Academic journal article Revue Canadienne des Sciences de l'Administration

Customer Dissatisfaction: The Relationship between Types of Problems and Customer Response

Academic journal article Revue Canadienne des Sciences de l'Administration

Customer Dissatisfaction: The Relationship between Types of Problems and Customer Response

Article excerpt

Abstract

For many service firms, successfully managing customer dissatisfaction is crucial to stability and profitable growth. It requires a strategy that identifies the connection between the type of problems and customer dissatisfaction responses, namely exit or voice. This research investigates that relationship through a quasi-experiment that examines customer responses to four problems dealing with service outcomes, service process, pricing, and location. The results suggest that, overall, customers are more likely to voice than exit when they encounter problems, the importance of the problem is linked to the rate of taking action (voicing and exit), and outcome problems lead to greater exit than other problems. The implications for management include the direction that dissatisfaction management programs should take to enhance profitability.

In an era of mature markets and intense competitive pressures, many firms are focusing their efforts on maintaining a loyal customer base. Loyal customers often cost less to service, spend more as their time with the firm lengthens, and provide a good source for new business. Customer dissatisfaction diminishes the base, forces the firm to rely on a more volatile customer mix, and erodes the firm's reputation. This is particularly true in service industries, where customer dissatisfaction is a significant problem (Best & Andreasen, 1976; Fornell, 1992; Singh, 1990) and improved customer loyalty has a substantial impact on profits (Reichheld & Sasser, 1990). For many firms, successfully managing customer dissatisfaction is crucial to their stability and profitable growth and requires a strategy that is far more comprehensive than simple complaint handling.

Emphasizing complaints alone is inadequate. The distinction between complainers and noncomplainers oversimplifies the customer reaction to dissatisfying experiences. Dissatisfaction, according to Hirschman (1970), provokes two active negative responses, voice and exit, which present different opportunities and threats to profits.

Hirschman contends that some customers react to dissatisfaction passively, preferring to remain with the firm. These "loyal" dissatisfied customers choose to remain in the belief that the likelihood of an improvement outweighs the benefit of searching for another supplier. While their choice does not immediately threaten profits, loyal customers' continued dissatisfaction may lead them to voice or exit. Another dissatisfaction response is negative word of mouth (Richins, 1983). Singh (1988) finds that negative word of mouth is only associated with exit. Here, it is not treated as a distinct behaviour in the discussion of dissatisfaction responses.

When customers voice, they give the firm a chance to rectify the problem, and interestingly, if the firm recovers successfully, to increase loyalty and profits (Fornell, 1992). Exit, for any reason, reduces the firm's profits. If customers leave from frustration with the product or service quality, they often compound the loss by persuading others to follow them. If exit and voice are driven by different problem types or customer characteristics, losing exit information means that the firm has an incomplete and possibly distorted view of dissatisfaction. Lacking accurate information, managers cannot determine which problems create the most serious threat to profitability; that is, which problems are more likely to prompt exit, and which voice.

Much of the previous research in understanding consumers' responses to problems has focused on individual determinants (such as attitudes toward complaining). Studies of episode-specific factors have examined the effects of product class, attribution of blame, perceived costs of complaining and the expectations of a successful complaint, as well as respondents' personal characteristics (see Richins, 1987, and Singh & Howell, 1985, for reviews). More recently, Singh (1990, 1991) has examined the role of market structure as a determinant of dissatisfaction responses. …

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