What does my loyalty points programme really cost?
Last updated
Use the base rules of the scheme, before any bonus-point promotions.
Display only. Your figures are read in the currency you pick — nothing is converted and no exchange rate is applied.
One cent is 0.01.
The share of issued points members cash in. Use your loyalty app's figure if you have one.
Optional. It turns the cost into a share of your gross profit.
Enter how many points a shopper earns per unit spent and what a point is worth, either directly or as the points needed for a reward.
- Points earned per unit spentNeeded
- What a point is worth, or the points a reward takesNeeded
- The share of points members redeemRecommended
- Gross margin, to set the cost against profitOptional
A scheme is worth its cost when members buy more often. To put a number on what a repeat customer is worth, use the CLV calculator.
No benchmark is used: the redemption rate is yours. The currency is a label only and nothing is converted. Nothing you type is sent anywhere.
Earn rate, point value and redemption
A points programme gives back part of every purchase as future credit, so 1 point per dollar with 100 points buying a 5 dollar reward hands back 5 percent of spend, and if 60 percent of points are ever redeemed the real cost is 3 percent of what members spend.
No published redemption rate is used; the one in the answer is yours. To weigh the cost against what a returning customer is worth, see the CLV calculator.
Three settings decide what a programme costs: how fast points pile up, what they buy, and how many of them are ever cashed in.
- Earn rate
- Points a member collects for each unit of currency spent. Five points per dollar sounds generous next to one per dollar, but the number means nothing until you know what a point buys.
- Point value
- What one point is worth when it is spent. If 500 points buy a 10 dollar reward, a point is worth 2 cents. Enter it directly, or enter the reward and the points it takes and the calculator works it out.
- Reward rate
- The share of spend handed back if every point were used. It is the headline promise of the programme and the most it can ever cost you on a sale.
- Redemption rate
- The share of issued points that members actually cash in. You supply it: from your loyalty app report if you run one, or as a cautious guess if you do not. Points that expire or are forgotten cost nothing.
- Programme cost
- The reward rate scaled down to the points you expect to be redeemed, as a share of member revenue. It is what the scheme really spends on every sale a member makes.
- Share of gross profit
- The programme cost set against your margin. At a 25 percent margin, a 3 percent cost takes about an eighth of the profit on member sales, before any other expense.
Nudgesmart is available on the Shopify App Store. Browse the template library or see what it costs.
Seven programmes, costed
Illustrative programmes in US dollars, not real store data. Each row is produced by the same function the calculator above uses.
| Programme | Point value | Reward rate | Redeemed | Cost of revenue | Verdict |
|---|---|---|---|---|---|
| Beauty store, 1 point per dollar, 100 points for 5 dollars off | $0.05 | 5% | 60% | 3% | Takes 4.6% of gross profit |
| Apparel, 5 points per dollar, each point worth 1 cent | $0.01 | 5% | 45% | 2.3% | Takes 4.1% of gross profit |
| Grocery delivery, 2 points per dollar, 500 points for 10 dollars | $0.02 | 4% | 80% | 3.2% | Takes 12.8% of gross profit |
| Electronics, 10 points per dollar, 1,000 points for 15 dollars | $0.015 | 15% | 70% | 10.5% | Takes 87.5% of gross profit |
| Coffee subscription, 1 point per dollar, 50 points for a 10 dollar bag | $0.20 | 20% | 90% | 18% | Costs as much as the margin, or more |
| Pet supplies, 2 points per dollar, each point worth 2 cents, no margin entered | $0.02 | 4% | 50% | 2% | Costs 2% of member revenue |
| Gift shop, 3 points per dollar, redemption not yet known | $0.01 | 3% | — | — | Hands back 3% of spend |
Where a points budget quietly drifts
Redemption rises as a scheme matures
Early on, few members have enough points to redeem, so the cost looks low. As balances build, more of them cash in. Re-run the numbers after a year with the rate you are actually seeing.
Rewards are paid at retail, costed at cost
A free product worth 10 dollars at shelf price costs you only what you paid for it. If rewards are products rather than money off, the true cost is lower than this page shows; if they are cash-like credit, it is about right.
The benefit is not on this page
Cost is the easy half. Whether members buy more often, or would have bought anyway, is the half that decides whether the scheme pays, and it needs a before and after comparison on your own orders.
Bonus points and promotions add up
Double-points weekends, sign-up bonuses and birthday rewards are extra issuance on top of the base earn rate. Include them in your point value or the cost here will be too low.
Unredeemed points may still be a liability
Depending on where you trade, outstanding points can count as a liability in your accounts until they expire. Ask whoever keeps your books how they should be treated.
Loyalty points: what merchants ask
How do I work out the cost of a loyalty points programme?
Enter how many points a shopper earns per unit spent, what a point is worth, and the share of points you expect to be redeemed. The calculator returns the reward rate and the programme cost as a share of member revenue. At 1 point per dollar, 100 points for 5 dollars and 60 percent redemption, the cost is 3 percent.
What is a points programme reward rate?
The share of spend a member gets back if they redeem everything they earn. Earning 5 points per dollar on points worth 1 cent each is a 5 percent reward rate, the same as 1 point per dollar on points worth 5 cents.
How much should one loyalty point be worth?
Whatever keeps the programme cost comfortably inside your margin at the redemption you expect. Pick the reward you want to offer first, then set the points needed so the reward rate fits. This page shows the result against your margin rather than suggesting a figure.
What redemption rate should I assume?
Your own, if your loyalty app reports one. If you are planning a new scheme, run the calculator at a cautious rate and again at full redemption, because full redemption is the most it can ever cost.
Does a higher earn rate make a programme more expensive?
Only together with point value. Ten points per dollar at a tenth of a cent each hands back 1 percent, which is cheaper than one point per dollar at 5 cents. The reward rate is the figure to compare.
Is anything I enter stored?
No. The calculator works on the numbers in the page and sends nothing about your store anywhere.
A loyalty scheme starts working after the first purchase. Most visitors never make one.
Nudgesmart works on the visit before any points exist: capture popups built from ready-made templates, grouped by industry and campaign type.
