How Much is Customer Service Worth? About $900M

If you’ve ever used a call tracking service to measure a marketing campaign, you know that you get a ton of interesting information from those services that include how many calls a tracking number gets, the sources of all those calls, the duration of each call, and you can even get recordings of each call.  This level of call tracking is much more sophisticated than anything most small businesses have in place, and yet, I think getting something like this would help them out a great deal.  Not only because it’s a great way to measure their marketing campaigns, but also because it’s a great way to see how good their customer service is.

I’ve written before about how marketing is more than a funnel, it’s an hourglass, and marketing efforts don’t end at getting customers in the door, but rather continue on to post-sale support, because a return customer is infinitely more valuable than a one-and-done customer. And the way to get repeat customers is to deliver exceptional customer service.

In July 2009, Amazon.com, the world’s largest online retailer showed the world just how much exceptional customer service was worth by buying Zappos.com for about $900M.  For those that are unfamiliar with Zappos, they are an online retailer, much like Amazon, that started out selling shoes.  While many online advertisers compete on price, what made Zappos unique was that it built a reputation of providing exceptional service.  Service so exceptional that customers who bought from Zappos, would continue to buy from Zappos even if they could find their goods elsewhere for less money.

So, why did Amazon buy Zappos?  Let’s be clear, Amazon is a technology juggernaut.  When it comes to technology, there was nothing that Zappos had that Amazon did not, or could not have built for less than the $900M purchase price.  What Zappos had was a world class customer service reputation, and a philosophy that Amazon saw that it needed to emulate if it wanted to continue to succeed in the low margin world of online retail.

Zappos’ service is unique in a number of ways, but their difference starts with their corporate culture, and the kinds of people they recruit.  Zappos has a policy that after weeks of intense customer service training, they will pay employees to quit.  The goal of this seemingly bizarre practice is to weed out anyone who will not be compatible with Zappos’ values.  Zappos never says that the people that don’t work for them aren’t good enough, but they do say that those who do work for them all share the same values when it comes to customer service.

While I was not able to find anything more recent, there is a telling stat from 2005 that showed that in that year, 60% of Zappos’ business was from returning customers, the holy grail of any business.  That is telling of just how satisfied customers are with their service.

However, beyond any stats, to understand how truly exceptional the company is, you need only talk to a customer.  I’ve spoken with people who are as loyal to Zappos as Grateful Dead fans.  They love this company the way most companies can only dream of being loved.  You will hear stories of Zappos replying almost instantly to anything posted on the web about them, to customer service agents walking people through an order process on a competitor’s website, accept returns on items that clearly should not be returned, and even just talk to customers who need an ear.

I’m not suggesting that every business should go and become the next Zappos, but I am pointing to them as an example of two things.  First, customer service is an excellent marketing tool because it costs less than most other marketing, and returns more.  Second, delivering exceptional value in some form or another, is a fantastic way to build a business.

Don’t believe me?  Just ask Zappos, they have 900 million reasons why you should.