GuidesCustomer researchWhat are the benefits of customer feedback?

What are the benefits of customer feedback?

Last updated

2 March 2024

Author

Dovetail Editorial Team

Reviewed by

Hugh Good

Many well-known companies, including industry giants like Amazon, Apple, Netflix, and Uber, acknowledge the pivotal role of customer feedback in their success, influencing new product development and ops optimization.

Whether streamlining manufacturing processes, enhancing supply chain logistics, or fine-tuning service delivery, these companies attribute their achievements to strategically integrating customer insights, ensuring continual refinement and excellence across various facets of their operations.

Still, many companies have yet to fully leverage the feedback they collect or employ a customer feedback strategy.

Moreover, some companies aren’t tapping into the power of collecting feedback—a huge missed opportunity.

Collecting and using customer feedback offers many concrete benefits and helps prevent various business risks. Let’s further investigate.

What is customer feedback?

Customer feedback is any information customers provide about their experience with any aspect of your business, from its products and services to its staff and facilities to its online presence—this feedback groups into two broad categories: indirect and direct feedback.

Indirect customer feedback:

This type of feedback comes directly from the customer but is unsolicited by the business. Indirect feedback can take many forms, including, but not limited to:

  • Social media comments

  • Online reviews

  • Inbound calls to customer service

  • Customer-initiated emails or chats

  • In-person comments to employees

Indirect feedback may also include customer data captured by point of sale (POS) systems, customer relationship management (CRM) tools, and web analytics. For example, repeated purchases at a given retail location indicate a customer's preference. These actions are a form of feedback.

Direct customer feedback:

This is the type that a business solicits from customers. Thanks to digital technology, setting up customer feedback mechanisms at multiple points along the customer journey is relatively easy nowadays. And when you wish to examine and validate insights from that feedback, you might also use market research tools like focus groups to delve deeper.

Standard mechanisms for gathering direct feedback include

  • Digital or physical feedback surveys (reward-based or not)

  • Subscription cancellation surveys

  • Interview panels

  • Focus groups

  • In-app ratings

  • Online forums created by the business

  • Loyalty programs

Structured or unstructured feedback

Feedback can be structured or unstructured. Structured feedback is quantitative, like ratings, while unstructured feedback is qualitative, like comments.

It’s crucial to validate insights from unstructured data before taking action. Consider a business with ten customers who have commented online about their trouble using a product. That business must review structured, quantitative data about the product's usability to ensure that many, not just a few, customers share this sentiment. 

If no quantitative research is available, you may need to solicit direct, structured feedback from customers about usability to validate these types of comments. Otherwise, there would be a risk of making product changes that only a handful of users value, thereby increasing costs that revenue won’t offset.

Why is customer feedback important?

Customer feedback is paramount for businesses as it is an invaluable guide for strategic decisions. Actively monitoring, collecting, and meticulously evaluating customer feedback enables companies to gain granular insights into the intricacies of preferences, pain points, and expectations.

This nuanced understanding allows you to fine-tune their products, services, and overall brand experience, ensuring a custom approach that resonates with their target audience. For instance, if customers consistently desire enhanced features in a particular product, you can allocate resources to meet those specific demands, thereby staying ahead of the competition.

Moreover, customer feedback serves as a real-time barometer of customer satisfaction, helping companies identify and rectify issues promptly. Quickly addressing concerns fosters customer loyalty and enhances the overall brand reputation.

Customer feedback isn’t just a measure of past performance but a strategic tool for future success. It empowers businesses to meet and exceed customer expectations, solidifying their position in the market and driving sustained growth.

The benefits of customer feedback

Customer feedback helps align your operational goals with customer needs in numerous beneficial ways, including

  • Improving products and services

When collecting customer feedback for product development, insights can uncover existing issues and inspire new ideas. Successful new product development relies on understanding consumer needs and emphasizing the importance of integrating various feedback forms. Products addressing real-world problems are more likely to be valued by customers and, therefore, succeed in the market.

In a global survey by 280 Group, nearly 900 product managers reported that, on average, 20.9% of their products failed to meet customer needs. Incorporating customer feedback into the development process reduces the risk of product misalignment with consumer preferences.

Continuous discovery, involving ongoing solicitation and analysis of customer feedback, is crucial for creating products that align with consumer desires and streamlining the development process. 

