Beyond References

By Promise Phelon & Steven T. Nicks
Phelon Consulting Services

Ten Smart Things Companies Do to Leverage their Customers

Part I

In the last article in our Beyond References Series, we discussed an impending shift in IT buying behavior that will all but negate reference efforts unless they evolve to a larger customer leverage strategy.  Because jobs are on the line, because large IT purchases are fraught with risk, buyers want the whole truth and nothing but the truth about your enterprise hardware, software and services.  As such they are beginning to circumvent formal customer references to gain candid opinions. We predict that by 2005, more than half of all referencing activities will occur outside the formal reference process.  What can you do about it today?

Ditch the Customer Incentives for Real Credibility

Pay-for-play is a term we hear frequently. Many companies reward points in exchange for reference activities—think airline frequent flier programs. Yet many of our clients’ customers have visceral reactions to the idea that they are “paid references.” And, buyers have gotten very savvy about filtering paid references from proactive promoters, which are customers who have a genuine desire to talk about their experiences with your company.

From our client experience, we’ve learned that incentive programs are not only difficult to manage but they warp the dynamics of your relationships with sales and existing customers. Instead, we recommend focusing resources on strategies and tools that raise your references on the credibility pyramid.

The pyramid depicts the credibility level of varying information sources during IT purchase decisions. The higher the source is on the credibility pyramid, the more impact that source has on a purchase decision.

1) People believe their own experiences most.

2) People believe the experience of others like them.

3) People believe objective third parties.

4) People believe vendors—last and least.

Invest in customers who are ecstatic about your solution and your company—do whatever it takes to ensure their continued satisfaction and success so they’ll want to share their stories—and you won’t have to pay them. And don’t forget about analyst relations and industry accolades—both truly under-used tactics.  Prospects rely heavily on what analysts say (and don’t say) about vendors and their solutions. They also trust industry assessments, benchmarks and evaluations.

Whether you are upselling to your install base or prospecting for new customers, invest in elevating your references on the credibility pyramid.  

Five Smart Things Companies Do

To create the list of smart ways to leverage customers, we first established a list of criteria and then interviewed dozens of companies including our own clients. Each example meets the following criteria:

• Mutually beneficial for vendor and customer

• Great idea coupled with smart execution

• Is part of an overall strategy that is both realistic and sustainable

• Demonstrates the long-term benefits of customer leverage

And because these “smart things” are main courses, not appetizers, we split this article into two parts, each of which allows you to feast on five smart things.  You’ll still get 10 altogether, but we are serving five here and five next time.

Our aim is to spark new thinking and to give you ideas that are easy to emulate—direct from companies reaping the benefits of customer leverage today.

1.  Recognize and cultivate customer innovation. The average case study is low on the credibility pyramid because it comes from you.  It tells how well XYZ Company enabled its customer to achieve incredible returns on investment. 

i2 Technologies, a developer of supply chain software and services, and SPSS, a predictive analytics technology firm, are two industry-leading companies that have leaped way beyond standard case studies and success stories to comprehensive programs that elevate customer best practices and foster the innovative spirits of their customers. 

i2 presents The Ken Sharma Awards for Excellence, named for i2 co-founder Ken Sharma who was an early innovator of supply chain management, to a select group of i2 customers every year.  Winners are chosen by an independent panel of analysts and other innovators, giving prospects the objectivity they crave.  The award

…recognizes leading companies for the pioneering work performed in supply chain management… [and] honors companies with i2 deployments either planned or already in progress, as well as to [sic] organizations that have completed i2 deployments and have documented the value they are receiving. These awards are co-sponsored by i2 Technologies and the i2 User Group.[1]

Past winners of the Ken Sharma Awards include tipping-point customers such as Boeing, Toshiba, Samsung, Caterpillar, Texas Instruments, Volkswagen AG, Best Buy, Panasonic, Honeywell, Hewlett-Packard and more.   

