Zappos grew to a billion dollars by promising five-day shipping, then delivering overnight. Foot Locker promised overnight delivery and failed to meet it, losing customers. The strategy: under-promise, over-deliver, and build loyalty without actually speeding up operations.
Fourth strategy, I'm just tearing through some stuff here is a technique called upod. Upod? It stands for under promise over deliver. Maybe it's a term you're familiar with, but I wonder if you're using it, because I know one company that used it to grow to a billion dollars in revenue. A billion dollars in revenue. Anyone ever buy anything from Zappos here? Just by a show of hands. Okay, good. So, okay, a lot of Zappos consumers. I don't know if you know the backstory of Zappos. When Zappos started their Internet presence selling shoes, they had a major competitor coming into the industry that you probably all know called Foot Locker. Right. Foot Locker had a presence in every mall in the country, was backed by venture capital, and had millions backing it. Zappos was a little startup out of a garage and had the same idea. Footlocker said, there's a huge opportunity on the Internet. We're moving in. And. And Zappos said, there's an opportunity on the Internet, we're going to give it a shot. Millions, actually, hundreds of millions backing this one. Nothing backing this one. But Zappos won. How? Because they use a technique called upod. Under promise, over deliver. Just because you're sitting right here, I'm going to pick on you. When you bought your shoes, you bought shoes from Zappos. Okay. How long ago? So a couple weeks ago, you bought shoes. This is not a magic trick. Have we ever met before? Is there anything up my sleeve? I've. Okay. When you bought your shoes, had you had this experience when you bought your shoes, did they promise it would take about a week to get the shoes? But did you get it overnight? Oh, my God. You got them overnight. Unbelievable. Now, we've never met before, we've never talked before, and I'm about to ruin your day. They do that with everyone. I know, I know. It's okay. You can go cry now. No. And they said you're a VIP and all this stuff. Zappos. And everyone in the audience. I bought from Zappos. They've done it with you. It's a special technique. They made a promise it'll take five days, and then they FedEx it overnight. And when it arrives overnight, it's like. It's like your birthday. This is amazing. The shoes are here now. Here's how Footlocker moved into the market. Footlocker said, we're going to take shoe orders and we're going to promise overnight delivery. And so Footlocker would order the shoes the exact Same shoes. Foot Locker would say, you'll have them the next day, and they'd arrive the next day. But that's what they promised. As my wife would say, eh? But sometimes UPS or FedEx would get stuck in a storm. They would miss a package, and it would take two days. Footlocker promises, they'll get to you overnight. It in fact, takes two days. You're sitting here waiting for your shoes leak. Where are they? It takes two days. Well, guess what? Foot Locker sucks. They can't deliver on their promises. Zappos, on the other hand, said, it'll take five days to get to you. It comes overnight, and you're blown away. But sometimes they'd have the same problem. Sometimes it would take FedEx an extra day to get the package there. Instead of coming in five days, now it comes in two. And it's still like your birthday. Under promise over deliver. The biggest way to improve a business is not by getting better on your deliverables. It's actually by improving your promises, setting promises that are on the outer side of reason and then beating those promises. Most people over promise, we want to promise the world to our customers. Of course we'll get your products ready. They'll be ready in five minutes. And then when they show up, it's not ready. You set your client for huge disappointment. Promise an outer side of reason. Now you are going to experience the tinge. And what I call the tinge is when you tell a customer, you know, it will take us five hours to prepare this or 10 hours to prepare this. And your competitors are saying, we'll get it done in two hours. Your customer will say, well, hold on, everyone else has two hours. You say 10. That's horrible. You have to have a reasonable explanation for it, saying, well, we want to make sure we do it properly. We want to have our metanologist review it. That's a horrible name. We want someone to review your order, but if it's an inconvenience, please tell us and we'll expedite it immediately for you. That's how you address the tinge. Then here's the magic. You prepare the order just as you did, as quickly as possible. But now, an hour later, you call a customer and say, hey, we have wonderful news. We say, we get it done in 10 hours. We're able to expedite. It's been reviewed. It's perfect. It's ready to go. We're ready early for you. And your customers will be blown away. Your competitors are over promising and under delivering and losing customer loyalty. Don't do your work better. Simply adjust your promise and you'll be perceived to be radically better. Zappos grew to a billion dollars and has loyal customers. Footlocker collapsed and doesn't have an online business anymore. I mean, who bought from Footlockers online recently? That's what I thought. Nobody under promise over deliver.
