NEW YORK For Tony Hsieh, CEO at Zappos, meeting up with a customer at a bar in midtown Manhattan was perfectly natural. Most execs with 1,600 employees and doing over $1 billion in annual sales would probably pass on having drinks with an individual customer, but Hsieh is not your typical CEO. In the past week alone he had given away shoes on Twitter, sent out an open invitation to a company barbecue and solved a service problem a customer left in a blog comment. If this seems exhausting, Hsieh sees it as part of a larger strategy to build Zappos into a brand on par with Virgin.
“We think our brand is going to be different because we want people to feel there’s a real person they’re connecting with, whether it’s when they call us or through Twitter or any way they come in contact with us,” he said.
The path Zappos is taking has been forged by some of the Internet’s top brands, like Craigslist. It’s part of a newer crop of companies, including T-shirt phenomenon Threadless, handmade-craft site Etsy and review destination Yelp, quietly building powerful brands online on the strength of communities. For these companies, community is not a tactic or marketing plan line item, but core to what they do. It means being hyper-responsive to customers, laser focused on usability, unapologetically human and OK with customers determining the course their businesses should take. The bonus: When they take off, these brands don’t need to do much in the way of advertising, instead letting their customers spread the word.
Not that advertising was, at first, even a consideration. For the latest wave of Internet services that came of age after the dot-com bust, spending money on marketing wasn’t in the game plan. These businesses, which saw how sites like Pets.com and Kozmo tanked fast and hard, typically ran far leaner operations. Instead, the paragon for online success was, and still is, Google, which has built one of the top brands in the world without advertising at all.
Yet Google obviously invests heavily in its brand. Its home page may have nothing but a search box and links to Google’s services — which means the company is forgoing tens of millions of dollars in advertising — but it’s doing something more important: putting its customers first. Untargeted ads, even simple text links, goes the rationale, would put too steep a cost on its users.
This decision is “revolutionary,” wrote Havas Media Lab director and London economist Umair Haque on Harvard Business Online in February. “By choosing to invest in consumers over advertising, Google is a living example of a deeper truth: The future of communications as advantage lies in talking less and listening more.”
Craigslist has made a similar calculation. The 13-year-old company would hardly seem a brand icon, yet a Brandchannel survey in 2007 ranked it as the No. 7 brand. The site has such a bare-bones appearance that it doesn’t even have a logo. Its worth was recently estimated at $5 billion. Not bad for a 25-person company. For Craigslist CEO Jim Buckmaster, the decision to forgo ads on the site wasn’t a tough one because it didn’t fit into the simple rationale he and founder Craig Newmark have for the site.
“All we do is try to respond to what users are asking for,” he said. “That’s how we set our priorities. Users aren’t asking us to run ads, so it doesn’t come onto our radar.”
At the heart of these decisions is a simple fact of life with the Internet: Everyone is connected, and hiding behind glossy images won’t work when a Google search can turn up the good, bad and ugly of your company. In the analog world, it was different. Haque believes brands thrived on how difficult it was for people to get information. Logos, spokespersons and slogans combined to give consumers a way to make choices. But now, the Internet has turned that on its head. “The entire economic rationale for brands is gone,” Haque said in an interview. “Interaction is too easy now for brands to have power.”
Online-review site Yelp sees Google as the great brand equalizer. The Yelp brand, thanks to its trove of user-created reviews, shows up whenever someone in major cities like New York, San Francisco and Chicago types in a local business name. “It all comes back to whether customers are having a strong interaction with the brand on a regular basis,” said Yelp CEO Jeremy Stoppelman.
Unlike many offline companies, most Web 2.0 businesses have community baked into their DNA. T-shirt design site Threadless has grown to 750,000 registered users in five years by letting its community decide the direction it takes. The business is premised on user-submitted designs getting voted on by others. The most popular get made and sold on the site. And it has made large and small changes to its approach based on customer feedback. Last year, a user who never bought something from the site pointed out that Threadless should change its e-mail newsletters to show just the design, rather than the T-shirt on a model, a change the company made. Earlier, it created a critique section for designers to get feedback after seeing people had used their Threadless blogs for this.
