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September 2012 Archives

5 Reasons Why Customer Reference Programs Fail

Posted by Bill Lee on September 25, 2012 at 04:14 PM

Although every company knows customer references are important, most companies have a lax approach to managing them."  

Marc Benioff, CEO, Salesforce.com

That's a key differentiator for Salesforce.com (SFDC): being highly disciplined about creating customer advocates, and making sure they can tell their story to buyers and prospects. It's not surprising to anyone that customer reference programs are important to growth, and becoming more so in our increasingly social and networked world. But a lot of companies fail to successfully tap this source of growth.

My organization, Customer Reference Forum, has worked with and educated customer reference program managers going on nine years now. Here are the major reasons customer reference programs fail.

1. Failure to dedicate the right resources

Reference programs are often organized as an afterthought, assigned as one of several programs to a junior level employee who has too much to do, and managed with a spread sheet.  Someone may hand him a list of prospective references who may or may not be happy customers, or strategically significant, or even profitable. Before long, reference requests to the new program go wanting, as sales and marketing return to their old habits of trolling for references themselves, leading to underutilization of potential powerful references at one extreme, or burnout at the other. That's no way to grow a business.

In fact, that's business malpractice. Enthusiastic references are extremely valuable to a business. They can close deals that were stuck, convince skeptical analysts or media that your product or service is the real deal, build your brand on thier social networks, provide referrals--the least expensive and most powerful marketing tool out there--and much more. Reference programs deserve adequate resources to realize that potential.

2. Failure to install the right systems and processes

This includes an adequate reference management system (RMS) that automates as much of the data needs of the program as possible. And these needs can be considerable: which references do you have, from which industries or segments? What requests have they fulfilled? What other advocacy activities do they engage in? What reference content have they provided? Where can you get your hands on it?

This also includes having the right processes and policies in place? What policies have you established for references and testimonials in your sales and marketing efforts? At what points in the sales process should references be used? How will customer videos, stories and other customer content be used in social media efforts? What rules have you established for customer content in your marketing communications?

3. Lack of executive support

A successful customer reference program not only needs resources, it must also cross boundaries and wok with, and get cooperation from, other divisions in your business such as sales, marketing, social media, PR, product development and the like. Sales people may "hoard" their prize references, fencing them off from big opportunities to promote or close business for you. Social media content can go stale fast, without ever refreshed supplies of new content from your advocates. Look at most websites: they bore viewers to death with "all about us" information that most visitors care noting about: how easy it would be to provide interesting content from someone like the visitor? Most often, that's going to be your customer advocates. 

The cure for all of these situations is a strong executive supporter, who understands the value of references and is passionate about capitalizing on it. She gets directly involved in issues like those above, resolves them and makes sure the program gets the resources and cooperation it needs.

4. Failure to integrate references into the growth strategy

You can spot a reference program that's done this in a heartbeat. Reference managers look puzzled when you ask what the corporate strategy for growth is? They recruit or keep customer references who may or may not be from markets that senior management is targeting. They're out of the loop. 

Reference programs that are well integrated into strategy can tell you, in your next product launch, how many customer references you'll need. And from which industries or customer segments. They'll know what types of reference activities they'll need to engage in. They'll know wow many are references are candidates to be early adapters of the new product line. 

5. Failure to measure (or even understand) the business value of references

You'll see this problem when reference managers tout the number of new references they recruited--without regarded to their actual value in generating business. They're measuring inputs that have little bearing on business results, not outputs. More sophisticated programs continually measure their business value and adjust accordingly. Reference programs can dramatically improve sales productivity (by freeing them from the time intensive task of hunting down references themselves). They can increase media awareness, by providing content for reporters or analysts that make it more likely you'll be published. They can ensure the success of new product launches, by proving critical early adopters, references and referrals. 

And finally:

Bonus reason: Failure to provide a compelling reference value proposition.

You see this in companies that resort to gifts, prizes, awards, cash discounts and even low grade bribes to get customers to reference. Not good. Smart companies think through why their customers would advocate for them--and come up with better and more ethical reasons than those. First, you provide a terrific product or service. That's the price of admission. Then you get creative in providing appropriate reciprocal value to your potential advocate. Does she like the limelight? Offer to do a joint case study or marketing piece. Does she want to affiliate with her peers? Invite her to your user groups or customer events. Would she like a higher profile in her industry? Arrange for speaking events where she can tout her accomplishments--with the help of your product or service.


 

The Big Goal Behind All that Customer Data

Posted by Bill Lee on September 17, 2012 at 03:10 PM

from the Harvard Business Review Blog Network

Big Data is working hard to get into the minds of customers and uncover accurate information about how the customer really feels, thinks and responds to products, services, advertising and brands. But like eager field-scientists exploring a verdant new continent, companies attempting to navigate and leverage Big Data risk getting lost in the weeds.

