Head of Customer Research at Zappos, Alex Genov

Julia Raymond:
Hello, today’s episode of RETHINK Retail features my guest Alexander Genov. Alex holds a PhD in experimental social psychology and currently leads customer research for the Zappos Family of Companies. In previous positions, Alex was responsible for research and usability of the products and services for companies like Turbo Tax, State Farm Insurance and the Active Network. Alex, thanks for joining us today.

Alex Genov:
My pleasure, Julia.

Julia Raymond:
Alex, I wanted to first say congratulations to you and Zappos celebrating your 20th year in business and I wanted you to just kick off. I know you’ve been there for at least the last five years and I wanted to hear about your experience there so far and just a bit about your background in general.

Alex Genov:
Absolutely, Julia. Thank you so much, first of all. It’s been an exciting, really exciting ride with Zappos. My academic background is in experimental social psychology like you pointed out. I’m originally from Bulgaria. I came to the States for undergraduate studies and then continued on to graduate studies and so on. Then after grad school I was considering briefly becoming a professor, but after applying a couple of times, I soon gave up that idea and I was sick and tired of being a living under the poverty line for 10 plus years as a student.

Julia Raymond:
So much education, yeah.

Alex Genov:
Exactly. So I then transitioned to the industry and I’ve been applying my learnings and my mindset from academic psychology to the business world for the past 15 plus years.

Julia Raymond:
Wow.

Alex Genov:
That’s kind of the short of it, yeah.

Julia Raymond:
Can you give our listeners just a quick overview of what the definition is, the foundation of experimental social psychology?

Alex Genov:
That’s great. I’ve done this a few times but nobody has asked me to clarify that. I’m delighted to be able to do that. Now, psychology is actually very varied and very diverse discipline. It basically covers different aspects of humans from the way we think, which is cognitive psychology, cognition, our thinking processes and so on, to emotions, to a clinical psychology which deals with disorders and when people need help to neuro psych and so on. And social psychology, that was my specialty and it’s the most interesting to me and it studies humans as social beings. And we are social beings so anything that happens either in the context of being with others or you have the feeling that others are observing you or that you are in the presence of others. That’s essentially the definition of social psychology. How the actual or perceived presence of others determines how we think, behave, feel, and so on.

Julia Raymond:
And relates to what we hear about in the business world a lot, which is the emotional intelligence needed by leaders.

Alex Genov:
Exactly. So emotional intelligence, that’s the application of emotions to organizational design and so on. But also there’s a big emphasis now on emotions as it applies to consumers and how companies appeal to their needs and so on. Behavioral economics is a huge trend now. And it’s essentially applied psychology in the sense that we realized that a lot of our decisions are not based on numbers or logic or reasoning, but they’re based on our emotional reactions to what happens. They’ve just branded it as behavioral economics, very clever, and it’s been very successful.

Julia Raymond:
So behavioral economics is really applied psychology. Can you give us an example of behavioral economics in action? Is there a way that we would relate to this in daily life as we’re shopping?

Alex Genov:
Absolutely. Some of the biggest names out there, for example, Dan Ariely is a big name in behavioral economics. One example he gives is that he talks about two European countries that are neighboring each other and he compares the level to which people in both countries donate their organs in the case that something happens to them. He finds drastic differences. So in one country, 80 plus percent donate their organs and in the other country, only 20% or so.

Alex Genov:
Then you can, rationally you start thinking, well maybe there’s differences in the way these cultures are different, but that they’re such close cultures and such close people in a way that it’s difficult to explain it. Then when you dig deeper, what he discovered was that the root cause of that was the way applications for driver’s licenses were designed. In one country, there’s checkboxes in each one, but in one, the box is already checked and you have to uncheck it. So the default choice is to donate your organs. In the other country, the default choice is not to, and then you have to take a step to donate. So it’s-

Julia Raymond:
Wow. So a checkbox.

Alex Genov:
It’s a checkbox. That highlights the power, so that’s one of the principles of behavioral economics, is the power of the default choice. Then we can use it in business and unfortunately, and we can talk about trust a bit later on, but unfortunately a lot of businesses now use these learnings, maybe not explicitly or implicitly, but they use these learnings to design what’s called dark patterns. Then basically tricking consumers into choices that they wouldn’t make otherwise.

Julia Raymond:
Interesting. I don’t know if I’ve heard that term used before, dark patterns.

Alex Genov:
Yeah, it’s a design term, but it’s kind of how Google say don’t be evil. Sometimes you get the opposite.

