Glossary
Loyalty program glossary
Plain definitions of the terms that come up when you run a loyalty program. Each page opens with a one-sentence definition, then explains what it means for your shop.
Active member
An active loyalty member is someone who earned or redeemed points within a window you choose, commonly the last 90 days. The active rate is active members divided by total members, so 300 active out of 1,200 is 25%. Pick one window, keep it fixed and count the same way each time.
Apple Wallet pass
An Apple Wallet loyalty card is a store card pass saved in the Wallet app on an iPhone, where it can show points or a balance and be updated after each purchase. The business signs each pass with an Apple-issued certificate, and customers can add it from an app, email, the web or a QR code. Most small shops get this through loyalty software, so ask any provider whether it supports Apple Wallet by name.
Average order value
Average order value (AOV) is the average amount a customer spends per order. The formula is total revenue divided by the number of orders. A café that takes US$3,000 across 400 orders in a week has an average order value of US$7.50.
Breakage
Breakage is the value of loyalty points, gift cards or credits that customers earn but never redeem. Under IFRS 15 and ASC 606, a business that can estimate breakage recognises it as revenue in step with the points that are redeemed, rather than all at once when points expire. High breakage lowers what you pay out, but it usually means members have stopped using the program.
Cashback
Cashback is a loyalty reward that returns a fixed percentage of each purchase to the customer as a money balance they spend on later visits. At 5%, a US$20 purchase adds US$1. It costs you the same as points that return the same share of spend, but a points programme lets you set what the reward is and change it later.
Churn
Customer churn is the percentage of customers you had at the start of a period who have stopped buying by the end of it. The formula is customers lost divided by customers at the start, times 100. A shop that starts the quarter with 400 customers and loses 120 has a 30% churn rate.
Coalition loyalty program
A coalition loyalty program is one points scheme shared by several separate businesses, so a customer earns at one partner and redeems at another. Research suggests it can pay off for partners, but only with careful design and shared cost rules. If you own your outlets, a single points balance across them gives you the same convenience without partners.
Cohort analysis
Cohort analysis groups customers by a shared starting point, such as the month they joined your loyalty program, and then compares how each group behaves in the months that follow. It shows whether newer members stay as active as older ones. You can do it by hand in a spreadsheet with three columns: member, join month and points earned each month.
Consent
Marketing consent is a customer's permission for you to use their contact details to send promotions. Rules differ by country. Singapore's PDPA generally requires consent and an easy way to withdraw it, while the US CAN-SPAM Act requires an opt-out rather than prior consent. A loyalty programme needs an email to run points, and that does not by itself give you permission to market.
Customer acquisition cost
Customer acquisition cost is the total you spend on marketing and promotions in a period divided by the number of new customers you won in it. If you spend US$600 in a month and win 40 new customers, your cost is US$15 each. Judge it against the gross profit a customer brings over time, and a points program gives you a way to see how many of those customers come back.
Customer experience
Customer experience (CX) is the sum of everything a customer goes through when dealing with your business, from walking in and ordering to paying and coming back. In a small shop it is mostly speed, helpful staff and convenience. A loyalty program is part of it, so keep the earn and redeem steps short enough that they never slow the counter.
Customer lifetime value
Customer lifetime value is the total gross profit you expect from an average customer over the whole time they keep buying from you. A simple estimate is average spend per visit times visits per year times gross margin times years as a customer. A café customer who spends US$6 twice a week at a 70% margin for 2 years is worth about US$874.
Customer retention rate
Customer retention rate is the percentage of customers you had at the start of a period who are still buying at the end of it. The formula is (customers at end minus new customers) divided by customers at start, times 100. A shop with 400 customers that keeps 280 has a 70% retention rate.
Customer segmentation
Customer segmentation means splitting your customers into groups that buy in similar ways, so you can treat each group differently. For a small shop the most practical split is by behaviour: how recently, how often and how much each person buys. That needs purchases tied to named customers, which a points program provides.
