Closed-loop feedback—You might have heard the term bandied about in discussions about customer experience management.
If you’re serious about reducing churn and improving customer loyalty, it’s something you must prioritize this year.
Research from the CustomerGauge intelligence team in 2022 discovered that businesses who closed the loop after running an NPS survey had three times the number of promoters the next time they ran the survey (compared to those who didn’t have a closed loop process).
It’s hard to argue with that.
But what does closed loop feedback mean? Why is it so important? And what are some closed loop feedback best practices? Let’s answer these questions one at a time.
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What is Closed Loop Feedback?
Closed loop feedback is central to any customer experience management strategy. It is the crucial technique you will use to respond to customer feedback, ensure action is taken, and reduce churn.
Let’s look at an example of closed loop feedback within the CustomerGauge CXM framework: Account Experience.
CustomerGauge’s Account Experience (AX) is the CX system we teach all our customers. It’s designed specifically for the needs of B2B and B2B2C organizations. AX comprises three circular steps: Measure, Act, and Monetize and Grow.
Measure is the foundation of your strategy. It involves actively engaging your customers through relationship and transactional surveys, knowing when to send an NPS survey, and other NPS survey best practices.
Monetize and Grow is how you use customer feedback to identify and improve opportunities to increase revenue and reduce churn. But the key step in the middle, the glue that holds it all together, is Act.
This is where closed loop feedback comes in. It’s the point in the process where you consider the feedback you’ve received from your customers and act on it, quickly and effectively. As such, closing the loop involves both responding to your customers and, if possible, demonstrating that you have taken their feedback on board.
The process is a little more complex than it might sound. An automated response saying, “Thank you for participating in our survey” and “We’ll consider your suggestions” doesn’t quite cut it. There’s definitely a way to do closed loop feedback and a way not to do it. More on that in a minute.
Did you know? Companies that close the loop in less than 48 hours experience a 6-point increase in NPS. Learn more stats like this in our annual NPS & CX benchmarking report.
Why is Closing the Loop on Customer Feedback Important?
According to CustomerGauge research, companies that don’t close the loop increase their churn by a minimum of 2.1% every year. Companies that do close the loop, on the other hand, and that do it at every level—from frontline through to executive— decrease their churn by a minimum of 2.3% per year.
This will have a serious impact on your bottom line.
Say you’re a $500 million company with a 20% churn rate per year. If you reduce churn by 2.3% over a five-year period (assuming revenue is flat), you’re adding $234 million to your bottom line over that period.
Your leading churn metrics, like NPS, are also improved significantly by closing the loop quickly (as shown in the image below, taken from our annual NPS & CX benchmarking report).
Research by PwC suggests that 32% of customers stop doing business with a brand they love after a single bad experience. Can you afford to take that kind of hit?
So, reducing churn and increasing revenue are immediate, obvious, and material benefits. What are some of the other reasons why closed loop feedback is important?
Show that you care. Few people like taking surveys, so acknowledging the time and energy customers have taken to get back to you will make them feel appreciated. Firstly, thank them, then exceed their expectations by demonstrating how you made small or major changes to your business as a result of their feedback.
Determine root causes. Improving your Net Promoter Score (NPS) involves understanding the root causes of every score. But no matter how many questions you ask, or how well they’re designed, you’re unlikely to uncover the root cause every time. Rather keep your surveys short and use your closed loop processes to reveal additional information.
Improve the customer experience and retention. How loyal your customers become is a direct result of the experiences you create for them in their customer journey. Use customer feedback not only to identify but also to fix the issues that are preventing your customers from becoming promoters.
Leverage your promoters. Your promoters are likely to recommend you when asked, but how do you get them to recommend you when they’re not being asked? Use the closed loop process to get them to refer new customers, share their opinions about you on social media, volunteer for case studies, or help you with product development.
Improve survey response rates. If your customers see that you’re listening to and acting on their feedback, they’ll be more likely to respond to the next survey. In fact, our research shows that customers are 21% more likely to answer the next survey if you closed the loop. This helps you improve your business incrementally over time.
Improve Net Promoter Scores. As we mentioned in the introduction to this article, companies with a closed loop feedback process see a three-fold increase in their NPS score in the second round of surveys they conduct. This is because:
(1) customers feel heard and valued, and
(2) closing the loop gives you the opportunity to improve issues impacting customer sentiment.
Case study: Find out more about how the multinational organization, Eaton Corporation, used CustomerGauge’s closed loop system to improve its company processes and customer experience.
What Defines a Good Closed Loop Process?
There are a few criteria that, if ticked, show that you’re implementing your closed loop feedback process successfully.
