Maintaining Loyal Customers and Customer Service Strategy

Maintaining Loyal Customers CNI’s journey Kenny Ong CNI Holdings Berhad

The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy

Denial and Defense “ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia “ It’s good value but not in our preferred customer market.” - ABC vs Toyota “ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO “ The rules we are playing by have always worked before” – AMEX vs VISA

Ad Hoc Tactics Selectively hold discounts to hold business that has started to go elsewhere Introduce new promotions, terms, conditions, and offers to confuse and cloud the market Beef up customer service by adding people to fix mess-ups and quicken delayed shipments Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers

Contents: Agenda: Introduction Philosophy Customer Focus Strategy Example Next Steps

Introduction The basis for all our Customer Loyalty strategies

Intro: CNI 17 years old Main Board Public Listing: August 2005 Products: Consumer Goods and Services Core Business: MLM Others: Contract Manufacturing, Export/Trading, eCommerce Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines Staff force: ± 500 Distributors: ± 250,000 Malaysia

Intro: MLM Sell through people Relationship & people skills Compensation Plan Follow-up Integrity R&D Training Functions & Events Tight regulations

Philosophy The anchor for all decisions

Philosophy: Goods Return Policy “ I don’t 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.” Sergio Zyman “ Retention and Loyalty useless if No Conversion is happening.”

Philosophy Loyalty is Useless… Virtual Consumption vs. Real Consumption

Philosophy Loyalty is misleading… Heavy Consumption ≠ Loyalty Loyalty ≠ Heavy Consumption *Today’s focus is on Loyalty, not Consumption. *To increase consumption, refer Marketing

Philosophy Loyalty = Relationship (something like Dating) Loyalty ≠ Points Loyalty ≠ Redemption Loyalty = Get more people, to buy more, more frequently, at higher prices

Customer Focus Keeping an eye on the right thing

Focus: Segment & Target Know your “Customer” User Distributor Leaders Super Leaders DCO SPO 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: Present Value Potential Value Low High High Maximize No action Micro Support Conversion

Focus: Segment & Target Loyalty Experience Swing Former Opposition

Loyalty 1: Experience Loyalty = Experience vs. Expectations Solution Strategy: Value Disciplines

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

Loyalty 1: Experience * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image

Loyalty 1: Experience * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices

Loyalty 1: Experience * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards

Loyalty 1: Experience * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations

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 “ To satisfy our stakeholders, what Financial objectives must we accomplish?” Internal Process “ To satisfy our customers, in which internal business processes must we excel?" Customer “ Who are our target customers? What is our value proposition?” Learning & Growth “ What capabilities and tools do our employees require to help them execute our strategy?

Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors Revenue Growth Productivity Market Value Department Operations Supplier & Alliances External Involvement Target Markets Products/ Services Channel Strategies Human Resources Technology Information & Intelligence Systems & Processes

Focus: Corporate Alignment Financial Learning & Growth Internal Process Customers / Distributors Profit after Tax. Revenue. Cash-to-cash cycle. Operating cash flow Customer Complaints. Customer Acquisition Rate. Product 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. Continuous Improvement. Response Time to Customer Needs. 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 with Career Development Plans. No. of training hours completed 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 Value Disciplines Base Retention 4-wheels

Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)

Zig Ziglar “ Most prospects that don’t buy are confused about the offer”

Product Leadership New, state of the art products or services Risk takers Meet volatile customer needs Fast concept-to- counter Never satisfied - obsolete own and competitors' products Learning organization Strategy: Value Disciplines Operational Excellence Competitive price Error free, reliable Fast (on demand) Simple Responsive Consistent information for all Transactional 'Once and Done' Customer Intimacy Management by Fact Easy to do business with Have it your way (customization) Market segments of one Proactive, flexible Relationship and consultative selling Cross selling

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

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

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

The McPlaybook* Make it easy to eat 50% drive-thru Meals held in one hand Make it easy to prepare High Turnover Tasks simple to learn & repeat Make it quick “ Fast Food” Tests new products for Cooking Times Make what customers want Prowls market for new products Monitored field tests *Adapted from: Businessweek , Februrary 5 th 2007

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 customer’s decision cycle Credit cards, Avis Bond with Customers Most customers, under most circumstances, won’t 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

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

Strategy: 4-Wheels Culture Corporate Objective Corporate Strategy Structure Resources Leadership Person

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

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

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

Strategy: Framework Involve everyone in Customer Focus Self managed teams Recognition Recruitment Training Profit sharing Manager’s role Values Person

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

Strategy: Framework Culture Corporate Objective Corporate Strategy Structure Resources Leadership Person

Mistakes and Challenges ISO Separating Sales, Marketing, and DCS New products Misinterpreting customer enthusiasm Lack of Frontliners Backoffice Customers = Frontline Lack of Training ‘ Talent’ Criteria Internal Service Hiring 2 nd level CRM database Balance between Service and Control Feedback from the Field

Next Steps… CRM DC Online eCommerce Customer Intimacy TNA reduction APQP Branding Loyalty programs Product R&D External networks Field support Upgrade DCs Smoothen supply chain BES Targeted marketing For CNI:

Next Steps… Customer philosophy Review SOPs Re-orientate staff Training Performance Mgmt System C&B Resources Product Quality Customer Service quality Stop defections Hiring Set standards Make it everyone’s responsibility For starting up:

Thank You. soft copy of slides: [email_address]

Maintaining Loyal Customers and Customer Service Strategy

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