Digital loyalty card
A digital loyalty card is a loyalty card kept on the customer's phone instead of in their purse. It comes in three main types: a card inside a business's own app, a web card that opens in the phone's browser, and a pass saved to a phone wallet such as Google Wallet. Wallet passes and web cards need no app download, which makes joining at the counter much faster.
Digital wallet pass
A digital wallet pass is a card, ticket or loyalty card saved in the wallet app already on a customer's phone, such as Google Wallet. For loyalty, the customer adds it from a link, and it shows their balance without any app download. The business that issues the pass creates it through the wallet provider's API.
Earn and burn
Earn and burn loyalty describes a points program in two actions. Customers earn points on what they spend, then burn (redeem) those points for a reward. The program stays healthy when the points you hand out and the points customers spend are in rough balance, and a single points currency keeps both sides simple to explain.
Earn rate
A loyalty earn rate is the number of points a customer receives for each dollar or unit of currency they spend, such as 1 point per US$1. On its own it says little. Combined with what a point is worth when redeemed, it sets the share of spend you give back, which for most small businesses lands at about 5% to 10% of spend.
Enrolment rate
Loyalty enrolment rate is the share of your customers who join your program in a period. Divide new members by the customers you served, so 150 sign-ups from 600 customers is 25%. Track it by week, because the way you ask at the counter changes it faster than anything else.
First-party data
First-party data is information you collect yourself from your own customers, such as purchases, email addresses and visit dates. It differs from third-party data, which you buy or get from other sources. For a shop, a points programme is a simple way to collect it, because the customer gives an email once and every purchase after that is linked to them.
Franchise
A franchise is a business that operates under a franchisor's trademark, follows its method of operation, and pays for the right. For loyalty, the key question is who owns the member list and who funds rewards, because franchisor and franchisee are separate businesses. Agree both in writing before any points are issued.
Gamification
Gamification is the use of game design elements, such as badges, streaks, levels and challenges, in a setting that is not a game. In a loyalty program it sits on top of the reward and asks customers to learn extra rules. The research finds effects that depend on context and users, and most of it comes from classrooms, not counters. A points program gives customers one rule to learn, which is why it is the simpler way to run gamification loyalty for a café or shop.
Google Wallet
A Google Wallet loyalty card is a loyalty card saved in the Google Wallet app on a customer's phone, where it shows their points and a code staff can scan. The customer adds it from a link or QR code, so there is no separate app to install. You issue it through loyalty software, which builds the card with Google's API.
Incremental revenue
Incremental revenue is the sales you earned only because of an action, such as a loyalty program, and would not have earned otherwise. To measure it, compare members with a similar group of customers who did not join, and count only the difference. A points program makes this easier, because every sale and every reward is recorded against one balance.
Lapsed customer
A lapsed customer is someone who used to buy from you regularly and has not bought for longer than their normal gap. Set the window from how often your regulars actually visit, for example 90 days for a café or 180 days for a bakery. A points program lets you list lapsed members by name.
Loyalty fraud
Loyalty fraud is any way of obtaining points or rewards that were not earned by a real purchase. At a café, restaurant or shop the common forms are staff crediting points without a sale, one person holding several accounts to collect a sign-up bonus, and someone using another member's account. A points-only programme gives you one balance and one earn rule to check, which makes odd activity easier to spot.
Loyalty program
A loyalty program is a scheme that rewards customers for buying from the same business again. Customers join once, each purchase is recorded, and they earn a reward such as money off. The common types are stamp cards, points, tiers, paid memberships and cashback, and points are the simplest because every customer already understands spend, earn and redeem.
Loyalty program ROI
Loyalty program ROI is the gross profit your members add because of the program, minus what you spend on rewards and software, divided by that spend. The hard part is the first number, because you must count only the extra spend the program caused. A points program with a fixed reward rate makes the cost side easy to cap.
Magic link
A magic-link login lets a customer sign in by tapping a single-use link sent to their email, with no password to create or remember. It is the simplest passwordless method for a loyalty card, because the customer already has the inbox. For a points-only programme it keeps sign-in as simple as the reward.
