Cineplex Entertainment

1598 Words Sep 12th, 2011 7 Pages
1. How might the reward program described in case exhibit 5 affect the movie and event –going behavior of major market segments? At retail, what is the average value of each reward structure for customer’s dollars spent – 5 %, 10%, 15% or 20%? Which reward structure would you choose? Why? (For the sake of simplicity, ignore the one-time fees and rewards)?

The reward programs as depicted in exhibit 5 are evaluated as below in terms of retail value they offer to customers of Cineplex entertainment. The obvious intention of the reward program is to enhance customer loyalty by rewarding them for their repeated, frequent patronage. Therefore, we will consider the discount percentage for 10 adult movie purchases and 10 concession combo
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As evident, option 2 offers maximum value for customer. I will also choose option 2 for reward structure due to below reasons:

✓ There is a nominal onetime membership fee of USD 2 which is immediately reimbursed to the customer on first enrollment and first movie purchase- both equivalents to USD 1.1 each. ✓ Additionally, this ensures that only serious customers enroll in database, thereby adding to relevancy to CRM database ✓ The membership fee keeps the member motivated to engage in repeat purchases until the first reward at least. This provides with sufficient time to understand customer behavior and design offerings which can help build a relationship.

2. What is the likely increase in Cineplex Entertainment’s revenue from your proposed program – 0%, 5%, 10%, 15% or 20%? What are the varying financial consequences for Cineplex Entertainment? Would you proceed with a reward program?

By rolling out the reward program, Cineplex is going to incur additional fixed as well as variable costs as well.

Fixed Cost Burden: ✓ Cost of setting up CRM

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