I wrote the other day (see my April 25 post) about seeing some very familiar issues coming up at the Customer Reference Forum. The top example: “How can I get sales reps to nominate their customers as references?”

My answer: “Delivering demonstrable value to your sales force.” Successful programs at the forum reinforced that solution, including two presenters. One, Stephanie Porter of Amdocs, told of a wonderful moment when an account manager emailed his peers to discuss the value the customer reference program had delivered to him and encourage them to nominate their customers and participate actively. The other, Wendy Wolfgram of Tomorrow Now, told a similar story in which her CMO asked how he could help her – he knew the program was wonderful, because she had measured her success in supporting sales, and now he wanted to know what she needed from him. Other reference program leaders I talked to there told similar stories.

Sound good? Could happen to you if you keep your focus on sales and how you can help them advance their deals and close business.

Another interesting moment at the forum came when speaker Jeremiah Owyang shared his views on how customer reference programs will evolve in response to social media. An April 25 post on his blog links to his presentation. Jeremiah had a lot of interesting things to say about how programs will change, but I question one of them. He says social media will expand the role of customer reference managers to include “turning negative references into positive references.” I think that’s off-base in some ways, but spot-on in others.

Don’t get me wrong, I absolutely think companies should take on that challenge. But turning nay-sayers into references is not a one-program job, and it requires insight and strategy that many companies lack. To do it, they need to take a holistic view of the factors that influence referability and bring all involved departments together, including sales, support, product development, consulting, pricing and contracts, and so on. Once you’re doing all of that, you’re not a customer reference manager anymore. It goes beyond expanding a role to transforming it completely.

I couldn’t agree more with Jeremiah, though, that social media provides a critical listening post for companies who want to know what their customers say about them. Tracking blogs, review sites, and other social media should have a place alongside surveys, focus groups, boards, and other feedback mechanisms. But for now, until companies evolve to the point where customer reference programs and voice of customer programs are tightly connected, don’t stick the (probably overburdened) reference program with that job without more resources and some serious executive backing.

Whitney Wood, Senior Consultant
whitney.wood@phelongroup.com

It’s a big crowd here at the Customer Reference Forum in Berkeley, and as usual there’s a lot of buzz in the air as customer reference professionals have the “aha!” moment of realizing that plenty of others face the same challenges they do.

For me, it’s really striking to see the same pressing questions come up year over year:

• How can I get sales people to nominate their customers?
• How can I meet all these demands when I’m so squeezed for money and headcount?

There are others (How do I get customers to participate in activities? How do I get them to reveal their ROI?), but the sales participation and budget questions really top the list.

There is an answer that consistently delivers results, in the form of greater sales participation and even increased program resources. It’s simple in concept, but like so many things in the business world, not necessarily easy. Ready for it? Deliver demonstrable value to your sales force.

You can break that down into a few steps: Listen carefully to find out just what “value” means to your sales force, refine your program to focus on delivering it, get buy-in from leadership to support the change, and use agreed upon measures to demonstrate your success.

You’re working in a complicated environment, and politics, workload, and corporate inertia obstruct your path. But you can cut through all that if you keep your focus on your clear and simple goal and the steps that get you there.

Whitney Wood, Senior Consultant
whitney.wood@phelongroup.com

There is a lot of talk these days about innovation being critical to the competitiveness and growth of an organization. In a 2005 study sponsored by Cisco Systems, 635 business and IT decision-makers from companies of all sizes ranked innovation as more important to their competitiveness than better education, lower wages, or reductions in corporate taxes. The world's top 1,000 corporate research and development spenders invested $384 billion in innovation in 2004, according to a survey by the consulting firm of Booz Allen Hamilton. This investment by the so-called Global Innovation 1000 represents between 80 percent and 90 percent of total R&D spending by business worldwide.

So if a company is going to invest in innovation how can it ensure that innovation is going to pay off? By making sure that the innovation is relevant and valuable to growing the business. Today, companies are looking to their suppliers and customers for new ideas or applications of their products, services or solutions. When the Council on Competitiveness asked 199 executives to identify their most frequent collaborators in innovation, suppliers and customers were cited by 78 percent and company employees by 70 percent.

