Harnessing the power of references and referrals seems like an obvious win. What could make more sense than to leverage the enthusiasm of happy customers to convince buyers that they need your products and services?

And in an increasingly social and networked world—not to mention an economy where every dollar of revenue is critical—this type of third party validation is more important than ever. So why do we have so much trouble mastering the art of customer advocacy?

“Because companies don’t take it seriously,” says Bill Lee author of The Hidden Wealth of Customers: Realizing the Untapped Value of Your Most Important Asset (Harvard Business Review Press, 2012, ISBN: 978-1-4221723-1-5, $27.00).

“Salesforce.com CEO Marc Benioff put it best when he said that even though every company knows customer references are important, most companies have a lax approach to actually managing them.

Don’t be half-hearted about it

“You just can’t half-heartedly paste a few new tactics on top of your current operations and expect advocates to start singing your praises,” adds Lee. “Nor can you rely on a few enthusiastic supporters with vibrant personalities to carry your message. The program has to be well staffed so it becomes a seamless and well integrated part of your entire growth engine. And it needs to command sufficient resources to kick it off strongly and to keep it going over time.”

Through his organization, Customer Reference Forum, Lee has worked with and educated customer reference managers for going on nine years.

“There are certain predictable mistakes companies make that can derail customer reference programs before they ever get off the ground,” notes Lee. “If you can create the right infrastructure and approach your efforts with the right mindset, you’ll increase the likelihood of success substantially.”

For example:

1. Lack of executive support. Too often, customer reference programs are rolled out with limited resources and staffed by junior people working off a spreadsheet—a recipe for failure. A successful reference program needs significant resources and a strong rollout that involves the entire company.

It must cross boundaries, working cooperatively with other divisions in your business such as sales, marketing, social media, PR, product development, and the like. Without strong, hands-on executive support from a powerful leader who is passionate about advocacy, none of this will happen.

Too often salespeople may “hoard” their prize references, fencing them off from big opportunities to promote or close business for you, says Lee.

What’s more, social media content can go stale fast, and needs ever-refreshed supplies of new content from your advocates—as opposed to “all about us” content that bores visitors to death! All of these problems are best solved at the executive level.

2. Lack of imagination. Many reference programs suffer from inertia, churning out old-school pdf case studies that are way too long and that don’t get read. “There’s so much more that customer advocates can do to grow your business,” says Lee. “And with advances in technology and social media—along with the current boom in personal and professional communities—those who adopt customer reference programs must think much more broadly about the forms advocacy can take.”

These may include references, referrals, testimonials, serving on advisory boards, and participating in your customer communities, he explains. Customer advocates can also lead customer communities and forums, create content and video, contribute valuable knowledge and resources to product development efforts, defend your brand on social media sites, and more.

3. “Cheaping out” on resources. Reference programs are often organized as an afterthought, assigned as one of several programs to a junior-level employee who has too much to do, and managed with a spreadsheet.

Someone may hand him a list of prospective references who may or may not be happy customers, or strategically significant, or even profitable.

Before long, reference requests to the new program go wanting, as sales and marketing return to their old habits of trolling for references themselves, leading to underutilization of potential powerful references at one extreme, or burnout at the other. That’s business malpractice, says Lee.

“Enthusiastic references are extremely valuable to a business,” he says. “They can close deals that were stuck, convince skeptical analysts or media that your product or service is the real deal, build your brand on their social networks, provide referrals—the least expensive and most powerful marketing tool out there—and much more.”

4. Failure to install the right systems and processes. This includes an adequate reference management system (RMS) that automates as much of the data needs of the program as possible. And these needs can be considerable: Which references do you have, from which industries or segments? What requests have they fulfilled? What other advocacy activities do they engage in? What reference content have they provided? Where can you get your hands on it?

“Ask yourself a few key questions,” suggests Lee. “Do you have the right processes and policies in place? What policies have you established for references and testimonials in your sales and marketing efforts?

At what points in the sales process should references be used? How will customer videos, stories, and other customer content be used in social media efforts? What rules have you established for customer content in your marketing communications?”

5. Not integrating references into the growth strategy. It’s easy to spot a reference program that’s disconnected from the company’s growth strategy. Reference managers look puzzled when you ask about the corporate strategy for growth.

They recruit or keep customer references who may or may not be from markets that senior management is targeting. Everything they do and say tells you they’re out of the loop.

“Managers of reference programs that are well integrated into strategy can tell you, in your next product launch, how many customer references you’ll need,” notes Lee. “And they can tell you from which industries or customer segments these references should come. They’ll know what types of reference activities they’ll need to engage in. They’ll know how many references are candidates to be early adapters of the new product line.”

6. Failure to measure (or even understand) the business value of references. It’s a red flag when reference managers tout the number of new references they recruited—without regard to their actual value in generating business. They’re measuring inputs that have little bearing on business results, not outputs. More sophisticated programs continually measure their business value and adjust accordingly, says Lee.

“Reference programs can dramatically improve sales productivity by freeing salespeople from the time-intensive task of hunting down references themselves,” he explains.

“They can increase media awareness by providing content for reporters or analysts that makes it more likely you’ll be published. They can ensure the success of new product launches by providing critical early adopters, references, and referrals.”

7. Not giving customers a good reason to reference them. Many companies resort to gifts, prizes, awards, cash discounts, and even low-grade bribes to get customers to refer them.

Not good. Smart companies think through why their customers would advocate for them—and come up with better and more ethical reasons than those. First, you provide a terrific product or service. That’s the price of admission. Then you get creative in providing appropriate reciprocal value to your potential advocate.

“Does she like the limelight?” asks Lee. “If so, offer to do a joint case study or marketing piece. Does she want to affiliate with her peers? Invite her to your user groups or customer events. Would she like a higher profile in her industry?

“Arrange for speaking events where she can tout her accomplishments—with the help of your product or service. Hopefully, you know your customer well enough to know what is valuable to her. Give it to her and she’ll give you an enthusiastic—and genuine—referral.”

This last reason touches on the real reason customer reference programs work: They’re mutually beneficial to all parties involved.

“All successful companies, at least those that are able to sustain their success, genuinely meet the needs of their customers,” remarks Lee. “Bribe someone to say something nice and you might get a half-hearted endorsement. But strive to truly understand his needs and go above and beyond in meeting them, and you’ll create someone who wants to help you succeed—and who wants to help others succeed by connecting them to you.

]“If you don’t start with the right customer value proposition, nothing you do will matter,” he adds. “If you do, your program will be easier and more successful than you ever dreamed possible.”