Setting earn and redeem rates

Do not start with the earn rate. Start with the reward you want to hand over and the percentage of your takings you are willing to give back. The earn rate is the last number you work out, and it is the least important one in the program.

All amounts are in whatever currency you take payment in.

Work backwards from the reward

1. Pick the reward and write down two numbers: what it sells for, and what it costs you. A 3.00 coffee might cost you 0.60 in beans, milk and cup.
2. Choose your give-back. Two to five per cent of spend is the usual band. Below 2% nobody notices. Above 5% you had better be sure the extra visits are real, because you are also paying for every visit that was going to happen anyway.
3. Spend per reward = the reward's selling price ÷ your give-back. That 3.00 coffee at 5% needs 60.00 of spend behind it.
4. Convert that into visits. Spend per reward ÷ your average ticket. Five to ten visits is right for a first reward. If you get thirty, choose a cheaper reward rather than a fatter give-back.
5. Pick a round earn rate and multiply. Reward cost in units = spend per reward x earn rate.

Worked example: a café

Average ticket 5.00, and a regular comes twice a week. The reward is a pastry that sells for 1.50 and costs 0.40 to make.

• Give-back of 5%: 1.50 ÷ 0.05 = 30.00 of spend per reward.
• In visits: 30.00 ÷ 5.00 = six visits, about three weeks. That is comfortably in range.
• Earn rate 1, so the pastry costs 30 points.

Now the part owners miss. You hand over 0.40 of pastry for every 30.00 spent, which is 1.3% of revenue. Your customer experiences a 5% program; your accounts see 1.3%. That gap is the whole trick, and it is why the best rewards are things you make rather than things you buy in.

Add a second rung above it: filter coffee at 3.00 needs 60.00 of spend, so 60 points, twelve visits. Keep the pastry. The small one is what keeps people playing.

Worked example: a salon

Average ticket 45.00, and a client comes every six weeks, so about nine visits a year. The reward is a treatment that sells for 20.00.

• Give-back of 5%: 20.00 ÷ 0.05 = 400.00 of spend.
• In visits: 400 ÷ 45 = nine visits, which is a whole year. Too far to be a first reward.
• Fix it with a smaller first rung: a 6.00 add-on at 5% needs 120.00, under three visits.
• Earn rate 10, so a visit earns 450. The add-on costs 1,200, the treatment 4,000.

The same program at Earn rate 1 would be 120 and 400. Identical economics, different feel. Pick whichever scale lands your rewards on numbers a person can remember — naming your points covers that choice.

The other lesson here is that at nine visits a year, points alone are slow. That is exactly what Status tiers are for.

Outstanding liability is a debt you are writing

Every unit you issue and nobody has spent is a promise to hand something over later. Overview totals it in Outstanding liability, the tile whose hint reads "Points customers still hold".

You can trust that number: every point issued, spent or corrected is a permanent line in a ledger, and balances are derived from it.

Translate it into your own goods before you worry about it. Three hundred members holding 22 points each is 6,600 points. At 30 points a pastry that is 220 pastries, and at 0.40 each, 88.00 of real cost if every one were claimed tomorrow. The 88.00 is the number to be comfortable with, not the 6,600.

Assume all of it gets claimed. Some never will, but a plan that only works if your customers forget is not a plan.

If liability keeps climbing while Redemptions stays flat, the reward is too far away rather than too small. Programs also carry an expiry policy, shown on the program page — today you ask us to set it. Rewards, redemption and expiry explains what it changes.

What you actually type into the builder

Earn rate is units per 1 unit of currency spent. A 1 means one unit per 1.00 spent. It is not a percentage and it is not per visit.

Reward cost is in your own units, entered per reward under Rewards, one line at a time with Add reward. The unit name you set in What is one unit called? changes nothing in the arithmetic.

Run the formula backwards to check any program you are shown: give-back = the reward's selling price ÷ (reward cost ÷ earn rate). If it comes out above 10%, look again.

Round reward costs to numbers people can hold in their heads. 30, 50, 100, 250. Never 37. Then is your program working tells you what to check a month after launch.