How loyalty programs actually work: cashback, stamp cards and tiers

A customer who visits once costs a business almost nothing to think about — they just picked a random place nearby. A customer who comes back already means something: they have a purchase history, an average check, and a habit of choosing you specifically. A loyalty program is simply a way to give that customer a reason to come back more often, instead of relying on luck.

Cashback

The most straightforward mechanic: the customer gets a percentage of their purchase back as points to spend next time. It works well anywhere the ticket size varies and purchases are regular — shops, cafés, services with different price points. Cashback's advantage is that it scales itself automatically: the more a customer spends, the more they earn, with no need to design separate promotions for different amounts.

Stamp cards

The classic: "buy 9 coffees, the 10th is free." A stamp card works best where the product or service is uniform and purchased often — coffee shops, bakeries, car washes, hair salons. It's simpler for the customer to track than percentages and points ("two more stamps and I get a reward"), and it rewards visit frequency specifically, rather than ticket size.

Tiers

Tiers (Silver → Gold → Platinum) add a sense of status on top of the first two mechanics: the more a customer spends over a period, the higher their tier and the better their terms — more cashback, priority service, tier-only offers. It's a layer on top, not a replacement — tiers are almost always combined with cashback or stamps rather than used on their own.

Which one to pick

• Irregular purchases with varying ticket size (shop, services) — cashback
• Frequent, uniform purchases (coffee, laundry, servicing) — a stamp card
• Want to reward your most active customers specifically — add tiers on top of either

Why it should be digital

A plastic card gets lost, forgotten at home, and gives the business no data about the customer beyond the fact that they own one. A digital card is a QR code the customer scans once and adds to their phone's home screen: the same mechanic, minus the plastic, with a visit history and the ability to send a reminder push notification if the customer hasn't been in for a while.