Loyalty Programs Financial Structure

Goals

Determine the financial structure of loyalty programs. The information will be used to make a decision on a loyalty program and the relationship with their corporate master brand.

Early Findings

Loyalty Programs Financial Structure

General Insights on the Reward Model

  • Existing customers typically "spend 67% more than new customers.
  • Given this, customer loyalty "really pays off" and these rewards programs can be considered as an endeavor that can eventually pay for themselves.
  • Some loyalty programs are fee-based and paid for by the customers to avail of premium benefits.
  • Some businesses also typically provide non-monetary benefits to their loyal customers.
  • Companies also partner with other firms to provide customer loyalty programs that can help increase customer engagement and grow their business metrics.
  • In the case of credit card companies, merchants are mandated to pay a certain portion of the purchase amount to credit card companies.
  • In this case, incentives for cash back rewards are shared by the credit card company and the merchant.
  • Some of the best loyalty programs come from Sephora, Virgin, Amazon Prime, TOMS, American Express, Swarm Perks, REI Co-op, and Apple.
  • Rewards programs typically bring in more sales but the loyalty program liability also needs to be considered.
  • This liability translates to the eventual cost to a company once customers claim their rewards.
  • However, careful analysis and factoring the financial impact of these loyalty programs into the balance sheet can turn them into investments.
  • If this is followed, the expected return should be greater than the implementation cost.

PROPRIETARY DATABASE SEARCH RESULTS

In addition to this public search, we scanned our proprietary research database of over 1 million sources and were unable to find any specific research reports that address your goals.

Proposed next steps:

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