photo credit: Lars Plougmann

It’s a common understanding of how to run a company that you must be market-driven, and be responsive to customer feedback. And as a customer advocate, I would certainly never be one to deny that customer input and market validation are important. But the other side of that coin is that you’re in business not only to make money, but to develop yourself, enjoy the rewards of a job well done, and hopefully leave this world having enjoyed yourself and given enjoyment to others.

To fully live that ideal might mean turning some work down. It might mean making tough decisions about when to leave your current job and start your own company. It might mean passing on certain investors who don’t share your views on how business should be conducted.

But in order to make those tough decisions, you have to really know yourself and your values. Not just personally, although that of course is important too, but as a company. What does your company stand for?

I recently ran across an article at Both Sides of the Table that dealt with this very idea on the way to becoming a more customer-centric organization:

So I started thinking about the ‘Inside Out’ organization. This is the company that lets outsiders have a glimpse of what is going on in the sausage factory. Being transparent about our workload, our struggles, our fund raising, whatever. Letting our customers and the market know that we were a real organization with real people rather than a pre-packaged, pre-processed marketing machine.

It may be scary, but there’s a lot to be said for letting your insides show. You may end up attracting more appropriate customers in the long run.

photo credit: Dennis Wright

If you had to choose between an idea that would generate money right now today and an idea that could generate considerably more money later, which would you choose?

It’s not a quiz, it’s an everyday decision. Some would say there’s no right answer for every business at every moment; that it depends on the circumstances; that a business hurting for cash flow probably shouldn’t pass up the short-term money. Some would say it’s a false dichotomy.

Every day we face the same choices in our personal lives when it comes to health and lifestyle decisions, and we understand the tradeoff: fun now vs. wellness later. Or when we make personal decisions about finance, and its our long-term financial well-being at stake. We know the value of compound interest, and we know that making healthy dietary decisions now can make all the difference in our health later in life.

But it seems that some businesses don’t even weigh their options; they automatically choose the short-term gains of immediate sales over creating something of lasting value. A company I used to work with struggled with this dilemma, even though they had solid earnings and money in the bank. It should have been easy to invest in their future by making decisions that would tend to make customers more loyal and return more often rather than drive customers to spend a little more in the short term.

Truly great businesses usually don’t make decisions that are based in short-term rewards; they seek outcomes that will prolong their health and enhance their longevity. We need more examples of that around us.

What’s an example you’ve seen recently of a company placing long-term health over short-term gains?

What’s not to love?

So I was delighted to have the opportunity to interview Tony Hsieh, CEO of Zappos.com, for Corporate Idealist. The following responses provide insights into what it’s like to lead a truly innovative and customer-centric company… that just happens to do over $1 billion in gross sales.

Tony Hsieh, CEO of Zappos.com

Corporate Idealist: Thank you for agreeing to this interview. In previous interviews, you’ve mentioned that you got into the shoe business because it looked like such a great opportunity — a $40 billion market. Did you have any concept at the time that you might differentiate the company through customer service, or did that evolve with time?

Tony: Back in 1999, there really weren’t any great destinations online for buying shoes. After learning that it was a $40 billion market in the US, and 5% of it ($2 billion) was being done through paper mail order catalogs, it seemed like a good investment opportunity. I got involved with Zappos about 2 months after it started.

From the beginning, we’ve always thought that customer service was important. But it wasn’t until 2003 that we decided we wanted the Zappos brand to not just be about shoes. Instead, we decided that we wanted the Zappos brand to actually be about the very best customer service and customer experience. Once we made that decision, we started making a lot of changes to our business to be even more customer-service focused.

Corporate Idealist: You’ve also stated that roughly 75% of your business on any given day is from repeat customers. Was the realization that repeat business was going to be your sweet spot something that came about by accident when reviewing business intelligence data, or were you actively trying to cultivate a loyalty- oriented business?

