What is the customer feedback loop?
The customer feedback loop is the practice of responding to customers meaningfully when they leave feedback. For example, if a customer complains about being overcharged, 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.
Here, we will first discuss why closing the loop is important, then provide three examples of how to grow your business thanks to customer feedback, and finally explain how to implement something like this in real life, using technology!
Why is the customer feedback loop important?
Did you know that it can be anywhere from five to 25 times more expensive to acquire new customers than to retain existing ones?
Thankfully, companies around the world have recognized this. Most successful companies invest heavily in designing special customer experiences and implementing structured customer success programmes. 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 area of customer experience which is often overlooked, even by the most successful companies. Most companies ask customers for feedback, but when it comes to closing the loop on that feedback, most still use these two rudimentary strategies, if at all:
- After a customer responds, they send “Thank you, we received your feedback”.
- 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. They are the most at-risk customers, who are likely to churn and give a bad review.
At Thematic, we’ve looked at churn data across all NPS scores and found that churn is present across all responses.
The below graphs outline real churn numbers from an existing company.
The graph on the left shows that among customers who gave a “likelihood to recommend” score of 0 in the NPS survey, they have almost 7% churn rate, but among those who gave a score of 10, only 3.5% churn.
However, in this company’s case, there are significantly more Promoters than Passives and Detractors. So when we look at the actual number of people who churn, there are more of them among higher scores.
In summary, whilst the “Super Detractors” do tend to churn more, up to 75% of all churn happens across just any score that a customer might give, so we can see that most churn occurs outside of the Super Detractors, so by focusing on low scores only, 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, and even on additional revenue, as we can see in the following examples. And 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”, the company should 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 much better than your old one”, the company could respond “We are so happy that you liked our website! Did you know that we also have an app, which you can use on the go? Download our app to get 10% on your next purchase.”
In fact, any personalized message that features specific things that a customer loved about your services makes it clear that you have listened and creates a mini-dialogue which ultimately builds a long-term bond with your customers.
2. Stop customers from leaving by closing the loop meaningfully
At Thematic, we have analysed millions of feedback pieces and have found that there is a clear link between what people say and what they do in the following months.
We see a lot of feedback from customers with the following 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 and show how looking at specific things people are talking about can help us pinpoint the things that will most prevent churn.
We found that each company has certain recurrent themes in their feedback that have a significant indication of churn. Here is a slightly redacted example from the same dataset we used above.
It’s showing that when people talk about improvements in delivery, they are less likely to churn, whereas when they mention loyalty (e.g. not being valued), the fact that they are thinking of cancelling or have issues with payment, they are more likely to churn.
By analysing past data and knowing which themes are highly linked to churn, companies can:
- act on those issues to minimize their effect in the future, and
- immediately close the loop with such customers preventing them from leaving.
If a customer mentions themes that indicate that they aren’t valued as a customer, it’s the perfect 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, to give another example, if someone comments on how the website is very difficult to use, you could respond with an email describing new upcoming 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!
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:
A message like this one increases the likelihood of Adam making another purchase, leaving feedback next time the company sends him a survey, and creates an easy way of sharing his positive experience with others in a win-win situation.
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. Coming up with a closing the loop 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?
If you analyze your customer feedback during different periods of time, say 12 and 3 months ago and link it to churn behaviour, 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, to get a deeper understanding of why and if there would have been anything to make them 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
Believe it or not, but we have worked with one software company, who had a working system for closing the loop built on Google Apps and Zapier, an integration system. Once the feedback is collected, it’s funnelled into a Google Spreadsheet.
A reviewer annotates each comment with a theme (what it is about, such as a new feature request). 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. Zappier 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, but it does take a bit to set 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. Including customers who haven’t left any feedback
Finally, not everyone leaves a comment, but with the right tools, you can close the loop automatically for a good proportion of your customers without the noise and bias.
In addition, you could find customers similar to those who did leave feedback by identifying key attributes that churned vs. happy customers share. The more you automate, for example, theme extraction and workflows that trigger responses, the more you can test whether your strategy is working and actually making a difference.
In summary, closing the loop is a critical step in monetising your customer feedback strategy. It can help you not only retain customers who make it very clear that they are at danger of leaving, but also bring in new revenue by making 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.