Zappos wants to “deliver WOW through service.” We saw an example of this culture in the story of the Zappos customer service rep who provided contacts for local pizza delivery to an out-of-town guest. Though it is a memorable story, providing the pizza 411-service did not involve significant cost to the employee or the firm for delivering “WOW through service.” However, at midnight on Friday, May 21, 2010, Zappos created a problem that required a significant financial cost to deliver that “WOW.” Due to a programming error in its pricing engine, Zappos accidentally capped the sales price at $49.95 for all products sold on its subsidiary site (www.6pm.com ). The mistake was not discovered until 6 a.m., and Zappos pulled down the site to correct the pricing problem. Once fixed, there remained a question of what to do about the products sold with the erroneous prices. Zappos’ terms and conditions clearly state that the firm is under no obligation to fulfill orders placed due to pricing mistakes. However, Zappos decided to honor every sale made in the time frame between midnight and 6 a.m.—resulting in a loss of over $1.6 million. That’s putting your money where your “WOW” is! Amazon, which owns Zappos, had its own pricing mistake just two months prior to the Zappos incident. Best Buy and Dell have also both had online pricing errors. None of these firms handled the situation as smoothly as Zappos.

1. What elements of an organic organization are apparent from the chapter material on Zappos?

2. How does the Zappos business strategy match its organizational structure?

3. Which strategic control-and-reward system discussed in the chapter would be most appropriate for Zappos?

4. Do you think Zappos’ decision to honor every sale, despite its explicit business terms and conditions that would allow it not to do so, was a sound one? Why or why not?