Points-Based Loyalty Program: How Points Work and How to Set Them

By Alva Chew · Updated 2026-11-01

Definition 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.

How does a points program work?

The customer earns points in proportion to what they spend. You set two numbers:

The earn rate. How many points each dollar earns. For example, 1 point per US$1.
The redemption rate. What the points are worth when spent. For example, 100 points = US$5 off.

Those two numbers decide how generous the program is. With 1 point per US$1 and 100 points worth US$5, a customer gets back 5% of what they spend. Raise the earn rate to 2 points per US$1 and they get 10% back. Work this out before launch, because cutting a reward later upsets your regulars.

A worked example

Customer	Spend per visit	Visits a month	Points a month	Value earned
Coffee regular	US$5	12	60	US$3.00
Family dinner	US$80	2	160	US$8.00
Weekend bakery shopper	US$20	4	80	US$4.00

All three get the same share of their spend back from one rule. Nobody has to learn which items count or how many visits are left.

Why are points simpler than the alternatives?

Every customer already understands spend, earn and redeem. Other systems ask them to learn something new.

System	The rule a customer has to learn	Fair across a US$5 and a US$80 bill?
Points	Earn per dollar, redeem for money off	Yes
Stamp card	What counts as a stamp, how many are left, when the card resets	No, each earns one stamp
Tiers	Status levels, spend thresholds, when status lapses	Partly, by period total
Vouchers and games	Which offer applies, when it expires, how to claim it	Depends on the offer

The more rules a program has, the more often staff have to explain it at the counter and the more often customers stop paying attention.

What about a shop that sells one item at one price?

A coffee bar or juice stand with one main product can still run points. If most drinks cost US$5 and you give 1 point per US$1, each drink earns 5 points. Set a reward of 50 points for a free drink and you have the “10th one free” offer customers recognise from a stamp card, with no separate card to run.

The difference shows when the menu grows. Add a US$7 sandwich or a bag of beans and the same rule rewards it fairly, with nothing to reprint or re-explain. Our guide to loyalty programs for cafés works through the numbers for a coffee and brunch menu.

What to watch when you set it up

Show the reward in dollars. “You have 340 points” means little. “You have US$17 to spend” brings people back.
Keep the first reward close. If a new member needs three months to reach anything, many stop counting.
Decide on expiry. Points that never expire are simple to explain. Points that expire build up as a cost you never pay out, which is called breakage. Tell customers clearly either way.
Let points travel. If you run more than one outlet, a customer should earn at one and redeem at another.

Before you pick software, check what free loyalty apps actually include and what a loyalty program costs once you add outlets.

How Gimify handles points

Staff scan the member’s QR card with any phone, enter the bill amount, and points are added at the earn rate you set. Earning always follows the purchase amount, and the same balance can be redeemed at any of your outlets. For the wider definition, see what a loyalty program is.

Questions owners ask

How many points per dollar should I give?

Set the earn rate and the redemption value together so customers get back about 5% to 10% of spend. For example, 1 point per US$1 with 100 points worth US$5 returns 5%.

Are points better than stamps?

Points need one rule, earn per dollar and redeem for money off, and they stay fair when bill sizes vary. A US$80 dinner earns more than a US$5 coffee. If you sell mostly one item at one price, points per dollar already work like a stamp card, with no second set of rules.

Should loyalty points expire?

Either can work. Points that never expire are easy to explain. Points that expire reduce what you pay out, but customers must be told clearly and given notice.

Can customers use points at a different outlet?

It depends on the program. A program with one shared balance lets customers earn at one outlet and redeem at another. Check this before choosing software if you run more than one branch.

How soon should a new member reach their first reward?

Within a few visits. Set the first redemption low enough that a regular reaches it in two to four weeks, so they see the program pay out before they forget it.