The latest in economics research has shown us the real value to an apology; when to apologize and how. Ben Ho, a behavioural economist from Vassar college, has shown through new data in a partnership with Uber and economist John List, that company apologies are most effective when they incur a cost to the company or the maker of the apology.
This project began when Uber’s chief economist, John List, took a trip with Uber and the time of travel was vastly miscalculated so he missed the conference he was attending. Uber did not attempt to remedy this with an apology, which may be a tactic they start using in order to save customers. Customers are said to use Uber 5-10% less when they are taken on a ride that is longer than anticipated.
The role of the ‘cost’ of an apology is important in understanding the apology plays as a transaction of trust. There were 4 tactics tried by the researches to determine what kind of response was more effective after a late ride.
- No apology
- Basic apology – “We’re sorry you were late”
- Status apology – “We know we got your arrival time wrong”
- Commitment apology – “We’re working to give you better arrival times”
The research found that an apology with a voucher of sorts (e.g. $5 off the next ride) was more successful in retaining customers than the apology without a coupon. The $5 voucher acts as a commitment that Uber would be improving future performance. When drivers had a second or third poor experience with Uber the tactic of a coupon paired with an apology was unsuccessful in eliciting a positive response from customers.
After a bad ride experience, customers were more likely to use Uber when given a $5 voucher than when they were refunded the entire trip amount or provided no apology or compensation.
This study showed that for an apology to be effective the cost of the apology must be seen to the person receiving the apology. The uses of this study for companies are inevitably broad, though larger corporations are often worse at compensating customers in order to retain their business. The study may also increase apologies in couples, remember when Chuck went and got Blair her favourite macaroons from Paris? That kind of thing. The cost is pretty evident there.