CINEPLEX

ENTERTAINMENT
The Loyalty Program

GROUP J

VIJAY LAXMI PAL (2111121)

ADITI SINGH (2111076)
KHALID ANWER (2111078)
SOURABH BOPCHE (2111087)
SREEJA (2111139)
Q1: (A) WHAT WOULD LEWTHWAITE LIKE TO ACHIEVE FROM THE 5.3 MILLION UNIQUE VISITORS, THEIR 7.5 AVERAGE ANNUAL VISIT AND THEIR
SPENDING?
GOALS
The right Loyalty program directed at
Gain Insights in User
different user segments(created
Behaviour to improve RPG
using similar behaviours &
and Concession RPG
characteristics)
Q1: (B) IS IT A GOOD IDEA TO SEGMENT BY AGE AND PURPORTED MOVIE-GOING BEHAVIOR?
Spending pattern analysis &
Marketing Channel Prioritisation
Targeted loyalty/reward program
An age based segmentation will
An age-based segmentation will
allow for Cineplex to customise
help identify the perfect and other
its reward/loyalty program &
potential consumer personas and
product bundling based on RPG
to identify the right channels to
and concession RPG of different
target different segments.
age groups.
Link box-office purchase
Use CRM to make sense of
and concession purchase to
user data to identify Angel and
a particular user
demons within it's user base
Targetting moviegoers based on
Utilising Moviegoer behaviour
Movie type
With alternatives to movie
It is a default movie industry
theatres coming up, An age-based
practice to target customers
segmentation will provide an
based on age. This segmentation
understanding of behaviours
practice makes it easier to target
towards innovation in movie
the right age group based on the
screening industry shown by
type of movie that is releasing.
different age groups.
 Q2: WHAT ARE THE POSSIBLE IMPACT/S OF THE REWARD PROGRAMS (EXHIBIT 5) ON THE MOVIE AND EVENT GOING BEHAVIOR OF
DIFFERENT SEGMENTS? WHAT IS THE PROPOSED AVERAGE RETAIL VALUE OF EACH REWARD STRUCTURE FOR CUSTOMER’S DOLLARS
SPENT – APPROXIMATELY 5%, 10%, 15% OR 20% OF REGULAR PRICES? WHICH REWARD STRUCTURE WILL YOU CHOOSE? WHY?

OVERALL IMPACT OF PROPOSED REWARDS PROGRAM

CUSTOMER ENGAGEMENT INCREASED LOAYALTY HIGHER REVENUE DATA COLLECTION

Customers feel valued The loyalty program More spending means a higher The data on customer
being rewarded for their incentivises customers for share of wallet. Customers behaviour/ prefs. can be used
usage; attract repeat frequent visits, increasing their likely to upgrade to higher- to improve experience,
purchases and better loyalty to the brand; they visit priced movie effective target marketing,
engement and spend more frequently. tickets/concession items introduce new products

SEGMENT-WISE IMPACT OF PROPOSED REWARDS PROGRAM

Segement Frequency Option 1 Option 2 Option 3 Option 4 Factors considered:

Teenagers High High High High High
1.Average Points accumulation in a
Young Adults High High High High High year
Young Working High High High High High 2.Frequency of visits over the year -
High, Medium, Low
Young Families Low High Low Low Low
3.Purchase behavior towards
Old Families Low Low Low Low Low concessionary items
Retirees Med Low Low Low High 4.Box office purchase behaviour
 Q2: WHAT ARE THE POSSIBLE IMPACT/S OF THE REWARD PROGRAMS (EXHIBIT 5) ON THE MOVIE AND EVENT GOING BEHAVIOR OF
DIFFERENT SEGMENTS? WHAT IS THE PROPOSED AVERAGE RETAIL VALUE OF EACH REWARD STRUCTURE FOR CUSTOMER’S DOLLARS
SPENT – APPROXIMATELY 5%, 10%, 15% OR 20% OF REGULAR PRICES? WHICH REWARD STRUCTURE WILL YOU CHOOSE? WHY?

