Maintain customer trust when your company messes up

Let me start with a question for you…

What would you do you do when you or someone from your company makes a mistake that will cost your company money? What if the amount of money is over USD1.5m? Will you unconditionally refund the money?

This week’s article is about a precious and fragile asset that every business needs to develop and nurture – customer trust.

Trust is the key currency in business today. Without it, you will not have a business. And, if you let it erode, your business will decline over time.

I’d like to share with you contrasting examples of how two companies reacted to a mistake they had made. Then, I will ask you the same question again.

Great example: Zappos

Zappos is celebrated for its focus on the customer. This has translated into brand and financial success.

Zappos messed up on its pricing in a big way in 2010. Its sister company, made a major pricing error between midnight at 6am one night in May of that year. On-line shoppers thought that it was Christmas in May – and took advantage of the low prices. By the time that the prices were corrected, Zappos had lost $1.6m.

So, what did Zappos do? Very simply, it honoured the deal.

The short term impact was a $1.6m loss for Zappos. However, the long term gain was the increase in trust of Zappos as a brand. And, of course, the story has become a brand-building legend.

Zappos understands that trust in the brand is priceless.

Don’t copy this company: “International Airline X”

Now, let me share with you an example of how small thinking in a company can lead to a major loss of trust.

It is based on a personal experience. It is not my intention name companies in public. I only do that when I have good things to say. So, let’s refer to this airline as “International Airline X.”

Our company  needed to book four return air tickets to Shanghai. The International Airline X on-line ticket price was favourable – but the on-line booking system was down.

We contacted International Airline X’s contact centre. A marginally higher price was quoted. We decided to book immediately through the contact centre to secure the seats.

The passenger details were taken. My credit was debited.  The deal was done…at least as far as we were concerned.

International Airline X contacted us a few days later to say the contact centre agent had made a mistake on the price quoted. Because of this mistake, we had to pay close to extra 25% on top of the fare that we had already paid.

The airline admitted that its contact centre representative had made a mistake.

The total amount of money involved was not great – it was less than USD400. However, there was a major principle involved.

Over a number of frustrating phone calls, we felt as if we were going blue in the face as we explained to them why it was not justified for them to raise the price after the deal was done.

They offered a full refund – but that would have meant that we would have to pay 25% more as prices by that time had gone up.

After a number of energy-sapping phone calls and discussions, we finally gave up on the dispute and paid in the order of 9% more in order to secure the seats to attend our meeting in Shanghai. The additional amount that we grudgingly paid – was less than USD100.

Now, let’s look at the impact.

Emotion is a key driver of customer loyalty and word of mouth. I have been flying with this airline for over 30 years. It has been my airline of choice. Correction. It WAS my airline of choice.

And, now, for the sake of less than USD100, my trust has been broken. My emotional bond with this company has been damaged.

At a tangible level, the loss of trust will convert to loss of business. I will now invoke the “Golden Rule” – I have the gold, so I will rule, in terms of my choice of airlines in the future.

Let’s ask the question that I started with…

What do you do when you or someone from your company makes a mistake that will cost your company money?

We have seen that Zappos protects customer trust at all costs. In doing so, it protects the brand and future flows of business.

On the other hand, there are many other companies that will protect revenue at all costs – even at the cost of trust. The impact is that customers like me quietly take our business elsewhere.

The message is simple.

Your currency is not short term revenue – it is long term customer trust.

Mistakes happen. If you pay the price and rectify early and fast, you will maintain and build customer trust – and your customers will reward you with repeat business and word of mouth referrals.

Until next time.

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