1. How might the reward program described in case exhibit 5 affect the movie and event –going behavior of major market segments? At retail, what is the average value of each reward structure for customer’s dollars spent – 5 %, 10%, 15% or 20%? Which reward structure would you choose? Why? (For the sake of simplicity, ignore the one-time fees and rewards)?

The reward programs as depicted in exhibit 5 are evaluated as below in terms of retail value they offer to customers of Cineplex entertainment. The obvious intention of the reward program is to enhance customer loyalty by rewarding them for their repeated, frequent patronage. Therefore, we will consider the discount percentage for 10 adult movie purchases and 10 concession combo …show more content…
As we can see below, option 2 selected returns almost USD 8 million by means of membership fees with 10% enrollments from current viewers. This itself should be sufficient to provide for fixed cost incurred by Cineplex.

|Attendance |39945000 |39945000 |39945000 |39945000 |
|Membership Fees |0 |2 |5 |0 |
|Considering 10% membership base of total attendees |0 |7989000 |39945000 |0 |

The remaining variable costs need to be linked with increased attendance from members and the reward program offered to these members for their repeat purchases. For option 2, we calculated 16.5% discount for members who repeat movie and concession purchase on 10 occasions. If we consider the entire 10% base receives this discount of 16.5%, Cineplex will have to bear additional variable costs of another USD 7.5 million (39945000*0.1*0.165*11.17). To breakeven this variable cost, Cineplex will