Choose a reward the customer values at three or more times what it costs you, that they would pick for themselves, that is a whole thing rather than a percentage, and that they collect at your counter. In practice that usually means something you make or prepare in the shop, often the very item your regulars already buy, sometimes with a choice or a size up. Money off is the weakest reward a shop can offer, because every dollar of it costs a full dollar, and it is forgotten by the time the customer reaches the footpath.
The one ratio that matters
Divide what the reward is worth to the customer by what it costs you to hand over. The customer's number is the shelf price they know, which is the perceived value. Your number is the real cost: ingredients, packaging and a fair share of the labour for something you make, or the wholesale price for something you buy in. That second figure is your reward cost.
The ratio sorts rewards quickly. Things you make in the shop usually come out between three and seven to one. Things you buy in and resell usually sit between one and a half and two to one. Money off is exactly one to one, always, because a ten-dollar discount is ten dollars out of the till and worth exactly ten dollars to the person receiving it.
A high ratio is what lets a reward feel generous while costing little. A reward the customer values at $16 and you can supply for $3 does more for the regular, and less damage to the margin, than a $5 voucher ever could.
Five questions for each candidate
Write down four or five possible rewards and put each through the same questions.
Would a regular choose it for themselves? A reward nobody wants is not generous at any ratio. The best test is to ask three regulars which they would pick.
What does it really cost you? Include the cup, the tub, the wrapping and the time.
What is it worth to them? Use the price on your board, not a price you imagine.
Is it collected at the counter? A reward picked up in the shop brings the regular back in, and the visit is often worth more than the reward.
Does it slow the counter at the busy moment? A made-to-order item at the height of the Saturday rush costs more in queue than it does in ingredients.
Kinds of reward that tend to score well
The usual. The thing the regular buys every visit, given free. They know its price exactly, so they know exactly what they have been given.
A choice up to a cap. "Any loaf you like", "a bunch up to $30", "a bottle up to $25 from the front shelf". Choice raises what the reward feels worth; the cap holds what it costs.
A size or an upgrade. A double scoop instead of a single, a large instead of a regular. Cheap to give and fine on a short card, but it can feel thin as the reward for a long one.
The thing they would not buy for themselves. A take-home tub, a jar of the house relish, a slab of the good cheese. These rewards feel like a treat rather than a refund.
Spare capacity. A service business can give something that costs little on a quiet day: a weekday wash, a dry, a trim of the fringe between appointments.
What scores badly: percentages, money off on low-margin lines, vouchers for some other business, and anything with conditions in small print.
A worked example: Frostwick Gelato
Frostwick Gelato is a fictional gelato shop where an average visit is $9.40. The card is eight stamps, one per visit, so filling it means spending about $75.20. The owner writes down five candidates:
- A single scoop cup: sells for $6.50, costs $0.95, a ratio of about 6.8 to 1.
- A double scoop: sells for $8.90, costs $1.60, about 5.6 to 1.
- A 500 ml take-home tub of any flavour: sells for $16, costs $3.10, about 5.2 to 1.
- 20 percent off the next visit: on an average visit, $1.88 off, costing $1.88, exactly 1 to 1.
- $5 off the next visit: costs $5, exactly 1 to 1.
The two discounts drop out at once. The single scoop has the best ratio and the lowest cost, 1.3 percent of what the regular spent to earn it, but after eight visits and $75, a single scoop feels like a token.
The tub costs more, $3.10, or about 4.1 percent of the spend. It is worth $16 to the customer, it is something most of them would not buy for themselves every week, and it goes home and sits in their freezer with the shop's name on the lid. In winter, when cones slow down, a tub is the reward people still want. And because tubs are packed in advance and kept in the freezer, handing one over takes five seconds even on a hot Saturday night.
The owner asks three regulars. All three pick the tub. The reward becomes "a 500 ml take-home tub of any flavour".
On Counter Club the reward is a line of up to 200 characters on the Loyalty card page, shown on the join page, so a cap or a size goes straight into the wording; setting the card covers the field.
Mistakes to avoid
Choosing by gut. Most owners pick a reward that is meaner than they can afford, because they think in shelf prices rather than costs. Do the sum.
Adding conditions. Weekdays only, not with other offers, excludes the premium flavours: each condition is a conversation at the till and a small disappointment.
Picking something you run out of. A reward that is out of stock on the day a card fills is a promise broken in front of the queue.
Undercutting the regular's habit. A free small coffee for someone who always orders a large feels like a downgrade, not a gift.
Changing it often. Pick well and leave it for a season. If you do change it, rewards earned before the change keep the old reward, as changing the target or reward explains, and regulars should hear about it first.
What to do this week
- Write down four or five possible rewards.
- For each, note the shelf price and your real cost, and work out the ratio.
- Ask three regulars which one they would choose.
- Work out the cost of your favourite as a share of the spend needed to fill the card.
- Write it in plain words, with a cap if the value could vary, and leave it alone for a season.