m>Realizing the Untapped Value of Your Most Important Asset

Harnessing the power of references and referrals seems like an obvious win. What could make more sense than to leverage the enthusiasm of happy customers to convince buyers that they need your products and services? And in an increasingly social and networked world—not to mention an economy where every dollar of revenue is critical—this type of third-party validation is more important than ever. So why do we have so much trouble mastering the art of customer advocacy?

Because companies don’t take it seriously. You just can’t half-heartedly paste a few new tactics on top of your current operations and expect advocates to start singing your praises. Nor can you rely on a few enthusiastic supporters with vibrant personalities to carry your message. The program has to be well-staffed so it becomes a seamless and well-integrated part of your entire growth engine. And it needs to command sufficient resources to kick it off strongly and to keep it going over time.

There are certain predictable mistakes companies make that can derail customer reference programs before they ever get off the ground. If you can create the right infrastructure and approach your efforts with the right mindset, you’ll increase the likelihood of success substantially.

For example:

1. Lack of executive support.

Too often, customer reference programs are rolled out with limited resources and staffed by junior people working off a spreadsheet—a recipe for failure. A successful reference program needs significant resources and a strong rollout that involves the entire company. It must cross boundaries, working cooperatively with other divisions in your business such as sales, marketing, social media, PR, product development and the like. Without strong, hands-on executive support from a powerful leader who is passionate about advocacy, none of this will happen.Too often salespeople may “hoard” their prize references, fencing them off from big opportunities to promote or close business for you. What’s more, social media content can go stale fast and needs ever-refreshed supplies of new content from your advocates—as opposed to “all about us” content that bores visitors to death! All of these problems are best solved at the executive level.

A strong executive supporter who understands the value of references and is passionate about capitalizing on them is a must-have. She will drive the program from the beginning. She will get directly involved in issues like those above, resolve them and make sure the program gets the resources and cooperation it needs.

2. Lack of imagination.

Many reference programs suffer from inertia, churning out old-school pdf case studies that are way too long and that don’t get read. There’s so much more that customer advocates can do to grow your business. And with advances in technology and social media—along with the current boom in personal and professional communities—those who adopt customer reference programs must think much more broadly about the forms advocacy can take.

These may include references, referrals, testimonials, serving on advisory boards and participating in your customer communities. Customer advocates can also lead customer communities and forums, create content and video, contribute valuable knowledge and resources to product development efforts, defend your brand on social media sites and more.

3. “Cheaping out” on 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 spreadsheet.  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 under-utilization of potential powerful references at one extreme or burnout at the other. 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 their 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.

4. 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?

Ask yourself a few key questions. Do you have 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?

5. Not integrating references into the growth strategy.

It’s easy to spot a reference program that’s disconnected from the company’s growth strategy. Reference managers look puzzled when you ask about the corporate strategy for growth. They recruit or keep customer references who may or may not be from markets that senior management is targeting. Everything they do and say tells you they’re out of the loop.

Managers of reference programs that are well -integrated into strategy can tell you, in your next product launch, how many customer references you’ll need. And they can tell you from which industries or customer segments

these references should come. They’ll know what types of reference activities they’ll need to engage in. They’ll know how many references are candidates to be early adapters of the new product line.

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

It’s a red flag when reference managers tout the number of new references they recruited—without regard 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 salespeople from the time-intensive task of hunting down references themselves. They can increase media awareness by providing content for reporters or analysts that makes it more likely you’ll be published. They can ensure the success of new product launches by providing critical early adopters, references and referrals.

7. Not giving customers a good reason to reference them.

Many companies resort to gifts, prizes, awards, cash discounts and even low-grade bribes to get customers to refer them. 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? If so, 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. Hopefully, you know your customer well enough to know what is valuable to her. Give it to her and she’ll give you an enthusiastic—and genuine—referral.

This last reason touches on the real reason customer reference programs work: They’re mutually beneficial to all parties involved.

All successful companies, at least those that are able to sustain their success, genuinely meet the needs of their customers. Bribe someone to say something nice and you might get a half-hearted endorsement. But strive to truly understand his needs and go above and beyond in meeting them, and you’ll create someone who wants to help you succeed—and who wants to help others succeed by connecting them to you.

If you don’t start with the right customer value proposition, nothing you do will matter. If you do, your program will be easier and more successful than you ever dreamed possible.

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The Powerful Growth Engine Hidden Right under Your Nose

October 18th, 2012

Are you ready to grow your company? If so, the business world is full of specialists who are all too eager to help. Brilliant ad agencies and clever marketing communications experts. Highly trained salespeople. Talented product developers. Even PhD

analytics eggheads. And while these professionals certainly have valuable services to offer, they all fall short in a critical way: None of them come from the buyer’s world.