Julia Raymond:
Right. So the power of default trust and we could see that with the example you gave in the study of the two neighboring countries in the EU and we can talk about trust later definitely if that’s an area that you study. But I want to bring it back a little bit to the research you do for Zappos customer research. What does that look like as we’re at the end of a decade now. We’re in 2020, so what do you think has really evolved when it comes to customer research over the past 10 years?

Alex Genov:
Absolutely. Thank you. Great question, Julia. And I’ll give that in the context again of my evolution as a researcher, as a applied psychologist, if you will. When I started, I started in usability about 15 years ago, and back then it was very important to have websites be easy to use and intuitive by consumers. There was a lot of emphasis on that.

Alexa Genov:
We looked at how we designed interfaces to match people’s mental models and to match how they think and to really help them with what they need to accomplish, get obstacles out of the way. I did that for State Farm. We had a huge usability lab. Then I moved down to Turbo Tax and they also invested very heavily in usability with big labs with one way mirrors and having people come in and do their taxes on the computer and we would observe what they did and so on.

Julia Raymond:
Oh, wow.

Alexa Genov:
That was lots of fun.

Julia Raymond:
Watching someone do their taxes, it’s never been more exciting.

Alex Genov:
Now you see why I’m so excited working for Zappos. Because it’s an area that people enjoy doing more than doing the taxes, but it was necessary work.

Julia Raymond:
I will say, I like Turbo Tax. I do use it.

Alex Genov:
Thank you. Yeah, a lot of work has gone into that. Then I moved on to the Active Network, which was a small company with not a lot of resources for research, but a blessing in disguise was that I worked with awesome colleagues and one of them was a great market researcher. I learned a lot from him. So when I came to Zappos, I started applying what I learned from him to broaden my area of research. At Zappos now we do usability of course, but also we help our marketing team, we do segmentation, customer segmentation. We do a lot of surveys, we do home visits, we run the gamut of research. But what is really defining what is underlying all of this is a mission, which is to understand your customers as people.

Alex Genov:
I’m also part-time giving talks on behalf of Zappos. We have a group internally called Zappos Insights and we go and give keynote speeches and so on. That’s been my topic and my message has been understand your customers as people, not as shoppers, not as callers, not as clickers on buttons, but as people. Then when you do that, then you can really create an emotional connection with them and long-lasting loyalty.

Julia Raymond:
I think a lot of retailers struggle with that. There was a report from Salesforce this year and it was showed that over half, the stat was 64% of consumers said they didn’t feel that retailers knew them. Does this number surprise you? Do you think Zappos is ahead of the curve when it comes to this because of the investments you guys make?

Alex Genov:
That’s a two part question and I think that’s where trust comes in. To answer your question directly, I’m not at all surprised by this. What’s really sad is that personalization is such a big topic and such a big trend now in retail, but combined with that insight, what it means is that all of that or most of it is not real personalization, it just best guests recommendations and their recommendation is to make people buy more to buy more. So where trust comes in is years ago when I was really adopting and learning about the Net Promoter Score, maybe you’ve heard of the Net Promoter Score developed by Bane Frederick Reichheld. I had heard him speak about another question that he developed, which never took as well as the Net Promoter Score but really stuck with me in the question or statement is, let’s say businesses or retailers always have my best interest as a customer in mind, same rating scale.

Alex Genov:
I started using that question along with the Net Promoter Score. That to me, I’ve called that trust. But what we’ve discovered in our research is pretty stunning. It’s not, when you think about it, it’s not news in a sense, but when you discover it empirically it’s pretty stunning as trust in retail is in the gutter based on that question. So what basically, it’s severely negative. What customers are saying is no, businesses or retailers do not have my best interest as a customer in mind.

Julia Raymond:
That’s interesting. Is there an inverse relationship between the two? You said you use it in tandem. What the NPS score is that, yeah, they don’t have my best interest in mind, but some are able to still recommend to a friend?

Alex Genov:
I think I’ve seen that. I haven’t done quite all the elaborate statistical analysis to correlate those. But I’ve seen that some of that relationship where you would recommend a company maybe because they’re the best out of all the other ones. But when it comes to do they really have my interest as a customer in mind, not really. There’s other data out there, there was a graph ranking the trustworthiness of professionals and on the very bottom were members of Congress and then [inaudible 00:14:00] people and then third from the bottom were business executives. I think that ties in with all of that.

Julia Raymond:
Certainly.

Alex Genov:
That goes to the heart of this question. Businesses retailers do not really get to know their customers really well, but they want to sell them more and more and more. Then consumers all nowadays have to look over their shoulders all the time. With a small print, and we talked about these dark patterns and the check boxes that you have to uncheck or you forget to subscribe to things that you didn’t want to subscribe to and so on. That’s one very interesting thing to watch out for.

