REWARD STRUCTURE OF THE PROGRAM
The program itself should be simple and easy to understand. Even though the main segment for this program is "young people" (16-24 years old), it will benefit all the other segments as well. Getting a card must be easy, free and besides the program must contain point-program, because majority of people expect that from movie rewards program (see exhibit 3).
After comparing different reward structure options, in my opinion the Option 4 (see exhibit 5) seems to be the best alternative. There's no membership fee and earning points is simple. Every card owner gets 10 percent discount from concessions, which encourages people to become members. It is important to notice that concessions discounts will probably add demand of those products. After getting the first members people will start talking about membership and word-of-mouth marketing works well in membership selling. Also the target steps between 1000 and 2000 points are clear and achievable for average customers. It can be said that every 10th movie visit is free for members, but having such targets (collecting points) also affect their consuming which increases when they actively start collecting points and achieving given point-targets.
If the sign-up points and discounts are not examined, Option 2 would be the cheapest choice. Anyway it is easier to handle a simplier program and that is why Option 4 is superior: Customers don’t get points from concession transactions, but they’ll get a discount of 10 percents. Membership fees are not needed, because it could affect negatively to membership interest of targeted segments. Especially it could affect selling membership for the segments of under 24 years old. Getting a free card is simple and the customer sees the benefits immediately. The following table shows the average cost of 100 points in every program. Anyway, the table doesn’t pay regard to different kinds of discounts and membership fees.
Option 1Option 2Option 3Option 4
1,44 CAD1,31 CADdiscount of 15 %1,35 CAD
Even though internal development and joining to Flight Miles card program were discussed, Scotiabank's partnership proposal was the most cost-effective and the best as a whole. Creating an own program and system would be not only expensive but time-consuming too. This market situation doesn't allow the company to wait too long. Flight Miles partnership offer was also expensive and besides the decision making power of Cineplex was minimal. Also making a commitment of 3 years in so early stage of partnership would be too risky for Cineplex to do.
Scotiabank (SB) is well-known bank owing a customer base of 6,8 million Canadians. Cineplex and SB have also made some earlier cooperation, which makes SB a reliable partner. The partnership gives added value not only for SB's current customers but also for Cineplex's customers. Even though there would be three different cards used in this program, it's not necessarily a big problem for customers. At least everyone can decide, which card they want and there's no need to open an account to SB either. This partnership is the most cost-effective as the approximate costs for the first 3 years would be about 6,6 million Canadian dollars (CAD). Even more important issue is that it would 50-50 partnership that allows Cineplex to give it's influence to whole program and it's development process from the beginning. Moreover, adding...