Multi-outlet loyalty
A multi location loyalty program is one program that you run across all your outlets, with one set of earn and redeem rules and one member list. The balance can be shared or split by outlet, and the rules on where points count must be written down before launch. Sharing one points balance is the simplest setup for customers and staff.
Net Promoter Score
Net Promoter Score (NPS) is the percentage of customers who answer 9 or 10 to a 0 to 10 'would you recommend us' question, minus the percentage who answer 0 to 6. It runs from -100 to +100. For a café or shop, it only means something if you measure it the same way each time and compare it with your own past scores.
Paid membership program
A paid membership program, also called a paid loyalty program, charges customers a fee up front in return for benefits such as discounts, free delivery or member-only offers. Research on one retailer found the fee raised member spending, but it also adds pricing, renewal and benefit rules that a single points balance does not need. Points reward the same repeat customers with no fee to explain.
Passwordless login
Passwordless login is any way of signing in that does not ask the customer to create, remember or type a password. The common methods are an emailed one-tap link, a one-time code and a passkey. For a loyalty programme, an email link is the simplest, because the customer joins once by scanning a QR code and later signs in with one tap.
PDPA (Malaysia)
The PDPA, or Personal Data Protection Act 2010 (Act 709), is Malaysia's data protection law for personal data processed in commercial transactions. A shop that records customer emails for a loyalty program is in scope, and the Act has seven principles from consent to access. Since 1 April 2025 the maximum fine for breaching a principle is RM1 million, up to three years in prison, or both.
PDPA (Singapore)
The PDPA, or Personal Data Protection Act 2012, is Singapore's general data protection law. It governs how any organisation collects, uses and discloses personal data, so a shop that records customer emails for a loyalty program is covered. PDPC can fine an organisation up to S$1 million or 10% of its annual turnover in Singapore, whichever is higher, where turnover exceeds S$10 million.
Per-member pricing
Per-member pricing means the loyalty software price rises with the number of members you enrol, usually in tiers with a member cap. Your bill then grows as your programme works. Compare plans by the price at the member count you expect in a year, and look for a flat price with no member limit.
Point of sale (POS)
Point of sale (POS) is the place and moment where a customer pays for goods or services, and the till, terminal or software that records the sale. For a loyalty programme, the point of sale is where points are earned and redeemed, so the fewer steps staff need there, the more often it happens.
Point value
A loyalty point is worth whatever the reward costs in points, divided into the reward's price. If 100 points buy US$5 off, one point is worth US$0.05. Starbucks Stars range from about US$0.03 to US$0.06 each depending on the reward, and the number matters because it sets how much of each sale you give back.
Points expiry
Points expiry is a rule that removes loyalty points from a member's balance after a set time. There are two common kinds: a fixed date after the points were earned, and a lapse after a period with no earning or redeeming. Some places limit it by law, so check the rules where your customers live before you set one.
Points liability
Points liability is the value of rewards you still owe members for points they have earned and not yet redeemed. Under IFRS 15 and ASC 606, part of each sale is set aside as a contract liability for those points and moves into revenue as members redeem. You size it from the points outstanding, what each point is worth and how many you expect to be spent.
Points-based loyalty program
A points-based loyalty program gives customers points in proportion to what they spend, such as 1 point per US$1, and lets them exchange points for a reward, such as US$5 off for 100 points. The earn rate and redemption rate together set how much the customer gets back, here 5% of spend. It is the simplest system to run because customers already know how points work.
Punch card
A punch card is a paper loyalty card on which staff punch a hole for each qualifying purchase, and a full card earns a reward such as a free coffee. It needs rules for what counts, a physical card in every wallet and a way to stop fakes. A points program gives the same reward with one rule: points follow what the customer spends.
Purchase frequency
Purchase frequency is the average number of purchases each customer makes in a set period. Divide total orders by the number of unique customers who bought. A café with 2,400 orders from 600 customers in a quarter has a purchase frequency of 4. A points program ties each order to a member, so you can measure it.
