World Academy of Science, Engineering and Technology

International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:4, No:12, 2010

Impact of Customer Management System in

Improving Customer Retention: Optimization of
Negative Customer Feedback
Alireza Faed, and David Forbes

contact services, which is known as, personal communication

Abstract—Complaints today have the ability to retain
customer loyalty using state of the art systems and strategies pathways. e.g. face-to-face, mail, , phone and email that
in customer relationship management to analyze and respond mainly effect the way a customer need to initiate his/her
to a plethora of customer perception. The Majority of interaction with a company [2]. This immense growth of
companies are not aware of the beneficiary utilization of customer contact prepares opportunities for a company to
International Science Index, Economics and Management Engineering Vol:4, No:12, 2010 waset.org/Publication/11734

customer complaints for the sake of quality improvements. exercise enthusiastic customer responsiveness. What is more,
Also, some companies have problems determining how a company can simply use the customer contact to
resolution of complaints can be profitable. In this study, we communicate their recognition and capability to fulfill,
will define the problems and ascertain the importance of customers’ requirements. Companies need to deal with
customer management system on the companies. Furthermore,
bundles of negative customer feedback and with their own
we will determine the impact of such a system on efficiency,
confidence, profitability and customer complaints. Eventually, strategies turn them into positive opportunities by providing
we will develop methods and address the issues. In this paper, personalized customer contact services [2]. One of the most
we used an open-ended questionnaire and distributed that to significant parts of supply chain management process is
30 randomly chosen respondents which were the passengers in customer management service that illustrates how companies
an airport. We also define three hypotheses for our study and may face to their customers. The major goal of these services
we will validate each of them. Then using frequency, Chi- is to provide a sole source of customer information, like
Square and quality control method we optimized the size of product accessibility [3]. Customer service outstandingly
customers’ negative feedback and improved the process of affects the performance of the company and absorbs lots of
customer retention.
customers in the company. This service should have the
Keywords—Complaint, Complaint management system, ability to directly leverage purchasing decision and provide a
Customer relationship management, Retention. competitive advantage in the work setting. Moreover, it can
intensify the loyalty of the customers and tempting customers
I. INTRODUCTION to repeat their purchases. What is more, a secure environment
will be created for customers and employees [3].
T HERE is a growing recognition that negative customer
feedback can be regarded as a strategic tool in companies.
Furthermore, complaint management is often not considered A. Defensive and offensive marketing strategy
as a profit centre asset [1]. Mostly, customer complaints are Today, most acknowledged business companies employ
treated as a cost element, and are regarded as a potential offensive as well as defensive marketing strategies. The aim
source of advantage. This alone may place the company under of the offense strategy is to create new clients; the objective of
continual pressure and causes declining revenues by reducing the defense is to keep current customers [4]. Defensive
the activities. Customer service has strategic significance. marketing have been become important while the cost of
Companies need to constantly increase the level of customer finding a new customer is high pertain to the cost of keeping a
satisfaction and customer expectation, to maintain quality in a current customer. For instance, Volvo, which is one of
competitive market [1]. Swedish automobile manufacturer, approximates that its cost
of finding a new customer is three times as the cost of keeping
a current customer [4].
II. CUSTOMER SERVICE

Customer service implies procedures and actions that make III. DEFINITION OF COMPLAINT
it easier for customers to accomplish their transactions and Complaints are the expression of dissatisfaction that is
businesses with a company in a secure environment [2]. illustrated within companies with the goal of making the
Above all, there has been a dramatic growth in customer service or product provider acquainted of an attitude which is
internally accomplished and experienced to have an adverse
effects and making a change in the criticized behaviour [5].
Complaints can be created verbally or in written statement [5].
Authors are with Curtin University of Technology, Australia.
e-mail:alireza.faed@postgrad.curtin.edu.au
e-mail:David.E.Forbes@postgrad.curtin.edu.au

