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B2C Crash as an Innovation Failure:

There is anecdotal evidence that service providers are divesting themselves of customers. The literature on customer valuation analytics offers tools to determine which customers to divest. Yet, there is no consensus about the process that can be used to implement the customer divestiture decision. In this article, we examine the nonvoluntary customer exit process initiated by the firm; we define Service Denial as the phenomenon where the existing customer of the firm is no longer extended the current level or type of service. It is a pervasive and global phenomenon and an important part of customer-asset management. We postulate termination of the relationship as a process continuum rather than a single decision, explore the unintended consequences of such decisions, and articulate how a firm can manage the process to mitigate negative consequences. The proposed strategic framework draws from the exchange literature and uses the incompatible value proposition between the firm and customers as a theoretical lens. In addition, we outline implications for theory and practice, and identify avenues of further research. 2 “One of the most difficult things in building a better business is learning what to divest.”--Sir Brian Pittman (Former Chairman and CEO of Lloyd Bank TBS). Consider these instances: RBC Centura of Rocky Mount of Carolinas and Virginia has created three classes of customers based on profitability. Individual banks have already started communicating with the customers who belong to the least profitable segment. They intend to let go of the customers who are not producing any value. (Asheville Global Report, March-April 2002) Commerzbank AG’s chairman, Klaus-Peter Muller, says he is putting his customers on notice: Either pay a reasonable price for loans and financial services or be cut off. That even applies to companies that have been banking with Germany’s third-largest bank for 30 or 40 years, he says.

As service failures are inevitable, firms must be prepared to recover and learn from service failures. Yet, the majority of customers are still dissatisfied with the way firms resolve their complaints. Can learning to reduce service failures reduce customer dissatisfaction, and to what extent are such reductions sustainable? Previous research showed that organizational learning curves for customer dissatisfaction (i) follow a U-shaped function of operating experience and (ii) are heterogeneous across firms. In this paper, I tease out where the U-shaped learning-curve effect and learning-curve heterogeneity originate: service failure or customers ’ propensity to complain given the occurrence of a service failure. Using quarterly data for nine major U.S. airlines over 11 years, I find that the U-shaped learning-curve effect as well as the learning-curve heterogeneity originates in the propensity to complain. In the long term, reductions in service failure did not translate in sustainable reductions in customer dissatisfaction. Customers’ propensity to complain eventually went up. Managing the propensity to complain provides more opportunity for a firm to distinguish itself from competitors. Key words: customer dissatisfaction; learning curve; organizational learning; marketing; service failure; empirical research 1.

communications strategy from a relational perspective