Customer complaints and recovery effectiveness: A customer base approach

G. Knox, R.D. van Oest

Research output: Contribution to journalArticleScientificpeer-review

Abstract

Although customer complaints are a well-studied aspect of business, no study has measured the impact of actual complaints and recoveries on subsequent customer purchasing. The authors develop a customer base model to investigate the effectiveness of recovery in preventing customer churn. They calibrate it on panel data that track actual purchases, complaints, and recoveries for 20,000 new customers of an Internet and catalog retailer over 2.5 years. Complaints are associated with a substantial increase in the probability that the customer stops buying, but the size of the increase depends on prior customer experiences: prior purchases mitigate the effect, and their impact is long-lasting, whereas prior complaints exacerbate the effect, but their impact is short-lived. Thus, unless the customer leaves the company after a complaint, or a second failure occurs shortly after the first, the relationship quickly returns to normal. Recovery counters the effect of the complaint but, in almost all cases, does not entirely offset it. The authors use simulation to translate the results to financial impact and discuss implications for researchers and managers.
Original languageEnglish
Pages (from-to)42-57
JournalJournal of Marketing
Volume78
Issue number5
Early online date7 May 2014
DOIs
Publication statusPublished - 1 Sep 2014

Fingerprint

Customer complaints
Complaints
Purchase
Managers
Simulation
World Wide Web
Customer experience
Customer churn
Retailers
Purchasing
Panel data

Keywords

  • complaints
  • complaint management
  • churn
  • failure
  • recovery

Cite this

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title = "Customer complaints and recovery effectiveness: A customer base approach",
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Customer complaints and recovery effectiveness : A customer base approach. / Knox, G.; van Oest, R.D.

In: Journal of Marketing, Vol. 78, No. 5, 01.09.2014, p. 42-57.

Research output: Contribution to journalArticleScientificpeer-review

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AU - van Oest, R.D.

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AB - Although customer complaints are a well-studied aspect of business, no study has measured the impact of actual complaints and recoveries on subsequent customer purchasing. The authors develop a customer base model to investigate the effectiveness of recovery in preventing customer churn. They calibrate it on panel data that track actual purchases, complaints, and recoveries for 20,000 new customers of an Internet and catalog retailer over 2.5 years. Complaints are associated with a substantial increase in the probability that the customer stops buying, but the size of the increase depends on prior customer experiences: prior purchases mitigate the effect, and their impact is long-lasting, whereas prior complaints exacerbate the effect, but their impact is short-lived. Thus, unless the customer leaves the company after a complaint, or a second failure occurs shortly after the first, the relationship quickly returns to normal. Recovery counters the effect of the complaint but, in almost all cases, does not entirely offset it. The authors use simulation to translate the results to financial impact and discuss implications for researchers and managers.

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