International Scholarly and Scientific Research & Innovation 4(12) 2010 2234 scholar.waset.org/1999.10/11734
 World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:4, No:12, 2010

IV. COMPLAINT MANAGEMENT 1) Personnel costs create from human resources that are
Prior to turning to the analysis of complaints, we will define directly regarded with complaint management procedure, for
the meaning of complaint management. We can bring an example we have some employees for a complaint
instance with a very much alike meaning to complaint management department.
management by easily contrasting that to guarantees and
warranties. A warranty is a restricted agreement or conditional 2) Administration costs that are normally created by some
guarantee which usually articulates that a service or product, if costs for instance the cost of buying office equipment.
covered, will be brought to proper order at the cost of the
provider [4]. 3) Communication costs are pertained with communication
Complaint management is a more general stipulating. Also procedures to resolve the client’s issues as an example the
those who have complaints may catch various rectification not internet cost can be deemed as communication cost.
particularly what this takes to lead the product back to first
made condition [4]. It is necessary to pay attention that it 4) Response costs are raised in the framework of the problem
permits companies to utilize complaint management for solution [1].
services and products, as well. Furthermore, an outstanding
International Science Index, Economics and Management Engineering Vol:4, No:12, 2010 waset.org/Publication/11734

factor of complaint management is achievement to expedite

According to the benefits of complaint management, four
articulation of complaints and expressing the opinions of
clear kinds of CM can be recognized based on literature
customers [4].
review [1].
The alteration of customer contacts into information for all
customers and the managers are called complaint a) The information benefit illustrates the value that is
management. created utilizing information from customer
complaints to enhance products, increate
A. Complaint management function effectiveness and decline failure costs.
Data collection, data analysis and reciprocal communication b) The behavior advantage assimilates the positive
of information can be considered as some of the roles of changes in behavior of the clients because of gained
complaint management [6]. The ultimate objective of complaint gratification [1].
complaint management and complaint management system is
to improve satisfaction of the each complainant. Moreover, c) The repossession advantage creates while
this generates new expectations and assumptions and prevents complaining customer stays with a company rather
further dissatisfaction between two parties [6]. Complaint than switching to other store.
management system produces an atmosphere for customers to
freely claim to the company and give their feedbacks directly d) Advantages of Communication define the spoken
and without fear of being identified. Besides, the company impact of complaint management. They are created
will utilize complaints and benefit from them for further when complaints are resolved and gratified clients
improvement. are involving in positive way, prescribing the
company and patronize the grabbing new customers
[1].
B. Complaint management profitability
Complaint management profitability (CMP) shows the C. Advantages of having complaints in work-setting
business-related effectiveness and productivity of the Dissatisfied customers generate managers with an
procedure of complaint management system [1]. CMP is opportunity to understand about issues and take positive
calculated by connecting the invested financial assets to the action to clarify that mistakes do not transpire. Customer
advantage of complaint management. The advantage of complaining attitude has been recognized as a response
complaint management is calculated by reducing its costs initiated by customer complaint. Customer satisfaction or
from its advantages. The invested financial assets balanced dissatisfaction is normally regarded as a personal assessment
with the costs of complaint management actions within a of the distance between expectations results, which negatively
extent of time [1]. To calculate CMP adequate data are cause instability expectations conduct to dissatisfaction [7].
mandatory. Besides, it must be argued that costs and benefits Acquiring information from mistakes was both are main
involved in this computation, ways of measuring the costs, elements of achieving legitimate, CRM, and profitability is
various approaches must be measured to delineate the unavoidable. If complaints are changed completely into
investment advantages [1]. Based on the costs of complaint knowledge about clients, they may produce an invaluable
management, different kinds can be recognized within amount of capital for enterprises. To achieve this asset,
complaint management. These are described as below: companies must design, improve, operate and upgrade their
systems for administering complaints [8].

