Grocery methodology overview for contracts

Last updated: July 2023

Methodology overview:

Upside measures, reports, and bills based on the following methodology. Upside may update this methodology in its reasonable discretion. 

Key Terms

  • Network - a geographically concentrated set of merchant locations whose sales are treated jointly for calculating the incremental revenue driven by Upside. Typically, all locations within a single DMA belong to a single network and locations within a different DMA belong to a different network, but custom setups can be supported by Upside. 
  • User - an individual who downloads and uses the Upside app. A user may upload one or more credit / debit cards into the Upside app and, once an Upside offer is claimed at a location, must use one of these cards at the location to successfully earn cash back from Upside. 
  • Loyalty Identifier - a unique identifier provided by the merchant to track spend behavior of an individual or household across multiple locations and across time
  • Payment Identifier - A generalized identifier used to associate sales behavior to a specific Upside user or to non-Upside customers used as a performance baseline. Typically, the loyalty identifier is used as the payment identifier if provided by the merchant and present on the transaction, while the first 6 and last 4 digits of the credit card number are used as the payment identifier when the loyalty identifier is not present or not provided by the merchant

Incremental Revenue Calculation

Incremental revenue is the core Upside measurement and is evaluated at a user level for each network. Total merchant performance is then aggregated across all users and across all networks. 

If provided by the merchant, loyalty identifiers are used as payment identifiers to capture an Upside user’s or non-Upside customer’s spend history. In the absence of a loyalty identifier, the first 6 digits and last 4 digits of the associated credit or debit card will be the payment identifier. As an Upside user claims offers and makes qualifying transactions at participating locations, Upside will associate the payment identifiers from these transactions with the user as the user’s “wallet”. 

For each Upside user payment identifier, Upside identifies a set of control payment identifiers (the “control group”) with similar spend behavior in the 12 months prior to the user’s first Upside transaction in the network. Upside considers spend amount, transaction frequency, seasonality, and recency when identifying the most appropriate control group. The sales behavior of the control group is designed to mimic how the Upside user would have behaved if Upside had not been introduced and serves as a performance baseline for measuring incremental revenue driven by Upside. 

At this time, Upside also calculates the difference between average sales made by the Upside user and their control group in the 12 months prior to their first Upside transaction. This “pre-period” difference will be subtracted from the measurement of incremental revenue in the “post-period” to account for any remaining deviations in performance prior to starting Upside. 

To calculate incremental revenue, we aggregate total sales for all payment IDs associated with an Upside user from the date of their first Upside transaction in the network through 7 days after their most recent Upside transaction (“Upside user sales”). Similarly, we aggregate total sales from all associated control payment identifiers over the same period, normalize these aggregate sales based on the number of distinct payment identifiers associated with the Upside user, and adjust these sales based on the pre-period difference calculated above (“difference-in-difference adjusted control sales”) . 

Incremental revenue is calculated by subtracting the difference-in-difference adjusted control sales from the Upside user sales. If the difference between Upside user sales and difference-in-difference adjusted control sales exceeds the Upside attributed sales from this user, incremental revenue is capped to the Upside attributed sales (likewise, if the difference is negative, incremental revenue is capped to zero).  The test vs. control difference is Upside’s incremental revenue and is used for all subsequent reporting. 

Calculating Merchant-Funded Promotion Costs and Profit Sharing Fees

Once incremental revenue is calculated, incremental revenue is multiplied by the average gross profit margin provided by the merchant to calculate incremental gross profit. 

If the incremental gross profit exceeds total cash back earned by the user from Upside transactions at the merchant’s locations, the merchant will fund all of these promotional costs. Upside calculates profit sharing fees by multiplying the agreed profit share percentage by the incremental gross profit minus promotional costs.

If the incremental gross profit does not exceed total cash back earned by the user from Upside transactions at the merchant’s locations, the merchant will fund promotional costs up to the measured incremental gross profit and Upside will fund the remaining promotional costs. Upside profit-sharing fees are zero. 

The above calculations occur for each user and network where incremental revenue is calculated and are then aggregated across all users and networks. Total net profit earned by the merchant is defined as total incremental gross profit minus total promotional costs and profit-sharing fees.

Return on Investment (ROI) is calculated by dividing the total incremental net profit by total program costs. Total program costs are the sum of all merchant funded customer promotions plus the upside profit-sharing fees.