Zappos Milestone: Marketing

As Zappos has grown and matured, so has its marketing strategy.

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In the beginning, relied on word-of-mouth to build brand awareness. Now it has achieved the final stage of its evolution — with a TV campaign airing on major cable networks.

Yet it isn’t easy for an Internet company to sell itself. Not only must it compete against other e-tailers, but even now it must contend with consumer uncertainties about shopping online.

Mike Gatti, executive director of the Retail Advertising & Marketing Association, a division of the National Retail Federation, said the most successful online merchants have built a level of trust. “Customer service is key,” he said. “A few [sites] really stand out with free shipping both ways, and they’ve made returns easy. They’ve seen where the challenges are for customers, and they’ve worked hard to make it easier for them.”

In addition to relying on word-of-mouth, Zappos also has signed with an affiliate network, where online partners, including blogs, shopping sites and comparison sites, drive traffic to Zappos and are paid a commission on the sales completed. The company is currently a member of Commission Junction, with 3,200 partners.

“For most online [companies], affiliate marketing is such an easy, affordable way to get your name out,” said Ned Farra, manager of online partnerships for Zappos. “They drive the traffic and build brand awareness. They do the work for you.”

However, Farra explained, as an online company grows it can use more cost-effective ways to drive sales, such as direct mail and search engines, which allow it to control its message more effectively.

Roughly a quarter of Zappos’ sales come from affiliates, but search engines are its most profitable direct marketing avenue, said Matt Burchard, the firm’s director of content and direct online marketing. “As the search engine marketing becomes more robust, we see it eroding the affiliate channel,” he said.

But direct marketing can only get a company so far.

In 2008, Zappos spent roughly $11.6 million on traditional measured media, according to TNS Media Intelligence. That included the company’s first TV campaign, with the tagline “Put a Little Zappos in Your Day.” The ad featured no product, but instead functioned as a brand-building exercise.

Zappos also spread the word last year through print ads in a wide range of national magazines, from Lucky to Backpacker. And its New York-based creative agency, The Ad Store, created a guerilla campaign that put ads on the bottom of airport security bins.

“Even though we have 10 million customers, our reach is pretty limited in terms of [the percentage of] the population who knows about us,” said Aaron Magness, Zappos’ business development manager. “We want to make sure that more people know who we are.”

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