Customer Complaints and Recovery Effectiveness: A Customer Base Approach

Journal of Marketing, Forthcoming

50 Pages Posted: 3 Jul 2009 Last revised: 24 Apr 2014

See all articles by George Knox

George Knox

Tilburg University

Rutger van Oest

BI Norwegian Business School

Date Written: April 24, 2014

Abstract

While customer complaints are a well-studied reality 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 how effective recovery is 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; prior complaints exacerbate it, but their impact is short-lived. Hence, unless the customer leaves the company after a complaint, or a second failure occurs shortly after the first, the relationship quickly returns to business as usual. 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.

Keywords: Complaints, Complaint Management, Churn, Failure, Recovery

JEL Classification: M31

Suggested Citation

Knox, George and van Oest, Rutger, Customer Complaints and Recovery Effectiveness: A Customer Base Approach (April 24, 2014). Journal of Marketing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1427265 or http://dx.doi.org/10.2139/ssrn.1427265

George Knox (Contact Author)

Tilburg University ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31 13 466 8778 (Phone)
+31 13 466 3219 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=g.knox

Rutger Van Oest

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
+4746410653 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
491
Abstract Views
2,529
rank
72,265
PlumX Metrics