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Tracey E.Schelmetic

[August 17, 2004]

Beyond References

By Promise Phelon
Phelon Consulting Services


Fueling Organic Growth in a Shifting Technology Market

Leaders at IT companies are scratching their heads:  “Where’s that recovery we’ve been hearing about?” CEOs at prospect companies are supposed to be pursuing revenue growth and investing in new technologies to help them achieve it. Budgets are supposed to be loosening.  Buyers are supposed to be buying.  But they’re not--at least not as much as enterprise vendors would like. And even when buyers do make purchases, they do so with a mentality, promoted by media and analysts firms, that encourages them to take advantage of sluggish technology markets--get your discounts while they’re hot.[1]

 

In response to this ongoing economic crunch, a slew of books and articles promoting “customers as your sales force” have made their way to market.  Authors of these works would have you believe that the path to faster sales and more intense marketing is easy--hug happy customers; they’ll do all the work for you.  Thanks to the proliferation of such propaganda, hugging customers is now all the rage.  And using the success of those customers, even more so:  in a recent survey, 100 percent of enterprise IT companies with revenues over $5 billion annually reported chartering central teams to influence buyers through formal customer reference programs.[2]

 

Referencing is big business, no doubt.  With program budgets well into the millions and sales effectiveness on the line, reference management keeps busy chartering one or more of dozens of agencies that qualify reference customers and write success stories. But is that enough to sway wary buyers in today’s economy? Is a willingness to enlist reference customers really enough to fuel faster sales, higher-impact marketing and better products, and ultimately to impact the bottom line? Read on. You decide.

 

A Seismic Shift is Coming:  Will Your Reference Organization Be Ready?

 

The buying process for IT organizations has changed; the playing field has shifted--and further shifts are in sight.  With internal purchasing processes and cultures putting jobs on the line, it’s not enough anymore for buyers to say, “Yeah, we talked to a few references; we did our due diligence.” Why?  Reputations and future access to monies are tied to the success of IT projects.  Prospects are smart. In addition to conducting lengthy solution and vendor evaluations and their own ROI (news - alert) and TCO assessments, they read online publications like TMCnet.com--they may even be reading this article.  Prospects also know references may be enticed to speak on your behalf with discounts, special rewards and incentives. And for those reasons (among others; another article altogether), prospects are hesitant to rely solely on formal references. 

 

One vice president of IT Development from a large telecommunications company is a perfect example of this hesitancy.  He says, “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.”

 

Because prospects don’t quite trust formal references, and because jobs are on the line, prospective customers are seeking channels outside your reference program to learn more about your company’s technology, value and ability to deliver. They are turning to external sources for vendor information that tips them to buy or run in the other direction. 

 

We believe that over the next five to seven years, as the Internet continues to shift how people think about purchases, more than half of all reference activities will occur outside of formal reference programs. Your ability to control the medium and message will erode as prospects increasingly turn to sources like these for referencing activities:

 

  • Independent Technology forums; IT executive and manager councils

  • Independent enterprise technology analyses organizations

  • Technology user Web blogs (news)

  • Informal networks of colleagues

  • Investigative IT journalist and independent analyst reports

 

This May Be Your Buyer Five Years from Now

 

Over the next five to seven years, more and more prospective customers will go around the system--your reference system.  Just as buyers shopping at Amazon.com and E-bay are bypassing the middleman, technology buyers seeking proof will, too. They’ll beeline to your customer base to search out candid references regardless of whether you have qualified them as success customers.  And just as buyers on E-bay and Amazon.com seek negative feedback and reviews for reasons not to buy, so too, will your technology prospects. 

 

Think about your experiences if you’ve shopped online--all it takes is a less-than-stellar feedback rating on E-bay, or for one not-so-good review on Amazon.com to resonate with you, and your credit card stays tucked in your wallet.  Somehow, that one unhappy and discontented voice seems much louder than the din of 10 others because we all look for reasons not to buy--as will your technology customers.

 

We are not saying to do away with your references or the programs that nurture them; nor are we negating the value of references. You leverage references to create market momentum with the press, industry award and organizations other media to get people talking about your company.  You leverage references for branding.  You leverage references as part of an orchestrated effort to validate your solutions with prospects and analyst communities.  There is no doubt--references are intrinsically valuable and will continue to be useful and important.

 

But references alone are not enough.  

 

References alone will not enable your organization to evolve and to tap into opportunities presented by this seismic shift in technology buying behavior.  Although important and a critical foundation, the key to surviving and thriving throughout and after this shift will not be found by enlisting more references or by chartering more success stories; the key will be found within a business strategy:  Customer Leverage. 

 

Beyond References:  Reaching for Customer Leverage

 

Customer Leverage goes beyond the acts of identifying and qualifying success customers, and beyond recruiting references and developing static stories about them.  Customer Leverage is a holistic strategy smart companies deploy to build genuine, mutually beneficial relationships with their most strategic asset--customers. Leverage enables relationships that result in more effective sales, more insightful marketing, more market-aligned solutions and more customer-aware organizations.