Julia Raymond:
Absolutely. You mentioned a lot of retailers, they use recommendation models and the goal of the data they’re collecting is to get you to buy more as a consumer. And you mentioned through your work that you guys actually do home visits with customers. Do you think there’s an element where the qualitative data is missing because it is hard to collect and quantify and that’s really how you get to know your consumer through conversations? Is that [crosstalk 00:15:15]?

Alex Genov:
Absolutely. I think that’s absolutely part of it. And it’s this currently, we tend to get these big swings in trends and in being enamored with one method over another. So now it’s the era of big data as we now have the technology to look at the big data and to see patterns in it. It’s almost like we got this fancy crystal ball and now we’re all about that. We forget that customers are people. And when I go and talk, I start by cracking a little joke and saying, let me tell you about myself. I’m married, we have 2.4 beautiful children, and then I get that reaction. People chuckle, but that’s exactly the point. We start averaging people and then we think we’re going to be creating experiences. And there’s no way average experience.

Alex Genov:
To counter balance that, you need to always combine qualitative with quantitative data. With qualitative data, you’re going to get those rare insights and then you need to quantify them, see how many people think that way and so on. You may go do one visit and have this epiphany which may lead to millions and hundreds of millions of dollars of business. Right?

Julia Raymond:
Definitely. Definitely.

Alex Genov:
I think the secret is in combining all those methods and always going back and forth between them.

Julia Raymond:
So if we bring this a little back to Zappos, I think it’s interesting how you guys have branded yourself as a service company that happens to sell shoes and there are a lot of loyal customers. I bought from Zappos many times myself, and I was wondering, is it part of your culture that’s helped create the loyalty or is it because of other elements, factors?

Alex Genov:
Yes, Julia. It’s both culture and also very innovative thinking and approach from the very early days. You mentioned Zappos is now 20 years old. But when the founder went to Tony Shay, Tony was first an investor that helped grow the company then he took over as a CEO. One of the stories I tell when I go and speak is the wow email that they got very early when they started selling shoes. Almost nobody was selling shoes at the time. And the interesting thing is that now everybody’s talking about wow and they have even whole commercials. Like Microsoft has a whole commercial around wow and so on. Many customer service companies now when you call them say, “How can I wow you?”

Alex Genov:
But early on what happened at Zappos was that they screwed up the order for this woman that needed a pair of shoes for a wedding or something important and she got very upset. She wrote to Zappos and they, at that point they went out of their way to fix it for her and they fixed it and then they got this email, and the subject said, wow, something like, you guys are great. And this was 19 years ago. Then they realized that, okay, everybody can be selling shoes and these people can buy these shoes anywhere. But what we’re going to do is we’re going to invest in customer service and they’ve invested in customer service ever since. That’s the main focus and over 20 years they’ve built this brand and this following.

Alex Genov:
That’s at a time when everybody else was cutting the cost for customer service. Meaning they would outsource it. They would essentially degrade it to the point that yes, it’s there, but it’s a horrible experience. Zappos is the opposite. You call, we have to answer in the first one or two seconds or 10 seconds. And then there’s no limit to the call. You can talk for hours. The longest call was over 10 hours long.

Julia Raymond:
What? What were they talking about? Their life story?

Alex Genov:
Exactly, exactly. I don’t know. The customer service agent had to take a couple of [inaudible 00:19:53], but they talked. I personally have been, when we get on the phones and we do that annually, it’s not uncommon to be on a call for an hour and a half and yeah, somebody just needs to talk.

Julia Raymond:
So your agents aren’t penalized if they are not meeting their time requirements, get off the phone within 10 minutes like some companies do?

Alex Genov:
Yeah, there’s no time requirements, there’s no time limit. Our agents are, they’re called customer loyalty team members. They’re incentivized to create an emotional connection.

Julia Raymond:
That’s excellent.

Alex Genov:
That’s the incentive. Also Zappos hires the best of the best. Our acceptance rate is more stringent than Harvard’s. It’s 1.4% and Harvard’s is like four point something. But it’s driven mostly by customer service. So many people want to work for Zappos that they select the best of the best. And I mean they select happy people. Happy, quirky, interesting people that then you can hear it on the phone, it comes through. That emphasis on customer service plus selection and other things that early on they decided it’s all about the relationships with your customers and with your vendors. So they’ve built this through the years. We don’t have a company party, we have a vendor party.

Julia Raymond:
Oh really? Is that an annual party?

