What a loyalty program really costs
Count the reward at what it costs you to make, not what you sell it for. A free coffee after six paid ones costs a few dirhams of ingredients spread over six visits. If the card brings people back even slightly more often, it pays for itself.
Use your cost, not your price
A coffee sold for AED 18 might cost you a fraction of that in beans, milk and a cup. That smaller number is the real cost of the reward.
Spread it over the visits
If the reward comes after six paid visits, its cost is shared across all six. Work out what share of each sale that is.
Compare with what you gain
The question is simple: does the card bring customers back often enough to cover that share? For most regulars, one extra visit a month is enough.
Add the system cost
Divide the yearly price of the loyalty system by the number of visits it records. Ask for the price and do this sum with your own numbers.
Questions
Is a discount cheaper than a free item?+
Usually not. A 10% discount on every visit costs more than one free item after several visits, and it is easier to copy.
What about customers who would have come anyway?+
Some would. The card still tells you who they are, so you can keep them when a new place opens next door.