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Economists have finally proved what most of us have suspected for a long time – when it comes to apologising, talk is cheap.
According to new research, firms that simply say sorry to disgruntled customers fare better than those that offer financial compensation.
The ploy works even though the recipient of the apology seldom gets it from the person who made it necessary in the first place.
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The study was carried out by the Nottingham School of Economics’ Centre for Decision Research and Experimental Economics.
Academics set out to show whether customers who have been let down continue to do business after being offered an apology. They found people are more than twice as likely to forgive a company that says sorry than one that instead offers them cash.
NSE research fellow and study co-author Dr Johannes Abeler said the results proved apologies were both powerful and cheap. He said: “We know firms often employ professional apologists whose job is to say sorry to customers who have a grievance.
“You might think that if the apology is costless then customers would ignore it as nothing but cheap talk - which is what it is. But this research shows apologies really do influence customers’ behaviour – surprisingly, much more so than a cash sweetener.
“People don’t seem to realise they’re dealing with an expert apologist rather than an individual who feels genuine shame.
“It might be that saying sorry triggers in the customer an instinct to forgive – an instinct that’s hard to overcome rationally.”
Researchers worked with a firm responsible for around 10,000 sales a month on eBay, controlling its reaction to neutral or negative feedback. Some customers were offered an apology in return for withdrawing their comments, while others were offered €2.5 or €5.
The simple apology blamed the manufacturer for a delay in delivery, adding: “We are very sorry and want to apologise for this.”
Customers offered money were told: “As a goodwill gesture, we can offer you €5 if you would consider withdrawing your evaluation.”
Because customers had no idea they were taking part in the experiment, their behaviour was completely natural and unaffected.
Some 45% of participants withdrew their evaluation in light of the apology, while only 23% agreed in return for compensation.
The study also discovered that a higher purchase price further reduced the number of customers willing to forgive for cash. Yet the size of the initial outlay had no effect on the willingness of participants to settle for simply reading the magic words: “I’m sorry.”
Dr Abeler, an expert in behavioural economics, said: “It’s interesting to note our setting should have made it hard for an apology to work.
“The apology was delivered by a large, anonymous firm and wasn’t face-to-face, and the firm had a clear incentive to apologise.
“All of this meant the apology should have been regarded by the customers as calculated, insincere and just cheap talk. Yet it still yielded much better outcomes than offering cash compensation – and our results might even underestimate its effects.”
The Nottingham School of Economics, based at the University of Nottingham, is regarded as one of the UK’s leading research departments. Its economists have advised organisations including the Treasury, the World Bank, the IMF and the Department for Work and Pensions.
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Notes to editors: The Nottingham School of Economics at The University of Nottingham has earned a world-class reputation for its research on a broad range of economic subjects, particularly globalisation, experimental economics and time-series econometrics.
Its standing among the elite economics departments in the UK was reinforced by the 2008 Research Assessment Exercise, which ranked its 'research power' among the top three in the country.
The measurement of 'research power' takes into account not only the quality of research but, crucially, the number of staff put forward for inclusion in the RAE. To underline the strength and depth of its work, the School put forward every member of its staff.
All of its research was classed as of international quality, and 85 per cent was defined as 'world-leading or 'internationally excellent' – the top two possible ratings.
The School has almost 50 full-time academic staff and 800 undergraduate, 80 Masters and 70 full-time PhD students.
The University of Nottingham is ranked in the UK's Top 10 and the World's Top 100 universities by the Shanghai Jiao Tong (SJTU) and Times Higher Education (THE) World University Rankings.
More than 90 per cent of research at The University of Nottingham is of international quality, according to RAE 2008, with almost 60 per cent of all research defined as ‘world-leading’ or ‘internationally excellent’.
Research Fortnight analysis of RAE 2008 ranks the University 7th in the UK by research power. In 27 subject areas, the University features in the UK Top Ten, with 14 of those in the Top Five.
The University provides innovative and top quality teaching, undertakes world-changing research, and attracts talented staff and students from 150 nations.
Described by The Times as Britain's "only truly global university", it has invested continuously in award-winning campuses in the United Kingdom, China and Malaysia. Twice since 2003 its research and teaching academics have won Nobel Prizes.
The University has won the Queen's Award for Enterprise in both 2006 (International Trade) and 2007 (Innovation — School of Pharmacy), and was named ‘Entrepreneurial University of the Year’ at the Times Higher Education Awards 2008.
Nottingham was designated as a Science City in 2005 in recognition of its rich scientific heritage, industrial base and role as a leading research centre. Nottingham has since embarked on a wide range of business, property, knowledge transfer and educational initiatives (www.science-city.co.uk) in order to build on its growing reputation as an international centre of scientific excellence. The University of Nottingham is a partner in Nottingham: the Science City.