Application of Research on Consumer Complaint Rates to the Estimation of the Financial Impact of Prospective Product Defects

Abstract

The complaint rate, which is defined as the proportion of consumers that complain after experiencing a dissatisfying experience, is an important input for determining the financial impact of prospective product defects. A defective product is one that suffers from a specific, significant design or manufacturing defect. We describe an approach for estimating the complaint rate in a hypothetical example involving defective wood preservative used to treat outside decks. It is assumed that the defect will eventually be discovered by at least some consumers. We rely heavily on studies of consumer complaint rates, recall campaign response rates, and class action response rates.