Design

Design of the loyalty program will be in the following sequence; Identification of key profitability drives Design of an integrated marketing strategy Member Segmentation Development of an appropriate loyalty engine Design of an incentive and reward structure

Key profitability drivers

The loyalty program will reward changes in customer behavior. The specific actions should be those that are most likely to increase customer profitability. Some of the key profitability drivers identified for card center include: Number of purchases Balance revolved per month

Design of an Integrated Marketing Strategy

Marketing promotions will be the primary lever used to get card-holders to change their behavior and increase expenditure on the card and to use more cost effective customer service and transacting channels. The following marketing strategies can be adopted

Proactive campaigns
This campaign will target members whose value to the business is declining and whose rate of closure and dormancy is high. Customer segment likely to churn will be identified and take measures to retain them.

Reactive Campaigns
This will be focused at increasing short term profitability, through the following stages: Identifying which cost effective promotion will change the targeted customers behavior and how the promotion will be presented to the target members to maximize their response rates. Create the loyalty promotion- define how many points to credit/debit a member for purchasing/redeeming a specified item. Analyzing promotion, campaign.

Loyalty Engine Development

The promotion developed for this model is one where cardholders receive a bonus point award for reaching a specified spend threshold/Limit utilization and high spending during a cycle. To make the promotion relevant, customers have been put into one of six different spending tiers and categorized as per their limits. For example, if a customer spent an average of 60 70% on the card, and have a limit of Kshs. 20,000 they are put on the BG spending tier and if having spent Ksh. 15,000, the cardholder gets 1 Point placed on G

Categorization
Limits Limit'000 >1,000,000 500,000999,999 400,000499,999 300,000399,999 200,000299,999 100,000199,999 099,000 A B C D E F G Utilization% Category Value 80100% 6079% 4059% 2039% 019% >100% A B C D E F Expenditure Category A Ao B C D E F G >100 8099 6079 4059 3039 2029 1019 09 Points Points >1000 900999 800899 700799 600699 500599 400499 300399 200299 0199 Class A Ao B C D E F G H I Category Value000

Bonus Point Multiplier

BONUSPOINTMultiplier CATEGORY BONUSPOINTS CATEGORY BONUSPOINTS CATEGORY BONUSPOINTS CATEGORY BONUSPOINTS CATEGORY BONUSPOINTS CATEGORY BONUSPOINTS AA 100 BA 83 CA 67 DA 50 EA 33 FA 17 AB 86 BB 71 CB 57 DB 43 EB 29 FB 14 AC 71 BC 60 CC 48 DC 36 EC 24 FC 12 AD 57 BD 48 CD 38 DD 29 ED 19 FD 10 AE 43 BE 36 CE 29 DE 21 EE 14 FE 7 AF 29 BF 24 CF 19 DF 14 EF 10 FF 5 AG 14 BG 12 CG 10 DG 7 EG 5 FG 2

Bonus points will be awarded on the following basis. For every 10% utilized 1 bonus point awarded The bonus point is then multiplied by the above factors to assign actual points For every Kshs. 10,000.00 spent -1 bonus point awarded No bonus points are awarded for Overdue, Over-limit, Suspended Accounts

Algorithm Definition Chart

Example
Credit Limit LimitClass Name March Exp. B1=March Exp/10,000 AprilExp. B2=April Exp/10,000 % Class TIER

1000000 Points 6

B X=Calc. Points 330

ROSA B=B1+B2 86

141,683 Hi Exp Class Ao

14 TotalPoints = X+B 417

719,871 Point Class A

72

C AwardTier CAoA

CB

Algorithm Simulation
Assumptions
The following simulation is done under the following assumptions: All Cardholders are eligible All accounts are in good status No Overdue, over-limit Only active accounts with monthly expenditure in March i.e. 2,122/7214 have been considered Incremental expenditure from Month-Mo to Month-M3 (Three Months) at a rate of 60% Cardholders qualify after an incremental usage of 1% Points for incremental expenditure awarded at the rate of 10% increase = 1 Bonus point Extra points awarded for every Kshs. 10,000.00 spent per cycle Points awarded per usage on account, not card and are not transferable Points are incremental, redeemed only at the end of the program which runs for 3 Months Prizes awarded for High expenditures Class A - B Percent Class A B The above assumptions above portray a win all scenario

Expected Point Distribution

Account distribution per parameter

Accounts Hi.Exp.Class PercentClass A B C D E F Total

A Ao B C D E F G GrandTotal 9 3 1 1 4

4 5 5

8 5 8 21 13 25 69 135 284

5 8 19 30 42 90 225 1247 1666

5 2 3 2 1 1 5 19

25 20 36 68 71 135 354 1413 2122

9 4 5 18 7 46

5 7 14 34 24 98

Reward/Prize Distribution
POINT_CLASS A Ao B C D E F G H I Total Gifts 1 2 2 4 6 14 9 15 50 30 133 GiftValue 70,000.00 50,000.00 40,000.00 25,000.00 15,000.00 10,000.00 7,500.00 6,500.00 3,500.00 2,000.00 229,500.00 Gift PlasmaTv Laptops Computers Cookers/Multichoice/Washing.M DigitalCameras/Ipods/B.Berry /DinnerforTwo MicroWaves/MemoryCards FreeSpend/FeeWaiver Upgrades/FreeSpend Umbrellas/Caps/Pens/ Total 70,000.00 100,000.00 80,000.00 100,000.00 90,000.00 140,000.00 67,500.00 97,500.00 175,000.00 60,000.00 980,000.00

Projections
Period Oct Dec 08 Oct Dec 07 Projected Increase % limit 0.1 748,664,400.00 680,604,000.00 Projected Percentage Increases % Accts % Local % Intl 1 0.65 0.55 10,008.00 162,196,864.96 67,798,866.54 5,004.00 98,301,130.28 43,741,204.22 Finance Charge 0.15 11,399,431.81 9,912,549.40

68,060,400.00

5,004.00 63,895,734.68 24,057,662.32

1,486,882.41