Reducing Customer Dissatisfaction: How Important is Learning to Reduce Service Failure?
31 Pages Posted: 8 Aug 2006
Date Written: August 2006
As service failures are inevitable, firms must be prepared to recover and learn from service failures. Yet, the majority of customers are still dissatisfied with the way firms resolve their complaints. Can learning to reduce service failures reduce customer dissatisfaction, and to what extent are such reductions sustainable? Previous research showed that organizational learning curves for customer dissatisfaction (i) follow a U-shaped function of operating experience and (ii) are heterogeneous across firms. In this paper, I tease out where the U-shaped learning-curve effect and learning-curve heterogeneity originate: service failure or customers' propensity to complain given the occurrence of a service failure. Using quarterly data for nine major U.S. airlines over 11 years, I find that the U-shaped learning-curve effect as well as the learning-curve heterogeneity originates in the propensity to complain. In the long term, reductions in service failure did not translate in sustainable reductions in customer dissatisfaction. Customers' propensity to complain eventually went up. Managing the propensity to complain provides more opportunity for a firm to distinguish itself from competitors.
Keywords: customer dissatisfaction, learning curve, organizational learning, marketing, service failure, empirical research
JEL Classification: M10
Suggested Citation: Suggested Citation