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A Model for Customer Complaint Management

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Author Info

  • Claes Fornell

    (University of Michigan)

  • Birger Wernerfelt

    (Northwestern University)

Abstract

A model of customer complaint management is developed in terms of defensive marketing strategy. Based on an explicit microfoundation, firms' incentives to manage complaints are analyzed. In the context of a monopoly and homogeneous oligopoly, we discuss the optimal levels of customer compensation and effort and characterize industries where complaint management is likely to be used. We then examine a differentiated oligopoly and find an explicit formula for the market share gains associated with complaint management. This is illustrated in an example with real data. We finally consider the trade-off between defensive strategy in the form of complaint management and various offensive marketing tools such as advertising and pricing.

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File URL: http://dx.doi.org/10.1287/mksc.7.3.287
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Bibliographic Info

Article provided by INFORMS in its journal Marketing Science.

Volume (Year): 7 (1988)
Issue (Month): 3 ()
Pages: 287-298

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Handle: RePEc:inm:ormksc:v:7:y:1988:i:3:p:287-298

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Related research

Keywords: complaints; oligopoly; repeat purchase;

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Cited by:
  1. Arnold, Mark J. & Reynolds, Kristy E. & Ponder, Nicole & Lueg, Jason E., 2005. "Customer delight in a retail context: investigating delightful and terrible shopping experiences," Journal of Business Research, Elsevier, vol. 58(8), pages 1132-1145, August.
  2. Hultén, Peter, 2012. "A Lindblomian perspective on customer complaint management policies," Journal of Business Research, Elsevier, vol. 65(6), pages 788-793.
  3. Kukar-Kinney, Monika, 2006. "The role of price-matching characteristics in influencing store loyalty," Journal of Business Research, Elsevier, vol. 59(4), pages 475-482, April.
  4. Rust, Roland T. & Metters, Richard, 1996. "Mathematical models of service," European Journal of Operational Research, Elsevier, vol. 91(3), pages 427-439, June.

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