).
Employees enjoy free lunches, no-charge vending machines, a company library, a nap room and free healthcare. They also want to make its office environment fun for employees, allowing them to customise desks and turn their environment into a jungle (see below).
According to Craig Akins of Zappos (as reported by Econsultancy by Charlton, 2014):
“Our best customers have the highest returns rates, but they are also the ones that spend the most money with us and are our most profitable customers. Zappos’ modus operandi is not to give its purchasers the cheapest footwear on the block, but to give them the best service: hence, a 365-day returns policy, and free two-way shipping.”
The company has ‘Zappos Labs’, which is focused on solving people’s pain points and creating optimised experiences across all channels. For example, customers can take photos of items they see on the street, send the images to Zappos employees via text, email or Instagram, who will then send the relevant link back to the customer for them to purchase it online.
In 2008 (just 10-years after starting), Zappos reached its goal of $1b in gross sales. The company was sold to Amazon towards the end of 2009 for $1.2 billion.
If you are interested in finding out how you can increase sales from a marketing expert, please connect with Tanya on Twitter @DigitalTanya or via her website www.Ti22Digital.co.uk.