Marlow Chemicals: Will the Loyalty Programme Pay for Itself?
Marketing
hard35 min0 submissionsBCG
Scenario
Marlow Chemicals operates in specialty chemicals across India with about 761,973 active customers, who buy 10.3 times a year at an average basket of ₹4124. Gross margin is 26%.
Marketing proposes a points programme returning 6.1% of spend as future credit. The business case assumes a 9.4% 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
- 4124
- active customers
- 761973
- gross margin pct
- 26
- purchases per year
- 10.3
proposal
- reward rate pct
- 6.1
- assumed frequency uplift pct
- 9.4
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: Verity Insurance: How Much Stock Is the Right Amount?Next 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.