Hitmetrix - User behavior analytics & recording

Walking in the Consumers’ Shoes

Zappos.com‘s reputation for customer service may be well established, but few know the secret to the success of its overarching customer experience: data. The online retailer has in place a data-centric backbone that distributes aggregated customer information across the entire organization, so constituents such as the marketing and customer loyalty team can then use it to get closer to customers.

“It is all about…trying to build a relationship with the customer,” says Michael Fellner, senior manager of email and database marketing at Zappos. “Relationship marketing is a core piece of our marketing.”

The idea is that customers will be so happy with their experience that they’ll tell their friends. “Word of mouth is the big driver for our business and happy customers are going to tell their friends,” Fellner adds. “We’re acquiring new customers because of our loyal customers.”

At the end of the day, most of the decisions that Zappos makes through its customer interaction channels—from its website to its contact center—occurs because of a foundation of solid customer information.

A smart site

Finding the cheapest deal online is as easy as querying Google Shopping and organizing the results by price. But the deal-making game isn’t the sport Zappos is interested in.

“We don’t play in that arena,” Fellner says. “We focus on selection and service. We set ourselves apart from the deal sites by making sure that customers have the best experience. We want to make it as easy as possible for a customer to shop with us.”

Zappos’ website is the hub of that easy experience. As its primary customer interaction point—and marketing tool—Zappos’ website must deliver an experience that satisfies and retains customers. There might be social media presences and email lists, but at the end of the day, Zappos lives and dies by its website.

For this reason Zappos needs to understand exactly who its customers are—and deliver the optimal experience based on that information. There are of course the one-and-dones—customers who show up to buy a pair of flip-flops and don’t return. Then there are premium customers who are loyal and high value.

“Premium customers have huge upside, and we need to know who they are and what they want to see,” Lisa Archambault, Zappos’ manager of display and social marketing, said at the Integrated Marketing Week conference. “There are a million different website features and everybody comes to a website for a different reason at a different time. It might be transactional or you might want to interact on the social side. By knowing what they want and why they’re coming to us, we can have that experience ready for them.”

Here’s a basic example: on the lower left of Zappos’ site is a smattering of text links. They’re archaic and, to many aesthetes, an affront to the streamlined Web design that these days seems de rigueur. While the principles of good taste might suggest hero banners or splashier creative, Zappos knows that more than half of its customers click on those text links before anything else. And of those, over half are premium customers.

Divide and conquer

Zappos appends its firsthand knowledge with third-party data using Experian Marketing Services, so the e-tailer knows that Bob has no interest in outdoor activities (strangely, an attribute of a top Zappos customer), and shops pretty much exclusively at Zappos when he buys shoes. Sally, the outdoor adventurer, shops for shoes 15 times per year, but only comes to Zappos seven times.

In other words, Bob’s a loyal customer while Sally’s a high-frequency customer. Knowing this informs Zappos’ outreach and marketing to each individual—whether it’s through the creative displayed on the website, the email messages and promotions each customer gets, or the banner ads he or she will see.

A few months back Zappos worked with Experian to attract new customers via display advertising. It matched its own database with the publisher’s database, and then used Experian data to further segment down to the household level—well beyond geographical or demographic data.

With this information in hand Zappos placed tracking pixels in strategic online locations, so when an existing Zappos customer landed, the company knew not to target him with its display banners (saving advertising spend) and pushed out dynamic content to ensure a targeted message.

Using these tactics Zappos saw 31% lift over what it typically sees in new customer acquisition campaigns.

Additionally, this type of insight allows Zappos to inspire loyalty among its premium customers. “By listening via data or customer inquiries, we learn what our VIPs like,” Archambault explained. As a result Zappos added VIP-only perks like a try-before-you-buy concept, in which premium visitors who see a “You Have Been Chosen” badge at the bottom of the page have the option to try—and possibly return—apparel before ever being charged.

