Does the brand define the customer experience, or is the customer experience the brand? Your work may involve both, but you probably attack problems with a bias for one or the other.

Earlier this year I asked Josh Levine of Great Monday to simply describe the relationship between brand and experience, and I like what he said.

I went back and dug deeper with Josh to clear up the differences between how he described it and and the way I often see the relationships between brand and experience being practiced. What emerged was this illustrated question and answer, attempting to untangle brand and customer experience in just 9 minutes:

Untangling brand and customer experience, in 10 minutes or less from Brandon Schauer on Vimeo.

In tough times every CEO takes a hard look at what his or her company could be doing better to weather the storm. Some cut jobs, others stop advertising, and still others try to innovate their way through. Those are all reasonable tactics, but what if they could’ve avoided the crisis in the first place? How do you build an unshakable business foundation from the start?

Every business has a critical, overlooked, underutilized asset—its people. The old employment model says: I pay you money, you do the work, end of story. While money is a key commodity and motivator in our economy, it isn’t the only reason we work. There’s more, and Zappos.com CEO Tony Hsieh has built his business around this more-than-sound assumption.

I had the opportunity to spend a few days at online shoe retailer Zappos.com’s Las Vegas headquarters and saw in person what makes the company who is setting the gold standard in service tick.

The answer? Focus on culture and the rest falls into place.

Culture may be a surprising answer considering all the CEO clatter out there about things like eco-innovation and the triple-bottom line, but after my time at Zappos I’m a believer—culture is the key to sustainable growth in business.

I got a chance to dig a little deeper into their culture, ask Tony a few questions about how sales are holding up, and the future of Zappos now that on-line behemoth Amazon has acquired them. Below is our conversation.

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JL: First, how do you define culture?

Tony: It’s a combination of making sure that everyone understands our vision of having the Zappos brand be synonymous with the very best customer service, as well as making sure we hire people that are a fit for our company culture. Our culture is defined by our 10 core values:

1. Deliver WOW Through Service

2. Embrace and Drive Change

3. Create Fun and A Little Weirdness

4. Be Adventurous, Creative, and Open-Minded

5. Pursue Growth and Learning

6. Build Open and Honest Relationships With Communication

7. Build a Positive Team and Family Spirit

8. Do More With Less

9. Be Passionate and Determined

10. Be Humble

JL: Zappos took 7 years to become profitable, and still now only earns about 5% profit. One rumor is that it’s because you invest so much back into the business, particularly the culture. I agree it’s important for businesses, but cultivating a great culture seems expensive—what kind of return do you see? How do you justify it to your investors?

Tony: Like any other business, we still have financial goals we need to meet in order to keep our shareholders and board of directors happy. Our approach has been to maximize the amount we invest in the customer experience and our company culture while still meeting our financial goals. There are always things we can do to make our customers happier…for example, in theory we could offer same day delivery for every customer. But it wouldn’t make sense from a financial perspective, so we don’t do that.

JL: I’ve got a theory, so tell me if I’m right or not. Because you’ve built such a strong culture, you’ve been able to avoid the worst of the recession. Have you felt a pinch on sales as people move to cheaper retailers?

Tony: For our own customers, we’ve noticed many of them migrating to less expensive brands, but they’re still purchasing from us,too. On any given day, about 75% of our orders come from repeat customers.

JL: There’s a phrase thrown around quite a bit at zappos: Focus on culture and the rest falls into place. When did you realize this was the core tenet by which you wanted to run your business?

Tony: We stumbled into it accidentally. In the early days of the company (we were founded in 1999), we were unable to raise funding so we weren’t able to spend a lot of money on expensive marketing campaigns. As a result, we were forced to focus more on our existing customers. What we found was that the more we invested into customer service and the customer experience, the more loyal they were, and the more we grew from word of mouth.

Today, we take most of the money we would have spent on paid marketing or advertising and invest it into the customer experience instead. We realized that the only way we could deliver great customer service was if we had happy employees, and our belief is that culture plays a very big role in the happiness of employees.

JL: For companies out there who want to improve their corporate culture what would you recommend they do first?

Tony: I don’t think the Zappos culture can or should be cloned, but I do think the idea of being transparent and running a business based on core values and a meaningful vision that’s not just about money or profits can work for any organization. It doesn’t really matter what the core values are, as long as the entire organization commits to those core values. The most important thing in any large organization is alignment.

JL: On you’re blog you write “we want the Zappos brand and business to be about … delivering happiness, whether for customers (through customer service) or for employees (through company culture).” I thought you sold shoes–how can you make money delivering happiness?

Tony: Every great brand that exists ultimately is about one or more human emotions. There are plenty of companies that sell shoes, but if you ask customers how they feel about those companies as compared to Zappos, you’ll find that customers will feel very differently about those companies versus Zappos.

JL: Amazon just acquired Zappos a few days ago. They’ve committed to support the Zappos brand and culture (clearly Amazon CEO Jeff Bezos is in awe of what you’ve been able to do in regards to providing the gold standard in customer service). Any indication that they’d like you to help them get some of that zappos magic?

Tony: The deal hasn’t closed yet, so it’s too early to tell.

