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

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    Cited by:

    1. Pinghan Liang, 2013. "Exit and Voice: A Game-theoretic Analysis of Customer Complaint Management," Pacific Economic Review, Wiley Blackwell, vol. 18(2), pages 177-207, May.
    2. Ruth N. Bolton, 1998. "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, INFORMS, pages 45-65.
    3. Gil Luria & Asaf Levanon & Dana Yagil & Iddo Gal, 2016. "Status, National Culture and Customers’ Propensity to Complain," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(1), pages 309-330, March.
    4. Rust, Roland T. & Metters, Richard, 1996. "Mathematical models of service," European Journal of Operational Research, Elsevier, vol. 91(3), pages 427-439, June.
    5. Roland T. Rust & Tuck Siong Chung, 2006. "Marketing Models of Service and Relationships," Marketing Science, INFORMS, vol. 25(6), pages 560-580, 11-12.
    6. Hultén, Peter, 2012. "A Lindblomian perspective on customer complaint management policies," Journal of Business Research, Elsevier, vol. 65(6), pages 788-793.
    7. John K. Christiansen & Marta Gasparin & Claus Varnes & Ina Augustin, 2016. "How Complaining Customers Make Companies Listen And Influence Product Development," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 20(01), pages 1-31, January.
    8. Joshua S. Gans & Avi Goldfarb & Mara Lederman, 2017. "Exit, Tweets, and Loyalty," Working Papers 2017-009, Human Capital and Economic Opportunity Working Group.
    9. Guo, Chiquan & Wang, Yong J. & Metcalf, Ashley, 2014. "How to calibrate conventional market-oriented organizational culture in 21st century production-centered firms? A customer relationship perspective," International Journal of Production Economics, Elsevier, vol. 156(C), pages 235-245.
    10. Xing Aijing & Nobuhiko Terui & P.K.Kannan, 2016. "How customer satisfaction affects loyalty: Insights from nonlinear hierarchical Bayes modeling of customer satisfaction index," TMARG Discussion Papers 124, Graduate School of Economics and Management, Tohoku University.
    11. 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.
    12. 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.

    More about this item

    Keywords

    complaints; oligopoly; repeat purchase;

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