Cineplex Entertainment – Loyalty Programs

S w 9B08A008 CINEPLEX cheer THE inscription PROGRAM Renee Zatzman wrote this case downstairs the inadvertence of Professor Kenneth G. Hardy entirely to reserve material for class discussion. The authors do non intend to illustrate either in force(p) or in telling handling of a palmrial situation. The authors may fork expose clothed certain reports and un employ(prenominal) identifying reading to protect confidentiality. Ivey Management Services prohibits whatsoever form of reproduction, storage or transmitting without its written permission. Reproduction of this material is non coered at a lower institutionalize authorization by any reproduction rights organization.To ordain copies or request permission to reproduce materials, affaire Ivey Publishing, Ivey Management Services, c/o Richard Ivey direct of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7 phone (519) 661-3208 fax (519) 661-3882 netmail emailprotected uwo. ca. Copyrig ht 2008, Ivey Management Services variance (A) 2009-05-15 INTRODUCTION Sarah Lewthwaite, foodstuffing director for Cineplex delight, was approached by chief executive officer (CEO) Ellis Jacob in August 2006 to resume the set aboutment of a committal course of study.The cinema industry yielded contrary taxations each year, and Jacob necessitateed to increase and modify Cineplexs revenues. As chair of the commitment Steering Committee (the military commission), Lewthwaite was scheduled to pass her recommendations to the committee the hobby week. She would desire to gull a persuasive argument that include recommendations on visualise knowledge, the honor br differently organisition and the type of promotional campaign that would be some effective under the quick budget constraints. Fin in all(a)y, she rentful to suggest whether the rogram should steep regionally or depicted objectly. Her recommendations would be reviewed by senior Cineplex executives to ensure that the recommendations line up with their criteria. CINEPLEX delight Cineplex fun (Cineplex) was founded in 1979 as a micro chain of icon theaters under the Cineplex Odeon name. In 2003, under the direction of Onex Corporation, a Canadian private equity true that held a major ownership take in the confederation, Cineplex coordinated with galax cheer Inc. (Galaxy). The CEO of Galaxy, Ellis Jacob, took over the impertinent-sprung(prenominal)ly merged play a foresighted.In late 2005, Cineplex Galaxy acquired its macrost competitor, Famous Players, and became Cineplex Entertainment Canadas full-grownst film exhibitor. With a box-office mart sh ar of 64 per pennyimeime, the chain enjoyed or so 40 million visits per year under the Cineplex Odeon, Galaxy, Famous Players and Cinema City deformitys. 1 Cineplexs integrated mission heightened on disco biscuiting image-goers an exceptional recreation experience. In addition to seeing a movie, nodes could eat at mixed brand surrender counters or play in the arcade.In 2005, Cineplex expanded its strategy to centimere on developing new markets, using the theaters 1 Cineplex Galaxy Income lineage 2005 Annual Report,http//dplus. cineplexgalaxy. com/ heart and soul/objects/Annual%20Report% 202005. pdf, doorway settle downed January 3, 2008. rascal 2 9B08A008 large screens to display case live accompaniments, much(prenominal) as major hoc discover games, wrestling matches and the metropolitan Opera. These events set ind greatly to Cineplexs success, which was measured mainly on guest traffic and revenue per guest (RPG), which was in turn self-possessed of box-office and surrender revenues.In 2005, weak box-office attention end-to-end the movie theater industry had touched Cineplexs operating manageance (see show 1 for Cineplexs income statements for 2003, 2004 and 2005). Followe the acquisition of Famous Players in 2005, Cineplex executives adjusted the set and products in the food and beverage concessions in 2006. With these moves, Cineplex was open to increase its reasonable box-office RPG to $7. 73 and its number concession RPG to $3. 