I have recently been researching about how an online retailer has gone from zero to $1.2 billion in less than 10 years just selling shoes and I have been especially interested in their implementation and use of social media including Twitter and online video. The 35-year-old serial entrepreneur , Tony Hsieh (he made his first mint selling LinkExchange to Microsoft for $265 million – when he was 24!) figures he goes through 1,000 tweets a day that are either directed at him or mention Zappos. By contrast, the company (and he) gets about 2,000 email messages a day. In fact, it takes six different members of the CEO team to respond to messages.

Zappos’ Customer Loyalty Team fields between 5,000 and 6,000 calls a day. Almost every customer, at one time or another, winds up calling Zappos at least once, Hsieh says. And that represents the biggest opportunity in social media to make a lasting impression since it currently lacks brick-and-mortar stores. “Our best branding tool, as unsexy and low-tech as it may sound, is actually the telephone,’’ says Hsieh. “And if we get that interaction right, it’s something they remember, maybe for the rest of their life, and tell their friends and family about.”

“The payoff is not in the current quarter or the current year,” Hsieh says. “The payoff is probably going to be two or three years down the line. So it’s about how long-term you are thinking.” Listening and interacting is also improving. Even if just one customer asked for an action button to appear in a particular place on a page, it’s likely it would pop up shortly thereafter. So what are some key elements that have enabled an online shoe retailer to go from zero to 1.2 Billion is sales in under 10 years.

1. The Differentiator: Customer service and interaction

2. Multi-Chanel  Core Customer Interaction Channels:

• Telephone
• Email
• Twitter
• Blogs
• Streaming video
• Partnerships with Facebook, YouTube

3. Culture is the Top Objective: “Our number one priority as a company is our company culture. Our whole belief is if we get the culture right, then most of the other stuff, like building a long-term brand or delivering great customer service, will just naturally happen on its own.” Hsieh wants it  to stand out for its personality, individuality and, yes, friendliness. Something social. Not automated. Not designed to make a sale, quickly. Bosses and un-bosses are supposed to spend 10 to 20 percent of their time outside the office, getting to know each other. Happy hours at bars, for instance. Ski trips. Note: Staff are trained for 5 weeks before commencing work

4. The Zappos Ambition: To build a collection of businesses “powered by customer service.’’ To be equated with service in the way Richard Branson’s Virgin businesses are thought of as cool and hip.

5. A Twitter Fact: The chief executive of a billion-dollar company has 770,692 followers on Twitter which garners a lot of attention

6. Amazing Revelation: Tony Hsieh, the CEO of online retailer Zappos.com, “does not” find the 140-character messages the best way to interact with customers. For that, “the really effective social media” is

• Email and
• Telephone

Note: They still consider the most “social” of the media they use to interact with customers is the phone

7. The Phone Strategy: The toll-free 800 number on the top of every webpage to encourage callers. There are no scripts in front of customer service reps, when they take a call. As with twittering or appearing in a streaming video, the reps are encouraged just to be themselves. Be chatty. Tell jokes. Find facts (Is that your dog barking? What kind is it?). Whatever works. No particular approach is proscribed. Except one: Spend as much time on the phone as it takes. Describe the return process in detail, if the caller is not familiar with it. Figure out what kinds of shoes match a particular dress. Just talk, if the caller is lonely, they’ll remember!

8. Social Media is not to drive up sales: Blogs, microblogs and streaming video — have a different purpose, Hsieh says. Hsieh contends these tools “give the public glimpses into how we act.” They are not used to drive up sales, although that may happen, as a byproduct. (These are the pre-cursors to the sale)

9. Social Media is not aimed at lowering costs:  Although the various video skits, waves of tweets and blog postings likely save the company significant sums on TV or other conventional forms of brand advertisinga typical 30-second ad costs $125,000 in prime time, Zappos estimates the cost of reaching out to past, present or potential customers in these micromedia at $300,000 a year – or less than three-hundredths of one percent of its $1.2 billion in annual sales (2009).

10. It’s not even looking for a return on that investment (ROI). “We don’t assign metrics to it,’’ Hsieh says. “It’s really just about our unwavering belief that making the customer happier is going to win in the long run.” There’s no way, Magness and Hsieh contend, to trace a straight line from all this dialogue, digital or otherwise, to the company’s ability to sell shoes.

11. Social Media  allows Zappos’  to be a customer relationship management (CRM) system for the digital customer: The company is made up of individuals. Happy individuals. Be a company full of people you’d like to get to know, explains Hsieh. And, oh, yeah, somewhere down the road, when you are ready to buy something, hopefully you’ll call us first (or go to its site, before that of any online rival).. “The question is, how do you break through that coldness where it is just you and a computer screen and you’re looking at 20 different retailers,’’ says Vaughan. “This gives character to the name Zappos and differentiates them from the other retailers you could be going to online.’’ How is this done?

