How to Set Your Points Earn Rate: Points per Dollar, Worked Out
By Alva Chew · Updated
In short Most small businesses should give 1 point per US$1 and set the reward so customers get back about 3% to 10% of what they spend, for example 100 points for US$5 off. Cost the reward at what it costs you, not its menu price, and check that a typical regular reaches the first reward within a few weeks. Then round the numbers so a customer can work them out in their head.
How many points per dollar should a loyalty program give?
For most cafés, restaurants and shops, 1 point per US$1. It is the rate customers expect, and they can check it against their receipt. The number that decides how generous your program is sits on the other side: how many points a reward needs.
A points-based loyalty program has two settings that work together:
- Earn rate: points per dollar spent.
- Reward threshold: how many points buy a reward, and what that reward is worth.
Divide the reward value by the spend needed to reach it and you get the give-back rate. With 1 point per US$1 and 100 points worth US$5, the customer spends US$100 to get US$5. That is a 5% give-back. Set the give-back first, then pick the earn rate and threshold that produce it with round numbers.
The method below takes four steps: choose a target give-back, cost the reward at cost price, check time to the first reward, and round.
Step 1: What give-back rate should you aim for?
Start with a target of about 3% to 10% of spend, measured at menu or shelf price.
| Give-back at menu price | Suits | Example at 1 point per US$1 |
|---|---|---|
| 3% | Shops with thin margins, high bills | 100 points = US$3 off |
| 5% | Most restaurants and shops | 100 points = US$5 off |
| 8% to 10% | Cafés rewarding with a drink or a pastry | 50 points = a US$5 drink |
This range is our working guide, not a published benchmark. Below 3%, the first reward is a long way off for most regulars. Above 10%, the cost gets hard to carry on a small business margin, unless the reward is an item that costs you far less than its price.
The give-back is a rate on spend from members only. A customer who never joins costs you nothing, and a member who would have visited anyway is the cost you are paying to keep.
Step 2: What does the reward actually cost you?
Two rewards with the same menu value can cost you very different amounts.
- A free item costs you its cost price: ingredients, packaging and a little staff time. For example, if a US$5 drink costs you US$1.25 to make, a 10% give-back paid in drinks costs you about 2.5% of member spend.
- Money off the bill costs you its full face value. US$5 off is US$5 of revenue you don’t collect, whatever the customer buys with it.
That is why cafés can afford a higher give-back than a clothing shop. Work out your own figure from your supplier invoices. The cost percentages in this guide are examples to replace with yours, not industry benchmarks.
| Reward | Menu value | Your cost (example) | Cost as share of the reward |
|---|---|---|---|
| Free coffee | US$5 | US$1.25 | 25% |
| Free dessert or starter | US$10 | US$3 | 30% |
| US$10 off the bill | US$10 | US$10 | 100% |
| Item from a set shelf | US$10 | US$5 | 50% |
If you want money off for its flexibility, use a lower give-back. If you want to be generous, reward with an item that has a low cost price.
Step 3: How long should it take to reach the first reward?
Work out what a typical regular spends in a month: spend per visit times visits per month. Then divide the spend needed for the first reward by that number.
A reward that a regular reaches within a few weeks keeps them counting. A reward that is months away is easy to forget. Research supports keeping it close. In a study at a café at Columbia University, members of a reward program bought coffee more often as they got nearer to the free drink.
| Finding | Scope | Source |
|---|---|---|
| Time between purchases fell by about 20% (roughly 0.7 days) as members neared a free coffee | Café reward program at Columbia University | Kivetz, Urminsky and Zheng, 2006 |
As a working rule:
- Café: first reward in about 2 to 3 weeks for someone who comes in a few times a week.
- Restaurant: first reward in about 2 months for a regular who comes twice a month.
- Retail shop: first reward in about 2 months for a regular shopper.
If the time is too long, lower the threshold or reward with a cheaper item. Avoid fixing it by raising the give-back on money-off rewards, which gets expensive quickly.