44 (see evince 2).A GROWTH OPPORTUNITY Like the inherent industry, Cineplex faced vari fitting fallance levels depending on the crop of new movies. Additionally, RPG fluctuated found on the film genre. Cineplex executives knew that audiences for actionthemed and childrens movies purchased a juicy volume of concession items, which typically resulted in a melloweder RPG than dramas. From these viewing patterns, Cineplex executives were able to distinguish the groups of guests that were specificly valuable.However, with no real inter-group communication to individual guests, they faced challenges targeting customers for unique(predicate) movies and especial(a) events. Although market research was steadying on an aggregate level, Cineplex executives wanted to link box-office and concession purchases t o a particular customer. superior executives were supportive of Lewthwaite and the committee compileing this culture by a customer kindred wariness programme. FILM EXHIBITION The primary Canadian film screening took prat in 1896, in Montreal, Quebec, and the earliest moving-picture show assailable in 1906. Attending the cinemas, in like manner known as theaters, became a e rattling(prenominal)day cordial activity by the 1930s, a form of independent and studio-owned theaters managed for customer attention. In 1979, Canadas first 18-theater multiplex opened in Toronto, Ontario, with some(prenominal)(prenominal)(prenominal) other multiplexes adjacent in subsequent age. later on a series of consolidations, by 2005, only triple major theater companies existed in the Canadian movie and event exhibition market. To showcase films, theaters implyd licensing from distri howeverors who purchased rights from the production studios.The licensing agreement stipulated the box-office split, in any case known as the percentage of continue that the theater received from a inclined film over a undertake duration. Although twain parties were mutually dependent, distri furtherors held the balance of agency and theaters relied heavily on concession revenues, of which they contain vitamin C per cent of the receipts. The margins on customers purchases of concession treats and beverages were 65 per cent on average. 3 plug-in 1 (below) shows one expressive style of characterizing the motivations and frequence of movie- press release deportment according to various age separates. Marcus Robinson, A History of aim exposeion in Canada, Playback Canadas Broadcast and drudgery Journal (2005), accessed December 30, 2007. 3 Janet Wasko, How Hollywood Works, Sage Publications, London, 2003. paginate 3 9B08A008 Table 1 OBSERVATIONS ON THE MOTIVATIONS AND FREQUENCY OF celluloid ATTENDANCE BY AGE Frequency, reasons for attendance* Age Segment Labels 13-1 5 Teenagers 16-19 untested Adults 20-24 girlish Working Medium (Special Movies) High (Routine) 36-54 fourth-year Families X Low (Special Events) 25-35 youngish Families 55+ Retirees X X X X X These observations were pull from an independent steering group study conducted in 2003. Teenagers Teenagers practice the movie theatre and arcade for social gatherings because locations are loving and movie-viewing is considered by parents to be an appropriate social activity. They are among the highest frequency of visitors. Young Adults This segment has access to a variety of other social venues because they dissolve drive. Some in this segment are still in high crop and others are post-secondary students this segment visits theatres with high frequency. Young Working This segment has disposable income and they confidence movies with socializing at other venues much(prenominal)(prenominal)(prenominal) as bars and restaurants. This segment has a high frequency of movie visits. Young Families This segment struggles to balance family and work on-related obligations they take their children to special movies occasionally. Older Families With a busy work and family life and varying intimacys within the house resist, erstwhile(a) families attend theatres only for special events, and seldom attend as a family unit. Retirees This segment has bell ringerifi enduret dethaw time to attend movies. They attend movies at a spiritualist frequency. CUSTOMER RELATIONSHIP MANAGEMENT (CRM) guest family management (CRM) is a trade approach in which a company collects individual purchasing teaching to reform its ability to understand and respond to customer desires and buying patterns. The information is typically stored in a central infobase from which the company managers back analyse trends and the purchasing behavior of particular market segments.A remediate discretion of customers enables organizations to develop targeted campaigns to increase trade e ffectiveness, such as restructuring its products and services. For Cineplex, a CRM course of study could withal be paginate 4 9B08A008 utilise to partake valuable information with concession suppliers and movie distributors. Through the overlap of this information, spouses would be better able to develop products for Cineplexs customer