In 2003, winners included Airbus, Whirlpool and Matsushita Electric Industrial Co., Ltd.  Winning customers, their teams and innovative-use cases also received significant media recognition. “Sponsoring the Ken Sharma Awards is a great goodwill gesture for our customers, and it's great for us,” says Tom Smithyan, Senior Director of Customer Programs at i2.  “Not only do we promote the winners' innovation and technology leadership throughout the media--which they love--but by recognizing their supply chain successes we are able to strengthen our relationships with them. As a result, many now view us not as a vendor, but as a strategic technology partner.  And we love that."

SPSS will honor winners of its first ever Insight Awards at a ceremony in Las Vegas this October.  "The Insight Awards encourage customers to innovate, reward them for doing so and give us great insight into how customers are using our products,” says Jennifer London, Director of Marketing at SPSS.  “We've seen several examples of customers who had rather unique needs to address, so they applied our technology in some very creative ways.  That's what we need to know about, and that's one of the things we like to promote."

The benefits of recognizing and cultivating customer innovation profoundly increase your solution’s value. Awards also demonstrate to the market that your customers have a vested interest in the success and continuance of your solution.  Even better, market and peer award recognition tightens customer bonds and helps your company get and maintain traction. Good for you.  Great for customers.

This strategy is especially smart when companies:

• Adhere to objectivity in the judging process

• Recognize customers for their innovative spirits and not their brand values

• Package best practices and share them with existing customers and partners

• Invest in communities of partners and customers who use products to incubate and innovate

• Pull customer innovations and best practices into the product development cycle

One word of caution: only engage in a program like this if your organization is serious about the pursuit of customer innovation. Awards programs require tremendous time and people resources, and long-term commitment. If your efforts are disingenuous, half-hearted or only for marketing purposes, your customers will see through the ruse.

2.  Call your customers regularly. That’s right. Just pick up the phone and call your customers—out of the blue.  And do so regularly.  Say, “This isn’t a sales call.  We just want to see if there’s anything we can do to enhance your experience or to help you be more successful.”  If you proactively reach out to identify and resolve issues, you’ll be more effective in your efforts to get close to your customers.  And, if you do so regularly and consistently, you’ll often be the first to find out when something’s wrong.

IT buyers overwhelmingly tell us that they feel a new and welcome channel of communication opens whenever a vendor calls unexpectedly.  Call your customers regularly to instead of waiting for them to initiate contact. Customer satisfaction and loyalty evaluations only solicit limited information.  Surveys with convoluted questions get sent to the wrong people. Tech support and customer service take calls when something goes wrong or breaks.  Here’s your chance to speak with and get close to customers yourself. 

One large enterprise designates a few people who regularly contact customers and assess their satisfaction firsthand.  Customer outreach is a powerful mechanism for checking in with your constituency.  And knowing how your customers feel about your company and its solutions—when they are not experiencing a problem or taking a survey—is at the core of customer leverage.

A word of warning: this technique will backfire if your company does nothing with insights gained or if it ignores cries for help and restitution. Whoever is charged with this relationship must have a process for documenting, tracking and close-loop communicating with customers. Be sincere—don’t hire Mo’s telemarketing firm to call your customers.

3.  Find an innovative way to demonstrate your customer’s success. Buyers want to mitigate risk by learning what a product, service or certain experience is like in the real world—from people who’ve already tried it. 

Unfortunately, many case studies and success stories are quickly tossed to the circular file. Writers forget your company not only is competing with other vendors, but also with the hundreds of e-mail messages backed up in the CIO’s inbox, dozens of voice messages, and 360-degree peer reviews piled on his desk. Success stories that read like your company’s brochure will not cut through the clutter to make it to the top of the pile.  And, anything you produce internally is likely to be viewed as least-credible to prospects.

If your company is on the success story bandwagon, we challenge you to step back and see who’s downloading your stories. Is it your own sales rep in who can’t find success stories on your internal site?  Is it your closest competitor?  Or…could it be prospective customers? The point is…everyone has case studies and success stories.

