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Companies swap good deals for testimonials

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Your company has great customers. You want them to speak at trade shows, meet sales prospects, appear in advertising, brief Wall Street analysts or maybe just talk to the press. But they don’t want to be references.

Recalcitrant customers, unwilling to participate in marketing initiatives, are a growing problem for sales and marketing executives, experts say. Some go so far as to say we’re in a customer reference recession. In response, some marketers have quietly begun building customer reference clauses into sales agreements, sometimes in exchange for preferential pricing.

Useful references

Customer references are a tried and true business technique. Among other uses: • Salespeople can bring potential buyers to meet current customers, who can describe how happy they are with the vendor’s performance.

• A customer case study can figure in trade show exposure for eye-popping demonstrations.

• Customers on conference calls can help financial and technology analysts gauge future demand.

• Press conferences touting new customers can generate welcome exposure for vendor and customer alike.

Lately, however, finding customer references has been tough, experts say.

"Customer references have never been harder to get," said Peter Duckler, director-media relations for Ketchum/Corporate Technology Communications, Chicago, and a 12-year expert in the field. Duckler said two factors are thought to be to blame.

First, potential references are more hesitant to talk because of either a real or perceived fear that this publicity will give away some competitive advantage.

If a technique has been found to increase effectiveness or cut costs, crowing about it might get your competitors developing similar capabilities just as quickly, Duckler said. Second, there is sensitivity about grandstanding in a time of recession and war, Duckler said.

Cooked into contracts

In fact, for the first time marketing service companies are beginning to build customer reference performance clauses into contracts.

That’s a tried and true practice in industrial sectors and the enterprise software industry, but service companies have rarely been challenged with negotiating these types of deals.

Bob Moyer, president of FullTilt Solutions Inc., King of Prussia, Pa., said the drought has cropped up at an unusual time.

In the enterprise software industry, where FullTilt competes, buyers have grown tired of marketing that speaks to specific product features. They want more case studies just when case studies are getting harder to come by, Moyer said.

A 20-year top database industry executive, Moyer has been working for months to develop the customer references and other sources necessary to publicize FullTilt’s work in developing an Internet-based product management system.

Securing customer references has been painstaking work, but is deemed critical to the company’s upcoming sales and marketing efforts, Moyer said.

"Customer-success marketing requires a true story that can be validated by a client," Moyer said. "To tell that story, you’ve got to work closely with the client. You’ve got to be sure the customer is also going to be successful in your telling of the story. That process has never been more than it is now."

Reference recession severe

Michael Della Penna, VP-marketing for Bigfoot Interactive, New York, said the customer reference recession is severe.

In recently closed deals, Bigfoot has negotiated for the first time terms that call on the customer to participate in a limited number of trade show and print marketing efforts, he said.

"We are just beginning to sign some of these types of deals that call for the client to do with us two conference presentations a year, and a case study," Della Penna said. "It has become a new element of our contract process."

Chip Overstreet, VP-corporate marketing and business development, Blue Martini Software Inc., San Mateo, Calif., said cooking customer references into contracts is no way to make secret sales sauce.

Today, Blue Martini will debut its Blue Martini Manufacturing line of software, which is designed for marketing and sales executives at middle-market industrial companies. A set of customer case studies with return on investment performance metrics has been obtained from beta customers, he said. But not one is participating as customer references because of contract elements to the deal, Overstreet said.

"It is one thing to have a Web site and make outrageous claims, and another to release qualified return on investment numbers," Overstreet said. "The bulk of our marketing time, effort and money is spent developing customer references. We haven’t done a contract with any of them. We’re getting our references by delivering for the customer and talking to them throughout the process.

Tom Cook, chief marketing officer for Digital Paper Corp., Alexandria, Va., has acquired the rights to cite such customer relationships as Boeing, Kodak, GM, Volvo and Lucent by negotiating favorable financial terms into standard
contracts.

Digital Paper typically sells its DocQuest brand of software for $150,000 plus an 18% annual maintenance fee, but participation in customer reference events, interviews, sales calls and briefings in some cases can lead to reduced rates, Cook said.

"More organizations than ever are requiring not only approval of their corporate communications department in order to be used as a customer reference but also legal department approval," Cook said. That’s a new twist, he said.

Ketchum/Corporate Technology Communications’ Duckler said in the last month he had lined up a major, undisclosed computer publication to do a major story that talked about how a Fortune 100 company, also undisclosed, was using Duckler’s client, MindTree Consulting Inc., Somerset, N.J., for competitive advantage.

The publication was even sending its reporter to the client site so she could get face-to-face interviews and demonstrations, which is an unusual outlay for trade publications these days, he said. At the very last minute, the Fortune 100 company’s legal department canceled the entire affair because of poor financial earnings and layoff announcements, Duckler said.

Starts with trust

A tried-and-true protocol for managing customer references—whether used by sales or marketing—is to seek out the sales representative on an account before any information is disclosed. Cook said you’d be surprised how often that’s forgotten.

"You have to stay close to a customer reference, and they have to trust you," Cook said. "We negotiate customer participation in advance in our contracts in part as a way to get the discussion about how the customer can participate in our sales and marketing started very early in the relationship. That builds trust."

Nick Nyhan, president of marketing research provider DynamicLogic Inc., New York, said big companies are particularly careful to not appear to be grandstanding during a recession and in a time of war. An equally important motivation, he said, is to avoid tipping off archrivals in especially competitive industries such as computer hardware.

"This is hypothetical, but if Compaq learns of some work we are doing for Dell, it could be construed that Compaq was willingly giving away a competitive advantage," Nyhan said.

Software may offer one solution to the customer reference drought. There are new software applications and marketing services being designed to better manage client contacts. Business Objects SA, Siebel Systems Inc, E.piphany Inc., PeopleSoft Inc. and Truis Corp. are among those with expertise in the area of customer reference management applications.

For example, San Francisco-based Truis sells software, usually in the $15,000 to $30,000 range, that connects sales and marketing with customer references. Truis’ price includes more than software.

There’s an extensive amount of consulting to make sure customer references never run amok, said Truis CEO Jerry McLaughlin. Truis software helps a company track how often a reference is contacted, and by whom, which in turn can avoid burning out a good contact, he said.

Such a system can help marketing departments tap contacts only when absolutely necessary, thus eliminating overuse of a reference, he said.

"With the economy the way it is today, it is back to basics for everybody," McLaughlin said. "One basic is the customer reference. To sign new customers, you need old customers. And to keep old customers, you’ve got to communicate with them and respect them."

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