3 ways to close the customer feedback loop to prevent churn and increase revenue

What is the customer feedback loop?

The customer feedback loop is the practice of responding to customers when they leave feedback. How to do this follow up meaningfully? For example, let's say a customer complains about being overcharged. To close the loop with this customer the company may respond with an apology and issue a refund.

But not all feedback is customer complaints. Customers also leave feedback when they have a particularly memorable experience. Or they may have suggestions for improvements or feature requests.

What many companies don’t realize is that they can turn this feedback into revenue. In this article, we provide three examples of how closing the loop can help you grow your business. If you are already collecting customer feedback, these strategies are a must. We'll also explain how to put in place something like this in real life, using technology! But first let's look into why closing the loop is important.

Why is the customer feedback loop important?

Did you know that it is 5 to 25 times more expensive to acquire new customers than to retain existing ones?

This is why most successful companies invest heavily in customer retention. This includes designing special customer experiences and implementing structured customer success programs. For example, Apple has carefully designed even something as rare as the process of unboxing a new Mac computer. Their Genius bars for technical support are also an innovation.

But there is one customer experience aspect which even successful companies often overlook. It's following up with customers effectively. When it comes to closing the loop, most companies still use these two rudimentary strategies, if at all:

1. After a customer responds, they send “Thank you, we received your feedback”.
2. They only reach out to the most extremely negative responses as defined by the scores left alongside the comment. In the case of Net Promoter Score (NPS) surveys, this may mean they only get back to “Super Detractors”, i.e. those who leave a score of 0, 1 or 2 on an 11-point scale.

We've seen similar approach to other customer satisfaction surveys such as CSAT. Companies seem to believe that only the most negative ratings are linked to churn. In reality, it's not true. Let's look at the actual churn metrics from a real B2C company.

The link between NPS survey and customer churn

At Thematic, we’ve looked at churn data across all NPS scores and found that churn is present across all responses.

The graph on the left shows how churn correlates with the “likelihood to recommend” score on a scale from 0 to 10. On average this company's churn is at under 4%. The lower is the score the higher is the churn. In fact, those who give a score of 10 are half as likely to churn (3.5% vs. 7%).

The graph on the right shows how the actual number of churned customers accumulates across all scores. Only 25% of churned customers have a score of 2 or lower. An additional, 50% sit between the scores of 2 and 8. Turns out this company has many more Passives than Detractors.

In summary, whilst the “Super Detractors” do tend to churn more, churn happens across all scores. So by following up with only most negative reviews, companies will ignore the bulk of customers who will churn.

Closing the loop meaningfully is important. Without it, companies are missing out on retaining key customers. There is also the case of attracting extra revenue through follow up, as we'll see in the following examples. Don’t worry, we understand that time to respond is limited and have come up with an automated way of closing the loop.

3 amazing examples of closing the customer feedback loop

1. Make it easy for people who love you to spend more money with you

My friend Ann-Margaret used to be an accountant.

She now owns a cupcake shop which is incredibly successful. There are customers who visit her each week. I was one of them, when my daughter Maya went to a Saturday school next door. We told Ann-Margret how much we love her cupcakes and she shared that she also bakes for birthdays and functions. Next time I ran an event, I ordered 250 cupcakes from her store.

This process shouldn’t be different for a large company that receives thousands or hundred thousands of positive feedback pieces each year.

Instead of “Thank you for your feedback”, how can you make it easy for a happy customer to buy more? Why not send a personalized offer, mentioning specifically what the customer said?

For example, if someone leaves a comment saying, “Your new website is amazing!”, you could respond:

Make it easy to spend more with you! Make it easy to spread the word on social media about the great services you provide.

Use personalized message that features specific things that customers mentioned in their feedback. Makes it clear that you have listened to both positive and negative feedback. This will create a mini-dialogue and builds a long-term customer relationship.

2. Stop customers from leaving by closing the loop meaningfully

You've seen the charts above! Analysis of feedback data shows that there is a clear link between what people say and what they do.

But customers might mention pain points in an indirect way. For example, they might talk about customer loyalty in this sentiment. “I’ve been a customer for twenty years, but you only give great deals to new customers”.

Customers want to feel valued. If they don’t, they are likely to switch to a competitor offering them a better deal.

Let’s go back to that churn example. Looking at specific things people are talking about regardless of score can help us prevent churn.

