The Frequency and Distribution of Better Business Bureau Complaints: An Analysis Based on Exchange Transactions

Abstract

With the cooperation of a local BBB office, the BBB complaint histories and sales volume records of companies in two key industries, new home builders and franchised auto dealers, were analyzed over a five-year period (1998-2002). Results demonstrated that in the new home construction industry one BBB complaint was generated for every 148 homes built, while the frequency in the auto dealers industry was significantly lower with just one BBB complaint for every 2,131 new and used cars sold. In both industries the distribution of BBB complaints was highly skewed with a few "bad apple" companies generating the bulk of the complaints. Most companies in both industries generated few, if any, BBB complaints. Larger companies in both industries generated significantly more BBB complaints than smaller companies. But when the rate of BBB complaints (number of BBB complaints divided by company size) was considered, a mixed view emerged regarding the relationship with firm size. In the auto dealers industry, larger dealers had significantly higher BBB complaint rates than smaller dealers. However, the complaint rate of larger home builders was not significantly greater than the complaint rate for smaller builders.