What Is a Feedback Loop and How Does It Work?

Your customers are your biggest supporters and your biggest critics as well. Because they use your product daily, they know what the best features are and worst as well.

The good news is that many customers gladly share their feedback or reviews with you. But you have to put in some extra effort to get those reviews. There is a complete process through which you can utilize this feedback.

One fascinating thing in this regard is the Feedback Loop. You might not have noticed, but they are everywhere. Surprisingly, they have a huge impact on our purchasing decisions.

It helps you analyze your customers’ reviews and connect deeper with your audience. A feedback loop is crucial if you want your business to grow and succeed in this digital age. But what is a feedback loop? How can you implement it for your business success?

Curious about it?

Then, keep reading because we are going to uncover everything you need to know about feedback loops. Let’s get started.

What Is A Feedback Loop?

A feedback loop is a self-regulating mechanism or process where the output or result of an action influences and modifies the initial action itself. In simpler terms, it’s a cycle where the output of a system affects its behavior.

But these are not limited to businesses only.

They are present in every field, such as biology in blood loss measurement, electronics, etc. But let’s talk about it with respect to customer experience.

It’s about gathering data, doing analysis using a tool, and then upgrading the product or service. But what’s its significance for businesses?

It helps them contribute to increased sales, customer loyalty, and positive word-of-mouth marketing. However, there is more to this tactic. If you execute it with the wrong approach, the outcome can be extremely damaging for your business.

Types Of Feedback Loops

To implement this tactic, you should know its types. After knowing it, you can make informed decisions that improve customer experience, leading to a high customer satisfaction rate.

Positive Feedback Loops

A positive feedback loop is a self-reinforcing mechanism or process in which an initial change or disturbance leads to additional and often amplified changes in the same direction. If implemented in a company, the process includes listening to employees’ suggestions to improve the workplace, boosting job satisfaction, and ultimately increasing profits.

It’s a continuous cycle of using employee/customer input to create a better work environment.

But what does it mean in a business context?

It means a company is taking steps to improve the product or services based on the reviews of its customers. After making improvements, this process starts again. Businesses analyze the users, check their reviews, and ensure that the audience loves improvement.

If everything goes

Example of Microsoft’s Transformation

By learning this example, you will be able to get a better understanding of these concepts.

Microsoft’s CEO, Satya Nadella, wanted to make big changes in the company. He noticed that different parts of the company were not working well together and were competing too much.

This culture is not good for the company. Right?

The CEO had to do something about it.

So, he asked all employees to focus on three important goals. This made everyone in the company work together better, following one vision. It gave employees a clear sense of purpose and improved team unity.

Negative Feedback Loops

In business terms, a negative feedback loop refers to a self-regulating mechanism or process that helps maintain stability or prevent excessive deviations in a system or operation. This is a negative feedback mechanism because it works to counteract or reduce deviations from a desired state rather than amplify them.

Imagine what will happen if a business ignores customer reviews to improve products or services. A company usually fails to acknowledge customer reviews or delays in making improvements. What’s the result of this?

The consequence will be decreased engagement, fewer happy customers, and eventually, the business’s downfall.

Example of United Airlines

In April 2017, United Airlines faced a public relations crisis when a passenger was forcibly removed from an overbooked flight, resulting in outrage and negative publicity.

United’s CEO issued a public apology, announced policy changes, settled with the passengers, and improved employee training. The incident prompted the airline to prioritize customer service and communication, working to rebuild trust with passengers.

Why Are Feedback Loops Important?

It plays a crucial role in winning the hearts of your audience. You might not know, but every company is doing it. If you utilize it, your business can see exponential growth because remember:

Happy customers = Business growth

So should you use it? Yes. This tactic has a lot of significance, and some of the most important benefits of it are as follows.

• It enables businesses to collect input and feedback from employees, customers, and other stakeholders. This information helps identify areas for improvement in products, services, and processes, leading to ongoing refinements and innovation.
• Businesses can enhance customer satisfaction by actively seeking and acting upon customer reviews. It, in turn, leads to customer loyalty and can lead to positive word-of-mouth referrals.
• Employees who feel their review is valued are often more engaged and motivated. The feedback loop impacts employee experience, thus creating a culture of openness and collaboration. It boosts employee morale and productivity.
• Companies that consistently gather and act on suggestions can gain a competitive advantage by staying attuned to market trends, customer expectations, and market demands.
• In the long run, businesses that establish effective feedback loops are more likely to adapt, grow, and thrive. They are better equipped to navigate challenges and meet evolving customer demands.

What Are Components Of Feedback Loop?

In order to make this tactic effective, you should know its three major components. By following these, you can yield better results. These components are:

• Input
• Process
• Output

Now, let’s discuss these components.