Set targets. Companies that don’t set targets are the slowest to close the loop. The faster you close the loop the higher retention rates are, and the better your chance of positively impacting experience. Your targets should focus on coverage (the percentage of survey respondents you close the loop with, and the speed of closing the loop).
The majority of customers don’t set targets, as we discovered in our annual CX benchmarking report.
But the results clearly showed that without targets, your closed loop speed will be slower.
Measure the impact of your actions. Your results should speak for themselves. If your closed loop feedback is working, you should see:
Increased future response rates.
A boost for your NPS. While improvement rates differ, our research shows that the average NPS increases by six points when you close the loop with customers.
Embrace agility. In closed loop feedback, how fast you respond to your customers or take action to resolve issues is essential. Responding to customers months later might either be meaningless or, worse, add fuel to the fire. A speedy loop-closing process impresses customers and shows that you really care.
Start by creating automatic alerts for feedback that requires urgent action. Fire-fighting issues this way ensures they’re escalated to the right people. In fact, our research has shown that closing the loop within 48 hours can lead to a 12% increase in retention.
Cover a large portion of your customers. Automation has its place, especially if you have thousands of responses and limited resources to handle them (i.e. in the B2C space). Try automating your feedback through emails or newsletters, explaining what you learned through your survey and what you plan to do or have already done. This can help to encourage your non-responsive audience to respond next time.
However, if you’re a B2B organization, we recommend aligning your feedback collection with quarterly meetings so that you can close the loop quickly. Then, have your Customer Success Managers use feedback as a point of discussion in their next meeting with your client.
Solve structural issues. While the frontline of your company can handle most operational issues, you might find that you battle to deal with issues that require cross-company intervention. To address this, you’ll likely need to make certain structural changes. If you don’t, your NPS might start to stagnate.
Closed-loop Feedback Best Practices
OK, so what are some best practice tips to help you on your way?
Be quick. Follow-up calls should be done within 48 hours. Even better if you can make this 24 or even six hours. A speedy response helps your clients feel valued.
Choose the right mechanism. A phone call is usually the best way to get more information about an unresolved issue and close the loop. But this can be time-consuming. If resources are limited, try responding via email instead. We recommend that you communicate progress and plans to customers via email, so that customers can engage at their leisure.
Engage with as many customers as possible. Closing the loop with your detractors might seem like the most important place to start, but don’t forget about your passives and promoters. They represent important customer groups that, if left unchecked, could become detractors.
Close the loop at different levels. Making your closed-loop feedback processes the exclusive responsibility of your frontline or customer service teams might sound like the best approach, but unfortunately, it’s not. Without engaging all the levels of your company, you’re likely only leaving the door open for additional and unnecessary churn.
Different problems require different interventions. Some issues require managerial or even executive involvement. Making sure everyone in your company is able to close the loop improves your internal skills and can have a meaningful impact on your NPS.
Introduce quarterly business reviews. In B2B, discussing customer feedback during quarterly review sessions helps you to close the loop with key decision makers. Presenting their company scores back to them with the comment, “This is how your organization sees your investment in us” is a great conversation starter. Use it to demonstrate the return on investment you’re providing, and to identify areas where you can still improve.
Learn more in our close the loop guide here.
How DHL Closed The Loop With 100% Of Detractors to Improve Response Rates
Survey response rates are a leading indicator of customer health. If your customers aren’t bothering to leave you feedback, it’s likely that they’re disengaged and a churn risk.
DHL knew this. Together, we put processes in place that increased their NPS survey response rates to an unbelievable 60%.
Those processes include:
Slowly adding new contacts within each customer account each quarter. Around 200-300 additional contacts were nominated by DHL’s customer success team to be included each quarter.
Closing the loop with 100% of NPS detractors within 48 hours. CX representatives ensure that low scoring customers have an effective response quickly, feedback is routed to the right team, and senior managers follow up themselves. If the revenue is deemed high value, C-level executives have been known to pick up the phone and close the loop, too.
Closing the loop with every survey respondent within seven days. Automation and an easy-to-use management tool ensure that everyone has clear communication, a motivating factor behind completing the survey next time.
What lessons can we learn here? Your goal should be to close the loop on 100% of customer feedback and fast. And it doesn’t hurt to have C-suite executives involved in the process—especially for your largest clients.
Read more about how we helped DHL build a world-class CXM program in a recent newsletter we sent out.
Close the Loop with CustomerGauge
Closed loop feedback matters. If you want to learn more about it, we’d love to share our wealth of knowledge with you.
Our sales excellence and customer success team continuously coaches some of the world’s best brands to close the loop on customer feedback. Book a demo with our team to learn more.