Reigniting the Promise of Customer Reference Programs

by in Marketing

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The 2016 presidential race has arguably been the most unconventional campaign contest in recent decades. Amidst Clinton’s email woes and Trump’s bold promises (including mandating that the U.S. recites “Merry Christmas” again), it’s been one for the history books.

One of the few familiar tactics unfolding this election season has been celebrity endorsements. It’s an age-old strategy: celebrities have reportedly contributed to campaign funds since as early as the 1930s. This year’s presidential race has seen at least 200 “big name Hollywood stars” drill up support for both campaign camps. Trump’s supporters have included the likes of Kid Rock, Hulk Hogen, Terrell Owens, Mike Tyson, and Kirstie Alley, while Hillary’s A-listers have included Amy Schumer, Leonardo Dicapprio, Tom Hanks, Jay Z, and Robert De Niro.

In the business realm, public reference customers can prove equally as lucrative as celebrity endorsements in the world of politics. More so than ever before, companies are recognizing the value of amassing reference customers who can add credibility and serve as powerful forms of social proof.  According to a 2014 research report by Forrester, companies spend approximately $250,000 annually on customer reference programs, while larger enterprises spend in excess of $1 million. At the extreme, one Fortune 500 software security company spent $96M in revenue on its public reference customer strategy throughout the first five months of 2014 alone.

When harnessed effectively, pubic references customers can markedly impact a company’s bottom line. A 2011 study by Harvard Business School found that signing a big-name endorser increases a company’s sales by $10M annually and results in a 0.25% increase in stock returns. With such a high potential for reward, it’s not surprising that building out an effective customer reference program is hard work. 90% of consumers are “Silent Satisfied Customers.” That is, while they are satisfied with their overall experience with a brand, they aren’t willing to vocalize this satisfaction.

Fear not! Several strategies can help you turn “Silent Satisfied Customers” into vocal ones that will improve your bottom line.

1. Offer incentives 

Acquiring reference customers is not a task for the faint of heart. There can be a lot of resistance on the part of the customer – and for valid reason. The customer typically must perform a lot of heavy lifting to obtain permission to participate in a reference program.  For Fortune500 and big brand customers, the process almost always requires internal PR and legal approval. Amidst brand image, privacy, and other concerns associated with being affiliated with the supplier, the process can require a lot of time, effort, and bureaucracy.

Introducing incentives can prove to be an effective tactic in motivating customers to cross the chasm from “Silent Satisfied Customers” to “Super Customer Advocates” (a classification held by a mere 0.5% of customers). Incentives can materialize in a multitude of forms, including early access to R&D roadmaps, complementary or discounted conference tickets, advisory board invitations, etc. PeopleSoft’s president of global sales productivity, Heather Loisel, has found a hybrid approach successful, explaining, “We do have rewards, and it’s kind of like a frequent flier program….The reference earns points, and those points can be used for things like a pass to one of our member conferences.”

Discounting can function as an effective incentive but should be exploited cautiously. Discounts should only be offered in situations where the customer has already proven to be an advocate for your company and are genuinely passionate about your offerings. They shouldn’t be used to coax customers into fabricating favorable accolades on your behalf. Be especially wary about offering a discount in the initial stages of customer reference conversations. Instead wait for the customer to broach the subject. If the customer broaches the subject without prodding, it’s more likely that the customer genuinely sees value in your offering and is interested in becoming a reference.

2. Avoid reference burnout 

References, especially Fortune 500 and other big brand ones, can act as powerful conduits of social proof. Social proof is an effective “decision heuristic,” or a shortcut for making decisions. When prospects are confident that reputable organizations have reaped value from your products and services, they’ll be more likely to jump on the bandwagon too.

Sales people know that soliciting reference-able customers to help accelerate and close deals can offer a path of least resistance. Not surprisingly, they’re apt to latch on to references. Unfortunately, the results can be disastrous. If a customer is routinely solicited to field calls with prospects, participate in case studies or other PR initiatives, and/or contribute to marketing collateral, they are susceptible to “reference burnout.” Reference burnout can be disastrous and cause the customer to reject all forms of partnership, which will inevitably reflect unfavorably on your brand.

To avoid “reference burnout,” your best bet is to build out a healthy collection of reference-able customers. If you have a rolodex of references to choose from, you’ll ensure that no single customer is chronically solicited. Best-in-class companies integrate their reference program database into their CRM system. This empowers them to track and monitor how frequently reference customers have been solicited so as to circumvent reference burnout. It also enables them to set parameters (for example, to restrict sales reps from contacting references that have been beseeched more than a certain number times in a given time frame, or within a past set number of days).  If a reference is encroaching the “burnout” point, a “do not contact” tag can be added to their CRM record.

Building out a healthy arsenal of references has the dual benefit of adding relevancy to conversations with prospects. If you have a pick-list of reference-able customers across various industries who can speak to various use cases, you can afford to be more selective in determining the optimal reference for each sales conversation. The better able prospects can relate to a reference (whether they are in the same industry, confronting similar organizational challenges, etc.), the more likely they’ll be to envision themselves using your product or service.

3. Compile customer testimonials 

References can be called upon to assist with a variety of different initiatives including logo use, reference calls, case studies, speaking engagements, and more. Customer testimonials can be one of the most powerful outlets. Recent research by TechValidate found that 94% of B2B marketing and sales professionals rated content sourced directly from customers (such as testimonials) as “very effective” or “extremely effective.” In contrast, only 54% of professionals rated third- party analyst content as “very effective” or “extremely effective.” As compared to logos, vendor-authored case studies, etc., customer-generated content (such as testimonials or customer-authored case student) tend to prove more trustworthy. When collateral comes “straight from the horse’s mouth,” it’s more credible and easier to believe. It’s easier for prospects to step inside the shoes of a reference customer and imagine a similarly positive experience as a result of purchasing your offering.

While it’s definitely worthwhile to optimize your customer reference program, the ultimate objective should be to optimize for customer advocacy. Word of mouth recommendations are the primary factor behind 20-50% of all purchasing decisions. This is, in large part, due to the fact that 70-90% of the buyer’s journey is completed before a vendor is even engaged (in most cases before a vendor has the opportunity to connect a potential buyer with customer references). When you focus on customer advocacy and aim to provide high quality customer service to all customers, you’ll ensure that customers (regardless of whether they are public references or not) will go to bat for you – including behind closed doors. Doing so will pay dividends: a 12% increase in advocacy has been found to generate a two fold increase in revenue growth rate. When customers truly believe in your product, they’ll go beyond the call of duty to advocate on your before. Consider Hulk Hogan’s recent testimonial on behalf of Trump: “I don’t want to be in the ring with any candidates — I want to be Trump’s running mate.” 

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About The Author

Rebecca Hinds
Rebecca Hinds - View more articles

Rebecca Hinds graduated from Stanford University in 2014 with a M.S. in Management Science and Engineering. In 2013, Rebecca co-founded Stratio, a semi-conductor company developing infrared sensors. The company was selected by the Kairos Society as one of the 50 most innovative student-run businesses in the world.