Foundation · 2 min
What you need to know
How much should a loyalty point be worth?
Set point value from the affordable reward cost and the number of points required, then model likely redemption and breakage. The number must be easy to explain without creating a reward liability the margin cannot support.
How should loyalty rewards affect margin?
Treat the expected cost of earned and redeemed rewards as part of the order’s contribution calculation. A program that increases sales can still reduce profit if rewards consume too much margin.
Should every product earn the same points?
Not necessarily. Exclude or reduce earning on products whose margin, legal restrictions or supplier rules cannot support the normal reward, but make exceptions clear to customers.
Should high-margin products earn different rewards?
They can, when the additional reward produces profitable incremental behavior and does not confuse members. Model the full basket because customers may combine a high-reward item with low-margin products.
How should refunds affect loyalty points?
Reverse points earned on the refunded portion and restore points used to pay for that portion according to the published policy. Partial refunds require proportional, auditable adjustments rather than deleting the entire transaction.
What happens to rewards when an order is cancelled?
Unvested points or rewards should not be issued, and any provisional balance should be reversed. If a redeemed reward is restored, the customer should see the updated balance and reason.
A quick store check
Model one order from points earned through redemption, refund, and cancellation. Include outstanding reward liability.
Foundation · 2 min
Frequently asked questions
When should points become available?
After the order reaches the program’s approved state, with any pending period clearly shown to the member.
How should unused points appear in financial planning?
Track the expected cost of outstanding points using documented redemption and expiry assumptions, with finance review.