Designing a closed-loop process can improve customer experience, enable customer recovery and, ultimately, increase loyalty.

Many companies collect customer feedback, but too often fail to close the loop by communicating back to customers. What's this tell us? Simply listening to your customers is not enough.

The Skinny on Feedback

Asking for feedback creates expectations that you will take some sort of action and not following up can harm loyalty. Even if you don't follow up immediately with all customers, it's important to communicate that you have heard them, are taking action and appreciate their participation.

What is a Closed-Loop Process?

In simple terms, it's listening to your customers, acting on the data and communicating back intended actions. It is a key differentiator of the Net Promoter approach and an essential element in increasing loyalty. While the process is inherently simple, it takes a commitment from individuals and management across the organization. Closed-loop processes are continuous, relying on the collection of feedback, modifications, additional feedback, refinement and so on.

There are two forms of closed-loop processes—event driven and periodic. Event driven closed-loop processes communicate to individual customers within a short time period. Periodic closed-loop processes communicate to all customers and employees what you have learned and what action you are taking as a result. How to design and implement a successful process depends a great deal on how your company interacts with its customers.

The event driven process is often overlooked and can offer the greatest advantages. When designing these processes there are five fundamental questions that need to be answered.

1. Which customers should receive follow-up?
2. Who should conduct the follow-up?
3. When would the follow up be most effective?
4. How should the company handle the follow-up call?
5. What will happen after the follow-up?

Deciding which customers should receive immediate action depends on your goals. Segmenting customers according to loyalty (Promoters, Passives and Detractors) and financial value can help an organization to determine its follow up process to maximize return on investment. For example, organizations may want to follow up immediately with Detractors who carry high financial value to understand their issues and attempt recovery.

Sage's Discovery Team takes this approach. On average, Sage receives over 14,000 responses a year to an in-product survey. Ten percent of those responses are Detractors and another five percent are from customers who request a follow up call. To improve customer experience, Sage committed to responding to all 15 percent of these customers. Members of the Discovery Team personally call and resolve their issues as quickly as possible. Sage has seen tremendous results from this effort. Due to the phone call alone, 25 percent of Detractors were converted to Promoters and another third to Passives.

Focus on Follow-up

If your goal is to optimize the overall customer experience, your follow up may focus on Promoters, Passives and Detractors. For instance, Brady Asia, a subsidiary of Milwauke-based Brady Corporation, follows up with all customers in order to build relationships and uncover additional insight into the overall customer experience. The company sends all feedback alerts directly to sales managers and the corresponding functional manager for immediate response. A focus on customer value means that smaller customers receive the same respect that major customers do.

Follow-up can also provide the opportunity to mobilize loyal customers and build positive word of mouth. You may choose to follow up with Promoters and offer them special opportunities. For instance, you might invite them to be part of a select community where they can suggest product ideas. Or, you may offer them first-to-know information and special promotions on new products. This increased level of engagement strengthens their loyalty and often motivates them to tell others about your brand.

In addition to deciding what customers will receive follow-up, you must determine who will handle the follow-up. Depending on an organization's operating and management structure, follow up is typically conducted by frontline employees, frontline managers, account managers, a special task force or executives. Since frontline employees have the most interaction with customers, it's imperative that they are trained and empowered to properly respond to customer issues.

A good example of frontline engagement is Allianz. The company has developed core training programs for its frontline employees to ensure they are equipped with the skills and knowledge needed to engage in conversations with employees.

Allianz has trained its employees to ask questions and probe for the core reasons that underpin the customers' dissatisfaction. While there are times that additional organizational support is needed (Allianz has a governance system in place when additional follow up is required), Allianz's frontline employees are equipped to respond in a timely manner.

The most important thing with follow-up, whether conducted by frontline employees or management, is to inspire employee participation and incorporate the process into the daily workflow of employees. The more employees involved in the closed-loop process, the more a cultural shift toward closing the customer feedback loop will occur.

When responding to feedback, timing is critical; a closed-loop process with a long delay before follow up is ineffective. Best practice studies indicate that follow up should occur within 48 hours, even if broader communication efforts take longer. While 48-hour response times might not always be feasible, customers will measure companies based on how quickly they first make contact regarding the issue and then on how quickly the company resolves the issue.

Follow-up Goals

Essentially there are two primary goals of following up.

• The first is issue resolution. Depending on the severity of the problem, resolving a customer's issue in a timely manner will help minimize the risk of losing them as a future customer as well as other potential customers that they could impact through negative word of mouth.

• The second is learning and improvement. When a customer provides feedback they are providing invaluable insight on structural and operational improvements your company can make to improve the customer experience and increase loyalty. For example, LEGO discovered through customer feedback that a particular packaging issue led to a decrease in its Net Promoter Scores. The company was able to act quickly, make improvements to resolve the issue and improve their Net Promoter Score accordingly.

While the closed-loop process design differs according to your goals and resources, the overall objective is to connect the dots between listening to your customers and taking steps to improve the customer experience. By designing a closed-loop process that empowers employees to respond immediately, you will improve the customer experience, enable customer recovery and ultimately increase loyalty.

Dr. Laura Brooks is vice president of research and consulting at Satmetrix, and co-author of 'Answering the Ultimate Question.'