International Scholarly and Scientific Research & Innovation 4(12) 2010 2235 scholar.waset.org/1999.10/11734
 World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:4, No:12, 2010

D.Advantages of having complaints management system questionnaires using Chi-Square for confidence of the
customer to utilize the system and estimating the profitability
Complaint management must be deemed the main segment of the firm. Moreover, we used quality control to find Upper
of customer relationship management[5]. It has the capability control limit (UCL), average and lower control limit (LCL) of
to better shape the life cycle of customer relationship by customer complaint. We used high, medium and low scale to
terminating improper stages and replacing with maturity stage analyze customer feedback and for customer complaint we
and revitalization stages. Having customer management used yes and no to find the respondents who complain or not.
system in the company we may give better service to our In the next part, we will analyze the variables that directly or
current and potential customers and gather our lost customers. indirectly influence in our process.
Moreover, it can strengthen the process of customer retention
and the company can simply regain management [5].
A. Hypothses
E. Customer retention process 1) Development of CRM and CMS have a direct and
Customer retention has been shown to be a primary goal in positive impact on Customer satisfaction
firms that practice relationship marketing [9]. Furthermore, 2) Control in CMS has a direct and positive effect on
1% improvement in the customer retention rate intensifies and decreasing the level of complaint
International Science Index, Economics and Management Engineering Vol:4, No:12, 2010 waset.org/Publication/11734

improves firm value by 5%. Moreover, 5% increase in 3) Development of CRM and CMS have a direct and
customer retention increases a firm's profits at a range positive impact on quality and profitability of the
between 25% and 85% [10]. services and products.

V. CUSTOMER RELATIONSHIP MANAGEMENT VII. ANALYSIS AND RESULT

Customer relationship management is one of the most Based on our questionnaire, we gathered our customers’
significant state of the art that makes the companies familiar feedback and the optimum responds from our respondents. As
with the customers and their behaviors. CRM is the shown in table 1, Complaint management system must work
comprehensive recognition of customers, their requirements under the control of CRM system to be more productive. To
and preferences [11]. Besides, it introduces broad scope of do so, customers had various behaviors considering the
marketing process, sales process, service process and the question. According to the respondents’ results, 100% of the
planning for each of the procedures. Moreover, it provides an respondents were agreeing upon the controlling variable and
efficient cooperation between procedures as well [11]. CRM they illustrated that the CMS is absolutely controllable. What
is a consolidation of technologies and business processes used is more, CMS does have a great managerial outcome for the
to gratify the requirements of a customer during any given company as well as customer. Moreover, CMS intensify the
interaction. More specifically, CRM includes acquisition, quality of products and services and is totally user-friendly.
analysis and utilization of knowledge about customers to sell Also, majority of people believe that this system can diminish
more products or services and to do it more productively and the level of customer complaint.
efficiently [12]. Also, it produces convenience in which customers see a
CRM creates knowledge severity and procedure elaboration website and the company alone as simple, and intuitive as
which each of them creates knowledge-centric business possible [16] Indicates that 30% of customers who leave a
procedure and the transaction-centric procedures, accordingly website without purchasing anything do so because they were
[11]. CRM has the ability to changes marketing context and unable to navigate their way through the site. Eventually, it
improves the internet technology. The company requires CRM may lead the company toward high profitability and save the
to acquire more clients, and utilize its knowledge to sell more time of the employees and customers simultaneously. In the
goods and services [13]. besides, CRM is a strategy to next part, we are going to validate and ascertain our
optimize the advantage and retain customers into various parts Hypotheses as we earlier mentioned that using CMS and
[14]. Furthermore, CRM is a customer-centric business CRM, we are going to decrease the level of complaint and
strategy that iconsolidates sales, marketing and customer care save the time.
service to produce and add some value for the firm and its
customers. It may generate system for assessing customer TABLE I ANSWER OF RESPONDENTS TO EACH OUTCOME OF THE RETENTION
PROCESS
relations and creates positive, assured and certain competition Feedback from
[15]. customers Number of Respondents:
High, Medium, Low
VI. METHODOLOGY Confidence 20, 5, 2
Avoid future
We benefited from an open-ended questionnaire which was problems 11, 4, 15
recently created to this research. It was disseminated to 30 Save time 19, 1, 10
accidentally chosen people in an airport. Before distributing Profitability 16, 8, 6
Higher quality 24, 3, 3
the questionnaires we pilot tested the questionnaires. The
Customer
survey questionnaires were given to respondents. Nearly, all satisfaction 22, 2, 8
respondents replied to the questions by fax or email. Then, Customer benefit 20,2, 8
using factor analysis and forecasting analysis, we analyzed the Managerial 9, 20. 1

