Every time I hear a member talk about having a good renewal rate but the company could use more new customers/members, I think referrals. I run a social group on the side and every day I see new people joining—the primary reason they list is that someone recommended it. Now that’s a much smaller and cheaper scale, but still the basic idea holds up: They’ve been referred.
Harnessing the power of references and referrals seems like an obvious win-win. But Bill Lee, author of The Hidden Wealth of Customers: Realizing the Untapped Value of Your Most Important Asset (Harvard Business Review Press, 2012), believes that “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,” says Lee. “Nor can you rely on a few enthusiastic supporters with vibrant personalities to carry your message. He quotes Salesforce.com CEO Marc Benioff who said that even though every company knows customer references are important, most companies have a lax approach to actually managing them.
Here are 7 ways Lee advises to improve your likelihood of success:
1. Increase 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, says Lee. A successful reference program must cross boundaries, working cooperatively between divisions. He’s worried about good references staying within sales and wants you to encourage your best customers to advocate on social media.
2. Use more imagination. Out with pdf case studies and long PowerPoints, Lee advises, and in with testimonials, serving on advisory boards, and participating in your customer communities. He believes customer advocates can also lead customer communities and forums, create content and video. That may be a lot to ask, but the idea of giving your customers a reason to go on social media or join a community to help plug your brand seems sound.
3. Commit to resources. Lee doesn’t want this to be an afterthought. “Enthusiastic references…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.” Giving a list of prospective references to an assistant is not enough, he says. You don’t know if they’re happy or strategically significant.
4. 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. To engage these customers you should have all the data. What is their history with you? “What policies have you established for references and testimonials in your sales and marketing efforts?” Lee asks. At what points in the sales process should references be used? What is your social media strategy? How will customer videos, stories, and other customer content be used?
5. Integrate references into the growth strategy. “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,” says Lee. They’ll also tell you from which customer segments these references should come and who can be an early adapter? Keep everyone in the referral loop.
6. Measure and understand the business value of references. “Reference programs can dramatically improve sales productivity by freeing salespeople from the time-intensive task of hunting down references themselves,” Lee explains. Managers should continually measure the business value of referrals instead of the number of new references found. In other words, gather input, tout the output.
7. Give customers a good reason to reference them. Lee does not advocate “bribes” to get referrals. He believes the smart companies think through why their customers would advocate for them. Get creative in providing appropriate reciprocal value to your potential advocate, he says. “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 the industry? Hopefully, you know your customer well enough to know what is valuable to her.
Ronn Levine began his career as a reporter for The Washington Post and has won numerous writing and publications awards since. Most recently, he spent 12 years at the Newspaper Association of America covering a variety of topics before joining SIPA in 2009 as managing editor. Follow Ronn on Twitter at @RonnatSIPA