AVERAGE RETAIL VALUES (WITHOUT JOINING FEES/ JOINING REWARD POINTS)

OPTION 1 OPTION 2
Cost to Effective Discount (Avg Effective Discount (Avg
Points Benefit BenefitAmount(CAD) Points Cost to getpoints(CAD) Benefit BenefitAmount(CAD)
getpoints(CAD) Retail Value) Retail Value)
500 54.75 Free Child admission 8.5 15.53% 1000 109.5 Free Adult Admission 10.95 10.00%
750 82.125 Free Concession Combo 12.37 15.06% 1500 164.25 Free Event Admission 19.95 12.15%
1000 109.5 Free Adult Admission 10.95 10.00% 2500 273.75 Night-out package 37.47 13.69%
1500 164.25 Free Event Admission 19.95 12.15%

Cost to get points is calculated considering a reward of 100 points per OPTION 4
adult movie transition, this is common across options 1,2, & 4. One adult Points Cost to getpoints(CAD) Benefit BenefitAmount(CAD) Effective Discount (ARV)
movie transaction is considered to cost $10.95 (as per Exhibit 5) 1000 109.5 Free Adult Admission 10.95 10.00%
Free Adult Admission +Free
1500 164.25 23.32 14.20%
For Option 2, reward points from concession combo transaction is not Concession Combo
considered as it is a costlier way to get points than adult transaction Free Adult Admission + 2 Child
2000 219 27.95 12.76%
(considering 75 reward point for $12.37 worth of concession combo). admission

RECOMMENDED REWARD STRUCTURE :: OPTION 2/ OPTION 4

Option 1 provides avg. retail value of ~15% against a spend value of $55 to $82 – too
lucrative for customers – may deter customers to avail other offers having lover avg. retail
value
Option 3 provides an effective discount percent of 13% and higher only at annual
expenditure of $250 and above, may not be lucrative enough
Options 2 and 4 : Minimum points for a reward is 1000 & effective discount % increases with
the no. of points
Options 2 and 4 actually reward loyalty and consistent spending
 Q3: WHAT IS THE LIKELY INCREASE IN CINEPLEX’S REVENUE FROM YOUR PROPOSED INCENTIVE PROGRAM – 0%, 5%, 10%, 15% OR 20%?
WHAT WOULD BE THE FINANCIAL CONSEQUENCESFOR CINEPLEX? WOULD YOU PROCEED WITH THE REWARD PROGRAM?

THERE ARE 2 SOURCES OF REVENUE

Suppose the rewards program reduces the box office retail value
The proposed reward structure may increase the frequency of customers. by 15% resulting in 25 % increase in no. of customers.

Assuming similar increase in no. of customers for concessions and

CONCESSION REVENUE BOX-OFFICE REVENUE
concession retail value being the same. Also assuming the
No. of customers x No. of customers x concession revenue being 20% and box-office revenue being 80%
Retail value Retail value of the overall revenue.

Increase in Concession Revenue = 30%

Increase in Box Office Revenue = 6.25%
[1.25 x (1 – 0.15) = 1.0625]

