What is the Customer Feedback Loop?
The idea of feedback is that when an event happens, the resulting actions are observed or felt, which then modifies further actions. For instance, in human behavior, a child might say something inappropriate. The parent scolds the child. The child has received feedback and will likely modify their behavior in the future. Feedback loops occur throughout nature!
In the business world, the theory of a customer feedback loop has given ways to higher levels of product quality, the meeting of consumer demand, and higher revenue for companies that successfully receive and act on feedback.
Closing the Feedback Loop
A closed loop is one that returns to the starting point. If a consumer buys a product or service, then provides feedback which reaches the ears of the producer, then the loop is closed. If they provide their feedback and no one receives it, the loop is open, and the information provided by the consumer has gone to waste.
Closing the customer feedback loop isn’t always as intuitive as it sounds. Thankfully, there are experts like Starlight Analytics who specialize in this field, and can help your business successfully receive and act on customer feedback data through smarter marketing.
Why Customer Feedback Loops Are Important
As stated above, an open loop receives no feedback. Consumers are putting products and services to the test every single day. They are the best source of information for how these products perform in real world conditions through positive and negative feedback.
When customers know they are being listened to, they tend to reward the companies who welcome the feedback with increased brand loyalty and higher sales.
There are many examples of products that looked good on paper, but performed horribly in the marketplace. Successful companies are agile and listen to the feedback and make changes accordingly.
3 Amazing Examples of Closing the Customer Feedback Loop
In one of the most famous examples of a customer feedback loop, the Coca Cola company reformulated its signature beverage. The feedback was instantaneously negative. Tens of thousands of phone calls and letters were received by the company expressing outrage for changing this American classic. In less than 80 days, Coca-Cola reintroduced the original formula. In this example, the feedback was loud and almost impossible not to receive, but had they not acted, the fortunes of the company might have been much different.
Lyft and Uber
Lyft and Uber both use feedback loops to provide service. At the completion of a ride, the driver rates the passenger based on their experience; the passenger rates the driver; and any problems with the service can be reported directly to the companies online. This in turn boosts customer satisfaction and keeps employees happy. Drivers with a lower satisfaction score don’t get as many rides. Lower rated passengers may not be picked up as often, which incentivizes better driving and passenger behavior! Customer concerns can be addressed immediately via the app. Dissatisfied passengers often receive refunds in minutes. This cements trust in the service.
Similarly, AirBnB is using customer feedback systems in a similar manner. After renting a property, the guests are sent a survey to rate the property. The owners can rate the guests. This keeps everyone on their best behavior. If there are any problems, customers or owners can contact AirBnB representatives immediately to receive refunds or a redress of their complaints.
Benefits of Using Customer Feedback Loop
The benefits to successfully closing the customer feedback loop are many! Here are just a few areas where you’ll see improvement:
The product development cycle is one of the best places to see the feedback loop in action. As the design evolves, beta testers use the product and report feedback of their experience. This results in changes, which are then checked for further feedback. This is done in nearly every industry from software, to food service, to consumer products and much more.
Many people have heard the famous quote by the late Steve Jobs: “Some people say, ‘Give the customers what they want.’ But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, ‘If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.”
Jobs wasn’t saying that companies should just make things and hope people want them, but rather that really understanding the feedback would lead to producing products that better meet their needs.
Churn simply means losing customers. Customers who don’t feel like they are being listened to often “churn” and find a new line of product or service. As it is often said, it's much cheaper to keep an existing customer than to find a new one, so keeping your customers happy is one of the keys to long term success. But don't just gather customer feedback and sit on it. Question first why customers may be providing this feedback and then act on it.
By offering the products and services that your customers actually want, you’ll be able to charge higher prices and avoid unsold inventory.
How to Gather Customer Feedback
There are many ways to create a feedback loop. A simple one, offered very commonly now, is to automatically include a satisfaction survey at the end of every transaction to collect customer feedback. Fast food restaurants often utilize this strategy. When you complete your order, the receipt will contain a phone number or web link for a short survey. As a reward, customers usually receive a free item with a future purchase.
For a more focused approach, some companies will do face to face interviews. After a transaction, a cross section of customers are contacted and invited to sit down with an interviewer. They can be asked targeted or open-ended questions, gathering customer feedback.
Pro tip: For a feedback loop to be successful, you need to have a way of separating out useful and non-useful feedback. More information is both a pro and a con. For example, you might value the feedback of one target demographic over another. Repetitive or chronic complaints from a handful of people may not be relevant. More information isn’t necessarily better.
Utilize The Services of An Expert
Consulting an expert company like Starlight is one of the best ways to make sure you are creating a beneficial and focused feedback loop.
With product concept testing from Starlight, you’ll be equipped with information on the perception of your product, buyer demographics and what drives them to purchase. Through social listening and voice of customer analysis, you can listen to your customers’ unmet needs and test these suggestions when it comes to concepts and pricing.
Developing a product is just one part of the process. You need to know exactly how to price it in the marketplace. This is where the concept of price testing comes in. Being thorough in your price testing through proper goal setting and data collection will help you set the right price for your product and avoid costly pitfalls. Starlight offers this suite of offerings to help you power your next winning product. They will base a custom study on your goals, and provide clear insight into what steps you should take next to truly go to market with confidence.
- Wharton Business School: The Feedback Loop: More Data Doesn’t Always Mean Better Customer Service https://knowledge.wharton.upenn.edu/article/feedback-loop-data-doesnt-always-mean-better-customer-service/
- Harvard Business Review: A 5-Step Roadmap For Becoming A More Customer-Centric Company. https://hbr.org/sponsored/2021/08/a-5-step-roadmap-for-becoming-a-more-customer-centric-company