Amber Grid: Will the Loyalty Programme Pay for Itself?
Marketing
easy35 min0 submissionsMcKinsey
Scenario
Amber Grid operates in utilities across Europe with about 233,412 active customers, who buy 3.2 times a year at an average basket of €3479. Gross margin is 42%.
Marketing proposes a points programme returning 6.4% of spend as future credit. The business case assumes a 3.9% lift in purchase frequency among members.
Analysis of the base shows 52% of customers already buy above the category average and would very likely enrol on day one.
Supporting data
base
- average basket
- 3479
- active customers
- 233412
- gross margin pct
- 42
- purchases per year
- 3.2
proposal
- reward rate pct
- 6.4
- assumed frequency uplift pct
- 3.9
base composition
- already above average frequency pct
- 52
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.