So given all this hoopla about using customers and suppliers as a source for innovation, is it really just about asking what they need? Before ATMs came into our world do you think if you asked all those people standing in line at the bank what they needed, they would say an ATM? NO, of course not! What they would have said is, “more tellers. The point is that asking your customers “what they need” does not always translate into innovation. Innovation can only come from carefully listening to why your customers are dissatisfied, and then further observing and understanding how they are compensating for a void or unmet need.

Debra Colombana, Vice President of Client and Market Development
Debra.Colombana@phelongroup.com

I am one of those people who love lists, so I couldn’t resist Business 2.0’s recently published 7th annual roundup of 101 Dumbest Moments in Business . There were some doozies in 2006, but the one that sets my own teeth on edge is AOL’s “Harassment Department”—number 2 in the subcategory of the 20 Worst Moments in Customer Service.

In this PR nightmare, when AOL customer Vincent Ferrari called to cancel his membership, John the customer retention consultant pressed him for 21 minutes, even though Vincent asked 18—that’s right, 18—times to cancel. Of course, Vincent recorded the call and posted it on his blog. Now AOL limits retention offers to two per caller. This scenario is so dysfunctional it could be a sketch on the Daily Show. To be fair, it’s probably the unlucky collision of an under-trained and poorly supervised individual with a particularly provocative customer, rather than a company policy to beat customers into submission.

However, less-extreme yet-still-aggravating versions of the practice represented here are commonplace, especially in high-churn businesses like telecommunications and credit cards. I am fuming about a credit card company that offered me a lower interest rate after I wanted to cancel (because I was such a good customer) than during the years before, while I was such a good customer.) Did the company ever communicate with me before the day I called to defect? Not that I noticed.

Of course, customer retention is important—it’s one of three “Rs” that drive top-line growth, along with repurchase and referrability (which The Phelon Group helps clients to harness—see David Ambler’s post this week). But is this really the best way to go about it—trying to keep disaffected customers on board a little longer? How long do these customers stay? Do they metamorphose into the most profitable type of customers? What word-of-mouth do they spread and what affect does that have? Companies employing this practice must have run the numbers and believe the benefit is worth the risk. But in this age of social media, citizen journalists, and customer empowerment, the risk of becoming a poster-child for bad customer treatment is greater than ever.

Nancy Heifferon, Consultant
Nancy.Heifferon@phelongroup.com

In my previous blog, I mentioned that many companies are swimming in meaningless customer data. This primarily stems from the fact that most companies do not have controls and methods, or guiding principles for how to capture customer insight. More to the point, most companies operate without a master budget and centralized ownership for capturing voice of the customer, resulting in fragmented data, without context, and conflicting goals and objectives. Consequently, they end up with mounds of data that is not actionable.

In order to properly capture the voice of the customer, organizationally garner actionable insights, and then leverage your customers to break through revenue barriers, we recommend you retool in the following key areas:

1. Create a master budget line item coupled with executive sponsorship for capturing voice of the customer. The issues uncovered by a formalized customer insight program cannot be resolved by one department alone. Executive sponsorship and a cross-functional leadership team are required. Start by creating a budget line with defined executive ownership for a formalized customer insight program.
2. Develop a master voice of customer plan – a master blueprint – around how to capture the voice of the customer from a 360-degree view. This master plan must include how to contextualize and structure your customer insight framework across the customer lifecycle for aligning the data, necessary corporate actions, outcomes and corresponding impact. Further, this master plan must tie back to corporate goals and objectives, take into account the cross-functional needs of the organization and be constructed to uncover the levers and dials that drive customer retention, repurchase and referrability. To do this, you must structure your customer listening system from the customer’s point of view, not departmental needs.
3. At the bare minimum, require an “Imperative First” for every research project. In our experience, the most meaningful research begins with statements like: “We want to find a way to improve the retention rates of customers within our healthcare segment. To do that, we’d like to understand the customer touch-points and identify the dials that have the greatest impact on loyalty and repurchase.”.
4. Once you have a master plan and budget in place, create ownership and accountability across the management chain for retention, repurchase and referrability—the three essential, revenue-driving customer metrics.

