How To structure this Case?

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New answer on Aug 07, 2020
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Anonymous A asked on Aug 06, 2020

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

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Ian
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replied on Aug 07, 2020
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Interesting case prompt.

As Sidi stated, 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
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Sidi
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updated an answer on Aug 06, 2020
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi!

Great question. This is a fantastic opportunity to show mature thinking, similar to how real top strategy consulting partners think! If you are able to show and articulate this kind of thinking in an interview, you will blow essentially all other framework-brainwashed candidates out of the park.

1. Verify the objective! Without this, structuring is impossible! --> Let's say it is "Maximizing long term profits"

2. Disaggregate your objecive (=your focus metric) into its components. Revenue, Costs, and further down.

3. Then think through how a loyalty program can impact each sub-branch of your tree into the desired direction (e.g., how can a loyalty program increase frequency of store visits? How can a loyalty program encourage larger basket sizes? How can a loyalty program encourage purchase of more expensive products, how can a loyalty program decrease customer lifetime costs, etc.).

4. Check whether and how the current loyalty program performs on the identified levers and identify pain points

5. Outline options for adapting the current program to address the identified pain points (start with the highest impact/lowest effort options!)

That's it.

Cheers, Sidi

(edited)

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Ian gave the best answer

Ian

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