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3 Pitfalls to Avoid in Building a Customer Reference Pipeline

Posted by Bill Lee on March 29, 2010 at 08:43 AM

Press Release: Dallas, TX March 29

Following are some tips--based on programs I've worked with and observed at dozens of firms--on common pitfalls firms fall into when building their pipeline of customer references. Plus some guidance on how to avoid them. 

Build a reference pipeline divorced from company strategy 

Tasked with building a pipeline of customer references, reference managers often look to the following customer groups for references: 

•    Your biggest revenue customers 

•    "Marquee" customers 

•    Customers nominated by sales, account management teams, service teams, etc.—people who deal with customers on a regular basis. 

•    Customers nominated by senior executives 

•    Members of your customer advisory boards or customer councils 

•    Customers who participate in online communities or forums 

Some or all of these groups may well provide fertile fields for harvesting customer references, but without strategic guidance and careful vetting process, they might also create land mines. 

For example, your biggest revenue customers may be exasperated with your offerings and looking desperately for ways to replace you. They may also be in markets your firm is strategically moving away from. Sales people who suggest their own clients as references stop checking in once the sale is closed—and may be sending you customers who've become disenchanted. Customer's reference candidates suggested by executives may simply reflect the personal relationship they have with the customer executive rather than any compelling story about your services. Even services teams can sometimes be the last to know of problems with a customer relationship. And even happy customers may not be strategic customers who can provide meaningful recommendations to buyers in the markets you're currently pursuing 

For such reasons, companies often think they know who their references are, but in fact are wrong. Even customers who are currently in your customer reference program may actually turn out to be poor references. 

Key Lesson: Any of those sources can be good for finding references. But always start with your firm's strategy. What are the key markets and key segments we're focusing on now, and will the proposed reference help us gain attention there and close deals? 

Leave performance out of the discussion 

One of the things I've seen way too often are conversations about "how can we get more customer references?" that don't include providing great products and services in the first place. Such conversations happen all the time. Some firms get caught up in whether they have the right legal agreements, or the right approach to inviting the customer into a reference program, or whether they're offering the right incentives. "Should we give nice gifts?" they'll ask. "Should we provide training or service discounts?" 

Such things can have their place at times, but they must not be the basis for a reference relationship. The basis must be grounded in one thing: providing superior performance. It's the only ethical basis for referencing. It's the only basis that will get you the enthusiastic referrals and promotions—the sheer excitement—you're looking for. And, if you build your reference program on the rock of performance (rather than the sand of incentives), it will act as a highly effective mechanism to continue improving your performance. 

What's not to like? 

Assume love lasts forever 

Another mistake some companies make is losing sight of how happy their references are with them. Just because they loved you a year ago doesn't mean they do now. The COO of a once fast growing technology firm whose growth had seriously stalled in the 2009 recession confided to me that the Board had directed him and other executives to ask key customers to provide references for the firm. None—none—would agree to do so. 

Companies with vibrant reference programs build strong relationships with key customers that include a lot of two-way conversation, and a regular formal process to review performance, correct problems, and stay current with the issues these customers are concerned with.  

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