Understanding and Managing Customer Complaints

Abstract

Retaining complaining customers and preventing complaint churn has been a topic of interest for scholars and businesses, yet research suggests there is ample room for both theoretical and managerial improvements. With the goal of understanding why complainers leave and what firms can do to mitigate complaint churn, in this dissertation, I conceptualize a framework to show 1) decreased perceptions of equity and trust are the two underlying mechanisms through which complaints negatively impact retention, and 2) complainers’ perceptions of the extent of their investments into their relationship with the firm moderate equity and trust mechanisms in opposing directions, resulting in a net curvilinear U-shaped effect of investments on post-complaint retention. When complainers’ investments are low, they mainly evaluate their relationship on transactional grounds. As such, perceptions of equity are the dominant mechanism driving post-complaint retention, and retention strategies that rebuild attenuated equity perceptions are more effective in minimizing churn. However, as complainers’ investments increase, they move away from a transactional, equity-driven, assessment of their relationship to a relational, trust-driven, assessment, and retention strategies that rebuild attenuated trust perceptions become more effective in minimizing churn. Three studies—controlled experiments, game-theoreticalmodel, and empirical analysis using data of an international financial services firm—validate the framework. Theoretical and managerial implications are discussed.