Valuation of Loyalty Tokens

Loyalty programs have transformed from a marketing lever that fosters customer loyalty, to a dependable collateral for financing transactions. How can they be valuated?

Abstract

Valuation of tokens is a wager on the platform adoption. This study investigates the effect of platform adoption on the valuation of loyalty tokens and the contingent claims with the token as an underlying. The platform adoption is modelled using the classical Bass Model. The example selected is that of airmiles, but the approach could be extended to loyalty token with other numeraires as well.

After assuming few monetary policy rules for the platform governance, the proposed simple model predicts that the Bass Model parameters could have significant influence on the valuation of loyalty tokens and the contingent claims with the token as an underlying.