Customer references and strategic relationships 

I had an interesting discussion with two friends on Twitter yesterday – Frank Scavo who is a well respected analyst and has advised a lot of customers on buying enterprise software and services , and Ben Haines who used to be the CIO of Box and who is now a VP at Yahoo . The topic was about customer references . I thought I will jot down my (strictly personal) views on this matter.

There is nothing more valuable for a vendor than having a customer who is willing to act as a reference to other customers and prospects.  Nothing puts a prospect at ease about a vendor like another customer who can vouch for the vendor. Customer references are also invaluable in securing favorable analyst reports for the vendor. 

References are very important for the customer too. Vendors will typically paint as bright and rosy a picture as possible to make the customer buy . It is by asking around other customers that a prospect typically gets a full picture . In most cases they just directly ask the vendor for the reference . As a seller and then as a sales leader in my career , I have been asked a zillion times to arrange such reference calls . I am greatly indebted to the customers who have provided such references.

There is a strange irony from this point forward in the story . Many customers who absolutely insist on reference calls are themselves not comfortable to be a reference for the vendors whose products and services they have successfully implemented . The most common excuse I have heard is the generic “it’s against company policy”. These same customers also often lament that their vendors have a very transactional relationship with them and doesn’t take the relationship to strategic levels . 

I am all for hard negotiations upfront . Haggle on price , payment terms , indemnity , dress code or whatever it is that both sides need to agree . But I always request my customers one thing – let’s agree on success criteria and a way to measure it . And let’s put it in the contract that if the success criteria are met – then please be ready to be a reference for a few prospects . As both Frank and Ben correctly pointed out – This is also the first clause in the contract that some CIOs and procurement folks ask me to remove . Their typical response is “we are happy to be a reference , but don’t want it in the contract”. Strangely enough I have not had a single business buyer EVER push back on me on this clause . Not one ! 

I trust my customers . If I don’t trust them , I won’t do business with them . And I earn their trust . So I am almost always sure that a customer who promises to be a reference will typically not decline at the end . But on the other hand I have been in this line of work long enough to know that people change jobs and roles . I also know that if I put it in contract , then any legal issues etc will surface upfront and get resolved one way or other . In many cases the person I am dealing with might not have the right authority to be a reference . In short – it gives me a chance to mitigate “not in policy” risk upfront . It also saves a lot of embarrassment for the customer Employees who find out after the project is over that they can’t keep their word to me . 

What does a strategic relationship mean between vendors and customers ? We both help each other to further our businesses beyond the transaction we have contracted for . As an example , I have many a times helped customers by providing them access to experts in other domains or markets that they need help with . And many customers have helped me win business elsewhere by being a solid references. If all we care about is price and budget and scope – then that is all we will get at the end . That is a fine way of doing business in some cases – but then the expectation should be appropriately set on both sides that there is no strategic nature to this relationship . 

So what is my success rate at getting referrals ? I would say maybe 30 to 40 percent at best . But I am hopeful that I can double the rate at some point . Life in enterprise software is not worth living for transactional relationships – at least for me .