When corporations ask me to train their employees on enhancing customer retention, I find one skill-set that is frequently weak -- how to diplomatically give customers bad news. Unfortunately, the task of giving bad news goes with almost every job. You may have to inform your customers of a price increase, of a product being out-of stock, or that their children aren't allowed to use your coat rack for rappelling practice.

Employees facing these scenarios worry that the customer might become defensive, offended, or worst of all, simply take their business elsewhere. Employees get stressed, absenteeism and turnover increases, and customer retention plummets. In other words, everyone loses. So, in our training programs we equip potential "bearers of bad news" with valuable tools to help make the process less painful for everyone. Here's a sampling:

1. Warn in advance

When you realize that you may not be able to give the customer what they're expecting, give them some advance notice. Example: An insurance underwriter or broker calls his customer. "George, I've been looking at your application and it's not looking very promising in terms of coverage. I'm wondering if I might have missed something . . . "

You can actually turn giving- advance-warning into a selling opportunity. "Martin, you're an important customer so I thought I'd better inform you about this right away. Our energy costs have almost doubled over the past year so we're forced to put through a 10% price increase effective July 1st. As you order items regularly, I thought I'd better check with you to see if it would make sense to reorder now to save you money and prevent any unpleasant last-minute surprises."

2. Accept responsibility.

While serving as President of our professional speaking association, I received a 'bad news' call from one of our event organizers: "Jeff, I wanted to talk to you about a situation that has just come to my attention. I want you to know that I accept full responsibility for the foul-up. It was a stupid mistake that I shouldn't have made and I will do everything that needs to be done to fix the error. What happened was . . . " Since he was already berating himself, my response could only be magnanimous. Accepting full responsibility, while recognizing the consequences of the error, shows that you're prepared to "take your lumps" like a grown-up. People respect that.

If in the last 24 hours you haven’t asked a customer how well you’re doing, pick up the phone right now and call one.

Make sure you’ve carefully defined the intermediate and final customers your organization will focus on, and that everyone in your organization knows who they are.

Identify your work group’s “internal customers.” Are your actions for them serving the final customers?

Constantly ask your customers how well you’re serving them.

Invest in complaints. Help your customers to complain when they’re dissatisfied, and use the information to improve your operations.

Develop a system to communicate throughout your organization the customer’s needs and expectations that you’re discovering.

Redirect incentive systems so that you reward behavior serving the customer’s interest. Root out incentives that are contrary to the customer’s needs.

Richard C. Whiteley, The Customer Driven Company