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The Economics Of Apologies: Why Saying Sorry Isn't Always As Easy As It Seems


When most people make a mistake, they say, I'm sorry. But what should a company do when it makes a mistake? A recent study looked at the economics of apologies. Stacey Vanek Smith, host of the podcast "The Indicator" from Planet Money, spoke with Benjamin Ho - he's an economics professor at Vassar - about why saying sorry is not as easy as it might seem.

STACEY VANEK SMITH, BYLINE: You did this, like, really, really interesting study as a way to study apologies.

BENJAMIN HO: So the study was partnered with Uber. So we look at - we focus on the 95 percentile of lateness. So the most extreme - you know, most late rides, there's about a 5 percent chance that you never come back to Uber again. And the question is, how can we repair this relationship? How can we repair, say, the trust between Uber and its rider?

We tested different kinds of apologies. And we found that the right kind of apology could basically increase Uber's revenues by 1 to 2 percent, but the wrong kind of apology could decrease Uber's revenues by 1 to 2 percent. Which - we tested apologies that involved sort of commitments to do better or not.

What we saw was that a commitment to do better in the future, it's - it doesn't seem to matter much right away. But we tracked these riders for three months after the apology. And we found that, basically, two or three months later, these commitments to do better in the future actually backfired against the company, in part because, you know, you might commit to do better in the future. And then the rider says, oh...

VANEK SMITH: Because they didn't do better.

HO: Because then maybe it's - maybe for some of them, they had another bad experience. And then, as a result, those people punished Uber more than the control group that got no apology at all.

VANEK SMITH: Did they ever have a good effect?

HO: Not in our data.

VANEK SMITH: (Laughter).

HO: (Laughter) So I think they temporarily had a good effect. Right? But I think there's this idea that once you've apologized, we're going to hold you to a higher standard. And sort of by the end of the three months of observation, it seemed like they either had no effect or a negative effect.

VANEK SMITH: It is interesting that we expect remorse from a company. Like, it's, like, minimizing human interaction, yet still seems like we still want the same level of trust and accountability.

HO: I think part of it is that our brain sort of works on scripts and heuristics. And so you know, when we enter into a relationship with a company, we sort of, like - the same sort of scripts and heuristics trigger in our brain. And so because we expect remorse in real life, we sort of expect it from our company.

VANEK SMITH: So what were the apologies that really worked for Uber? Like, what was the magic?

HO: The magic was money (laughter), basically.

VANEK SMITH: (Laughter) Really?

HO: Yeah. Show me the money, basically.

VANEK SMITH: Yeah, yeah, yeah.

HO: That - we tested, you know, apologies with or without a coupon. And we found basically the most effective apology, the ones that sort of increased revenues, was just with a $5 coupon.

VANEK SMITH: Was it just money, or was there a certain language that people responded well to?

HO: So we were hoping to figure out the best language, but we found that there was no statistical difference between the different languages we used.

VANEK SMITH: It's just money.

HO: It seemed to be just money. And, in fact, the type of message that actually might - may have backfired a bit was the message of sort of committed to do more in the future.

VANEK SMITH: Do you think this, like, carries over into personal relationships?

HO: Think...

VANEK SMITH: Like, I'm so sorry that I, like - whatever - was late meeting you for dinner. (Laughter) Here's 10 bucks.

HO: (Laughter) Right. Well...

VANEK SMITH: (Laughter).

HO: You know, here's a box of chocolates, right? Or here's a - here are some flowers.

VANEK SMITH: Oh, yeah. Oh, right - flowers and candy.

HO: Exactly.

VANEK SMITH: Oh, this takes on a whole new significance. Does it - has it changed the way, like, you apologize?

HO: (Laughter) I mean, people sort always wind up asking me this question.

VANEK SMITH: Of course they do. I'm so curious.

HO: I think the main way it's changed is that because all my friends and my family know that I study apologies, then they - they're sort of always automatically skeptical whenever I apologize. So I have to, like, go an extra mile to sort of sound, like, earnest and sincere and remorseful because people are always just like, oh, you're just doing that because of your paper.

KELLY: No apologies for telling you. That was Professor Benjamin Ho, speaking there with Planet Money's Stacey Vanek Smith. Transcript provided by NPR, Copyright NPR.

Stacey Vanek Smith is the co-host of NPR's The Indicator from Planet Money. She's also a correspondent for Planet Money, where she covers business and economics. In this role, Smith has followed economic stories down the muddy back roads of Oklahoma to buy 100 barrels of oil; she's traveled to Pune, India, to track down the man who pitched the country's dramatic currency devaluation to the prime minister; and she's spoken with a North Korean woman who made a small fortune smuggling artificial sweetener in from China.