Harnessing the Power of Financial Modeling: Part 2

Jul 16, 2023

PART 2 – Whose Model is it Anyway? 

Organizations often request financial models for a variety of reasons. Typically, they want to assess program success, mitigate liability expenses, or optimize offers amongst a variety of other reasons. Sometimes, they come to third-party experts like Kobie, not because they don’t know the answer, but because they need someone impartial to back them up. In these cases, financial modeling serves as a valuable tool for organizations looking to make informed decisions and drive alignment.    

Aligning day-to-day actions with broad program goals can enhance measurement and reporting accuracy. Financial responsibility and the program’s true purpose can sometimes be at odds with each other, leading to the need for careful consideration and evaluation. Organizations often focus on day-to-day tactical decisions and hope for positive outcomes, but fail to make that crucial alignment, a discrepancy that can make measurement and reporting challenging.  Many businesses focus too much on justifying their actions in the present, rather than aligning them with the future.  The information gleaned from a well-informed financial model can be a giant step toward that balance.    

To help action on the information from your financial models, consider categorizing it into big-picture construct questions, operating questions, and relevancy questions to help guide decision-making at different levels. The big picture construct questions refer to the broader, strategic questions that need to be addressed over multiple time periods. These questions help us understand the bigger picture and guide our decision-making. On the other hand, operating questions focus on the day-to-day activities and ensure that we are asking the right questions and collecting the necessary data to keep things running smoothly. Lastly, relevancy questions highlight the need to assess whether our programs are still relevant to our customers. The combination and balance are what ensures you are looking at the program holistically, and truly able to evaluate it from all angles.   

Identifying Trends and Shielding from Distractions 

There are trends across industries that can and do impact your business.  Identifying these trends and addressing concerns relating to them is important in the measurement and success of a program.  It is also important to note that there are some popular buzzwords, such as AI, Metaverse, and personalization, that could be distractions from focusing on what truly matters, emphasizing the importance of understanding these key trends by industry.  It is critical to monitor and measure trends as they relate to your customers to understand the potential impacts on your overall loyalty program.  

Key Trends in Retail: 

  • Engagement between transactions  
  • Delivering seamless multi-channel experiences  
  • Increasingly complex MarTech systems  
  • Post-acquisition activation 
  • Managing loyalty program costs 

Key Trends in Financial Institutions: 

  • Disruptive competition 
  • Digital relationships  
  • Eroding brand trust  
  • Increased regulations  
  • Efficacy of rewards programs  

 Key Trends in Travel and Hospitality: 

  • Improving the core travel experience  
  • Managing disjointed legacy technology  
  • Driving non-stay or ancillary revenue  
  • The permanent decline of business travel  
  • Loyalty program changes away from travel  

Simply having a great program with good value is not enough. The experience surrounding the program and how it is delivered must also be considered. Failure to evaluate the key trends that impact your business and meet these expectations can result in customers feeling unappreciated and undervalued. Financial modeling serves as a powerful tool for predicting such outcomes and where to focus efforts without being distracted by irrelevancies.  

The ultimate goal is to help decision-makers understand that market influences extend beyond just the financial aspects of a program. By bringing them into the “why,” we can demonstrate how external factors impact the overall program.  

In Part 3, discover how to use regular assessment of data and analytics to close the gap between expectations and reality. 

To learn more about Kobie’s Financial Modeling COE (Center of Excellence), reach us today.