How to build customer feedback loops for exceptional service and high-value innovation


Companies are continually asking for our feedback. But do they actually use that feedback, and if so how? Unless we know, the company’s response comes back to its customers, there is zero motivation to provide meaningful input. But if that feedback loop is well-designed it will build far more loyal and engaged customers.

I wrote about how to build customer feedback loops in my book Living Networks, shown below. The advice is still just as relevant today, not least as still so few companies are doing this well.

Building customer feedback loops

Consumer expectations have soared over the last years. In a world of digital connections, customers take for granted virtually immediate responses to their problems and desires. For the last few years companies have been working hard to improve their service response, by creating new service delivery channels, building sophisticated automated response systems, and enhancing call center processes. The intent is to respond to customers’ issues quickly and efficiently.

What companies now need to do is to close the loop. This means using feedback to change how things are done. What customers tell you should result, not just in fixing a problem or trying to keep them happy, but actually in enhancing services, products, and their delivery, and swiftly getting feedback on those changes. This creates a living cycle that builds powerful relationships, and a level of value to customers that can be hard to equal.

Applying customer feedback to improving how business is done is not new. What is new is how communication technologies enable companies to integrate input and feedback so quickly that the customers become deeply involved in the company’s core processes. This tight customer feedback loop is illustrated below.

The heart of the issue is how customer feedback is used. It’s easy today to gather feedback quickly and effectively through Internet focus groups and by monitoring online discussions; but unless that input is applied to make things different, it is wasted. It is only when customers’ feedback results in changes that they can notice that there is a true customer feedback loop rather than simply a response to complaints. There are four key steps in bringing these customer feedback loops to life, and in the process creating true competitive advantage.

1. Monitor customer discussions

Many people who would never have complained to a company are happy to express their thoughts on, a website where consumers can share their experiences and views. It’s easier and less confrontational than writing a letter or making a telephone call, consumers feel that their voices are heard because at least their peers will read their opinions, and they understand the power of numbers in attracting the attention of corporations. In a typical story on a similar Australian website, aptly named, one user found the manufacturer of a faulty heater responded with alacrity when his complaint was posted in a public forum, after getting no answer to letters and e-mails.

The new forms of dialogue that have emerged in the Internet Age present a massive opportunity for companies to gain a deeper insight into their customers’ views and opinions. Chat and discussion forums are the new agoras—public, open spaces in which everyone can hear what others are saying and join in with their own thoughts. The proliferation of these means that far more of the world of customer interaction is visible, but it is harder to monitor everything that is going on. Companies like eWatch, a division of PR Newswire, scan public activity on the Internet and report to their clients on any references to their company and products. However these services are promoted mainly as a means of identifying and dealing with negative messages. For example eWatch also offers services such as getting forum hosts to delete messages, and tracking down anonymous posters. There may be times when these are useful, but monitoring what is being said about the company is far more than a public relations tool. It should be one of the primary inputs into everything the company does, and how it tries to continually improve what it does. has a “service improvement” team that uses feedback directly from customers as well as from third-party monitoring sources to enhance the website and service.

Customer communities often provide the best source of direct input, because participants expect the company to be monitoring discussion, and are more likely to make constructive comments. Unfortunately, there are quite a few customer forums that provide customers with a chance to interact, but their comments are either left unread, or are not acted on in any form. This is a big missed opportunity.

2. Get faster, richer feedback… and use it

Procter & Gamble now does almost half of its product tests and focus groups online, allowing it to get feedback on new product trials within a few days rather than months. Every one of the more than 250 brands within the company’s vast empire of consumer products regularly runs focus groups, so the shift results not just in cost savings but also probably more importantly a substantial acceleration in the feedback and product development process. In a similar vein, every day eBay e-mails thousands of customers that have been in touch with the company within the previous 24 hours to invite them to respond to a detailed satisfaction survey. Companies can now swiftly get far more detailed feedback from their customers. The obvious first step is to take advantage of communication technologies to tap that faster, richer feedback. The initial problem is that there is now often far too much information. In addition, business processes must change in order to take advantage of the new wealth of feedback.

Clearly one of the richest channels for customer feedback is a company’s salesforce. The challenge is taking the immense wealth of information potentially available and making it useful and actionable, without disturbing salespeople from their primary duties. Companies can get their salespeople to contribute ideas or snippets of information into an online system. This is only worthwhile if a streamlined filtering mechanism is in place to ensure action is taken, however this also means that salespeople can be rewarded for valuable contributions. Innovation processes such as the BT Ideas systems referred to in Chapter 5 can be adapted to tap customer feedback. One company provides a different topic each week for its salespeople to focus on in gathering customer feedback.

In technology product development, traditionally alpha testing is an early stage process performed inside the company, while beta testing gathers feedback on a pre-release version from potential customers. It is now possible to rapidly get input from a very broad range of external beta testers, but doing this effectively is becoming an enormous job. BetaSphere, a company that provides software and services to incorporate customer input into product development, has attracted clients such as Palm, Cisco, HP, and Federal Express. These companies need to recruit a broad and representative range of testers; work with them to ensure they are providing useful, timely information; and collate their input into reports that developers can apply directly in enhancing products. Taking full advantage of the new possibilities of information flows requires applying effective processes. In addition to making beta testing far more valuable, the development of the networks means that even very early stage alpha testing can include customers. This is exactly what IBM’s alphaWorks unit does, as described in Chapter 5. Customer involvement can shift from product development to innovation—generating the ideas that drive a business.