While this approach requires greater discipline in spending and customer management, at the end of the day, your company will have more insightful information about your customers from a 360-degree view. With that information, you’ll be able to make actionable decisions, build better and value-driven solutions, and ultimately, sustain and accelerate your company’s growth.

David Ambler, Vice President of Client Services David.Ambler@phelongroup.com

Listening to customers is one of the leading executive mandates for 2007. Various tools and methods are being used - Net Promoter initiatives, Customer Experience Management implementations, etc. The power of these programs is to give transparency to customer insight so any group, team or individual understands the pulse of the customer at any given time. While this holistic view of the customer is certainly a key benefit of VoC practice, the unification of sales, marketing and other business units is equally important and can be a significant accomplishment!

The collection of customer insight brings an organization together to address leading issues as a team – and respond to them with a single voice back to the customer. Critical for success is executive sponsorship and involvement across the organization that spends time listening and responding to the good…and the bad. The power of voice of customer programs not only gives invaluable insight into customer perception, but can also pull an organization closer together to make powerful, informed business decisions.

Kathleen McBride, Senior Consultant kathleen.mcbride@phelongroup.com

Corporations are becoming more attuned to listening to their customers. We see more and more of our clients implementing CEM (Customer Experience Management) systems. We see Voice of the Customer programs getting more senior level attention and sponsorship. We see the momentum of Net Promoter in the marketplace. But not all companies I encounter feel like they are getting results from listening to their customers, even though they should.

I constantly try to understand this. I ask myself “Why aren’t companies able to act on the information before them?” and “Why is it so hard for professional services firms to get companies to act?” While I believe these are complex questions to answer, if you’ll humor me with this blog post, I’m going to try to shed some light on these questions from a somewhat unconventional perspective.

We are all creatures of our environment. People inside companies are influenced by corporate lore and by the perspective of their current position. And consultants, internal or external, fail to realize how important lore and perspective are. We fail to acknowledge how shattering it may be for individuals to realize the basis of their strategy and actions is misguided, or based on inaccurate facts.

Corporate action, therefore, often manifests itself as evolution, not revolution. It is a never-ending succession of learning and decisions. If we are to judge the success or impact of listening to one’s customers, we need to do so with perspective. And to do this, we need to allow our programs time to work. After all, listening to your customers is not a fad, rather it’s a discipline. Ludwig Wittgenstein, a great English philosopher, once asked a friend, “Tell me, why do people always say it was natural for man to assume that the sun went round the earth rather than the earth was rotating?” And his friend replied “Well obviously because it just looks like the sun is going round the earth.” And to that Wittgenstein replied, “Well what would it have looked like if it had looked as if the earth was rotating?”

Steven Nicks, Executive Vice President Steven.Nicks@phelongroup.com

Last night I attended an event that you would only find in Silicon Valley. An organization called the Connector Group brings together a selective group of top influencers—business people, bloggers, thinkers, technology innovators and the like—and companies looking to gain their goodwill and attention. I think there were 300 people in attendance—bankers, marketers, agency people, venture capitalists, consultants, reporters, and so on. The purpose was to get innovative companies in front of future customers, build buzz by talking to influencers… and help them get money to fulfill their business visions. My favorite sign read “Angel Investors Wanted.”

It was buzzing. This concept is a phenomenal way to—as the founders of Connector Group attest—reach customers, cut through the noise and have a conversation that you couldn’t otherwise have. It’s also the best way I can think of for early-stage companies to get no-strings-attached ideas and do free R&D. You bring your good idea, people poke holes in it. You give your pitch, people critique it. You talk about your go-to-market plan, people buy into it and write you a check on the spot. Great event. Very Santa Clara circa 1999.

But, can wisemen tip markets?