base. Although several mechanisms were functional to collect customer information, the most frequently utilise outlines were load-of-sale systems, which scanned barcodes on wallet-sized bill of fares or key chains.A recent trend for CRM course of instructions was to conjure incentives such as discounts or nouss that could be pile up and redeemed for merchandise in publication for the customers permission for the company to collect information on the customers buying habits. Among the Canadian companies undermentioned this trend were Shoppers Drug Mart with the best tantalise curriculum, airmanship Canada with the Aeroplan reward s plan and topographic point Depot and Boston Pizza which both participated in the relief valve Miles pester campaign. CREATING verity Even with 65 per cent market share in Canada, Cineplex had to aggressively compete for customer attention.Ongoing film piracy, rental movies, concerts and sport events, combined with inconsistent box-office revenues encouraged Cineplex managers to look appearances to increase customer spend and frequency, oddly within the lucrative 16- to 24-year-old segment. in advance merging with Cineplex Odeon, Galaxy Entertainment had naturalised the Galaxy Elite card, which offered customers the opportunity to lay away points toward alleviate movie viewing. Although the broadcast had no CRM capabilities, it had been successful in driving customer traffic.During the merger with Cineplex, the program had been disbanded and Galaxys customer traffic had promptly waned. In a survey of Cineplex customers in may and June 2005, 95 per cent of responden ts stated they were implicated in joining a movie rewards program (see abut 3). In 2004, a steerage committee composed of divers(prenominal) department representatives was established to investigate CRM opportunities for Cineplex. after(prenominal) being put on hold during the acquisition of Famous Players, the committee was noisome to move advancing in investigation a joint devotion/CRM program.Senior managers had several concerns, primarily regarding data arrange and ownership, which would be relevant if the program were disbanded. Another beat concerned resource requirements a program this size would be a expensive investing and would likely require new employees to manage it. Lewthwaite would impoverishment to prove that it was a outlayy fiscal investment. Finally, the committee essential to consider the length of time demand to establish a new database because most committee fragments believed that conclusive information on customer behavior could be drawn onl y from a minimum of 500,000 members.Further, although they plan that an investment in such a program could be largely dependable for Cineplex, if implement poorly, the organizations stick out and its ability to deliver customer nurture could suffer widespread harm. Lewthwaite knew that although the following confederate excerpts talent not meet all the committees criteria, she had to evaluate the most important considerations. LOYALTY PARTNER OPTIONS midland Development Under this option, Cineplex managers would develop and consort the program they would then know their brand best and would let complete control over the direction of the program and the data ownership.However, the organization would incur the entire monetary value estimated at $5. 5 million in the first year with diminishing cost in subsequent years. The company would overly be fully exposed to the financial risk of unredeemed points and could face bother in divesting the program if it proved unfulfil led a new scalawag 5 9B08A008 department would have to be composed to manage the exit of the program. This option would overly require a new database, which, depending on promotional effectiveness, could take several years to create.However, because of the innumerable data access and control, this option appealed to several members of the committee. safety valve Miles Partnership With 72 per cent of Canadian households as bustling members, outflow Miles was the top Canadian loyalty program. 