Reference Point

How's that for a provocative statement? But stay with me on this. I hear a lot of smart business professionals talk about how they often regard customers as good friends, even close friends--that indeed, they make it a personal goal to build such a relationship with some customers.

I say, be very very wary.

Great customer relationships are built on achieving a rich exchange of mutual value. Economic value. Both sides have a responsibility to keep it that way--and it's a solemn resonsiblty to your investors, employees, management, and yes, to your customers. That's not friendship. The danger if you start mixing the two up is that you start doing things for each other--favors, special deals, and the like--that make no business sense. Not good.

Some years ago when I was consulting for a commercial developer in Dallas, I found that project managers in his ' construction division had gotten a little too cozy with subcontractors. How? Because one of them got outraged at me when I insisted that a subcontracting bid be awarded to the lowest priced qualified bidder. (What a concept!) The offended (losing) sub was buddies with the project manager on the job, and as a result of their friendship had gotten used to submitting bids with little competition, and when his bids weren't low, he expected to get a heads up so he could  lower his bid. 

That wasn't good for the project manager's boss (and my client)--not for his bottom line, and not for his goal of building a more price competitive construction division. And by the way, it wasn't good for the preferred sub: relying on such "friendships" and cush deals in business dulls your competitive edge and also tarnishes your ethical compass. In business, those are liabilities.

So whatever action or arrangement you're contemplating with a customer, it's a good idea to stop and ask, are we doing this because it makes economic sense for both our businesses? Or is it to further some misguided sense of "friendship." 

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There is growing interest in, and evidence of, the value of developing strong emotional bonds with customers. Gone is the notion that customers - even B2B customers - buy primarily for rational reasons. Much more important than giving them logical reasons to buy is engaging with them on an emotional level.

In a series of studies, the Gallup organization has found that businesses that optimize such customer engagement outperform their competitors by 26% in gross margin and 85% in sales growth. Their customers buy more, spend more, return more often, and stay longer.

Reference programs are in an excellent position to help build those emotional bonds. Often the "relationship owner" is an sales or account management (AM), who gives their closest attention to customers when they want to sell them something. Reference managers, on the other hand, have an interest in keeping customers engaged and connected consistently - it's in your interest. What we're learning is that this will not only be good for your program, but also for your firm's growth and profitability. 

Here are some tips for keeping customer references emotionally engaged:

Avoid obvious turn offs

Examples are asking for reference commitments up front upon signing the contract (the only exception here is to tie reference commitments to performance goals), engaging with customers only when you want references, relying on rewards and gifts to keep references happy (not to be confused with thoughtful, appropriate gifts to show appreciation, while relying on performance to keep them happy).

Learn and care about their issues and problems

Former Motorola CIO Patty Morrison calls this one of the first tests she applies in deciding whether to build a relationship with a vendor representative - including the reference manager. Think this is outside the scope of your responsibility? See how SumTotal Systems' Kathryn Perkins used that approach to build her refererence program and raise its visibility and importance both within the firm and with customers. 

Tie customer reference deliverables to regular performance reviews

Someone such as the customer's AM engages in regular performance reviews to make sure that the customer is receiving the value promised. That's the time to discuss references because it tells the customer you care, and the reference activities that naturally flow from such discussions can be exciting. In areas where delivery excels, for example, suggest doing a white paper or case study that would prominently feature the customer's role in the success. In areas where delivery is falling short, AMs are sometimes negligent in getting the problem corrected. Offer to step into the breach (as Kathryn did at SumTotal.)

Understand the customer reference's emotional drivers

What's her personality type? Is she a Driver? Analytical? Expressive? Amiable? Different types respond to different approaches and have different emotional triggers. Here's a useful checklist.  An Expressive, for example, loves the spotlight and will likely be excited about getting up on stage or in the media with his success story. A Driver may be ambitious to raise her professional stature, which can guide you in developing reference opportunities that will excite her.

Integrate references with other customer engagement programs

This will allow you to provide more options to customers - not just referencing, but other activities such as advisory boards, customer communities, user groups, customer events, etc. Such integration clearly creates better opportunities to leverage key customers. But, it also deepens emotional ties to your firm. SAS Canada's Wally Thiessen, who heads up customer programs, has taken this approach. Customer engagement at SAS Canada is 50% higher than a comparable region that has not been able to achieve significant integration. And it's leading to improved business performance, as the Gallup studies suggest: customer retention rates - once a strong point for SAS Canada that began falling off earlier in the decade, have risen steadily since Wally and his team began integrating key customer engagement programs.

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Just caught up with Kingsley Joseph, Senior Product Manager, salesforce.com, who created salesforce.com's IdeaExchange platform. It's being used not only by SFC but also Starbucks and Dell to attract large number of customers to their community sites, make sense of their input, de-dupe their feature requests, and prioritize them in remarkably innovative ways. IdeaExchange makes ample use of popular community tools such as Digg, Twitter, Linkedin and others.