Tony: We stumbled into it accidentally. In the early days of the company (we were founded in 1999), we were unable to raise funding so we weren’t able to spend a lot of money on expensive marketing campaigns. As a result, we were forced to focus more on our existing customers. What we found was that the more we invested into customer service and the customer experience, the more loyal they were, and the more we grew from word of mouth. Today, we take most of the money we would have spent on paid marketing or advertising and invest it into the customer experience instead.

Corporate Idealist: What challenges did you have to overcome to make the company truly able to focus on customer service and customer experience?

Tony: During the first few years, there were many times when we we didn’t have enough money to pay our own employees, but we had such a passionate and dedicated group of employees, that many of them decided to forgo or reduce their salaries because they all believed in the long term potential of the company. If it weren’t for the passion of our early employees, Zappos wouldn’t be around today.

Corporate Idealist: Have you ever had to debate with other executives or with your board of directors about the costs associated with providing an excellent customer experience? If so, how has that been resolved?

Tony: Like any other business, we still have financial goals we need to meet in order to keep our shareholders and board of directors happy. Our approach has been to maximize the amount we invest in the customer experience and our company culture while still meeting our financial goals. There are always things we can do to make our customers happier… for example, in theory we could offer same day delivery for every customer. But it wouldn’t make sense from a financial perspective, so we don’t do that.

Corporate Idealist: Turning our attention to the employee experience, your hiring practices are famously steeped in Zappos culture and oriented towards retaining the right people through the on-boarding process. There’s a clear customer benefit in all this, but it seems that there is an employee benefit, too, in working around people who share a vision and a positive attitude. What indicators can you describe (such as retention, etc.) that this approach is working as intended?

Tony: Our turnover rate for employees varies by department (for example, turnover in the warehouse is higher), but when you compare each department with the same department in other companies, we’ve found that it’s generally lower, which saves the company money in the long run.

Corporate Idealist: You’ve said that when you decided to move operations to Las Vegas in 2004, it was due to difficulties finding customer service people in San Francisco. Yet it seems as if Las Vegas has come to be part of the company identity, as well — visiting conventioneers are often welcomed by Zappos by a party in a trendy nightclub. [Editor's note: I've been fortunate enough to attend one myself.] How did the employees who relocated from San Francisco adapt to Las Vegas culture, and how long did it take for Las Vegas to be part of the company identity?

Tony: When we first moved from San Francisco to Las Vegas, we had about 90 employees in San Francisco and about 70 ended up moving with the company.  Today, we have about 700 employees in Las Vegas, so the vast majority of our current employees joined Zappos after they had already lived in Las Vegas.

For the employees that moved from San Francisco, some of them decided that living in Las Vegas wasn’t quite right for them, so we offered to pay for their relocation back to San Francisco. Overall, I think most employees are pretty happy with the move.

Most customers don’t actually know that we are located in Las Vegas, so I’m not sure if it’s really a part of the company identity.

Corporate Idealist: Another big piece of the Zappos identity that was later to the game is Twitter. You yourself are clearly one of the most popular accounts on Twitter, and many Zappos employees use it as well. How did Zappos come to embrace Twitter, and how has it become a part of the culture?

Tony: We have over 400 employees on Twitter, and you can view their tweets at:

http://twitter.zappos.com/employee_tweets

As you can see, most of the tweets are not about business or marketing, but it’s a great way for us to connect on a more personal level with both employees and customers. It gives people a glimpse into our company culture, which is ultimately what our brand is all about.

Corporate Idealist: Corporate Idealism, as we espouse it on this blog, is all about creative business, meaningful and satisfying work, and an unrelenting focus on the customer, none of which do we believe contradict the ability to make money. The Zappos story epitomizes that. Do you have anything to add for our readers about being a real- world Corporate Idealist?