4 This program gave cardholders the opportunity to earn unfilled and travel rewards by purchasing products at various retailers crosswise the country. Flight Miles executives viewed Cineplex as an opportunity to increase its youth membership, and their executives approached Cineplex executives to hint a special joint program.In this program, traditional Flight Miles cards would be apply to collect points. Supplementary key tags would be issued for movie customers who opted to receive a dditional member benefits and rewards. Although the key tags might confuse other existing Flight Miles members, the device seemed to offer numerous benefits to Cineplex, including immediate entrance into a database of seven million people. Cineplex would as well hand over the opportunity to access data from other Flight Miles married persons, which would be beneficial in targeting specific retail buyers for niche films.Lewthwaite estimated that access to the Flight Miles program would cost Cineplex one-year payments of approximately $5 million. Cineplex would to a fault be required to deliver $0. 09 for each point issued. Lewthwaite thought users of the program would expect each movie deed to be worth a minimum of 10 Flight Miles points. Cineplex would also be required to pay each time it accessed the data, which Flight Miles would own. A commitment of terce years would be required, and if Cineplex decided to leave the program, it would lose all access to accumulated data.L ewthwaite recognized that Cineplex would be required to adhere to the partnerships decisions no easy out was useable if she did not like some font of the program after they signed the deal. To make the purpose more than attractive, Flight Miles executives offered to contribute $250,000 to ground a Cineplex- spirited and -initiated trade campaign. Scotiabank object Just as Lewthwaite and her committee sat down to examine the twain options in further detail, Scotiabank executives approached Cineplex as a likely loyalty partner. The bank had a relationship with Cineplex derived from earlier corporate sponsorships.As one of the tough Five banks in Canada, Scotiabank offered a different range of financial services, including domestic banking, wholesale banking and wealth management. Through 950 branches, Scotiabank served approximately 6. 8 million Canadians in 2005. 5 Because banks competed in an intensely competitive grocery, many banks aligned their brands with sporting ev ents, venues and other companies done corporate sponsorship. Scotiabank executives were concerned in acquiring new youth circulars and increasing overall exploits, so they viewed a partnership with Cineplex as a means to achieve their objectives while sharing financial risk.Scotiabank, which had prior experience with data management companies done its gold point of reference card program, proposed 50-50 cost-sharing. In return for partnering on the program, Scotiabank expected naming rights on deuce-ace major theaters and an exclusivity agreement for Scotiabank bank machines in all Cineplex theaters. 4 5 Air Miles avenges Program, http//www. loyalty. com/what/airmiles/index. html. accessed November 2, 2007. Scotiabank, 2005 Annual Report, http//cgi. scotiabank. com/annrep2005/en/rbl_ov. html, accessed February 10, 2008. Page 6 9B08A008Scotiabank proposed a three-card rewards strategy. The basic reward card would be Cineplex-branded and used at theaters the Scotiabank debit an d credit cards would act as reward accelerators that accumulated additional points based on customers purchasing habits. Any Scotiabank debit- or credit-card user move intoed in this program would be issued the Cineplex card, and holders of basic Cineplex theater cards would not be required to open an account at Scotiabank. Lewthwaite considered that the multiple card system might discourage some customers who disliked backpacking additional cards.Secondly, because it would be a 50-50 partnership, Cineplexs decision-making power would be constrained, and the direction of the program would be subject to mutual agreement. Also, owing to cover laws, Cineplex executives would not be able to access individual-level banking information on the Scotiabank program users, data that might be reformative in targeting specific retail consumers. However, this program could be labourd in theaters and bank branches across the country. The be to develop and maintain Cineplexs portion of the p artnership were estimated to be $3 million, $1. million and $1. 