Kingsley will be speaking at the 2008 Communities Exchange Summit on October 15.

Q. Kingsley, if you would, tell us how you got involved with salesforce.com's online customer communities. Who were these people? Where have you taken the program?

A. I became involved with the salesforce.com community in early 2006 when I joined salesforce.com. Back then, we had about 50 pages of content, mainly developed by us. Over the last 2 years, we've created a system that has almost every product manager blogging about their product, as well as lively discussion and idea communities that now span 200k pages of content that attract 100k visitors a month. We're more engaged than ever with the pulse of our community, and have found innovative ways to incorporate it into the way we do business.

Q. What have you learned about engaging with your customers? What works? What doesn't?

A. The key lesson we've learned is that it is a two way street. If you want customers to engage, you have to engage first, and be willing to take the relationship to a new place. Passionate customers expect a responsive business in return.

Q. Let me see if I've got this straight. salesforce.com both engages with its own customer communities via the IdeaExchange, plus you provide a platform - Salesforce Ideas - that helps other companies engage with their communities, correct? How did IdeaExchange come to be?

A. We first created the IdeaExchange in October 2006. Our rapid growth had caught up with us, and we needed a new system for processing feature requests that could scale with our customer community. The key challenges in feature request systems are prioritization and de-duplication. I was looking for a good web 2.0 solution to these problems, when I realized that the social news site model pioneered by Digg would be a great way to solve them. I located a small startup providing an on-demand social news solution, and implemented the IdeaExchange using their product.

The success of the IdeaExchange brought calls from customers (incidentally, on the IdeaExchange) to provide them with the same capability. We acquired the startup that had provided the solution, and we've since re-written their solution on the Force.com cloud-computing platform. It's now available to customers as the Salesforce Ideas product.

Q. Who are some of your marquee customers, and how do they use Salesforce Ideas?

A. When Michael Dell came back to lead Dell, he wanted to have the company reconnect with their customers. During a chat with our CEO Marc Benioff, he showed Michael Dell the IdeaExchange, and before we knew it, Dell IdeaStorm had launched. Within the first week, Dell IdeaStorm had collected more than 500 ideas; by the first month it had collected 2,500 ideas. Soon, Dell deployed EmployeeStorm, a secure community that allows employees to post ideas regardless of where they sit within the company; in the first two weeks of launching it had gathered more than 700 ideas. EmployeeStorm breaks down the silos natural in corporate life and increases collaboration-allowing, for example, tech support employees in Asia to communicate and share ideas with sales reps in Round Rock, Texas.

Customer feedback on IdeaStorm led the company to build select consumer notebooks and desktops pre-installed with the Linux platform. Dell also decided to continue offering Windows XP as a pre-installed operating system option in response to customer requests.

MyStarbucksIdea is an important part of how CEO Howard Schultz isre-inventing Starbucks - to instill what he calls "a seeing culture." While it gives their customers unprecedented say in the business, MyStarbucksIdea is also an always-on focus group for Starbucks to test product concepts. 48 Starbucks Idea partners play the role of representing customer ideas internally, as well as providing responsive feedback to customers. Customers go to MyStarbucksIdea, not to complain, but instead to offer creative solutions.

Q. In soliciting ideas from a large community of customers, how do you a) cull out the bad ones, and b) make sense of the ones that are left?

A. The nice part about Salesforce Ideas and a healthy community is that they do a lot of the hard work of culling out the bad ideas for you. As long as you maintain a healthy community, the application makes sense of what the community wants. Ideas that the community does not like disappear very quickly, and the ones that are ignored by most community members slide slowly into purgatory.

The ones that survive can be ranked by the total amount of interest in the community. Tie this in with customer relationship management (CRM) data and you gain remarkable insight into questions like "what do your most valuable customers want, what does your fastest growing customer segment want?" etc. The power of community becomes many times more valuable for product planning when you can connect it with your customer data.

Q. By the way, why don't you bring us up to speed on what salesforce.com is doing these days.

A. We are in the middle of two very exciting transformations. The first transformation is that, from leading the software-as-a-service revolution, we're now making rapid progress towards becoming the trusted cloud computing platform of choice. The Force.com platform that was unveiled recently, puts the power of salesforce.com's dependable, multi-tenant infrastructure in the hands of developers everywhere. The second transformation is that we're expanding Salesforce CRM into exciting new frontiers like community, innovation management and content management. We're excited about both transformations and are working very hard to deliver more than what our customers expect from us.

As always, we have some very exciting announcements coming out at Dreamforce, our annual conference in early November, so I would hate to ruin the surprise!

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I recently had the chance to have a conversation with Bob Pearson, Vice President, Communities and Conversations, about how Dell is preparing for the future of digital media.

Bob will be speaking at the 2008 Communities Exchange Summit on October 15.

