8 Types of Reward Programs: Examples and How They Work

There's no single "right" way to structure a loyalty programme. What works brilliantly for a coffee shop might fail completely for a clothing boutique. A model that drives results for a national chain might be overkill for an independent business.

The good news? You have more options than ever. Digital loyalty platforms have opened up programme structures that were once only available to enterprise brands. You can now reward customers for engagement, not just spending. You can offer experiential perks alongside traditional discounts. You can build programmes as simple or sophisticated as your business needs.

This guide explores eight different approaches to reward programmes, with real examples of each. Use these as inspiration to find — or create — the model that fits your business and your customers.

1. Item-Based Stamp Cards

How it works: Customers earn a stamp with each qualifying purchase. After collecting a set number of stamps, they receive a free item — typically the same product they've been buying.

Example: Buy 9 coffees, get the 10th free. The card resets after redemption and the cycle begins again.

This is the most traditional loyalty model, and it endures because it works. The simplicity is its strength: customers understand it instantly, staff can explain it in seconds, and there's no complicated maths involved.

Best for:

• Cafés and coffee shops

• Quick-service restaurants

• Salons and barbershops

• Car washes

• Any business with frequent, similar-value purchases

Why it works:

Stamp cards tap into powerful psychology. The visual progress of filling a card creates motivation. The goal gradient effect means customers visit more frequently as they approach the reward. And the tangible nature of "stamps" (even digital ones) makes progress feel real.

For businesses with high-frequency transactions, stamp cards also make economic sense. Giving away every tenth coffee costs you roughly 10% in product — but customers who collect stamps visit more often and feel more connected to your business than those who don't.

With Perkstar, digital stamp cards work exactly like this model. Customers save their card to Apple Wallet or Google Wallet, earn stamps with each visit, and redeem when they hit their target. Simple, effective, proven.

2. Spend-Based Points Programmes

How it works: Customers earn points proportional to how much they spend. For example, 1 point per pound spent. Points accumulate and can be redeemed for rewards at various thresholds.

Example: Boots Advantage Card awards 4 points per £1 spent. Each point is worth 1p, effectively giving customers 4% back on every purchase to spend in-store later.

Spend-based programmes reward customers who spend more, which feels fair and incentivises larger purchases. They're particularly effective when transaction values vary significantly.

Best for:

• Retail shops with varied price points

• Full-service restaurants

• Service businesses with different treatment levels

• Any business where "per visit" rewards would unfairly benefit small spenders

Why it works:

Points programmes create a sense of accumulation that stamps don't quite match. Watching a points balance grow feels like building savings. And because points convert to monetary value, customers understand exactly what they're earning.

The flexibility is valuable too. You can offer multiple reward tiers (redeem 100 points for £5 off, 250 points for £15 off), run bonus points promotions, and adjust point values without changing the fundamental programme structure.

Considerations:

Points programmes require slightly more explanation than stamp cards. Make sure customers understand both the earning rate (how many points per pound) and the redemption value (what those points are worth). Confusion kills engagement.

3. Percentage Cashback Model

How it works: Customers receive a percentage of their spend back as credit toward future purchases. This credit accumulates in their account and can be spent like cash.

Example: The Co-op Membership Card gives members 5% back on selected purchases. This credit sits in their account until they choose to spend it.

Cashback feels different from points psychologically. "5% back" is immediately understandable — customers know exactly what they're getting without converting points to value.

Best for:

• Grocery and convenience stores

• Retailers with regular repeat purchases

• Businesses wanting maximum simplicity in their value proposition

Why it works:

Cashback programmes are transparent and straightforward. There's no ambiguity about what customers earn or what it's worth. This clarity can drive higher engagement than more complex points systems.

The model also encourages customers to return to spend their accumulated credit — creating a natural incentives for repeat visits without requiring complicated reward structures.

Considerations:

Cashback programmes commit you to a specific margin impact. Offering 5% back means your effective margin on loyal customers is 5% lower than sticker price. Make sure your economics support this before committing.

