How Big is Your Customer Reference Shadow Market?

Oh, that infuriating customer reference shadow market! You’ve put a system in place—technology and or a collection of processes—specifically to wrangle the customer reference process and improve opportunity outcomes. Yet, the old messy reference “model” continues in DM and email channels. We call these backchannel, out-of-the-system methods the shadow market.

You know that a more formal approach:

a) Makes finding relevant references faster, and less of a “magic 8 ball” experience

b) Prevents the overuse of everyone’s favorite reference accounts

c) Leads to the right references being delivered to buyers faster

d) Provides a way to attribute reference activities to closing deals

Change is Hard for Humans

In particular, salespeople are set in their ways and have been finding customer references the old-fashioned, shadow market way for, most likely, their entire sales careers. We all know the experience of switching work computers. While perhaps slower, maybe a little buggy, and incapable of supporting state-of-the-art applications, the old one is familiar, comfortable. Getting used to the new one isn’t initially a source of great joy. If your current computer is still functional, you still gravitate to it when you “have to get something done quickly.” There’s some trepidation and frustration with the new one, comfort with the old one. But, day by day, with consistent use, it soon becomes familiar, comfortable, AND faster with the latest state-of-the-art apps and features. You eventually cut the cord and don’t look back.

One very straightforward way to size up the shadow market, and ultimately make it the exception and not the rule, is to:

1. Run a report of all the new client opportunities in the last quarter or two that ended in closed/won
2. Run a report of all the opportunities that made use of customer references and ended as closed/won
3. Compare the two reports. What % of closed/won deals didn’t go through your system?

This baseline report helps provide one adoption metric. It also establishes two other baselines: a) The percent of time your system is being used, and b) the percent of time references are being used as part of closing deals. Essentially, this tells you the current size of your customer reference shadow market. The first baseline value is obvious: you want your system to be consistently used for all the reasons listed previously. What about the second metric?

Customer Reference Best Practices

In most opportunities, the buyer determines whether or not a salesperson has to provide references. In some cases, references simply aren’t necessary to close a deal. Perhaps your product(s) is just that well known in the market. Perhaps the buyer is a former client contact who moved to a new company. They are the reference needed to close the deal. Some salespeople will provide case studies or customer videos, or point a buyer to a product review site such as TrustRadius or G2—literally do everything possible to avoid finding and arranging live reference calls. There is a hidden cost in this last approach. The customer satisfaction “evidence” may not be compelling enough to make a decision easy. So the decision is strung out, needlessly, over weeks, months, or quarters. That’s not good for the salesperson’s or the company’s sales targets. Compelling evidence can also counter aggressive price negotiation by reducing (or eliminating) the perceived risk of going with one solution over another.

In our experience, little time is spent training salespeople customer reference best practices. Most salespeople just figure out a way to satisfy, reactively, eleventh-hour reference requests. That way is often the customer reference shadow market. If only they knew how to use them proactively, creatively, and consistently. Average performers, the largest segment of the sales team, could become above-average performers. You, the reference program manager, can have a crucial role in sales effectiveness.

Changing entrenched behavior isn’t like flipping a switch. But through a combination of “carrots” and “sticks,” and consistent reinforcement, it is entirely achievable. Tamping out the shadow market is an essential step in that journey.