Total Increase = 11%

Assuming 15% Discount on [1.3 x 0.2 + 1.625 x 0.8 = 1.11]
Retail value, the increase in no.
of customers should be 17.65 %
or more for positive change in
Assuming a 12.5% cannibalization rate,
overall revenue
for an actual incremental attendance increase of 30%:
Net increase in attendance = 13.75 %
[1.30 x (1- 0.125 ) = 1.1375]
Q4: WOULD YOU DEVELOP THE REWARD PROGRAM ALONE?
WOULD YOU PARTNER WITH FLIGHTMILES OR SCOTIABANK? WHY?
INTERNAL
DEVELOPMENT
COSTS $5.5 Mn( 1st year)
DATA Complete ownership
CUSTOMERS 5.5 Mn unique visitors
No restrictions on data control
Build brand image better
MERITS
New database to be developed
Substantial time and cost
DE-MERITS investment leading to financial
risk
SCOTIABANK
$3 Mn( 1st year) + $1.7 Mn(2nd
year) +$1.9 Mn(3rd year)
No ownership
6.8 Mn
Big five bank in Canada
Previous sponsorship
engagement
50-50 cost sharing reduced
financial risks
No need to open bank account
Carrying multiple cards
Naming rights on theatres
Exclusive agreement on bank
machines
No access to banking
information
FLIGHT
MILES
$5 Mn + $0.09 for each point
issued + data access cost
Ownership by Flight Miles
7 Mn
$ 2.5 Mn towards marketing
Easy reach
No need to carry multiple cards
3 years commitment
Additional cost to access
database
Difficult exit
Q5: WHAT MARKETING COMMUNICATIONS CAMPAIGN SHOULD LEWTHWAITE EMPLOY?
CAMPAIGN TYPE HOW PROS/CONS
Decision to make: Most effective media w/o overwhelming movie-
In-Theater Advertising No costs associated
goers
Promotion options Promiotion option can go wrong
Promoted on Concession Products
Point of Purchase displays
Backlist Posters
Website

Decision to make: Decide on which newspapers to advertise and With Regional newspaper, several more movie-
Newspaper Advertising
the message and frequency of the insertions going markets could be reached
Through Half page ads in regional newspaper Regional newspaper could be more costly

High potential to achieve significant coverage

Radio Advertising Through 30-second commercial in key markets
Already tried and tested in rural theater markets
Could also help in negotiating free ad space

Promotion options
Online Advertising Big Box Advertisements Costs can be controlled as it is varied according
Banner Advertisements to format and site
Own website

Goal: Spreading word-of-mouth publicity and raising awareness of Unsure of the costs associated
Grass Roots Initiatives the program
Promotions at college/university campuses
 WHAT SPECIFIC AMOUNT OF HER $300,000 WOULD YOU ADVISE FOR SPENDING?

Target: Acquire 500,000 customers per year for next 3 years with budget of $300,000 per year

Conversion rate: 3-4% Customers acquired annually = 5.3 * 10^6 * 3.5%

In-Theater Advertising Associated costs = 0 . = 185,500

Online Advertising
Conversion rate: 3-4%
Will be effective in Customers acquired annually = 250,000
Acquisition per 1000 ad impressions = 35 customers (1000*3.5%)
urban markets, where Advertising Spent = 250,000 * 0.57 = $142,262
Avg. cost of acquisition per customer = 239/(35*12) = $0.57
internet penetration is
high

Large Markets = 6 S/M Markets = 16

Radio Advertising Weekly Development Cost = 1100
Will be effective in rural Weekly cost S/M markets = 160 Customers acquired annually = 500,000 - 185,500
markets Weekly cost L markets = 225 - 250,000
Annual cost = (6+16)*1100 + (160*16+225*6)*365/7 = 64,500
Annual cost = $228079
Since cost is too high, for initial 6 months radio advertising can be adopted
& later rely on word-of-mouth marketing
Advertising spent = $228079/2 = $114040

Total Marketing Spend = $0 + $142,262 + $114040 = $ 256,302

Lewthwaite should go with combination of marketing communication campaigns
SHOULD THE LAUNCH BE ROLLED OUT REGIONALLY OR NATIONALLY?

National Launch Regional Launch

PROS PROS
Cost-efficient Provides opportunity to resolve problems before full
Faster accrued revenues implementation
2006's new POS platform provided technological It would allow Cineplex to stretch funds over a longer
capability to support national rollout period of time
CONS CONS
Risky option: any problem would affect all More expensive option
markets

Hence, the launch should be rolled out Regionally

THANKYOU