Customer loyalty is a direct result of the integrity displayed by the company.
Integrity – adherence to moral and ethical principles; soundness of moral character; honesty.
In the business world today, integrity is something that we hope to find in the companies that we interact with. The successful companies are those that have integrity as one of their core values. This characteristic comes through in the way they do business and the way that they treat their customers. Customers appreciate the organizations that work in their best interest. Working in the best interest of the customer is the typical business model that most organizations strive to live by. It’s a common principle that if you treat me well, I’ll treat you well by continuing to do business with you.
Holding Integrity as a Core Value, Even When it Results in a Loss for the Company
Recently, 6pm.com, a sister site to Zappos.com that offers greatly discounted and reduced prices, encountered a pricing issue which resulted in a 1.6 million dollar loss to the company. Their pricing engine capped all products on the site to $49.95. The system allowed this glitch to happen for approximately six hours, resulting in many products being purchased far below their true price on the site.
In an excerpt from the 6pm.com blog post, Aaron Magness, Director of Brand Marketing and Business Development explained how they handled the situation. It’s an example of real class and integrity displayed by a company revered for their dedication to service.
While we’re sure this was a great deal for customers, it was inadvertent, and we took a big loss (over $1.6 million – ouch) selling so many items so far under cost. However, it was our mistake. We will be honoring all purchases that took place on 6pm.com during our mess up. We apologize to anyone that was confused and/or frustrated during out little hiccup and thank you all for being such great customers. We hope you continue to Shop. Save. Smile. at 6pm.com.
Director of Brand Marketing & Business Development
Zappos Development, Inc.
To explain why they did not contact customer and notify them of the issue to recover some of their losses Tony Hsieh, CEO of Zappos.com, added these comments to the blog post….
To those of you asking if anybody was fired, the answer is no, nobody was fired – this was a learning experience for all of us. Even though our terms and conditions state that we do not need to fulfill orders that are placed due to pricing mistakes, and even though this mistake cost us over
$1.6 million, we felt that the right thing to do for our customers was to eat the loss and fulfill all the orders that had been placed before we discovered the problem.
The payoff is increased customer satisfaction and loyalty
Although 1.6 million dollars is a lot of money, I suspect that 6pm.com will recover most, if not all of those costs simply because of the fact that consumers appreciate and value the way they handled the situation. Studies show that truly loyal customers will come back to your business and spend more money with each return visit. Based on the comments that the blog post generated, they have now converted many customers into the truly loyal customer category and can certainly expect higher purchase points from most of them.
Integrity should be part of your branding
While most small businesses don’t generate as many sales as Zappos.com, why can’t they still handle similar situations the same way? By doing so, they will be developing loyalty and strengthening relationships with their customers in a way that matters. Knowing this, their loyal customers will then turn into their best marketing resource – spreading the news by word of mouth referrals. People do business with those they know, like and trust. Given this situation, 6pm.com did a fantastic job of branding themselves with integrity, even at their expense in the short term. I bet the long term payoff will make them glad they handled it the way they did.