Reference Point
a newsletter for customer reference professionals
May 2005
in this issue
-- The Value of References: Notes from a Conversation with Frederick Reichheld, Part 1
-- Upcoming Event: Customer Reference Forum 2005 II

Here's the May issue. In case you experience formatting or other issues with the email version, please respond to this email and I'll send you a text version.
Best regards, Bill.

Reference Point is a Customer Reference Point newsletter about reference (CR) programs and how to improve them. To subscribe, please contact me (contact information is below or just respond to this email). To unsubscribe at any time, just reply to this email with "unsubscribe" in the subject line. This email list and your name will never be made available to anyone else, not even to others on the list, unless by mutual request and agreement.

The Value of References: Notes from a Conversation with Frederick Reichheld, Part 1

No one understands the strategic importance and business potential of customer references better than Fredrick Reichheld. And he has the ear of senior executives. He's a director emeritus at famed Bain & Company, the Boson-based consulting firm. He's also a Bain Fellow and founder of the firm's Loyalty Practice. He has published many widely read articles for Harvard Business Review, The Wall Street Journal, the New York Times, Business Week, Fortune and the Economist. His book, The Loyalty Effect (Harvard Business School Press, 1996) is an international business bestseller.

More recently, his Harvard Business Review article, "The One Number You Need to Grow," (December 2003) contained the results of research that uncovered the tremendous importance of enthusiastic references (or "net promoters" in Reichheld's terminology) to a company's top line growth. Click here (www.lee-communications.com/5-07 -04.doc) for more on this in the May 2004 issue of Reference Point. And more research is on the way.

Recently, I had a chance to chat with him at Henrietta's Table, a charming restaurant in the Charles Hotel on Harvard Square, Cambridge. Following are my notes from this fascinating conversation. If you're running a customer reference program and wondering about the importance of your work - and how to demonstrate its importance to senior executives - I think you'll find it interesting.

-- Referrals drive sales. "Everyone knows" that references are important to sales. But who can prove it? Can we quantify their impact? Reichheld is preparing to publish research results that do precisely that. They will show that referrals drive a whopping 30 -70% of sales in the companies he studied. Your program - and its potential impact on sales - is far from "fringe." I can't tell you which companies Reichheld studied yet, but they are very high profile technology firms. (I'll let you know when the study comes out.)

-- Referrals tend to take place "below the surface." Companies often are unaware that customers are referring them. This creates an obvious, compelling need to bring referral activity into the open and leverage it.

That leads to two clear, strategic roles Customer Reference programs can play.

-- One is the role you're already playing: bringing customer referral activity to the surface and leveraging it, for example, by exposing referrals to prospects with which they otherwise wouldn't have contact. That's a pretty important role - and with Reichheld's research, one whose impact on top line sales can be reasonably well quantified.

-- The second is for CR programs to expand the amount of actionable information they are already gathering from customers, in order to convert neutral or even unhappy customers into references, to convert mild references into enthusiastic ones or "net promoters," and to help deepen and leverage overall customer relationships. Each of these can have a significant impact on sales. And in many cases, these would be quite natural and strategic extensions of your reference program.

For example, if you're surveying customers already on whether they're willing to act as references and talk to prospects, why not also ask if they'll talk to product development about developing new value added solutions? The result of all such naturally expanded reference activities can result in measurable impact on your company's performance.

In a subsequent issue, we'll look at some ways of using this framework to actually assess the impact of reference programs on performance.

Upcoming Event: Customer Reference Forum 2005 II

We were going to wait until next year for our second live event, but the success of the first one in Phoenix and the number of inquiries we've received since has forced us, happily, to change our plans. We're scheduling our next live event for this October, on the East Coast (probably New York or Boston). We'll keep it affordable, like the Phoenix event, and full of content and networking opportunities with your peers.

Plus we're adding some exciting new offerings for participants, such as presentations on professional development, on smaller programs with smaller budgets, on vendor solutions out there that you may not know about; and more. You may want to click here and bookmark the page to keep abreast of information as we put this together. Or email me at bill@customerreferenceform.com to be put on our distribution list for the event.

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