Four Fatal Mistakes Software Companies Make with Customer References� And How to Avoid Them

BY PROMISE PHELON

Anyone in the software business will tell you: Good customer references are hard to come by. So when you find a satisfied enterprise customer, remember this: Customers are jewels, not tools. But in the minutia of the everyday, it's easy to forget the strategic and tactical value of customers. After all, while an unhappy customer quickly reduces your well-marketed product to rubbish, satisfied customers can create a cash cow overnight.

Senior management in customer-savvy organizations tells us that sales, PR and marketing departments continuously request customer references. It's not surprising. Market-driven companies recognize that customer references are not only valuable in closing sales deals or as reactive measures to change analyst viewpoints, but also, they provide the best third-party validation for advertising and marketing programs, strategic press and analyst relations, and give much-needed insight to key executives.

With that said, almost all companies recognize the importance, whether tactical or strategic, of customer references. Ironically though, the majority of software companies lack defined processes and programs to manage and leverage post-sale customers. Perhaps it's due to a lack of time, resources or focus. I'm confident that if your software company had the time and resources, you'd dedicate hundreds of staff hours to mining data, ensuring 100-percent customer satisfaction, developing relationships, success story writing and strategizing for a successful customer reference program. However, you probably share the same core challenges other software companies face: Not enough marketing and sales support resources and a lack of an internal owner or advocate for customer programs.

So what typically happens is that good companies with great technology invest little, if any, in their satisfied and successful customers. Yet your enterprise account managers still need references to meet sales objectives, and your analyst relations group needs three customers to speak with Gartner�by tomorrow.

If you want to take advantage of your customers' intrinsic value, and leverage their power in a meaningful and results-driven way, read on and find out how to avoid four fatal flaws that software companies make every day in managing customer references.

1. NO CARROT, NO THANK YOU, NO END
Imagine this scenario. You've found an excited and enthusiastic customer, and when you're dealing with enterprise technology challenges, that is not easy. Your customer says, "Yes, I'd be pleased to act as a reference," not realizing what he or she's in for. A few weeks go by, and you call without warning. Your customer is a busy executive, but takes the time to answer your queries because of the business impact of your company's technology. You call again. And again. Your customer begins to wonder just how much they're indebted to you, and whether the requests will ever end. The next time you call, you hear testiness in your customer's voice. They're abrupt and curt. They say they're busy, and don't have time to answer more questions. And then finally, your customer gives up, and says they'd prefer not to act as your reference.

The lesson? Develop a program that establishes clear rules of engagement, rewards and thank yous for each of your reference customers. First of all, clearly communicate with your customers and let them know exactly what will be asked of them over a defined time period. Executives like to see the horizon, so show that you value their time by letting them know that the process will end. Second, when possible, give your customers ample warning before requesting anything from them -- whether it's just a quote or a full reference call. Don't just tell them you respect their busy schedules -- show them.

Third, give your customers a carrot -- a compelling reason to act as a reference. One-sided customer relationships do not last. Sometimes, great technology and successful deployments are enough of a lure for a potential customer reference. But the other 98 percent of the time, that's not the case. You must develop strategies specific to each customer account. For instance, present small customers with co-marketing opportunities -- their logo on your Web site, PR opportunities and pitch your internal advocate for speaking engagements and other highly visible activities. Provide larger customers with early access to new or to-be-released products, or make them integral to your strategic, executive-level decisions. Customers are people too. They love personal visibility, unique and thoughtful gifts, and the feeling that they have strategic influence with you, their enterprise vendor.

Finally, make it a mandatory part of your reference program to send a thank you note after each reference event. Even better, send a gift or a personal letter each quarter from your company president or another high-ranking executive to your customer representatives -- and their bosses. Let them know you appreciate what they are doing, and that you respect their time and efforts. Remember to find out in advance whether or not their company policies prevent them from accepting certain gifts (especially when you're dealing with government and financial services), and plan accordingly.

2. FIRE, READY, AIM!
True story. About a year ago, I had the opportunity to mentor a customer reference manager and was critiquing a sales reference call that she managed. The prospect: Vice President of Information Technology in the final stages of the sales cycle. The reference account: A sharp and capable senior manager of architecture within a large financial services organization.

Less than ten seconds into the call, I realized that the reference account representative had probably spent the entire weekend snowboarding or surfing with his pals. He was cordial, but at least four levels lower in the organization than the prospect. Doesn't seem important? The customer could not speak to his company's strategy, business objectives and enterprise-wide architecture. It took about two minutes for everyone on the call to realize we were all wasting time. The call ended abruptly and the incident was quickly escalated by the account manager to senior sales and marketing management.

Fortunately for the reference manager, the deal finally closed (although elongated by 60 days) after two other reference calls and a personal letter from the company's CEO. Unfortunately, the reference account refused to take any more calls. Not only did he waste his time, he felt like he failed.

The lesson? When setting up reference calls, carefully map prospects to reference accounts. Make sure the reference account representative is able to speak to your prospect's business challenges, discuss why they chose your company's technology, how it addressed their solution, and the results. Also, give your reference account a short preparation session before the call so they have the information they need about your prospect's situation -- and so they're equipped to handle the call.

