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I recently attended the customer reference forum, which was a great event. It has been awhile since I was directly involved in managing customer reference programs, but let me tell you that this is big business – over 150 employees dedicated to the effort at Oracle, over 50 at SAP, divisions at Microsoft having 8 figure budgets just to write reference stories, some large companies having Customer Reference Officers, etc.

As I immersed myself into the issues facing customer reference managers, it dawned on me that like many other marketing processes, this one is badly due for an overhaul.

Here are two takeaways from the conversations I had at the event.

Customer Reference Programs have to be focused on the buying process, not the sales process

Most customer reference programs are standalone programs that are squarely focused on supporting the sales process and specifically the sales organization. Sure, they sometimes support PR and product management efforts as well, but those are all company-centric processes. What companies need to realize is that people increasingly buy products based on what peers, opinion leaders, and friends are telling them, and not information coming from their company. So the customer reference program needs to be focused on the buying process, and not the sales process – it needs to become customer-centric, and not company-centric.

It also needs to be fully integrated with any word-of-mouth (WOM) activity the company is trying to foster. Since customers who are acquired through WOM are much more profitable than those acquired by traditional marketing programs, companies should make that a high priority. And with customer references being the biggest asset in such efforts, the customer reference program needs to move front and center to those efforts.

The Customer Reference Program process needs to be turned into a social process.

As buying decisions are increasingly made based on information that does not come from your company, moving forward you will need an increasing number of customer references – not less. And that increasing number is not linear, it’s exponential – those with the highest number of people buzzing positively about them in the marketplace will win. Unfortunatelly, and considering historical marketing budget trends, the budgets needed to scale your customer reference programs will not allow you to scale those programs to the point where you need them. In order to reach an acceptable scale you will need to turn the whole process into a social process – one in which customer references, other employees, and non-customer references or even non-customers can get involved. You see, there are many more people who are buzzing about you than you have in your customer reference database. And there are many more employees talking with happy customers than you have in your customer reference department. You need to get them involved and let them help one another tell a better story in the marketplace – their story that is, and not yours.

So in summary, Customer Reference Programs may be more important than ever, but they need to move to the center of all marketing activities and need to be focused on the buying process, not the sales process. And in order to scale the program to where it makes a real difference, you will need to turn it into a social process.

Let me know your thoughts.

Many senior sales executives are still looking for a predictable flow of leads at the end of a lead acquisition and nurturing “funnel.” And while many marketers have been struggling with expectation settings around predictable lead delivery for more than a decade, their sense of panic and angst around this issue has risen to alarming levels.

So what’s going on?

First of all, the funnel metaphor is broken. People no longer make buying decisions in a linear fashion. Second of all, people no longer listen to companies, but instead they turn to advise from their peers, friends, and other users of those products. Third of all, the potential number of choices they can have in their product consideration set is much larger than it ever was before, and the information sources that can get products into a buyers consideration set has grown exponentially.

A new study published in McKinsey Quarterly (requires subscription) reports that 2/3rd of touch points in a buyer’s active evaluations process are now consumer-driven marketing touch points: user generated reviews, word of mouth, and in store interactions. Only 1/3rd of the touch points are still company-driven. DID YOU HEAR THAT? You still control 1/3rd of the touch points!

So how should you think differently about lead generation?

First of all, ditch the funnel concept, and educate sales why the funnel no longer works. Second of all, make sure that there is uniformity among all the different customer touch points that you control: in-store display, packaging, attitude of your customer service department, online product information, educational information, etc. Third of all, position yourself to be findable for when customers can be influenced during their buying cycle – and in many cases that includes post sales as well.

One of the best things to happen to marketers is that most buyers leave a digital trail as they move through their journey. When they ask friends on twitter, you can see it. If they ask peers in communities, you can see it. And when they read or contribute to online reviews, you can see it if you want to.

You just need to make sure that you are there and generally helpful when those interactions happen. You also need to make sure that your branded content can travel as part of word of mouth, not just sit idle on your site. As the McKinsey Quarterly study says, you need to give prospects reasons to switch to you instead of excuses to stay with what they have – and you need to make it super easy for them to progress through their buying cycle.