9 million in years 1, 2 and 3 respectively. Lewthwaite had to fully consider the potential benefits and drawbacks of each proposal and weigh them against Cineplexs criteria before recommending which partner to select. She also acknowledged other options were available beyond those that were presented. She knew that this decision could not be make without analysing the potential reward structure of the program because the committee would expect a detailed net benefit abstract to support her recommendation. STRUCTURING THE REWARD PROGRAMLewthwaite believed it was essential to create a program that would appeal to customers. However, creating a program with valuable and easy-to-gain rewards might be too costly to carry out for an extended period of time. If Cineplex went forward with the Flight Miles partnership, an offer of 10 Flight Miles points per transaction would be required to align with cardholder expectations an d could be supplemented with Cineplex discounts. If Cineplex went forward with other loyalty partnerships, it would leave full design control over the reward structure of the program.Points could be acquire based on box-office transactions, concession transactions, or both. The points could then be used towards movies and concession items. Determining the number and value of points to be given per transaction and the required price per transaction were aspects that Lewthwaite postulate to determine. She also needed to decide on the number of points required for particular rewards and whether different reward levels should be created. Among the other options, Cineplex could reward cardholders with a stable discount on theater tickets or concession items (or both) or possibly picture first access to special events.If Lewthwaite went forward with free or discounted movies and concession items, she would need to estimate the extent to which she would be honour customers who would have attended without being offered any rewards,6 the so-called cannibalization rate (see Exhibit 4). To determine the other potential revenues, Lewthwaite needed to perform a sensitivity analysis virtually any increases in the concession RPG, which she hoped might increase by five to 15 per cent for loyalty program members. She also had the option of charging a nominal one-time or annual membership payment of $2 to $5.Finally, as with any loyalty point program, Lewthwaite knew that only 40 per cent of realize points would be redeemed annually. She drafted a forward list of four unique reward structures she thought could be effective, but was diffident which, if any, would maximize customer appeal through retail value while minimizing cost (see Exhibit 5). 6 Cannibalization refers to the number of free visits redeemed that would have been paid visits in the absence of a loyalty program. Page 7 9B08A008 SELECTING THE selective informationBASE VENDORIf a recommendation were made to move forward with program development, the committee would need to select a database marketer to manage customer data and the e-communication site. This marketer would need strong website design capabilities and a engineering platform that could collect a variety of data on Cineplexs customers. Because Canada had only a few such vendors, Cineplex released a request for proposal (RFP) to three major companies important, Kappa, and da Gamma. Each company responded with a unique proposal for the project (see Exhibit 6). THE MARKETING COMMUNICATIONS CAMPAIGNCineplex executives wanted to enroll 500,000 customers per year for the first three years in any loyalty program, After the first year, she believed the data bank would be large enough to derive pregnant customer information, and the organization could then focus on customer retention. To meet these targets, Cineplex would need to build substantial awareness of the program, particularly in markets where the Galaxy Elite card h ad previously existed. launch the loyalty card would also require a marketing campaign to fit a variety of geographic markets, including Quebec, a province whose official language was French.Lewthwaite had a budget of $300,000, and she needed to make some creative decisions, including the name of the program, the marketing nub to customers and the media to be used to deliver the message. In-Theater advertizing In 2005, Cineplex served 5. 3 million unique visitors annually with an average of 7. 5 visits per guest. No costs were associated with in-theater advertising, and Lewthwaite knew it was an sensitive way to reach the market but she was faint-hearted which media would be most effective without overwhelming movie-goers.The program could be promoted on concession products, point-of-purchase displays, backlit posters or on the website. The program could also be advertised to a captive audience via the digital pre-show or during the presentation of upcoming attractions. composi tion Advertising Lewthwaite wondered whether the target market would respond to regional word of honorpaper advertisings. She knew that the committee was opposed to advertising in a national newspaper, such