The loyalty programme is based on a $5 discount for every $100 spent - right? It seems to me like an important calculation would be that whilst the loyalty programme increases spending by around 7% (i.e. $7 for every $100), it also gives customers a $5 discount for every $100. So surely we can argue that the impact is positive but minimal given this cost.
Please correct me if my logic here is off!
Your logic makes sense, and it's a good observation.
You're right that the net impact matters. If customers spend 7% more but get a 5% discount, the actual gain is closer to 2%, not 7%. That's a much smaller win.
However, there could be a few reasons why the case doesn't focus on it.
First, they might want you to catch it yourself. Some cases test whether you can spot the missing piece. Raising this point could actually show good business thinking.
Second, the discount might not apply to all purchases. Maybe only certain items or categories qualify. That would change the math.
Third, there could be other benefits not mentioned. Loyalty programs often increase visit frequency, improve customer retention, or generate data for targeted marketing. The 7% lift might be just one part of the value.
Fourth, it could be a simplification. Case interviews sometimes ignore certain details to keep things focused. The real test might be whether you can work through the structure, not whether you catch every cost.
My advice is if you see something like this in an interview, raise it. Say something like "Before we conclude, I want to check if we should factor in the cost of the discount. The 7% lift looks good, but if customers get 5% back, the net impact is smaller." That shows you think beyond the obvious.
You're not wrong to question it. That's exactly the kind of thinking consultants need.
hi!
I would also say that your logic seems correct.. the $5 discount partially offsets the $7 gain from increased spending, so the net effect is positive but smaller than just the 7% uplift. It’s important to show both the increase and the cost to get the true impact.
best,
Alessa :)
