Maintaining Loyal Customers

CNIs journey

Kenny Ong
CNI Holdings Berhad
Contents:

Agenda:
Introduction
Philosophy
Customer Focus
Strategy Example
Next Steps
 Introduction

The basis for all our Customer Loyalty

strategies
 Intro: CNI

1. 17 years old
2. Main Board Public Listing: August 2005
3. Products: Consumer Goods and Services
4. Core Business: MLM
5. Others: Contract Manufacturing,
Export/Trading, eCommerce
6. Malaysia, Singapore, Brunei, Indonesia, India,
China, Hong Kong, Philippines
7. Staff force: 500 Malaysia
8. Distributors: 250,000
 Intro: MLM

1. Sell through people

2. Relationship & people skills
3. Compensation Plan
4. Follow-up
5. Integrity
6. R&D
7. Training
8. Functions & Events
9. Tight regulations
 Philosophy

The anchor for all decisions

 Philosophy:

Goods Return Policy

I dont care if they return a
Goodyear tire. If they said they
paid $200, pay them $200.

Nordstrom does not sell tires

 Philosophy

In business after business, 60% to

80% of lost customers reported
on a survey just prior to defecting
that they were satisfied or very
satisfied.

HBR March/April 1996

 Philosophy

CNI is more than business.

We strongly believe that every
individual has the opportunity to
attain a better living through
CNI.
 Philosophy

Ultimate Objective of Marketing:

Get more people, to buy more
things, more frequently, at higher
prices.

Retention and Loyalty useless if No

Conversion is happening.

Sergio Zyman
 Philosophy

Loyalty is Useless

Virtual Consumption vs.

Real Consumption
 Philosophy

Loyalty is misleading

Heavy Consumption Loyalty

Loyalty Heavy Consumption

*Todays focus is on Loyalty, not Consumption.

*To increase consumption, refer Marketing
 Philosophy

1.Loyalty = Relationship (something

like Dating)
2.Loyalty Points
3.Loyalty Redemption
4.Loyalty = Get more people, to buy
more, more frequently, at higher
prices
 Customer Focus

Keeping an eye on the right thing

 Focus

1. Targeting
2. Alignment
 Focus: Segment & Target

Know your Customer

1. User
2. Distributor
3. Leaders
4. Super Leaders
5. DCO
6. SPO
7. Corporate
 Focus: Segment & Target

Targeting based on Value of the

Customer:

Value of Customer = RFM =

Recency x Frequency x Monetary
 Focus: Segment & Target

Targeting based on Value of the Customer:

High

Conversion Micro
Support
Potential
Value
No action Maximize

Low High
Present Value
 Focus: Segment & Target

Loyalty

Experience Swing Former

Opposition
 Loyalty 1: Experience

Loyalty = Experience vs. Expectations

Solution Strategy: Value Disciplines

 Loyalty 1: Experience

Product "They are the most innovative"

Leadership "Constantly renewing and creative"
"Always on the leading edge"

Customer
Operational Intimacy
Excellence "Exactly what I need"
"A great deal!"
Customized products
Excellent/attractive price Personalized communications
Minimal acquisition cost and "They're very responsive"
hassle Preferential service and
Lowest overall cost of flexibility
ownership Recommends what I need
"A no-hassles firm" "I'm very loyal to them"
Convenience and speed Helps us to be a success
Reliable product and
service
 Loyalty 1: Experience

Product/Service Attributes Relationship Image

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

 Loyalty 1: Experience

Operational Excellence: Quality and selection in

key categories with unbeatable prices

Product/Service Attributes Relationship Image

Price Time Smart

Selection Shopper
Quality

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

 Loyalty 1: Experience

Product Leadership: Unique products and services

that push the standards

Product/Service Attributes Relationship Image

Time Best
Function Product
Brand

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

 Loyalty 1: Experience

Customer Intimacy: Personal service tailored to

produce results for customer and build long-term
relationships

Product/Service Attributes Relationship Image

Service Trusted
Brand
Relations

* Treacy & Wiersema, The Discipline of Market Leaders, 1995

 Loyalty 2: Swing

Loyalty = Best alternative at the current

moment until I find another alternative

Solution Strategy: Base Retention

 Loyalty 2: Swing

Swing Customers are loyal because:

Individual Relationships
Convenience (at that point in time)
Tied-up
Product Uniqueness
Promotions
No better alternative
Downlines
No known alternative
Psychologically lazy
 Focus: Corporate Alignment

Financial Customer
To satisfy our Who are our target
stakeholders, what customers?
Financial objectives
What is our value
must we accomplish?
proposition?

