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This is reprinted from and the livestream based on, “Customers Say AmeriGas Propane Falsely Claims Ownership Of Tanks” by Zennie Abraham in ZennieReport.com
In system dynamics parlance there is what is called a “negative feedback loop”. As this author is an expert in system dynamics modeling, and has been since the early 1980s, it’s easy to conceptually explain what a “negative feedback loop” is, and how it applies in the world of AmeriGas.
Very simply, a “negative feedback loop” is a set of actions that causes a something to get constantly worse. Translated into system dynamics the “something” is a called s “stock variable”. Stocks increase or decrease in population. The “set of actions” are the variables called “inflow” and “outflow”: inflow variables cause the stock to increase, outflow variables make the stock decrease. And finally, we have “converter variables”. Converter variables regulate the rate of inflow and outflow.
Right now, the simple model that is a stock, inflow, and outflow, and converter variables is balanced: equal inflow to outflow. A change in outlflow causes a constant stock decrease. That is negative, but it’s not a “negative feedback loop” .
A “negative feedback loop” is developed when we introduce another stock. So, let’s say the stock is AmeriGas customers, and the second stock consists of ex-AmeriGas customers. The outflow variable is governed by two converters, one called “price level”, so the higher the price the more customers leave, and the other called “bad service” and so the worse that gets the more AmeriGas customers head for the exits.. They go to the inflow to the second stock that consists of ex-AmeriGas customers. The more ex-customers there are, the more another converter attached to the stock and called “social media” communicates their displeasure.
The second stock consists of ex-AmeriGas customers also communicates displeasure to inflow customers, causing a slow down in that rate as the stock of ex-AmeriGas customers grows. Now, you can see where the growth in the second stock of ex-AmeriGas customers becomes what is called “self-reinforcing”.
AmeriGas Customer Neg Feedback Problem
As Kelly Wardman says in her website The Systems Thinker “self-reinforcing” “means they compound change in one direction with even more change. Unstopped, they continue to reinforce a particular behavior.” In the case of AmeriGas, that ” particular behavior” is a constant loss of customers.
So, AmeriGas has two primary drivers: price and service, but it also has another driver that it has not addressed: social media. Moreover as we drill down and further define the components of customer attrition, we also understand what the actions that produce more customers are. Sometimes they simply call for AmeriGas to stop having high prices and bad service, and communicate that to social media.
The trouble is AmerIGas does not use system dynamics or systems thinking. It relies on the experience of managers, some that respond to crisis with an emotional response – and at times that action is to push more of the bad actions, which just makes things worse.
AmeriGas could improve if it discovered systems thinking and realize better credit ratings in the process.
Stay tuned.
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