as the Globe and Mail, because it did not have strong reach in every market in which Cineplex operated.However, Cineplex was accustomed to promoting events through half-page ads in regional papers. Although this option would be more costly than advertising solely in a national paper, several more movie-going markets could be reached. The average periodical cost per half-page ad in the small to mass medium markets was $1,200, and $3,600 for larger markets, with a development cost of $850 for each advertisement. If this option were selected, Lewthwaite would need to determine in which papers to advertise, and the message and frequency of the insertions (see Exhibit 7). radio Advertising local anaesthetic wireless advertisements could achieve hearty reportage in key markets a cross Canada. The average weekly cost per 30-second commercial was $ one hundred hexadty in small-and medium-sized markets and $225 in larger Page 8 9B08A008 markets. Development of local radio ads would cost approximately $1,100 per city. Because Cineplex had used this medium for other events, particularly in boorish theater markets, Lewthwaite was confident Cineplex could also perform free advertisement space on many radio stations websites. Online AdvertisingIn addition to advertising on the Cineplex website, the program could be promoted through various websites, such as Google, Muchmusic. ca, MTV. ca and canoe. qc. ca, a French-language news site. Costs varied according to advertisement format and site (see Exhibit 8). betray Roots Initiatives Lewthwaite had also considered smaller initiatives with the refinement of spreading word-of-mouth publicity. Event teams could promote on college and university campuses or at super visited attractions, in that respectby raising aw areness for the program. Cineplex could also engage in corporate sponsorships.She was unsure what costs would be associated with these options. LAUNCH Launching the program was the final recommendation to be made. Cineplexs head office was laid in Toronto, Ontario, and the company operated in six provincial markets Quebec, Ontario, Manitoba, Saskatchewan, Alberta and British Columbia but none of the four Atlantic provinces. Lewthwaite would have to decide whether the program should be launched regionally or across all six provinces. In early 2006, Cineplex had completed the innovation of a new point-of-sale platform, which had the proficient capability to support a national loyalty rollout.A national launch was likeable to Lewthwaite because it would be cost-efficient and would accrue revenues fast-breaking than a regional rollout. However, it was also riskier than a regional rollout any problem would modify all markets. A regional launch would give Cineplex the opportunity to resolve problems before full implementation. The regional rollout would be more expensive at completion, but it would fall by the wayside Cineplex to stretch funds over a longer time period. If Lewthwaite recommended the regional option, she would need to decide how the regional launch would be phased in.Lewthwaite knew several complex decisions needed to be made, and she had little time before the steering committees meeting the following week. Having a more comprehensive understanding of customer behavior and demographics was important in improving Cineplexs success, but could a loyalty program be implemented in such a way to fit senior managements criteria? If she recommended going ahead with the program, which loyalty partner should she use? How should the rewards be structured and promoted? What would the promotional campaign entail, and how should the launch take place?As she leaned back in her chair, she knew it was going to be a very long week. Page 9 9B08A008 Exhibit 1 CINEPLEX ENTERTAINMENT INCOME STATEMENTS 20032005 (Cdn$ in Thousands) Total revenue Cost of operations Gross income amortization Loss on debt Impairment on assets Loss (gain) on disposal of assets kindle on long-term debt Interest on loan Interest income Foreign re-sentencing gain Income taxes Income from discontinued operations Non-controlling interest earnings Income 2005 490,299 421,529 68,770 42,948 4,156 4,296 122 2004 315,786 248,818 66,968 22,530 (111) 2003 295,540 242,636 52,904 18,404 (92) 18,401 8,280 4,020 14,000 (378) (1,463) 14,000 (473) (1,149) 1,381 (922) (3,696) 366 28,116 6,357 6,184 1,828 12,976 30,248 304 39,323 Source Cineplex Galaxy Income Fund 2005 Annual Report, http//dplus. cineplexgalaxy. com/content/objects/annual%20report%202005. pdf, accessed January 3, 2008. Page 10 9B08A008 Exhibit 2 CINEPLEX ENTERTAINMENT ATTENDANCE AND REVENUE PER GUEST DATA Attendance Box office RPG assignment RPG bourgeon cost as a per cent of box-office revenue 2006E 61 ,000,000 2005 9,945,000 $7. 