Using references to talk to your prospects and endorse your software product can be the most effective way to close a sale and cut the length of the sales cycle. They reassure your prospect that his or her impending decision isn't too risky. For large purchases of business software, references are the equivalent of the much-sought-after word-of-mouth marketing for consumer products.
But cultivating and using good references can be one of the most challenging tasks you may ever face. There are a number of barriers which get in the way of building a good stable of solid references. Read on for some pointers on how to use customer references to your full advantage.
Rising Risk and Fear
Before embarking on what may seem like a herculean effort to obtain references or to improve your reference program, it helps to know why they are so crucial. It's a matter of the psychology of a sale as it progresses through the sales cycle.
Early on in the sales cycle, prospects are generally considering price and functionality as the most important factors in their decision. Price then drops down in importance for awhile as functionality takes the position as leading concern. Then, as your prospect gets closer to the decision, as your sales rep gets nearer to closing the deal, price again becomes more important, and a new factor takes center stage: risk. Your prospect begins to worry about the possible negative consequences of making the purchase. Will the project succeed? What if it fails and it makes a black mark on their record at work? Nobody wants to be associated with a failed project and waste of money.
Think about the major purchases you make, such as a car, house, or expensive TV. Shortly before you decide, you're focused on such questions as "Is there anything wrong that I don't see? What if I don't like it? What if this is a dud? I won't have a second chance to buy this, so I've got to get it right this time." Your prospects are going through the same experience on behalf of their company and their own reputation within it.
Therefore, to a person needing reassurance that the purchase is not too risky, what they need in order to get over the risk hurdle is a reference call where an experienced customer talks about their reasons for buying and their good experience with the product. What's more, they can get advice and lessons learned that will increase their chance of success. This reassurance and guidance is exactly what your prospect requires to move forward with the decision.
That's why references are so important, and why reference calls generally take place when a deal is ready to close.
Who Owns the Reference?
The matter of who owns a reference is a very sensitive one. The owner is the individual who has the right to contact a reference and request their time and assistance with a prospect. If you don't make it clear who owns the reference and require permission from the owner first before approaching the reference, you can wind up with your own people abusing the reference's generosity. This can end in both losing the reference for all future benefit, and possibly provoking a tepid conversation with a prospect that leads them to decide not to buy your product.
A rational reference program is probably managed centrally by Marketing or Sales, but the challenge with such a program is that it's usually the sales rep who is the best person to own the reference. The sales rep should have a close, ongoing relationship with the reference and have the greatest interest in keeping them as a satisfied customer. If you have products or services where ongoing sales from existing customers are critical, then you must pass through the sales rep to get permission to ask for a reference.
This is much less the case when you have sales where a customer buys once and the sales rep moves on to other deals while your Professional Services and Support functions handle the ongoing relationship. Then ownership can be more realistically centralized with Marketing or designated individuals in Sales or Support. But with every reference, there needs to be a designated individual who is mindful of the reference's time and acts as gatekeeper for all requests.
Looking For Perfection
Once you have a gatekeeper for each reference, you run into the problem of wanting the perfect reference. That would be a customer who thinks that your product is perfect, always perfect, and has never had to expend any energy, or experience the least amount of difficulty in working with it. Such situations are close to impossible to find in real life. In fact, they really wouldn't be the best situation for a reference if they do exist, because they give a distorted or unbelievable picture of a completely painless product implementation.
But it can be a real barrier when a gatekeeper to a reference keeps that gate shut unless absolutely everything is going smoothly.
Also, many sales reps can react nervously to asking for a reference if they know there's an open issue, or additional business in the pipeline. They don't want to distract the reference from the deal they're currently working with them, and they don't want the reference doing them a favor just before negotiating a sale, where the reference may ask for a favor in turn in the form of a discount.
So as a Product Manager cultivating and encourage references, you will have your work cut out for you when approaching the gatekeepers. It helps to point out that everyone has a vested interest in utilizing references for more sales, who in turn will be references for sales further down the road.
Some people are uncomfortable asking for references even when there is no rational reason not to. It's simply a discomfort with asking for a favor, feeling like they are imposing on a reference. This is where you as a Product Manager can exert some of your influence to explain that many people enjoy the discussions they have during reference calls. It is not necessarily the onerous task they think they are asking of their customer (though time is always in short supply).
See What Motivates a Reference? below.
Never Reaching Closure
If a sales rep or other gatekeeper wishes to wait until everything is going swimmingly, they'll probably wait forever, and you need the reference before then. A good customer relationship is always growing, and the customer is always experiencing ups and downs as they use your product to accomplish their goals. Some of the difficulties may have nothing to do with your software, but stem simply from the difficulty of the initiative they are working on, whether aided by software or not. Not all your customer's difficulty is the fault of your product, not by a long shot.
When you run into a gatekeeper who wants to wait until such-and-such an issue is resolved, try forging ahead. Reassure them that the situation will always be developing and changing. Not every open issue has to be successfully resolved to request a reference. Rather, the reference has to have be okay with how past issues were resolved and how open issues are progressing. Your product is not required to be perfect. When you create software, you create bugs, guaranteed (kudos to those who achieve perfection). It's not having no problems that you are aiming for, it's having a organization which responds when problems are encountered, cares about the customer's issue, and works well to resolve them in a reasonable timeframe.
Earning the Right
Even with a clearly superior product, getting a new sale to a point where they can provide references is a significant effort. On the customer side, it takes a capable manager, first to set good goals for using your software, then to accomplish them. On your part, it takes consistently superior delivery of training, implementation, and support. You will have to earn the right to ask the customer for a reference.
