A Model for Customer Complaint Management

Claes Fornell and Birger Wernerfelt
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Claes Fornell: University of Michigan

Marketing Science, 1988, vol. 7, issue 3, 287-298

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.

Keywords: complaints; oligopoly; repeat purchase (search for similar items in EconPapers)
Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:7:y:1988:i:3:p:287-298

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