Keywords: Complaint handling, Customer loyalty, Service failure, Service recovery, Transparency
Introduction
One of the primary goals of business organizations is to provide effective customer service to ensure that they retain their existing customers and attract new customers to the business. Retaining the existing customers shows customer loyalty. Achieving customer loyalty is critical to the success of organizations because it helps them to maintain their share of the market. However, the imperfect nature of organizations means that service failures occur at times, and this has a negative effect on customer loyalty. Service failure refers to the occurrence of errors in the organization, which hinder the effective delivery of services to the customer. Incidences of service failure are usually followed by customer complaints. Failure to address customer complaints effectively can lead to customer dissatisfaction, which has a negative impact on customer loyalty (Davidow, 2003). This is because dissatisfied customers are likely to seek services elsewhere, which reduces the market share of the organization. Therefore, organizations need to have effective complaint handling procedures to address the concerns raised by their customers.
Furthermore, the effective handling of customer complaints promotes faster service recovery. Service recovery refers to the restoration of services to a level that is satisfactory to the customers. Quick service recovery is important because it ensures that other customers do not experience similar problems, which can be damaging to the reputation of the organization. In other words, the effective handling of customer complaints helps organizations to address problems quickly to mitigate the negative consequences of such problems. One important attribute that organizations ought to embrace when handling customer complaints is transparency. Transparency refers to the complete disclosure of information in a timely manner. Organizations that demonstrate transparency in their operations build their customer trust. The purpose of this study is to examine the role of transparency in the complaint handling process. Specifically, this study seeks to find out how transparency helps organizations to maintain customer loyalty after the occurrence of a service failure. This is an interesting topic of study because we are living in an age where information about customers and organizations is readily available from a variety of sources (Craven, 2015). Consequently, modern organizations are expected to be transparent because all information about them eventually becomes a matter of public record.
Literature review
Although there have been extensive studies about transparency in organizations, little research has been done to identify the role that transparency plays in the complaint handling process. This literature review examines previous studies about the impact of transparency on organizations. Grimmelikhuijsen & Meijer (2012) conducted research about how transparency affects the perceived trustworthiness of government organizations. Using social psychology theories such as the Cognitive Dissonance Theory and the Elaboration Likelihood Model, the researchers found that previous knowledge and the general tendency to trust play an important role in the relationship between transparency and perceived trustworthiness. According to the researchers, government transparency led to changes in perceived competence among individuals with high trust and limited knowledge. In other words, trusting and non-knowledgeable individuals perceived an increase in government competence when the government was transparent about its activities (Grimmelikhuijsen & Meijer, 2012). This is because the government transparency confirmed the beliefs that people had about it based on trust.
On the other hand, government transparency led to changes in perceived benevolence among individuals with less trust and limited knowledge about the government. In other words, transparency caused the people with a little trust and knowledge of the government to feel closer to it, which increased their level of trust in the government. However, government transparency did not change the attitudes held by knowledgeable individuals. This is because such individuals had already formed strong opinions about the government based on information from other sources. Therefore, the research by Grimmelikhuijsen & Meijer (2012) showed that previous knowledge about an issue weakened the impact of transparency. In light of this, organizations must take immediate action when customer complaints arise because transparency will not have a positive impact after information about the complaints becomes public knowledge.
Carter & Curry (2010) conducted research that investigated the impact of transparent pricing on consumer behavior. The researchers found that consumers prefer transparent pricing to opaque pricing. According to the study, price transparency causes consumer behavior to deviate from the predictions of standard economic theory. The researchers found that transparent pricing elicits a social component of utility, which increases the value of the product or service. Consequently, consumers are willing to pay a higher price in transparent pricing as compared to opaque pricing. This is because consumers benefit from the additional information provided in transparent pricing, which encourages them to pay a higher price for the product or service. Therefore, organizations can increase their profitability by embracing price transparency because it encourages customers to pay premium prices for products and services.
Eskildsen & Kristensen (2007) carried out a study that examined the role of transparency in customer satisfaction. The researchers found that the perceived transparency is related to the perceived value. However, the strength of this relationship varies according to different industries. For instance, the study revealed that the relationship is the strongest in the mobile phone industry as compared to the banking industry. A possible explanation for this is the mobile phone industry has opted for a strategy that reduces transparency in the market to increase profitability. However, this strategy might be counterproductive. This is because the reduced transparency in the market results in decreased customer loyalty, which has a negative impact on revenue.
A common thread in research into effective complaint handling processes is the concept of justice. Tax, Brown, & Chandrashekaran (1998) conducted research that showed that customers are often dissatisfied with the complaint handling procedures of most organizations. The researchers used justice theory to evaluate the perceptions of customers towards complaint handling procedures. According to the researchers, customers use the outcomes of complaint handling procedures to evaluate the effectiveness of such procedures. The occurrence of unwanted outcomes in complaint handling procedures creates the perception among customers that such procedures are unjust. Consequently, the perception of unjust complaint handling procedures leads to customer dissatisfaction, which adversely affects customer loyalty.
