Loyalty math reveals the reality in level valuation and redemption
Are you a one-percenter?
Think twice earlier than you reply the query as a result of it might land you in two vastly completely different camps of individuals.
Being a “One-percenter” can imply you might be a part of the wealthiest 1% of the inhabitants, or it may possibly discuss with members of outlaw motorbike golf equipment, often known as 1percenters. The time period got here from an interview with a member of a biker gang who mentioned that “99% of motorcyclists are law-abiding residents. We’re the One Percenters.”
The One Percenter could also be an outlier in society, however not in Loyalty Advertising and marketing.
Constructing a loyalty program round a one p.c deferred rebate, expressed to the client in a factors or mileage foreign money, is the OG loyalty mannequin. In 2025, the brand new normal rebate share for e-retailers ranges between 2-5%. With the US inflation price estimated at 2.7% as of July 2025, it is sensible that the “normal” loyalty rebate has crept above the one p.c mark.
It’s protected to say that if you’re nonetheless working a program that gives a 1% rebate, you must replenish on whiteboards and markers, then collect your crew collectively. When you don’t change that program, you’ll bleed advertising price range by losing cash on a program that gained’t change conduct.
The Loyalty Math of Unfulfilling Redemption
If the OG loyalty rebate share is creeping to a better degree, why does redemption really feel so unfulfilling today?
I lately was planning journey and needed to make use of factors to pay for air fare and a resort keep. Earlier than redeeming factors with Marriott Bonvoy and JetBlue TrueBlue, I did some loyalty math.
- The worth of 47,000 Marriott Bonvoy factors was $.0068/level. That’s 68 foundation factors, lower than 1 p.c.
- To prime up my account, Marriott provided to promote me factors 19,000 factors at a value of $.0125 per level. That’s 125 foundation factors, almost double the worth of my factors in redemption.
My loyalty math illustrated that the precise worth of Bonvoy factors is weak. Have my years of devoted model loyalty been worthwhile? Loyalty math additionally confirmed that Marriott is having fun with a margin of 45.6% on level gross sales. May they’ve narrowed that margin for a buyer with high-tier lifetime standing?
Shifting on to e-book airfare, JetBlue provided me a mixture of factors and money as factors don’t apparently cowl the price of premium seat choice and taxes. I experimented with three combos of factors and money, considering that I’d understand extra worth from my factors if I used to be keen to pay extra in money.
My loyalty math advised me simply the other.
- After I minimized the money element, my factors had been valued at $.015 or 1.5%.
- As I elevated the money element of the transaction (shifting from $36 to $100 in direction of a $272 fare) my level values slipped all the way in which right down to $.0116 or 1.16%.
Airways generally promote miles to 3rd events at $.017 – $.02 every, so the margin on mileage gross sales by JetBlue was calculated to be much less aggressive than Marriott. General I didn’t really feel that my factors had been being overly diluted on this redemption instance, although the sliding scale on the money and factors combine bothered me.
What’s the Way forward for Loyalty Foreign money?
There’s been loads of debate about whether or not the way forward for buyer loyalty packages will embrace level techniques. It’s a extra sophisticated debate than chances are you’ll think about. However the illustration I’ve shared on this article makes it clear that when you do select to make use of some extent system, you should contemplate these key factors:
- Shoppers can do loyalty math. Don’t make modifications to your program that encourage a better degree of scrutiny. Program devaluations have been observed by the US DOJ and are the topic of pending federal laws.
- Simplicity is vital to customers, however overly clear level valuation techniques encourage a transactional mentality. You will need to think about a system that facilities on experiences and transcends even right now’s model of the OG mannequin.
- Resist the simple path. Out-of-the-box loyalty configurations from ecommerce software program platforms (sure, the one or two with the best market share right now) end in program worth propositions that may bleed your advertising price range whereas delivering lower than anticipated conduct change.
A CEO of a giant retailer lately advised me that “individuals purchase experiences, not packages”. By no means lose sight that buyer loyalty ought to be a top-down planning train, integral to the C-Suite buyer technique.
Once you prioritize model loyalty and construct loyalty packages as an amplifier of your model guarantees, factors should play a task, however they gained’t be the point of interest of your buyer loyalty outreach.
