Points Liability & Breakage Model
Points you have issued are a balance-sheet liability. This prices it, discounts it, and shows what breakage is really worth.
Model 5 of The Marketing Quant Python Kit, and Part 2 of The Float & Breakage Model. Runs entirely in your browser — nothing you type is sent anywhere.
Your programme
Total outstanding, not this month's issuance.
Redemption value, not the rate you issue at.
Share of still-unredeemed points that get redeemed each month. Measure this from one issuance cohort rather than guessing — it is the whole model.
Your cost of capital. This is what makes a deferred liability cheaper than a present one.
Liability
Present value of the liability
What the outstanding points are actually worth to you today.
$8,183
Nominal value
If every point were redeemed.
$10,000
Expected breakage
Share never redeemed by expiry.
13.52%
Expected redemption cost
$8,648
Saved by discounting
The gap between nominal and present value — the working-capital benefit of the delay.
$1,817
Redemption schedule
| Month | Redeemed | Cost | PV |
|---|---|---|---|
| 1 | 8.00% | $800 | $795 |
| 3 | 6.77% | $677 | $664 |
| 6 | 5.27% | $527 | $507 |
| 12 | 3.20% | $320 | $296 |
| 18 | 1.94% | $194 | $173 |
| 24 | 1.18% | $118 | $101 |
Redemption is front-loaded: the hazard applies to whatever is left, so the first months carry most of the cost.
Do not budget against breakage. 13.52% is an expectation, not a guarantee — a redemption campaign, an expiry-date change or a press cycle can move it sharply, and the liability lands in the quarter it moves. Model the downside case before you spend the $1,352 you expect to keep.
Get the Float & Breakage Model
Stored value as working capital. Model your float, breakage and redemption liability the way the filings do it, plus the price-discrimination math behind gated promo codes.
Browse all free guides →The maths behind this
Points Liability and Breakage: Pricing the Currency You Invented
Loyalty points are debt you issued in a currency you control. A $10,000 nominal liability with an 8% monthly redemption hazard is worth $8,183 in present value. Here is the survival curve, the discounting, and why a flat breakage assumption is the most expensive line in the model.
Read →Float, Breakage and the Stored-Value Balance Sheet
Starbucks held $2.12 billion in customer-loaded accounts as of Q1 FY2026 and recognised $207.6 million of breakage revenue in 2024. Prepaid balances are interest-free working capital. Here is how to model your own.
Read →Why Promo Codes Beat Sales: Price Discrimination in Practice
A blanket 20% discount earns $20,000 less than no discount at all. The same discount behind a code that only bargain hunters bother to find earns $64,000 more. The friction is the entire mechanism.
Read →Other tools
Promo Expected-Value Calculator
Most promos lose money on the customers who were going to buy anyway. This shows you how much, before you launch.
Streak & Retention Hazard Model
The cheapest day to save a user is almost never day one. This finds the day.
Content ROI & Payback Calculator
Find out whether the content programme pays back before you spend twelve months finding out.
Want this fitted to your actual numbers?
The defaults here are illustrative. Fitted to your own data — real hazard rates, real margins, real conversion — the same models tell you what to do next rather than what is theoretically possible.
Get it modelled properly