Person to person

Unlike many other e-tailer companies, Zappos places a heavy premium on the one-on-one connection it has with customers. The contact center is at the heart of Zappos’ database. Zappos takes its phone calls seriously and interactions with customer service reps (part of the customer loyalty team) inform other Zappos interactions. For example, according to Archambault, elements of Zappos’ website design are based on what the team learned when talking to consumers. For this reason Zappos CEO Tony Hsieh has said that the contact center is the company’s best and smartest marketing tool. Hence, both the toll-free customer care number and a live chat button are featured prominently at the top of its website.

In an interview with CNBC, Hsieh explained that Zappos’ customer service reps don’t have scripts guiding conversations with customers. Instead they’re encouraged to engage callers on a personal level. This means common contact center metrics that place a premium on decreasing call-handling times or call volumes are out the window. Zappos’ philosophy, Hsieh said, is to extend great customer service to the point where, if a shoe isn’t available on its website, the representative will direct the customer to a competing website that offers the product.

What’s the payoff? According to Zappos, customers who have called the contact center have an average of $38 lift in lifetime value.

“There have always been places to buy cheaper shoes, but Zappos offers vast assortment, really fast shipping, and great service,” says Sucharita Mulpuru, VP and principal analyst at research firm Forrester Research. “They have managed to take share from a whole lot of retailers in spite of other companies offering to undercut them. The truth is that there is no other retailer that ships shoes that does things as reliably and as quickly as Zappos does.”

Customers on the go

As canny as Zappos has been with its contact center, the e-tailer needs to extend that shrewdness to the mobile channel. Mobile is taking precedence for a fast-growing number of consumers and online retailers. According to eMarketer, 15% of online retail sales will come from mobile devices this year, which is up from 11% in 2012. eMarketer also estimates that mobile commerce sales for retailers will reach almost $39 billion in 2013, up 56.5% over 2012.

Zappos is well aware of this growth and is working to make it easier to shop its wares on mobile devices. While the company would not disclose what percentage of its sales come from mobile devices, it did reveal that Zappos customers tend to browse on mobile phones and make purchases on tablets, though younger customers will buy on either.

“On tablets, it is more of a relaxed experience,” says Vincent Calderaro, mobile product coordinator at Zappos. “People [are] home on their couches, where they have more time to browse, explore, and engage. There are different types of customers on the phone than on the tablet, as well. Tablet customers seem to know what they want, and they come to the app with more purchase intent. Phone customers are more about discovery. They are less intent-driven but drive more overall traffic.”

The Zappos apps are designed to be independent from the website and are focused specifically with mobile devices in mind. The apps are transactional and include the same customer service that customers have come to expect across the brand. For instance, apps feature large product shots and provide the ability to chat with a customer service representative.

While the company does optimize for different platforms, iOS is dominant among its customers. Zappos’ latest iOS update is designed to make mobile shopping easier from a product discovery point of view. It includes features such as negative faceting in which customers can exclude certain features from their search to home in on the item they’re looking for. “Instead of just telling us what you know you want, you can tell us what you don’t want so the product offering remains broad but only brings you things you might find interesting,” Calderaro says. “This ensures that you find what you’re looking for more quickly, even when you’re not exactly sure what you want. Our customers have responded well with tweets and emails on how much they enjoy the experience.”

The company also optimizes its email messaging for mobile by tracking which devices customers use to open their email, and delivering the appropriately formatted message. “We are definitely using what we learn across other marketing channels to provide the best experience for customers,” Calderaro says.

“One example: People are opening marketing emails using smartphones in large numbers now. In general more people check email on the go. Therefore, it’s critical that marketing emails and mobile browser sites be optimized for the mobile customer.”

Data helps the company with this optimization. To make its email messaging relevant, Zappos looks at past purchases and browsing data and crafts messages based on that profile data.

Additionally, Zappos uses a preference center that lets customers sign up to receive emails about specific brands and related items, as well as control the frequency with which they receive messages. “We’re taking seconds or minutes out of their day to get them to look at our emails, so we try to be as relevant as we can,” Fellner says. “We also look at email conversions to make sure that we’re going after the right people.”

All of this data, and the focus it brings on reaching the right customers and communicating with them with relevancy across their preferred channels, is an integral part of Zappos’ customer experience. Add the e-tailer’s penchant for delivering outstanding customer service and it has all the makings for creating and retaining happy customers. And happy customers return with their friends.

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