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[December 1, 2003]

Customers Are The SolutionTM

By Promise Phelon

The Art Of Referencing: Accelerating Sales Through Satisfied Customers

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There must be a law of economics that says when times are good we overspend, and when times are bad we promise never to do what we did when times were good.

As the economy regenerates, several artifacts of the IT spending downturn will remain with us. Large, enterprise-buying decisions will continue to be made with precision and scrutiny. CIOs and IT organizations will continue to seek solutions that meet the real business challenges of their internal stakeholders. And, solutions that present low risk and substantive return on investment will continue to receive top billing from senior IT buyers.

In the late 90s, when IT budgets were bloated and internal spending requirements were liberal, companies could experiment with projects, innovative technology and vendors. This reality is gone in most industries, especially telecommunications, technology and financial services, all of which were hard hit by the recession. Technology-buying decisions are no longer driven by features and functionality, but by proven solutions from proven vendors. Proven is the operative word, as risk is a significant factor in making purchasing decisions today.

Why? Because no one ever lost a job for buying IBM.

Today, vendor and technology validations are key to unlocking budget dollars. "When a company is trying to sell me enterprise technology, my first question is, 'Who else is using your solution and what was their return on investment?'" says Didier Arnaud, CFO of Monarch Beverage Company. "Most of the time the sales rep avoids the question. I'm skeptical about their product when they have no other company with a similar business challenge to provide as a recommendation."

Enter customer references.

Until you offer a 30-day money-back guarantee, prospects will want to talk with your successful customers or references. According to our internal lexicon, a customer reference is a company (and an individual) that has successfully used your products or services over time, and is willing to provide external validation.

The concept of references is quite simple. Just as references are important for job searches, objective recommendations can help sell everything from security software and mainframes to cruises, cars and mobile phones. Although the idea is simple, the task of building a mechanism that allows your company to truly integrate customers into its sales cycle is anything but simple. As many of you understand, enterprise solution providers are burdened with long, highly-competitive and protracted sales cycles. References help companies selling to the enterprise avoid long and costly sales cycles; they reduce the need for multiple technical evaluations, product demonstrations and proofs of concepts. Further, customer references, empowered with business metrics, such as ROI and total cost of ownership, help your prospective customers accelerate toward attaining internal buy-in for projects. We’ve also seen, in some cases, how references can increase the perceived value of a solution and eliminate a company’s reasons for requesting a heavy discount.

In summary, the benefits of sales references are as follows:

  • Increased conversion rates, where more prospects are turned into paying customers;

  • Lower cost of goods sold and shorter sales cycles; and

  • Higher average sales price as a result of fewer discounts.

The good news: Most companies that have integrated customers into their sales cycles have realized “selling” customers and business metrics is more effective and expedient than selling functions, features and product specifications. Gone are the days when the list of standards your software supports or the speed of a machine differentiated your company. Today, it’s your customers that differentiate you. It’s the successes they’ve had. It’s the ROI they’ve achieved.

Our recommendation: Before you write another datasheet or whitepaper, focus on telling your customer success stories. When asked what would have the greatest impact on increasing sales effectiveness, more than 90 percent of the enterprise IT sales reps we surveyed identified customer intelligence, customer wins and references as the most valuable purchasing "tools."

How do references help sales? Referenceable customers, at each stage of the sales cycle, are invaluable. Customer validation -- a success story, logo or quote -- opens the door and creates an audience for your company’s solution. Later in the sales cycle, customer references, case studies, ROI reports and onsite visits can be employed to get users, lines of business buyers, senior management and CFOs onboard. The reality is that vendors vying for wallet-share are doing so in highly-competitive situations. CIOs not only want more for less, they want proof that your solution will create no risk for them …and their jobs.

As a consulting organization, we have always been acutely aware of the importance of cross-selling and up-selling existing clients. We counsel our clients that as the cost of customer acquisition rises, identifying and capturing new opportunities within existing accounts is critical to long-term profitability. Referencing is a tool that reopens and widens doors within existing accounts; it is also a way to create internal customer champions.

Internally selling the success of a deployed project is yet another stage in the sales cycle. Assessing a customer’s success based on their predefined criteria, and then getting the internal customer to "sell" the project in order to get more budget or new projects is second to none.

To achieve this outcome, effective sales organizations employ "post-implementation" ROI and business metric analyses -- not only to document customer successes, but also, to help internal customers "sell" future projects. The result: Internal customers’ cases to senior management are strengthened, creating an opportunity for you to gain future budget positions.

Customer references not only turn the sales wheel more quickly and efficiently, but also, are fundamental to any successful marketing strategy or campaign. Customer references help marketing organizations reinforce messages, strengthen value propositions and build credibility with market influencers, such as industry analysts and the press. Customers are your proof-points.

During the technology boom, industry analysts were extremely busy measuring the size of expanding markets, evaluating technology and helping their clients (your customers!) make buying decisions. Also during the boom, many of those analysts were burned by companies with great, yet unproven, technologies. Industry analysts from organizations like Meta, Gartner and Giga have an incredible sphere of influence over the press, market analysts, and, most importantly, your prospective customers.

"Analysts play a critical role in the sales process. Our enterprise clients look to us to provide objective and educated advice about solutions to their real business challenges," says Beth Gold-Bernstein, a recognized analyst and expert in e-business integration technologies. "Throughout my career, I have always prioritized customer case studies and use-case scenarios to make those recommendations."

Gold-Bernstein is VP Strategic Services of ebizQ. Prior to joining ebizQ, she was the director of business integration technologies at the Hurwitz Group.

Successful customers accelerate sales and convert ever-skeptical industry and market analysts into advocates. As one colleague recently shared, technology doesn’t get you on the Gartner quadrant, customers do. Additionally, customers’ case studies and best practices attract interest to your marketing programs such as Webinars, executive series, user groups and other core field events.

Point internal resources towards educating the market, as well as your prospective customers, on how easy it is to be successful with, and how rapid the payback is on, an investment in your company’s solution. Not only will you be able to identify your references and customer best practices, but also, you will develop stronger relationships with your high-value customers. These relationships not only enable referencing, but infuse your organization with real customer intelligence that drives positioning, product development, pricing and service offerings.

All organizations need a mechanism that allows customers to be advocates. We have consulted and worked with companies that had no methodologies in place to capture customer success, as well as with others that had elaborate reference management systems, incentive programs, customer reference portals and the like. Program structure, resources and processes notwithstanding, the one key to reference program success is the existence of satisfied and successful customers. Assuming that engineering, product management, consulting and other groups have this under control, we can begin to discuss structuring a reference methodology and program.

In the next article in this series, we will discuss how to build a program that leverages your most valuable customers as references and creates a compelling value proposition for both sales and customer support. We will also dispel the following myths about customer references:

  • Contracts and discounts create reference relationships;

  • The Sales organization is an obstacle to a reference program;

  • Sales wins = customer references; and

  • The longer the reference list, the better the program

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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 promise.phelon@phelonconsulting.com.

Like what you've read? Go to past Customers Are The Solution columns.

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