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Q1} 1it'llalmart's Customer Relations Management {CRM} team recently submitted a proposal to the CED Doug McMillon to authorize a budget of $2.3 billion to redesign
Q1} 1it'llalmart's Customer Relations Management {CRM} team recently submitted a proposal to the CED Doug McMillon to authorize a budget of $2.3 billion to redesign and relaunch its loyalty program. More and more Walmart customers are now shopping online and these online shoppers prefer Amazon. To improve Walmatt customers' loyalty to the store and thus increase their share of wallet. the CRM team wants to introduce a revamped loyalty program with an attractive cashback provision as well as exciting prises that can be redeemed with accumulated points. They claim that this will encourage 1lullalmart shoppers to spend more money at Walmert, both in brick-and-mortar stems as well as online. Walmart had a revenue of $319.2 billion in the US in 2919. The f'mancial statement for the US business for the last year is shown below. 2:119 Financials for us market [All values LIED Millions]: Saleiservenue $ 319.299 Cost of Goods Sold (COGS) $ 256.493 Depreciation onmorzaon Expense $ ?.142 Staten Expense $ 41.611 EBIT $ 13.954 The retail chain has 4159 stores in the US market. About 199 million householdsabout ?9% of the US householdsalready shop at Walmart. The CHM team plans to increase the purchase frequency and basket sizes of some less loyal households through the new loyalty program. Based on past shopping data. the CRM team divided Walmart households into two groups. high- loyalty households and low-loyalty households. Forty five percent of the households were categorized as high loyalty households with an average 5.2 trips per month and an average spend of $96 per trip. The remaining 55 percent of the households were categorized as low loyalty households with an average 1.5 trips per month and an average spend of $4? per trip. Using market research, the (3th team estimated that they would be able to shift about 1.5 million customers fmm the low-loyalty category to the high-loyalty category with the proposed marketing spend in one year. a] How many customers will each 1Walmart store have to convert fmm the low loyalty category to high loyalty category to breakeven on the proposed investment in the loyalty program? b) Mclvllon believes that all marketing investments should breakeven in one year. Based on the CRM team's conversion estimates. should McMillon approve the invesonent in the loyalty program
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