Glossary
What is loyalty liability?
This is what you still owe your customers: every part-finished card and every unused voucher. It is a real commitment whether or not it shows up in your accounts. One of the best arguments for a digital programme is simply that it lets you see the number.
Every stamp you give out is a promise. Liability is the sum of the promises you have not yet kept.
The paper problem
With punch cards you have no idea what this number is. Cards in circulation are invisible, so the obligation is real and unmeasured at the same time.
What changes with a digital programme
The number becomes knowable. You can see how much is outstanding, how much is close to a threshold, and what a promotion would add to the total before you run it.
Prepaid value is a different weight
Rewards a customer earned and value a customer paid for are not the same kind of obligation. Anything prepaid deserves proper advice.
Common questions
Do I have to account for it?
Treatment depends on your jurisdiction, the size of the programme and whether customers paid for the value. Prepaid value is usually treated more strictly than earned rewards. Ask your accountant.