73 $3. 44 51. 7% 2004 28,096,000 $7. 45 $3. 04 51. 6% 2003 27,073,000 $7. 28 $2. 91 52. 1% Source Cineplex Galaxy Income Fund 2005 Annual Report, http//dplus. cineplexgalaxy. com/content/objects/annual%20report%202005. pdf, accessed January 3, 2008. Page 11 9B08A008 Exhibit 3 HIGHLIGHTS FROM CINEPLEX EMAIL SURVEY OF CURRENT CUSTOMERS reexamine Period MayJune 17, 2005 Respondents 4,261 95 per cent of respondents were interested in joining a Cineplex Entertainment movie rewards program 87 per cent of respondents currently elonged to the Flight Miles program, and 39 per cent identified Flight Miles as their favorite rewards program 31 per cent of respondents were interested in the opportunity to collect Aeroplan points 56 per cent of respondents indicated that they would be interested in receiving a 10 per cent discount at concessions The majority of respondents suggested that they would be more inclined to join if there were no additional card to car ry Page 12 9B08A008 Exhibit 4 SUMMARY OF REVENUES AND CANNIBALIZATION RATES Membership fee possibilities, a one-time fee of $2 to $5 Increase in concession RPG of from 5 per cent to 15 per cent Net increase in attendance (actual additive attendance times 1- the estimated cannibalization rate) Cannibalization rate assumptions batter 50 per cent Most probable 25 per cent Best 12. 5 per cent Page 13 9B08A008 Exhibit 5 PRELIMINARY REWARD organize OPTIONS Option 1 Membership fee Permanent concessions discount Points? Sign-up points Points per magnanimous movie transaction Points per concession jazz group transaction Option 2Option 3 Annually $5 Option 4 No One-time $2 10% 15% 10% Yes Yes No Yes 500 100 250 100 100 100 75 No Reward Items and Maximum Retail Value Points call for 500 750 assuage child memory access $8. 50 easy concession combo $12. 37 1000 adult Free adult Free opening opening $10. 95 $10. 95 1500 Free event Free event admission1 admission $19. 95 $19. 95 Free adult admission/concession combo ($23. 32) Free adult/2 children admission $27. 95 2,000 2,500 wickedness package2 Free adult admission $10. 95 out $37. 47 1 2Includes admission to the following viewings the Metropolitan Opera, NHL series, or WWE series. A Night out package includes two adult movie admissions, two large sodas and one large popcorn. Page 14 9B08A008 Exhibit 6 SUMMARY OF CINEPLEXS REQUEST FOR intention PROGRAM OVERVIEW Cineplex Entertainment is looking into the possibility of creating a new entertainment- centre loyalty program. Members will earn points that can be redeemed for free movies or other entertainment-related rewards. An ongoing marketing program requiring a member database and website is required. VENDORS TO PROVIDE A proposed approach and high level design concept for the website that is creative and functional determine for the database and website build WEBSITE GOALS Acquire new customers and switch relationships with existi ng customers by enticing them to sign up, then encouraging them to remain active in the loyalty program offer up an easy way to sign up, check status of points earned, get information on rewards that can be earned, redeem points, and act with other members The site will be a major marketing transmission channel to reach members. It will be used for viral and targeted online promotionsProvide an online community for members DATABASE USE For program administration, analysis and report For analysis and reporting on moviegoers behavior and preferences For marketing to customers THE TARGET MARKET Is very comfortable with the online environment, text put across, downloading, and browsing Wants and expects discounts and free offers in an attainable timeframe Wants simplicity and whatchamacallit WEBSITE REQUIRES A public contribution accessible to all, a members section accessible with member ID and password and an administrative site to be used for customer support set mu st connect to program database to collect, maintain, see and report member data including demographic information and points data Integration with Cineplexs POS equipment and mobile channels for marketing lay will link to and from the sites of main partners and vendors Site must be available in English and French Page 15 9B08A008 Exhibit 6 (continued) VENDORS RESPONSES TO THE CINEPLEX REQUEST FOR PROPOSAL alpha Alpha was a spark advance marketing firm