1.

0: Differentiate point policy for mass customers Crown Bakery

Critical moment for Crown Bakery which was in a state of court receivership

【 Situation of domestic bakery market 】 Crown Bakery case

Paris Kor
Crown Shilla
Croissan yod
t 파리크라상Bakery 크라운ang
베이커리 Bakery Needed marketing to respond to financial crisis
50.0% (application for composition)
고려당 신라명과
 Significant reduction of marketing budget with decreased spending
40.0%
– Advertisement budget: ½ of competitor Paris Baguette
30.0% (‘98~’02 accumulated budget: KRW 7.5B vs. KRW 14.3B)
 Crown Bakery brand exposed at OK Cashbag's ATL/BTL activities
20.0%
– Indirect advertisements in various channels (TV/newspaper/online)
10.0%

0.0%
1997 1998 1999
 Franchise brands were taking the lead in a saturated
market
– Aggressive business management by franchise
operators equipped with large corporations' capital Needed differentiated loyalty marketing
– By focusing on increasing number of stores, had suitable for a mature business
store in most major commercial districts, leading to
 Bakery market entered maturity and required a differentiated approach
market saturation
 Provided OCB exclusivity in bakery market  grew together with OCB
 Financial crisis of Crown Bakery  application for
composition – Paris Baguette adopted its own point system but initial benefits were
small
– Higher cost burden with rise in cost of raw material
imports
– Difficulty in debt repayment due to diversification
of business (e.g. flower delivery)

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1.0: Differentiate point policy for mass customers Crown Bakery (impact)

OCB increases the transition cost for customers, significantly contributing to Crown Bakery’s
countermeasures against the crisis

Change from Crown Bakery's adoption of OK Cashbag (switching cost increase)

Crown Bakery locked in customers by

creating/increasing financial, procedural,
relational transition costs with OCB  Recovered original state in
Relational
transition 4 years and 10 months
cost Crown after application for
Bakery composition, without
Procedural overcame raising external capital
transition Brand preference crisis – Repaid KRW 42B out of
cost total debt of KRW 58B
Relationship with  KRW 700~800M monthly
Financial store staff
revenue increase with
transition Need for learning about OCB partnership
cost other point policies
Need for subscription to
other point policies
(set-up)  Paris Baguette adopted own
Loss of Competitor
opportunity to point policy in ’00 but its
Cost of evaluating s
use benefits other products impact was weaker than OCB
Loss of attempted
opportunity to to join  Paris Baguette management
gain points OCB requested for partnership
partnership with OCB
’99 ’00
Launched Paris Baguette
partnership introduced
Happy Point

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1.0: Differentiate point policy for mass customers E-mart

E-mart had a successful start from the early period of its OCB partnership to become a retail
industry leader

Change from 's adoption of OK Cashbag

【 Successful settlement 】

At a time of fierce competition with global players such as

Walmart, E-mart was able to build customer loyalty as
the first player to adopt an effective loyalty program
【 Adoption of OCB 】

Initial success factors

Advantage  Higher operational efficiency vs. Homeplus
One of the over – Reduction of operating costs for DBM
 Minimal loyalty programs were in competitor
first retailers infrastructure and points
the retail market s
to adopt – Competitor Homeplus launched  High point accumulation/usage rate
coalition club card in ’02
loyalty  Easier entry with coalition loyalty
program program Continued partnership despite hurdle
 Background: Lotte launched integrated membership
 Repeat purchases (higher  Initial response: Announced launch of independent Shinsegae
frequency of OCB point accumulation) card
Fits OCB
as a  Difficulty in differentiating – Invested in 70% of internal system through Shinsegae I&C
products (can differentiate with  However, shifted directions and chose OCB-coalition card
hyperma (competitor topped 5M cards in a short period of time;
OCB point accumulation and benefits)
rket acknowledged stronger effectiveness of OCB partnership over
 80% of customers actually independent card)
presenting card  Launched successfully by realizing initial target early on
(8M cards within first year)

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