Let’s try a basic example for projecting the loyalty value of a proposed loyalty program to determine if there’s a positive business case for it.
Imagine that you are developing a loyalty program for a car rental company. You want to determine if the proposed loyalty program will produce positive loyalty value for the business in order to determine help if the proposed program should be implemented.
You estimate the following:
• Your car rental company has 1,100,000 total customers annually.
• You project membership in your loyalty program of 600,000 customers.
• The proposed loyalty program will produce a business lift of 2.0 incremental rentals annually of 1.8 days per rental for each active member.
• The average rental price (i.e., revenue) per active member is $120 per day.
• The company operates at a 25% margin.
• The 83% of the loyalty program members are active and would earn the free rental.
• 80% of the members who earn free rentals will actually redeem them.
• The internal cost for the company to redeem a free car rental is $30.
• There are no operating costs for the loyalty program benefits.
• The cost of implementing the loyalty program is projected to be $500,000 for development and $2 million for a marketing launch.
• The ongoing marketing cost for the program will be $1,000,000 annually, with an additional $500,000 annually for ongoing staff costs.
Based on these projections (i.e., estimates), address the following:
1. What is the projected loyalty value that the proposed loyalty program will produce?
2. Does the projected loyalty value support going ahead with the proposed loyalty program?
Type of service: Writing incl. calculations
Type of assignment: Essay
Number of Sources: 0
Academic level: Master’s
Paper Format: Harvard
Line spacing: Double
Language style: US English