Feasibility Study Loyalty Card Program In Dm

DM is the leading chain of drugstores in BH, with a market share of 70 %. The biggest competition on the BH market are Cosmo and Samshop. Drugstores primarily offer cosmetics from World-known brands, but DM has expanded their offer with products from the assortment of their own label and also with offer of healthy, organic food. This market in BH is following all the present World trends in technology, commercials and operations. Other competitors that influence market are small retailer shops. Also there are substitute shops where products can be bought that are similar to those which Dm offers.

Business Vision

With the loyalty card program DM will continue to follow it’s business vision, which in short term means holding the existing costumers and bringing new, the bigger volume of sales, bigger profitability and in the long term loyal costumers and increasing market share.

Business Units

Three business units within the company are relevant to this project: Department for Informatics, Marketing Sector and Finance Department.

Figure 1

Business Processes

For this project the payment process will be used for collecting data. When the costumer pays and collects the points, automatically the terminal will read the data from the card. Later that data is processed by a software and it can be used for various purposes.

Figure 2

Business Locations

There are 36 Dm shops in BiH altogether. Of those 36, 9 shops are located in Sarajevo, 3 in Mostar, 3 in Tuzla, 2 in Zenica and only one in citys that are marked in picture.

Business Problem(s) and Opportunities

Business Problem

There are two major problems that needs to be addressed: finances and security. The implementation of this project by it’s self is expansive. For every store there will need to be at least one terminal which will be used for data collection. The issue and building the cards will also be expansive, because some external firm will need to produce this cards for us. Also this program will collect many data which is later stored on servers and those servers will need to be maintained regularly. Security of personal data protection is very important both for costumers and the company. Personal information must be securely kept, because if it leaks to public, company will face the lawsuits. Also the data must be kept away from competition, which could abuse them. Also card will need to have a good security system against hacking, because costumers use these cards for discount bonuses. If the card is hacked and shows false information it can be used for continuenly getting the discount.

Business Opportunity

This program offers an unique opportunity of collecting a very important data about costumers. With this program company has personal information of their customers with their complete buying history. Another opportunity is that the competition does not offer anything similar to this, so DM would be the first on the market. Since DM is much bigger than the competition and this program is expansive, it is unlikely in next 3 years that any of competition will implement this program. Data collected, will enable the company to make a better communication with buyers, research, development of trends and better planning. That will lead to making more loyal customers, bigger market share, bigger volume of sales and eventually bigger profitability.

Requirements Statement

Business Drivers (Needs)

Key business drivers for this project are :

Increase of profits

Advantage over competitors

Loyal costumers

Better recognition of buyers characteristics and preferences

Supporting decision-making for the managers

Keeping up with the World-trends

Cost-effective – marketing directed to loyal customers is 6 times cheaper than marketing directed to attracting new costumers

Business Requirements

Problem / Opportunity©

Requirement

Finances

Approval from the board of directors for the implementation budget

Security

A good software security system updated regularly

Database of buyers

A good technology platform which needs to be maintained

Unlimited timeframe

More time to find competent software programmers

Feasibility Assessment

Loyalty card allows each business to identify, reward and encounter each visit and purchase made by customers.

There are three types of loyalty card:

No-tech (plastic card used for collecting stamps – in practice this type of card is not used much because technology nowadays offers far better solutions)

Low-tech (has a bar-code which is scanned at point of scale)

High-tech (has an integrated chip which automatically tracks consumer visit)

Loyalty card program is expected to keep present loyal and making new loyal buyers.

Option 1 – [DM low-tech loyalty card]

Plastic card with bar code that is going to scan the amount of money that has been spend.

For the amount of **** customer will get one point; therefore for **** points they will get discounts. Scanning each bar code information is going to data base. Owners of DM low-tech loyalty card will participate in monthly and yearly reward contest. In the databases will be kept information’s about consumers and their spending. Implementation of this card is not so complicated and cheaper than high-tech. All payments are made by cash. Also with this card DM will get demographic data about their consumers and the ratio between their ages and spending. There will be no information about every single product they buy and because this program cost is not high competitors can also implement this loyalty card program. There is still question is the cost of implementation efficient for the data company will get

Option 2 – [DM high-tech loyalty card]

Plastic card with an integrated chip that is scanned by the terminal which sends data to software; therefore software processes data to information that are stored in data base. In this data base will be stored personal information about each customer, products and their spending on those products. DM will pay all expenses of implementing the project:

Production of cards

Protection

Maintenance

Creation of software

Also buyers will collect points that will be used for discounts and reward contest. There would be extra discounts on specific products only for customers with those cards. Customers can apply for this card via web page.

Option 3 – [DM partnership card]

It is plastic high-tech card with a chip that is also scanned via terminal. The main difference between this and above options is that DM will be partner with a bank. With getting this card customers are directly becoming members of the bank with credit bank account. The information about customers is shared with the bank. Besides getting the same information as in Option 2 DM will get valuable information such as buyers’ salaries and their workplace. This card will need to have a high value of security because the costumers will have the option of paying with this card. Since the account in bank will be a credit, customers can go in minus. The costs of production and implementation are very high and it will be splited with bank. There will be some additional cost for training of workers. Timeframe for implementing this option is longer than previous ones. Costumer may not apply because requirement of opening new bank account.

Feasibility Ranking

Ranking Criteria

List the criteria used to rank the options identified and describe the scoring / weighting mechanism used to produce an overall result.

Ranking Scores

Score each option by completing the following table:

Option 1

Option 2

Option 3

Criteria©

Score

Weight

Total

Score

Weight

Total

Score

Weight

Total

Cost of program

1,5

6,5

Gain of information

1,5

4,5

1,5

13,5

1,5

Implementation of software

1,5

13,5

1,5

Timeframe of implementation

1,0

Education of workers-cost

0,5

2,5

Timeframe for making card

0,5

4,5

0,5

4,5

0,5

Complication during card making process

0,5

4,5

0,5

2,5

Total Score

42,5

NB. The Score is typically a number from 1 (low feasibility) to 10 (high feasibility) and the Weight a number from 0.5 (criterion is unimportant) and 1.5 (criterion is very important). The Total is calculated as Score * Weight. ©

Feasibility Result

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