Best Practices in Managing CX: Robust Closed Loop Processes
- ericsmuda
- Jun 7, 2023
- 6 min read
In the third on my series of best practices in managing a customer experience program, I discuss what for me is a non-negotiable factor for any meaningful CX program: having high functioning closed-loop processes.
Most of my readers will understand what I mean when I discuss closed-loop processes, but for those new to the term, it comes from Bain & Company’s Net Promoter SystemSM:
The inner loop refers to contacting a customer after receiving feedback from them—via a survey, social media post, review, etc.—and trying to understand their feedback and resolve any issues they may have. The inner loop is often described as a 1-to-1 feedback loop.
The outer loop describes the activities that happen to understand the root cause of issues across many customers, the improvement activity that occurs, and the subsequent “closing of the loop” by communicating with all customers or at least all those impacted by a particular issue. This is typically done through marketing and PR channels rather than individually with each customer. The outer loop is often described as a 1-to-many feedback loop.
I’ve already said having strong closed-loop processes is non-negotiable. Let me be more adamant: if you don’t have closed-loop processes, you are not doing CX.
And according to a 2020 Forrester study, 61% of companies don’t have a formal process for closing the loop with customers. Based on my experience as a consumer as well as a hypothesis about the types of companies that participate in Forrester surveys, I would be willing to bet the percentage is actually much higher than that.
According to Gartner research, 95% of companies collect customer feedback, but only 10% work to improve their products and services, and 5% bother to tell their customers what they have done for them.
The Importance of Closing the Loop
Why is closing the loop so important? The easy answer is that it’s the right thing to do. If a customer has spent the time to provide feedback or to reach out for help, you owe them the courtesy of a response. We all know that those who complain are just the tip of the iceberg. According to Esteban Kolsky, CEO of thinkJar, only 1 out of 26 unhappy customers (4%) complain; the rest churn.
Which leads us to the more important reasons to have effective closed-loop processes:
Reduced churn—it’s cheaper to keep a customer than to replace one
Higher customer loyalty—which leads to longer tenure and higher lifetime value
More likely to recommend the brand—making them an unofficial, free marketing team
Establishing an Effective Inner Closed-Loop Process
To establish an effective inner loop process, first, you need to make several decisions and determine:
Who is going to handle the closed-loop conversation? Will it be the team that created the issue—local operations, digital team, etc.—or a centralized customer care team? Should you get the executive team involved and, if so, when? Having the local team do it enhances their learning opportunities and helps them build direct relationships with customers. But they may not have the skills or the time to prioritize doing this effectively.
Who or which customers are we going to contact? And what is the source—surveys, social media comments, reviews—and how do we respond by source? Obviously the more customers you can contact, the better. But my advice is start small and build the organizational muscle. If you can’t contact all detractors, start with the most extreme ones. In one of my previous roles, we started with just contacting those who gave us a 0 to 3 on a survey response. We eventually migrated to all detractors. The social media team handled anything that came through online channels.
How quickly do we need to contact them? My advice is within the first 48 hours after a complaint, sooner if possible.
After you make these decisions, then you must figure out how to build the right business rules and alerting or ticketing process, design the proper training, and determine the proper tracking and escalation system. All of the major customer feedback management companies have the capability to make this easy, but it may be better to route these through your CRM or existing case management systems in order to have all cases in a single system of record.
Advancements in Artificial Intelligence
One factor that is more relevant today than ever before is how to incorporate artificial intelligence. AI offers the ability to handle many of the tasks described above and handle them more quickly and in much greater volume than humans can. But two cautions here:
One of the key benefits of a closed-loop process is the learning that happens when you contact the customer and how that learning can be shared and applied to prevent a recurrence of the issue. This is likely lost when using AI.
The second caution is the use of automation vs. human interaction. What impact does it have on your brand if it is clear to the customer that they are not dealing with a human? Do you need to disclose that they are dealing with an automated system versus a human? You need to consider both the customer and brand implications of your decision here.
But I believe there are at least two ways that using AI can enhance the closed-loop process. First, it offers greater scale benefits, so as you make the decisions discussed above, perhaps you have a segment of customers or situations where you use AI to respond to customers to whom you would otherwise not be able to respond.
I know of one large tech company that used text analytics to classify customer verbatims or complaints and automatically sending replies based on their classification. They knew they had 10 to 12 improvement projects in process at any given time, so they had unique replies for each project; and if they could classify the customer feedback into one of those buckets, they would auto-generate a response that said something to the effect of “we heard you and this is what we are working on.” It likely wasn’t addressing the nuances of every customer’s feedback, but it was better than not responding at all.
The second area where using AI could be beneficial gets back to the “tip of the iceberg” issue from above. If only 1-in-26 customers complain, can you identify more of those other 25 who may have experienced the same or similar issues and proactively reach out to them as well to prevent silent churn?
Establishing an Effective Outer Closed-Loop Process
Establishing an effective outer loop process requires establishing root-cause processes and then governance processes to manage the improvement activities. The governance process will be the focus of next week’s newsletter, but I will briefly discuss the outer loop communication process. Too many companies shortchange or miss this step, but here is where you actually have an opportunity to tell customers “we listened and here is what we are working on,” or “we listened, we have made some changes, come see what’s new.” It is a great opportunity to demonstrate to your customers that you value their feedback and are acting on it as well as market your improvements or new offerings.
One best practice I used in a past role as a CX leader was to send a quarterly email to every customer that had given us survey feedback (we were getting over 400K surveys per quarter) that said “Thank you for taking the time to give us feedback. Across all of our customers, here are the main themes that we heard and here are the [3 to 5] things we are working on and when you can expect to see them.” Of course we had to be a little careful not to give away competitive intelligence, but what we found is that our survey response rate increased as customers recognized that we were listening and acting.
Conclusion
When I talk to clients, I often get told “we don’t have the resources to do closed-loop properly and to contact all of these customers.” Given the statistics included in the links above regarding churn, my question is how do you not have resources to retain your customers? And are you more willing to spend more effort to acquire new customers than to keep the ones you have?
Moving forward, look at your organizational priorities, staffing options, and the potential for AI to figure out how to “close the loop” and capture the financial benefits that come from reduced churn, longer tenure, higher CLV, and the free marketing of your promoters.
Come back next week to learn about the final best practice in managing CX: Governance—how to get organized to manage a portfolio of improvement efforts and how to ensure accountability and follow through.
This article was first published in my LinkedIn newsletter, Transformational CX.
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To discuss how I can help your company, please contact me at: eric.smuda@outlook.com
Net Promoter ScoreSM and Net Promoter SystemSM are service marks of Bain & Company, Inc., NICE Systems, Inc., and Fred Reichheld.
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