4. Experiential Rewards Model

How it works: Instead of (or alongside) discounts and free products, customers earn access to experiences, VIP treatment, and exclusive perks.

Example: Nordstrom's Nordy Club offers members benefits like exclusive event access, curbside pickup, free alterations, and early access to sales. These perks don't cost the company much but feel valuable to customers.

Experiential rewards tap into a fundamental shift in consumer preferences. Research consistently shows that younger customers in particular prefer experiences over things. Social currency matters more than savings for many consumers.

Best for:

• Businesses where experience is part of the value proposition

• Brands building community around their products

• Businesses with natural experiential perks to offer

• Premium or lifestyle brands

Why it works:

Experiential rewards create stories. Nobody posts about a 10% discount, but an invitation to an exclusive preview event? Early access to a limited-edition release? A behind-the-scenes experience? Those are shareable moments that create word-of-mouth and social proof.

Many experiential rewards also cost the business little or nothing. Priority booking doesn't cost anything. Early access to new products is essentially free. These perks feel valuable to customers while having minimal margin impact.

For small businesses:

You might think experiential rewards are only for big brands, but small businesses often have natural advantages here. A bakery can invite loyalty members to a decorating workshop. A boutique can host private shopping evenings. A salon can offer behind-the-scenes content about techniques. The personal touch of a small business makes these experiences feel more genuine than corporate VIP programmes.

5. Paid Membership Model

How it works: Customers pay an upfront fee (monthly or annual) to access ongoing benefits. The fee creates commitment; the benefits justify the investment.

Example: Amazon Prime charges £95/year for free delivery, streaming services, early access to deals, and numerous other perks. The membership pays for itself quickly for regular Amazon shoppers.

Paid membership flips the traditional loyalty model. Instead of earning toward rewards, customers invest upfront and receive benefits immediately. This creates strong psychological commitment — having paid, members want to extract maximum value.

Best for:

• Businesses with high-frequency customers who would benefit from ongoing discounts

• Services where premium access makes sense

• Businesses with multiple value streams to bundle

• Any business where committed customers are dramatically more valuable

Why it works:

Paid membership does something free programmes can't: it generates revenue directly. That revenue funds better benefits, creating a virtuous cycle. Members feel they're getting a deal; the business builds predictable recurring revenue.

The commitment effect is powerful too. Paid members actively seek reasons to shop with you to justify their investment. They become more loyal because they've committed, not just because they've been rewarded.

Considerations:

Paid membership only works if the benefits genuinely justify the fee. Customers will do the maths. If your membership costs £50/year, the perceived value needs to clearly exceed that — probably by a significant margin. Underwhelming benefits will generate refunds and resentment.

With Perkstar, membership cards let you create paid or qualifying membership tiers with ongoing benefits for your best customers.

6. Referral Rewards Model

How it works: Existing customers earn rewards for referring new customers to your business. Often, both the referrer and the new customer receive something.

Example: Many service businesses offer rewards like "refer a friend and you both get £10 off" or "free month for every successful referral."

Referrals are distinct from loyalty programmes but often work alongside them. A customer might earn stamps for their purchases AND bonuses for bringing in new customers.

Best for:

• Service businesses with subscription or repeat elements

• Any business where word-of-mouth is a primary acquisition channel

• Businesses with customers who have natural networks of potential new customers

Why it works:

Referrals leverage trust. A recommendation from a friend carries weight that advertising can't match. Customers who arrive through referrals often have higher lifetime value because they come pre-qualified and pre-trusting.

Rewarding both parties removes awkwardness. The referrer isn't just benefiting themselves — they're giving their friend a deal too. This makes them more likely to actually make the recommendation.

For small businesses:

Referrals can be particularly powerful for local businesses. Your customers likely know other potential customers — neighbours, colleagues, friends in the area. A formalised referral programme captures word-of-mouth that might otherwise happen informally (or not at all).

