Marketing Sherpa has a great article on the top 10 reasons why Zappos online shoes is one of the biggest success stories in online marketing.
If you boil the 10 reasons down, it's basically: relentless focus on customers.
I'm going to excerpt a bunch:
Rather than putting the lion’s share of their marketing budget into advertising, Hsieh and his team have allocated an increasing amount of dollars into customer retention, including three key tactics:
When they first started to create brand awareness, they bought mass ads, including expensive sports stadium signage. But the tactic didn’t create enough conversions to justify either the often inaccurate response forecast or the unspecific ROI analysis once the campaign ended.
Until four years ago, they used drop-shipping quite a bit and suffered from the fact that 80%-90% of the product being displayed on the Web site was currently in stock. The data feeds going from retailer-to-manufacturer-to-fulfillment produced regular glitches in the pipeline.
“That means 10%-20% of our customers were finding out a couple days later that their item was out of stock, and they’d be extremely upset, creating a lot of negative word of mouth,” Hsieh says. “Drop-shipped orders were producing 25% of our revenue, and we walked away from it because we knew it was important to be true to our brand.”
Shortly after joining the company in 2000, Hsieh had his marketing team test discounts and ecoupons for six months. What they discovered was that these tactics attracted too many price-minded, one-time customers rather than brand loyalists.
“In terms of the three major areas -- service, selection and price -- you can really only offer two of them at the same time,” he says. “Our brand [niche] was in service and selection.”
“You have to avoid falling into the trap of a consultant telling you that, ‘If you spend a large amount of money with us, all of your problems will be solved, and you’ll never have to worry about this again.’ In the end, they are outsiders and do not understand your business as well as you do.”
Here’s the list they’ve followed:
Zappos has a unified vision - and it permeates their success (they will likely sell $1B worth of shoes in 2008). For example, you can see why they can have a large affiliate program - they pay a lot for that first sale, but the affiliates are doing the hard work of acquiring new customers. Zappos doesn't pay the affiliates much for the return business, because the customers remember the brand and go back directly.
There's more in the full article at Marketing Sherpa.