Alex Genov:
An annual party, and our parties are epic. You have to come sometimes when there’s a Zappos party and you’ll be breathless. It’s unbelievable. But that’s part of the culture. Then again, hiring the right people, even if it takes longer so you don’t have to manage them. Now we’re in this self organization mode. We’ve been in debt for four or five years. Where there’s no managers, there’s still a hierarchy, but people are encouraged to organize around the work, not around individuals and titles. And that’s very helpful in the context of research that has enabled us to do research across. We don’t have a VP of marketing with their research team and their research budget. We have leaders in all those areas, but then our customer research team helps all of them across.

Julia Raymond:
That’s a huge part of it. That was another thing I was wondering just because it is a lot of times siloed with large companies where there’s a data team, there’s a marketing team and there’s research teams and they have a bit of a challenge to connect all of the data and insights from each team to create that 360 picture.

Alex Genov:
Exactly. That’s one of the biggest impediments, is the silos and then translate into budget silos and into data silos and all of those. Then you cannot connect the dots. You can’t realize that it’s the same person in all those databases.

Julia Raymond:
Exactly. I wanted to ask you because this was a recent news story that you guys launched your goods for goods platform, which is another great thing that is embedded in your culture is purpose-driven platforms and products. Can you tell us a little bit about the goods for goods platform?

Alex Genov:
Sure. It’s a whole program, a set of initiatives if you will, that highlights the fact that Zappos is not only a customer service company that happens to sell shoes, but it’s also a purpose driven company. We are [inaudible 00:23:44] profit really. And you can see that most clearly in the customer service area where we give up a lot of profit in the shipping and everything to really satisfy our customers. But also we do things where, so the goods for good encompasses a lot of things, but some of it is Zappos adaptive, which somebody in the company realized that a lot of people with disabilities have a difficult time putting on clothes, for example, and so on. Well, they started this program to partner with different brands to provide easy to put on apparel.

Alex Genov:
Also, another offshoot of that is selling single shoes for people who only, either the two feet don’t match or you have an amputee or something like this that needs the only one shoe. So this is something that I don’t know how many other retailers are thinking about that. Then there’s around the holidays and especially black Friday, cyber Monday, because we don’t have a lot of sales, we are pretty much a full price retailer or higher than most in order to be able to sustain that customer service level. We organize things like pet adoptions. We sponsor pet adoptions so we have the [inaudible 00:25:13] and so on.

Julia Raymond:
That’s great.

Alex Genov:
All of these initiatives I think are the core of what Zappos is about.

Julia Raymond:
It just makes so much difference. I mean, there was a study that said over a third of consumers are willing to pay 25% more than full price if it means the items are equal friendly. And then there’s that trust factor where people want to do business with retailers they trust. Even though your price might not be discounted often if ever, it’s worth it because of the service you’re providing.

Alex Genov:
Exactly. The overgeneralization is that a lot of millennials and younger people are more into that. So maybe there’s something to that. There are other retailers out there that in Patagonia and other times that have put this trust and purpose at the heart of their, these are brands more than retailers, but at the heart of what they do.

Julia Raymond:
I just think Zappos is such an interesting brand to look at because of the fact shoes are something in the past that have just been harder for consumers to buy online because of the fit and the difference between certain brands. So it’s amazing that you guys have had just so much success selling direct to consumer. You guys were one of the first brands to test out popups, I believe. That’s an interesting thing I learned as well when I was researching.

Alex Genov:
Yeah, they’re always experimenting, Zappos is always experimenting. Tony Shay is doing a lot of those organizational change innovation to bring us back to this startup and entrepreneurial mentality instead of a siloed big company. The popups were part of that. I think there were a lot of learnings. I think for me some of the learnings were that you need to have a very clear goal for these popups and to execute based on that so you can have popups based on experiences, more experiential or to create buzz, to create word of mouth. And you can have other types that are more sales oriented.

Alex Genov:
If you mix both then I think that’s a trap in a way. So that was one of the learnings, is you have a very clear strategy. For example, others like Bonobos have been very successful with these men’s shirts, I don’t know if they would be considered popups, but they’re small spaces. These spaces they call them guide shops where men can go and get measured to get a great fit, but they don’t necessarily walk away with a bag that day, but they create an experience, you can get a drink or whatnot.

Julia Raymond:
Adding that value. Yeah.

Alex Genov:
Adding that value. Even not being able to purchase on the spot, they’ve branded positively, like you walk out back free or something like that. You can really be successful with these experiments. I personally see a lot of value in those.

Julia Raymond:
I don’t want to put you on the spot here, but I want to just out of my own curiosity, is there anything throughout your five plus years at Zappos now that has really been super insightful? I mean, is there anything your teams have tested or piloted that it was just like aha moment? If you need to think about this for a while, we can cut out?

