Case study: Appliances Online

Prioritising Customer Relationships to Deliver Fantastic Business Success

Introducing AO

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. 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. 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. Freedom to the Customer Service team to do what they felt is 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?

Customer satisfaction

Despite initial concerns, it turned out that customers could be trusted with free, no questions returns. In fact, the initiative showed that customers only returned items for two reasons: they had ordered the wrong one, or the item was damaged.

Giving the AO Customer Service team freedom to do what they feel is right when sorting out customer problems also makes for happy customers.

AO is one of only 20 companies to reach over 100,000 ratings on TrustPilot UK.

%

of TrustPilot ratings are either 'great' or 'excellent' placing AO in the top 0.01% of all ranked companies

%

of customer issues are dealt with immediately, with humanity and personality

Staff satisfaction

Alongside greater customer satisfaction, AO’s approach to Customer Service means that staff enjoy greater autonomy and responsibility, and feel able to make a positive difference by bringing warmth, humanity and personality to what is often a rigid, cold negotiation.

Cost savings

As well as increasing custom, AO’s initiatives have realised cost savings. Their returns policy has enabled them to gather insight, resulting in them changing the buying process to minimise ordering mistakes and working at deliveries to eliminate damage. Their approach to Customer Service has enabled them to save 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.

What can we learn from AO?

A couple of things that stand out to us about the way that AO operates:

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.