Check out a few of the ways Travelocity takes care of its customers:

ATA and Aloha Airlines Bankruptcies
We proactively contacted 10,000 of our customers who were impacted to provide them with information and assistance.

American Airlines' MD-80 Flight Cancellations
We immediately contacted 13,000 of our customers with American Airlines reservations to alert them of the situation, confirmed their departures, advised them of their options, and rebooked them when possible.

Hurricane Katrina
We contacted customers whose travel plans were impacted by hotel closures, waived all cancellation fees, and worked with our suppliers to get our customers the refunds they were due.[i]

Ask your customers what they want

Some customers will not want to work with you after they’ve experienced a product or service failure.  They may just want you to refund their money and go away.  In fact, they may not let you know about the problem until they’ve already solved it in some other way.  Other customers may expect you to solve the problem.  How do you tell the difference?  You can’t go wrong by asking the customer which resolution he would prefer. 

For example, the Princeton Review offers test preparation courses for the SAT, ACT and other entrance exams.  Their guarantee gives the customer a choice of getting his money back or seeking satisfaction in either of two alternate ways.

• Money Back Guarantee:  If, after taking our program, your score doesn’t improve, you may receive a tuition refund.  OR
• Readiness Guarantee:  If at the end of our course, you do not feel ready to take the test for which you are preparing, you may repeat the course you have just completed or, if available, take a refresher course. OR
• Satisfaction Guarantee:  If at the end of our program, you are not satisfied, regardless of how much your score improves, you may continue to work with us for up to a year. [ii]

Transaction costs

The transaction cost is the amount you spend to make the customer happy, excluding the cost of the defective item.  If you have to refund the customer’s money plus pay $10 for return shipping, your transaction cost would be $10.  To put this in perspective, however, the transaction cost should be compared to the lost opportunity cost for every customer who leaves your store unhappy or with his problem unresolved.  If all you do is refund the money, but make the customer pay for the return shipping, you may be out a whole lot more than $10 in future lost sales.  Not only will the customer refuse to return to your online store, he will likely tell several of his friends what poor customer service you have. 

You might argue that most of your customers will be reasonably happy with getting their money back.  But is that what you really want?  Do you only want most of your customers reasonably happy?  Why not set the bar higher with a big, hairy, audacious goal like having all of your customers ecstatic to be doing business with you?  You don’t want to be one of the 95% of retailers who simply offer a guarantee.  You want to be the leader in your industry by having your customers see you as a problem solver, both before and after the sale.