Hewlett-Packard has evolved their customer successes in some exciting ways. Rather than develop traditional success stories, HP works with its customers to co-author thought-leadership articles that highlight how HP’s customers are achieving success with help from HP.  Customers often distribute the articles to their colleagues who in turn, are often HP prospects.  The company is also producing customer video testimonials—not about how many HP widgets customers bought, but about how their partnerships are leading to market innovation and increased profits. Finally, HP+ advertisements are not really about HP.  They’re about HP’s customers; about what customers plus HP can achieve.     

Stay tuned! In September 2004, Phelon Consulting will host a Webinar on innovative ways you can demonstrate your customers’ success.

4.  Build a well-oiled customer reference program. At the foundation of every successful customer leverage strategy lays a well-oiled customer reference program.  Why?  Because any program that promotes customers should not exist in a vacuum; a topic we discussed in detail in the first article of our Beyond References Series.

Several of our clients are implementing this smart strategy today, and as a result, exhibit these signs (and experience these benefits) of a well-oiled reference program—all of which contribute to increased credibility:

• The organization ties resources and core activities to tangible organizational outcomes and business metrics like more effective marketing campaigns, increased sales and customer satisfaction

• Stakeholders understand a reference team’s primary objectives, overall strategies, processes and best practices

• Reference customer attrition is low; reference customers follow an established lifecycle

• Reference customers and sales both support the program, thanks to strong and sustainable value propositions

• The organization leverages technology to enable efficiency

• Stakeholders and champions ask the organization to contribute to left-brained marketing activities like customer perception audits, and they tie those activities to other company-wide initiatives

5.  Create purposeful customer networks, purposefully. Prospects want to hear honest opinions from people like themselves who are using your solutions.  There’s no better way to spread the word than by building online communities in which customers share ideas, insights and best practices.  So often, companies assemble customer councils and other groups, but after a year or two, people begin asking, “Why are we here?”  The purpose of your customer community or network should be very clear, and that clarity should impact its execution.  Ask yourself:  is the purpose of our network to galvanize relationships, enable the sharing of best practices or to get high-value customers together to evaluate some concept?

Before being acquired by EMC Corporation, Documentum, an enterprise content management company, created a community with a purpose and they call it Studio D. The community still lives on after the acquisition. From the Studio D home page:

What's Studio D all about?  It's about sharing information - what's going on at Studio D, and what's going down at your place. We'll connect you with happening product news, the hip User Group scene, live Studio D get-togethers, and a blitz of other handy resources readily available at Documentum.[2]

Studio D is an interactive online community where customers share best practices, talk about ideas and provide references for an interactive audience.  EMC’s Documentum’s customers love it and actively promote it because Studio D gives them information they can’t get elsewhere.  It also gives customers a louder collective voice with which to influence future products and services. 

EMC’s Documentum loves it too: the company builds that oft-sought stickiness with its high-value customers; finds out what customers are thinking, how they’re using the products and what problems they might be having; and learns about its customers’ business and industry issues in general.

"Studio D started out as a value proposition for reference customers, and over the past three years has become a tight community for our customers to seek references, network and share ideas and best practices. It's also a powerful way to stay close to our customers, demonstrate our commitment to their successes, and differentiate our products in the marketplace," said David Milam, Chief Marketing Officer, EMC Software Group.

Look for Five MORE Smart Things Next Week

Next week, we will bring you five additional smart things your company can do to leverage customers.  Find out how smart companies, perhaps your competitors, are:

• Stretching reference customers without breaking them

• Using technology in exciting ways

• Rethinking the strategic leverage plan

• And more

In the meantime, if you have any questions or comments about the strategies and tactics presented in this article, or if you would like more information about implementing customer leverage in your organization, please call 1-877-717-9210 x508, e-mail [email protected] or visit our website at www.phelonconsulting.com.