You can read the full case study below or take a look at and download the infographic – which provides a short, print-friendly summary of the case study – here.
Introducing Appliances Online
Appliances Online (AO), is a British white-goods startup founded in 2000 by John Roberts. It has since grown into an online electronics store with a valuation at IPO of over £1bn, thanks in part to a number of bold strategic decisions centred around AO’s relationship with customers.
How does AO work?
AO is, to all intents and purpose, a standard online retailer selling and delivering electrical goods. But it is interesting from a relationship perspective because of three pivotal strategic decisions, all of which aimed to improve the customer relationship, meeting customers’ needs at high cost and risk to AO.
1. To offer next-day delivery on all AO white goods
John felt being able to offer customers such rapid service could be a game-changer given the stress and pain caused to a household when a crucial electrical item like a fridge or a washing machine breaks down. The problem was that to offer this with confidence, AO would need control of its stock and its deliveries – otherwise it would risk letting thousands of customers down on a continual basis. To do this meant having its own stock in its own warehousing, and its own delivery network of trucks and drivers. It was a multi-million pound bet based on wowing customers, but John’s belief was that unless the business was a lot better than the established competitors in the eyes of its customers, it might not survive. AO went ahead … and it worked, setting new standards in the industry in a way that has been very hard for others to replicate.
2. To offer customers free returns for any reason within 100 days
AO’s CFO at the time, Steve Caunce, was sure this was a bridge too far – that AO would be bankrupted by customers borrowing white goods for free and then returning them. John felt it would be a demonstration of great customer service and confidence, showing the company trusted customers and would do whatever it took to make sure they were happy.
3. To give the AO Customer Service team complete freedom to do what they felt was right when sorting out customer problems, and to look out for ways to be memorable and thoughtful in the process
If AO could instil a genuinely customer-led set of beliefs among colleagues, John felt this would be almost impossible for a big, sales-led competitor to copy. His guiding phrase to staff, to initiate this philosophical revolution? “Treat the customer as if she was your gran but then after the call you need to explain what you did to your mum.” This gave people the sense of balance they needed, but in a human way – it made it as fulfilling to work for AO as it was to be one of their customers.
What impact is AO having?
Although it recycles used white goods, AO is a for-profit company, and the benefits it has realised through its relationship-centred decisions have been in the business rather than social sphere. These benefits, all of which came despite sizeable risks, relate to each of AO’s strategic decisions:
Offering next-day delivery on AO’s entire white-goods range
- Manufacturers were so impressed they started to ask other retailers to use AO’s logistics system. AO most certainly won a competitive advantage.
- Customer appeal and satisfaction increased.
Offering customers free returns for any reason within 100 days
- It turns out customers could be trusted. In fact, the initiative showed that customers only returned items for two reasons: they had ordered the wrong one, or the item was damaged. This was a valuable insight for AO. It allowed them to learn, changing the buying process to minimise ordering mistakes and working at deliveries to eliminate damage. This further improved the right-first-time customer experience and saved money, too.
- This helped create a win-win, an ‘outside-in’ model, where customer and AO incentives are aligned.
Giving the AO customer-service team complete freedom to do what they felt was right when sorting customer problems
- Over 95% of customer issues were subsequently being dealt with immediately, with humanity and personality.
- This made customers happier. AO is one of only 20 companies to reach over 100,000 ratings on TrustPilot UK. The fact that 95% of these ratings are either “great” or “excellent” places AO in the top 0.01% of all ranked companies.
- Staff enjoyed greater autonomy and responsibility, and felt good as they made a positive different using their own personality throughout the day.
- AO actually saved money on management costs otherwise arising through supervisors needing to grant permissions to customer-service staff – layers of management were taken out with the savings more than accounting for additional costs from the possible loss of control.
Surely in part because of these customer-relationship-driven changes and the competitive advantages they bestowed, AO is now the only electrical retailer with over 100,000 Excellent reviews on Trustpilot, and has an average rating of over 9.1/10 from over 100,000 customers. In 2014, it listed at over £1bn.
What can AO teach us about effective relationship-centred design?
Particularly in organisational contexts, agency, autonomy and trust are required for relationships to form
We have seen this insight throughout our case studies, but mostly in social-sector contexts. In this example, AO’s business decisions granted more trust and agency to both customers (in returning goods) and staff (in dealing with customer problems). In both cases, despite apparent risks, increasing agency helped establish a trusting relationship.
Investing in better relationships can lead to cost savings
Across these decisions, AO found that seemingly costly risks in fact saved money (and made customers happier) in the long term. Apparent spending was in fact saving. The unexpectedness of this hinges on a misunderstanding of trust in relationships – an idea at the very heart of our Relationships Project. AO’s example shows us that the tendency for businesses to tightly, centrally control processes is often misguided. In fact, delegating trust and agency can bring many benefits, from profit through staff and customer satisfaction to (in the cases of other social enterprises) wider social impact.
What’s next for AO?
AO is continuing to ride the wave of its success, prioritising an outside-in, or customer-centric approach that is good for customers and business.
Has this case study inspired any comments, ideas or critiques?
Please do get in touch with us at email@example.com if so. An essential part of the Relationships Project is learning from others engaged in thinking about relationship-centred design. We don’t have all the answers, so hope some people reading will contribute suggestions.