Tony: I would say rather than focus on what will make you the most money or be best for your career, figure out what you would be passionate for 10 years and go pursue that. A lot of people work hard at building a career so that one day down the road they think it will bring them happiness. And most of the time, when they finally accomplish their goal, they realize that it doesn’t really end up bringing happiness or fulfillment for the long term. One of the things that the research has shown is that people are very bad at predicting what will make them happy. If the ultimate goal is to achieve enduring happiness, it seems like it’s worth spending some time learning about the science of happiness so you don’t wind up in the same situation.

photo credit: Seattle Municipal Archives

It’s Memorial Day in the U.S.A., which means most of us have the day off of work, although many of us (ahem) are working anyway. Either way, it’s still Monday, which means a new week, which means new motivation. In honor of Memorial Day (and in no way meaning to trivialize what is truly being memorialized on this day), try asking yourself:

What have you done lately that’s worth remembering?

What interactions have you had with customers that they’re likely to talk about to colleagues and friends? And what will they say?

People tend to remember and talk about the amazingly good interactions they have and the really bad ones. The ones in between don’t really merit remembering, let alone retelling. If you want people to talk about you, you have a choice.

How will you be memorable this week?

photo credit: Mac Babs – Bárbara Bessa.

How much money does your company spend on advertising? On marketing activities overall?

And how much customer trust does your company lose from allowing deceptive practices to get in the way of a long-term relationship with customers?

Most of what constitutes branding is about defining the ideal customer experience and seeking to embody it in every way possible. How many executives would actually go through the exercise of defining the company only to put it in terms of “deceptive” or even “hoping for apathy?”

Seth Godin makes a lot of great observations in his books and in his blog, but this one from last September is one of his best on how customer trust can be (and so often is) eroded little by little:

My car insurance bill has been steadily rising, year after year, despite the fact that I have a clean record. The logic, I’m sure, was, “well, let’s raise it a little and see who quits…”

If revenue increases enough to make up for the few who quit, you come out ahead. So, quarter after quarter, year after year, repeat the same process. Raise it a little, check to see if revenue rises in aggregate, and repeat.

I’d get the bill, sigh about the fee, consider the hassle of switching, pay the bill and move on.

Until last week. Last week the number was too high. Something in my relationship with the insurance company shattered. After all, it’s not like they had done anything for me, not like I knew anyone there. It was just momentum. And the number was suddenly enough to make me take action.

19 minutes later, I was at Geico.

The problem for my insurance company is that a whole bunch of people will do this at once. When you hit the breaking point with one person, it might be 1,000 or 100,000 people who do the same thing at the same time. And you don’t get a second chance. They’re gone.

Some magazine companies do this. They start subscribers out at low introductory rates, only they don’t call them that, and then gradually step up the pricing for the subscription each year. Of course the best case scenario for the company is that the customer doesn’t notice, but even if the customer notices, the company is counting on laziness or apathy, but as long as the incremental revenue is greater than the cost of attrition, they consider it a winning formula.

But how can you know the true cost of attrition?

Are these companies factoring in the ill will these customers now bear towards them, and the possibility that they will tell their friends, and the possibility they will cancel multiple magazines (in this scenario) at once when the tipping point comes, and the possibility, ever more likely, that they will post their experiences on a blog or on Facebook or on Twitter where dozens if not hundreds if not thousands of customers and potential customers will read what a sneaky practice the company employs?

They may be factoring all of that in. There may well be valid metrics that can be used to measure the effects of each of those considerations. But it’s kind of like the adage that telling the truth is easier than lying; the effort expended to track those considerations seems far more difficult than simply doing right by the customer. And doing right by the customer has all kinds of upside, measurable and less so.

I once heard Jon Luther, Chairman and CEO of Dunkin’ Brands, speak about transforming that company from an outdated brand to a leader, and he emphasized customer experience. Everything from their recognition of the importance of coffee in the brand to the remodeling of their stores was drawn from an understanding of customer preferences and experience.

No matter what the business, it is entirely possible and highly recommended to get feedback from the customers. At a loss for how to get feedback? Listed here in alphabetical order are several tried and true ways of getting customer feedback.

