Managing a loyalty program’s financial drivers is crucial to its success, regardless of size. Loyalty currency issued carries a monetary value that can increase a company’s liability and deferred revenue accounts. Cost per point (CPP) is the primary metric used to calculate these financial implications.
In its simplest form, a program’s cost per point can be calculated by dividing the cost of rewards ordered by the amount of loyalty currency spent, for a given period.
Determining the real cost of a reward order is subject to debate and will often differ based on if it is being used to calculate a program’s financial implications versus overall health.
With an estimated $16 billion worth of unredeemed loyalty currency in the US alone, managing a loyalty program’s cost per point has become a full-time job for many practitioners.
In this deep dive, we will explore five tactics that loyalty programs can employ to reduce their cost per point.