Zappos.com Inc. credits its novel
Web 2.0-based sales philosophy for much of its significant sales growth -- and continuing profitability -- during the current hard times.
The online shoe and clothing store doesn't spend massive sums creating and implementing online or offline marketing and advertising campaigns, yet it still generates significant buzz among its current and potential customers.
How? Mostly through its heavy use of
Twitter Inc.'s eponymous social network and, to a lesser extent, its use of tools from Web 2.0 providers like
Facebook Inc.
Of Zappos.com's 1,400 employees, 450 actively use Twitter to promote the company. In fact, CEO Tony Hsieh is the 20th most popular Twitterer, with more than 186,000 followers on the social network, according to Twitterholic.com.
Instead of sending online shoppers coupons or information about sales, executives and employees at Henderson, Nev.-based Zappos.com regularly tweet about what happens to them at the airport, the fact that they eat marshmallows in between phone calls and the state of the economy.
The goal is to respond to customer comments and form personal connections with their Twitter followers, as well as with friends on Facebook, where employees post blogs and videos.
The tweets and posts are a way to give customers and other curious social network members a way to get a glimpse at the inside workings of the company.
"Today, consumers have access to so much information," said Aaron Magness, director of business development at Zappos.com. "You can buy the same shirts at Zappos as at somewhere else. The product almost becomes less important; it becomes about the business."
The privately held retailer claimed more than $1 billion in sales last year, up from $840 million in 2007. In blog posts, Hsieh said the company did cut 8% of its workforce late last year because of the declining economy, but it continues to be profitable nonetheless.
Zappos.com isn't alone in its use of social networks. Companies large and small are increasingly investigating how to best use Web 2.0 tools from the likes of Twitter, Facebook, LinkedIn and YouTube. Analysts note that there's increasing pressure from customers and employees on companies to use social networks.
Potential Risks
Analysts say that, as in the case of Zappos.com, using Web 2.0 tools to boost visibility can be a good thing, but the strategy can also pose risks, especially in a time of layoffs, benefit cutbacks and salary reductions.
For example, an employee, whether she's a CEO or a researcher, could create an online maelstrom with an unintentional slip of the keyboard. And readers of a company's online posts, bolstered by anonymity, could respond to them in a particularly vicious manner.
"It's two-way communication, and you have to be able to take the heat that may come your way," said Dan Olds, an analyst at Gabriel Consulting Group Inc. in Beaverton, Ore. "It isn't for everyone. Some companies will have a hard time dealing with it, while others will thrive."
Olds said that any company using Web 2.0 tools will inevitably face strong, and potentially embarrassing, criticism. "No company is perfect, and some customers will complain about anything," he said. "That's why some companies are still cautious about engaging with social networks."
Olds also noted that it's important for businesses to find the right voice or tone for their social networking personas. For example,
Dell Inc. uses sites like Twitter to blast out information about sales and coupons, while Zappos.com is all about letting customers get to know its employees, he said.
"You have to make sure that you're presenting the right image for your company and doing it in the right way," he said. "A whimsical and funny approach will work for Apple and many other companies, but not so well for, say,
Dow Chemical. It takes a lot of thought and careful consideration."
Olds also suggested that companies establish a clear goal for their social networking strategies -- and he said they shouldn't expect users to automatically embrace them. "A bank that focuses on its interest-bearing checking accounts will be less interesting than a bank CEO who provides straight talk on the economy. The critical thing is to understand your goals and present an image consistent with your company," he said.
"I see this whole social networking phenomenon not as truly a purely technical phenomenon, but as a change in the values of the organization," said Soumitra Dutta, the Roland Berger Chaired Professor of Business and Technology at INSEAD, an international business school in Fontainebleau, France.
"CEOs are becoming more open to new ideas from employees and customers they haven't normally interacted with," Dutta said. "Traditionally, companies have looked at customer relationship management as a one-to-one issue. Today, we're seeing that customers talk to each other and not just directly to the company."
Thus, businesses must move in to try to actively manage their relationships with these communities and respond to positive and negative feedback, he added.
A growing number of businesses are creating such communities to bring together groups of people who all love the same thing, whether it's a certain pair of sneakers, a car model or a mainframe computer.
For example, just over a year ago, IBM created a Facebook page for people interested in news and information about its System z mainframe computer offerings. Launched in December 2007, the page now counts more than 700 friends. And, IBM notes, that's a lot of friends for a computer that isn't the newest or sexiest around today.
IBM spokesman Kevin Acocella acknowledged that the company's use of what many see as kids' technology to gather people interested in big-iron machines used by the Facebook generation's fathers and grandfathers is somewhat ironic.
IBM is looking to use the technology to get young people interested in mainframe technology by offering links to articles, comment strings, YouTube videos and the like. The Facebook page has become particularly important in this economy, since many IT professionals and students can't afford to go to conferences or seminars, Acocella added.
Despite its status as one of the earliest computer companies, IBM is no Johnny-come-lately to the social networking scene. IBMers have been blogging and collaborating with wikis for several years.
The company has even created a social networking site, dubbed
The Greater IBM Connection, for IBM employees and alumni. The site, which was created about two years ago, attracted some 24,000 members in the first 14 months. Membership has since tripled to 73,000 in more than 110 countries, Acocella said.
Also, IBM has created a social media team to help its current employees learn how to use social networks, record and edit podcasts, and be successful bloggers.
"Over the years, we've learned that what the decision-makers cite as one of the most, if not the most, important driver of their perception of IBM is their personal interaction with IBMers," noted Acocella.
And while IBM requires its employees to follow Web 2.0 guidelines it has established -- such as banning the use of obscenities or slurs, or the posting of confidential company data or personal information about fellow employees -- others, like Zappos.com, give their employees free rein.
Want to find out more about Web 2.0 for business? See
How and why to launch a business presence on Twitterand
Best Buy getting results from social network .
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