How to choose rewards customers want and you can afford

The clearest evidence is a detail in the café study behind How soon should customers earn their first reward? The café, on an American university campus, ran a card that promised, after ten coffees, "one American Coffee or one baked good FREE". Members could take either. The researchers report that "the majority (85%) of reward redemptions were for coffee".

That is one café, and its members had just bought ten coffees, so the finding is narrow. Separate studies by one of the same authors point the same way: people prefer rewards "congruent with the promoted consumption effort", which means a coffee for buying coffee. We read only that paper's abstract. It gives no sample sizes, and it lists conditions under which the preference weakens.

So start with your own core item: the drink, the cut, the wash. Where there is no single item, as in a grocer's or a clothes shop, the same reasoning leads to money off the next purchase. That is how large retailers' points work. My Lotus's, for one: "You can convert every 200 points to RM1 to offset your shopping bill at Lotus's."

Then keep it near. The article linked above sets out the evidence on distance. A study of 358 grocery banners (the names supermarkets trade under) in 27 European countries, which we read in abstract, also found that the programs which helped were the basic kind "that offers direct and immediate rewards".

For a reward that is further away, the evidence points somewhere else. Two researchers ran what they describe as a series of studies "with approximately 3100 consumers". They found that "higher program requirements shift preferences in favor of luxury rewards". The more effort a reward demanded, the more people chose an indulgence over something practical. The authors' explanation is guilt: effort earns the right to a treat a person would not buy for themselves. The shift was stronger among people "who tend to feel guilty about luxury consumption".

Two limits. We read only the abstract, and it describes preferences recorded in studies. It reports nothing about rewards collected at a counter or the sales that followed. And luxury is relative: in a bakery it is the whole cake.

A discount is about as practical as a reward gets, so the finding argues against making your big reward "RM20 off". Make it the thing on your menu or your shelves that regulars look at and do not buy.

In native.cards a second, further reward needs a Points program, where each reward has its own cost. A Stamp card has one distance, because "A stamp reward always costs one full card": see Points, stamps or visits: which should you use?

Birthday rewards are common. Seven of the large Malaysian programs we read publish one in some form. Padini's FAQ offers "a 20% discount on your purchase in your birthday month (one time usage only)". FamilyMart's FAQ lists "1 free Sofuto during birthday month (1 time use only)".

That is practice, not proof. We found no sound study of what a birthday reward does to visits or spending. We found none of experiences offered as rewards either, such as a tasting or a class.

If you want one anyway, know that native.cards has no birthday trigger: it will not give a reward or send a notification on a member's birthday by itself. For a season rather than a birthday, a reward can carry a deadline, and there is a kind of item called Event: see How to use perks, offers and events, not just points.

A reward does not simply cost the price on its label. The cost lies between what you pay to make or buy it and what you would have sold it for. Where it falls depends on what the member would have done without it.

An example with made-up numbers. A café sells a latte for RM12 that costs RM3.50 to make. Its Stamp card takes eight stamps, one a visit, and a full card earns a free latte. A member who buys a latte each visit pays for eight of them, RM96, to fill it.

If the free latte is a cup the member would not otherwise have bought, it costs the café RM3.50: 3.6% of that RM96. If it replaces a latte the member would have paid for, the café gives up RM12: 12.5%.

A gift shop runs Points, one for every RM1, and puts its big reward at 300 Points. As "RM15 off" the reward costs RM15, or 5% of the RM300 spent to earn it. As a candle that sells for RM20 and cost the shop RM9, it costs 3%.

You cannot see which case each free latte falls into. Your trade tells you roughly. A free latte handed to someone who buys one every morning mostly replaces a sale. The candle, given to someone who has never bought one, mostly does not.

That is the cost argument for the pair of rewards this article opened with. The usual item is the one members want, so keep it small. A treat costs only what it costs you to supply, and rarely takes a sale away. Money off costs exactly what it says. If the dearer figure for your usual item is more than you could give away, make the reward smaller before you make it further.

The wording is where you do that. "A free drink" lets every member choose your dearest one. "A free regular latte" does not.

The other unknown is how many will be claimed. Not every member finishes a card, and no published figure will tell you your own share. Do not budget on balances lapsing either: Points and Stamps do not expire in native.cards, and only a reward can carry a deadline. For anything dear, settle the question yourself with a limit: a hundred of those candles can never cost more than RM900.

Once the program is running you can stop guessing. Rewards And Benefits shows Used at the counter, the rewards handed over in the last 30 days, and Waiting to be used, those members still hold. Multiply each by what one costs you.

Rewards are added under Programs, on Rewards And Benefits, with Add a reward. There are four kinds: Reward, Offer, Event and Benefit. This article is about the first: "Earned with stamps or points." Nothing unlocks at a spend total, a visit count or a level.

A member with enough Stamps or Points claims the reward, on your Business page or with staff at the counter, and staff hand it over. The form says of the cost: "Reaching this balance makes it claimable. It is never claimed for them." A full Stamp card says the same to its holder: "Card complete. Claim your reward at the counter". Claiming and handing over can be days apart. When the cost is taken decides what happens in between.

When they claim it takes the cost at once. If the reward has a deadline and the member misses it, "it does not come back". That suits an everyday reward with no deadline.

When it is handed over sets the cost aside at the claim, "so it can’t pay for anything else", and "If it is cancelled or expires unused, it comes back." Choose it for anything with a date, so that nobody loses Points to a week away.

Four more settings on the same step matter here.

native.cards reviews the wording and the rule before members see a reward. The form's own advice on wording is worth following: "Lead with what they get. Leave conditions for the details."