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Whether you’re looking to build a loyalty program from scratch or already have one in market, you’ll want to know if your strategy will strike a profitable balance between benefits and costs before you make a commitment to your business and your customers. Our loyalty program calculator can help make sure your investment pays off.
If you’re getting challenged about the profitability of your program, you may not believe that the words ‘financial’ and ‘heart’ belong together in a sentence. That aside, a few questions are at the financial heart of a loyalty program:
Not to be too technical, but mathematically speaking, #4 is a region called “the sweet spot” where you’re receiving enough value back from customers to cover the cost of the benefits they receive and your costs to provide them.
Below is a simple calculator to see if your program will generate a positive return. If you don’t know some of these numbers, don’t worry – read on a bit further for some help.
What you’ll need:
You may have come here to get answers to these questions, not to get asked for them – particularly for numbers 3 and 4. Take a look at the bottom of the calculator. There are two numbers there that can help.
These will give you guardrails for your sweet spot. A simple calculator like this can’t tell you exactly where it is – but it can tell you where to look.
| Description | Value |
|---|---|
| Incremental Sales from Loyalty Members: | $21,000,000.00 |
| Gross Margin on Incremental Sales: | $8,400,000.00 |
| Less: | |
| Cost of Program Rewards & Benefits: | $6,300,000.00 |
| One-time Development & Launch Costs: | $500,000.00 |
| Ongoing Program Technology & Operations: | $700,000.00 |
| Total loyalty costs: | $7,500,000.00 |
| Net Benefit (Gross Margin - Total Costs): | $900,000.00 |
| Lift Needed to Break Even (%): | 17.6% |
| Max Offer Value (% of Spending to Break Even): | 5.7% |
Setup a call with our consulting team to talk through RoI
Other calculators we’ve seen stop at the limited view of what goes into a program’s ROI. We can offer something more complete for you to download. In this file, you can again start with as few as 7 inputs, like above. But there are additional optional inputs to give you a more detailed view.
Even with these, keep in mind that this is a simplified model. There are many financial and non-financial factors to consider for your program that aren’t captured here. But it’s a good starting point. You can calculate your incremental sales from loyalty members by year, the lift needed to break even, your time to break even, and a more detailed breakdown of both benefits and costs.
The file includes guideline values for the percent of customers who will be members of the program, and the rewards offered for companies in your vertical. The required inputs are:
You can expand your model with optional inputs including:
See projections for your future revenue, costs, and ROI, over a period of 1 to 5 years.
Transparent calculations: Feel confident in the numbers you see with views of your current and future business.
Open to update. All of the inputs in the workbook are open for you to update. A simple protection has been put on the file to avoid accidental errors. We’re happy to unlock it for you – just reach out to us!
It’s important to know what you don’t have. We’ve included some factors that aren’t captured where you may want to go into deeper detail.
At the risk of offending our fellow Excel lovers, some of the most important questions about your program can’t be answered in a spreadsheet. Questions like:
To find the answers to these questions and how to optimize your loyalty program to improve ROI— including using AI to create smarter lifecycle campaigns — book a free call with one of our loyalty strategists.
Kognitiv has over 80 years of experience building and running loyalty programs. Because we do both, our strategies are realistic and implementable, tailored to your needs and capabilities. We understand that your loyalty strategy needs to work in the real world, not just in spreadsheets. As much as we may love them.