Input is the initial signal or stimulus that triggers the loop. It sets the process in motion. After that, input is processed or acted upon, leading to a change in the system.

Now remember the result of the process can either reinforce or counteract the initial input. But it’s not completed yet. The most crucial part is yet to come.

It is a feedback mechanism. This component monitors and feeds the output into the system, influencing future processes. But it doesn’t use the latest information only. Instead, it incorporates past results into its decision-making process.

This process keeps on going until the desired results are achieved. The iterations of the loops are made on previous ones. So what result do we get?

It leads to refinements or adaptations in the system’s behavior as time unfolds.

Steps Of A Successful Feedback Loop

Now that you’ve all the information, it’s time to implement this strategy practically. It is divided into five stages, and each of them is immensely important.

It begins with collecting all the information that can be beneficial, especially reviews of customers. It includes analyzing and learning the data. You can use some tools, such as Luminoso, to refine your research.

Many people think that’s enough.

But there’s more to this strategy. You need to follow up with respondents. Because just by the name, you can tell it’s a loop. So, to make it work in your favor, you must constantly make changes and incorporate those suggestions or reviews.

Examples of Feedback Loop

There are many examples of this tactic. But I’ll share the top three most relevant examples of the business industry.

Customers Satisfaction:

A restaurant uses customer comment cards to gather food quality and service-related suggestions. They want to know what people say about their services, staff, and, most specifically, food quality.

• Process: The management analyzes all the suggestions, reviews, and identifies areas for improvement. Focus on continuous improvement to create a positive impact. You can also conduct customer satisfaction surveys. 
• Result: Changes are made to the menu, and staff training is adjusted accordingly.
• Outcome: Customers experience improved service and better food quality, leading to higher satisfaction and repeat business.

Employees Encouragement:

A tech company conducts regular employee surveys to increase job satisfaction and identify workplace issues. What approach should they use?

To improve it, you can also conduct employee satisfaction surveys. However, keep it an anonymous survey so everyone can honestly share their opinions. It can contribute to employee retention and enhanced workplace satisfaction.

Here’s what they should do.

• Process: Survey results are analyzed, and HR implements changes in response to employee concerns.
• Result: Improved workplace conditions and morale lead to high productivity and reduced turnover. They learn the company’s vision and understand company policies and goals.
• Outcome: The company retains top talent and achieves better overall performance and higher chances of employee happiness. 

Product Development:

Suppose you’re running a software company. The beta version of the app has been released. Now you know what people think about it. So you can move on to the next official launch. Here’s how the process goes.

• Process: All the constructive feedback from the users is assessed, and product developers make updates and enhancements.
• Result: The app becomes more user-friendly and gains new features based on user suggestions.
• Outcome: Increased user satisfaction and higher app ratings drive greater adoption and revenue. It leads to a continued increase in happy customers and ideas for future products. 

How Can You Get Feedback?

It is the most important thing you should know if you’re planning to start this strategy. For this, you need to make a robust system for the collection of user responses, reviews, and suggestions.

Find the platforms from which you can extract reviews of your customers. Think of which channels they are using. It can be Instagram, LinkedIn, or anything else. Some other ways to collect information are:

• Surveys
• Chat logs
• App reviews
• Social media apps

Now, create a system to analyze all these reviews or suggestions. I’m not talking about just understanding the sentiment of the review. It’s about diving deeper and assessing it. Create feedback loops that implement changes.

The commitment to improvement is based on the suggestions of customers. Remember, communication is the key. Communicate with your audience and try to gain trust. After making updates and improvements, reconnect with them to show appreciation. Don’t forget to get more insights for ongoing improvements.

Not only this, but it keeps your team informed about changes based on reviews. Encourage them to share their ideas on how you can improve.

So here’s how the process goes.

Extract customer feedback → Analyze these reviews manually or use Luminoso → Make improvements → Communicate with your audience → Keep your team updated → Keep brainstorming for more improvements and growth opportunities.

Conclusion

Feedback loops are a game-changer for businesses. It gives insights into how you can win your audience’s hearts, make better decisions, and grow exponentially. But you’ve to be quick and think creatively.

It will help you stand out from the crowd.

Don’t limit yourself to extracting information from one source only. Keep experimenting and analyze what’s working perfectly. Sound communication is also important because customers see transparency and honesty in high regard. You must use it to drive sales of your business.

It doesn’t matter if it’s with customers, employees, or stakeholders; build trust with them. Engage with them and show how important they are. They are the key pillars of your business. If a business monitors the effectiveness of the feedback loop, then it’s most likely to succeed compared to those who don’t bother to monitor or measure the progress.

Instead of doing everything manually, use tools that can save you time, like Luminoso. Because time is the new currency, use it wisely to accomplish success.