This is how I compensate in the event of damage, save money and remain a customer favorite

Your service organization has made a mistake. Of course, mistakes cannot be completely avoided. However, some blunders damage the relationship with the customer in the long term. This can be avoided through skillful compensation negotiations.

Mishaps that really annoy customers can come about in many different ways. Both in the office and in the field. Perhaps you failed to meet a deadline or were unable to increase the productivity of the machine as promised thanks to your consulting services. It may also be that a part from your customer can no longer be manufactured without problems because of you.

Fight or flight?

Essentially, there are then two possible courses of action. Either you play dead and speculate that the customer will overlook the faux pas or you actively approach the customer to solve the problem. Sometimes it may be that the customer is uncomfortable with the situation and therefore does not raise the issue again. In this case, you would probably get away with going underground. However, it is of course clear that in the vast majority of cases the latter option is more advantageous. Make sure you use the right forms of communication Customer communication in service.

An effective Complaints management is the prerequisite for not disappointing the customer in the event of a claim.

Actively approach customers to compensate for mistakes!

As soon as you have plucked up the courage to have a clarifying discussion with the customer, the question of compensation naturally arises. Here, too, two doors open: Do you want to present the customer with a ready-made compensation offer that will convince them to continue working with you? Or do you enter into negotiations with the customer in order to jointly develop a concept for compensation?

Talk to the customer to find the optimum solution! 

Studies show the advantages of working out a solution in partnership. The absolute costs of this variant are demonstrably lower on average than if you present the customer with a fait accompli with a prefabricated solution.* Of course, there is a risk that the customer will negotiate very well with you and extract a very high compensation from you. However, this scenario is relatively unlikely.

In most cases, you will benefit if you understand the customer's point of view. What has bothered them the most and what is the most economical lever for compensation? He may even value the damage caused somewhat less than you might initially assume. So listen carefully to what the customer has to say! Of course, anger will also dissipate more quickly if there is a feeling that a service provider has an open ear for its partners. This allows you to After-Sales save a lot of money and save face.

Practical example:

"Once, a spare part I had sent to a customer in Egypt got stuck at customs. I had a frank discussion with him about how I could compensate for the damage. It turned out that the machine had a very special software package and unique machine components. He assumed that no one else could produce the parts he urgently needed and was afraid of upsetting his own customers by delaying delivery. However, I actually managed to find a company in Morocco that had an almost identical machine option. So we ended up ordering the parts in Morocco and I only had to pay for the delivery. Otherwise, I would have had to compensate him for the entire loss of production, as I had promised to deliver on time. Instead of a few hundred euros, that would probably have been several thousand euros. So always try to find out exactly where the customer's shoe pinches." - Dr. Simon Tonat

With a reactive compensation strategy, the effect is reversed   

However, the proven positive effect on customer satisfaction only exists if you take the first step. If you try to avoid a solution or compensation and the customer has to approach you first, the effect is the opposite. In other words: In this case, it is better to have a ready-made compensation solution ready. Otherwise, trouble is inevitable.

Lengthy discussions and arguments will then be interpreted as incompetence or defensive behavior. You should therefore always make sure that you seek the conversation yourself. Because if you let the customer approach you in the event of a complaint, future revenues will fall by an average of 30%. Proactive negotiation solutions, on the other hand, only lead to a loss of around 10% in the long term.

Cultural influences on compensation negotiations

Interestingly, the effects described also reveal some cultural differences. These negative effects on customer satisfaction and repurchase rates are significantly higher in individualistic cultures (generally westernized industrialized countries) than in collective cultures, which are increasingly found in Asia. Asian customers are more likely to forgive you if you have to take the first step in compensation negotiations.

Conclusion

Approach the customer if you have made a mistake or caused damage and don't wait until they complain to you! It is also worthwhile not to rush straight in with a compensation offer, but to find out in dialog exactly how you can make your customer happy again.