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Customer feedback is the best way to know what your customers think about your brand. In this competitive business landscape, customers can tell you where you stand and how satisfied they are with your products/services.
Gathering feedback from customers helps you identify areas of improvement, concerns, and innovations and build stronger relationships. But how can you utilize customer feedback to its full potential?
In this blog, we will explore two feedback systems – open and closed-loop feedback systems. Understanding the difference between the two approaches can help you utilize feedback.
In the field of customer engagement, an open-loop feedback system implies the data collection process in which businesses gather data from customers but with no follow-up. There is no direct response from the company nor any action taken based on that information.
The feedback is collected for analysis and insights to improve future products or services. But, the respondents are not kept in the know of what the company is doing with the feedback.
When you gather customer feedback, respond to customers oh how you will use the feedback, and act on the feedback, it’s known as a closed-loop feedback system.
You can use online surveys to collect customer feedback, ensuring there is a point of contact for follow-ups. For example, when using close the loop with NPS surveys, you can follow up to understand the reason behind the scores. You can use the opportunity to learn about their concerns and how you can address them. Â
The aim of the closed-loop approach is to improve customer satisfaction and increase loyalty by addressing their concerns at the right time.
Open-loop and closed-loop feedback systems refer to how businesses gather, analyze, and act on customer feedback. There are several differences in the approach of the two feedback systems.
Here are six differences between the two:
A close loop is a process in which you gather customer feedback, analyze, and act upon the insights. The feedback loop is closed because you take action to communicate back to the customer about how you are going to use their feedback. In this feedback approach, the results of the actions you take are measured to ensure satisfaction.
On the other hand, an open-loop feedback system is a process where feedback is collected but not necessarily acted upon. The company gathers customers’ feedback, but they don’t communicate back to the customers. The feedback is not necessarily used to make changes to the product or service.
The goal of a closed-loop feedback system is to improve customer satisfaction, loyalty, and retention. Gathering customer feedback and following up with them to explore further helps you identify areas of improvement. Closed-loop communications with customers help you make changes that meet customer needs.
The purpose of an open-loop feedback system is to collect data and insights. It allows you to understand the customers better. The feedback is collected with the purpose of gathering data. There is no goal to make feedback-driven actionable improvements.
In a close-the-loop feedback system, you gather, analyze, and act upon the feedback in real-time. The goal is to address customer concerns promptly to maintain customer satisfaction. You reach out to customers to understand their reason behind the feedback and inform them of how you are planning to use the feedback.
However, in an open-loop feedback system, there is no requirement to act on the feedback or respond to customers immediately. While you may gather the feedback in real-time or after a certain period, the analysis and action may not be immediate. You can use the feedback for future product or service development.
The objective of employing closed-loop feedback systems is to create a highly customer-centric experience. The focus is on creating that caters to customers’ needs, preferences, and pain points. The goal is to establish trust and maintain a positive relationship with customers.
On the other hand, open-loop feedback systems may not be as focused on customer engagement. Since the feedback you collect doesn’t come with the expectation of immediate action.
You can evaluate and compare the results of closing the customer feedback loop in a business. When you act on the feedback and make improvements, you can track and measure its impact on customer satisfaction.
The results of an open-loop feedback system may not be as measurable. Since the feedback may not lead to immediate action, you may not be able to evaluate its impact.
In a closed customer feedback loop, feedback collection requires a point of contact from customers. So that once the feedback is collected, the business can follow up with customers to ensure that their concerns are addressed and that they are satisfied with the resolution. As a result, anonymous surveys are of no use in closed-loop communications.
In contrast, an open loop system can use anonymous surveys to collect feedback from customers without a predetermined action plan. The focus is on gathering feedback and opinions that can inform future product development and innovation. While the feedback is analyzed, there is no plan to follow up with respondents or to act on it.
In short, the main difference between a closed loop and an open loop is that the former is focused on analyzing and acting on that data to improve customer satisfaction and loyalty. In contrast, the latter is focused on collecting data.
This sums up the general differences in open vs. closed customer feedback loops. Let’s look at the advantages of the two approaches.
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Did you know that just by reaching out to customers, you can void 11% of customer churn? There are several advantages of a close-the-loop approach, some of these benefits are as follows.
Companies that employ close-the-loop decrease churn by a minimum of 2.3% per year.
By listening to customer feedback and addressing their concerns, you can improve customer satisfaction and loyalty. This, in turn, can help you increase customer retention and reduce customer churn.
