When you set up a loyalty programme, the first decision is the mechanic: stamps or points. Both reward repeat business, but they measure different things, and choosing the wrong one is the most common reason a programme underperforms.
Stamps reward frequency
Each visit, or each purchase of a specific product, adds a stamp. At N stamps, a reward. The classic "nine coffees and the tenth is free".
In favour: it needs no explaining, it gives a visible goal and it pulls the next visit forward. Zero friction. Against: it treats a 1.20 receipt and an 8 receipt identically. If your spend per visit varies a lot, it is unfair and it discourages the bigger basket.
Points reward spend
Each unit of currency spent adds points, which the customer redeems against a catalogue you define.
In favour: fair when the receipt varies, flexible, and it rewards spending more rather than only turning up. Against: one more layer of abstraction than a stamp, and it needs a well designed catalogue for the reward to feel reachable.
How to choose, in one sentence
If your customer spends roughly the same on every visit, use stamps. If they spend wildly different amounts, use points.
A coffee shop where almost everyone orders a coffee and a pastry: stamps. A restaurant where one day it is the set lunch and another a dinner for six: points. A hair salon with services at very different prices: points, or tiers.
Setting the points rate
The question that follows immediately is how many points per unit spent. The short answer is that the number matters less than you think, as long as it is round and it never changes: what matters is what each reward costs, not the rate.
A simple, stable rate has two advantages. The customer can do the maths in their head, and it leaves all your flexibility where you actually need it, which is in the price of each reward.
The opposite mistake is making the rate adjustable and tweaking it each season. A customer who earned ten points per unit yesterday and six today notices the rules changed, and that is the fastest way to make them stop checking their balance.
How to price the catalogue
- Work backwards from what a regular customer actually spends in three or four weeks.
- The first reward has to fall inside that range. It is the one that proves the system is real, and if nobody reaches it the rest of the catalogue never gets read.
- Add two or three steps above, up to a large reward almost nobody reaches. That one is not there to be redeemed, it is there to give direction.
- Leave out anything that costs you more than the margin on the purchase that earned it. A generous catalogue that does not hold up gets cut, and cutting rewards annoys people more than never offering them.
The design mistake that ruins a points catalogue
Putting the first reward too far away. Kivetz, Urminsky and Zheng (The Goal-Gradient Hypothesis Resurrected, Journal of Marketing Research, 2006) showed that customers buy more often the closer they are to the reward. The flip side is that the early stretch, when the goal looks impossibly distant, is where people give up.
With stamps that risk is visible at a glance: a twenty box card is intimidating. With points it hides behind a big number, which is why the mistake is more common there. A catalogue starting at 2,000 points is a twenty stamp card in disguise.
The same study offers the cheap remedy: the illusion of progress also accelerates. A twelve stamp card with two given away completes faster than an empty ten, even though the effort is identical. In points, that means welcome balance at sign-up.
What happens if you choose wrong
It is not irreversible, but it is not free. Moving from stamps to points means converting every customer balance to a new rate, rebuilding the catalogue and explaining it to people who had half a card done.
What is worth knowing up front is that the way back is harder. Stamps to points has a direct conversion: each stamp is worth an amount. Points to stamps does not, because a points balance does not say which card it belonged to. If you are genuinely torn and your receipts are irregular, start with points.
A third case that is neither
Some businesses already charge a fee and the visit generates no receipt: a gym, a class, a centre selling blocks of sessions. Stamps and points both fit badly there, because there is no purchase frequency and no amount to reward.
What works instead is rewarding attendance, which is what actually predicts renewal. A streak of consecutive weeks attending, with a reward for keeping it, measures the thing that matters. Short, repeated cycles build more habit than a one-off prize draw.
The table that settles it
- What it rewards. Stamps reward the visit. Points reward the amount.
- Ideal ticket. Stamps want a stable one. Points want a variable one.
- Ease of understanding. Stamps are the clearest thing in retail. Points need one extra step of explanation.
- Reward flexibility. Stamps give one fixed reward. Points give a catalogue you control.
- Where each fits. Stamps: coffee shops, bakeries, bars, car washes. Points: restaurants, clothing shops, opticians, perfumeries.
What if I want both
Running stamps and points in the same business is usually a bad idea. The whole value of a loyalty programme is that it is understood instantly, and asking a customer to track two separate balances loses exactly that. It also doubles what your staff have to explain at the counter, which is where programmes actually live or die.
Pick one and do it properly. If the business changes, migrating is possible, and it is a far smaller problem than confusing people for a year.
The detail that levels the two
None of this matters if the programme lives on a piece of card that gets lost. Stamps and points both only work when the balance is somewhere the customer cannot misplace and you can update without asking them for anything.
That is what a card in the phone wallet solves, and it is the reason the format is part of the decision and not an afterthought. The model decides how you reward. The format decides whether the customer is still playing in six weeks.