Q. Bob, Dell's impressive recovery from "Dell Hell" to regaining the top spot in customer sat scores through its online community programs has been well documented http://money.cnn.com/2008/09/03/technology/fortt_dell.fortune/. Rather than rest on your laurels, I thought I'd give you a chance to frighten us (and yourself!) and inspire us. Let's get the first one over with. What is it about digital media and the online community revolution that keeps you up at night?

A. Well, our goal is to ensure our customers are enjoying their technology experience and we're learning from each other in real time. So, with an average of 500,000 people going online for the first time in their lives every day and the fact that Dell is mentioned in 5-10,000 conversations per day, I would say it's fair to say we go to sleep every night with a full day of work ahead of us.

Q. Dell has a large Customer Community budget - for example, you've got 42 employees spending their days engaging with Facebook, Twitter, and other popular sites. How do you justify the budget to senior management? Are your increasing customer sat scores, along with your decreasing customer "negatives" scores, enough for them?

A. It's not about budget. It is about having conversations with our customers and becoming relevant members of their communities online. Dell has been direct since the first computer was sold by Michael in '84. We think of this new connected era as providing us with new ways to speak directly with customers, share ideas and, in many cases, empower our customers to help each other out. It's an approach that is part of our culture, which goes well beyond a single group at Dell.

Q. Using IdeaStorm to manage feature requests by your online communities led to creation of the new Latitude laptop. Exciting stuff. But how do you know that input from the "vocal few" accurately reflects the average buyer? How do you plan to address this issue?

A. I would look at it a different way. Since when has a focus group been the right place to make major decisions? Is it better to watch ten people behind smoked glass, feed them sandwiches and ask them leading questions? Or is it best to let the community tell you what they want, customers vote on their own ideas, they discuss their ideas with each other and then we get to ask questions and watch the debate of tens of thousands of people over a period of months? In the case of Latitude, our product team was able to look at over 130 ideas, which led to six features being higher priorities in our launch. The community should be our development partner. Their insights are, ultimately, the ones that truly matter.

Q. You're hiring specialty tracking firms like Radian6 to help you make sense of the volumes of information customers generate about Dell online. What do you see as the greatest potential for such information?

A. We can see a tag cloud showing what is important for a product or a topic, as we speak. We can hear what is being said around the world, so we are more aware of trends, pro or con, in real time. We can also outreach to anyone not having a good experience with their technology to help them far quicker than it was possible in the past. Eventually, it will be important for companies to understand conversations in the ten languages that reach 95% of the online world in real time. We're on our way to doing this.

Q. Rank the following for their business potential: using customer communities to improve innovation and grow revenues, engaging with communities to improve Dell's brand, or using them to supplant cost centers such as customer support?

A. None of the above, since they are all results of doing one thing really well. We want to be a trusted partner of our customers, whether it's to help them with a technology issue, allow them to teach us how to improve via an idea, or to unlock their value to each other by empowering them to share their knowledge with each other. If we do this well, it improves innovation, revenue, our Brand and our costs.

Q. Going forward, what are the top 3 most exciting and potentially rewarding opportunities for firms like Dell in the digital media space?

A. The opportunities for us to learn from our customers via IdeaStorm are endless. So, idea management is key. The second area is to continue empowering our customers to share their expertise with each other. We're really just getting started here. The third is the innovation waiting to explode out of countries, like China, India, Brazil, Russia and more. We like to think of where we are today as finishing chapter one. There is a long way to go in exploring the potential of digital media.

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CAB EXCHANGE Summit
July 21-23
San Jose, CA
http://www.cabexchange.com/event/
For professionals who run Customer Advisory Boards, Executive Summits or similar structured customer collaboration meetings. You'll hear presentations from CAB programs at Wells Fargo, Intel, Interwoven, Cisco, Adobe, SAS, iCrossing, and other respected firms, get results from the first comprehensive survey of CAB programs, get a panel of executives' views on why they value CABs, and much more.

(new!) COMMUNITIES EXCHANGE Summit
October 13-15
San Jose, CA
http://www.communitiesexchange.com/event/
For professionals who engage with and build B2B customer communities - the only conference that addresses their unique issues. Includes a marquee group of presenters from respected Customer Community programs such as Oracle, Intuit, salesforce.com, Dell, Intel, HEUG (the 16,000 member Higher Education User Group), Citrix Systems, Riverbed Technology, and more. Early registration now open.

CUSTOMER REFERENCE FORUM
February 17-19, 2009
Berkeley, CA
(event website will be up in July)
For professionals who build and run customer reference programs. Keynote: Customer Reference Programs: Why Their Importance is Increasing, How Social Media will Radically Transform Them, by Merv Adrian, Sr. Vice President of Forrester Research. Merv will describe why he views references as increasingly important not only in analyst relations to firms like Forrester, but in marketing efforts in general. He'll also present research from Forrester on how social media is and will continue to dramatically change the field.

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