“The community changes the brand to suit them,” said Jeffrey Kalmikoff, CCO at Threadless parent Skinnycorp. “We don’t have expectations of what Threadless will be. We just manage the parameters.”
That includes trying to manage the perception that the brand is getting too big. It turned down offers to sell its shirts in department stores, for example, and chose to open retail stores in markets like Chicago and Boulder, Colo., rather than New York and Los Angeles.
Etsy has been equally protective of promoting its brand. While it tried some advertising on behalf of the nearly 100,000 merchants who sell handmade goods on the site, Etsy found the ads didn’t fit well with what the company was about: an authentic antidote to mass-produced merchandise. The Brooklyn, N.Y., company’s CEO, Rob Kalin, said Etsy has built its brand more through focusing on its customers and relying on them to promote it. (CLICK HERE FOR A VIDEO INTERVIEW WITH KALIN.)
“When you have a service that people feel enthusiastic about, they spread the word and pass it on,” he said. “If we were to take out big glossy ads in magazines or do television commercials, then that changes how people perceive what your company is.”
The problem with more established companies, according to Noah Brier, a strategist at Naked Communications, is that as they’ve grown they’ve lost their sense of what they stand for. “What these [Web 2.0] companies have in common is an absolute understanding of who they are,” he said. For Craigslist, maximizing revenue by putting ads on the site isn’t really considered, just as Kalin doesn’t think Etsy could have a unified brand message even if it wanted one.
“Our brand grows with a thousand different focal points, rather than one big mono voice of ‘Here’s our brand, come engage with us,'” Kalin said.
And while the early part of the Web was often about the ability to be someone else, the recent rise in social networking has put a premium on real identity. Facebook is only valuable to users if they interact as who they really are.
At Zappos, Hsieh sees his customers as human beings, not just “consumers,” and so makes customer service the defining feature of the brand. Last week, he flew to San Francisco with 20 employees to hold a surprise happy hour he announced on Twitter. An hour and a half later, 200 people showed up with “Zappos” written on their hands for free drinks.
“Tony realizes that in order to be successful you need your customers to love you,” said Michael Galpert, the Zappos customer who had arranged to meet Hsieh in New York. “You do that through great customer service.”
This was a necessity when Zappos began selling shoes online: People were skeptical about buying them from the Web, so Zappos implemented generous return and shipping policies. Its commitment to service can sometimes seem extreme. In 2004, Hsieh up and moved the entire company from San Francisco to Las Vegas because he found attracting and keeping high-quality customer service representatives was too difficult and expensive in the Bay Area. Rather than have customer service split off in a different location, the company relocated.
Zappos gives attention to all details of customer service, scrapping scripts in favor of encouraging regular conversations with customers. Also, service reps are not given time limits on calls and get latitude to address customer needs, even directing them to competitors if Zappos does not have a size or style. This has given the company a reputation for going the extra mile — and more — for its users. Last July, when the payment deadline for shoes a customer had ordered came and went, a Zappos rep e-mailed the woman to remind her the money was due. The woman told the rep the reason: She had meant to send back the shoes, which were for her ailing mother, but in the meantime, her mother had died. The company rep arranged to have UPS pick up the shoes, then actually sent the woman a flower arrangement and condolence card. A blog post the customer wrote about the event, “I Heart Zappos,” bounced around the Web, with customers contributing their own good experiences with the company. “If you buy shoes online, buy them from Zappos.com,” the poster wrote. “With hearts like theirs, you know they’re good to do business with.”
When asked about it, Hsieh — who said they don’t send flowers to everyone — explained that it pointed to the need to get company culture right. Without that, he noted, Zappos’ service will falter and the brand will suffer.
The experience of these brands is instructive for all companies, according to Adrian Ho, founder of ZeusJones, a Minneapolis agency. The transparency demanded of the Internet will require new approaches to creating customer loyalty. “Right now, we’re still at a point where if you have a big enough budget, you can cover up what you’re doing by spewing out some nonsense,” he said. “Clearly that’s going to change. We’re not going to know less about companies tomorrow than we do today.”