Today Google made another announcement about the impending end of the Google Video’s download to rent/download to own program. This is an excellent example of a company (big, faceless company?) admitting a mistake, doing right by their customers, and being really honest and forthcoming:

When your friends and well-intentioned acquaintances tell you that you’ve made a mistake, it’s good to listen. So we’d like to say thank you to everyone who wrote to let us know that we had made a mistake in the case of Google Video’s Download to Own/Rent Refund Policy vs. Common Sense.

So, do you think Google’s legal team spent three days reviewing and approving this message, looking for potential liability and analyzing the potential risk of a class action lawsuit? I don’t really think so. I’m sure there was some level of review, but I’m willing to bet the business unit manager had the most influence. The key element here though is this: Google admitted it made a bad choice, explained why they thought it was good, and most importantly, made it right with the customers. And GOOG went up 1.75% today. Admitting to a mistake and announcing what amounts to a double refund did not have an immediately discernible impact on stock prices (there was bigger news there today).

So many businesses, large and small, are unwilling to outright admit a mistake – and that is a mistake in itself. Customers appreciate this honesty, it builds trust and loyalty, it makes a customer (and employees) feel as though the company is somehow almost human. It provides the start for a dialog, an opportunity to gain feedback, and turns a bad experience in to a good one.

Another example, I was recently on a Northwest Airlines flight that was delayed about 18 hours leaving Amsterdam, then there were problems with the in flight video system. The hotel in Amsterdam wasn’t too great, and there were a few other minor issues, not least was the paltry compensation of $10 airport food voucher and 2,000 frequent flyer miles they offered for the inconcevience. But today I came home to a letter informing me they were giving me 25,000 miles for the inconvenience – about one half of a free domestic flight. This went a long way toward making a bad situation better.

Finally, as a last example, I had lunch with a friend who asked for seasoned salt that comes on his salad to be on the side (there is usually too much). When the salad came it was covered in the seasoned salt. The server apologized and offered to have the salad made again, since this time there wasn’t an excessive amount of salt and he could eat it, my friend declined. But, the server went one better, told the manager, who apologized and took the cost off the bill. This is the third time I have seen a screwed up order at this restaurant, and the first time they went so far to correct the error. The server got a good tip, and the restaurant avoided losing some future business.

The lessons are pretty simple:

• Honesty is the best policy – Honesty is appreciated and respected by customers
• Goodwill is worth the cost – Goodwill isn’t always cheap, but it is usually cheaper than the bad reputation and bad press
• Ill-will is expensive – the corollary to the previous, it is hard to underestimate the negative impact to the business of trying to cover up or ignore mistakes
• Businesses are human – everyone makes mistakes, even the best managers, making a simple plea to customers at the human level can actually improve the relationship.