Reinforcing Feedback Loop

Reinforcing Sales Process Caused by Customers Talking to Each Other About Your Product

A reinforcing feedback loop amplifies a change through its effects on the system. More sales can bring more customers, whose recommendations bring further sales. The same links can amplify a decline. A reinforcing process need not be intentional or beneficial, and its rate of change depends on the surrounding system.

Consider a simple sales example. The following chain describes a reinforcing feedback process. Follow the effects back to sales:

If the product is a good product, more sales means more satisfied customers, which means more positive word of mouth. That will lead to still more sales, which means even more widespread word of mouth … and so on. On the other hand, if the product is defective, the virtuous cycle becomes a vicious cycle: sales lead to fewer satisfied customers, less positive word of mouth, and fewer sales; which leads to still less positive word of mouth and fewer sales.

A reinforcing loop can drive sustained growth or decline. Its speed depends on the links, delays, and limits in the system. The nuclear-arms race produced an accelerating growth of arms stockpiles over decades. A bank run produces an accelerating decline in a bank’s deposits.

Folk wisdom speaks of reinforcing loops as the “snowball effect,” “bandwagon effect,” or “vicious circle,” and in more specific phrases: “the rich get richer and the poor get poorer.” In business, “momentum is everything” captures the same idea when building confidence in a new product or a fledgling organization. We also know about reinforcing spirals running the wrong way. “The rats are jumping ship” describes how a few people losing confidence triggers defections that cause others to defect, a vicious spiral of eroding confidence. Word of mouth can easily work in reverse and, as occurred with contaminated over-the-counter drugs, produce marketplace disaster.

Reinforcing processes can develop quickly enough to take people by surprise. A French schoolchildren’s jingle illustrates the process. First there is just one lily pad in a corner of a pond. Every day the number of lily pads doubles. It takes thirty days to fill the pond, but for the first twenty-eight days, no one even notices. Suddenly, on the twenty-ninth day, the pond is half full of lily pads and the villagers become concerned. But by this time there is little that can be done. The next day their worst fears come true. That’s why environmental dangers are so worrisome, especially those that follow reinforcing patterns. By the time the problem is noticed, it may be too late. Extinctions of species often follow patterns of slow, gradually accelerating decline over long time periods, then rapid collapse. So do extinctions of corporations.

But pure accelerating growth or decline rarely continues unchecked in nature, because reinforcing processes rarely occur in isolation. Eventually, limits are encountered—which can slow growth, stop it, divert it, or even reverse it. Even lily pads encounter a limit in the pond’s available area. Balancing feedback counteracts a change: for example, growth may deplete resources, which reduces further growth. To understand the trajectory, examine both the amplifying links and the conditions that might limit them.