Advisory Board

On the OPEN Forum, a recent post discussed the nature of advisory boards:

Advisory Boards have many benefits. First, there’s an inverse learning curve for board members. With time, they become more knowledgeable about the company. Second, people will often serve on Advisory Boards for lower fees than they’d want as a consultant. An important point is to not take advantage of Advisory Board members, especially in professions like law and finance, where advice can be binding and carries risk. It’s OK to ask for an opinion, but not a binding judgment. That is what they get paid to do.

I’ve served twice on an Advisory Board. It’s a fantastic experience for the customer, and even as a participant it’s a great reminder to look to your customers for input.

Analytics

Using business intelligence and web analytics tools can help you uncover patterns of customer behavior you might never have noticed in day-to-day operations. Maybe the majority of customers use only a portion of your product, but which part? And how does their loyalty change when they use more of the product? It’s no exaggeration to say that insights gained from savvy use of analytics tools can make the difference between profitable operations and unprofitable ones.

Blogs

See Social Media.

Customer Support Records

Of course you probably have a goldmine of customer data already in the form of customer support contacts. Customers that complain are your best asset; they provide in-the-moment feedback about the usefulness of your products and services, and how either can be improved. If your company isn’t set up to store these records in a searchable database, it probably makes sense to make this a priority.

Eye-Tracking Studies

See Usability Studies.

Facebook

See Social Media.

Focus Group

A focus group can be a great way to get live, interactive feedback from customers on a set of issues. The topics can range from strategic to tactical, with the caveat that the more abstract the questions, the more likely the answers are to be a bit arbitrary. Like most of us, when asked to articulate thoughts on topics we’ve had no reason to think deeply about before, customers will usually struggle, and will sometimes say the first thing that comes to mind, whether or not it would hold up under further scrutiny. Your job, or your moderator’s job, is to suss out the patterns that emerge from all this and determine what’s actionable and what’s just on the periphery of usefulness.

Social Media

Pay attention to what’s being said about you on Twitter, in blogs, and all across the web. You simply can’t afford not to.

An easy first step is to set up a Google Alert with the name of your company and the names of your products, and watch what comes in. You might be startled. As soon as you see negativity, make sure you’re part of the conversation. But the objective is not, of course, to silence the negativity; you want to harness it. Make it known that you want to hear feedback and you appreciate the effort customers are putting in to making their voices known. Promise to do better. And then do better. This will go a long way towards changing the minds of anyone who was negative or skeptical about the quality of your company.

Surveys

Surveys are one of the most familiar methods for getting customer feedback, but they are also one of the most abused. Too many surveys are constructed without a clear objective and with confused purposes in the questions.

Your best bet is to know what you want to accomplish with the survey, but avoid including questions that are too leading.

As for tools, you can get pretty far with tools like Zoomerang or SurveyMonkey, or if those don’t suit your needs, there are certainly heavier-weight tools on the market including enterprise applications.

Twitter

See Social Media.

Usability Studies

Usability studies entail placing a customer (or potential customer) in front of a product and asking them, step by step, to perform the actions a customer would normally perform with the product, asking for feedback and watching for trouble signs all along the way.

The difficulty, as with focus groups, is that when asked, most customers won’t be able to elaborate on why they do some of the things they do, so it’s not always meaningful to ask. Sometimes just observing user behavior is enough to realize a product’s flaws without needing elaboration.

Another difficulty in usability studies is that users can end up feeling that they, rather than the product, are being tested. This can be overcome with reassurances and a completely non-defensive attitude about any of the customer’s feedback about the product.

If you want an easy way to start, I recommend the book Don’t Make Me Think: A Common Sense Approach to Web Usability. It will help you get oriented to the concepts in usability testing, and how to execute them on the cheap.

User Conference

I was part of organizing a user conference once early on in my career at a start-up software company, and it was a fantastic experience. We invited customers from around the world to come take part in a two-day series of discussions about the product suite, the roadmaps, and where we could improve as a company, as well as opportunities to share tips and tricks with the other attendees. The generosity with which customers responded was amazing, and the humility with which my coworkers accepted critical feedback was equally impressive. If this is an option in your business, it might be worth considering.