 

Truly leveraging customers means shifting from pockets of sales and customer lore to organizational wisdom; from reactive customer communication to dialogs and a closed loop; from reactions and complaints to proactive quests for customer advice; from overburdened customer references to active promoters; and from data analysis about customers to insight into their feelings and perceptions.

 

Customer Leverage is also a natural extension of your existing reference program—it’s a strategic concept you can successfully introduce today. The only extra building blocks you need are a commitment from senior management and the framework of a well-oiled customer reference program. In past articles, research reports and speaking engagements, we presented real insight, industry data and allegories about building, improving and expanding customer reference programs. Now, we take you one step further: to an evolutionary approach that lets you build on your company’s customer reference program investment—to Customer Leverage.

 

Surviving the Shift:  Customer Leverage Points the Way

 

A solid Customer Leverage strategy is built upon the foundation and measurable impact of customer referencing.  It combines your existing financial investment and the value of current success customer relationships with the following leverage points:

 

Leverage Points

  •    Intelligence: Knowing your customers and why they bought your company’s solution; knowing your defectors and why they left.

  •    Communication: Creating active listening and speaking relationships with your customers and defectors.

  •    Connection: Building insight communities for your best customers and others in your technology community.

  •    Reference: Promoting your success customers and their stories to industry and financial analysts, the press and prospective customers.


 

Two leverage points in particular allow you to meet the upcoming shift head-on:  communication and connection.  First, when you actively communicate with and listen to your customers, you learn early on who’s happy, who’s not--and why.  By doing the same with defectors, you learn why they defected and what they might be saying about you in external forums.  Like we said, all it takes to sway a wary technology buyer is one unhappy voice that negates 10 positive ones; it takes just one person to say they had horrible experience with your company--and that experience might not even have been related to your technology.  Maybe it was a problem with order management or with shipping.  But it does not matter—just as a low-flying F14 drowns out the drone of 10 vacuum cleaners, so too does one negative external voice drown out the din of 10 positive ones. Leveraging customers means more than having a cadre of success customers and people who promote your company unprompted; it also means knowing what existing and ex-customers are saying about your company… and where!

 

Our second leverage point, connection, lets you meet wary and truth-seeking buyers where they are most likely to be found--among strong insight communities of best customers and others in the technology community—perhaps your community, filled with customers who will help spread the good word about you.  Communities help every touch point:  customers get best practices, prospects get the objective proof they need, and you get happy customers and more sales.

 

Some communities are long-standing and allow customers to share best practices related to your technology, others are short-lived and designed to give your services organization feedback on a new offering. Regardless, these communities show existing customers that you want them to access their peers, and they allow prospects to understand what they will be getting into when they purchase your product or service.

 

The Impact of Customer Leverage on the Bottom Line

 

From 40,000 feet, customer leverage is similar to what your company probably does through various unconnected programs, initiatives, campaigns and special projects. The challenge with operating in unrelated pockets is that pockets tend to hoard knowledge; pockets are unable to manage customer expectations, experiences and the evolution from purchase to leverage.  For customer leverage to be effective, the customer must perceive your program to be part of a collective company embrace—your efforts must be coordinated.  When centralized under a unified and cohesive strategy, customer leverage results in benefits that uncoordinated activities can not achieve alone:

  • Faster sales and a higher return on marketing.

  • Networks of customers who learn from one another, share best practices and independently promote your solutions.

  • Customer communities incented to innovate and actively improve your company’s technology and solutions.

  • Channels for strategic and detailed communications with your customers and defectors.

  • Smarter solutions and a more “customer aware” organization.

  • More in-account and follow-on sales.

Customer leverage is unique among strategies in that it produces a balanced balance sheet if introduced and managed correctly.  You get what you want.  Customers get what they want, including:

  • Respect. Customers do not want to be viewed as “references,” nor do they want to be viewed as your extended sales force.

  • Promotion. Customers love industry-wide recognition, and co-branding and public relations activities that help their companies and their resumes.

  • A voice. Customers want a louder voice for better pricing models and new product features and services--now and in the future.

  • Real action.  So often companies conduct surveys or focus groups and make promises to customers that are rarely, if ever, kept.

  • True investment. Customers want a greater commitment to their success, as well as ongoing innovation.

 

Enabling Customer Leverage

 

At the end of the day, the better a company identifies, understands and manages its customer relationships the easier those relationships will be to leverage.  And the easier they are to leverage, the easier you will find it to build better products, accelerate sales, empower marketing, affect market perceptions and, more importantly, increase sales during the approaching shift in technology buying behavior.

 

The next article in our Beyond Reference Series will highlight 10 things smart companies do to leverage their customers. Steven Nicks and I will explore this topic and provide real examples of how companies you know are putting customer leverage first--and winning.

 

 

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

 


 

[1] Gartner FirstTake, July 14, 2004, Joanne M. Correia, FT-23-4473

[2]  Phelon Consulting Customer Reference Program Benchmarking Study – 2004 Edition. Author: Promise Phelon with Steven Nicks and Kenneth L. Benson

 


 






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