Step 4: How do you round the numbers?
Customers trust a program they can work out in their head. After the first three steps, round to numbers that pass that test.
- Keep the earn rate whole. 1 point per US$1 is the default. Use 10 points per US$1 only if your bills are very small and you want visible progress on each one.
- Avoid fractions. “0.5 points per dollar” or “1 point per US$1.50” makes customers do sums at the till.
- Use round thresholds. 50, 100, 200 or 500 points.
- Round the bill down. Award points on whole dollars, so a US$8.60 bill earns 8 points at 1 point per US$1.
- Show the balance in dollars. “You have US$3.50 to spend” brings people back. “You have 70 points” makes them guess.
If your café sells mostly one drink, you can mirror the simplicity of “buy 9, get the 10th free” with points. At 1 point per US$1 and a US$5 drink, 50 points for a free drink returns the same 10%, and a large breakfast order still earns more than a single coffee. Stamp cards and tier schemes add rules on top of this, and points give you the same result with one rule.
Worked examples: a café, a restaurant and a shop
All three use 1 point per US$1. Spend and cost figures are illustrations. Replace them with your own.
| Café | Restaurant | Retail shop | |
|---|---|---|---|
| Typical regular | US$8 a visit, 12 visits a month | US$60 a visit, 2 visits a month | US$35 a visit, 3 visits a month |
| Monthly spend | US$96 | US$120 | US$105 |
| Earn rate | 1 point per US$1 | 1 point per US$1 | 1 point per US$1 |
| Reward | 50 points = a free drink (US$5 menu) | 200 points = a free dessert or starter (US$10 menu) | 200 points = US$10 off |
| Give-back at menu price | 10% | 5% | 5% |
| Reward cost to you | About US$1.25 (2.5% of spend) | About US$3 (1.5% of spend) | US$10 (5% of spend) |
| Time to first reward | About 7 visits, under 3 weeks | About 4 visits, about 2 months | About 6 visits, about 2 months |
Two things stand out in these illustrations. The café can afford the highest headline give-back because its reward costs a quarter of its menu price. The shop pays the full value of every reward, so 5% money off is already a real cost. A shop with thin margins could drop to 300 points for US$10 off, a 3.3% give-back, and accept a slower first reward.
What should you check before you launch?
- Does a typical regular reach the first reward within the time you chose?
- Is the reward costed at your cost price, not your menu price?
- Can a customer work out their progress from the receipt?
- Have you decided whether points expire, and how you will tell customers?
- If you have more than one outlet, does the balance work at all of them?
Then run the numbers on your last month of sales. If 20% of your revenue had come from members, what would the rewards have cost? Our loyalty program cost guide covers the software side, and the café guide has more on rewards for coffee and brunch menus.
Setting the earn rate in Gimify
Gimify earns points in proportion to each purchase, and staff add or redeem them on any phone at the counter. The free plan covers one outlet with unlimited members, and the unlimited-outlets plan keeps one points balance across every branch.
Questions owners ask
How many points per dollar should a loyalty program give?
1 point per US$1 suits most cafés, restaurants and shops, because customers can follow it without a calculator. The generosity comes from the reward threshold. 1 point per US$1 with 100 points worth US$5 returns 5% of spend.
What percentage of spend should a loyalty program give back?
About 3% to 10% at menu or shelf price. Shops with thin margins sit near the bottom of that range. Cafés that reward with a drink can sit near the top, because a drink costs far less to make than its menu price.
Should the reward be a free item or money off?
A free item usually costs you less. A US$5 drink might cost US$1.25 to make, while US$5 off the bill costs the full US$5. Money off is easier to apply across a varied menu, so many shops use both.
How long should it take to earn the first reward?
Aim for a few weeks for a regular. Research on café reward cards found customers bought more often as they got closer to a reward, so a target that feels months away loses that effect.
Can I change my earn rate later?
You can, but raising it is easy and cutting it upsets regulars who have been saving. Test the numbers before launch and give notice before any cut.
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