How Sticking to Their Principles Helped Zappos and Tom's of Maine Step Ahead of Their Competition A principled approach to why you operate a business can be a massive differentiator for consumers.
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Capturing market share in a competitive industry is a matter of differentiation. When Tesla saw that its rivals favored function over form, it positioned itself as a sleek alternative to more prosaic vehicles like the Toyota Prius or the Chevy Volt. Chipotle marketed itself as a fresh, authentic alternative to Taco Bell. Uber became the business alternative to Lyft.
That's standard branding practice. But what about using principles to position your business? Can making character be part of your company's signature to make you distinctive without seeming gimmicky?
While there are potential pitfalls to a character-based approach, two enterprises have found surprising success: Zappos and Tom's of Maine. Here's what they can teach entrepreneurs:
1. Go to extremes for customers
A quirky startup with a funny name, Zappos is no longer a joke. From a modest launch in 1999 to its Amazon acquisition only a decade later for just under a billion dollars, the online shoe store has become Exhibit A for how forging a unique brand identity can reap dividends.
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What Zappos did was to make its greatest liability into an asset. The shoe retailer turned its call centers from cost sinks into brand differentiators.
Originally, call centers were a minor part of Zappos' business plan. After all, only 5 percent of its sales came from phone operators. But even if these reps weren't moving much merchandise, they were getting lots of contacts. People kept them busy asking all kinds of questions about the shoes they were scrutinizing online. The service they were getting from impatient Zappos employees wasn't always very good.
Zappos' leadership saw an opportunity to shift its culture and brand identity. If customers wanted contact with real people before making online purchases, Zappos would go to extremes to keep its callers satisfied.
That required some changes: It implemented a 365-day return service, for one. Even more impressively, it's been known to stay on the phone with clients for up to six hours. When word about its strategy of relentless service started spreading, the trajectory was set. The rest is history.
2. Go back to nature
Where Zappos built its reputation out of a strategic pivot toward customer service, Tom's of Maine was stamped from the start with the principles of sustainability and social responsibility.
When Kate and Tom Chappell relocated from Philadelphia to Maine in 1968, they decided to raise their children in a healthier, simpler way. They traded the concrete jungles of Pennsylvania for the wilds of Maine to live closer to nature. Soon, however, they found that there were few personal care products free from artificial colors, flavors or preservatives. Supported by a $5,000 loan from a sympathetic investor, they started a business to fill that void.
Three values guided Tom's business development: developing natural products, growing the business sustainably and making the operations responsible to the larger world community. The Chappells adhered to strict principles of natural product development, minimized their company's carbon footprint and encouraged employees to spend up to 12 paid days giving back to causes that mattered to them.
At the time, that strategy seemed more aspirational than geared toward market growth. But over time, the Chappells have proven their critics wrong. Customers who sought out natural alternatives also appreciated the brand's social conscience. Its reach grew. By 2006, Tom's had grown from a boutique brand to an industry player, selling to industry giant Colgate Palmolive for $100 million.
3. Be authentic
The remarkable success of companies like Zappos and Tom's of Maine has inspired others to follow their lead of using corporate values to position their brands. But trumpeting your principles won't necessarily differentiate your organization. For it to work, those principles must be genuine.
Attentive customers can spot a gimmick a mile away. What they're looking for is consistent follow-through, not a cynical marketing strategy. Tom's was built on principles of well-being and environmental concern, so its social initiatives were seen as serious. Zappos didn't just tout itself as customer-oriented and hire friendlier representatives; it overhauled its whole call center culture.
Donations can help demonstrate authenticity, but they're not enough. Patagonia, which crafts apparel for serious outdoorsmen and women, backs up its commitments not just with money, but also with socially and ecologically conscious corporate practices.
Will your initiatives be read as expressions of principle or stunts? Analysts suggest asking these questions:
Is this an isolated one-off project or an ongoing commitment?
Is the goal to elicit good feelings or create self-sustaining, long-term impacts?
Would the company be doing this, even if it didn't directly generate profits?
4. Go against the grain
If everyone's doing it, it doesn't differentiate anyone, right?
Zappos worked because the lengths it went to keep customers happy and entertained were without rivals in the online marketplace. What made Tom's stand out in the aisle was its novelty as a natural alternative; it was way ahead of the curve when it came to social and environmental responsibility.
Consider just how powerful values can be in a space that isn't known for them. Keyser, a commercial real estate brokerage, is building its identity as a purveyor of selfless service rather than an instigator of cutthroat rivalry.
Instead of perpetuating the common practice of making the best deals for the brokers themselves, Keyser's brokerage focuses on what's best for clients by following through on commitments and outworking all expectations. In a dog-eat-dog industry like commercial real estate, it's no surprise Keyser's alternative strategy resonates.
5. Be relentlessly consistent
Until people experience your principles, it's all rhetoric. But to really drive those principles home, you have to deliver that experience over and over again.
Skeptics (including CEO Tony Hsieh) thought an online shoe store would struggle -- until they got on the phone with one of the famously dedicated Zappos reps. Tom's, too, seemed destined for co-op stores manned by patchouli-scented staff, but its values eventually became mainstream enough to stand out in supermarkets everywhere. When Starbucks began providing healthcare plans to part-time baristas, it spoke volumes more than a lecture about corporate responsibility would have.
What do these different companies share? Broadly speaking, integrity. They're aware of their impacts on their workers and clients, the market, the environment and the larger community, and they showcase that fact over and over again in everything they do.
Integrity means following through. Zappos, Tom's of Maine and Patagonia have been operating this way for years, reflecting a depth of commitment. When they point to their principles, people believe them -- and more importantly, they believe in the brand. There's a lot for aspiring entrepreneurs to learn from these companies about defining your principles and sticking to them no matter what as your business grows.