A Contingency Approach for a Profitable Complaint Management

This study aims to understand whether organizational responses to customer complaints improve customer profitability. To do so, the authors propose a contingency framework in which the effectiveness of organizational responses to complaints and direct marketing in improving customer profitability is contingent upon: relationship strength and type of failure. The framework is empirically tested applying latent class techniques to longitudinal data for a sample of complaining customers. The results reveal that: (1) different complaint-handling strategies have differential effects on profitability; (2) direct marketing can both hinder and enhance the effectiveness of complaint-handling strategies; and (3) there is significant heterogeneity –four customer segments–; the effectiveness of complaint handling and direct marketing is contingent upon the strength of the relationship and the type of failure.