Question 1

How do loyalty programmes actually make money?

Accepted Answer

Rarely through the loyalty itself. Most programmes earn through a combination of **margin funded by suppliers, changed purchase behaviour, unredeemed value, and — for the largest schemes — selling the data**. Understanding which one a programme relies on tells you what it is really for.

**The revenue mechanisms:**

**Increased share of wallet.** The genuine goal: a customer who might have split spending across three retailers consolidates it into one. Even a small shift is valuable because the incremental sales carry no new customer acquisition cost.

**Price discrimination in disguise.** A member price and a non-member price let a retailer charge **two different prices for the same item** without appearing to. Price-sensitive shoppers self-select into the programme; everyone else pays more. This is the most economically significant function and the least discussed.

**Supplier-funded promotions.** Brands pay for targeted offers to relevant members. Much of the apparent generosity is not funded by the retailer at all.

**Breakage.** Points that expire or are never redeemed are value promised and never delivered. Programmes are modelled with an expected breakage rate, and it is material.

**Deferred redemption.** Points are a liability carried until used, and the float has value.

**Data.** The programme is how a retailer attaches purchases to an identity across visits and channels. That data powers personalisation, range decisions, store planning and increasingly a **retail media business** sold to suppliers — which for some retailers is now worth considerably more than the loyalty effect.

**Coalition schemes** — points earned across many merchants — additionally earn by **selling points to partners** at a price above expected redemption cost.

**What this means for you as a customer:**

**Check whether member pricing is a discount or a surcharge on everyone else.**

**Redeem promptly**, since breakage is the business model's friend.

**Value points in currency**, not in points — a "1,000 points" reward may be worth very little.

**Understand what you are paying in data**, which is the actual price of entry.

Question 2

How does affiliate marketing actually work, and who gets paid for what?

Accepted Answer

A performance model where a third party — a publisher, creator or comparison site — sends traffic to a merchant and is paid only when a defined action occurs, usually a sale. The mechanics are

Question 3

What is customer lifetime value, and how is it actually calculated?

Accepted Answer

The total profit you expect from a customer over the whole relationship. It is the number that determines how much you can afford to pay to acquire one — and it is calculated wrongly more often than

Question 4

What are category entry points?

Accepted Answer

The situations, needs and moments that prompt someone to think of a category at all — and the argument, from the Ehrenberg-Bass Institute, is that brands are chosen by being mentally available at

Question 5

How does influencer marketing actually work?

Accepted Answer

A brand pays someone with an audience to feature its product — and the mechanics of pricing, contracting and disclosure are considerably more structured than the casual appearance suggests. The

Question 6

What are anchoring, charm pricing and the decoy effect?

Accepted Answer

Three well-documented ways in which the presentation of a price changes how it is judged — because people evaluate prices comparatively, not absolutely, and have no independent sense of what most

Question 7

What is a retail media network, and why is every retailer building one?

Accepted Answer

A retailer selling advertising inventory against its own shopper data — on its website, in its app, in physical stores, and increasingly on other websites entirely. It has become the fastest-growing

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