Optimizing Your Loyalty Program Return
There are several factors that contribute to program return, including perceived reward value, buy-more rate, visit rate, member acquisition, and costs. Paytronix created a model that incorporates these influencing factors, basing it on client data. With this model, inputting a variable cost rate derives a reward-optimization curve that predicts the impact that changes in reward levels will have on program return.
Paytronix recommends targeting a zone that promises between 80% and 100% of the program benefits for a core loyalty program, while leaving room to enrich offers during short-term promotions. As an example, a restaurant with a variable cost rate of 40% should set its core loyalty-program reward level at between 11% and 18%.
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