There's nothing worse than having to own up to a customer that you screwed up-an employee lost an order, a supplier backed out on you at the last minute, your network crashed or maybe the customer just doesn't understand one of your policies. But regardless of who caused the error, it's time for you to go out there with humble airs and say two of the most feared words in the English language: "I'm sorry."

It's always important to impress a customer with your service, but common sense says that screw-ups are gonna happen. Life's not perfect and neither is your business. But how you handle those mistakes can be the most strengthening moment in your relationship with a prized customer.

In Knock Your Socks Off Service Recovery (the newest book in the Knock Your Socks Off Service series published by Amacom), authors Ron Zemke and Chip R. Bell examine the importance of what you do when things go wrong. We've asked Chip Bell, senior principle with Minneapolis-based service consulting firm Performance Research Associates (Zemke founded it), to explain why a good, heartfelt "I'm sorry" can help you retain customers and give you a competitive advantage.

Entrepreneur.com: Why is it economically important to your company to have a strong customer recovery plan?

Chip R. Bell: There are several reasons. One is it's economically better to keep customers for a long, long time, and recovery is an important part of that. First of all, [existing customers] are a lot less expensive to serve because they understand you. They know your systems. You don't have to train them every time they show up. The longer they're with you, the more forgiving they are. They tend to be a lot less picky. They give you the elbowroom to try new things and make mistakes. They also tend to give you more candid feedback, and they champion you to others.

So keeping customers for a long time absolutely has a huge impact on your bottom line. And we know that the longer a customer stays with you, the more apt you are to make a mistake, and they expect you to make mistakes. To err is human. So how you handle that mistake and manage that error is what separates the ability to keep the customer vs. to lose them. That's why I think it's very, very important to understand how we can make service recovery a key strategy to maintain customer loyalty.

Entrepreneur.com: What are the three rules of first-class customer care?

Bell: The first is to do it right the first time. You want to focus on doing the very best you can the first shot. The second thing is, you're never going to do it right the first time every time, so you'd better do it really, really well in terms of recovery because the customer will generally give you a second chance. [The third rule is,] very rarely do you get a third chance. If you make a mistake, don't recover well, and then make another mistake, you're down to very few customers who'll say, "Oh, I'll give you a third chance." Most of the time, you're out. That's why we say, do it the best you can the first time, but if you do make a mistake, do great recovery because you may not get a third opportunity.

Entrepreneur.com: What's an at-risk customer base?

Bell: A customer who is at-risk is a customer who has no particular allegiance to your organization. He or she is at the whim of another service provider, meaning that customer will only stay with you as long as somebody else isn't more convenient, offers lower prices or maybe is just different-and that's the satisfied customer. Satisfied customers are at-risk because there's nothing holding them from a loyalty standpoint.

The customer who is loyal to you, who is an advocate and a champion for you, won't abandon you if [a competitor] offers them a lower price. They'll give you a chance to hang in there. What I tell people when I give speeches is, we're all customers and if we were always fickle for the latest model, nobody would stay married. Because you know somebody's gonna come along after you're married who's better looking or smarter. And so what keeps people in a relationship when newer models come along, so to speak, is that sense of commitment and loyalty. And customers are no different. They'll remain committed to you even though your competition brings out something better or newer because they're loyal. But an at-risk customer is a satisfied customer who is at risk of leaving you because that loyalty isn't deep.

Entrepreneur.com: What can you do to lower that risk?

Bell: The first thing is to make sure that the kind of service you provide is world class. The second is to manage recovery well. The third is the way in which you continually remind and educate the customer of the great value they're getting. Sometimes you're better than your competition but customers don't know it because you haven't tooted your own horn. I tell people, don't let your spouse take you for granted. Remind them of what a good deal they've got by your actions. The same thing applies to service providers. You need to let customers know that there's value added, and it takes great marketing and communication to let customers know they've got a good deal. Basically what we're saying is, don't take customers for granted.

Entrepreneur.com: What are some unique customer service problems facing e-commerce companies? What steps can a company take to thwart these problems?

Bell: E-commerce automatically creates a distance because it eliminates the opportunity for an interpersonal, face-to-face interchange. You're denied the ability to read nonverbal signals when the customer is upset. So you may be communicating to an e-commerce customer who is very upset, but because they're not giving you feedback, you don't know it. If they were standing in front of you, you could read their face.

It requires a greater effort to communicate with those customers. It requires giving them numerous opportunities along the way to communicate dissatisfaction, to invite them to give you feedback and to complain. The great e-service providers beg for complaints because they know if customers complain, they've increased the chances of retaining them. Research says the customer who has a problem and complains spends twice as much [money] as the customer who has a problem and doesn't complain.

Customers are also more apt to give you really candid feedback on the Internet than they would face to face because it's hard to tell somebody face to face that their service sucks. But when it's done over the Internet, [customers] can tell you anything because they're not gonna see you. So you can get much more helpful feedback that way.

Entrepreneur.com: What should you do when you get the customer from hell?

Bell: There's a difference between the customer from hell and the customer who's been through hell. The customer who's been through hell is the one who's had a bad day or got up on the wrong side of the bed, like we all do from time to time. He or she is looking for somebody to take it out on, and it's a momentary thing. It's not a permanent deal. And I think just trying to listen to that customer and to help him or herout of that space is key to dealing with the customer who's been through hell.

The customer from hell is different. The customer from hell is the evil, malicious customer who's bent in life is to try to break your system. Their goal and mission is to be venomous and emotionally damaging to your frontline people, and I think those are the customers we fire. Those are the customers you should send to your competition because they're too expensive to serve. They may provide an economic return to you but when you weigh that against the emotional impact on your frontline people, you may wind up losing good people over that customer, and it's not worth it. It also says a lot to our frontline people when they watch us fire a customer who's been taking it out on the frontline. It says "I care about my people."

Entrepreneur.com: What are important things to know about apologizing to customers?

Bell: We've done a lot of research about the whole art of apologizing, and I think the most important part of apology is it needs to be delivered in the first person. There's a huge difference between somebody saying, "We at Acme Manufacturing are sorry" vs. "I'm sorry that happened." And "I'm sorry" doesn't necessarily mean you personally caused the problem. But it says to the customer that you care about their outcome and their feelings. So that sincere, authentic, real, not plastic, first-person apology is what customers pay attention to because then they're dealing with a person, not some corporate entity that is faceless.

The other thing we've learned is that the apology you deliver can often mean the difference between the customer who stays and the customer who leaves. How many times have you heard people say, "Well, if they had just apologized, it would have been a whole lot better." Apologizing is key because it communicates concern and empathy and caring, and that's what customers want.