[November 30, 2004]

How to Measure Your Reference Program�s Success�and Why You Must

By Promise Phelon and Steven Nicks, Partners, Phelon Consulting Services

Almost everyone has heard of the “six degrees of separation” concept. It says that somehow we’re all connected to some regaled 80s actor. The premise is that everyone is connected to everyone else by no more than six degrees of contact. So by leveraging someone in your network, who then leverages someone in theirs, who then leverages someone in theirs etc., no more than six people back, you’ll discover your connection to—you got it—Kevin Bacon.

Customer leverage, a proven methodology by which enterprise vendors strategically leverage their customer relationships for mutual benefit, works much like that—either to your company’s advantage, or to its disadvantage. How so? Well, we already know that today’s IT buyers and influencers are contacting their peers, colleagues and industry analysts to ask important questions that help them not only decide if they should purchase a particular solution, but also to identify companies for the short list.

“For big-ticket items, we want to talk with references. But we want candid feedback. We want all the details. So we usually try to get around the formal reference by going to the lowest point possible within an organization,” says Steven Bjorgan, France Telecom, VP of Technology Development.

In our 10 Smart Things Companies Do to Leverage their Customers (Part 1 – Part 2) article, we predicted that by 2005 more than half of all referencing activities will occur outside the formal reference process. Our current research confirms this. Half of the participants in our Customer Perspectives Study told us they conduct web research while evaluating vendors. And 72 percent told us they work their informal networks before making IT purchases.

What you need to know is that IT buyers are using the six degrees of separation concept. The danger here is that sometimes this concept works to their advantage, which is to say, to your company’s disadvantage. Suppose Jill Buyer, CIO at Acme Tech Inc., wants to integrate her company’s business processes. So she calls her peer, Joe CIO over at TurkeyTech and asks him if he knows anyone who’s gone through the same process. Joe gives Jill his input, and then thinks of Sally, VP of IT at Bloggin’ IT, who shares her feedback and then recommends that Jill give her colleague Tom a call—he went through the same scenario a year or so ago. Trouble is, Tom also happens to be a disgruntled past user of your company’s technology. So what happens is that your company has lost its chance to sell to Jill’s company—before sales even knew her company was in the market for a solution.

Sound unlikely? Yes. But it’s happening. This scenario is as unlikely as you, personally, being related to Kevin Bacon. But search through your six degrees—see if you can’t find the connection.

Of course this scenario could work to your company’s benefit, too, if its name came up early in every conversation—and always in a good light. It could also work to your company’s advantage if Tom happened to be your satisfied customer, or if Tom knew someone else who had good things to say about your company’s solutions. The six degrees of separation concept also works with a mixture of other communication tools besides the telephone as well, such as with tech blogs, tech evaluation Web sites or analyst and press reports.

What’s this have to do with metrics? Well, given this change in how customers are obtaining information with which to evaluate IT products and services, you might need to ask yourself whether or not the metrics you’ve been using make sense. Metrics won’t capture Jill’s decision not to buy if she makes it before sales even knew she existed. Nor will they capture your reference organization’s part in her decision TO buy based on good things she’s heard through peers of her peers of her peers.

Program credibility is such a difficult concept to quantify, which is why reference program leaders have always struggled to demonstrate programmatic impact. But they’ve tried. Most reference programs have adopted metrics to evaluate performance, but not necessarily success. For instance:

• Number of reference customers
• Number of success stories and case studies
• Number of requests fulfilled

Some programs also measure “revenue influenced,” which is a little closer to a measurement of success—but it’s still not quite there.

With 2005 on the horizon, managers of customer reference and customer marketing programs need to step back and conduct business impact assessments. They need to identify where their programs genuinely add value today, as well as what the CMO and CEO view as strategic priorities for their companies. By doing so, reference and marketing leaders will be able to better determine which metrics to use going forward to measure impact and success—in terms that are relevant to both the CMO and CEO. Here are five other helpful hints to help start the New Year off right.

Five Things to Do to Help Demonstrate Your Organization’s Results

Distinguish between YAWN and YOW metrics. Volume of reference requests received and fulfilled measures performance. Performance metrics are powerful tools that help reference management manage capacity, but they tend to make internal budget decision makers yawn. On the other hand, show those same folks other metrics, and watch their eyes light up. For instance, the rate by which sales cycles were shortened due to formal reference visits, the number of deals influenced by customers not formally in the reference program, but who proactively promoted your technology.

Remember, stealing metrics is a felony! If you like severe internal skepticism, claim benefits that have to be tied to the results of another team. Your metrics need to mean something, so don’t be afraid to ask to those who might question or downplay them for review and validation before you share those metrics with senior management. For instance, if you’re going to measure impact on up-sell opportunities, get support from key sales management first.

Demonstrate long-term value with benchmarks. One misconception among reference management is that a slide filled with numbers and graphs will yield a flurry of respect, resources and sponsorship. Wrong! Try benchmarks or business cases instead. Benchmarks are incredibly valuable, as are solid business cases derived from evaluating metrics, mapping results over time and assessing organizational risk. For instance, use those slides to show what would happen if your team went away, or the impact if it doesn’t get those additional resources in its stocking this year.

Keep in mind that less really is more! It’s not necessarily a bad thing if the quantity of your program’s output decreases. Really! As a reference program matures, it tends to become more focused and so the quality of its references and customer content increases. To illustrate this shift from quantity to quality, highlight that what you trimmed was the low-impact customer content from only moderately satisfied customers anyway. So you’re saving resources, and reducing risk of exposure as well.

Always speak before spoken to. Never mind what you learned when you were a child. Smart customer reference and marketing leaders don’t wait until they’re asked for results—they promote them! These smart folks talk about the challenges their organizations are having and what measures are in place to address them. Being smart about presenting metrics is almost as important as how you determine and measure them. If you find yourself being asked to react to the questions like, ‘What does your team do?” and “How does your organization benefit the company”?—you have perception issues your metrics will need to address.

And there you have it. Five ways to get the respect and funds you deserve, despite the fact that more and more buyers are circumventing traditional reference programs in a search for the truth. The best thing you can do to circumvent their circumvention, and to minimize the potential damage of the six degrees of separation, is to know what ALL of your customers are saying about you—good and bad, loyalists and defectors—and continue to build mutually beneficial relationships the Customer Leverage way.

Nicks, Steven. Customer Perspectives Study – 2004: Initial Findings. Phelon Consulting Services: November, 2004.