Blog
Loyalty trends and best practices

Financial Modeling Guidelines for Loyalty Programs

by Julia Leyrer
August 08, 2017
Financial Modeling Guidelines for Loyalty Programs

Loyalty programs are not risk-free endeavors. An organization’s CMO and CFO demand to know the ROI of all initiatives, especially for a large undertaking like a loyalty program. Brands are slowly changing their perspective of programs to revenue generators, as opposed to continued cost centers. This, in turn, necessitates the need for a complete financial analysis to understand the income statement, balance sheet, and cash flow implications of your loyalty initiative.

The financial modeling process for a loyalty program is a complex one, involving large data sets and customer assumptions based on understanding behaviors of a subset of members. Several inputs influence the program’s impact across enrollment, revenue, cost, and profitability. A credible financial model allows you to have the confidence that the program will deliver strong financial results over time and be able to track actual member behavior against forecasts.

In this paper, we share some of our best practices of the main structural elements our loyalty strategy team uses to model programs: 

  • Data collections and aggregation
  • Translation of program design inputs and customer assumptions
  • Model build and stabilization
  • Initial model review
  • Final model review and iteration


CLICK HERE TO DOWNLOAD


---

500friends’ strategy team provides financial modeling as a service. For more information about the services provided by 500friends, please visit www.500friends.com.



SEARCH
SUBSCRIBE

Enter your email address recieve notifications of new posts

ARCHIVES