The secret to making something good out of your mistakes is to (a) refuse to feel guilty about them, and (b) resolve to learn from them.” – Michael Masterson

I placed the phone call and was told she would arrive within an hour.

To my left and 55 floors down, were the neon lights of the Mirage, the Venetian, and Caesar’s Palace. To my right, the enormous sign for Circus Circus. And beyond, I saw the aging lights of old Vegas and Freemont Street.

I heard her knock at the door behind me, and moved away from the window to let her in.

She was about 30, brunette. She could have been from Thailand, or perhaps Vietnam.

“Your meal is here, sir. May I come in?”

I motioned her to enter.

Of all the luck. I was at The Wynn, one of the strip’s newest and nicest hotels. An exciting marketing conference had brought me to Sin City for the first time… and I’d come down with perhaps the worst stomach virus of my life.

After 24 hours of misery, I had to get some food in me, so I’d ordered room service. She set my table with the steaming chicken soup, prepared a cup of chamomile tea, handed me the bill, and left.

I sat down and took a sip of the soup.

Yikes! Too salty!

“Hmmm,” I thought to myself. “This is a four-star hotel. Must be my taste buds playing tricks with me.”

I dipped a breadstick in the broth. Better. But still, something seemed off. Regardless, I needed some energy and so I made my way though the bowl.

Half an hour later came another knock on the door. She was back.

“I’m sorry, sir, I must apologize. The chef noticed the soup was too strong. So I’ve brought you a new bowl. Of course, with our compliments. Once again, I am so sorry.”

So, someone had messed up. And the chef made the decision to acknowledge the mistake and make it right.

What would you have done?

Would you have figured it would be best not to remind the customer that there’d been a problem? Or would you have gone back to the customer to “kiss and make up”?

Sitting there with my new bowl of (properly salted) soup, I was reminded of a book I’d recently read.

In Supercrunchers, Yale law professor and econometrician Ian Ayres describes a test done by Continental Airlines that sheds some interesting light on this subject. (I have some problems with this book… but that’s a different subject for another day.)

For eight months, Continental’s customer relations group randomly assigned travelers who called in with complaints into one of three groups.

The first group received a formal letter after the phone call, apologizing for their bad experience. The second group received the formal letter plus a trial membership in the airline’s Elite Flyers Club. The third group received nothing.

What happened?

According to follow-up discussions with these customers, those who’d received nothing were still angry. But the two groups that received the letter turned into better customers than ever!

In fact, Ayres explains, they spent 8 percent more on Continental tickets the following year, translating into increased revenues of $6 million. And almost a third of those who received the trial membership in the Elite Flyers Club converted to paid members.

The message for your business is clear. Proactive damage control and open, honest communication with your customers is a far better strategy than hoping problems will fade into the sunset.

Michael Masterson writes about this in his new book, Ready, Fire, Aim:

“If you recognize the deeper needs of your customers and provide them with more and better products more frequently, you will double or triple your back-end sales and, thus, double or triple your company’s profitability.

“And if you do one more thing – talk to your customers about what you are happy to do for them – your profits can skyrocket.

“This is an aspect of customer service that too many entrepreneurs – even good entrepreneurs – neglect. You shouldn’t do that. Talking to your customers is one of the most powerfully profitable things you can do.”

But not everyone agrees with Michael’s advice. Take, for example, the case of an ETR staffer who came on board early this year. I’ll call him “Stu.”

Stu’s first assignment was to coordinate the final production and shipping of an 8-chapter real-estate program. For the first few weeks, everything seemed fine. The product met its deadline and the programs were mailed out.

At ETR’s regular in-house meeting the following week, publisher MaryEllen Tribby went around the room to get a brief report from each employee. Our Customer Service Manager, Sharika Kellogg, was up first.

“I’ve gotten a few calls on the new real estate program. Some people think it is confusing and difficult to follow,” she said.

Stu spoke up. “Oh, I know what happened. It turns out that the first 144 binders got assembled without the Introduction. We noticed it last week. It’s too bad, but we can just mail the Intro out to anyone who calls in.”

MaryEllen’s eyes lit up. She asked Stu to “go over that again” to make sure she’d heard it correctly.

She had.

“That’s not how we do things around here,” MaryEllen said. “First of all, for every one call Sharika gets, there are 10 unhappy people who don’t call in. Second, we’re about making our readers successful – and if this product doesn’t do that, we all lose.”

She told Stu to immediately write a letter of apology and explanation, and express mail the missing Introduction to the 144 readers who received the “defective” version of the program. (By the way, Stu was dismissed soon afterward. He just couldn’t pick up on the ETR quality vision.)

We haven’t yet analyzed the numbers to prove that the 144 people who received that letter of apology became more loyal customers. But based on the Continental Airlines test, I’m willing to bet they have.

Moving forward, we’ve put procedures in place to ensure that problems like this are NEVER swept under the rug at Early to Rise.

MaryEllen personally tells every new employee the “Continental Airlines story” so they understand our Standard Operating Procedure:

1. Acknowledge the problem.
2. Fix the problem.
3. Fix what caused the problem.

Think about sharing the Continental Airlines story with your staff and/or colleagues.

It may not result in added revenues of $6 million, as it did for Continental – but, at the very least, next time a problem comes up, you’ll know how to turn lemons into potentially very profitable lemonade.

And that’s a win-win for everyone.

[Ed. Note: Charlie Byrne, ETR’s Editorial Director, is on the board of experts of the Internet Money Club, ETR’s new Internet business-building program. The program is entirely sold out – but you can click here to get on our waiting list.]

Charlie Byrne

Charlie Byrne is a former Senior Copywriter and Editorial Director for Early to Rise. Charlie spent the earlier part of his business career as a systems analyst, project manager and consultant in New York City for Fortune 100 companies including Philip Morris, Digital Equipment, and Citicorp as well as New York University and Columbia University. He then spent over ten years at Reuters Ltd and Interealty Corp designing and implementing financial, real estate and news information services. In 2003, he joined Early to Rise as a senior editor and copywriter. Since then he has helped publish over 1000 editions of ETR, resulting in gross revenues of well over $25 million. He has also produced dozens of winning sales letters and promotions, including two that brought in over $200,000 in under 24 hours, another two that have grossed over $1 million each, and a single sales letter that sold 25 units of a $10,000 product.