Every feedback survey has certain recurrent themes that are linked to higher churn. Here is a slightly redacted example from the same dataset we used above.

You can see an overview of themes by their impact on churn. When people want improvements in delivery, they are less likely to churn. Same goes for the experience with the call center. When they mention customer loyalty, cancelling the service and issues with payment, the impact is positive. This means that they are more likely to churn.

By analysing past data and knowing which themes are highly linked to churn, companies can:

1. act on those issues to minimize their effect in the future, and
2. immediately close the loop with such customers preventing them from leaving.

If a customer indicates that they aren’t valued as a customer, take the opportunity to show to a customer that you appreciate their loyalty and offer some sort of loyalty reward.

After all, it’s only fair.

Or, let's use another example. If someone says the website is very difficult to use, respond by showing how you prioritize this feedback in product development. It could be an email describing new features that will address these issues. Don’t just show that you are listening and this feedback is valuable, but also get the customer excited about what’s next in store!

This is what a meaningful feedback loop process looks like.

3. Acquire new customers through advocacy

Positive feedback can also be used in a meaningful way. Imagine a customer, let’s call him Adam, has said: “I love your weekly deals section”. A powerful way of closing the loop would be to acknowledge this by saying:

You can achieve multiple benefits with a message like this, such as:

• increase the likelihood of Adam making another purchase, perhaps a new product you are launching!
• increase future response rate (Adam will want to leave feedback in the next customer survey)
• create an easy way of sharing his positive experience with others

So don't just collect customer feedback! Use it to build more customer loyalty, get referrals and ideally new customers too!

How to create a personalized closing the loop strategy?

So, you have hundreds, or thousands, of people leaving feedback each month. What are the right steps for closing the loop? How do you actually implement this? Here are some steps to consider.

1. Choose the right follow-up strategy

First of all, decide what will create the greatest impact on revenue?

If you have a high NPS or satisfaction score, you might not have that many Detractors. People are already saying that they are advocates of your brand. What’s the best way of activating them? Identify some of the key themes in feedback and for each theme, the most suitable response and possibly an offer.

If you have a low NPS and/or high churn, you need to address that first. Why are people churning? What would have kept them going? Are you using the right survey questions to learn more about their pain points?

The most important thing you can do during your follow-up is to learn more about customer pain points to inform your product roadmap. Involve your product team or your customer experience team! What would help them?

If you analyze your customer feedback during different periods of time, say 12 and 3 months ago and link it to churn behavior, you’ll get an insight into any possible causes, as well as themes in their feedback indicative of churn.

Have at least ten conversations with customers who have churned. You'll get a deeper understanding of why and how to make future customers stay.

Put some dollar values against what those customers are spending to get an understanding of revenue at risk, and the value of investing into closing the loop and actions to retain future customers.

Create and launch personalized responses based on themes and actions/offers tailored to retaining those customers.

2. Implementing closing the loop workflows

You don't need expensive software to build closing the loop workflows. Here is an example of one company, that implemented a closing the loop strategy using Google Apps and Zapier.

1. First, they gather customer feedback in a Google Spreadsheet.
2. Then, a reviewer or a feedback analysis software annotates each comment with a theme (what it is about, such as a new feature request). - This is the part we help automate!
3. Once the comment is ready for responding, for example, when the requested feature is shipped, a reviewer marks this comment as ready for a response.
4. Zapier monitors that action and creates an email in Gmail sending it to the user.

This is one possible flow that does not need a software developer. You do need to take the time to set it up and to monitor.

At Thematic, we can help customers automate aggregating feedback in one place, annotating of the comments with relevant themes, and setting up the closing the loop workflows.

3. Fight low response rates

Finally, not everyone leaves a comment. The right tools can still help you close the loop automatically for a good proportion of your customers without the noise and bias.

For instance, you could find customers similar to those who did leave feedback by identifying key attributes that churned vs. happy customers. You can then know what matters to different customer segments without them having to tell you. Start improving your customer journey, and keep your customers posted on what's new!

In summary, closing the loop is a critical step in monetizing your customer feedback strategy. The right strategy will help you improve customer loyalty metrics. It will also help you bring in new revenue. Make sure to make it easy for happy customers to spend more and spread the word among their friends.

Whether you are a small cupcake shop or a multi-billion dollar business, thinking about the specific touchpoint of receiving feedback and making the most of it should be on your agenda.