Companies Grow (or Shrink) Based on How and When They Apologize

Netflix, the DVD-by-mail service with over 10 million subscribers experienced a severe technology glitch in August 2008 that interrupted and halted shipping of DVDs to subscribers. Netflix confessed immediately on their Web site, saying, “IMPORTANT: Your DVD Shipments Have Likely Been Delayed.” They didn’t sweep the problem under the rug and didn’t try to hide from the blame. Netflix followed up with emails to make sure all customers heard the news. Not all customers even knew that there was a delay. Didn’t matter. Netflix was honest in telling everyone and swift in extending an olive branch, automatically applying a credit to subscribers’ next billing statements. New Netflix subscribers who had their first shipments delayed received this message, “We recognize that this is not a good way to begin your Netflix membership and we’ll automatically extend your free trial.”

Differentiate with Service

In 1999, Netflix introduced what was then a landmark product when they began offering DVD rentals by mail. Prior to that, we all trudged to the video store for rentals. Netflix gave consumers an option to go online, make selections, read reviews, and get the DVDs for viewing via their mailboxes. Service and “delighting” customers has been the backbone of the company’s offering, and service has fueled their growth. As the market has changed, and Netflix’s easy delivery method has faced heavy competition from digital delivery services such as iTunes and the Comcast cable box, they continued to differentiate with service. So, when this glitch occurred, Netflix knew they needed to recover quickly, honestly, and in their own unique way to prove that they were worthy of having customers stick around.

Decide to Say Sorry

Netflix “End of Week” blog update after the shipping debacle posted the message. “Apologies to all once again and thanks for hanging in there with us.” A customer responded with: “Forget all those whiney haters. You guys did your best. You deserve praise for getting through it, not hatred for having some hiccups.” It’s estimated that Netflix’s recovery cost it $6 million. Because they communicated directly with customers, their decision and actions are being applauded and fueling their growth. Ninety-three percent of existing subscribers say they “talk up” how great Netflix is to everyone they know. How about you? Would you so readily fess up to an issue not all customers are even aware of?

Groupon’s Recent (Humble and Honest) Apology:

Recently, Andrew Mason, founder and CEO of Groupon, made his own apology. Known for his great sense of humor, Mason tucked his humor away for the moment and showed his serious side while apologizing in a video to his Japanese customers for an error made in a deal featuring a food delivery service. When too many “deals” were sold, the food company was unable to keep up with the volume, forcing them to deliver the meals late and in poor condition.
http://www.youtube.com/watch?v=CDMLMFxEY4A&feature=player_embedded

Rather than blame the food company, Mason acknowledged that it was Groupon’s error, and Groupon reimbursed customers and handed out vouchers for future use. Like Netflix, Groupon management could have sidestepped the issue, twisted the press and avoided much of the blame, especially considering Groupon is a rather new phenomenon (much like Netflix was a few years back) and people are fascinated with finding “deals” and probably willing to cut them some slack. But rather than hoping to slide under the wire on this recent food snafu—Groupon stepped up and owned the mistake. As Mason says in the video apology posted above, “We created Groupon to help enrich people’s lives by bringing new exciting experiences to them,” he said. “So when we do the opposite, as we have in this case, it really hurts.”

Do You Confess to Customers When Something Happens?

Netflix, the DVD-by-mail subscription service, let all customers know that they were experiencing a technology glitch holding up requested DVD shipments. They didn’t wait for customers to notice; they were proactive in admitting the error, apologizing for it, and making up for it.

– Do you openly explain to customers when something goes wrong?

– Do you wait for customers to complain or do you proactively offer a resolution for everyone?

– Which direction is the natural instinct inside your company?

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