About Effective Cost-Back Ratio

Understanding how we calculate the value of your rewards

What is ECBR?

The Effective Cost-Back Ratio (ECBR) measures how much value you get back per dollar spent when redeeming rewards. It's expressed as a percentage that shows the "return on investment" for your loyalty program participation.

The Calculation

Points per dollar is the rewards ratio of each restaurant. For example McDonald's gives us 100 points per dollar

So spending dollars gives us points which we must convert back to "dollars" by reedeming them for a specific item. This gives us a second Dollars per Point ratio that depends on the item's price and how many points it costs.

$$ \begin{align*} \text {PPD} &: \text{Points per dollar} \\ \text{DPP} &: \text{Dollars per Point (Item Dependent)} \\ \text{ECBR} &= \text{DPP(Item)} \times \text{PPD} \end{align*} $$

Following the units through we get dollars per dollar, or in otherwords cashback 🤑🤑🤑

$$ \frac{\text{Dollars}}{\text{Dollar}} = \frac{\text{Dollars}}{\text{Point}} \times \frac{\text{Points}}{\text{Dollar}} $$

Example Calculation

Let's say a restaurant offers:

  • Earning rate: 10 points per $1 spent
  • Reward item: Free burger (normally $8)
  • Points required: 500 points

Step 1: Compute DPP (Dollars per Point) for the item

$$\text{DPP}=\frac{\$8}{500\ \text{points}}=0.016\ \frac{\$}{\text{point}}$$

Step 2: Use PPD (Points per Dollar) from the program

$$\text{PPD}=10\ \frac{\text{points}}{\$}$$

Step 3: Multiply to get ECBR (Dollars per Dollar)

$$\text{ECBR}=\text{DPP}\times\text{PPD}=0.016\ \frac{\$}{\text{point}}\times 10\ \frac{\text{points}}{\$}=0.16\ \frac{\$}{\$}=16\%$$

This means you get back 16 cents in value for every dollar you spend. At 10 points per dollar, you'd need to spend $50 to earn 500 points; redeeming for an $8 burger returns 16% of that spend.

Interpreting ECBR Values

20%+ ECBR

Excellent value - prioritize these rewards

10-20% ECBR

Good value - worth redeeming

5-10% ECBR

Fair value - consider carefully

<5% ECBR

Poor value - look for better options

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