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ABSTRACT
Considerable research in the customer complaining behavior (CCB) literature has been focused on the effect of a successful recovery on customer loyalty and retention. However, comparatively less is known about how loyalty, as an antecedent, moderates customer responses to both a service failure and subsequent service recovery. Based on two studies conducted with non-student samples, we find that loyal customers are more likely to air their complaint directly to the firm and less likely to engage in negative word-of-mouth in response to a service failure. Also, loyal customers express greater satisfaction with service recovery efforts compared to less loyal customers when redress is offered. These results indicate that customers who complain may be among a firm's most loyal customers and such customers are potentially more responsive to service recovery efforts. However, not attending to their complaints could result in the loss of one's loyal (and best) customers. Hence, managers need to seriously consider complementing their existing loyalty programs with formal complaint management systems.
INTRODUCTION AND LITERATURE REVIEW
Complaint management systems have been advanced as the best line of defense in retaining existing customers (Fornell and Wernerfelt 1987). The justification for investments in complaint management programs rests on findings that proper complaint management can result in improved customer retention and loyalty, with consequent beneficial effect on the bottom line. While Reichheld and Sasser (1990) provide an economic rationale in terms of the disproportionate impact to the bottom line of increased retention rates, experimental research in the consumer complaint behavior (CCB) literature has suggested that service recoveries can sometimes result in the complainants becoming more loyal adherents of the firm than previously, as a consequence of their satisfaction with the complaint handling process (Smith and Bolton 1998). In a cross-sectional study of actual complaints across 110 firms in the service and manufacturing sectors, Homburg and Fürst (2007a) find strong evidence of complaint satisfaction driving customer loyalty. Other papers that explore the link between satisfaction with service recovery and increased patronage include Andreassen (1999), DeWitt, Nguyen, and Marshall (2008), Mattila (2001), Smith, Bolton, and Wagner (1998) and Maxham and Netemeyer (2002).
In contrast to the above, relatively fewer papers have examined how loyalty influences consumer responses to a firm's service recovery efforts, though researchers such...