Assessing the Effects of Post-Purchase Dissatisfaction and Complaining Behavior on Profitability: A Monte Carlo Simulation

Abstract

The authors present a Monte Carlo simulation demonstrating the effect of post-purchase dissatisfaction and complaining behavior on profitability. Although it is widely believed that improvements in complaint management can increase profits, empirical evidence is lacking. Based on pre-specified probabilities of complaint behaviors, and inputs regarding different outcomes (specifically justice, repatronage, and word-of-mouth), a simulation model is developed. The model allows one to estimate the opportunity costs of post-purchase dissatisfaction and complaint behavior. "What if" analyses are also conducted in order to estimate the impact of changes in complaint management and recovery outcomes on profitability.