Most reward decisions are made by picking a number that feels about right. It is worth spending an hour doing the arithmetic instead, because the difference between a five stamp card and a nine stamp card is roughly half your program cost and almost no difference in how customers feel about it.
Cost the reward properly
Use cost of goods, not retail price, and express it as a percentage of what the customer spent to earn it.
A cafe with a £4.20 average order and a coffee that costs £1.30 to make:
At ten stamps, the member spent about £37.80 for a £1.30 giveaway. That is 3.4 percent. At six stamps, £21 spent, same giveaway. 6.2 percent. At five stamps, £16.80 spent. 7.7 percent.
The reward did not change. Only the threshold did, and it moved your program cost by more than double.
Sensible territory for most hospitality and services is 5 to 12 percent. Below that customers do not notice. Above it you are buying visits that were already happening.
Perceived value per pound of cost
The rewards worth choosing are the ones where what the customer feels they received is much larger than what it cost you.
An upgrade rather than a free item. Large instead of regular. An add on treatment. Often a fraction of the cost of a free item at a similar perceived value.
Something not normally available. An off menu drink, first access to a new product, a members only variant. The cost is close to zero and it produces the thing customers actually mention to other people.
Time based perks. Skipping the queue costs nothing to give and is worth a lot at your busiest hour. It also makes membership visible to everyone else standing in line.
Off peak rewards. A free item redeemable before eleven or after three. The marginal cost of serving someone during a dead hour is far lower than at peak, and it moves demand toward capacity you are already paying for.
A take home product. A bag of beans, a bottle of the product you use. Higher perceived value than a single service and it puts your name in someone's kitchen.
The format that gives the worst ratio is a straight percentage discount. It is forgettable, it is arithmetic, and it teaches customers that your prices are negotiable if they wait.
Rewards that cause trouble at the counter
Cost is only half the question. A reward that is cheap and awkward will quietly stop being offered.
Anything needing a decision. If staff have to judge whether something qualifies, some will say yes and some will say no, and customers will notice.
Anything that varies by location. If you have two sites and the reward differs, you will spend more time explaining the difference than the reward is worth.
Anything with a long list of exclusions. Every exclusion is an argument waiting to happen at your busiest moment.
Anything slow to prepare. A reward that takes four minutes to make during a queue is a reward staff will dread.
The test is whether a new member of staff on their second shift can deliver it correctly without asking anyone.
Write the terms so they can be said aloud
Reward terms should answer three things: what exactly the customer gets, what is excluded, and when it can be used.
Write them as a sentence a person can say, not as a clause. "Any regular drink, in store, not with another offer" is better than a paragraph, and it is what staff will actually repeat.
If there is an expiry, be generous and be explicit. A year of inactivity is defensible. Three months is not, and it will cost you more in goodwill than it saves in liability.
Adjusting a live program
The instinct when costs run high is to shrink the reward. Do not.
Reducing a reward reads as a takeaway, even when the new deal is objectively reasonable, and customers remember it for a long time. Raising the threshold barely registers by comparison. Going from nine stamps to eleven changes your cost meaningfully and changes how customers feel about you almost not at all.
If you do need to change something, apply it to new members and let existing cards finish on the old terms. The cost of honouring a few hundred in flight cards is small and the goodwill is not.
What to measure
Margin given away. Total reward cost divided by total member spend, monthly. This should sit near the percentage you chose. If it drifts higher, something is leaking, usually same day repeat stamping.
Redemption rate. The share of completed cards that get claimed. Low redemption is not a saving. It means customers lost interest before the finish, which usually means the threshold is too far away.
Repeat visits after redemption. Whether people come back after claiming. If they do not, your reward is functioning as an exit rather than a reason to return.
Change one thing at a time and give it six weeks, because a card takes that long to cycle.
Where to go next
For the full set of reward and bonus mechanics, 27 loyalty program ideas. For the threshold arithmetic in context, how to create a loyalty program. For the wider cost picture including software, how much a loyalty program costs.
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