Yes—but only if you allow them to do what they do best—be wise. After observing and participating in the various pitch-pods, I realized that no one was saying use my product for six months or a week, or tell me how you’d use this product in your day-to-day. It was all pitch and no proposal. Remember: the best influencer is a customer. The most credible reference is a user. It’s one thing to hear about your solution over really good wine and this tasty portabella mushroom concoction they served us in a martini glass. It’s another to have someone give you their business pitch while you’re face-down getting a massage. Turn the wisemen into customers and watch things happen.

One group got it right. I met the founders of Zubio and was most impressed by a company that promises to be the Starbucks of Massage. Imagine getting pitched about something while you’re experiencing it. These Zubio guys are building a company that provides a massage that is as predictably good as a grande carmel macchiato: always the right pressure, duration unlike the other spas where you can’t predict your experience. And it’s convenient…

• Schedule a same-day 5, 10, 20 minute massage ONLINE
• Get a convenient massage in the airport, your building, at the mall… or in your office

Their booth wasn’t as packed as the others, but I was impressed. People would hear their pitch while getting a free 10-minute rub down. One woman (with her hair and clothes mussed) met me in line to get a soda and said, you’ve got to get one of those massages… this company is the Starbucks of Massage.

Learn more about The Connector Group:http://www.connectorgroup.com
Learn more about Zubio: http://www.zubio.com/

Promise Phelon, CEO and Founder Promise.Phelon@phelongroup.com

Do you love the reference management system your company uses? Finding what you need, when you need it? Getting great data out of it that helps support the company’s strategic objectives? Enjoying the intuitive user interface?

No? Well, most of your peers don’t love theirs either, as it turns out. A precious few would recommend whatever system they use, whether it’s a humble spreadsheet or a custom-developed system with all the bells and whistles. But most feel stuck – they’ll be using those not-so-great systems for years to come.

That’s all according to our 2007 Customer Reference Benchmarking Study, which we released last week. It’s got lots of great data (check it out in our resources section, or join us for a webcast next week, or read about it in MarketingSherpa), but that lack of satisfaction with basic reference program infrastructure, coupled with resignation that it’s not likely to change, really struck me.

Customer reference programs are no strangers to making do with what they’ve got, whether it’s headcount, budget, or systems. Does it have to be that way, though? Does the reference management system have to slip down the priority list of IT projects for another quarter? This is critical stuff – the home for data about one of your company’s most precious resources, your referable customers. Everybody needs it: sales, marketing, executives, even customers.

So get a coalition together and agitate. Stop thinking of these systems as belonging to the customer reference program and start talking about them as critical company assets that drive sales effectiveness and market presence. There’s an extremely compelling case to be made for greater investment here – so start making it.

Whitney Wood, Senior Consultant
whitney.wood@phelongroup.com

I was talking this week with a global account manager who deals continually and pretty successfully with a very common problem—getting time with his customer’s executives. After years of building credibility, he’s earned some access and is justly proud of that fact. But cultivating a relationship at the executive level remains a challenge, he says, because of the power mismatch. First of all, the customer is a household name with revenue in the double-digit $ billions, while the company he represents is a tenth that size. “Meeting with our CEO isn’t a big deal to them—they see executives all day long.” On top of this, the main competition is a well-entrenched giant with a legacy of trust and influence.

With customers consolidating vendors and moving buying decisions to higher levels in the company, what does the smaller player need in order to gain trust-share?

Well, we asked this account manager and others, and their answers overwhelmingly pointed to one solution: they need content for executive dialog.

By content, they don’t mean more marketing or corporate presentations. They don’t mean more white papers or benchmark studies. (All that is really more vendor–centered monologue.). And they don’t mean new and improved product features to tout. These account managers are hungry for compelling content that will capture the attention of business unit VPs; cause these VPs to say, “my CFO must see this”; and start a chain reaction of invitations up the ladder for executive-to-executive conversation. What this does mean is customer-centered content on the impact the vendor can have on the customer’s revenue and the customer’s customers. While this is a lot easier said than done—it’ll require investment in processes and skills—it is the one sure way to fuel the dialog, shorten the buying cycle by gaining admission to top level of the decision hierarchy, and beat out those goliaths on the inside.

Nancy Heifferon, Consultant
Nancy.Heifferon@phelongroup.com