• 450 of the company’s 1,400 employees are on Twitter.
• An untold number contribute to its “Inside Zappos” blog, which aims to be “fun and a little weird.”
• You can see the faces of and antics of Zappos’ employees on videos that appear on Facebook, YouTube and Zappos.tv.
• You can hear their voices all day long, over the telephone. There are neither scripts nor time limits on conversations ( A little different to your normal call center)
• The goal is to create 1,400 spokespeople for the company, online–and offline

12. Devotion to streaming video: Any Zappos employee at almost any time can become a star. But the time frame is not Marshall McLuhan’s 15 minutes. The frame of fame is now less than five minutes.

13. Online Video Reources: A five-person video team makes micro stars of members of Zappos staff, chronicling when they take a fitness walk (to Starbucks, across the street) or just showing off the “things” on, say, a quality assurance team member’s desk, like the meditating frog she uses to keep her “sane through the day.” The “AV” club represents the only staff devoted full- time to thinking about, coming up with, blogging about, shooting and editing what goes on at Zappos, at work and play. There’s one combination cameraman and technician, three combination video editors and bloggers and Houchin, who acts as the video and blog supervisor, as well as publisher. The five people represent one-third of 1 percent of Zappos’ work force. And they act as a kind of cross between comedy improv sketch crew and news team, in creating or reporting on hijinks at Zappos.

Note: They have also built 10 in house video production studios to film online video product reviews, with the goal of having 50,000 online video reviews on their website by the end of 2010.

14. Free shipping both ways: Making it as easy to try on a pair of oxfords in your living room as in a store.

15. Social Media Marketing Campaigns: This is built on building up the human side of Zappos, as if showing humanity and personality is totally counter-culture amongst faceless private (or public) companies. And asking only one thing of employees: “Just be yourself’’

16. Zappos 4 keys to great online retailing:

• Do what you say you’re going to do, promptly.
• Deliver the exact products ordered, on time.
• Take returns without a hitch.
• Avoid complaints and frustrated customers, who might flood your phone banks, email boxes and tweet streams with angry (and costly) messages.

17. Zappos wants both insiders and outsiders to be talking about the company. And the outsiders to be customers for life. The “intangible ROI” also can be described by another benchmark, Magness says: the “wow” factor. (Three pairs of shoes are sent to the customer, 1 pair a size above, 1 of the size requested and  another a size below with a free mail bag to send back the shoes that don’t fit)

So have you used some of these elements for your eCommerce  store?

The use of online video is continuing to grow and develop as higher broadband speeds become more widespread worldwide and the appetite by the younger generation for viewing rather than reading.

The old chestnut phrase , “A picture is worth a thousand words” begs the question, “How many words is a video worth?”So how do Zappos utilize online video and how effective is it?

They use video to engage with the buyer as much as possible. The use of  video is to create “virtually” the reality experience of a bricks and mortar  store, as if the buyer were in store and “more”.

They use online video to

• Describe their shoes
• How to use the product
• To demonstrate

Note: The videos are about the products, are with real Zappos employees and not models or actors… a bit of authenticity happening here, not stock photos with incredibly handsome and beautiful people.

They are testing interactive video on their site for Nike products. The company has launched interactive product videos.

The website provides the following 9  Functionalities, Features and Future Plans

• Allows viewers to click on items in the clips before landing on product detail pages.
• It can signal to consumers if an item is out-of-stock, discontinued, or part of a special offer.
• If the viewer mouses over a shoe in a video, it becomes highlighted, alerting the person that the item is clickable.
• Users are then taken to a product detail page in a separate browser window where the item can be added to a shopping cart.
• Zappos.com’s media player also allows shoppers to post the videos to their Facebook and Twitter profiles while the clip continues to roll.
• The 10 product videos currently on the site are each around one minute long.
• plans to leverage the interactive videos by incorporating them into its  user-generated-content program (UGC).
• Its “Daily Shoe Digest” is one of the few e-mail newsletters — in any niche — featuring UGC (User Generated Content) 100 percent of the time.
• Site visitors will be encouraged through future marketing messages to create product video reviews that will also have the interactive features.

Selling products directly from online video content, known as “hot-spotting,” is an advertising niche that’s growing slowly but surely. For instance, earlier this year, H&R Block began utilizing YouTube’s annotations allowing viewers to click on specific items in a video linking to a landing page or another video. And last year, clothing brand Express sponsored Vogue magazine’s online reality show, Models.Live, which featured clickable overlays in a manner combining product placement and direct response marketing.

So what are the effects of using video?

Zappos’s experience has shown “It obtained increases of 6 to 30% in conversions ..for products that use video”.

Note: This has prompted Zappos to strive for 50,000 videos !!! next year (they have about 8,000 currently), they will include “10″ fully working studios in house in 2010 to handle all of it.

Zappos, last month partnered with Overlay.TV and rolled out “Engagement Pages” for specific brands, where the videos engage users with clickable overlays. These overlays allow users to shop within the video content, pull up additional information and click through to product specific landing pages. Users can also record product video testimonials directly from the engagement pages.”

Online at Zappos you can see the shoe from “7″ angles and “3″ different magnifications (see Nike page at Zappos) and the screenshot below.