I know: easier said than done. I am hoping that in the next few weeks we can expand on some of those concepts with some real case studies.

I enjoyed attending the 2009 IDC Directions Conference in Boston yesterday. By listening to marketers who attended the conference, I realized that many tech marketers are still solidly grounded in a Marketing 1.0 world – a marketing world with few leverage points, and one that is increasingly hard to sustain.

Statements like “We look at how many new names we have in our database,” or calling social networks “the digital marketplace,” or just the fact that they lament that only 20% of all content developed by marketing gets used by sales, illustrate my point.

Let’s take them one at a time.

When someone measures success of a marketing program by looking at how many new names there are in their database they are only concerned about one thing – having a one way monologue with that prospect. You know the routine, after that comes the qualification process – spamming everyone in that database so that the ones who are not about to buy can be ejected from their prospecting funnel. Those marketers do not realize that the most important conversations in the marketplace are those among prospects, customers and detractors – not the ones that happen between companies and those people. They need to develop content that will become part of those conversations and set up ways to attract only those prospects who are ready to engage with the company.

Calling social networks a digital marketplace is not only wrong, it also shows the mindset of marketers – always focused on the transaction part of customer relations, not the relations (in a very broad sense). It is wrong to confuse the two because the underlying driver in social networks is the social, while the underlying driver in marketplaces is the economic transaction. You can have a marketplaces with social networking capabilities (i.e., eBay), although most marketplaces do not have social networking, and most social networks do not have marketplaces.

Only 20% of content produced by marketing gets used by sales. That is a shame and should be corrected, but focusing on that again exposes the mindset of the marketer 1.0 – empowering sales to interupt and catch that prospect and turn them into a customer. Based on the conversations I heard yesterday nobody seems to be concerned about the percentage of content that actually gets used by prospects. Which brings me back to the first point – the most important conversations are those among your prospects, detractors and customers, not the ones you intend on having with them.

An interrupt-driven Marketing 1.0 world has no leverage points.

Eleven years ago, researchers found that consumers acted as if low digits were farther apart than higher ones (via the New York Times).

The research found that students who saw ads showing a $233 skate marked down to $222 thought they were getting a larger discount than did students who saw a $199 skate marked down to $188. The first group also rated themselves about 20% more likely to to buy the skates than did the others.

That is a pretty interesting finding, especially considering that so many products are priced with the highest digits 99…

[Tags: promotions discounts consumer behavior]

According to a recent article in the Harvard Business Review (requires subscription or can be purchased), you could and you should strive towards integrated sales and marketing departments as the benefits of having both groups work in harmony are plentiful.

Stop marketing departments who spend on advertising without tying the results to sales, stop sales departments that only fulfill demand instead of (co)creating it, and stop managers for whom marketing is nothing more than selling and sales support… p.l.e.a.s.e!

The authors see two main sources of friction between sales and marketing – one economic and one cultural. The economic one has to do with the power distribution between sales and marketing in three of the four P’s – promotion, pricing, and product. The cultural one, which may be even more entrenched, has to do with the fact that the two departments attract vastly different types of people – with different educational backgrounds, skill sets, etc.

The article offers a few suggestions to better align the marketing and sales departments:

• Encourage disciplined communication – and that does not mean more communication, which is expensive.
• Create joint assignments and rotate jobs
• Improve sales force feedback

Once you have your sales and marketing departments aligned you can go a step further and work towards achieving an integrated relationship. The authors suggest the following actions to achieve integrated departments:

• Appoint a chief revenue or chief customer officer – a CRO or a CCO
• Define the steps in the marketing and sales funnels
• Split marketing into two groups – strategic and tactical groups
• Set shared revenue targets and reward systems
• Integrate sales and marketing metrics

While some of the advise and terminology may seem a little staid or even passé (after all, is marketing still about the 4 P’s? and is the buying process still a funnel?), the advise is solid and practical and should benefit any company with dysfunctional marketing and sales departments.

[Tags: sales marketing hr organizational behavior]