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A Model for Customer Complaint Management

Author

Listed:
  • 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.

Suggested Citation

  • Claes Fornell & Birger Wernerfelt, 1988. "A Model for Customer Complaint Management," Marketing Science, INFORMS, vol. 7(3), pages 287-298.
    • Handle: RePEc:inm:ormksc:v:7:y:1988:i:3:p:287-298
    DOI: 10.1287/mksc.7.3.287
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