How to Structure "Loyalty Program Improvement" Case

Question

Case prompt: Store X, a store selling groceries and housegoods among other things (like Walmart) has a loyalty program that has been established for 10 years now. The CEO would like to improve the loyalty program. Loyalty program is handled by a 3rd party. Store X is one of 3 major players in the market and the rest are numerous smaller stores.

This is an interviewer Led case.

Q1: what factors would you consider in approaching this case?

What would be a good structure for this problem.

Thanks

Answer 1

Clarifying the objective here is paramount. We need to know if the goal is to improve profits through upselling to customers, improve stickiness of customers to prevent them from shopping at competitors, to growth the top-line but at a cost, or something else?

That being said, here's how I would look at it

Benchmarking / Opportunity Identification

What do our competitors do?
- What looks effective that we could adopt?
What do leaders of loyalty programs do (i.e. airlines, hotels)?
- What works? What would apply to groveries
What internal options have been suggested already
Some examples might include:
- Partnering with other grocery stores to create a group loyalty program (like OneWorld or Sky Alliance, etc.)
- Partnering with other, related industries to grow the program. Say, fitness centres/programs, restaurants, etc (Like Virgin or Qantas points)
- Incorporating customer data analytics to better target customers
- Partner with banks to join data
- Partner with credit cards to promote points
- Partner with Mastercard/Visa to join data
- Introduce better rewards rates
- Introduce better redemptions for points
- Leverage data and customer knowledge for next-best-action recommendation on what to sell the customer and at what price/discount
- Better gamify the loyaltly earnings (i.e. have tiers, weekly contests/promotions, etc.)
- Build an app

Opportunity evaluation

Determine what matters/counts when deciding between the programs
- I would assume we want to balance cost of the program against benefit in terms of ultimate profits
  - Profits = customers retained, customers acquired, and average basket size/spend per customer
Evaluate the programs across benefits, costs, and ability to implement (ease of implementation)
Identify the most promising opportunities and launch trial programs to test effectiveness