Note: This goes a long way to overcoming the issues of online shoppings  “experience gap” that shopping at bricks and mortar store provides.

This is starting to show how “real” an online store can become, as online video enables a more pervasive and integrated experience within an ecommerce website.

For a good resource on Online Video “Best Practice“  see Reel SEO article.

So how are you using online video to good effect? Like to hear your stories and the tools and apps you are using.

I decided to look at some direct evidence for social media and its positive effects with eCommerce online businesses both for “Business to Consumer” (B2C) companies as well as “Business to Business” (B2B) companies and I came across these rather diverse examples where social media was very evidential in producing results.

Firstly Mark Logan from  BarkleyUS  provides us with some insights from a presentation

Case Study One: Zappos (Online Shoe Store)

Why is Zappos so successful at Social Media? .. What is their strategic approach? ..It comes down to two things..Service and Culture and they believe they are one and the same thing and because their culture is unique and offers the company a competitive advantage, they use Social media to project that culture out into the world..

So what are some of the elements of this approach

• Service
  • They have a Twitter account dedicated to Service Issues
  • To uncover service opportunities
  • Initiate response
  • Amplify praise
  • Reinforce Service reputation
• Culture
  • The companies 400 employees all have Twitter accounts
  • Who they hire is consistent with this culture of service 
  • Most of their social media initiatives are about exposing the people at Zappos, who through their actions reinforce the companys competitive advantage.. It makes the company real.
  • The CEO leads by example he communicates about his passions.. he is personally invested in Social Media
  • They do measure social media but don’t calculate it’s ROI on Sales as they don’t consider it a traditional marketing channel 

The primary purpose of their blogs and twitter is so that outsiders can get a glimpse of their company’s culture

“Quote from Twitter while I am typing here from a Zappos Employee…… “Good morning Zappos Fans! My name is Danika, and I am here to answer any questions you have about Zappos/Canada! ”

Case Study Two: Dell (not telling you what they do)

They are very strong on Social Media .. they have a “Conversations and Communities” team of 40 and they have several blogs, including a direct to consumer blog and several special interest blogs and engage in almost every major social media channel 

Some other Highlights

• Over 65 corporate twitter accounts
• More than 400,000 followers
• They do promote on Twitter eg “15% off any Dell Outlet Inspiron 15 – 1545 laptop. Enter code at checkout: S2?70S6LK1VWVS – only at http://bit.ly/SM28A – exp 8/315:05 AM Aug 28th from CoTweet”
• Have sold Over $3 Million in Sales via Twitter

Case Study Three: WetSeal

They are an online E-Commerce store that sells Teen Clothing For Girls

They launched a community section of their site where fans can design their own ensembles and publish them to the community for reviews.What does this achieve?

• It leverages wisdom and creativity of the crowds
• It provides social validation of fashion choices to enhance selling
• It is user generated merchandising

Result: Immediately After Using Social Media : 10% increase of sales as well as a 10% increase in the average dollar value of the sale (Net benefit.. 21% increase in revenue)   

Case Study 4: Build-A-Bear Workshop

Challenge this one …..as it is an “Experience Retailer” (How Do You Create an In Store Experience and create it Online?) and ..How do you take your brand  online, without losing your experience and commoditizing your product.

Well…They created a kids virtual world where

• Kids could interact and chat
• Play games
• Earn virtual currency
• Spend virtual currency on items in the virtual world, like clothes or furniture for your condo

What the game did was create fundamental changes to the buying experience and value proposition that

• Extended the instore experience to online
• Increased frequency from occasional to daily or weekly
• Influenced 10% of sales

Result: Since being initiated last year sales of “60,000 units” in virtual goods and nearly “half a million dollars in real revenue”.

 Case Study Five: Hubspot 

(Business: Online services to businesses for generating inbound leads.. Permission Marketing)..

This is what Mike Volpe The VP of Marketing revealed about some of the elements and successes of  Hubspots Inbound marketing strategies

1. “With our WebsiteGrader.com tool, we marketed it through social networks and it brought us 450,000 leads,” says Marketing VP Mike Volpe at HubSpot
2. “Those leads are one of the most important channels for us as far as sales; 2 to 4 percent of the qualified leads convert to HubSpot customers.”
3. Volpe’s firm hired an intern to post its software tutorial videos on YouTube, one of hundreds of content-sharing sites. After uploading a video, YouTube provides a code that anyone can use to add it to their blog or Webpage. “We didn’t promote them at all, and we started to get over 10,000 views a month of those videos up on YouTube,” Volpe says. “We’ve since discovered that in-bound marketing–a combination of social media, search-engine optimization and blogging–is by far the highest ROI of any marketing out there.” Those views turned into leads that generated sales
4. In  summary he said “a combination of social media, search-engine optimization and blogging–is by far the highest ROI of any marketing out there.
5. A Hubspot  Report  mentioned in their Blog post reveals a $84 cost per lead versus $220 for traditional marketing

So is your eCommerce site using the social media to connect and promote? Look forward to hearing your story