Customer Relationship Management Framework Used in Zappos - Case Study Example

E-Business Strategy Relationship Management (CRM) Framework Used in Zappos Relationship Management (CRM) involves multiple strategies that modify organizational culture to achieve new customer management skills (Gartner, inc. 13). It involves aligning multichannel, integrating systems and quality of data through the use of technology to achieve better customer experience. The CRM framework focuses on visions and strategies of the company to achieve better performance of the organization and improve customer experience and satisfaction (Gartner, inc. 13). The CRM framework enables the company to monitor customer behavior acquire data and make analysis to help the organization improve its performance and deliver customer expectations more effectively. Zappos organization boasts of its customer-focused culture that focuses on delivering value and building strong brand for the company. The organization leadership embraces the culture of customer satisfaction and establishment of customer satisfaction. The management and employees seek to achieve customer “WOW” (Salim 8). All its activities are geared towards building teamwork, personal and professional growth. In order to achieve customer satisfaction Zappos applies various strategies. Company’s strategies Improved business operations and supply chain management In order for the company to achieve better customer experience there is need to improve the quality of service delivery and make customer appreciate the services. As the first retailer for online shoes Zappos Company had to create customer loyalty by offering quality services with little focus on business profitability (Salim 13). The company provided clients with an efficient retail website that loaded faster. The customers place orders online and use telephone services in improving customer experience. Employees responded the phone calls within 20 seconds and the call center operators had the authority to decide all issues. This improved information sharing between the organization and its customers and improved relationship between customers and organization (Lee & Whang 13). Customer Retention Strategies: Initially, most customers did not have confidence with making online transactions. Zappos management used various approaches to win customers confidence (Salim 15). They overcame customers’ worries by availing adequate product information online, free overnight shipping, and free returns and maintaining a call center. Customers concerns about the fitness of the products bought online and the chance to return those that did not satisfy their expectations was necessary when making online transactions. Zappos offered a 365 days free returns to their customers who found the product unfit after purchasing (Salim 17). That opportunity enabled them to purchase many pairs and retain the ones that fitted them and returned those that did meet their requirements. Those who made more returns had higher purchases thus higher net purchases. Giving fast response to customer queries: The quality of goods and services offered by the suppliers influence customer confidence and loyalty to the company. Through customer call centers and online ordering of goods by the customers Zappos has managed to serve the customers twenty seconds from the time they make call and the time they get someone responding to their calls. About 95% of the Zappos customers were served through website while the remaining 5% were served through call centers (Salim 18). The call centers handle the returned products and any other issue that would result to customer experience. The company was interested with a time it took for call center operators to respond to customer calls and did not bother about the duration of the conversation. They helped to ensure customers got faster services and made sufficient interaction with the call center operators and have all their problems addressed effectively (Lee & Whang 11). Increased rate of product innovation: Zappos offer their customers unique products and services by enabling them select the shoes of their choices from various products produced by various suppliers. Customers are given the opportunity to return products that fail to match their needs within 365 days for free. The unique products and services offered online by Zappos have increased customer satisfaction by ensuring that customers get the products and services of their choices (Lee & Whang 16). Higher order execution rate: Zappos provide unique services and products to its customers. They respond to customers issues within 20 minutes after making calls. Furthermore, call center operators are given the opportunity to attend all customers’ needs in order to ensure faster solution to the customer needs. In addition, the customer has established retail outlets in all strategic locations in different countries they operate and through partnership with various suppliers the company can execute customers’ requests in time. The company had to develop its inventory system in-house that could handle complex stock inventory. The company provided training to its employees for four weeks to build their capacity to provide excellent customer services (Lee & Whang 24). 2. Zappos supply chain model The initial Zappos model (drop-ship model) focused on providing unique product assortment by collaborating with shoes companies that would hold stock and execute orders. Once customers placed an order to the Zappos Company the order would be forwarded to the shoes companies that would bear the cost of inventory. The customers would pay retail price to Zappos while Zappos would pay in for the order to the shoe companies in wholesale prices. From the year 2003, Zappos changed the strategy and started maintaining inventory in order to focus on customer satisfaction. The model depended on the vendors efficiency to satisfy the customers’ requests and that posed numerous challenges to Zappos. For instance, the flow of information was inaccurate, and vendors could not predict the actual demand. Lack of accurate information either resulted to delays in delivery of orders and cancellation of some orders because sometimes customers ordered