Client Loyalty
Program Study
Jonah Guo & Team Note: The presentation is designed
for the discussion based on the
assumed scenario of video service
in consumer research course.
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We would like to go through this presentation with
movies, which are the reason Blockbuster has
business and we are here today.
Movies remind us of beauty, freedom,
and most importantly dream.
We enjoy movies because they give us experiences we
might never have to a chance go through, they give us
different perspectives and inspirations, and they make us to
feel scared, angry, and happy.
Now let’s start our dream journey
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Picture
START
80% revenue comes from 20% clients
Some lessons we learned
from films
Learn the culture of
targeted market
Make wise
decisions
Now Let’s jump to the AGENDA
1) Company Overview
2) Current Situation
3) Consumer Behavior
4) Alternatives
5) Recommendations
6) Take-away
Blockbuster is a leading video rental service
with 5300+ store in 15 countries.
They had some financial issues and are facing
challenges from various channels.
But we believe the retail channels will survive
because people still want options and the retail
experience to explore new films.
Current Situation(Given by Case)
Customers purchase coupons up-front
loyalty program : each month every fifth rental is
free.
Free
e.g. If you are a Rocky fan, you can get all the five
movies to maximize the utility of the coupons.
But that’s not the way we watch
movies. What if there is a 6th
Rocky movie?
4 more movies ?
2 more?
Or movie series like Harry Potter?
Consumer will try to get the “perfect” quantity of films
to maximize the coupon value. Yet this ruins the experience.
That’s why we are here today to make the change.
For the case practice reason, we will have to make
some assumptions to design our loyalty program.
Assumptions
Basic CRM system
Coupons expire
2
Every fifth movie is free
regardless of the number of rentals
The only loyalty program
The coupon is valid for all types of rentals
Customers rent more than one movie/visit
Consumer Behaviour
Complexity
the program is simple and the
communication is clear
Consumer Behaviour
Financial Savings
Savings are easy to calculate
However the program focus on
only financial saving
Consumer Behaviour
Payment
Structure Because the customer usually pays the
total amount of coupons in the beginning,
the value of each rental is diminished, so if
a customer rented a movie and decided he
doesn’t want to watch it, or doesn’t have
time, the feeling of the loss is not
magnified because he didn’t pay anything
RIGHT now.
Paying the total amount upfront is hard for
customers, especially for non-regular
movies fans
Consumer Behaviour
Time
All coupons will expire eventually, which
restricts the customers in terms of time,
customers will hesitate to participate if
they are not regular watchers and they will
feel they are spending too much money
with no gain
Even if you are a regular, you will probably
watch a movie per week, which means you
might not get to this free 5th rental anyway
Consumer Behaviour
Execution Style
Coupons are an outdated concept
and give a feeling of old, also these
coupons require the customer to
remember to save the coupon and
bring it with them when they next
visit the store.
Also they can lose their coupons,
because they won’t typically keep
all of them in their wallets
Consumer Behaviour
Value
This unifies the value for all customers with no
differentiation between heavy and light
customers
Consumer Behaviour
Satisfaction
The program focuses on satisfying the
customer in the traditional way, but it doesn’t
increase loyalty or produce delight
Short-term Goal
Increase rentals
Build unique
customer experience
Long-term Goal
Build loyalty
Differentiation component
Easy Rental Service
The Matrix
The Matrix
Build
Loyalty
Increase
Rentals
Differentiation Customer
Experience
Ease of
Rental
Gold/base
memberships ✔ ✔ ? ✔ ✔
Database ✔ ✔ ✔ ✔ ✔
Rental priority ✔ ✔ ✔ ✔ ✔
Movie updates ✔ ✗ ✔ ✔ ✔
Forum ✔ ✗ ✔ ✔ ✔
On-line hold ✔ ✔ ✔ ✔ ✔
Self checkout ✗ ✔ ✔ ✔ ✔
Free popcorn ✔ ✔ ✔ ✔ ✗
Movie experts ✔ ✔ ✔ ✔ ✗
Random tokens ✗ ✔ ✔ ✗ ✗
The Matrix
Build
Loyalty
Increase
Rentals
Differentiation Customer
Experience
Ease of
Rental
Gold/base
memberships ✔ ✔ ? ✔ ✔
Database ✔ ✔ ✔ ✔ ✔
Rental priority ✔ ✔ ✔ ✔ ✔
Movie updates ✔ ✗ ✔ ✔ ✔
Forum ✔ ✗ ✔ ✔ ✔
On-line hold ✔ ✔ ✔ ✔ ✔
Self checkout ✗ ✔ ✔ ✔ ✔
Free popcorn ✔ ✔ ✔ ✔ ✗
Movie experts ✔ ✔ ✔ ✔ ✗
Random tokens ✗ ✔ ✔ ✗ ✗
Alternatives
Option 1: Gold Membership for
$20/year
Priority for new movies
Alerts for new movies
Rewards based BBS
Online reservation system
VIP Self-checkout lanes
Option 2: Base Membership for
$10/year
Free popcorn in store
Movie Guide service
Lucky Draw for free rental
Consumer Research
Response %
14 35%
26 65%
Option 1
Option 2
0% 20% 40% 60% 80%
Recommendation
Pursue Option 1: Gold Membership
Develop best customers as brand ambassadors
Increase loyalty, ease of rental and improve experience
Most popular alternative based on research
Option to pursue Option 2 in the future once cost is more feasible
Take-away
Consumers value
tangible benefits > experience
Questions?
Contact:
Queen’s MBA 2012
Canada
www.Jonahguo.com
Tel: +1
(613)-770-3710
Jonah Guo
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