Tricycle Advisory · Program Economics Analysis
Measure What Your Loyalty Program Costs—and What It Returns
A fixed-scope financial analysis of incremental revenue, reward obligations, earn and redemption economics, alternative investments, fully loaded cost, and multi-year scenarios. You receive a documented model and recommendation prepared for finance review.
A model built for review
Data sources, assumptions, comparison methods, sensitivities, and limitations are documented so finance and marketing can evaluate the same evidence.
- 6Connected analysis components
- 5-yearDecision scenarios
- ClearAssumptions and sensitivities
WHEN THE ANALYSIS FITS
Use It When the Financial Case Cannot Support the Next Decision
The strongest fit is an established or proposed loyalty investment with enough evidence to model—and an economic question the current reporting cannot resolve.
- Finance and marketing disagree about the program’s incremental value.
- A budget or investment review requires a documented financial case.
- A platform migration, earn-rate change, or program redesign needs scenario modeling.
- The organization cannot forecast outstanding reward obligations or breakage confidently.
- Leadership needs to compare continued loyalty investment with another use of the budget.
WHY LOYALTY ROI IS HARD TO CALCULATE
Three Ways Loyalty ROI Models Lose Credibility
Weak results usually come from the comparison method, obligation forecast, or cost boundary—not from a lack of available metrics.
- Member Revenue Is Treated as Incremental
- A model that attributes all member revenue to the program ignores what those customers would have spent without it. The analysis needs an agreed baseline, a documented comparison method, and explicit limitations.
- Reward Obligations Are Poorly Forecast
- Outstanding currency, expected redemption, breakage, and reward cost affect the program’s economics. If those assumptions are incomplete or stale, the forecast can misstate future obligations and margin.
- The Cost Boundary Is Too Narrow
- Licensing, implementation, promotion funding, vendor management, internal resources, and operational overhead can materially change the result. The model must define which costs are included and why.
THE PROGRAM ECONOMICS MODEL
Six Components Connect Performance to the Investment Decision
Each component answers a different financial question. Together they show what the program costs, what value it may be creating, and which assumptions determine the recommendation.
| # | Component | What it models |
|---|---|---|
| 01 | Reward Obligation Analysis | Forecast outstanding reward obligations using historical redemption, expiration, breakage, and unit-cost assumptions prepared for finance and accounting review. |
| 02 | Incremental Revenue Estimate | Compare observed member behavior against an agreed baseline and document cohort construction, assumptions, confidence, and analytical limitations. |
| 03 | Earn and Redemption Economics | Model how earn rates, redemption behavior, reward cost, and member response affect marginal revenue and program margin. |
| 04 | Alternative Investment Comparison | Compare loyalty investment with a relevant alternative—such as paid media, discounting, retention activity, or another use of budget—using a consistent outcome and time horizon. |
| 05 | Fully Loaded Cost | Define and quantify platform, implementation, promotion, vendor, internal-resource, and operating costs included in the program economics. |
| 06 | Decision Scenarios | Model the current path and proposed changes across downside, expected, and upside assumptions, with sensitivity analysis showing what changes the recommendation. |
WHAT YOU RECEIVE
A Financial Decision Package, Not Just an ROI Number
The agreed scope defines the question, evidence, scenarios, stakeholders, timing, deliverables, and fee before analysis begins.
- 01
Documented Economics Model
Revenue, reward obligations, earn and redemption economics, costs, comparisons, and scenarios in one connected model.
- 02
Assumption and Sensitivity Record
Data sources, baseline choices, breakage assumptions, limitations, and the variables that materially affect the result.
- 03
Recommendation and Decision Conditions
The recommended path, why the evidence supports it, and the conditions or new evidence that would change it.
- 04
Finance Briefing
A concise presentation of the model, findings, sensitivities, and recommendation for the stakeholders reviewing the investment.
Typical engagement · 4–6 weeks from scope approval
- Discovery and data readinessConfirm the decision, evidence, assumptions, and working team
- Model and scenariosBuild the analysis, test alternatives, and identify sensitivities
- Review and briefingChallenge the findings and prepare the decision package
Timing varies with evidence readiness, scenario complexity, and stakeholder availability.
BEFORE YOU ENGAGE
Questions to Resolve Before Building the Model
The first conversation should clarify the financial decision, available evidence, accounting boundaries, scenarios, and stakeholders.
What data is required to build the model?
Inputs depend on the decision, but commonly include member and transaction history, reward issuance and redemption, expiration or breakage patterns, program rules, platform and vendor costs, promotion funding, internal-resource assumptions, and existing finance models. Discovery identifies the minimum useful evidence set.
How do you distinguish incremental revenue from existing customer behavior?
Tricycle and the client agree on an appropriate comparison method based on the available evidence. The model documents cohort or baseline construction, observed differences, assumptions, confidence, and limitations rather than treating all member revenue as program-generated.
How are redemption and breakage assumptions established?
Assumptions are informed by available issuance, redemption, expiration, and historical behavior, then tested through sensitivities. The client’s finance and accounting teams remain responsible for the accounting policies and treatments applied in financial reporting.
Does this analysis provide an accounting opinion or audit assurance?
No. The analysis can support finance and accounting review by documenting data, assumptions, forecasts, and sensitivities, but it does not replace the organization’s accountants, auditors, actuarial specialists, or formal accounting-policy decisions.
Can you model a proposed redesign or platform investment?
Yes. The scenario model can compare the current path with proposed changes such as a platform migration, earn or redemption revision, tier redesign, benefit change, or different investment level.
When should we use this instead of a Loyalty Program Audit?
Use Loyalty Program Audit when the broader program problem is unclear and multiple operating dimensions need diagnosis. Use Program Economics Analysis when the blocked decision is specifically financial and requires a deeper model of value, obligations, cost, and scenarios.
Who should participate, and how are timing and fees established?
Participation commonly includes the loyalty or marketing owner plus finance, data, accounting, and relevant technology stakeholders. Before work begins, both teams agree to the decision, evidence, scenarios, working team, deliverables, timeline, and fee.
START WITH THE DECISION
Bring Us the Financial Question Your Loyalty Program Cannot Answer
Share the decision being considered, the evidence available, and where finance and marketing disagree. We will determine whether a focused Program Economics Analysis is the right next step.