Loyalty Programs · The economics · Component
The return
What the programme produces, against what it costs — measured incrementally rather than by comparing members with non-members.
The deliverable
What it is
The return has to be incremental. Revenue from members that would have arrived anyway is not produced by the programme, however large it is.
Set against the full cost including the liability accrual, most programmes are considerably less profitable than their headline figures suggest.
One level in
What it is made of
Each element is a constituent part of the component. Follow one to see the attributes it carries.
The incremental revenue
Revenue the programme actually produced.
3 attributes: Incremental revenue · Source · Confidence
LearnThe margin
What that revenue is worth after costs.
3 attributes: Incremental margin · Full cost · Net
LearnThe verdict
Whether the programme is worth running.
3 attributes: Verdict · Decided by · Next review
Learn
Programmes continue because ending them is difficult, not because the arithmetic supports them.
The other components in the economics
The cost
Redemption cost plus running cost per period — the second of which is consistently forgotten.
LearnThe liability
Points earned and not yet redeemed, valued — an obligation that grows with the programme and appears long after the decision.
Learn