How to Choose the Right Loyalty Card Reward (Without Hurting Your Margins)

The reward is the entire point of a loyalty programme. It's the reason a customer scans their card instead of walking out. It's the reason they come back Tuesday instead of Thursday. It's the thing they're working toward — consciously or not — every time they visit your business.

Get the reward wrong and even the best-designed digital loyalty card will underperform. Too generous and you bleed margin. Too stingy and nobody cares. Too complicated and customers disengage before they get halfway through the card.

Get it right and the reward becomes the engine of your retention strategy: driving repeat visits, increasing customer lifetime value, and costing you significantly less than the revenue it generates. It's one of the most powerful ways to retain more customers — and one of the cheapest, if you structure it correctly.

This guide walks you through how to choose a loyalty reward that works — one that feels valuable to your customers, protects your margins, and fits your specific business. Whether you're running a café, a barbershop, a salon, a fitness studio, a restaurant, or a retail shop, the principles are the same.

The Three Questions Every Reward Must Answer

Before you pick a specific reward, run it through these three filters. If the answer to any of them is no, go back and rethink.

1. Would I be excited to earn this as a customer?

Put yourself on the other side of the counter. If you'd been visiting a business regularly and finally hit your reward, would you feel genuinely pleased? Or would you shrug and think "is that it?"

A free coffee feels like a treat. 10% off your next purchase feels like a coupon. There's a meaningful psychological difference, and it shows up in how customers engage with the programme.

2. Can I explain this in one sentence?

"Buy 8, get the 9th free." That's it. One sentence. No conditions, no fine print, no mental arithmetic.

If your staff need more than five seconds to explain how the reward works, it's too complicated. Customers don't study your loyalty programme. They glance at the card, decide whether it's worth their time, and either engage or don't. Simplicity isn't just a design preference — it's a participation requirement.

3. Does this cost me less than it's worth to the customer?

This is the sweet spot of loyalty reward design: high perceived value, low actual cost. A free flat white costs your café £0.50–£0.80 in ingredients. The customer perceives it as a £3.50+ reward. That gap between what it costs you and what it's worth to the customer is where your loyalty programme generates profit.

Why Discounts Are Usually the Wrong Reward

This is the most common mistake small businesses make with loyalty programmes, and it's worth addressing directly.

Percentage discounts — "10% off your next visit," "15% off for loyalty members," "$5 off after 10 stamps" — feel like the safe, obvious choice. But they create problems that compound over time.

Discounts train customers to wait. When the reward is a discount, customers learn that patience is rewarded with lower prices. This is the opposite of what you want. A loyalty programme should accelerate visit frequency, not teach people that your full price is negotiable. The evidence that loyalty programmes actually increase sales is strong — but only when the reward drives behaviour change rather than subsidising purchases customers would have made anyway. The evidence that loyalty programmes actually increase sales is strong — but only when the reward drives behaviour change rather than simply subsidising purchases customers were already going to make.

Discounts are forgettable. Ask someone about the last discount they received. They probably can't tell you the amount. Now ask about the last free item they earned. There's an emotional difference between "I saved £2" and "I got a free haircut." One is a calculation. The other is a story.

Discounts erode your price perception. Every time a customer receives "15% off," it subtly communicates that your standard price is higher than the product is worth. Over time, this devalues your brand in the customer's mind. A free item, by contrast, reinforces the value of what you sell — the customer experiences the full product and associates it with the positive feeling of earning a reward.

What to do instead: Offer a free product or service as the reward. The cost to you is typically lower than a blanket percentage discount (because you control exactly what's given away), and the perceived value is higher. A free blow-dry after 6 salon visits costs you staff time on a service you'd have available capacity for anyway. A 15% discount on a full treatment costs you more in direct revenue and teaches the customer to expect a lower price.

The Golden Rule: High Perceived Value, Low Actual Cost

The best loyalty rewards share a common characteristic: they feel generous to the customer but cost you far less than they appear to.

Here's how to identify these rewards in your own business.

Look at your cost of goods, not your selling price. A café sells a coffee for £3.50 but the ingredients cost £0.60. A barbershop charges £18 for a haircut but the marginal cost (the barber's time during a quiet slot) is much lower. A fitness studio sells a class for £12 but the cost of one additional person in a class that's already running is virtually zero.

The reward should be based on what it costs you to deliver, not what you charge for it. This is why free items and services almost always outperform discounts — you're giving away a product at your cost, which the customer values at your retail price.

Consider add-ons and upgrades. A free size upgrade at a coffee shop costs you an extra 10p in milk. A free conditioning treatment at a salon uses £2 of product. A free topping at an ice cream shop costs pennies. These feel like premium extras to the customer but cost you almost nothing.

Use spare capacity. If your gym has empty spots in a Tuesday afternoon class, offering a free class as a loyalty reward fills a seat that would have been empty anyway. If your barbershop is quiet on Mondays, a free cut redeemable on Mondays only turns dead time into a retention tool. The cost is effectively zero because the capacity existed regardless.

Reward Ideas by Business Type

Here's what works in practice, based on real programme performance data across different business types.

Cafés and Coffee Shops

Best rewards:

• Free coffee after 8 visits

• Free pastry after 6 visits

• Free size upgrade after 5 visits (good as an interim reward)

Why these work: Ingredient costs are low (£0.50–£1.00 per reward), the perceived value is high (£2.50–£4.00), and the rewards align with what customers are already buying. The free coffee after 8 visits is the single most effective café loyalty reward — it's universally understood, easy to explain, and delivers a clean, satisfying experience. If you're looking for more café loyalty programme ideas beyond the classic stamp card, pairing a free coffee reward with seasonal or limited-time offers can keep the programme feeling fresh without increasing your cost per reward. For cafés looking to go beyond the standard stamp card, there are several café loyalty programme ideas that layer in seasonal rewards, tiered perks, and referral bonuses without adding complexity for staff.