Perkstar's referral features let you set up automated rewards for both referrers and new customers, tracked and delivered without manual effort.

7. Tiered Status Programmes

How it works: Customers progress through membership levels based on their activity (usually spend or visit frequency). Higher tiers unlock better benefits — enhanced earning rates, exclusive perks, or preferential treatment.

Example: Many airline programmes use tiers: Silver, Gold, Platinum. Each level offers incrementally better perks, from priority boarding to lounge access to complimentary upgrades.

Tiered programmes gamify loyalty. The aspiration to reach the next level motivates continued engagement. The status itself becomes a reward — customers feel recognised and special for achieving higher tiers.

Best for:

• Businesses with significant variation in customer value

• Brands where status and recognition matter to customers

• Businesses wanting to differentiate treatment of best customers

• Any business with enough volume to make tiers meaningful

Why it works:

Tiered programmes acknowledge a reality: not all customers are equal. Your top 20% of customers probably generate 60-80% of your revenue. Tiers let you reward that behaviour disproportionately while still engaging occasional customers at entry levels.

Status also creates its own motivation. Many customers will spend more specifically to reach or maintain a tier, even if the incremental benefits don't strictly justify the extra spend. The status itself has value.

Considerations:

Tiers add complexity. Customers need to understand how to qualify, what each level offers, and how to maintain status. Too many tiers create confusion; too few make progression feel either trivial or impossible.

For most small businesses, simple stamp or points programmes outperform tiers. Consider tiers only if you have clear customer segments with genuinely different value levels.

8. Staff Incentive Programmes

How it works: Rewards aren't just for customers — internal programmes incentivise staff behaviour around service quality, sales targets, or skill development.

Example: Many retail and hospitality businesses reward staff for metrics like customer satisfaction scores, upselling success, or completion of training modules.

This isn't a customer loyalty programme, but it's worth including because it demonstrates the versatility of reward programme thinking. The same psychological principles that motivate customers can motivate employees.

Best for:

• Businesses wanting to improve service quality

• Teams where specific behaviours drive business results

• Businesses investing in staff training and development

• Any business where employee motivation impacts customer experience

Why it works:

Staff who feel recognised and rewarded deliver better customer experiences. Internal programmes align employee incentives with business goals. And the gamification elements — progress tracking, achievement recognition, friendly competition — can make work more engaging.

For small businesses:

You don't need elaborate systems. Simple recognition for achievements, small rewards for hitting targets, and celebration of learning milestones can significantly impact team motivation and performance.

Choosing Your Approach

With so many options, how do you decide? Start with these questions:

What does your customer behaviour look like?

• Frequent, similar purchases → Stamp cards

• Variable spending → Points programmes

• High-value, committed customers → Membership or tiers

What motivates your customers?

• Pure savings → Cashback or points

• Status and recognition → Tiers or experiential

• Convenience → Membership with practical perks

What can you sustainably offer?

• Every reward has a cost. Choose a structure where the rewards are meaningful to customers but sustainable for your margins.

How much complexity can you manage?

• Simple programmes outperform complex ones that are poorly executed. Start simple; add sophistication only when you've mastered the basics.

For most small businesses, the best starting point is a straightforward stamp card or points programme. These models are proven, understood, and effective. You can always add referral bonuses, membership tiers, or experiential perks later — but only after you've established a working foundation.

Building Your Programme

Whatever model you choose, the principles of good programme design remain consistent:

• Make it simple to understand. Customers should grasp how it works within seconds.

• Make rewards achievable. Progress should feel real, not distant.

• Make participation effortless. Digital cards that customers always have beat paper they might forget.

• Communicate the value. Customers should know what they're earning and why it matters.

Perkstar supports multiple programme types — stamp cards, points, membership, cashback, and more — so you can choose the model that fits your business or combine approaches as needed. The platform handles the technology; you focus on creating value for your customers.

Ready to build a reward programme that fits your business?

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