Learning & Growth Internal Process

What capabilities and To satisfy our customers,
tools do our employees in which internal business
require to help them processes must we
execute our strategy? excel?"
 Focus: Corporate Alignment

Financial Revenue
Market Value Productivity
Growth

Customers /
Distributors Products/ Channel Target
Services Strategies Markets

Internal Supplier & Department External

Process Alliances Operations Involvement

Learning & Technology

Growth Human Information &
Resources Systems & Intelligence
Processes
 Focus: Corporate Alignment

Financial Profit after Tax. Revenue. Cash-to-cash cycle. Operating

cash flow

Customers / Customer Complaints. Customer Acquisition Rate. Product

Distributors Availability. Product Quality & Service. Renewal Annual
Subscription. Distributor Rank Achievement. No. of Active
Distributor. No. DC/Regional Sales. Distributor with commission

Customer Database Availability. Accuracy of Forecast Planning.

Internal
Continuous Improvement. Response Time to Customer Needs.
Process Perfect Order Fulfillment. Inventory Turnover. Number of Effective
Sponsoring Program. On Time Delivery. No. of Effective Training.
Number of Effective A&P

% of staff evaluated on Core Competency Framework. % of staff

Learning & with Career Development Plans. No. of training hours completed
Growth per staff. % of staff with access to strategic information. Q12
Index. % staff evaluated on Culture alignment
 Strategy Example

What we have done and why

 Strategy

Mamak stall
 Strategy

1. Value Disciplines
2. Base Retention
3. 4-wheels
 Strategy: Value Disciplines

Product Leadership
(best product)

Operational Excellence Customer Intimacy

(low cost producer) (best total solution)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
Zig Ziglar
Most prospects that
dont buy are confused
about the offer
 Strategy: Value Disciplines

Operational
Operational Product
ProductLeadership
Leadership Customer
CustomerIntimacy
Intimacy
Excellence
Excellence New,
New,state
stateof
ofthe
the Management
Managementbyby
Competitive
Competitiveprice
price art
artproducts
productsoror Fact
Fact
services
Error
Errorfree,
free,reliable
reliable
services Easy
Easytotododo
Risk
Risktakers business
businesswith
with
Fast
Fast(on
(ondemand)
demand)
takers
Meet
Meetvolatile Have
Haveitityour
yourway
way
Simple
Simple
volatile
customer
customerneeds
needs (customization)
(customization)
Responsive
Responsive Fast
Fastconcept-to-
concept-to- Market
Marketsegments
segments
Consistent
Consistent counter
counter of
ofone
one
information
informationfor
forall
all Never
Neversatisfied
satisfied-- Proactive,
Proactive,flexible
flexible
Transactional
Transactional obsolete
obsoleteown
ownand
and Relationship
Relationshipandand
competitors'
'Once
'Onceand
andDone'
Done'
competitors' consultative
consultative
products
products selling
selling
Learning
Learning Cross
Crossselling
selling
organization
organization
 Strategy: Value Disciplines

Operational Excellence
Move know-how from top performing
units to others
Benchmark against best in class
Ensure operations training for all
employees
Use disciplines like TQM for continuous
learning to reduce costs and improve
quality
 Strategy: Value Disciplines

Customer Intimacy
Capture knowledge about customers
Understand customer needs
Empower front line employees
Ensure that everyone knows the
customer
Make company knowledge available to
customers
 Strategy: Value Disciplines

Product Leadership
Reduce time to market
Commercialize new products fast
Ensure that ideas flow
Reuse what other parts of the company
have already learned
Ensure there are multiple sources of
funding
 Strategy: Value Disciplines

Product Leadership
(best product)