Barbershops and Hair Salons

Best rewards:

• Free haircut/blow-dry after 8 visits

• Complimentary add-on service (beard trim, conditioning treatment, scalp massage) after 5 visits

• Free product sample after 6 visits

Why these work: Service-based rewards feel premium because the customer associates them with the full retail price, not the marginal cost to you. A free beard trim that takes 10 minutes of a barber's time between appointments costs you very little but is perceived as a £10–£15 value.

Fitness Studios and Gyms

Best rewards:

• Free class after 8 sessions

• Guest pass (bring a friend for free) after 6 sessions

• Free recovery session or consultation after 10 sessions

Why these work: Fitness rewards encourage consistency (which is what the customer wants anyway), and the cost of one additional person in an existing class is negligible. The guest pass is particularly effective because it doubles as a referral tool — the friend experiences your studio and has a high chance of becoming a member themselves.

Restaurants and Takeaways

Best rewards:

• Free starter or dessert after 6 visits

• Free drink with a main course after 8 visits

• Free signature dish after 10 visits

Why these work: Food-based rewards have high perceived value relative to food cost. A free dessert that costs you £1.50 in ingredients is perceived as a £6–£8 reward. And because the customer is visiting for a full meal anyway, the reward drives the visit without cannibalising revenue. A well-structured restaurant loyalty programme turns that single-visit diner into a regular who books every other Friday — and the reward is what makes the difference between a programme they use and one they forget.

Retail Shops

Best rewards:

• Free product (from a curated selection) after 10 visits

• Exclusive early access to new stock after 8 visits

• Free gift wrapping or personalisation service after 6 visits

Why these work: Retail rewards should feel exclusive rather than discounted. "Choose any item under £10 as your reward" feels like a gift. "10% off your next purchase" feels like a coupon. The emotional difference drives significantly different engagement levels.

How Many Stamps Should the Reward Take?

This is the second most important design decision after the reward itself.

The right number depends on how often your customers visit:

Daily visit businesses (cafés, coffee shops, lunch spots): 8–10 stamps. A regular customer earns their reward in two to three weeks, which is fast enough to stay motivating.

Weekly visit businesses (barbershops, fitness studios, salons): 6–8 stamps. The reward arrives in roughly six to eight weeks — close enough to feel achievable, far enough to protect your margin.

Monthly visit businesses (med-spas, wellness clinics, specialty retail): 5–6 stamps. With longer gaps between visits, a shorter card keeps the goal visible and prevents the programme from feeling like it takes forever.

The general principle: the reward should feel achievable within a timeframe that sustains motivation. If a customer has to visit for three months before seeing a reward, most will lose interest before they get there. If they earn it in a week, the programme costs you too much and the reward doesn't feel earned. For service businesses specifically, where visits are appointment-based and spaced weeks apart, a loyalty platform built for service businesses lets you match stamp counts to natural rebooking cycles rather than forcing a retail-style frequency.

You can always adjust. With Perkstar, changing your stamp count or reward takes minutes — no need to reissue cards or restart the programme. Test, learn, and refine.

Modern Take: The Interim Reward That Most Businesses Miss

Here's a technique that significantly improves loyalty card completion rates, and almost nobody uses it.

Place a small reward at the midpoint of your stamp card.

A café with a 9-stamp card adds a free biscuit at stamp 5. A barbershop with an 8-stamp card adds a free product sample at stamp 4. A fitness studio with an 8-session card adds a free guest pass at session 4.

Why does this work? Because of the motivation dip.

Customer engagement with a stamp card follows a predictable pattern. The first few stamps feel exciting — progress is new and visible. The last few stamps feel urgent — the goal is close and the desire to reach it intensifies. But the middle is where engagement drops off. The novelty has worn off, the goal still feels distant, and the temptation to drift away is highest.

An interim reward bridges that gap. It gives the customer a surprise payoff when their motivation is weakest, re-energising them for the second half of the card. The cost is tiny — a biscuit, a sample, a small add-on — but the impact on completion rates is significant.

In Perkstar, you can set up interim rewards alongside your main reward when configuring your stamp card. The customer earns the small perk at the midpoint and the full reward at the end. Two moments of satisfaction instead of one, and a much higher percentage of customers completing the full card.

A Step-by-Step Framework for Choosing Your Reward

Step 1: List your three best-selling products or services. These are what your customers already love. Start here, because a reward based on something customers already want will always outperform something you think they should want.

Step 2: Calculate the actual cost to deliver each one. Not the selling price — the ingredient cost, the staff time, the marginal expense. This is your true cost per reward.

Step 3: Choose the option with the biggest gap between cost and perceived value. The product that costs you £1 but sells for £5 is a better reward than the product that costs you £3 and sells for £4.50.

Step 4: Set the stamp count using the visit frequency guidelines above. Match the number to how often your customers visit, aiming for a reward cycle of two to eight weeks depending on your business type.

Step 5: Add an interim reward at the midpoint. Something small but unexpected — a free add-on, a bonus stamp, a complimentary upgrade.

Step 6: Launch, measure, and adjust. Use Perkstar's analytics to track how many customers are completing their cards and how the reward is affecting visit frequency. If completion rates are low, the stamp count might be too high or the reward not compelling enough. Adjust and test again.

Start your free 14-day trial with Perkstar →

No credit card required. Choose your reward, build your card, and launch in minutes.