On the basis of Hirschman's exit-voice theory, an economic model of defensive marketing strategy is developed for complaint management. Though many firms strive to reduce the number of customer complaints about their products, this objective is found to be questionable. Instead, analysis suggests complaints from dissatisfied customers should be maximized subject to certain cost restrictions. The authors also show that defensive marketing (e.g., complaint management) can lower the total marketing expenditure by substantially reducing the cost of offensive marketing (e.g., advertising). The savings in offensive marketing are often high enough to offset the additional costs associated with compensating complaining customers, even if compensation exceeds the product's profit margin.
Get full access to this article
View all access options for this article.
References
1.
BeckwithNeil E. (1973), “Concerning the Logical Consistency of Multivariate Market Share Models,” Journal of Marketing Research, 10 (August), 341–4.
2.
BestArthur and AlanR. Andreasen (1977), “Consumer Response to Unsatisfactory Purchases: A Study of Perceiving Defects, Voicing Complaints, and Obtaining Redress,” Law & Society, 11, 701–42.
FornellClaes (1976), Consumer Input for Marketing Decisions: A Study of Corporate Departments for Consumer Affairs. New York, Praeger Publishers.
5.
FornellClaes (1987), “Corporate Consumer Affairs Departments: Retrospect and Prospect,” in Research in the Consumer Interest: The Frontier, ScottE. Maynes, ed. Ann Arbor, MI: Association for Consumer Research.
6.
FornellClaes and NicholasM. Didow (1980), “Economic Constraints on Consumer Complaining Behavior,” in Advances in Consumer Research, Vol. 7, JerryC. Olson, ed. Ann Arbor, MI: Association for Consumer Research, 318–23.
7.
FornellClaes and NicholasM. Didow and WilliamT. Robinson (1983), “Industrial Organization and Consumer Satisfaction/Dissatisfaction,” Journal of Consumer Research, 9 (March), 403–12.
8.
FornellClaes and NicholasM. Didow and WilliamT. Robinson and BirgerWernerfelt (1986), “A Model for Customer Complaint Management,” working paper, Graduate School of Business Administration, University of Michigan.
9.
FornellClaes and NicholasM. Didow and WilliamT. Robinson and BirgerWernerfelt and RobertA. Westbrook (1984), “The Vicious Circle of Consumer Complaints,” Journal of Marketing, 48 (Summer), 68–78.
10.
GaleBradley T. (1972), “Market Share and Rate of Return,” Review of Economics and Statistics, 54 (May), 412–23.
11.
GenschDennis H. (1984), “Targeting the Switchable Industrial Customer,” Management Science, 3 (Winter), 41–45.
12.
GoodmanJohn A. and AlanR. Malech (1985), “Using Complaints for Quality Assurance Decisions.” Washington, DC: TARP (Technical Assistance Research Programs) Institute Working Paper.
13.
HauserJohn R. (1984), “Theory and Application of Defensive Strategy,” paper prepared for the Dean Symposium in Applied Economics, September13–14, Columbia University.
14.
HauserJohn R. and StevenP. Gaskin (1984), “Application of the Defender Consumer Model,” Marketing Science, 3 (Fall), 327–51.
15.
HauserJohn R. and StevenP. Gaskin and StevenM. Shugan (1983), “Defensive Marketing Strategies,” Marketing Science, 2 (Fall), 319–60.
16.
HirschmanAlbert O. (1970), Exit, Voice and Loyalty. Cambridge, MA: Harvard University Press.
17.
NaertPhilippe A. and AlainBultez (1973), “Logically Consistent Market Share Models,” Journal of Marketing Research, 10 (August), 334–40.
18.
Nielsen, A. C., Company (1981), The Consumer's View of Product and Package Performance. Northbrook, IL: A. C. Nielsen Company.
19.
PorterMichael (1985), Competitive Advantage. New York: The Free Press.
20.
RossIvan and KathyGardner (1985), “The Use of Consumer Initiated Communication as Marketing Research Data: The View of Consumer Affairs Professionals,” working paper, School of Management, University of Minnesota.
21.
SchmalenseeRichard (1978), “A Model of Advertising and Product Quality,” Journal of Political Economy, 86 (June), 485–503.
22.
ShuganSteven M. (1987), “Estimating Brand Positioning Maps Using Supermarket Scanning Data,” Journal of Marketing Research, 24 (February), 1–18.
23.
SmallwoodDennis E. and JohnConlisk (1979), “Product Quality in Markets Where Consumers are Imperfectly Informed,” Quarterly Journal of Economics, 93 (February), 1–23.
24.
SteeleEric H. (1977), “Two Approaches to Contemporary Dispute Behavior and Consumer Problems,” Law & Society, 11, 667–75.
25.
TARP (1979), “Consumer Complaint Handling in America: Final Report.” Washington, DC: U.S. Office of Consumer Affairs, Technical Assistance Research Programs.
26.
SmallwoodDennis E. and JohnConlisk (1986), “Consumer Complaint Handling in America: An Updated Study.” Washington, DC: The Office of the Special Advisor to the President for Consumer Affairs, Technical Assistance Research Programs (March).
27.
U.S. Department of Commerce (1986), Statistical Abstract of the United States. Washington, DC: U.S. Government Printing Office.