International Scholarly and Scientific Research & Innovation 4(12) 2010 2236 scholar.waset.org/1999.10/11734
 World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:4, No:12, 2010

outcomes company. Figure 4 show the profitability willingness of the

Efficient 17,1, 12 system with their Mean and standard deviation which has a
User-friendly 24, 2, 3
Control 30
positive and normal trend. Below, shown how the system are
Customer complaint 25, 5 efficient and can save the time for the customers and the
company.
International Science Index, Economics and Management Engineering Vol:4, No:12, 2010 waset.org/Publication/11734

Fig. 1. Customer response regarding each variable

Fig. 4. Efficiency of the CMS system based on customers feedback
As shown in figure 1, we have three series of response TEST STATISTICS
basen on above variables which is descrined in high, medium
confidence Profitability Customer satisfaction
and low. Blue color illustrates the high or positive response
from customer, green color outlines medium satisfaction and Chi-Square 15.000a 5.600a 9.143b
the red one shows the negative response or low feedback on df 2 2 1
behalf of the customers. Amon all variable control has the Asymp. Sig. .001 .061 .002
main impact on customers and employees. Moreover, using a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected
CMS system, company can easily decreases the customer cell frequency is 10.0.
complaint and the system and the company become more user
frienly. Furthermore, customer may take benefit from new CONTROL * CUSTOMER COMPLAINT CROSS TABULATION
advantages from company. What is more, having this system
company encounters profitability and may prevent future Customer
issues and this alone can lead the company through efficiency complaint
and some important managerial outcomes. On the other hand, yes no Total
customer will become more satisfied and it save customers’ Control high 5 25 30
times as well and they have more tendency and confidence to
Total 5 25 30
repeat their purchase using the system.

Fig. 2 (P. Pie Chart) and 3 (P. Diagram). Profitability of the

company based on customers’ feedback
Fig. 5 Quality control chart
Fig. 2 shows the profitability of the company. As shown in
the figure the figure had separated in three parts that has Based on fig. 5, CMS under the supervision of CRM
already shown in above table. Using the CMS system will system has a major effect on controlling all aspects of a
bring about high profitability to the customers and to the business and its transaction. Moreover, it has a big impact on

International Scholarly and Scientific Research & Innovation 4(12) 2010 2237 scholar.waset.org/1999.10/11734
 World Academy of Science, Engineering and Technology
International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:4, No:12, 2010

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advantages.
Prior to that we defined three hypotheses and in the end we
were manage to validate all three hypotheses. Majority of the
respondents believe that complaint management system has a
broad control over customers, their complaint and employees
of the company. Moreover, this system under the monitoring
of CRM can decrease the level of negative feedbacks on
behalf of customers. Besides, it is efficient, save the time of
both parties and has some managerial and customers benefits.
Eventually, the system is absolutely profitable for company
which was the main factor for manager to implement that.

ACKNOWLEDGMENT
The authors would like to express their acknowledgement to
Prof Elizabeth Chang, and Dr Chen Wu, for their invaluable
comments and insights in this study.

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International Scholarly and Scientific Research & Innovation 4(12) 2010 2238 scholar.waset.org/1999.10/11734