How It All Started
We’ve all heard it — loyalty matters, engagement drives results, and building customer relationships are key. As marketers, we get it. We've read the theories, sat through the LX (Loyalty Experience) presentations, and nodded along when people talked about "stickiness" and "belonging".
But let’s be real: none of that means much without the numbers to back it up.
Loyalty doesn’t just happen, and it definitely doesn’t show up on a balance sheet overnight. What decision-makers need — and what we often struggle to provide — is a clear, measurable case for loyalty. That’s where the idea for this platform came from.
We created Loyalty Economics to help fellow marketers connect the dots between strategy and ROI. To bring together the emotional side of loyalty with the commercial reality. Because when we can talk loyalty in numbers, we can finally get the buy-in, the budget, and the results we know are possible.
The Loyalty Economics team are passionate about delivering a mainstream understanding about commercials in loyalty.
No more tricky acronyms and algorithms that make your head spin, the team are bringing a down-to-earth approach to understanding the numbers behind a successful program.
✺ Dictionary of Key Terms ✺
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The monetary value assigned to a loyalty point for accounting purposes. This is typically the estimated cost incurred by the business when a point is eventually redeemed by the customer.
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The acquisition cost of issuing a point to a customer when they earn it. This includes:
The immediate cost of funding the point (e.g., if you prepay a partner for points)
Any associated promotional costs
The anticipated redemption liability
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The actual expense incurred when a customer redeems a point for a reward.
This is often higher than the earn cost because it includes the cost of fulfilling the reward, taxes, and logistics. -
Return on Investment (ROI) is a critical metric when evaluating the effectiveness of loyalty programs. It helps businesses assess whether the resources invested in these programs—such as rewards, marketing, and technology—are generating measurable benefits in terms of customer retention, increased sales, and long-term brand loyalty.
By calculating ROI, companies can determine if their loyalty initiatives are truly fostering a sustainable relationship with customers, or if adjustments are necessary to optimise performance. A positive ROI not only justifies the continued investment in loyalty strategies but also helps in refining them to create more value for both the business and the customer, ultimately driving growth and enhancing competitive advantage.
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The financial obligation a business recognises on its balance sheet for all outstanding (unredeemed) points that customers hold. This reflects the estimated future cost to honour these points when redeemed.
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The difference between the value perceived by the customer (the perceived value of the point) and the actual cost to the business. This spread is often what makes loyalty programs profitable: members feel they’re receiving high value, while the business fulfills at a lower cost.
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Breakage refers to the percentage of loyalty points or rewards that are issued to members but are never redeemed.
Why Breakage Happens
Members forget or are unaware of their points.
Redemption thresholds are too high.
Rewards are not attractive or relevant.
Accounts become inactive or lapse before use.
Program rules or expirations limit usability.
Founding Business
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Specialists in the design and delivery of B2B & B2C loyalty programs that drive repeat engagement and ROI.