As we hop, skip and jump (hopefully not crawl) into a new financial year, there is a feeling of urgency and commitment coming from loyalty program managers to ensure their programs are financially sustainable and viable.
A new financial year + an economy of caution = the perfect time for a loyalty program financial fitness assessment
There is always a good time to review the financial fitness of your loyalty program.
However, with greater economic challenges upon us now and in the foreseeable future, prioritising a financial fitness assessment of your loyalty program is even more important.
Start with a measured and proactive approach by reviewing your loyalty program’s financial fitness from three points of view:
A fit and healthy loyalty program financial ecosystem has dynamic and connected profit and loss, balance sheet and cash flow models for real-time insights.
The financial models need to continuously ascertain the:
- Incremental revenue
- Balance sheet implications
- Cash flow effects of the loyalty program
‘Dynamic’ means as you change any of the variable program success levers (those impacting revenue and expenses), the financial model provides real-time updates to the financial outcomes connected to the profit and loss (EBITDA), the balance sheet (Net Assets) and Cash flow (Net operating cash).
Is your loyalty program financial ecosystem healthy?
The loyalty program financial model provides the ROI indicators for your loyalty program to be an asset of growth
A ‘wealthy’ loyalty program is a program performing profitably over the long-term and proving its value to the business as an asset of growth.
The financial ecosystem of the program needs to co-exist with the rest of the business financials proving it is a wealth creator for the host business.
Is your loyalty program financial ecosystem wealthy?
Real time insights need to be available to take action and improve the financial well-being of the program
A ‘wise’ loyalty program financial ecosystem provides the insights to act at speed. It allows for simple ‘what-if’ scenarios.
What if scenario’s
‘What if’ scenario planning is powerful in directing your loyalty program strategy. Feed your loyalty program financial model with ‘what-if’ inputs (drivers of success) to reveal the real-time impact on success.
What if you changed (increased/decreased) the:
- Volume of members
- Activity rates
- Spend value and frequency
- Engagement with external partners (if relevant)
- Redemption of rewards
- Policies of expiry
- Cost of rewards
(There are many other inputs to consider)
How would these impact
- Achieving revenue targets
- Reducing cost metrics
- Enhancing profitability
- Understanding liability management and
- Managing cash flow outcomes
Is your loyalty program financial ecosystem wise?
Building a healthy, wealthy, and wise loyalty program financial ecosystem in 2023
A successful loyalty program is dependent on the ‘fitness’ of the financial models supporting the program.
New strategies, changes to program propositions or new costs can be tested in a financial model to assess and support executive decisions.
Like starting a new personal fitness regime, a ‘loyalty program financial fitness’ regime needs to assess the current situation.
Take the Loyalty Program Financial Fitness Assessment (it’s free)
To help you with this, we have a simple (and free) Loyalty Program Financial Fitness Assessment.
If you need some guidance or an independent assessment of the financial fitness of your loyalty program, please email firstname.lastname@example.org for our free Loyalty Program Financial Fitness Assessment (loyalty program managers only please).
Our collective experience and expertise has been gained from over a decade in accounting for loyalty programs through tailored and program specific profit and loss, cash-flow, and balance sheet reporting.
These have been developed for major airlines, retail programs and B2B wholesaler programs. The financial models developed manage program structures of all types of programs from points earn and burn, credits, discounts, cashback, and gift cards, tiered and flat programs.
The goal is to have a healthy, wealthy, and wise loyalty program fit and strong for 2023 and into 2024, ready to face the economic challenges you might face and to help you make strategic decisions to deliver a positive financial difference for your program and your business.
Have a financially fit loyalty year!