For example, in the smartphone industry, brands leverage user communities and surveys to gather feedback on current devices and ideas for new features. This iterative process enables companies to avoid wasting resources on unwanted features and continually deliver value to consumers.

  • Enhancing satisfaction levels and creating value 

Monitoring customer feedback helps you understand how well you are (or aren't) serving customers. Companies can use customer feedback to learn what customers like the most about their products. 

Depending on the data, you may learn that by leaning into your strengths, you can increase customer satisfaction and create additional value, for which some customers may even be willing to pay more.

How much more, exactly? 

Depending on your industry and clientele, perhaps as much as 10–30% more, going by Forbes contributor and CX expert Shep Hyken's willingness to pay findings.

Conversely, when customer satisfaction levels begin to lag, feedback will grow negative, customers may buy less or jump ship to competitors, and profits will decline. 

Moreover, when customers are dissatisfied, they don't keep it to themselves. A bad viral product review can result in skyrocketing customer acquisition costs—GM of Service Hub at HubSpot describes the state of customer acquisition in unequivocal terms like appalling.” According to research by SimplicityDX, the increase in e-commerce acquisition cost is 222% more than in 2013.

However, when you recognize early dissatisfaction signals, you can modify the product, service, and customer experience (or all three). 

  • Engaging and increasing customer loyalty 

People appreciate having their voices heard. Direct engagement with customers online can deepen a customer's connection with and respect for a company, strengthening their loyalty. 

When you directly respond to a customer's feedback, they may reward you with greater loyalty, increased purchases, and positive word of mouth. 

Moreover, having high numbers of loyal customers can improve the efficiency of marketing efforts. 

Additionally, engaged, happy customers respond favorably to direct feedback solicitations, particularly if you ask them immediately after a purchase. 

According to a BrightLocal survey conducted in 2023, 34% of consumers said they would likely leave a review if asked to do so via email.

Meanwhile, 33% said they would provide a review in person during their experience or transaction.

A further 32% reported that a receipt or invoice would be an effective way to request a review. (Social media reviews weren’t far behind, ranking a close 4th).

(Remember that you’ll be competing with loads of other inbox messages, so a hybrid approach may maximize the volume of customer feedback you can capture).

  • Improving customer acquisition and retention

Listening to existing customers can also yield insights about marketing and sales strategies that make it easier to acquire customers. For example, a business may learn that its pricing is too high or that its marketing is turning off a segment of consumers

Customer feedback can help your business make the adjustments necessary to attract more customers and, in some cases, do so while reducing customer acquisition costs.

Moreover, businesses aren’t the only ones who pay attention to customer feedback. Other customers do as well. Many customers, especially those seeking a product or service for the first time, will skim customer reviews for potential red flags. 

TrustPulse says 60% of consumers believe the number of reviews is crucial when considering whether to use a business. Also, more reviews testify to a business's credibility and popularity, so quantity matters.

Conversely, businesses whose customers speak negatively will find it more challenging to attract new customers and face growing customer acquisition costs and customer churn.

  • Optimizing resource and training allocation

Customer feedback also helps optimize training and performance. Imagine your business is introducing a complex new product.

Suppose you receive customer feedback suggesting that your sales team struggles to explain aspects of the product's functionality or installation.

Your business could respond accordingly by investing more time in training.

Additionally, by reviewing touchpoints like call center feedback, chat logs, or other employee-consumer interactions, you can pinpoint errors stemming from inexperience and ensure that departments have a balance of senior and junior staff.

  • Enhancing decision-making ability

It may be tempting to react immediately to customer criticism. A negative review or comment can send PR teams into overdrive. It might also be tempting to spur designers, engineers, and product teams into action.

Still, reacting without adequate data might lead to spending considerable time and money making product modifications or operational adjustments, only to discover that the feedback was misleading—it may be that the feedback reflects the sentiments of the few and not the majority of customers.

Or perhaps customers don’t value a feature request enough to pay for it. When insights or sentiments are batches of unstructured data, they must be tested and validated before taking action to avoid these unnecessary risks.

  • Reducing costs

There are nearly unlimited ways your business might lower costs using feedback data, potentially impacting everything from acquisition costs to churn rates.

You might identify potential design flaws through prototype testing and feedback before production starts, avoiding production errors and shortening the NPD process, saving time and money. 

