Marketing literature has for long argued that retention of customers is an important issue because losing a customer can be very costly. The results of customer defection include loss of free positive Word-of-Mouth, loss of market share, higher costs of attracting new customers, decrease in revenue, and decrease in employee retention (Colgate and Hedge 2001; Colgate and Norris 2001; Ndubisi, Malhotra, and Chan 2008; Reichheld and Sasser 1990). Marketing scholars have also argued that the cost of gaining a new customer could be as high as five to six times the cost of retaining an existing one (Blodgett, Wakefield, and Barnes 1995; Desatnick 1988; Fundin and Bergman 2003; Rosenberg and Czepiel 1983). It has also been demonstrated that a 5% decrease in customer defections could translate into 25-85% increase in profits (Reichheld and Sasser 1990), depending on the service industry (Lee & Cunningham 2001).
In the past three decades, researchers have examined differences between consumer complaining and non complaining behavior in terms of individual differences such as demographics (Bearden and Oliver 1985; Singh 1990b), personality factors, e.g. assertiveness, consumer alienation (Bearden and Mason 1984; Singh 1990b), attitude toward complaining (Bearden and Oliver 1985; Singh 1990), and situational factors, e.g. cost-benefit evaluations, consumer experience, probability of successful redress, attributions of blame (Folkes 1984; Bearden and Oliver 1985; Folkes, Koletsky, and Graham 1987; Singh 1990; Stephens and Gwinner 1998). In recent years, researchers have conducted studies on consumer complaint behavior mostly looking at the different types of complaint actions of customers (e.g. Broadbridge and Marshall 1995; Blodgett, Wakefield, Barnes. 1995; Eccles and Durand 1998; Fisher, Garrett, Arnold, and Ferris 1999; Nyer 2000; Liu and McClure 2001; Kim, Kim, Im, and Shin 2003; and Heung and Lam 2003; Bennett 1997).
However, a review of the extant literature indicates a dearth of research effort in understanding the impact of different complaint behaviors, namely public versus private complaint, on customer defection or retention (see Bearden and Oliver 1985 for exception). Customer retention is driven by customer satisfaction (Roland & Zahorik 1993) and dissatisfaction is a key reason why customers defect. All companies experience some degree of customer dissatisfaction (Fisher, Garrett, Arnold, and Ferris1999), but not all of them get a chance to resolve the problem. Our first objective is to examine, between public and private complaints, which is a better predictor of customer defection? This is a critical issue as research examining consumer dissatisfaction has revealed that up to two thirds of consumers do not report their dissatisfaction (Warland, Herrmann, and Willits 1975; Day and Landon 1976; Andreason 1985; Stephens and Gwinner 1998). These customers either resign themselves to taking no action and willing to live with poor service or they may quietly engage in private complaint behavior by either quietly switching providers or engaging in negative word-of-mouth communication or both (Singh 1988). If customers are unwilling to engage in public complaint with respect to their dissatisfying experiences, the organization is denied a chance to make amends and improve on service quality. Organizations are to encourage customer complaints because complaints provide the firm opportunities to appease and retain dissatisfied customers (Fornell and Wernerfelt 1987). Such understanding will help practitioners in developing effective strategies to check customer defection and to improve customer retention.
