Reference Point
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Featured Article: The Most Powerful Tool in Reference Management

There is now a clear dividing line between those customer reference programs that will make a major, strategic impact on their businesses, and those that won't. That dividing line is Frederick Reichheld's concept of "net promoters." If you want your reference program to become a major player in your company - to have a significant business impact that gets the attention of senior management all the way up to the executive suite - it must embrace this concept.

And you'll need to convince senior leaders to do so as well. Fortunately, this won't be hard given the power of Reichheld's existing research as well as more exciting research he has on the way.

The One Tool Your Reference Program Must Embrace

Regular readers of this newsletter know of the importance I've placed on Reichheld's "net promoters" concept for more than a year now:

- See the July 2004 issue for an overview of the "net promoters" concept, why it's critical to a firm's growth, and an action plan for incorporating it into your reference program.

- See the May 2005 issue for a preview of new research Reichheld is doing that will directly show the impact of references on a firm's sales - and the impact is huge.

- See the July 2005 issue for thoughts by Reichheld on how reference programs can measure the impact of references on their firm's businesses. h

Now I'm happy to report that the "net promoters" concept has gone from being a theory to actual practice at one respected technology firm that has embraced it thoroughly - and the results are stunning. The company is SAP. The point person is Coleen Kais er, Vice President, Customer Value and Reference Services at SAP, who get s net promoters in a big way.

I'm even happier to say that Coleen will be presenting her experiences at the Fall Customer Reference Forum. I'm not given to hype, but this is a presentation you won't want to miss. Following is a preview. For those wishing to make a quantum leap in the respect and resources your reference program receives - and in the impact it makes on your firm's top line growth - please read on. Or better yet, come to Boston in the Fall!:) (Please click here for more information on the Fall Customer Reference Program.)

Time to Get Serious About Net Promoters

Coleen was brought in by senior management to fix the company's reference program, which was languishing with about 1700 reference customers (a small number for a firm the size and global reach of SAP). And what references they had were having no real impact on sales, according to after-sale "win- loss" reports.

Coleen came across Reichheld's seminal Harvard Business Review article, "The One Number You Need to Grow," which introduced his "net promoters" research. Reichheld's conclusion was simple and profound: Companies with the highest percentage of "net promoters" in their industry invariably gain the highest revenue growth rates in their industry. Another term for "net promoters" w ould be "en thusiastic references."

To her delight, Coleen found that in its regular customer satisfaction surveys, SAP was already asking the precise question Reichheld used to determine net promoters ("How likely is it that you would recommend SAP to a friend or colleague?"), and even using his 10-point scale in the answer. Those who answer with a 9 or a 10 are considered the "promoters." "Net promoters" is then the percentage of promoters to total customers. Thus, Coleen could immediately start crunching numbers to see how many net promoters SAP's various businesses had and what their impact was. She could also see how many were actually in the SAP reference program.

In addition, two SAP Board members had read the Reichheld article, became very interested in the results, and would provide crucial support for the concept going forward.

Two significant findings

Coleen uncovered two significant findings:

(1) The success of SAP's various businesses is indeed driven by the number of net promoters they enjoy. Those with higher percentages of net promoters enjoy higher rates of revenue growth, just as Reichheld's research predicts.

(2) The reference program was not leveraging the firm's net promoters - that is, its best references. Remarkably, very few of these enthusiastic references were actually in the reference program. This explained a major puzzle: despite the obvious importance of references to the sales process, SAP customers rated references as "neutral" in importance to their decision to buy. Coleen realized that the references SAP was supplying to prospects weren't helping close deals because the references weren't particularly enthusiastic about SAP!

This strongly suggested that if she brought the company's net promoters into the SAP reference program and started leveraging them, it would make a substantial impact on company performance. That's precisely what Coleen began to do. And, armed with the data from Reichheld's research as well as her own internal findings, combined with key b oard allies, she got the resources she needed to do so.

Impact on SAP - and resulting growth of its Reference Program

Here's what happened in the next two years:

- The number of SAP reference customers has grown from 1,700 to over 6,000.

- Where previously there were less than 20% of the promoters in the SAP reference program, now, over 90% of the firm's promoters are in the program.

- In the after-sale "win-loss" surveys, the importance of references to closing deals was "neutral" two years ago. References are now one of SAP's highest ranking competitive advantages. They are helping close deals and distance SAP form the competition.

- Over the next few year s, two reference-related measures will become part of the core measures used internally by executive management to measure firm performance. One will, of course, be net promoters. The second will be how many "value customers" Coleen's team can bring into the reference fold. The goal is to achieve a significant number of customers that are willing to share the quantitative benefits they have experienced as a result of implementing SAP's solutions.

- When a program can demonstrate such results and gain such visibility, it gets resources. Coleen's staff in the global team has tripled over the last few years and local resources have doubled.

At the Fall Custome r Reference Forum in Boston, Coleen will show how her program gained such visibility, respect and support from senior management, and will have further information on how it is making a significant impact on SAP's business.

For more information on the event, please visit us here.

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