Book review: Delivering Happiness by Tony Hsieh, CEO of Zappos

June 1, 2010

Tony HsiehZappos is the online retailer of shoes and clothing that was last year purchased by Amazon for $1.2Bn. They are known for their incredible service and their unique culture.

As a member of the Zappos Insights programme I received an advance copy of their CEO’s new book, aptly named “Delivering Happiness”. I thought as someone who has visited Zappos, met the management team, and read and listened to dozens of articles and presentations I would not have much else to learn; I was wrong.

The initial part of the book focuses on Tony Hsieh‘s childhood and background before Zappos. To understand Zappos you have to understand Tony, and the book certainly gives a greater insight into him as a person. Unlike the stereotype of a what a businessman should be, money is not his prime motivation.

My favourite example comes from when his first business, Internet Link Exchange, was bought by Microsoft for $265M. Tony’s share meant he was due to get $40M, but 20% of that – $8M – relied on staying on for 12 months after the sale. During the few weeks after the sale – sleep walking at Microsoft –  that he realised he would “stop chasing the money, and start chasing the passion” and walked out, and on the $8M golden handcuffs. Why? Simply because the happiest times in his life had never been related to money and he already had more than enough of that.

Another example of new information is the rollercoaster ride of what it was like struggling to grow Zappos. Although it was successful, raising additional venture capital to fund that growth proved impossible after the dot com crash in 2001. Redundancies were made, salaries cut, and Tony personally sold every asset he had, ploughing everything back into Zappos. This was a huge gamble, but underlines the faith and passion he had for this unique business. Looking back it must seem like a distant memory, but it was clearly a difficult time.

The outsider might wonder why all this information, warts and all is shared. The answer is that Tony just wants to help people, when I asked him that question he said, “when you find something really useful and helpful don’t you want to share it with people so they can make use of it too?”

It’s not about content of what they do, it’s more about why they do things that gives Zappos their competitive edge:

“If we want to continue to stay ahead of our competition, we must continually change and keep them guessing. Others can copy our images, our shipping, and the overall look of our website, but they cannot copy our people, our culture, or our service.”

Finally, I found the answer to one of the questions I have been asked most about Zappos, which is what is their policy on using Twitter, which is used by hundreds of their staff. It is very simple: “just be real, and use your best judgement”. That plus the Zappos ten core values keeps everyone aligned.

Delivering Happiness is published on June 7th 2010. For more info visit the Delivering Happiness website.

Meetups are happening all round the world to celebrate the launch so if you want to speak to like-minded Zappos fans, or others who are interested in building amazing company cultures, or want to know more about the path to happiness, then make it happen with other people in your city.



Zappos: the world’s best customer service?

November 6, 2009

Photo credit: Ad Store

Most companies believe in customer service, right? “It’s at the heart of our business”. Pointy haired bosses nod in agreement. I don’t feel this though when I call a company and get this message which has become the hallmark of poor customer service:

“Thank you for calling. All our representatives are busy right now. Please be assured that your call is important to us”.

I always react in the same way now when I hear this empty phrase: if you really valued me as a customer I wouldn’t have to listen to this; you would ensure that you had enough people answering the phones!

This is exactly what US based Zappos does – they ensure everyone in the company is trained up to take customer service calls, that includes departments such as legal and finance, and in the busiest periods even the CEO will join in. Their call centre is known as the “customer loyalty team” the first clue that things are done differently here.

Zappos is a $1Bn turnover online clothing retailer and has become famous for its quirky style, fantastically loyal staff and customers and most recently its purchase by Amazon for around $1.2Bn.

There’s a whole host of things that set Zappos apart from the competition. First of all, they don’t regard themselves as just a retailer of clothing, shoes, or whatever; one of their core values is to “deliver wow through service”. Above all they are delivering a customer experience. By the way, it’s a customer experience that is rated ridiculously highly, with net promoter scores of 92%.

“Wow” translates into happy, loyal customers who come back again and again. While Zappos does carry out some traditional above the line marketing, they reinvest the millions of dollars saved here by putting it back into the customer experience. The service is market leading, and that provides them with their unique edge. Someone could always spend more on advertising, but Zappos have instead earned the trust and loyalty of their customers and created customers who are “raving fans”, the title of a Ken Blanchard book which is made available to all employees. The transaction cost drops significantly when you have loyal customers seeking you out and buying from you again and again. The protective moat that has been built around the Zappos brand is significant and on a typical day 75% of orders are from repeat customers.

Here’s just a few things Zappos does to create wow for their customers:

  • a free phone number to their customer loyalty team
  • a call centre that’s open 24 hours a day, 7 days a week and 365 days a year
  • free shipping anywhere in the US
  • random surprise upgrades to next day shipping (Something which their VIP customers get all the time)
  • 365 day return policy
  • all calls answered by a human being, usually in well under one minute

Yes these things are expensive, particularly the call centre, but Zappos is seeking to create a “personal and emotional connection” with their customers. The extra expense of all of the above appears as a line item in their marketing spend and it’s paid for by saving money on traditional advertising, which is reinvested to create something remarkable. Consumers don’t buy things any more because you have the most advertising, we’re way too sophisticated now; we’re looking for companies who deliver real value and something special.

Here is the catch though: while you could copy all these tactics, what you can’t copy is what truly sets them apart, and that is their unique DNA, their core values and the culture they have built. That culture is now so important that their CEO, Tony Hsieh considers developing and nurturing that culture as everyone’s number 1 priority.

That culture, and core values means that Zappos empowers the members of its Customer Loyalty Team with unprecendented freedom and autonomy. Once you’ve set the parameters then everyone knows how to behave appropriately. That means staff take it upon themselves to send hand made cards through the mail to their favourite customer of the day. Another often mentioned example was when someone called to return a pair of shoes bought for her now departed husband. The Zappos rep sent a bouquet of flowers to the grieving widow; a story recounted in front of the entire congregation at the funeral. It’s difficult how you could get more personal and emotional than that.

I hope this has left you intrigued to find out more about this unique company. This is the first in a series of posts I will be writing following my two day immersion into Zappos at their headquarters in Las Vegas. I will be writing about their unique culture and what can be learnt from it shortly; if you have questions so far please post comments below and I will address these in future blogs. Thanks, Scott.

Part 2 of my blogs on Zappos: Culture at Zappos and how everyone benefits