Tessellate: Will the Loyalty Programme Pay for Itself?
Marketing
medium35 min0 submissionsGoldman Sachs
Scenario
Tessellate operates in developer tools across US with about 341,852 active customers, who buy 12.6 times a year at an average basket of $4008. Gross margin is 31%.
Marketing proposes a points programme returning 7.5% of spend as future credit. The business case assumes a 3.3% lift in purchase frequency among members.
Analysis of the base shows 44% of customers already buy above the category average and would very likely enrol on day one.
Supporting data
base
- average basket
- 4008
- active customers
- 341852
- gross margin pct
- 31
- purchases per year
- 12.6
proposal
- reward rate pct
- 7.5
- assumed frequency uplift pct
- 3.3
base composition
- already above average frequency pct
- 44
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: Otter Payments: Is the Growth Worth What It Costs?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.