No one can truly understand your customers or genuinely share their interests unless she is a customer herself. Everyone else is a layer removed, which makes it exceedingly hard for them to relate to actual buyers and respond to their needs.

Increasingly, companies are figuring out that they do have a resource that does come from the buyer’s world, and that this resource is key to creating robust, organic growth.

Your most powerful growth engine is your existing customer.

That’s

right. If you can harness the knowledge, natural enthusiasm and peer influence of your very best customers—I call them “Rock Star” customers—they’ll market, sell and help develop breakthrough products for your firm better than your internal resources can do, and often at a fraction of the cost. In short, they provide a natural, organic and deeply reliable way to grow a business.

Consider the superb results companies are getting from this new way of thinking about customers:

• Customer salespeople achieved, in effect, 80 percent close rates for Salesforce.com, which was key in growing their business in the face of much bigger, better-funded competitors.

• SAS Canada “customer champions” helped the firm restore declining customer retention rates—which had fallen as low as the mid-80s percent—back to the firm’s traditional high retention rates of 97-98 percent.

• Local MVP (most valuable professional) customers are critical in helping Microsoft penetrate foreign markets affordably and effectively, providing the firm its most effective marketing communications and saving it hundreds of millions of dollars in support costs.

• Customer content and engagement built rapid growth in the success of Intel’s social media and Web-based marketing efforts, increasing “customer contacts” by a factor of tenfold and overall page views by 100x.

• When 3M brought “lead users” into its innovation process, they improved revenues by a factor of eight times over innovations from internal product developers.

These are just a few of the powerful, growth-fostering impacts “Rock Star” customers are creating for a variety of companies. And engaging customers in such ways is generally much less

expensive than hiring costly employees or agencies. But it does require some new thinking.

I share the following insights about finding and leveraging Rock Star customers:

“Rock Stars” are not who you think they are.

Often companies think their Rock Star customers are the biggest spenders, or the most loyal customers or perhaps the marquee names or brands. Not necessarily. Loyal customers don’t always promote you (in fact, it’s likely they’re not doing so), big spending customers may not even be profitable or have a good story to tell and marquee names or brands often have policies against advocating for the companies they buy for.

So who are your potential high-value Rock Star customers? In my book, The Hidden Wealth of Customers, I provide a model for helping you find and cultivate them. I describe a hypothetical Rock Star named “Catie” who is a composite of the sorts of customer advocates used by Salesforce.com, SAS Canada and others. She might be a “promoter” of your firm in Net Promoter Score (NPS) surveys, a member of several associations that interest you and an avid social media networker.

First, they’re loyal—that’s the price of admission.They have a good story to tell about how your product or service helped them succeed. Second, they’re eager to tell it. Third, they have access—and want to gain more access—to influential networks that contain more buyers like them. And fourth, they want to build their reputation and influence in such networks.

They won’t grow your business on their own.

Even customers who identify themselves as “promoters” in customer surveys—saying they’d be highly likely to refer your firm to a colleague or friend—aren’t actually doing so. Two studies have shown that only about 10 percent of promoters actually refer profitable new customers. You have to make it easy for them to do so.

Some of the most creative technology coming out of Silicon Valley is designed to do exactly that. Firms such as IBM, GE, Intuit, VMware, SAP, Dell, Infor and others are using these new technologies to:

• Automatically turn customer surveys into customer success stories, complete with graphs and charts, and even industry data that can be used immediately for marketing and sales—while bypassing lengthy review and approval processes that are typical with traditional success stories.

• Find and engage customer advocates using a gamification platform that makes it interesting and enjoyable to advocate.

• Allow customers who identify themselves as promoters on surveys to immediately provide a recommendation on the spot. That recommendation can be automatically populated to their Facebook friends, LinkedIn colleagues or Twitter followers. This has resulted in dramatic increases in sales.

Rock Stars want professional growth benefits, not bribes.

I urge companies to avoid giving rewards and prizes and other quid pro quo inducements. It’s often unethical, and at the least, it detracts from the authenticity of a recommendation. What does work and is ethical is helping them build their social capital.That means helping your Rock Stars build their peer or professional networks, grow their reputations and gain access to valuable knowledge. The beauty of this approach is that you’re helping your advocates build social capital by helping them tell the story of how successful they’ve been, due—in part—to your product or service. For example, when SAS Canada customer champions show their peers how to make better use of data, they gain status by showing their understanding of the issue and by achieving success. In the process, everyone understands that SAS Canada software was an important contributor.

Traditional approaches to marketing and sales will only screw up customer advocacy.

