🎓 Apologies work better than compensation

Customers are up to 32% more likely to forgive a service mistake when they receive an apology, rather than financial compensation.                                                                                                                                                                                                                                                                                                                                                                                                                 January 23, 2024 | [Read Online]( Apologies work better than compensation Customers are up to 32% more likely to forgive a service mistake when they receive an apology, rather than financial compensation. [Thomas McKinlay]( [fb]( [tw]( [in]( [email](mailto:?subject=Post%20from%20Ariyh&body=Apologies%20work%20better%20than%20compensation%3A%20Customers%20are%20up%20to%2032%25%20more%20likely%20to%20forgive%20a%20service%20mistake%20when%20they%20receive%20an%20apology%2C%20rather%20than%20financial%20compensation.%20%0A%0Ahttps%3A%2F%2Fariyh.beehiiv.com%2Fp%2Fapologies-work-better-than-compensation) New to [Ariyh](? This is a 3min practical summary of a scientific study 🎓 Join 25,580 marketers who use science, not flawed opinions 📈 [Subscribe here]( Today’s insight is brought to you by… [One Thing Better]( The newsletter to improve your work - and your life - one tip at a time. By Jason Feifer, editor in chief of Entrepreneur. Here are some examples of the tips that Jason shares: - How to avoid distractions and get important things done - How to speak confidently when you don't feel confident - How to turn insults and setbacks to your advantage [Subscribe for free]( for a short tip every week! 👇 [Subscribe here]( Want to sponsor Ariyh? [Here’s all you need to know](. 📝 Intro You accidentally misspelled a shipping address while sending an order for your small business. Because of that, your product arrived two weeks late. You just got an angry email from your customer. What do you do? Should you offer some store credits? Refund the shipping fees? Or maybe - you could simply offer a genuine apology about a human mistake? Here’s what scientists found you should do. P.S.: [Saying “thank you” (e.g. as an appreciation of patience) over saying “sorry”]( (an apology) after a service failure can improve customer satisfaction. Previous insight: [When ads go from effective to annoying]( (more insights [here]() People are more forgiving when given a sincere apology compared to a cash compensation Channels: Customer Experience For: B2C. Can be tested for B2B. Research date: September 2020 📈 Recommendation If you make a service mistake (e.g. late delivery, forgotten order) offer a sincere apology, and politely explain why the mistake happened without deflecting or being defensive. People will perceive you and your business as more considerate and will be more likely to forgive the mistake. 🎓 Findings - People are more likely to forgive service mistakes when given a sincere apology, compared to financial compensation. - As part of 4 experiments, researchers found that when given a sincere apology (vs compensation) people were: - 32.1% more likely to forgive a missing reservation at a hotel (vs. a 35% refund). - 32.2% more likely to forgive slow service at a fast food restaurant (v.s. cash compensation). - 13.2% more likely to forgive a flight delay (vs. 10% refund with no apology or explanation). - 9% more likely to forgive a shipping delay for online clothing shopping (vs. 20% price compensation). 🧠Why it works - Receiving an apology helps us [regain self-esteem]( after a mistake that made us feel disrespected. It also shows a company’s [consideration]( of our feelings and experiences. - We feel that when a company apologizes, it makes them appear more moral (i.e. a good and kind company will understand my frustration, acknowledge it, and apologize). This increases our [empathy]( towards them. - On the other hand, a company offering money as compensation can be seen as an admission of [guilt]( and an attempt to “pay off” the debt without owning up to the mistake. - When the value of a transaction is low (e.g. purchase of a $10 trinket) or in B2B business partnerships (where long-term trust matters), we may value the sense of fairness (e.g. receiving an apology) more than a small amount of material wealth (e.g. a coupon compensation). 🚀 Looking to drive more traffic and skyrocket your online presence? Get in front of more customers by having quality and relevant websites link to your business. [dofollow.com]( is a premium link-building agency that can get your business ranked higher in search engines (like Google). Why choose them? - High-quality websites: Backlinks from websites that Google loves (e.g. HubSpot, Canva) - Pay-for-performance: Only pay for the links they get live - Link monitoring: They replace any broken links, for free [Elevate your digital presence]( This announcement was sponsored. Want your brand here? [Click here](. ✋ Limitations - The research compared two methods of mistake management (apology vs financial compensation) separately. It did not investigate the combination of the two (e.g. an apology and a voucher), which could, potentially, provide a “sweet spot” solution. - The researchers did not look at the long-term consequences of each strategy. For example, we do not know if an apology would still be effective if the same mistake is repeated a few times. - There was no accounting for mistakes where a high-value purchase was not delivered. If the mistake involves a significant financial loss, only an apology (without a refund) will likely not be enough. 🏢 Companies using this - Many B2C companies seem to use a combination of both strategies — an apology and a compensation - Deliveroo automatically provides a quick apology and voucher compensation when orders arrive late. - China's ride-hailing giant Didi offered an apology and a Â¥10 coupon after their app stopped working and/or it overcharged their users in November 2023. In case of flight cancellation WizzAir sends out an apology email and amongst different compensation options offers a 120% refund if claimed in credits. ⚡ Steps to implement - If you make a mistake, sincerely apologize (e.g. in person, via email, or a phone call) and explain the situation without deflecting the blame. - Assess the type of mistake that was made. Sometimes financial compensations are necessary (e.g. an apology is not enough if the customer never received their item). - If you do offer compensation, always combine it with an apology. - [Thank the customer](for their understanding and patience. - Let the customer know that [there is a real person on the other side of the business]( (e.g. send a personal, handwritten apology note). This will help to build emotional connections and increase satisfaction. - If the customer complaint is public (e.g. on social media) keep your response prompt and short, and then [direct the customers to contact you privately](. 🔍 Study type Lab and online experiments and field experiment (at a popular fast-food restaurant in China). 📖 Research [The road to consumer forgiveness is paved with money or apology? The roles of empathy and power in service recovery.]( Journal of Business Research. (September 2020) 🏫 Researchers - Chuang Wei, Tsinghua University - Maggie Wenjing Liu, Tsinghua University - [Hean Tat Keh](, Monash University Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s [how science works](). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely. Rate today’s insight to help me make Ariyh's next insights 🎓 even more useful 📈 How was today’s insight? 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