How generous should a loyalty card reward be?

Two numbers decide a points scheme: what a pound earns, and how many points buy a reward. Get the pair wrong and the scheme either goes unnoticed or quietly eats your margin.

Work from visits, not from points

Customers do not think in points. They think in how long until I get something. So choose how many visits a reward should take, then work the numbers backwards from your average basket.

Visits to a £5 reward, at 2 points per pound and a 250 point threshold
Average basket	Points a visit	Visits to a reward	Effective discount
£3.50, a coffee shop	7	36	4.0 per cent
£8, a lunch trade	16	16	3.9 per cent
£15, a convenience basket	30	9	4.2 per cent
£40, a butcher or off licence	80	4	4.2 per cent

The discount is the same in every row, because it is set by the ratio of the two numbers rather than by either one alone. What changes is how it feels: thirty six visits to a reward is a scheme a coffee shop customer gives up on, and four visits is one a butcher's customer notices immediately.

The rule of thumb that works

Aim for a reward every eight to twelve visits. Often enough to stay interesting, rare enough to be worth having. Then set the threshold so that your own average basket gets there in that many visits.

The sum is: threshold equals average basket, times points per pound, times the number of visits you want. A ten pound basket at two points a pound over ten visits is a two hundred point threshold.

What the reward should be worth

Between three and five per cent of what the customer spent getting there. Below two per cent nobody notices. Above eight per cent you are running a permanent sale and would do better cutting your prices, which at least attracts people who have never heard of you.

Round numbers beat clever ones

Ten points a pound and a reward at a thousand points is easier to explain across a counter than seven points a pound and a reward at six hundred and forty. A scheme staff cannot explain in one sentence is a scheme that does not get mentioned, and a scheme nobody mentions does not get joined.

One thing to decide before you launch, not after

What the points are worth in pounds, published where customers can see it. A scheme that never states the value is one where the value can be quietly reduced later, and customers can tell the difference. It also makes your own liability calculable, which matters at the end of the year.

Written for shopkeepers rather than for a search engine. The arithmetic here is yours to check, and if a figure looks wrong for your trade, tell us and we will correct it.