Now — still early on in our understanding of Big Data's true impact — is the time to avoid the most common mistake that companies make when embarking on tech-based research about customers: losing their way amidst all the complexity of systems issues, technical possibilities and implementation snags. Instead, when it comes to Big Data, your firm must stay focused on the business outcomes you want to achieve. And in many firms, the most promising outcome is unleashing vast stores of hidden wealth their customers can create. Thus, the most important question regarding Big Data at almost any company is: How much are your customers really worth?

Uncover the Hidden Wealth of Your Customers
It's a remarkable fact that most companies can tell you to the penny how much their furniture is worth, but don't have a clue about the real value of their customers. Neither do their bankers or investors. And of course, customers are the basis on which firm value rests.

The most forward thinking companies are adopting some form of Customer Lifetime Value (CLV) to assess the value of customers to their bottom lines. But by now, CLV is highly limiting and narrow — it only assesses the value resulting from a customer's purchases of your products and services. And in today's increasingly networked, social-media-infused reality, that's missing a whole lot of customers who can generate value far beyond anything they buy. Purchasing is just one way — and often not the most lucrative way — customers can create value for your firm.

That's because customers are your most credible and persuasive marketing and sales resources — much more knowledgeable about buyers' needs, and much less expensive than the resources you're probably currently using to grow your business. Big Data needs to capture this reality and focus your organization on it.

Expand the Value You Harvest From Customers
Consider a customer we'll call Catie. She's a solid, if modest, purchaser of your products and services. Let's say she purchases $6,000 per year resulting in a profit of $2,400 (feel free to use your own numbers for a solid if modestly profitable customer in your business). Her CLV might be $7,000 or so and that's where even companies with advanced analytics stop.

But Catie blogs regularly and participates in a variety of social media and professional networks — networks that have plenty of potential buyers. And she's respected. She's also interested in speaking at her professional association meeting — and would be willing to talk about the success she's enjoyed on an important project — success that your product or service helped to make possible. She also scores high in your Net Promoter Score surveys, but at the moment (like most "promoters") she's never actually referred a profitable customer to you. That's because you haven't reached out to her to do so. And that, in turn, is because these characteristics of Catie, and the potential value they would bring, haven't shown up from Big Data.

By the way, Catie is not fictional. She's a composite of actual customers, such as Salesforce.com's MVPs (Most Valuable Professional) and SAS Canada's "Customer Champions" and other "Rock Star" customers that I write about in my book, The Hidden Wealth of Customers.

Now suppose you identify her as a modest buyer, but a high-potential referral and lead-generating source. So you engage her by giving her speaking opportunities, you co-present at her industry association, host a webinar featuring her, invite her to local customer forums, and give her a leadership role if she's interested. And suppose as a result of these activities over the next year, Catie generates four direct referral customers, another 17 additional leads who become customers (remember, unlike the webinars and speeches by your executives, hers are much more credible to buyers because she's one of them). That makes her referral and influencer value to your firm (after allowing for other factors that influenced purchase decisions, along with the cost of supporting Catie's advocacy) equal to $33,080 — or 13.8 times her value as a purchaser.

A primary goal of Big Data must be to show you this potential, and to record it as it's realized.

Expand the Value You Create for Customers
Improving the customer experience is a fine idea. But companies often take it to extremes. It's always a good idea to look for new ways to create value for customers. But focusing only on doing so through your product or service is entirely one-dimensional. The hard reality is that your product or service, however great it is — however much it helps your customers get a job done or provide an enjoyable experience — is likely just not that important to their lives in the grand scheme of things.

So let's take customer value up a notch, to a higher, richer dimension. SAS Canada, for example, gives its Customer Champions opportunities to take leadership positions in its customer communities, increasing their professional networks and building their professional reputations. Salesforce.com seats its MVP customers in the front row of its massive annual Dreamforce event, and keeps them updated with important industry information. In our example with Catie, you can help her build her professional visibility with speaking and webinar engagements, and increase the reach of her blog by providing "insider" information that other bloggers don't have access to. Companies are creating much greater satisfaction than "getting a job done." They're helping customers build social capital. They're improving customers' lives. Other leading firms such as Procter & Gamble, Lego, and Hitachi Data Systems engage in similar activities.

Does your data capture such opportunities? Does it show which customers are influential on the Web? Which are plugged into and respected by networks attractive to your firm? Does it reveal customers who want to gain recognition in their peer groups and who have great stories they can tell (based in part on help from the product or service you provide)?

Make sure you're not getting bogged down in Big Data. Instead, focus it on unleashing the hidden value of your customers.