Karatepe (2006) arrived at a similar conclusion in a study that examined the effect of organizational responses to customer complaints. According to the researcher, customers’ perceptions of justice in the complaint handling process has an impact on customer satisfaction and loyalty. The researcher identified the dimensions of justice as being atonement, facilitation, promptness, apology, explanation, attentiveness and effort. In addition, the study revealed that customers expect distributive, procedural and interactional justice. An organization’s response to customer complaints must include the three types of justice to promote customer loyalty and customer satisfaction.
Lopes & da Silva (2015) conducted research into how justice influences customer loyalty after the occurrence of a service failure and its impact on the process of failure recovery. The researchers found that justice has an impact on customer satisfaction and loyalty. Furthermore, the study showed that justice supports the process of failure recovery. This is because justice in the complaint handling process causes customers to maintain their perception of quality, which helps the organization to recover quickly from a service failure.
The literature review has shown that transparency is important to the success of modern organizations. Aside from this, organizations must ensure justice in the complaint handling process to promote customer loyalty and satisfaction. However, it is worth noting that justice cannot be achieved without transparency. This is because mistakes cannot be rectified without laying bare all the pertinent information. In light of this, this research begs the question: how does transparency in the complaint handling process affect customer loyalty? A sub-question of this research is; how does transparency contribute to the perception of justice when dealing with customer complaints?
The study’s theoretical contribution addresses the gap in the knowledge about the relationship between transparency and the successful handling of conflicts in organizations. Aside from this, the study’s contribution to managerial practice is the importance of transparency in building good customer relationships, which can withstand the negative consequences of service failures.
Conceptual framework
The conceptual framework guiding this study is shown in Figure 1. The model demonstrates service recovery as the independent variable, and transparency and justice as the moderator variables in the complaint handling process. Customer satisfaction and customer loyalty, which are the customers’ behavioral intentions, are the dependent variables.
Figure 1. Conceptual model
Methodology
The research will be carried out in various MISSHA cosmetic shops in the Netherlands. The study will use a qualitative design methodology to examine the impact of transparency on customer loyalty in the complaint handling process. To facilitate the collection of data to answer the research question, questionnaires will be developed. The research participants will be chosen from the customers of the MISSHA cosmetic shops in the Netherlands. The researcher will visit a MISSHA cosmetic shop to request several customers to participate in the study. Individuals that accept to participate in the study will receive the questionnaire through email. The study will be conducted from a sample size of 10 customers of the MISSHA cosmetic brand. Initial coding will be used to examine the characteristics of the data collected. After the initial coding, the researcher will use pattern coding to reveal patterns in the data. The identification of patterns will enable the researcher to show the relationship between transparency and customer loyalty in the complaint handling process. Finally, the researcher will triangulate the patterns to provide an understanding of the knowledge gained from the study.
In conclusion, effective handling of customer complaints is critical to maintaining customer loyalty. Organizations that fail to handle customer complaints properly are likely to lose their market share to their competitors. Consequently, such organizations might experience a decline in profitability and might suffer from a tarnished reputation. The effective handling of customer complaints requires transparency and the provision of justice. Such measures promote customer satisfaction, which leads to customer loyalty. Furthermore, transparency and justice help the organization build customer trust, which enhances the reputation of the organization and attracts more customers.
References
Carter, R. E., & Curry, D. J. (2010). Transparent pricing: theory, tests, and implications for marketing practice. Journal of the Academy of Marketing Science, 38, 759-774.
Craven, R. (2015, March 31). Let's Be Real: Why Transparency in Business Should Be the Norm. Retrieved from entrepreneur.com: https://www.entrepreneur.com/article/244474
Davidow, M. (2003). Organizational Responses to Customer Complaints: What Works and What Doesn’t. Journal of Service Research, 5(3), 225-250.
Eskildsen, J., & Kristensen, K. (2007). Customer Satisfaction – The Role of Transparency. Total Quality Management & Business Excellence, 18(1-2), 39-47.
Grimmelikhuijsen, S. G., & Meijer, A. J. (2012). The Effects of Transparency on the Perceived Trustworthiness of a Government Organization: Evidence from an Online Experiment. Journal of Public Administration Research and Theory, 1-21.
Karatepe, O. M. (2006). Customer complaints and organizational responses: the effects of complainants’ perceptions of justice on satisfaction and loyalty. Hospitality Management, 25, 69-90.
Lopes, E. L., & Silva, M. A. (2015). The effect of justice in the history of loyalty: A study in failure recovery in the retail context. Journal of Retailing and Consumer Services, 24, 110-120.
Tax, S. S., Brown, S. W., & Chandrashekaran, M. (1998). Customer Evaluations of Service Complaint Experiences: Implications for Relationship Marketing. American Marketing Association, 62(2), 60-76.
Wright, R. (2006). Consumer Behaviour. Boston: Cengage Learning.