* * *

Of course, there are low cost and higher cost options for implementing any of the options listed above, and the difference will mostly come down to experience and quality of execution. If no one in your company has ever conducted, for example, a usability study before, it will probably make sense to hire professional consultants or an agency to perform the first set, at least. Or depending on the size of your organization, you may consider hiring someone, or building a new group, to conduct all of your user research.

Now it’s your turn. What have I missed? What other methods do you use for gathering customer input about your business or your products or services? Let me know in the comments.

photo credit: Witt Istanbul Suites

Raise your hand if you’ve been affected by layoffs – meaning you either had to accept one or dole them out – due to the downturn in the economy. Yeah. We thought so.

Now raise your hand if you think more layoffs are in store.

That’s likely the truth, and another likely truth is that a good many companies are probably hurting themselves and their customers by approaching layoffs poorly. Yes, layoffs stink. No one wants to get one; no one wants to give them.

That said, when they’re handled with care and caution, layoffs can definitely help a company survive the downturn. Jimmy Guterman, writing over at HarvardBusiness.org, lays out some thoughtful advice about reducing the pain of ill-considered cuts:

Thinking strategically about both groups and treating them respectfully ensures that the virtuous circle — the vital link between engaged employees and satisfied customers — remains unbroken. And it positions your company for greater success when the economy turns around.

Layoffs are going to happen. It’s a non-idealist situation, that’s for sure, but if you’re the one doing the laying off, there are idealist ways to handle the situation. You can approach the decision of which employees to let go from a customer experience standpoint, as well as from the perspective of the remaining employees.

(Of course, if you’re the one being laid off, there’s not a lot you can do to control the outcome of the immediate situation and you have our sympathies. We sincerely wish everyone the best of luck in finding even more meaningful work the next time around.)

Lastly, and this can’t be said enough, although layoffs are depressing and in some cases inevitable, that doesn’t mean they can’t be approached with respect and a forward-looking attitude:

For those who must go, the best procedure is to “lay off people as if they were future customers,” he says. “When you let someone go, try to put together a safety net, do the best you can do, provide relocation support. Treat these people as potential future customers and potential future employees — as if they will one day be in a position to send business to your company.”

The whole article is a great read.

[via HarvardBusiness.org]

Church of the Customer has a timeline of the events.

Queerty has a listing of some of the books that have been classified as “adult” along with descriptions,  sarcastically described as pornographic, such as

Winner of the Whitbread Award and often taught in British schools, it tells the story of Jeanette who is raised in an evangelical household who grapples with her lesbian identity, while submitting to exorcisms by her famly.

Consumerist shows us that not all books on homosexuality have been relegated to the adult section.

Much of marketing punditry lately has been about how the customer is in control and the importance of trust: this move from Amazon and the popular reaction to it demonstrates that the customer doesn’t get to control Amazon’s decision, per se, but they can certainly control where they spend their money. Because needless to say, this move has caused offense among writers, LGBT consumers, sex educators, and more, and several blogs are calling for readers to go out and buy these books, DVDs, and other items… from someone other than Amazon.

Customers can also control certain aspects of publicity: another movement underway is the effort to Google Bomb the term “Amazon Rank” with an alternate definition expressing displeasure with Amazon’s decision.

04/13/2009 9:30 AM – Edited to add: Thanks to Twitter user arkley68 for pointing out our Amazon Store widget that was visible on this blog, running alongside this story. The store widget has been removed and will remain gone until Amazon reverses their policy.

04/13/2009 1:52 PM – Edited again to add: Is it a hack? Could be. Or not. Valleywag has the run-down.

04/13/2009 8:15 PM – Edited again to add: “An embarrassing and ham-fisted cataloging error.” Embarrassing for them and for those of us who got worked up over what turned out to be nothing. Our Amazon Store widget has been returned to the sidebar; life goes on.

Image credit: Jasoon, via flickr

They not only perform better during expansions but recover faster when growth rebounds from an economic slump.

Source: HarvardBusiness.org – The Daily Stat: Which Companies Bounce Back, Post-Recession?.

How are you adding value to your business today?