Improving Customer Service with Apologies Instead of Cash

By Kristina Evey • September 21st, 2009

There is an article posted today on www.dailymail.co.uk that will be surprising to many. It states that when resolving a problem with a customer, most customers value a true and genuine apology over receiving a cash payout from the company.

The article is based on a study conducted by the Nottingham School of Economics’ Centre for Decision Research and Experimental Economics. NSE research fellow and study co-author Dr Johannes Abeler claimed the results proved apologies were both powerful and cheap.

The study was done using a seller on ebay who generated 10,000 sales per month over a six month period dealing with their unhappy customers. The researches predicted that customers would not accept the apology over the cash. The apology was given by a faceless company, not face to face, and was certainly in the best interest of the company to apologize rather than to pay out money.

The stand-alone apology blamed the manufacturer for a delay in delivery, adding: ‘We are very sorry and want to apologise for this.’

Customers offered money were told: ‘As a goodwill gesture, we can offer you five euros if you would consider withdrawing your evaluation.’

Some 45 per cent of participants withdrew their evaluation in light of the apology, while only 23 per cent agreed in return for compensation.

The study also discovered that a higher purchase price further reduced the number of customers willing to forgive for cash.

Yet the size of the initial outlay had no effect on the willingness of participants to settle for simply reading the magic words: ‘I’m sorry.’

This goes to show that throwing money at a problem is not necessarily the answer. People want an apology for mistakes and for responsibility to be taken. Consumers today recognize that issues arise.

Remember, the problem is not going to define you or your company. How you respond to it will. Customer satisfaction and customer retention rates dramatically improve when a company has taken the time and effort to serve the customer relationship. By focusing on customer service through staff training to include an apology when necessary, you will see customer satisfaction levels increase.