In some cases, feedback can help identify bottlenecks in the customer journey and pinpoint where to streamline. For instance, one energy company found that setting up a new utility account for customers moving to a new home required 18 steps (!) That company used survey data to streamline its process and reduce new account opening steps to five, resulting in a 40-50% cost reduction. The number of complaints also decreased, as did the number of people handling them (from 109 to 20).

Product reviews, sales data, and other indirect customer feedback may also help divest a product or brand before it becomes a liability.

  • De-escalating and continuing conversations offline

Acknowledging customer feedback is crucial, especially when monitoring reviews or engaging in social listening. A key aspect of this practice involves taking the conversation offline by inviting the customer to follow up directly via email or another direct route, away from the public view.

By doing so, you can address concerns or feedback with a personalized and focused approach, demonstrating a commitment to customer satisfaction. This private interaction respects the customer's privacy and encourages a more open and detailed discussion.

Handling matters privately can also prevent escalation and negative public perception while striving for long-lasting customer relationships through direct and meaningful communication.

Better customer experience

In today's competitive landscape—once in which 73% of consumers told PwC that customer experience is their top decision-making factor driving purchasing decisions—prioritizing exceptional service must be a paramount focus.

Many businesses even have a team devoted entirely to ensuring service excellence, from when customers visit their website (or enter a retail location's doors) to when they unbox the product.

Positive customer experiences help strengthen brand loyalty and customer lifetime value. But it's nearly impossible to build a consistent high-quality customer experience  without being in tune with precise data describing what customers need, want, and value.

In his book Business @ the Speed of Thought, Bill Gates emphasizes that customer feedback, even if negative, helps a business learn and improve, stating, "Your most unhappy customers are your greatest source of learning."

The complexity of interpreting customer feedback

Unpacking customer feedback isn’t always straightforward or even factually correct.

For instance, a customer might unknowingly state that a product feature “doesn’t work” when it simply lacks that feature. Or a comment might be so vague that it has insufficient detail to identify the problem.

Customer feedback can also be rooted in a customer's own biases. In the worst case, negative feedback may result from coordinated efforts, such as in the case of “review-bombing,” a form of trolling that could stem from boredom or even disgruntled employees. 

Consequently, it is becoming increasingly essential to have a combination of know-how and tools to help determine which insights are genuine and valuable and which are not.

Challenges in customer feedback management:

  • Disjointed understanding: Teams often have a disjointed sense of customer feedback due to a lack of easily shareable findings.

  • Feedback difficulties: Providing feedback becomes challenging when surveys have vague questions or do not allow open-ended responses.

  • Training gaps: Call center representatives or employees may lack training to address specific customer concerns.

  • Missed opportunities: Companies commonly miss the benefits of real-time communication through live chat and social media platforms.

  • Delayed action: Delayed action on customer feedback can lead to a loss of interest and reduced feedback participation.

  • Quality of feedback: Consequently, received feedback may be inaccurate, unclear, or fail to reflect overall customer sentiment.

Complexities in analyzing customer feedback:

  • Data prioritization: Determining the most important datasets and the best analysis methods can be complex.

  • Time-consuming analysis: Manual customer feedback analysis is often time-consuming.

  • Resource constraints: Many businesses, particularly smaller ones, lack the time or personnel for comprehensive customer feedback evaluation.

  • Skill challenges: While market research evaluation is a specialized skill, companies with a single marketing generalist may find customer feedback analysis challenging.

How to get actionable customer feedback

Despite these challenges, even the smallest businesses can obtain actionable customer insights. Customer feedback hubs—online platforms that leverage technologies and tools, including AI, machine learning, and data visualization—are available to forward-thinking companies looking for easy ways to transform customer data into product, design, service, and experience insights data they can use.  

How to build a customer feedback hub

Businesses don't need to build a customer feedback hub in-house when they can take advantage of Dovetail's all-in-one platform. Dovetail's hub automatically secures customer data from CRMs, enterprise apps, and other sources. 

Businesses can quickly bulk upload data, as well as automatically integrate data from

  • Google Drive

  • OneDrive

  • Zoom

  • SharePoint

  • Trello

  • Many others via Zapier

Using AI and machine learning, the platform can rapidly identify patterns and trends businesses can use and share internally securely. You can get the insights you need to increase customer satisfaction, loyalty, and sales while reducing costs.

Get started today

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