Loyalty glossary · 12. Commercial and partner (15)
Wholesale Point Rate
The wholesale point rate is the price per point at which a loyalty programme sells points to a commercial partner, typically set below the member facing redemption value. It is the partner's cost to buy the programme's currency for its own promotions, and it dictates whether a partner earn offer is economically viable.
The wholesale point rate is the price a programme charges a partner for each point the partner buys to award to its own customers. It is not the worth of a point. It is a cost the partner pays to rent the programme's currency. Confusing that cost with member value is the first mistake, and it is a mistake every programme benefits from when the gap is wide.
The rate is set against what the programme expects to pay out when points are redeemed, not against the number printed on a redemption chart. That expected payout includes the liability for redemptions, the cost of running the earn side, and an allowance for points that will never be used. A partner who buys at a rate below that expected payout is receiving a subsidy, which is unusual. More often the wholesale price sits above the cost but far below the member facing redemption figure, and the spread is the programme's margin on the deal.
Work the numbers to see the distortion. A hotel chain buys 10 million points from an airline programme at 0.7 cents per point, paying 70,000 dollars. A member redeems 10,000 points for a hotel night that the chain usually sells for 100 dollars, giving the member a value of 1 cent per point. The partner has paid 0.7 cents for each point but the member uses it at 1 cent, so the partner loses 0.3 cent per point. On that 10,000 point stay, the partner is out 30 dollars, which is a 30 percent discount on the room. That is a coupon, not a currency.
The trap is hiding the wholesale rate. Most programmes refuse to publish it, so a partner cannot compare one programme's ask against another. That secrecy lets a programme sell points at a low price while advertising a high member value, creating a spread that is pure marketing. The wholesale rate should be public, like the price of any wholesale currency. If it is not, the partner is buying blind and the member is being told a story about value that the numbers do not support.
There is a second trap. The wholesale rate is often disconnected from the programme's accrual cost, which is what the programme actually incurs when an active member earns points through activity based qualification. If the wholesale rate is below the accrual cost, the programme loses money on every partner point unless enough of those points expire or go unredeemed. The active member rate, the percentage of members who actually engage with earn and redeem, determines how sharp that loss is. In other words, the wholesale rate contains a hidden breakage assumption that nobody outside the programme can audit.
The wholesale point rate is the single number that reveals whether a programme treats its points as a stored value liability or as a marketing expense. A programme that sells points at a rate close to its true liability is running a currency. A programme that sells at a fraction of the member facing rate and hides the number is running a coupon book. One of those is a loyalty programme. The other is a discount scheme dressed up as one.