The Model Damage-Control Letter

After a botched job, the right combination of explanation, apology, and compensation can make a difference.

Tweet

In the wake of a botched job, the right combination of explanation, apology, and compensation can make a world of difference to your customers -- and to your business's chances of success

It's not exactly "stop the presses" news that if you screw up a customer's job, you'd better figure out how to explain what's going on and what you're going to do about it. All companies, after all, disappoint their customers at some point. The best strive to restore that momentarily lost confidence somehow.

Still, there's a lot of latitude in how much you concede. How much do you spell out? And what do you do about compensation?

Like all delivery companies and most other businesses, Sterling Courier Systems, a provider of same-day-delivery services based in Herndon, Va., occasionally fails to meet its deadlines. Sterling uses commercial airlines to transport the parcels it takes on, so the delays are usually the result of packages' being misplaced in airlines' tracking systems. The fact that it happens is beyond Sterling's control, but from a customer's vantage point a missing box is Sterling's problem -- end of discussion.

For several months back in late 1990 and early 1991, Sterling experienced a spell of bad luck. Several packages disappeared in transit, and Sterling had to report late deliveries to three accounts. Even though the packages eventually turned up, the delays meant real cash losses to the customers.

Sterling president Glenn Smoak says he hesitated to pay out compensation. "We normally make it right by not charging the customer for that particular shipment, and if they need another shipment done to rectify the problem, we do that -- which we did with all of these folks. But in these cases it wasn't enough; they had suffered downtime." What made Smoak's decision more difficult was that because the packages weren't permanently lost, neither Sterling's insurance company nor the airline that handled the transport was obligated to pay damages. If Smoak elected to reimburse his customers, the total hit would be about $30,000 -- an amount that would push his then five-year-old $5-million company into a loss for that quarter. On the other hand, "one of the customers," says Smoak, "had 23 plants around the country. This fellow was so ballistic that all it would have taken was one E-mail message to the other plants, and 10% of our business would have evaporated."

Often damage control for such problems can be handled with phone calls, apologies, and make-goods. But because the gods had conspired to make similar and sizable problems happen concurrently, and because it took several months for Smoak to confirm that the company's insurer, Lloyd's of London, definitely wouldn't cover the damages, he decided to draft one letter to all three customers to explain the company's situation.

In the end Sterling did give out $30,000 in gratis service and did take a hit to the bottom line that quarter. But the customers stayed, and Sterling continued to grow, to $7.5 million in 1993. Smoak still deals with problems on an ad hoc basis -- "We tell people during our sales pitch that there will be problems, that we're not infallible, but that we guarantee to fix them for them." On the pages that follow he explains why he included what he did in this particular letter.

Below is a sample letter.

May 1, 1991

REF: -- Magazine Shipment 1/17/90

Dear Mr. -- :

I have had long, fairly intense discussions with our insurer, Lloyds of London, regarding your claim, as well as insurance for air cargo in general. Air cargo insurance covers tangible physical damage or actual loss of the item shipped, be it from theft, weather, or whatever. Sterling Courier Systems is the most specialized shipper in the business, for we ship ONLY same-day, rush items. However, ALL POLICIES CURRENTLY WRITTEN BY ANY INSURER WILL NOT COVER LOSSES SUSTAINED BY DELAY. This sort of loss is described as consequential - loss due as consequence of the delay, which tends to be open to subjective judgment.

Had your shipment been damaged, stolen, destroyed, or lost, you would have been compensated long ago. But because we eventually found your shipment in the American Airlines system, there was no "loss," as is currently defined by insurers.

I have been in contact with Lloyds, as well as Allstate and the Fireman's Fund, asking them to write Sterling Courier Systems a specific policy to cover losses sustained in the delay of a rush shipment. If it is feasible, it will be announced soon.

We value your business. We do not want to see you look elsewhere for your rush shipping. Therefore, I am offering $7,875 in rush shipping to you, and hope this will sufficiently compensate you for the loss you sustained due to the delay of your shipment. If this is satisfactory, please deduct as you see fit, and note it on future invoices. I would appreciate a confirming call.

Best regards,

STERLING COURIER SYSTEMS, INC.

 1 | 2  NEXT 

Read more:

Sign-up for our Sales and Marketing Newsletter

Email Address: