Fast Food Loyalty

Your client is a national fast food chain that is considering instituting a frequent diner program to increase revenues per store. Through the program, customers would receive 1 point for every dollar spent. After accumulating 20 points, they would receive a free movie ticket. The CEO asks you to evaluate whether they should proceed with this strategy.

Your client is a national fast food chain that is considering instituting a frequent diner program to increase revenues per store. Through the program, customers would receive 1 point for every dollar spent. After accumulating 20 points, they would receive a free movie ticket. The CEO asks you to evaluate whether they should proceed with this strategy.

Key Framework Components: Revenues • How often do customers visit? • How much do they spend per visit? • How many customers will participate? • How many additional visits will they make because of the program? Costs • Margin per store • Program setup costs • Cost of movie ticket • Ticket redemption rate Customer Segments • Do all customers visit with the same frequency? Spend the same amount? • Will all customers respond the program the same way? Branding • How will this program impact the client’s brand? Net profit = Additional profit – reward redemption costs – set up costs Additional profit = $48,000*50% = $24,000 Redemption costs = $328,000/20*$1*50% = $8,200 Set up costs = $10,000 Net Profit = $24,000 - $8,200 - $10,000 = $5,800 ($15,800 after year 1)