It’s painful to watch web-based media initiatives use traditional marketing techniques such as interruption advertisements or “all about us” marketing communications. It’s a little like hawking a “get rich quick in real estate” scheme at a TED conference. Wrong message, wrong audience.

Intel realized this when its initial forays into web-based and social media marketing were going nowhere. While its B2B social media team was attracting large audiences in its market, it failed to engage them because it lacked credible, regularly refreshed content. Traditional corporate messaging—such as information about the company, its products and services lineups, their features and functionality and the like—wasn’t going to cut it in such an interactive medium.

Once it became clear that this “all about us” approach wasn’t working, Rhett Livengood, who runs the firm’s global customer engagement programs, took an approach of intelligent experimentation that kept in mind social media’s unique requirements (don’t try to control the conversation) and its opportunities (customers and buyers are starved for credible, relevant content).

At first, Livengood and his team tried traditional pdf customer success stories on the corporate website. That provided relevant content from Intel’s most credible sources, which resulted in more engagement and downloads, but the results were still uninspiring. Then Intel began placing customer content on social networks like Facebook, LinkedIn and Twitter, as well as other firms’ websites where its buyers were active. Finally, it began experimenting with content delivery and was among the first firms to exploit the power of video to tell customer stories. Short, well-told customer-story videos proved most powerful, exponentially increasing engagement and lead generation for Intel.

Community marketing is the best way to leverage Rock Star customers.

Even if you’re a global firm, it’s a good idea to restore community marketing. New marketers are taking cues from the way people buy products and services in their local communities—e.g., a refrigerator, a flat screen, a new roof or a family physician. Most people aren’t likely to seek out a salesperson to talk to or collect company brochures. Rather, they’ll talk to their friends, neighbors, colleagues at work or other peers to find out what or whom they’re using.

Microsoft has deployed customer advocates brilliantly to leverage this natural approach to buying, particularly in its efforts to penetrate global markets where buyers don’t speak the language or know the culture. Microsoft will find local “MVP” customers who are well connected in their local communities, and who want to increase their status, and help them do so by providing access to early releases and “insider knowledge.” Getting known through established locals is faster—as well as more affordable—than trying to get locals to know you through advertising, PR, big splash events and other traditional marketing approaches.

It’s better to be a thought leader than to depend on the kindness of strangers. (Rock Star advocates can help.)

Many firms fall into the rut of seeking influencers—such as bloggers with large followings, prominent media personalities or authors and other pundits—in their markets. I call this the “Blanche DuBois approach to marketing—it depends on the kindness of strangers.” I urge companies: Be the influencer. Be the thought leader in your market. Your Rock Star customers can help with this.

A good company providing exceptional solutions to a market has two things that no outside influencer can match. You have actual customers who are happy, plus you have internal subject matter experts who work with these customers on a regular basis. That alone gives you far more valuable knowledge than the usual outside “influencer.”

For example, Hitachi Data Systems (HDS) develops excellent technology in the data-storage and knowledge-management space, led by visionary Chief Technology Officer Hu Yoshida, and has won passionate customers in the process. But HDS was having trouble getting noticed against a much bigger, better-funded rival. So the firm unleashed those two assets: a brilliant internal expert along with those passionate customers, to take a position of thought leadership in its space.

The firm started putting on live seminars around the world, attended by many of those passionate customers, and unleashed Yoshida with his own blog. HDS expected to get perhaps 150 or so attendees at the seminars, but they wound up attracting double that and generating millions of dollars in new business. And Yoshida’s blog—which combines a dynamic mix of his thoughts on the future of the industry, customer examples and information about HDS solutions—became ranked as one of the “Top 10 Most Influential Blogs” within the storage industry by Network World.

The best thing about Rock Star customers is that they already exist. Your own “Caties” are already out there, quietly thriving under the radar, waiting for you to discover them and put them to work. Failing to do so is a little like being a homeowner who knows a stash of gold is hidden in his walls yet who never brings out the metal detector to find it. (Incredibly foolish, right? Especially in a tough economy!)

[Catie] can drive organic growth that “sticks” and bring in new customers who could benefit immensely from the value you provide. Your firm could be engaging with her to build a remarkable new exchange of exceptional value, in which you work with her to make her an increasingly powerful evangelist for your firm while helping her build her network, her reputation and her business. Firms that miss this opportunity—or undermine it by offering poorly disguised bribes to get their customers to advocate for them—are leaving a lot of value and a lot of profits on the table.

About Bill Lee’s Book:
The Hidden Wealth of Customers: Realizing the Untapped Value of Your Most Important Asset (Harvard Business Review Press, 2012, ISBN: 978-1-4221723-1-5, $27.00) is available at bookstores nationwide and from major online booksellers.

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