Alex Genov:
No, no. There’s several that I can point to.

Julia Raymond:
Okay, good.

Alex Genov:
I would say one of the biggest ahas for us was this research on personalization. Because in business, you tend to pick up a buzzword. It becomes a buzzer, like personalization and it becomes a marketing term and it starts, it loses meaning very quickly.

Julia Raymond:
Omni channel.

Alex Genov:
Omni channel, yeah. All of that. So let’s take personalization, it’s a good thing, we want to personalize blah, blah, blah. It dawned on me that, okay, we’re talking about personalization, but we’re not measuring it. We’re not asking our customers if they think Zappos is personalized. So I included that question in an open text field in our voice of the customer feedback loop [inaudible 00:30:05] getting data in. The numbers were through the roof, very high numbers and I was a little surprised.

Alex Genov:
Then I read the text and it was, if it had almost nothing to do with personalization, they’re like, give us a 10, you have great customer service and great [inaudible 00:30:21]. I’m like, wait a minute, we need to dig deeper. So we did a bigger survey, much more targeted survey. And what we found out was the couple of things. First, a lot of people, some people didn’t understand what personalization meant. They’re like, what do you mean? So that was one. Then when we looked at the text data and the numbers, we discovered that about half of our customers actually expect us to look at their data and to personalize and another half want to be anonymous. And do you know what that, I think that leads back to the trust issue.

Alex Genov:
It’s exactly right. But I think it’s understandable because that goes back to the trust and I believe that trust can be earned, but some people just don’t want to put their information in because they’re concerned and so on. But the other, the glass half full thing is… And I think it’s perfectly fine. You can give people great tools and so on to go on their own without having to suggest. It may go back to coming up with another psychology explanation, there may be personality differences where some people are more do it yourselfers whereas others expect more advice or more help.

Alex Genov:
For the people who expected personalization, they essentially said, you have my data, you have my past purchases, please help me, curate for me, all that stuff. You know my size, why do I have to start over every time picking a size and picking this and picking that. That to me was a bigger aha moment. What I’ve been advocating is that personalization should start at the level of asking for permission, ask for permission. Like can we use your past behavior, past data to tailor the experience to you?

Julia Raymond:
Certainly. And making that questions super clear. So it’s not some hidden box that pops up or a form that’s pre-checked what they’re opting in and saying yes. So you know who of your 50% of the customers want that personalization.

Alex Genov:
Right, exactly. And again, I’m just spitballing here. [inaudible 00:32:58]. There’s people who make the decisions for features and so on, much above my pay grade and so on. But this is just my personal opinion. And I’m not talking about how it can be done checkboxes or other things, but it’s just the principle of respect people’s desire to be anonymous or to have their data be used to help them, [inaudible 00:33:25] the data for companies to market to them or to keep selling to them.

Julia Raymond:
Absolutely. On that note, I want to ask one last question and just get your feedback on what you’re most excited about for the new decade. I guess it’s two questions. Is there anything exciting Zappos is planning in the industry that you can share with our audience?

Alex Genov:
I’m sure, yeah, there is one thing. I think the press release went out, so I can talk about it. But it’s again, Zappos being Zappos, we don’t spend money on traditional advertising. We don’t do TV ads and so on, but we spend our money more on experiential marketing and they call it story worthy things. For example, we partnered with a theater in Vegas now it’s called the Zappos Theater. It used to be the Access Theater in planet Hollywood. That’s one thing. But what I heard is coming up is Zappos purchased a jumbo jet from Burning Man, and they’re going to plop it right across from Zappos and they’re going to create this awesome experience of, it’s going to be like event venue.

Julia Raymond:
Oh, very neat.

Alex Genov:
This jumbo jet there with almost like a minute terminal and you’re going and you check in and you can check in your emotional baggage.

Julia Raymond:
That’s funny.

Alex Genov:
I’m looking forward to that.

Julia Raymond:
That’s very exciting. Yeah, I would love to see that once that’s live. That sounds really cool. Instagrammable.

Alex Genov:
[inaudible 00:35:07]. That’s the definition, Instagrammable. Then in terms of just customer research, I’m really excited, but there’s so much more that can be done in terms of focusing more on customers as people and understanding [inaudible 00:35:22]. Now there’s so many different methods for understanding emotions that are non-verbal, like facial expressions and they’re getting into neuroscience and so on. So using more of these methods, again, not being evil, but using them to help our customers better.

Julia Raymond:
I love that. Well, thank you Alex so much for joining today. Great insights, really fun things to talk about that we probably don’t talk about enough, which is the research part of retail. So, loved having you on.

Alex Genov:
Thank you, Julia. My pleasure.