QR code
A QR code is a square barcode that a phone camera reads in one scan and turns into a link or text. For QR code loyalty, the code sits at the counter, the customer scans it to join, and their points card opens on their phone with no app to download. The code only starts the sign-up, and the points do the work of bringing customers back.
Redemption rate
In loyalty programs, redemption rate has two meanings. It is either the share of issued points that customers actually spend, such as 60,000 of 100,000 points redeemed (60%), or the number of points needed for a unit of reward, such as 100 points for US$5 off. The first tells you whether customers use the program. The second, with the earn rate, sets how generous it is.
Referral program
A referral program rewards an existing customer for bringing a new customer to your business, usually once the newcomer makes a first purchase. For a small shop the simplest version pays the reward in loyalty points, so there is no separate voucher or code system to run.
Regulars
Regular customers are the people who buy from you again and again, often enough that staff recognise them. There is no standard cut-off, so pick one that fits your trade, such as three visits in 30 days, and count it from your loyalty records. A points balance gives you that count without a notebook.
Repeat purchase rate
Repeat purchase rate is the percentage of your customers who bought more than once in a set period. The formula is customers with two or more purchases divided by total customers, times 100. A shop with 500 customers where 150 bought twice or more has a 30% repeat purchase rate.
Reward catalogue
A loyalty reward catalogue is the list of rewards a customer can redeem points for, each with a points price. Keep it to one to three rewards priced in clean points, because every extra choice is another rule for customers to learn. The catalogue and the earn rate together decide how much you give back on spend.
Reward threshold
A reward threshold is the number of points a customer needs before they can redeem a reward, such as 100 points for US$5 off. Set it so a regular reaches the first reward in two to four weeks. Research on a café coffee card found customers bought faster as they neared the goal, so a threshold that is close enough to see does real work.
RFM analysis
RFM analysis ranks each customer on three numbers: how recently they bought (recency), how often (frequency) and how much they spend per order (monetary value). Score each from 1 to 5, add the scores, and the top group is your best customers while the bottom group has drifted away. It needs sales tied to named customers, which a points program provides.
Sign-up bonus
A sign-up bonus is a one-time award of points a customer receives the moment they join your loyalty program, before they have bought anything. Research on reward cards (Nunes and Drèze, 2006) found that the share of the goal the bonus covers matters more than its dollar value. In a points-only program, a bonus of 10% to 20% of the first reward is a sensible starting size.
Stamp card
A stamp card is a loyalty card that gives the customer one stamp per visit or qualifying item and a reward after a set number, such as a free coffee after nine paid ones. It is easy to explain but rewards a US$4 order and a US$40 order the same. A points program can match the same reward for a single product while also scaling with what the customer spends.
Surprise and delight
Surprise and delight marketing is an unannounced reward given to a customer who did not expect it, such as a free pastry or a bonus on their points. Research on unexpected in-store coupons suggests a pleasant surprise can lift what shoppers buy on that trip. For a small shop the cheapest way to run it is as an occasional gift in the same points currency your regulars already collect.
Tiered loyalty program
A tiered loyalty program groups customers into levels, such as silver, gold and platinum, based on spend or visits, and gives each level better rewards. Every level adds a threshold, a time period and a rule for what happens when a customer falls short. A single points balance rewards bigger spenders with more points and needs none of those rules.
Unified points
Unified points are a single loyalty points balance per customer that works at every outlet you run. A customer earns at one branch and redeems at another, and the balance is the same everywhere. The alternative is a separate balance at each outlet, which splits one customer's progress into small piles.
Visit frequency
Customer visit frequency is the average number of times each customer visits you in a set period. Divide total visits by unique customers, or divide the days in the period by that result to get days between visits. A café with 1,800 visits from 300 customers in a quarter averages 6 visits each, about one visit every 15 days.
Win-back campaign
A win-back campaign is a planned effort to get customers who stopped buying to buy again. It has four parts: a list of lapsed customers, a reason to return, a first-visit-back offer and a count of who came back. In a café, restaurant or shop it can run entirely in person, and members of a points program are the easiest group to list.
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