Operational Excellence Customer Intimacy

(low cost producer) (best total solution)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
 Strategy: Value Disciplines

Product Leadership
(best product)

Operational Excellence Customer Intimacy

(low cost producer) (best total solution)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995
 The McPlaybook*

Make it easy to eat Make it easy to prepare

50% drive-thru High Turnover
Meals held in one Tasks simple to learn
hand & repeat

Make it quick Make what customers want

Fast Food Prowls market for new
Tests new products products
for Cooking Times Monitored field tests
*Adapted from: Businessweek , Februrary 5th 2007
 Strategy: Base Retention

Increase switching costs

Complex relationships - they will be reluctant to go through the
hassle of undoing those relationships in order to leave
Ensure no competitor will be able to come up with a big enough
offer to outweigh their switching cost
Increase switching cost, by providing valuable, but entangling,
services
E.g. Telcos, ERP, Microsoft, Consultants

Tailor your offering

Understand customer behaviors and motivations to personalize
experience for its best customers
Share of Wallet
Information is KING
IBM, Amazon
 Strategy: Base Retention

Preempt Defections
Predict, Response, Execute
Keep track of customers changing value criteria
Be ahead of the customers decision cycle
Credit cards, Avis

Bond with Customers

Most customers, under most circumstances, wont evaluate a full
range of alternative products when making a repurchase decision
Brands create emotions
Need to influence customers to be on your side
e.g. Apple, Baby products
 Strategy: Base Retention

Mega packages Suggestion Box

Community Self Profiles
Reward programs Programs x Lifestyle
(Points) Matrix
Membership Subscription Fun, Interactive programs
Email communication (e.g. design and submit
Newsletters your own: recipe, jewelry,
greeting card etc.)
Personalized alerts
Switching Techniques
Reminder & Gift
(e.g. Balance Transfer of
suggestion credit cards)
Survey
 Strategy: 4-Wheels

Corporate
Resources
Structure Objective
Corporate
Strategy
Culture
Leadership

Person
 Strategy: Framework

Structure Org Structure

Job Design
C&B
Policies & procedures
Decision making
Job fit
Management Systems
BSC and KPIs
Decentralized & Empower
 Strategy: Framework

Resources Tools
Physical facilities
Peer support
Information
T&D Programs (internal)
ICT Systems
eCommerce
 Strategy: Framework

Leadership Role modeling

Vision/Mission/Philosophy
Leadership Style
F/L importance
Delegation & Empowerment
C&B, Promotions
Sense of Urgency
Speak regularly about customers
 Strategy: Framework

Person Involve everyone in Customer Focus

Self managed teams
Recognition
Recruitment
Training
Profit sharing
Managers role
Values
Person Development: BES
 Strategy: Framework

Culture Focus point

Alignment
Quality
Innovation & Differentiation
Risk taking
Performance Management
Corporate obsession
Decision making
 Strategy: Framework

Corporate
Resources
Structure Objective
Corporate
Strategy
Culture
Leadership

Person
 Mistakes and Challenges

1. ISO 8. Lack of Training

2. Separating Sales, 9. Talent Criteria
Marketing, and DCS 10.Internal Service
3. New products 11.Hiring
4. Misinterpreting 12.2nd level CRM
customer enthusiasm database
5. Lack of Frontliners 13.Balance between
Service and Control
6. Backoffice
14.Feedback from the
7. Customers = Field
Frontline
Next Steps
 Next Steps

For CNI:
1. CRM 9. Product R&D
2. DC Online 10.External networks
3. eCommerce 11.Field support
4. Customer Intimacy 12.Upgrade DCs
5. TNA reduction 13.Smoothen supply
6. APQP chain
7. Branding 14.BES
8. Loyalty programs 15.Targeted marketing
 Next Steps

For starting up:

1. Customer philosophy 8. Product Quality
2. Review SOPs 9. Customer Service
3. Re-orientate staff quality
4. Training 10.Stop defections
5. Performance Mgmt 11.Hiring
System 12.Set standards
6. C&B 13.Make it everyones
7. Resources responsibility
 Thank You.

soft copy of slides: kennyong@cni.com.my