Customer loyality Strategy

Abstract

Hilti has high market coverage but relatively low penetration in the Dutch Diamond Service Contractor (DSC) trade. There is also no dedicated strategy. This loyalty issue needed a solution. I fulfilled this position from a fresh point of view during my graduation project. The target groups in the DSC trade are Diamond Service Contractors (DSC’s) and Demolition Experts (DE’s). Hilti Hilti was analyzed from an internal and external point of view. Remarkable is the strong Hilti identity, which can create excitement among people. However, sometimes this leads to arrogant attitudes among Hilti employees. The Hilti organizations itself is very large and international. Hilti is therefore easily able to survive a local crisis, like the current one in the Netherlands. Another strength of Hilti compared to the competition is the channel system in own control. This enables Hilti to explain an unambiguous story everywhere. A drawback of the large Hilti organization is the inflexibility. I tried to break this is aspect during this project by introducing innovative concepts. DSC Trade The DSC trade customers’ workload is directly linked to the total Dutch construction output. Trend agencies predict several scenarios for the building construction sector, but the latest prediction expects growth in 2014. Prices in the DSC trade are also under a lot of pressure. Hilti products on the other hand are relatively expensive. Although Hilti products are always good, my analysis showed that they are not always value based. In other words, there is a gap that should be bridged between the Hilti pricing and the Hilti value proposition. Simply lowering the prices is not an appropriate solution that fits Hilti. Furthermore, the Hilti TS’s from the DSC sales team are unable to act upon certain sales issues. An example is that they do not have access to a catalog that shows all Hilti DSC trade products. The need for radical new products among DSC trade customers is mostly bound by legislation. Also no radical product innovations have been introduced the last few years. Therefore the DSC trade customers use similar products already for many years. The Hilti product portfolio does not include some of these products, which are regularly used in the DSC trade. This indicates product gaps in the Hilti DSC trade tool portfolio. The DSC trade consumable sector on the other hand is suffering from extreme competition. Many competitors are selling consumables almost below cost price. Customer Research The DSC trade customers are researched in depth. First several employees of a DSC trade customer were observed. Many intersecting facts showed up but especially that drilling the hole does not take that much time actually. Starting and cleaning up on the other hand takes much time. Focusing on those aspects is even more interesting than improving tools or consumables. Another fact is that employees care little about safety. This is an important mismatch, because Hilti is currently one of the best suppliers in safety aspects. The last important fact from observation was that employees do not get to choose the type of consumable, they just get a certain brand from their manager. However, when they do production work (drilling many same sized holes), they get different consumables types and/or brands to compare the performance of each type individually. The second part of the customer research is interviews. A total of ten managers from DSC trade customers were interviewed about different topics. The findings are best represented with three key findings. The first is the Hilti image among the DSC trade customers. Although the customers mention that they like Hilti because of the good products, without a doubt it is the first thing they mention when thinking about Hilti is expensive. Secondly, changing any of their habits is difficult, because they are very conservative. It takes a lot of time to gain trust of a DSC trade customer. Thirdly, almost all customers I visited were categorized as engaged. Engaged is the highest customer loyal level towards Hilti according to Hilti’s own loyalty system. I expected inventories full of Hilti but the opposite was true. Most of them had only a few tools from Hilti and sometimes a lost Hilti consumable lying around. Apparently engaged customers are not that loyal to Hilti as the loyalty stage suggests. The third part of the customer research was a survey among 93 DSC trade customers to determine Hilti’s market potential for the DSC trade. This was needed to adjust the impact of a customer loyalty strategy. The research confirmed Hilti’s loyalty problem and showed a low market share. It also showed a large potential regarding four new product lines. The last part of the research was a workshop with the five DSC trade Hilti TS’s. The goal was to look for characteristics that could describe a DSC trade customer. When DSC’s and DE’s are taken as one big group, there are many personal differences. Profiles were the best method to describe a specific customer. These profiles can segment customers. With these profiles it is possible to create a tailored approach for a specific type of customer. Strategy The analysis resulted in four strategic directions for Hilti in the DSC trade. Three were within scope of this project: Extreme Hilti craziness through personalized approach Employee focus for market penetration Transparent discount policy Furthermore a customer journey workshop with key people from the DSC trade resulted in a customer journey tailored to the DSC trade customer and many ideas to solve the loyalty problem. The customer journey clarified an important problem. Apparently many Hilti touchpoints are non-functioning in the DSC trade. Based on this conclusion the design task was to design a new touchpoint that enhances the overall DSC trade customer journey combined with one or more of the three strategic directions mentioned before. Concepts Three realistic concepts were developed from the design task. One of those concepts is radical and two are incremental. The radical concept is a sales tool that convinces the customer about the Hilti offer by using the profiles mentioned before, customer review movies, branding movies and most important a complete overview of an up to date Hilti portfolio to show to the customer. It is radical, because it needs integration with Hilti’s back office and focusses on Hilti headquarters. The second concept is the Hilti Elite. It is an exclusive networking club for DSC trade customers with points they can collect for discounts. Customers are attracted to various events in the benefit of Hilti. The last concept is the Fleet Van, which is the ultimate loyalty solution. It is a concept that brings Hilti’s fleet management to a new level. The customer is able to get total package with a furnished van, tools and consumables in consignment stock. The customer can now respond quickly to orders on the go, because high quality consumables are always in stock. Implementation The Hilti Elite and Fleet Van are relatively low risk concepts. I definitely recommend Hilti to implement them. Timing the implementation of these concepts is very important, because although both concepts are individually good they can reinforce each other positively. Pilots should also be executed, because feedback from customers is very important for finetuning the concepts. As explained before, the sales tool is a very radical concept. Probably there is no possible way to develop it at Hilti Netherlands. Therefore communicating the concept to Hilti headquarters is needed. The concept is easily worldwide up scalable within Hilti. Conclusion The success of increasing the customer loyalty in the DSC trade depends on the willingness to innovate and amount of money spend by the Hilti management. Hilti should be triggered to do so, because of their low market share in the DSC trade. Otherwise the competition is simply able to outperform Hilti and in the end Hilti should always outperform and outlast.