Customer References are the best way to get credibility for your product. While the eventual decision by the prospect might be more dependent on your value proposition and how painful of a problem the prospect has, references could push the deal past the goal post. Providing references that can vouch for the product has become an integral part of the sales cycle. Most early stage companies sweat bullets when it comes to furnishing them.

Irrespective of what stage your company is at, in its lifecycle, you will be asked for references. Consider it as a certificate of merit for the excellent service you have provided your existing customer. While NPS (Net Promoter Score) serves as an indicator of your customer loyalty (also how good your customer satisfaction score has been), a customer reference is an indicator of  how compelling the value proposition of your product/service is.

If you are a well-known brand, customer references are easy to secure. Look at  the large software vendors and you will see why. Their customers bitch and moan at every opportunity they get and then you see leaders of those very companies giving a glowing testimonial to the vendor. (speaking from experience you ask ? )

If you are an up-and-coming company or one that is yet to make it, customer references are scarce and few. You feel like you are on a limited talk time cellphone plan from AT&T. You have few minutes and you need be judicious in using them.

Having said all that, here are 7 things to keep in mind in securing and leveraging those customer references.

Securing Customer References

1. Get it before you need it: The process of securing a customer reference should start right during the sales process. As part of the negotiation of the deal, you will end up with give-and-take. Invariably, you give up some money in the form of discounts. Make that equitable. In return for discounts, secure a call-option for a future reference. 
2. Learn before you ask: Make sure you know about the customer health, before you ask for a reference. Your customer success dashboard should show you their engagement level, their success in using the product/service, their renewal status, outstanding commitments from product/support/service teams. Last thing you want is to further aggravate an already tense situation.
3. Multiplicity: A successful customer can be a good reference. But secret to making them more valuable is to secure multiple references from within that one account. The CEO could be a CEO level reference, Operational leader (VP, Director) for another reference,  end-user/line-level reference and an IT Leader could be an IT reference. That way even if you had one customer reference you now have 4 references out one customer.
4. Segment: Segment your references based on location and product. Even when confronted with dire need try and not break the segment. A mismatched reference says a lot about your not understanding the prospects’ business and their challenges. Not to mention your using up one of your reference quotas.
5. Reference Quota: Maintain a quota of how many times you will use (and have used) a particular reference. Overdoing it might result in losing the reference for good.
6. Value their time: Set expectations to prospects about the nature of access to the reference. While they should get reasonable latitude to ask any questions, set strict guard rails like the one-call for one reference, time limits. It should not be an extensive fact-finding mission.
7. Filter the morons: Expanding on the previous point, it is important that you qualify the person calling the reference. I had an instance where I had the CEO of a $200MM company agreeing to be a reference only to have the GM from the prospect let someone from his IT team asking him things like Security, Performance related issues, firewall etc. Needless to say the CEO was less than amused. So while you might not be in the meeting, it is critical that you ensure the qualification of the person conducting the reference check.
8. Replace your references: Stay on top of what is happening with your reference contacts. If/when they decide to move to another job (before you pitch your product in the new position), secure an alternate reference contact in their organization before they move on. In fact, the reference contact would be the best person to help identify the replacement.

Rewarding References

What is the norm in rewarding the reference contacts who take their precious time out to help you close new deals?

There are two schools of thoughts here.

• Some companies reward their reference contacts with passes to conference/trade-show, golf courses or gift cards. Some reward the company that provides reference with discounts in their next renewal.
• Then there are companies that prohibit their employees from taking rewards (quid-pro-quo) as it creates an environment of conflict of interest. Public companies might have disclosure requirements if they received rewards for doing something. The prospects might balk when/if they come to know that the reference contact was rewarded.

So it is up to each individual company to decide which side they fall on this issue. Personally, I feel if your product or service delivers overwhelming value to the customer, most would be happy to be a reference without expecting anything in return.

As I said in the beginning, whether your prospects ask for references or not, having a goal of securing references is key. It is one of the key indicators of the value you added to your customers.

About Subraya Mallya

Subraya Mallya is a technology executive, entrepreneur involved in conceiving, building software businesses. In this blog, he focusses on business and technology strategies around Business Model, Product Development and Marketing. Connect with me on Twitter - @subrayamallya