Where did the term 'graphic novel' come from?

The term “graphic novel.”

The following is a piece of text taken from a transcript of Will Eisner’s keynote address at the ‘Will Eisner Symposium’. He explains of how the term graphic novel began:

That began what is known as the graphic novel today. Those of you who've heard me speak before know this now famous story about how it was called a “graphic novel.” I completed the book, A Contract With God, and I called the president of Bantam Books in New York, who I knew had seen my work with The Spirit. Now, this was a very busy guy who didn't have much time to speak to you.

So I called him and said, "There's something I want to show you, something I think is very interesting." 
He said, "Yeah, well, what is it?"
A little man in my head popped up and said, "For Christ's sake stupid, don't tell him it's a comic. He'll hang up on you." So, I said, "It's a graphic novel."
He said, "Wow! That sounds interesting. Come on up."

From Eisner’s words the term graphic novel was created in 1978, this was at the same time his work A Contract With God had finished.

Reference: Keynote address from the 2002 'Will Eisner Symposium http://www.english.ufl.edu/imagetext/archives/v1_1/eisner/