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

jonahguo@gmail.com

Tel: +1

(613)-770-3710

Jonah Guo