Our second objective is to examine the moderating influence of three variables in the relationship between public vs. private complaint behavior and customer defection, namely, switching cost, income, and ethnicity. First, we argue that when switching costs are high, both private and public complaints will have little or no impact on customer defection. Rusbult et al. (1988) reason that the likelihood that a customer will engage in defection depends on the degree of prior satisfaction with the relationship, the magnitude of the person's investment in the relationship and an evaluation of the alternatives one has. The more investment customers make in a business relationship, the more difficult they find it to discontinue the service or product, especially if they are not sure how a new relationship will turn out. Such investment by customers and trustworthiness of the organizations can act together or severally to raise switching cost for customers. Second, income is another variable that can potentially moderate the association of private and public complaints on defection. It is not uncommon for high net worth bank customers in Malaysia to get quality audience from services providers regarding their grievances than lower income customers. Such quality audience can be a motivation for the former to engage in public complaint (complaint to the organization) while lack of attention to the latter can lead to private complaints (to family and friends). Third, since most of the customer complaint behavior studies have been conducted from the West (Keng, Richmond, and Han 1995), extant literature is almost silent on the role of culture in moderating the influence of complaint dimensions (i.e. public versus private complaint) on customer defection. The Chinese business culture is marked by strong personal connection (guanxi), interpersonal harmony (renji hexie), and holistic thinking (zhengti guannian), which co-integrate and synergize themselves holistically to smoothen business relationships and business processes (Pek and Ndu 2006). It is therefore important to examine how ethnicity (Chinese versus non-Chinese) affects the relationship between private and public complaints and defection.
We first discuss the research framework that examines the relationship of public versus private complaints on customer defection and the moderating roles played by switching cost, income, and ethnicity. Hypotheses based on theoretical considerations are developed subsequently. The schema of the research model is shown as Figure 1.
[FIGURE 1 OMITTED]
In order to better understand the word "dissatisfaction", it will help to consider the term "satisfaction". Satisfaction is determined to a large extent by the disconfirmation or confirmation of consumer expectations (Bearden & Oliver 1985; Cornwell, Bligh, and Babakus 1991). According to Hsieh (1996), the disconfirmation model has been widely accepted, and many researchers have tried to define satisfaction further using this model. The disconfirmation model focuses on the condition where the product disconfirms expectation. If the product disconfirms expectation by exceeding it, customer experience satisfaction; in contrast, if product disconfirms expectation by falling short of expectation, dissatisfaction arouses (East 1997; Stewart 1998). Michel (2001) defines dissatisfaction among the service industry as the disconfirmation of service expectation caused by the service failure. The expectations are determined by factors such as advertising, prior experience, personal needs, word-of-mouth and the image of the service provider (Michel 2001), while service failure is the problem that a customer has with a service (Colgate & Norris 2001). Peyrot and Doris (1994) explain that consumers form pre-purchase expectations and post-purchase evaluations and that dissatisfaction is generated when evaluations do not meet expectations. Broadbridge and Marshall (1995) provide similar definition by trying to relate satisfaction with the quality of product. They state that consumer dissatisfaction is the result of the discrepancy between expected and realized performance, with an attribute. Dissatisfaction is thought to culminate to different complaint behaviors or responses.
Dissatisfied Complaint Action
Customer complaint behavior is also known as customer complaint responses (Singh & Widing 1991). Crie (2003:61) defines consumer complaint behavior as a process that "constitutes a subset of all possible responses to perceived dissatisfaction around a purchase episode, during consumption or during possession of the goods or services". He argues that complaint behavior is not an instant response, but a process, which does not directly depend on its initiating factors but on evaluation of the situation by the consumer and of its evolution over time. Broadbridge and Marshall (1995) explain that consumer complaint behavior is a distinct process, which begins when the consumer has evaluated a consumption experience (resulting in dissatisfaction) and ends when the consumer had completed all behavioural and non-behavioral responses.
Singh and Widing (1991) propose a definition that consumer complaint behavior includes all potential behavioral responses that a consumer may utilize to deal with his/her dissatisfaction. Singh (1990a) identifies consumer complaint behavior as the consumer dissatisfaction response style. Thus, complaint is actually the response following the consumer dissatisfaction. These responses/actions include voice, that is, response directed towards salesperson, retailer, service provider; private, that is, negative word-of-mouth communication to friends and family and exit from exchange relationship or switching patronage; and third party, that is, complain to formal agencies not involved in the exchange relationship, e.g. complaining to a consumer agency. Some scholars have categorized complaint action into two groups: action versus no action. For example, Mason and Himes (1973) categorize the response styles into action group and no action group, while, Warland, Herrmann, and Willits (1975) categorize the consumer complaint behavior into upset action and upset no action. They argued that consumers might not complain, even though they...