Pallas Pharma: Will the Loyalty Programme Pay for Itself?
Marketing
easy35 min0 submissionsBCG
Scenario
Pallas Pharma operates in specialty pharma across US with about 450,584 active customers, who buy 9.6 times a year at an average basket of $4283. Gross margin is 43%.
Marketing proposes a points programme returning 5.8% of spend as future credit. The business case assumes a 11.7% lift in purchase frequency among members.
Analysis of the base shows 49% of customers already buy above the category average and would very likely enrol on day one.
Supporting data
base
- average basket
- 4283
- active customers
- 450584
- gross margin pct
- 43
- purchases per year
- 9.6
proposal
- reward rate pct
- 5.8
- assumed frequency uplift pct
- 11.7
base composition
- already above average frequency pct
- 49
Your task
Advise the CMO. Your answer should provide:
- Analysis — programme cost, incremental margin, and the net position. Show your working.
- Risks — including who you are paying and what for.
- Recommendation — launch, redesign or decline, with the break-even uplift.
State any assumptions you make.
Ready to move forward? Up next: Driftwood Hotels: Every Channel Claims the Same SaleNext question
How you'll be graded
80 points, 60% to pass.
- recommendation20
- market analysis20
- risk assessment15
- financial analysis25
Hint
Reveal suggested structure
Reward cost applies to all spend; incremental margin applies only to changed behaviour. Break-even uplift = reward rate / gross margin.