3. Involve customers in innovation

United Parcel Service (UPS) regularly visits its largest clients, sending teams that include product development, strategy, and innovation executives, as well as the account manager, to meet its clients’ senior management for up to a day, presenting and discussing forthcoming UPS initiatives. Everything from recently launched products through to very early stage concepts are brought to the table to see what may strike a chord with the clients. In one of these sessions with Gateway, UPS proposed the idea of merging goods in transit. This meant that UPS would put together the shipments from all of Gateway’s suppliers as they were being transported, to result in regular deliveries of all the required goods for production, rather than a multitude of uncoordinated parcels coming into the dock. Gateway expressed enthusiasm at the idea, worked with UPS to refine the concept and implementation, and was the first to adopt this new service that was subsequently offered across all of UPS’s major clients.

Customers always have and always will be the greatest source of innovation. That doesn’t mean that companies can simply ask their customers what they want, and give it to them. Innovation stems from the interaction between a company and its customers, bringing different perspectives together both to come up with novel ideas, and develop them into a useful form. The challenge for companies today is to find effective ways of involving their customers in the innovation process, rather than simply seeking feedback or market testing along the way. The potential power of this is unleashed in a networked world. British consultancy KSBR works with major firms such as Lloyds TSB to identify customers who have complained vocally. It asks these customers to develop ideas to help the companies improve their service, and gets them to present their ideas to company executives in highly interactive forums or on video. KSBR finds that most customers who complain have very constructive ideas, and actively want to help companies to perform better.

Lucas Arts asked its customers to help develop its game “Star Wars Galaxies”. A year before the planned release date, the developers launched a website specifically to get broad participation in the design process. As the game was developed, updates were posted to the site, participants were asked their opinions on design issues, and the lead designers answered questions from the community. Die-hard fans were able to debate issues dear to their heart, such as whether any player should have the ability to achieve the ultimate Star Wars gaming ambition—to become a Jedi Knight. Clearly the exercise was valuable for its promotional value, but as importantly, it resulted in an award-winning, top-quality game that was truly designed from the perspective of the user.

In Chapter 5 you saw how open source software demonstrates the power of customer innovation, as well as the distinction between idea generation and development. This helps frame how you can involve your customers in innovation. Focus on getting ideas directly from customers, as well as gaining insights that will spark your own ideas. Actively engage in dialogues about their needs and issues. Get designers and product developers, not just marketers, to interact directly with customers. And design development processes that involve customers throughout. Customer testing is not enough—you have to get them involved earlier. That is what creates winning products and services.

4. Use input for customization

The product designers who spend a day at GE Plastics’ Customer Innovation Center in Selkirk, New York, can leave the premises not only having developed the exact color and effects they require for a new product, but toting home in their luggage an initial batch of color resin and sample plastic parts in their very own custom color. If the library of 20,000 standard colors isn’t sufficient, customers can create a new one, within a few minutes produce plastic samples to view under a range of lighting conditions, and then if they have brought plastic molds, can evaluate how their own product looks in the selected color. For those who prefer to avoid leaving the office, an online service allows a similar interactive process for color development, producing small lots of the customer-designed color within 48 hours. The customer colors are held in the system, and an extranet gives customers a secure way to share color information with third-party designers and manufacturers.

Billions are spent annually doing customer surveys, yet many of these focus mainly on asking customers how satisfied they are with different aspects of service. This feedback certainly can be useful, but far more valuable is applying information directly to customizing service and products. Consider how you can build this approach into your business model, as GE Plastics has done.

Many companies have missed much of the potential value in how they have implemented customer relationship management (CRM) systems. These systems can only ever be as valuable as the information they contain. As firms gather information on all of their interactions with customers, they can learn a great deal on how to service them better, and what sorts of offers they are likely to accept. However, whether you interact with your customers online, through call centers, or through dedicated salespeople, you have an opportunity to ask them questions. So given your customers’ limited attention span, what few questions do you want to ask them?

Rather than asking your customers whether they are satisfied with your service, try asking questions that will enable you to customize what you do for them. In Chapter 4 you saw how this kind of approach can be applied in high-value services relationships, but it is just as relevant in every industry. Depending on your business, you might ask what communication channels they prefer, whether they prefer a large typeface, what operating system they use, or the configuration of their loading docks. Customers recognize that this sort of information enables you to provide them with better service, so they are usually very open. The trick is designing your CRM system so that it can both accept this sort of information, and apply it directly to customized service. If the system is designed with this in mind, then it can prompt customers or relationship staff for the information, and then immediately demonstrate to customers that you are listening to them, by using it to directly enhance service. This can do an immense amount in making them more open to sharing information with you, creating loyalty, building rich customer feedback loops, and uncovering far more revenue-generating opportunities.

Customer feedback loops link the people inside an organization with the most important people outside: the customers. However in order to be able to respond effectively and create the service levels and innovation that will delight customers, the workers in a company themselves need to be closely networked. Let us examine the flow of knowledge and work within organizations.