JL: Fair enough. Thanks for you time, Tony. Good luck and continued success on your mission to bring happiness to your employees and customers.

This is phenomenally articulated. I couldn’t have said it better myself (though I wish I had).
—Josh

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Posted by Tony H. (CEO, Zappos.com) Jan 3, 2009

Building a brand today is very different from building a brand 50 years ago. It used to be that a few people got together in a room, decided what the brand positioning was going to be, and then spent a lot of money buying advertising telling people what their brand was. And if you were able to spend enough money, then you were able to build your brand.

It’s a very different world today. With the Internet connecting everyone together, companies are becoming more and more transparent whether they like it or not. An unhappy customer or a disgruntled employee can blog about bad experience with a company, and the story can spread like wildfire by email or with tools like Twitter.

The good news is that the reverse is true as well. A great experience with a company can be read by millions of people almost instantaneously as well.

The fundamental problem is that you can’t possibly anticipate every possible touchpoint that could influence the perception of your company’s brand.

For example, if you happen to meet an employee of Company X at a bar, even if the employee isn’t working, how you perceive your interaction with that employee will affect how you perceive Company X, and therefore Company X’s brand. It can be a positive influence, or a negative influence. Every employee can affect your company’s brand, not just the front line employees that are paid to talk to your customers.

At Zappos.com, we decided a long time ago that we didn’t want our brand to be just about shoes, or clothing, or even online retailing. We decided that we wanted to build our brand to be about the very best customer service and the very best customer experience. We believe that customer service shouldn’t be just a department, it should be the entire company.

Advertising can only get your brand so far. If you ask most people what the “brand” of the airline industry as a whole is (not any specific airline, but the entire industry), they will usually say something about bad customer service or bad customer experience. If you ask people what their perception of the US auto industry is today, chances are the responses you get won’t be in line with what the automakers project in their advertising.

So what’s a company to do if you can’t just buy your way into building the brand you want? What’s the best way to build a brand for the long term?

In a word: culture.

At Zappos, our belief is that if you get the culture right, most of the other stuff — like great customer service, or building a great long-term brand, or passionate employees and customers — will happen naturally on its own.

We believe that your company’s culture and your company’s brand are really just two sides of the same coin. The brand may lag the culture at first, but eventually it will catch up.

Your culture is your brand.

So how do you build and maintain the culture that you want?

It starts with the hiring process. At Zappos, we actually do two different sets of interviews. The hiring manager and his/her team will do the standard set of interviews looking for relevant experience, technical ability, fit within the team, etc. But then our HR department does a separate set of interviews, looking purely for culture fit. Candidates have to pass both sets of interviews in order to be hired.

We’ve actually said no to a lot of very talented people that we know can make an immediate impact on our top or bottom line. But because we felt they weren’t culture fits, we were willing to sacrifice the short term benefits in order to protect our culture (and therefore our brand) for the long term.

After hiring, the next step to building the culture is training. Everyone that is hired into our headquarters goes through the same training that our Customer Loyalty Team (call center) reps go through, regardless of department or title. You might be an accountant, or a lawyer, or a software developer — you go through the exact same training program.

It’s a 4-week training program, in which we go over company history, the importance of customer service, the long term vision of the company, our philosophy about company culture — and then you’re actually on the phone for 2 weeks, taking calls from customers. Again, this goes back to our belief that customer service shouldn’t just be a department, it should be the entire company.

At the end of the first week of training, we make an offer to the entire class. We offer everyone $2000 to quit (in addition to paying them for the time they’ve already worked), and it’s a standing offer until the end of the fourth week of training. We want to make sure that employees are here for more than just a paycheck. We want employees that believe in our long term vision and want to be a part of our culture. As it turns out, on average, less than 1% of people end up taking the offer.

One of the great advantages of focusing on culture is when reporters come and visit our offices. Unlike most companies, we don’t give reporters a small list of people they’re allowed to talk to. Instead, we encourage them to wander around and talk to whoever they want. It’s our way of being as transparent as possible, which is part of our culture.

We’ve formally defined our the Zappos culture in terms of 10 core values:

1) Deliver WOW Through Service
2) Embrace and Drive Change
3) Create Fun and A Little Weirdness
4) Be Adventurous, Creative, and Open-Minded
5) Pursue Growth and Learning
6) Build Open and Honest Relationships With Communication
7) Build a Positive Team and Family Spirit
Do More With Less
9) Be Passionate and Determined
10) Be Humble

Many companies have core values, but they don’t really commit to them. They usually sound more like something you’d read in a press release. Maybe you learn about them on day 1 of orientation, but after that it’s just a meaningless plaque on the wall of the lobby.

We believe that it’s really important to come up with core values that you can commit to. And by commit, we mean that you’re willing to hire and fire based on them. If you’re willing to do that, then you’re well on your way to building a company culture that is in line with the brand you want to build. You can let all of your employees be your brand ambassadors, not just the marketing or PR department. And they can be brand ambassadors both inside and outside the office.

At the end of the day, just remember that if you get the culture right, most of the other stuff — including building a great brand — will fall into place on its own.