Old School CRM.

For those skeptical whether a company wants or can have true relationships with its customers, here is the bulletin board of a Starbucks I happened upon in my travels:

A simple note, handwritten cards with customers' names, favorite drinks & details. The odd customer photo. How long do you think that it took to construct this mural? 30 minutes? 60?

The answer is on the blackboard. 4 years of investment in customer relationships, made 30 seconds at a time.

ANY company can have this kind of relationship with its customers. Only those willing to invest 4 years do.


(No, it’s not lost on me that it is really people that create and maintain the relationships. Service businesses are about people, and front line staff in particular. Front line people are the are “product”, the marketers and the customer service staff. Customers’ feelings about them are transferred to the company. Customers’ feelings about the company are likewise transferred to them.)


(One other note from this: Want to be the Mercedes of your industry? The Ogilvy of your local market? The Zappos of your niche? In service businesses, all three are represented by your front line providers. 3 functions in 1. Don’t tell me service businesses are inefficient.)

Compete Through Service Symposium: A source for services thought leadership.

I credit two early sources for much of my perspectives on service and leadership – formative years spent as an officer in the Canadian Navy and in a program associated with the Arizona State University Center for Services Leadership.

The Navy is the sort of place that, once you leave, you really can’t go back to refresh your perspective - at least not formally.

The Center for Services Leadership, its objective in bridging the business & academic communities to compete strategically through the profitable use of services, is much more accommodating. They offer array of continuing programs, including service business webinars, cutting edge research & resources, and a series of events capped by the annual Compete Through Service Symposium.

Symposium is the venue for some of the best service content I’ve ever taken in, and year-after-year is a veritable who’s who of businesses engaging in service excellence. This year, Avnet, DuPont, Marriott, IBM, Zane’s Cycles and Zappos, and others are represented as content providers.

Symposium offers any service business great lessons with practical application for:
- Service design & innovation
- Use of technology to facilitate the service experience and service environments
- Transformation product-based companies into services oriented companies
- Creation of lasting customer loyalty
- Service process improvement by mapping the service encounter
- Service recovery
- Service culture & values
- Service differentiators for B2B

This year, I’m proud to be not just an attendee, but a contributing member of the social media team. You can look for updates on Twitter under the hashtag #CTSS, in the Center’s official blog, and in this space.

This post preaches to the converted, but I know hundreds of service business professionals that care deeply about creating customer value and want to continue to get better at their craft. Regardless of level or organizational function, the Compete Through Service Symposium has content, experts and opportunities to help any business or individual differentiate on service.

On Encounter #2, Zappos Delivers. Early.

I wrote in a past post that my first Zappos service encounter, while good, didn’t exceed any sort of expectations I had going in. Having heard so much about their corporate culture and noting the cult-like service following they’ve developed, I engaged the initial experience with heightened expectations that would have been very difficult to surpass.

While they didn’t “wow” me, they did offer an experience that scored high on some service quality dimensions – a user-empathetic experience that was easy to interact with, name brands backed by good prices assuring the overall value, and most of all, reliably delivering on their promise.

It wasn’t enough to get me to sing their praises the way others do, but it was enough to turn me into a repeat customer and give them another chance to make me an outspoken advocate. Of course, the second service encounter began with expectations reduced at least a little by the first.

This time, they exceeded those expectations.

I made a fairly routine purchase, replacing the wallet I lost while on vacation a few weeks previous.

After receiving the usual order confirmation email, I quickly received another email from Zappos. Usually when this happens with an online retailer, someone is telling me that the item I ordered is out-of-stock and resetting expectations for when my purchase will arrive.

In this case, however, Zappos was informing me that the shipping on my product would be upgraded to expedited, free of charge.

I know that my service upgrade was an opportunistic move for them. It came at no additional charge (depending on fulfillment costs, potentially even a savings) to them. Still, the consideration that goes into evaluating the service promise and committing more than was asked is worth noting. It knowingly creates a potential dissatisfier if the commitment is unable to be kept, but also builds in the customer the sense that Zappos is empathetic to customer desires, responsive in finding and executing on opportunities to surpass their commitment and is confident in their reliability to perform.

For encounter #2, not only did Zappos retain a repeat customer, they also created someone willing to advocate their commitment to service.

Zappos is just Okay.

I know, heresy.

Zappos is the example of the modern enlightened organization, held up by service & leadership experts as the first company to tap into the service profit chain and the original inventor of outstanding service.

At least it seems that way, with legions of raving employees and fans & the success they’ve had merchandising their culture - the leadership books, the blogs, maybe the Amazon merger itself. They’ve turned into a social media-enabled service industry legend, extending to reach or even surpass the fabled Nordstrom experience and the Ritz-Carlton credo.

Like those examples, I’d guess that Zappos has many boosters that have never actually experienced their service. Full disclosure, I counted myself amongst them - until recently.

I'm a fan of Zappos’ position. They say the right thing about internal service & employee engagement, and how these lead to a superior customer experience. More than once used them as an example of how a good service business should be run.