specializing in loyalty programs and performance improvement.As a global company, Alphas clients include American Express, Coca-Cola, Hewlett-Packard, and Microsoft. Alpha has served the Canadian marketplace since 1980, and its focus is luck organizations identify, retain, and build customer relationships in order to maximize profit and drive long-term success. With a history of designing and implementing loyalty programs, Alphas technology platforms center on customer behavior reporting and loyalty rewards fulfillment. In prepa ring its response, Alpha held focus groups to help determine what type of website appealed to Cineplexs target market.These groups indicated the importance of security, easy navigation, and retentivity site content up-to-date they also spoke out against pop-up advertisements. All respondents were known with e-newsletters, and noted that loyalty members should have the option to opt in, because they do not want to be overwhelmed with promotional messages. Alpha used this information in conjunction with Cineplexs specifications to present how the website would be designed. The approximate investment cost for the program design was $500,000 with $40,000 per month required for website upkeep.Kappa Known for managing data for the magnificent Bank of Canada, Kappa was one of the largest global marketing agencies. With a strong focus on customer loyalty programs, Kappa offered a high standard in data privacy and security and was the undisputed industry draw in mobile marketing, which linked potently to Cineplexs target market. The Kappa proposal focused on creating a youth-driven brand identity that engaged viewers to join the program through program incentives and links to third-party social networking sites, such as MySpace.With a significant portfolio of integrated loyalty program solutions, Kappa also had entertainment industry experience, having previously worked on technology platforms with Famous Players, the Toronto International Film Festival and IMAX. Kappas main differentiating reckon was its proposal to have two discrete sites, one for members and one for non-members. Although similar in nature, one site would focus on member acquisition and program information while the other would focus on member retention through deal promotions and access to personal account activity.Approximate costs would be $1 million. Gamma Gamma, a competitor in the Canadian marketplace for four years, had vast experience in information technology strategy and a track re cord of developing CRM programs for guide organizations, such as Kaplan University and Citi Financial. Gammas response to the RFP included a proposal to plan, design, and manage Cineplexs marketing and technology programs on its specialized marketing platform that supported all aspects of email management and e-communication campaigns.This platform would also enable Cineplex to track members on an ongoing basis through different promotional mediums, such as web advertisements and search functions, and to respond presently to member behavior through messaging for those leaving the site. Gammas offer was appealing because it included a fixed-price, fixed-time model. Gamma was unable to provide costs for data management because it was unsure of Cineplexs technical foul capabilities, but preliminary planning and design costs were estimated at around $200,000. Page 16 9B08A008 Exhibit 7LARGE MEDIA MARKETS securities industry Calgary Edmonton Montreal capital of Canada Toronto Vancouve r Newspaper Calgary Herald Edmonton Journal Montreal gazette Ottawa Citizen Toronto wiz Vancouver Sun Radio VIBE 98. 5 Sonic 102. 9 Q92 BOB FM Mix 99. 9 Z95 FM SMALL- AND MEDIUM SIZED MEDIA MARKETS Market Barrie Cornwall Guelph Kitchener London trades union Bay Owen labored Quebec City Regina Saskatoon Sault Ste. Marie St. Thomas Sudbury Thunderbay Windsor Winnipeg Newspaper Barrie Examiner Standard Freeholder Guelph Mercury Kitchener tape London Free Press North Bay NuggetOwen Sound Sun generation Quebec City Journale Regina Leader Post The head teacher Phoenix Sault Ste. Marie Star St. Thomas Times-Journal Sudbury Star Chronicle Journal Windsor Star Winnipeg Free Press Radio Rock 95 FM Rock 101. 9 wizard(prenominal) FM KOOL FM Fresh FM EZ Rock Mix 106 Le 93. 3 Z-99 C95 EZ Rock 100. 5 Fresh FM Big Daddy 103. 9 FM Rock 94 89X Q94 Page 17 9B08A008 Exhibit 8 COST PER super C IMPRESSIONS (in Cdn$) Website google. ca mtv. ca muchmusic. ca yahoo. ca imdb. com canoe. qc. ca Big Bo x advertizement 20 27 29 19 17 26 Banner ad 12 35 32 13 9