It pays to identify accounts which have a high potential to become a reference, and make sure your entire training, services, and support team are aware of that potential. If there is a glitch with delivery of training or support, causing customer dissatisfaction, it can set you back and require an uphill battle to reach the point where you have earned the right to a reference.
Another factor in developing a reference-ready customer, and possibly the most difficult to deal with, is time. If your software product serves as a tool to accomplish an initiative designed to show results over months and years, rather than days and weeks, then you have to wait out the progress which your customer is making before they can point to clear successes. Time is one of the factors that make it so hard to earn the right to a reference. When new capabilities in your product are launched, you may not see references who can provide success stories around those capabilities for several months to a year.
Positive, Not Pollyanna
A common misconception is that in order to be a good reference, a customer must be resolutely and entirely positive about your product. This mistaken belief can lead to much useless effort expended trying to make things perfect for a customer. And waiting for things to be perfect can lead to never using the reference because you never consider them ready.
In the real world no product is perfect, and any implementation of that product is even less so. Most prospects know that, and those who may have forgotten that fact during their search for a tool to solve their problems could use a reminder. Your reference will have more credibility when they are able to talk to your prospect about their overall success using your product, including some of the limitations or failures.
In fact, when you talk with references to obtain their agreement to speak with a given prospect, you may want to coach them a little about not only the successes, but the realistic constraints they encountered while using your product. Those constraints may have nothing to do with the product itself, but are a factor nonetheless. A reference who can paint a picture which is positive overall, without making the product sound perfect, will have more credibility.
Customer Pain Is Your Prospect's Gain
There's another reason why you want your references not to avoid negative information. Your reference customer's experience with your product includes lessons learned. These lessons learned can be one of the most helpful aspects of a reference call, because they can be imparted to future customers, helping new customers achieve greater success and feed into your list of reference accounts.
Encourage your reference customers to bring up the lessons they learned when they used your product, and prompt your prospects to raise the issue as well. Lessons learned make for an authentic, compelling story, and give your prospects confidence that they can benefit from the experienced customers they speak with, giving them a shot at implementing your product more smoothly.
You'd Be Surprised What They Want to Know
When you move your prospect through the sales cycle, often responding to RFPs and detailed reviews from technical staff, you get used to focusing on your product's capabilities. Therefore, you expect those capabilities to be the central focus of any reference call placed as one of the last steps before your prospect's decision to go with your product.
But there is a whole set of important guidance which reference calls can provide which may have nothing to do with capabilities. That would be information on how the reference customer selected your product.
This makes sense when you think about it. Because a prospect hasn't reached the point of implementing the software, but is instead going through the process of evaluating and selecting a product, they are just as interested in gaining a perspective on how their selection process compares to that of others. It pays to point this out to your reference customers, because the reference call can serve to reassure your prospect that they are indeed proceeding with a complete and thorough evaluation.
Your prospect can benchmark their approach against the reference customer's. The reassurance that comes from such benchmarking will go a long way toward getting your prospect to the decision to buy.
Don't Forget Word of Mouth
While we are on the subject of formal reference calls, it pays to remember that all your customers serve as unofficial ambassadors to the marketplace, providing word-of-mouth marketing well before your sales reps have an opportunity to reach a prospect. These are like informal references. So it pays to cultivate good relations with customers and generally encourage them to talk about your product by pointing out what kinds of information others in their industry are likely to be interested in.
Persnickety Sales Reps
One of the biggest barriers I have faced as a Product Manager when arranging for references has been the resistance of the sales rep who owned the account. Sometimes the sales rep has a knee-jerk reaction against having anybody contact the account. They are somehow afraid that even the slightest imposition on the reference will ruin the relationship.
This is hard to get around. It helps to point out to the rep that just as they facilitate references for other reps, so too will they be able to get references from other reps when the need arises. Explain to the rep that in many cases, their customer will relish the reference call experience, that it is not merely an imposition but a valuable and enjoyable experience for their customer.
What Motivates a Reference?
Recent research by Marketing Sherpa (www.marketingsherpa.com) about conducting a reference program clarified what motivates a customer to serve as a reference. It concluded that it was not rewards in the form of gifts, like those typically offered by reference programs, that inspired customers to participate in reference calls. Rather, it found that customers got great value out of speaking with knowledgeable members of their profession, gaining visibility with industry peers, swapping best practices and benchmarking their own efforts against those of the prospect. By participating in reference calls, your customers can obtain this knowledge without leaving their office, and build networks that serve them in good stead when they need to reach out for assistance.
Truly, this networking and knowledge exchange is the aspect of your reference program that appeals most to your customers. It is well worth talking this up both to potential customers and to your sales force and company at large. You want every customer-facing team member to be ready and able to talk up the benefits of providing references.
Understanding the rewards inherent in providing references can make your sales reps more cooperative when it comes to asking them, as gatekeepers, for a reference. When they realize there is a reward in it for their account, they will be more willing to ask their accounts to serve as references.
The Best Sales Pitch Ever
A reference call is the best sales pitch ever for your product, precisely because it isn't a sales pitch. It's a conversation where your prospect learns something valuable, maybe even gets tips on what to do and what not to. It reassures your prospect right at the point where the risk of their impending decision is the top thing on their mind, and gives them the confidence to go forward with purchasing your product.
— Jacques Murphy, Product Management Challenges