Moreover, keeping customers engaged even after data collection shows that you care about their input. This makes them feel like they are part of the brand, which can lead to better customer experience and satisfaction.
41% of customers believe that the companies responding to their reviews care about their customers.
By responding to customers’ concerns and keeping them updated about how you are going to resolve them, you can establish trust with the customers. When customers see that their feedback is being used to make changes and improvements, it allows them to trust your brand. This results in increased loyalty and repeat business.
A closed-loop feedback system enables businesses to improve their products and services based on customer feedback continuously. You can gather initial feedback and follow up for more detailed opinions and suggestions to uncover ideas for innovations.
While you don’t have to use every suggestion, closed-loop customer feedback allows you to explore the ideas that appeal to you. It helps you better understand customers’ needs and how you can cater to them.
Satisfied customers are likely to be repeat customers and make additional purchases. By improving customer satisfaction through close a loop feedback system, you can increase revenue and profitability.
Overall, a closed-loop feedback system can help businesses improve the customer experience by enabling real-time closed-loop communications.
Open-loop customer feedback has several advantages as well. Here are two benefits of using the open-loop approach.
Open-loop feedback system allows you to gather feedback without a predetermined plan to respond to the audience. This means you can gather customers’ suggestions from multiple sources and discover new ideas for innovation.
You can track review websites or launch an anonymous survey to collect huge amounts of data from a wider population. This way, you can collect ideas that may not fit your current strategy but that you can use for future innovations.
Open-loop feedback allows you to conduct anonymous surveys. This means customers who usually shy away from offering insights can freely share their opinion. Customers may feel more comfortable sharing their honest opinion when they know their identity won’t be revealed.
You can engage a large number of respondents without a point of contact and demonstrate that you value their opinion.
Overall, open-loop customer feedback can help you gather innovative ideas and listen to honest opinions.
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So, we have established that close a loop feedback system is more effective and impactful in improving customer satisfaction and loyalty. But what are some of the closed-loop feedback best practices?
When using surveys to gather customer data, leverage survey software that allows you to set up an automated follow-up email. For example, when using the NPS survey, set up an automated email based on the promoter, detractors, and passive scores.
While you may not be able to contact all the customers, prioritize which customer to respond to first. Your priority can be based on the concerns or pain points that may have a potential negative impact on business revenue. Or, you can also decide the priority based on advocates and at-risk of churning customers.
It should not be limited to customer support teams to close the customer feedback loop. Engage various departments and assign ownership to each department for whom the feedback is coming.
Whether an open-loop or closed-loop customer feedback system is better for your business depends on the needs and goals of the business. Â
An open-loop feedback system is more suitable for businesses focused on innovation and exploring new ideas. Without any need for immediate follow-up, you can leverage insights that can inform future product development and innovation.
On the other hand, a closed-loop feedback system is more suitable for businesses prioritizing customer satisfaction and loyalty. By collecting and acting on customer feedback, you can improve customer satisfaction, loyalty, and retention.
Some businesses can also benefit from a combination of the two feedback systems. For example, businesses can use open-loop feedback to gather insights and ideas for future product development. And at the right time, use a closed-loop approach to gather deeper insights and refine those products based on customer feedback.
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In conclusion, both Open and Closed Loop feedback systems have their advantages and disadvantages. The choice between the two depends on the specific needs and goals of your business.
Customer feedback is a valuable tool for businesses looking to improve their products and services and build better relationships with their customers. Implementing effective feedback systems enables you to gain insights into customer needs and preferences, build brand loyalty, and stay ahead of the competition in an ever-changing marketplace.
Businesses using customer feedback to resolve issues and improve products/services is a prime example of closed loop customer feedback.
For instance, a customer can offer negative feedback about experience with a product or service. You can use this feedback to further investigate and address the specific issue. This way you can follow up with the customer to ensure their satisfaction.
The main difference between closed-loop and open-loop customer feedback is the approach to use the collected feedback.
Closed-loop systems are focused on addressing specific issues and concerns raised by customers. While open-loop systems help generate new ideas and opportunities for innovation.
The benefits of closed-loop customer feedback include improved customer satisfaction and loyalty, reduced churn, and increased revenue. Â
An example of a closed-loop conversation is a customer providing feedback about a negative experience with a product or service. You can then use this feedback to open a conversation with the concerned customer. This allows you to address the specific issue, such as improving the product or service, and follow up with the customer to ensure their satisfaction.
This creates closed-loop communications between you and the customer. Â
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