Overstock.com, the 2008 Gartner & 1to1 Customer Award's User's Choice winner, sells more than 800,000 products online and serves 25 million customers, 55 to 60 percent of whom are repeat customers. How does the company keep its commitment to customers? CEO Patrick Byrne recently sat down with Martha Rogers, Ph.D., to discuss his approach to customer strategy, and how it all depends on customer care. Below is an excerpt of the 1to1 on the Run video:
What prompted your current focus on customer care?
We realized it was the missing block for us. We had gotten all different parts of the technology right -- the supply chain, etc., and we realized there was this great big patch in the middle that we did not have a cohesive, full-blown strategy for.
Describe your customer care approach.
Instead of being reactive, we now can be more proactive. We have a customer service team that we brought in-house, and [gave them] a lot more front-line responsibility. There's also a lot of measurement of satisfaction and of how customers feel. Every individual agent is getting polled, for example. What we've also done is a lot of stratification of customers by value, and we're creating white-glove service teams to assist those customers.
These numbers aren't exact, but something like 10 percent of customers give 160 percent of the profit, and the other 90 percent give the -60 percent of the profit. Once we realized that, we started changing the way we treat people by value.
Why is customer care now considered the most important department in the company?
At the end of the day, all the value that a company can generate (or hope to generate) comes from customers. It's not a matter of extracting value from them. It's a matter of entering into a partnership with customers to provide them better value than they can get anywhere else.
I was blind before. We were doing all these individual things, but they weren't integrated into one big strategy of managing our customer relationships.
What measures are you using for customer care, customer value, etc.?
We're using the gross profit, less the marketing costs at a customer level. And we now have a pretty precise look at the value of a customer. We look at any customer incidents that make them call us. What you find out is that some customers who you thought were really profitable were not profitable at all, and then there might be someone else you might not be paying attention to.
Now that Overstock.com is very customer-oriented, how does that message get across to employees?
We were in a ditch, economically. We had a great first six years, and then we hit a wall. In coming out of that, we made the customer care department the top department in the business. So when people come in they understand the structure of the company. It's like a Grecian temple, where the roof is the customer care department. They are no longer relegated as some corporate backwater in a different building. They are the boss, and when they speak, our buyers jump. We really changed the power relationships between that department and all the other departments within the company.
Some of the customer care employees get put into other areas of the company. They still report to the customer care department, but if they see something going on -- for example if a buyer is buying a sofa and selling it and we're having too many returns or complaints, there's a customer service person in the buyer's department policing them. It's closing the feedback loop so we're not just broadcasting products. We're getting the voice of the customer back and changing our behavior based on it.