for stock that was not available. Finally, there was the inability of Zappos to control delivery of customer orders. The vendors were responsible for shipping customer orders, and they would sometimes focus on their customers and forget to supply Zappos customers. Need for change of Zappos Supply Chain Model In order to overcome the challenges of drop-ship model, Zappos started maintaining their own inventory to ensure the clients’ requirements were supplied in time (Salim 18). They established stores in strategic points that served as distribution centers and continued the drop-ship approach with some of its vendors to ensure all customer demands were satisfied. Improved Supply chain Partnership Partnering with suppliers and customers as well as improving efficiency with which the organization responds to customer needs could help improve the relationships (Winner 98). Zappos established third-party agent in various parts who reduced the delivery time for the customer orders. The use of automated inventory system reduced the cost of managing inventory and provided a quick update of the inventory and customer orders. The move also reduced the need for huge capital investments. Zappos decided to establish its own distribution centers in Kentucky in order to meet specific customer needs through maintenance of many stock-keeping units. The strategies used by Zappos to maintain the stock aimed at reducing the cost of inventory management and ensuring system accuracy. Improved Information Technology As the demand for products increased Zappos increased the size of their stores and automation system for easier identification of items required for shipping and destination of those items. The use of the robotic system increased the efficiency of workers. The company upgraded its software and hardware constantly in order to meet its ever-growing demand and give superior quality to the customers (Winner 92). Evaluating the value chain efficiency Zappos assessed the level of consumer satisfaction by comparing the services provided by the company’s warehouse and those served through drop-shipment (Salim 16). The assessment disclosed that the customers served from the company’s warehouse were more contented than those served through vendors. Zappos opted to redefine itself as a service company dealing with the sale of shoes and not as a shoe company. After the redefinition, the company switched off its services from drop-shipment to its storage services in order to meet the customer needs efficiently (Winner 94). 3. Merger and Acquisition of Zappos by Amazon In the 2009, Amazon acquired Zappos online shoe retailer at a cost of about $930 million. Amazon is the largest online retailer of various products and focuses on delivering the best selection conveniently and affordably to worldwide clients (Channeladvisor 1). On the other hand, Zappos is an online shoes retailer focused on delivering best customer services to its clients. Zappos stocks shoes, handbags, apparel and accessories. It stocks over 1,000 brands that cannot be easily obtained from mainstream shopping mall (Salim 7). Amazon considered the deal worth because the two companies had a similar culture that focused on creating value for the customers (Channeladvisor 1). Having similar customer focus gives the two companies a better opportunity to strengthen their pursuit for customer satisfaction. The completion of the acquisition between Amazon and Zappos was seen as a better opportunity for partnering to achieve better performance. Amazon perceived the deal as offering the best opportunity for it to expand the Zappos brand. The merger also offered Amazon an opportunity to help Zappos to maintain its brand and culture of offering the best services to its clients (Channeladvisor 1). Therefore, Amazon opted for merger with Zappos because the Zappos was customer focused and had developed its brand online which Amazon could continue pursuing effectively alongside its own goals. The Zappos competence was in its well-established organizational culture that brought all workers close as one family and made it easy to retain the customers. Customers were closely attached to Zappos brands and identified with superior services they received from the retailers (Salim 19). Zappos focuses on achieving low prices for its clients, creating wide selection and convenience to create customer satisfaction by developing relationships with customers, establishing emotional relationships and delivering “WOW” customer services. Zappos aimed at acquiring significant benefits from its new relationship (Channeladvisor 1). For example, Amazon had vast resources, innovative technology and long-term operating experience that would contribute to faster growth and enable Zappos to attain brand and culture growth faster. Zappos would continue to strengthen their brand and provide better services to the services by utilizing the capacity to access Amazon resources. Its operations would not be affected much because they would continue their operations, and only shareholders and directors would change (Channeladvisor 1). Therefore, through merger between Amazon and Zappos the two companies would increase their resource base and customer experience to strengthen brand growth and customer experience and consequently increase business profitability. Works Cited Channeladvisor, “Analysis and Retailer Impact of Amazons Acquisition of Zappos,” (2009). Available at http://www.amazonstrategies.com/2009/07/thoughts-on-the-amazon-acquisition-of- zappos.html Gartner, inc., “Factors to consider when choosing one of the many CRM Solutions,” (2009): 1- 28. Available at Http://www.squidoo.com/crm_solutions[http://www.gartner.com/DisplayDocument?&id =1004212 Lee, Hau, L. and Whang, Seungjin, “E-Business and Supply Chain Integration,” (Stanford Global Supply Chain Management Forum, 2004): 1-20. Available at Http://public-prod-acquia.gsb.stanford.edu/.../EBusiness_SC_Integration_whtp... Salim, Febianto, “Zappos.com: Developing a Supply chain to Deliver WOW!” (Case GS-65 2009): 1-28. Winner, Russell, S. “A Framework For Customer Relationship Management.” California Management Review Vol. 43. No. 4 2001: 89-106. Available at www.gvoss.cox.smu.edu/CRM.pdf Read More