3. OVERUSE AND ABUSE
What happens when a software company gains a new marquee or brand-name account? Most respond by issuing a press release announcing the new customer, which is when reference overuse begins. Within moments, the account manager is deluged with reference requests from across the organization, and your reference becomes disillusioned about the process. It's only natural -- most of us would become irritated if we were asked for our input 10 times in two weeks, and if we were thrown into the administrative tasks of setting up phone calls and arranging meetings. Further, both the reference customer and sales become disenchanted, and begin to retreat. One of the most formidable barriers to a successful customer reference program is a sales team that has withdrawn support from corporate reference initiatives. Happens all the time!

Imagine this common abuse scenario. Your newest customer is thrilled with the results of your software, and is ready, willing and able to share his results with anyone who asks. But a junior account manager, in response to a request from the press, releases a confidential document without your customer's permission. The next morning, the customer's confidential plans appear in an industry magazine. You'll be lucky not to lose that customer. Customer trust is invaluable. Breaches? Often irreparable.

The lesson? Avoid overuse and abuse, which not only leaves key sales people and customers discontented, but leads to reference account and sales team burnout and unsuccessful programs. Develop a formal internal customer reference program with the holistic view in mind. Streamline reference requests through defined points of contact to enable the prioritization and management of all requests. Your sales team (and your customers) will feel a sense of security when they know who their contact is for all requests, and when they know that their customers will be treated well. Not only does this reduce overuse and abuse, but also, it enables you to establish a relationship between your company contact and the reference customer. Also, create and keep a reference-use plan and calendar, and share that information with people who need to know. You'll find that participants in your reference activities are more cooperative, and that your customers and account managers feel less stressed by the process.

4. NO USE!
No use is, in my opinion, the worst transgression a software company can make when dealing with customer references. Some of the best and most successful companies find themselves reacting and scurrying each time the press relations phone rings. Or they wonder why they're not closing more deals, or why the sales cycle is so long.

What we often uncover is that the lion's share of a company's deployed customers are underutilized or not being leveraged at all. Some blame lack of staffing resources, but most companies attribute underutilization to technology. In most cases, customer information is locked in organizational silos: Enterprise resource planning (ERP) and accounting systems, customer relationship management (CRM) and sales force automation (SFA) applications, and databases, to name a few. The challenge is that if a company builds a reference team, they spend their time searching for and verifying information. The total cost of a technology package and implementation is often extremely inexpensive when compared to the cost of keeping a team responsible for updating, re-keying and analyzing customer information -- a process that's grossly inefficient.

Customer leverage starts with a group's ability to access, view and modify accurate customer information. I would say that customer leverage -- utilizing customer references to close deals and create greater market awareness -- is almost never considered in CRM or SFA technology decisions. In future articles, we will discuss how appropriate organizations, such as marketing or sales operations, can articulate the costs, ROI and benefits of customer leverage.

Without integration across critical enterprise applications and databases, and with the lack of a centralized system for automating and presenting customer reference information, the reference team will struggle. They will always be under-resourced, and will never serve their customers, sales, marketing, press and analyst relations, product development and corporate executives successfully.

The lesson? Use proven technologies to share information about your customers with your customer leverage team. Ensure that the team has easy access to who they are, where they are, what they bought, and the status of projects and deployments. Purchase or build a system and process with the "customer lifecycle" in mind; one which integrates customer purchase and technical support information, and customer satisfaction and marketing data, to provide meaningful "intelligence" about your customers -- your most valued asset. Further, as you develop a system to manage customer reference information, create multiple access levels for 24x7 access by sales, as well as to ensure information integrity and accuracy.

More importantly, if you've worked with enterprise account managers, you know that they are skeptical and cautious about everything. To ease their wariness and engender trust, make the customer reference process clearly known, and continually update and "time stamp" information. This way, the consumers of customer references will be confident that the information, content and other details are accurate and relevant.

Finally, when you're building the application or group of systems to support your customer reference program, stick to technology basics to keep your sales organization as productive and as efficient as possible. Sales reps tell us over and over again that they despise technology requiring intensive training, and large client programs clogging up their systems. If they despise it, they won't use it. Sales reps also recognize that every minute they spend waiting for information to download, or sitting in a training class, is time they could be spending following up with a prospect or developing proposals. However you deploy your program, keep it light, simple and easy to use. Sales will appreciate you, and they'll be more likely to support your program.

DOING IT RIGHT
Smart enterprise software solution providers realize that a satisfied customer is worth four to five times the value of the original deal. Satisfied and enthusiastic reference customers help communicate your company's differentiation, and validate its solution to prospective customers, the media and analysts. In this market, and during these uncertain economic times, it's critical to leverage every advantage you have. Developing potential customer references is about creating extensions of your relationship rather than about giving hefty discounts in hopes of obtaining useable references. Be thoughtful about your customer references. Treat them as close friends. Ensure their deployments are successful, thank them for all that they do, incorporate their requirements into your strategies, and create a structured program that enables your reference base to grow -- and flourish.

Promise Phelon is the founder and principal at Phelon Consulting, a consulting firm focused on enabling enterprise software companies to shorten their sales cycles by leveraging sales and customer successes. She may be contacted at [email protected].