THE RIGHT ENDORSEMENT

The Sales Power of Reference Letters
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THE RIGHT ENDORSEMENT

Jan 1, 2002 12:00 PM, ALAN KRUGLAK

LIKE MANY MEN OVER 40, I'M SUBJECT TO CONSTANT abuse — from my wife. She claims thatIsnore. All night, I'm harassed, woken up, hit, etc., all to stop my snoring. Finding a solution is not easy. There are dozens of treatments for snoring, ranging from staying up all night to wearing an extremely uncomfortable mouth apparatus to using a laser to cut a wide swath of “unnecessary” tissue in your throat.

I didn't believe anything would work until I saw a commerical for a product called D-Snore, presented by the actor who played the doctor on The Love Boat. I thought, “Maybe I should give it a try.” The endorsement from a trustworthy actor (who played a doctor) was enough to convince me to try this product, which shows that there's nothing like the power of the right endorsement to change the behavior of a prospect.

But I didn't write this article about snoring because the manufacturer of D-Snore is paying me millions (this is a free plug). Instead, I want to highlight the power of testimonials. For consumer goods, they're called endorsements. In the business world, they're called references and reference letters.

WHY REFERENCE LETTERS?

AT MY FORMER integration company, we had never used reference letters. We relied primarily on our client list to demonstrate our track record. But my attitude toward reference letters changed after an eye-opening discussion with John, one of my sales reps. John was handy around the house, making all of his own repairs. He even tarred his own roof in the middle of a hot Washington, D.C., summer. But when his furnace broke, he told me, “That's one task that we hire others to do.” He received three bids, all around the same price, and selected the lucky one within five minutes. I was amazed with his decisiveness.

“John, how did you make your decision so quickly?” I asked.

“Alan, I chose the one with the stack of reference letters like this,” he said, showing me a dozen letters. “If the company could do a good job for them, it could do a good job for me.” The reference letters reduced John's risk of making a bad decision. That simple yet powerful lesson revolutionized the way our company packaged all future proposals.

The same rules that applied to John's decision-making process equally apply to the corporate environment. Most corporate managers have one goal: job security. One way to maintain job security is to meet the budget (a discussion for another time). The other way is to minimize risk. Risk management is one reason why it's so difficult to break an existing client-vendor relationship, unless the vendor's performance is poor enough to jeopardize the client's job.

So if the client is seeking a new vendor relationship, you make your company attractive by minimizing that client's preceived risk. A key variable that influences their selection is your track record. While you can simply list all of the companies you have worked for, the best and most tangible way to communicate your success is through reference letters. Reference letters reduce a client's perceived risk, increase the value of your company in their eyes and ultimately enhance your ability to win the project. They'll think as John did: “If they did a good job for these people, then they could do a good job for me.”

STEPS FOR USING REFERENCE LETTERS

Generate Letters

The first step is to begin collecting letters. If you're doing an exemplary job, you'll receive unsolicited reference letters. However, most busy corporate managers don't have the time to write letters. We wrote the letters for them. They would overlay our letter on their letterhead, sign it and return it to us.

Organize Letters

When we got a reference letter, we made 50 good copies and stored them where our sales reps would have easy access. We kept a master file of the originals, received and added new letters to our library nearly every month, and made sure that we had letters from each of our major market segments.

Use Them to Sell

Incorporate letters into your proposal and into the selling process. In our proposals, we created a reference section that contained the appropriate market-specific reference letters selected by our sales reps. Another effective way to use reference letters is to hand out copies during client presentations, enabling clients to “touch” the companies you've successfully worked for.

When it comes to sales tools, there is no silver bullet; however, reference letters go a long way to showing the client that you are a low-risk solution. This not only adds value, but enables you to charge a higher price for your products and services. As for my snoring, the D-Snore must be working. Last night, I stayed up all night to see if I snored, with positive results.

Alan Kruglak is the former owner of GIC, one of the most profitable systems integration firms in the country, sold to Sensormatic Electronics Corporation in 1995. You can reach him at akruglak@erols.com.

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