But I've refrained from commenting on the actual experience, as I had yet to witness it firsthand. Recently, I decided if I was to hold them up as representing what a modern service business act like, it was time for an encounter of my own.

The experience went off without a hitch through every moment of truth. The registration-through-purchase experience on the site, the in-process updates, and the fulfillment were as expected, and I ended up having a good experience buying a good pair of shoes for a good price.

The entire experience was good – pretty much exactly as I had expected.

And there's Zappos’ problem.

Because of considerable build up – much of it self-produced – on what a wonderful a service organization they are, Zappos would have had to absolutely rock my service world in order to be notable.

In all fairness, my expectations were sky high for a first time service use. Sensitivities were heightened to every aspect of the service encounter, as though by having it, I would come away with a different perspective on how a business should be run.

For companies that set high-level of expectations, it is extremely difficult for a service business to exceed them. Unless something goes monumentally wrong and is spectacularly recovered, it’s unlikely the experience will seem more than adequate.

But in a time when many businesses seek to establish & perform to an adequate level of service expectations, Zappos seeks out a higher level of criticism. That in itself says that much of what we read about their culture might actually be true.

I'm not a fan of the "underpromise / overdeliver" ethic that has swept business culture, and while Zappos didn’t “knock my service socks off” with my first encounter, I respect them for trying, and I’ll likewise be giving them another try.

Is Zappos the Anti-United?

Both companies have had service experience foul-ups that became publicly visible throughout the social media sphere.

United involved a single case of a damaged guitar handled poorly, but that spawned a video since played virally over 8 million times and chronicled as a case study by Harvard Business Review.

Zappos involved thousands of customers impacted by an incorrect implementation of a pricing change and ultimately the temporary shutdown of the site.

In recovering service, providing a fair outcome for the customer is the key, but almost as important is the speed with which the company reacts, usually driven by the ability of employees to make good on their service promise after it has initially failed.

United is literally a case study in how not to approach service recovery. By refusing to pay $3,000 for the damage to Dave Carroll’s guitar because he failed to file the damage claim within 24 hours, the company provided no fairness of outcome. They acted slowly, hiding behind process & red tape, hoping the customer would eventually tire of the claim process and simply give up. Along the way, they repeatedly showed their insensitivity through employees not empowered to act on the behalf of the customer.

Zappos, on the other hand, handled its service encounter miscue with fairness, honoring the purchase price of all items at $49.95, regardless of what they were supposed to sell at – a move that instantly cost the company $1.6M. They acted quickly in doing so, announcing within hours of the occurrence that they had made a mistake, that the mistake had been corrected, and that the purchase prices on the transactions would be honored. One could argue that as the CEO, of course Tony Hsieh is always empowered to make decisions. But part of empowerment is the ability for the line to make critical issues visible to leadership, so that they can act quickly and appropriately. (It’s likely that an organization without that kind of upward information unempowerment is the culprit behind the millions of gallons of oil still gushing into the Gulf of Mexico.)

If you ever wanted to draw attention to your fledgling luxury site, there are worse ways to do it than spending $1.6M in what amounts to free advertising that reinforces the offering, the service integrity, and the brand. On the other hand, while the ultimate cost of United’s flawed customer service wasn’t likely the 10% of market cap claimed by The Times, it probably cost them more than Zappo’s $1.6M in negative reinforcement.

We often speak about the power of word of mouth. With over 8M hits and an HBR case study, the negative WOM is evident. I still feel like we’re a viral video short here, but “Zappo’s Honors its Purchase Prices” is harder to fit to a rhyme.

amazappos.com

I hope I’m wrong about this one.

One exceptional service organization purchased another yesterday, and I’m fearful for the final result. I’m not a believer in big-merger-as-corporate-strategy, and think most tend to destroy more shareholder value than they create.

I think it’s particularly dangerous when the organizations merging are differentiated on the basis of their service culture.

Amazon.com is a leader in creating technology that enables the service experience. From the algorithms that make ever intelligent point-of-purchase suggestions based on my product preferences, to the self-service technology that creates a credible, user-friendly experience that I have absolute confidence in, Amazon.com uses technology as well as anyone to add delight to the retail experience. They account for the bulk of my online shopping.

My Zappos knowledge is limited. One flawless service experience, little interaction with their famous world-class service. It is an environment where, like Amazon, the service promise is fully enabled to be kept, but in Zappos case, it is people that do it. Zappos relies on a corporate culture that is not the same as other online retailers. They work to hire great people that are service-oriented first and foremost. They rely on the employees to provide exceptional service and form close relationships with the customer.

What is clear about the models is that they are both excel at making service promises and keeping them, but where Amazon uses technology, Zappos uses a workforce that is widely regarded as exceptional amongst its peers and across industries.

As it stands, Amazon is reporting that service operations will not be integrated, that they will operate as standalone businesses, and that the deal is not about synergies. In my opinion, the cost savings associated with a shift from the people-driven service model to the technology-enabled service are too easy to identify. As a result, Zappos operations will eventually be integrated into Amazon. If so, it will ruin the element of the experience that differentiated Zappos from every other online retailer, including Amazon.