Case Study: Customer Loyalty

A large, multiformat retailer faced two challenges. Retail sales were under threat from specialty stores and discounters. And the store's credit franchise was suffering as customers moved balances to non-proprietary cards with lower interest rates. Management asked McKinsey for assistance in developing a new, more customer-focused approach that would boost sales and improve profit performance with its most important customer segments. The team built a retail/credit customer database and developed an integrated customer-level profit model. Using these tools, it evaluated the customer base to identify which groups were "Migrating" toward lower-value spending patterns.