The Marketing Bureau

By Ariella Brown
First Published on www.thecmosite.com

When your company has made a mistake, offering a proper apology is not just the right thing to do. It can pay big dividends.

This week witnessed a high-profile apology from Netflix CEO Reed Hastings. As my colleague Keith Dawson observed yesterday, many things could have been done better.

As for the apology itself, you know how kids sometimes say they're sorry because a parent or teacher is forcing them to say it? That's about the extent of the sincerity that comes across in the CEO's blog posting that supposedly conveys an apology. The title does not even mention the word "sorry." Instead, it is a rather abstract "Explanation and Some Reflections." The text also does not get right into an apology. It indicates that the explanation he presents should suffice to rectify the situation.

The huge number of negative responses say otherwise. The "many members [who] felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes" are not convinced the company has improved in those two respects. A number of them point out that the blog post completely misses the mark, showing that Netflix is not really attuned to what the customers are upset about -- the split into two services translates into inconvenience and higher costs with no benefit whatsoever to them. Ignoring that fact in the explanation reinforces the company's arrogance and lack of respect for its customers.
Perhaps Hastings would benefit from a bit of reading.

In "Should Business Leaders Apologize? Why, When and How an Apology Matters," Linda Stamato outlines what makes a true apology. First, it affirms "that an injury or damage has occurred." And those actually issuing an apology, rather than merely saying "I'm sorry," as in "I'm sorry to hear that," should acknowledge "responsibility for the mistake" and "express regret, humility or remorse." The person apologizing could also admit his/her role in the mistake. Another step is to "ask for forgiveness" expressly "and include a credible commitment to change or a promise that the act won't occur again." The slighted parties are reassured that they are not taken for granted. That may be enough to restore the relationship to status quo ante. But to be as sure as possible that the relationship does not suffer, the one who messed up should offer "some form of restitution or compensation."

Here's an everyday example. You place an order for something online. When the order arrives, you see that one of the items was sent in the wrong color, though you placed the order correctly. At the very least, you would expect the company representative to apologize for the mix-up, take the return, and send a replacement at no cost to you. There is no way to avoid the delay in getting the correct item, though. Consequently, a company that cares about its reputation with its customers will offer some form of appeasement. As a demonstration that it is not just correcting its mistake but actively trying to make it up to you, the company might put a rush on the return shipment, offer a coupon, or automatically apply a discount. If it does, you are much more likely to buy from the business again, because you believe it cares about making things right. And from the company's point of view, as Stamato says, "Taking responsibility for an error earns the privilege of being forgiven, and thus granted a second chance."

One company that fully understands the importance of an apology and an offer of restitution is Nurse Next Door, a Canadian home healthcare service provider that promises "Whatever it takes to bring you peace of mind." When a mistake happens that threatens a customer's peace of mind, Nurse Next Door's policy is to apologize via a note accompanying a "humble pie" (typically apple-flavored). John DeHart, one of the two founders, has estimated that Nurse Next Door spent $1,500 last year on pies. But the payoff was many times that -- $100,000 in saved sales. Now that is an impressive ROI on humble pie.

An added benefit of keeping current customers happy is that they are likely to recommend the business to others. In contrast, ticked-off customers will let the whole world know via the Web what a lousy deal they got from a business that messed up. When they do something wrong, businesses should resolve to break out the humble pie and then do what they can to restore customer loyalty.

Ariella Brown is a writer, editor, Web content developer, and social media coordinator.