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Q&A with Phelon Group partners Promise Phelon and Steven Nicks

What are the biggest challenges facing reference program managers today?

Steven Nicks: Most programs are entirely tactical and focused on churning out case studies, success stories or fulfilling sales reference requests. Those activities are really just tools that communicate or capitalize on the relationship between a vendor and its customer. Very few companies focus on what’s most important – cultivating that relationship. That’s also why content deliverables are losing their spark – the same old challenge/solution model is losing impact while trust is increasingly becoming important. Prospects want to know why they should trust you with their purchasing dollars, and the history of your relationship with existing customers is gaining increasing importance in the purchase decision. Unfortunately, most companies do little to cultivate relationships.

Promise Phelon: For reference program managers that all leads to increasing struggles. Referencable customers don’t feel they are getting anything out of being a reference so their tenure is limited. There is a constant need to find new and interesting customer wins to replace references that have burned out while at the same time increasing the ‘pot’ of customers willing to act as a reference because the demand for testimonials is increasing. However, no new resources are being invested in reference programs, even though internal stakeholders are demanding more.

The folks we’re talking to are not only dealing with these challenges, they’re trying to be heard by senior management and make a case for more resources. Is it working? Sure, in some cases, but merely touting the number of referencable customers is a metric that is easy to ignore and often doesn’t open the corporate purse strings.

How can companies up level the value of their reference programs?

Promise Phelon: First, companies need to realize that the real value is not in the tactical reference fulfillment program - it’s in the relationship with the customer, the strategy about how to leverage that relationship and the inherent value it brings.

Second, they need to put a strategy and process in place that meets customer needs first, internal stakeholders second. Reactive management of programs with direct customer touch points only causes a downward spiral of burnout pressure to find replacement customers and unfulfilled requests. Without purpose, strategy and process it’s a vicious cycle that not only causes unnecessary internal churn, but risks the company’s overall relationship with that customer.

Finally, they must develop follow-on value propositions for their referencable customers after the transaction. In our own work with major technology companies and also through validated industry research, we have discovered that very few customers place any real value in traditional reference program incentives like points, giveaways or discounts. They demand real value in exchange for engaging in a relationship and allowing their success to be leveraged.

Steven Nicks: We did a Customer Perspectives Study recently that showed customers value the ability to participate in product development more than any other incentive currently offered. Next in order of priority was the ability to network with peers. Very few companies are focused on delivering that value. To be successful, you need to think of building your inventory of reference customers as solution selling – companies need to find out what their customers want out of the relationship. If they don’t, they will discover too late that they don’t have enough referencable customers to meet demand, which really means they simply don’t have good relationships with customers.

Is Customer Leverage new?

Steven Nicks: We’ve always used Customer Leverage in our work with reference programs; we just didn’t have a name for it. Often we came in to find CRP teams grappling just to keep up with the day-to-day while reference program managers were constantly under pressure to produce more and more content and referencable customers without any additional resources. They weren’t able to get additional resources because they weren’t tracking metrics that showed how reference programs contributed to ROI so they had no business case. The only way to fix existing problems was to increase the value of the program, and the only way to do that was to have a more holistic approach – Customer Leverage.

Promise Phelon: The more we applied components of Customer Leverage to existing reference programs, the more our clients began to experience other benefits, such as reduced reference customer turnover and reference loyalty, much more powerful content for sales and marketing, ability to contribute to the marketing function’s overall metrics which is such an issue for marketing management these days, and increased levels of participation from reference customers.

Steven Nicks: And we knew the benefits were much more powerful than anyone had originally anticipated. All companies have this incredible asset just waiting to be leveraged. Everyone can understand the logic in that; they just don’t have the process in place to make it happen. Customer Leverage is the methodology that makes it happen.

You’ve spoken and written quite a bit about a shift that’s occurring in the IT buying environment. What accounts for that shift and how does it affect reference programs?

Steven Nicks: Buyers are becoming more savvy. These days they proactively buy, they aren’t sold. Jobs are on the line, profit margins are narrow and companies simply need to be very diligent about their IT purchases. We hear over and over that references do not carry as much weight as they did in the past. Buyers know references often receive something in exchange for acting as a reference, and they know those references are thoroughly screened and sometimes even coached by vendors.

In response buyers are going around formal reference program channels to seek out candid opinions from happy customers and defectors. They want to know the good and the bad. They visit online communities, they ask their peers, they listen to objective third parties such as analysts and press, and they simply pick up the phone and call the customer direct. Vendors obviously can’t control these activities, but they can shift their focus to building deep and solid relationships so that when customers are contacted, the outcome is exceedingly positive. Customer Leverage is a methodology to help them do that in a very strategic, proactive manner.

Can you provide some key Customer Leverage concepts that reference program managers can begin to integrate now?

Promise Phelon: Evaluate your assets and start to think about your program in terms of impact on the business versus inventory of success stories and references. Look back at your success stories and think about how you would promote your program to your company’s CMO or CFO; practice your pitch. If there are not salient points that you believe will get them excited, it may be time to re-evaluate how you are approaching the program or simply how you’re measuring and demonstrating its success.

Phase out your incentive programs as soon as you can. Many people are surprised when we say that but incentives are actually discrediting the value of references and therefore, your program. Also, build and share the knowledge you gain from referencable customers from all the interactions and interviews your team conducts for case studies and success stories. That information is critical and must be shared with the right organizations. It’s really customer intelligence at its best, especially because it’s gathered after the sale and captures real vs. perceived information.

Steven Nicks: Review your organization’s charter and see how you can elevate it to more of a relationship builder than a tactical program. Educate your marketing leadership on the value of customer relationships and the potential impact on the company as a whole. And introduce the term “Customer Leverage.” You need to elevate their view of how reference programs have traditionally operated so they see past the tactics to the strategic value.

What is the future of reference programs?

Promise Phelon: We see reference programs evolving from tactical programs to strategic relationship managers. Most any technology vendor can replicate its competitors’ offerings, price, branding, etc. but they truly cannot replicate customer relationships. Smart companies are realizing those relationships are tentative at best without real commitment and shared benefit. Reference programs as they currently exist already have much of the infrastructure in place to manage and cultivate customer relationships.

Steven Nicks: Customer Leverage is really a wider corporate strategy. The benefits are immediately apparent in reference programs because that’s where so much of the post-sales customer communications are happening today. But as reference programs evolve and focus more on that strategic relationship with customers, the benefits are going to spread throughout the company.

What’s next for The Phelon Group?

Steven Nicks: Although our focus is currently on reference programs, we’re also doing a lot of industry research and work with CMO’s and VP’s of Marketing who understand the potential value that marketing can contribute starting with reference programs as a foundation. They’re beginning to see that reference customers want to serve on customer councils and participate in beta programs, they want to tell you about their growth goals and how you can deliver solutions in the future. They also want to have an ear when something is wrong so it can be solved before they become a defector.

These customers can contribute to an organization’s growth on so many levels. It’s our mission to help our clients maximize that opportunity, which is sitting right at their feet, waiting to be leveraged.


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