Average spend per transaction increase by about 7%?

Hi there,

I would be happy to share my thoughts on your question:

• First of all, you are correct that in absolute terms, spending increased by 4%.
• Moreover, however, the difference in additional spending between the two groups (likely vs. unlikely to sign up) increased by 7%.
• Lastly, considering the question "Based on the chart below, what is your assessment of the loyalty card program?", I find the calculation of additional spending change somewhat unclear. The shifting baseline for the "unlikely to sign up" group complicates the assessment. In a real case interview, I would highly advise you to clarify the situation first, as the term "assessment" is rather vague and leaves a lot of options open.

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Best,

Hagen

The spend per transaction increase is calculated by comparing people who spend more vs. the control group who spend less.

Before the Loyalty Program:

• People likely to join the loyalty program spent $48 per transaction on average.

• People not likely to join the loyalty program spent $38 per transaction on average.

• This means that, even without the loyalty program, there was already a group of high spenders spending 26% more than the control group.

After the Loyalty Program:

• People in the loyalty program now spend $50 per transaction on average.

• People outside the loyalty program now spend $37.5 per transaction on average.

• This means that loyalty program members now spend 33% more per transaction than non-members.

Impact of the Loyalty Program on Spend:

• The spending gap increased from 26% to 33%, meaning the loyalty program contributed an additional 7 percentage points (p.p.) to increased spending.

The key insight here is that the relationship between spending and loyalty program participation is both cause and consequence—

✔ Cause: The loyalty program encourages higher spending.

✔ Consequence: High spenders are more likely to join the loyalty program in the first place.

Best,

Alberto

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Explore my latest case inspired by a real MBB interview: FastFashion - Customer Loyalty

Hey! 

Your logic seems correct to me! 

The discrepancy could stem from:

1. A potential error in how the "7%" was calculated or rounded.
2. The use of a different baseline or additional factors (e.g., weighted averages across segments) in the analysis that aren't immediately apparent in the provided data.

Maybe check whether additional context or assumptions (e.g., changes over multiple periods or other groups) are being applied to arrive at 7%. If not, your 4% calculation is accurate from my point of view.. 

Alessa

Hey there, 

I really like this case. I can see, however, how the wording here does cause some confusion. 

The 7% increase refers to the gap in percentage points between the two spending groups (the control and those likely to take up the loyalty program) that results from introducing the loyalty program, not the actual percentage increase in the transaction amounts of $50 and $48 (which is rightly 4% as you have it)

Hope that helps