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Requirement
Has Zappo's emphasis on customer satisfaction contributed to its profitability? Explain
Has Zappos developed long-term customer relationships that provide a competitive advantage in the purchase of shoes and other products? Explain.
Zappos’ management has asked you to suggest opportunities for further expansion of the company’s product porftolio. Zappos already offers shoes, clothing, bags/handbags, home products (linens, kitchen, and dining), beauty products, and accessories. They also operate outdoor and riding (bikes and skateboards) shops. Moving beyond these product lines may require Zappos to move into hard goods such as furniture or electronics. This would compete with Amazon and IKEA. What options do you suggest and why?
Solution
ABSTRACT:
Zappos is an online place for shoes mainly. Headquartered in Las Vegas, Nevada, it sells cloths, bags, home products and accessories also. Zappos is known for its unique marketing strategies and corporate structure. Marketing strategies are customer focused. Customer satisfaction is the unique selling proposition for Zappos. Its success depends mainly on maintaining long term relationship with customers.
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Has Zappos’ emphasis on customer satisfaction contributed to its profitability? Explain
Excellent service to the customers is the forte of Zappos. Zappos has developed a reputation by providing the best experience for their customers. Excellent customer services are the values add-on which keep customers returning to the Zappos. It cannot be denied that customer satisfaction is the most prominent reason for the success story of Zappos. They have many repeat customers. Zappos goes to the extent of excellent services that it does not remain as profitable for them as it could be. But this gives Zappos loyal customers who keep benefitting it. A happy customer is a top most priority for Zappos. It bypasses profits also. Eventually it will have to find a way to make profits. (Phillips, 2014)
Has Zappos developed long-term customer relationships that provide a competitive advantage in the purchase of shoes and other products? Explain.
Zappos has developed long term relationship with customers by working hard. They make customers feel special by going out of their way. This put them ahead of their counterparts. But they also have to struggle sometimes. Once an ad campaign was not received properly and smudged the brand image. Security breach in 2012 also affected its image. Customers are very concerned about security and it is difficult to maintain relationship after such incidences. Some other issues are prices errors and delays in 2011.
Relaying only on customer service means if a customer has bad experience with the company it will be very difficult to gain his confidence again. It reduces number of customers drastically. Zappos has competitive advantage in this area but it should be very careful when promoting customer relations. (Yeung & Ennew, 2012)
Expansion of the company’s product portfolio
Zappos has proven its capabilities in many product portfolios. It has been an investment choice for many investors. It started from shoes and extended to beauty products and outdoor and riding products. Moving to other services like furniture and electronics will require a lot of manual and financial support both at front end and back end. There is growing demand of furniture and electronics in the market. At present Amazon and IKEA are providing these products to the customers.
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Competitors’ Analysis: Both the existing players in the market has huge capabilities. They have already tapped the market. Zappos will be new in the market. It will have to deal with the existing standards of the industry. It can rely on the huge customer base. But, most of these customers are loyal towards competitors for these products. By providing excellent services they can make customers change their mind.
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Operational Strategies: Both furniture and electronics come under heavy products category. They will require more operational space and efficiency. A separate dedicated warehouse space and transportation will be required. This may increase operating cost. Return of items will also be handled differently. There will be different terms for exchange or returning of products. (SMITH, 2013)
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Marketing strategies: Zappos is already famous among customers. It will not require brand marketing but switching of customers from existing competitors to Zappos for these products may take time. Adding new product to the list will give more options to the customers.
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Market Scenario: Shoes are cash cows for the Zappos. Cloths and bags also come under this category. Furniture and electronics have high market growth rate, but because of low market share it will be question mark for initial year. Although it has the capability of turning into stars for the company.
SUGGESTIONS:
Given the market scenario and the customer base of Zappos, it should go for product portfolio expansion. There is market growth in this sector. It will also be an added advantage for the customers to buy everything from the same place. This may enhance their experience with the company services. Amazon and IKEA may give a strong competition in the market but Zappos can leverage its large customer base. Excellent customer services will lure customers to buy from Zappos. It can overcome operating cost by developing an efficient system for that. (McNally, Durmu?o?lu, & Calantone, 2012)
CONCLUSION:
Zappos has serviced its customer very well. It is playing on volumes by serving many customers. It goes out of its way to make customers happy. Even if it cost to company sometimes. There are many loyal customers who are backbone of Zappos’ profits. Zappos can enhance its product mix by extending to furniture and electronics category. Large customer numbers will be an edge to compete in the market.
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McNally, R. C., Durmu?o?lu, S. S., & Calantone, R. J. (2012). New product portfolio management decisions: Antecedents and consequences. Journal of Product Innovation Management, 30(2), 245–261. doi:10.1111/j.1540-5885.2012.00997.x
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Phillips, J. (2014). The key to competitive advantage is customer satisfaction. Competitive Intelligence Review, 5(1), 64–66. doi:10.1002/cir.3880050111
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SMITH, P. (2013). Portfolio management for new products by R. G. Cooper, S. J. Edgett, and E. J. Kleinschmidt. Hamilton, Ontario: McMaster university, 1997. 131 + xi pages. $dollar;35.95 (paperback). Journal of Product Innovation Management, 14(6), 529–530. doi:10.1016/s0737-6782(97)90046-1
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Yeung, M. C. H., & Ennew, C. T. (2012). From customer satisfaction to profitability. Journal of Strategic Marketing, 8(4), 313–326. doi:10.1080/09652540010003663
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