Monday, April 5, 2010

 Well run customer reference programs can provide substantial value in areas critical to business success: more credible and more effective marketing, improved lead generation, greater sales productivity and higher close rates among others. But they're surprisingly expensive. They require staffing, budgets for expensive publishing and video production, and for larger programs, a sophisticated reference management system. In addition, poorly funded reference programs can completely miss tremendous opportunities to generate leads, build brand and close deals. Indeed, they can wind up alienating the customers they do touch, by over relying, for example, on your most accommodating customer references until you tick them off.

Here are some tips for unleashing the strategic value of your best customer promoters:

Tie the reference program operations to corporate strategy

Put the reference program directly under s senior executive who has a significant voice in corporate strategy. Also, consider making the sponsor a sales executive. Often, reference program managers or directors report to marketing executives, but some of the most successful programs I've seen report to sales because that's where they have the most impact. Often firms staff reference programs with people who have sales experience, the better to understand sales needs.

Keep reference staff in the strategy loop

Reference program leaders should participate in strategic implementations and be kept abreast of strategic planning through their executive sponsor. With strategic alignment, you'll develop remarkably effective ways to deploy your customer promoters in new ways like product launches or web-based marketing initiatives. In the absence of clear strategic alignment, you'll wind up with customer references that won't matter to strategic prospects, along with expensive collateral and video that won't get read or seen by buyers you want.

Communicate to key stakeholders

Much of the senior management in your firm may not be aware of reference programs, what they do, or why they matter. It requires a process of awareness building to fund these programs and get the senior level support needed to leverage their potential. Always a good thing to communicate is the impact these programs can have. See the next tip.

In particular, communicate the value a robust reference program provides

Everyone in your firm will understand conceptually that sales and marketing need references to raise awareness, create demand and close deals. But why do you need a reference program? Here's one research-based reason. Without one, finding those references, particularly for larger firms with global reach and complex offerings, isn't easy. A study by Boulder Logic, showed it took sales people 5 to 7 hours to hunt down references themselves—which equals time spent away from selling to prospects. And note, Boulder Logic didn't address the quality of such self-sourced references—many newer sales people may simply provide the best of a poor group to choose from, since they lack the contacts of knowledge they need to access the best available.

One enterprise software firm calculated that at 5-7 hours per "hunt," the firm was losing more than 10,000 hours of selling time from its global sales efforts per year; in dollar terms, this was a loss conservatively estimated at $3 million in sales. A properly funded reference program—which delivers the best available reference to the right sales person at the right time—can save their firm that much in lost sales. In addition, the firm also calculated that every dollar spent in providing such a reference program creates $5 in additional sales and saves another $2 if you add in the cost of sales salaries and benefits, for a total of $7 in return for each dollar invested.

Build out a business model for supporting strategic initiatives

Armed with such information, reference programs can demonstrate critical contributions to strategic initiatives. The reference program director at the enterprise software firm mentioned above now participates on high level planning teams that develop strategies for selling new offerings into specific markets. Her presence on these teams is now a rather obvious step.

Once sales goals are established and formalized for a new offering, the reference program director can tell her colleagues on the planning teams how many reference requests sales will make in order to fulfill those goals (information based on the data she's developed over a period of two years). After determining how many references they'll need to cultivate for the new solution, she can quantify the headcount and budget she'll need to support the sales goal, rather than waiting and scrambling for references when the solution reaches the market.

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