How to give references that sell: Startup sales negotiations 101

by Steli Efti

negotiation_references

When you're talking with prospective clients, they'll sometimes ask you for references. They want to talk with someone other than you to get a real customer's perspective on your product and service.

References of happy customers are one of the most powerful sales tools you have. You’re basically turning your customers into an extention of your sales team. Use them at the right time, in the right way, and they’ll close your most important deals for you.

The key thing here is to make sure you don’t waste their time and burn them out on too many reference calls. 

What’s the best time to give a customer reference?

Late. It should be the last step in your entire sales process.

Keep your references close to your chest until your prospects are ready to buy, the deal is just about to happen, and everything else is checked off the list.

Think of it as the final move to make the close. The prospect should have a sincere and strong buying intent and all the necessary information to understand the deal before you ever consider giving out a reference.

By offering to let them speak with someone who already bought from you, you help them overcome any remaining fears of, or hesitations about, making a bad buying decision.

Why not use your customer references early?

Your references are too precious to parade around. If someone is a happy customer of yours, they’ll be willing to help you out by sharing their experiences with your prospects.

But keep in mind, they have other things to do. If they’re flooded with inquiries from your prospects, they’ll turn sour. Don’t burn out your happy customers by having them constantly talk to window shoppers who are too early in the sales cycle and later won’t end up buying.

You want to shield your references as much as possible from failure. You don't want them to hear things like, “Thanks for taking the time to tell us about your experience with company XYZ, we decided to go with another company though.”

You want them to be on team winning and get the validation that every person they talk to on your behalf becomes a customer. Everyone loves to hear things like, “Thanks for sharing your experience with company XYZ with us, we’re now a happy customer too!”

The quality of the conversations your references have with prospects will also be a lot higher if you only let highly qualified prospects with a sincere buying intent talk to them. So make sure to only connect prospects and customers when the deal has the highest chances of success.

How do you tell prospects that you aren't willing to give them a reference yet?

Won't it alienate prospects? Make them feel like you have something to hide?

That's what salespeople often worry about, but it's never happens. Prospects will understand and respect you more for it if you decline to give them references too early but offer to do it later in the sales process.

Here’s what you say when a prospect asks for a reference early

"I’m happy to put you in touch with successful customers and give you references at the right time.

I want to make sure that we first get to an understanding that this deal makes sense and is a good fit for both parties.

Once we’ve answered every question and taken all the steps for you to be ready to buy, I’ll be happy to put you in touch with as many customers as you want before you actually end up signing the deal.

Sounds fair enough?"

Negotiating with investors?

When a potential investor wants to talk with other investors or customers, the same principle applies.

If they ask for a reference too early in the process, tell them:

"I'm absolutely happy to make connections and give you references at the right time.

Once you're really sure that this is a deal you're interested in and this is part of the due dilligence, I'm happy to open up the kimono, and give you access to that resource, but not as a first step, not that early in the process."

Your happy customers are like family. You wouldn’t hand out your cousin's phone number to anyone just because they ask, would you?

If someone has sincere interest, they’ll be ok with evaluating whether it’s a good match or not before talking to references. In fact, they will respect you even more because you're treating your customer references with respect and don't give them out prematurely.

By only letting references talk with people who are pretty much willing to buy, you create a virtuous positive feedback loop: your references experience talking about your company as something positive and successful, and become stronger advocates of your brand in the process.

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Further reading:

  1. How to respond to discount inquiries
  2. The pair negotiation tactic
  3. The B2B referral sales system