A new study in the Journal of Marketing investigates complaint publicization on social media. Increasingly, consumers use social media platforms like Twitter to make complaints and firms respond to these complaints. For example, a recent survey shows that from 2016-2018 complaints and responses to them increased by 250% on Twitter. The use of social media for complaints is expected to increase further as younger consumers air their complaints online instead of calling customer support phone lines. On Twitter, a firm’s responses to complaints brings them to the top of the firm’s page and makes them accessible to the firm’s followers. Before this, only the followers of the consumer would have seen the complaint. In addition, further responses to complaints bring them to the top of the Twitter page each time. These features of Twitter give responses to complaints additional publicity.
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Prior research on firm responses to complaints on other forms of social media has found benefits to responding quickly and transparently while showing empathy when responding (i.e., responses by firms mitigate the negative effect of the complaint). However, on some platforms (like Twitter) responses to complaints make them more visible. (Our research team calls this phenomenon complaint publicity.) We find that firms responding to complaints on Twitter exhibit lower firm values and daily stock returns around tweets and receive more complaints in the future. Responding to complaints also lowers the effectiveness of a firm’s other tweets (those not associated with complaints).
We conducted two separate studies of firms’ Twitter communications. To collect our sample, we identified the 375 of the S&P 500 firms that had Twitter pages. We then developed a python engine to scrape information from Twitter for these firms and we crawled the Twitter page of each firm to collect its tweets and responses to others’ tweets. In the first study, we found that responses to complaints are associated with lower firm value (measured by Tobin’s Q). In the second study, we focused on firms that were responding to complaints stemming from product recalls. Of our 375 firms, we identified 107 that had product recalls. Product recalls provide a nice setting for our tests because their severity is disclosed (allowing us to control for it) and they are exogenous (i.e., they are unexpected and are not associated with our dependent variable other than through the independent variable), which allows us to test for causality between complaint responses on Twitter and their effect on firms. In the second study, we find that responses to complaints surrounding product recalls are significantly associated with lower daily abnormal returns and a higher volume of future complaints for firms following open- versus closed-complaint response strategies. In both studies we controlled for other brand equity, accounting, and financial measures. Our results consistently show that complaint response publicity has negative implications for firms using Twitter to respond to complaints and outweighs any positive benefits from being seen as responsive to consumer complaints. We also provide evidence that firms can mitigate these negative implications by using closed-response strategies.
We recommend that managers avoid long interactions about customer complaints on social media to reduce complaint publicity. Firms can employ open- or closed-response strategies on Twitter. We define an open-response strategy as one where firms handle more than 75% of complaints through multiple exchanges on Twitter. We define a closed-response strategy as one where firms handle more than 75% of complaints through one public message on Twitter, inviting the complainant to continue the complaint handling process in private. We find that closed-response strategies mitigate the effect of complaint publicity. Most platforms have specific features that managers can use to reduce potential complaint publicity. For example, firms on Twitter can reduce the amount of exposure that complaints get by “pinning” positive tweets to the top of the page, which leaves less space for responses to complaints to potentially fill. Overall, when responding to complaints on social media, managers should consider and potentially avoid platform-specific features that can make complaints more public.
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