Many salespeople depend upon reference accounts to help convince potential customers to buy. What few understand, though, is that a reference account should always be a last resort, rather than a regular part of your sales strategy.
A reference account, of course, is when a prospective customer calls an existing customer (whom the prospect doesn't know) to ask whether you can be trusted to deliver as promised.
There are three reasons reference accounts are dumb:
1. You lose control of the sale. When you provide the contact information for a reference account, you're leaving the ball in the prospect's court. You can't force the prospect to call, so you must wait until the prospect calls the reference account to move the sale forward.
While you could have the reference account call the prospect, doing so makes it seem that you've "prepped up" the reference account and raises the specter that you are in cahoots with the person who calls your prospect.
2. The existing customer might blindside you. You can't assume that any reference account will say nice things about you and your company. You may think that they're happy but unless you're 100 percent on top of that account, there may now be problems of which you're unaware.
Even if you're certain that the reference account is happy, there's always a chance that the reference will say something that you'd prefer remain unsaid, like how you gave them a huge discount that you can't (or don't want to) give the new customer.
3. You're imposing on an existing customer. Your customer presumably has better things to do that help you make a sale to some stranger. You might easily sour the existing relationship by having too many prospects call, especially in a short amount of time.
Furthermore, if what you're selling is truly wonderful, and your prospect is in the same industry as your existing customer, you're asking your existing customers to help out their competitors.
Because of the problems above, it's smarter to start the sales engagement with a referral rather than using a reference account to help you close.
A referral is when an existing customer personally contacts somebody the existing already knows and recommends you, thereby turning that person into a prospective customer. (More: How to Get a Customer Referral)
With a referral, you enter the engagement with the credibility of being endorsed by an existing customer and, more importantly, if you're blindsided it won't matter. You'll only invest your time in the opportunity after (and if) you get a good referral.
By the way, my favorite expert on referrals, Joanne Black, has a new book out: Pick Up the Damn Phone! How People, Not Technology, Seal the Deal. I read an advance copy and it's great stuff.
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