Defensive Marketing Strategy by Customer Complaint Management: A Theoretical Analysis

Abstract

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.