How to Design a Rewards Program Customers Value

A rewards program customers value is one where members can see what they get, reach a first reward early, redeem it easily and keep earning in ways that change their behavior enough for the business to justify the reward cost.

Rewards programs often disappoint for one of two broad reasons: customers do not think the benefit is worth changing their behavior for, or the business gives away margin without enough extra purchasing, retention or data to justify it. Deloitte's 2025 survey of US loyalty members shows how often enrollment does not turn into participation: "the average consumer enrolls in eight loyalty programs, yet actively participates in only five." The design task is a value exchange that customers notice, understand and use often enough to change behavior. This guide covers choosing the target behavior, making the first reward reachable, matching the reward structure to the behavior, building benefits worth more than they cost, making redemption easy, the rules that apply, and how to measure customer value and program value. For tier design in depth, see the guide to tiered rewards programs.

Key Takeaways

What behavior should the rewards program change?

Choose one primary behavior, such as purchase frequency, basket size, category reach or retention, before choosing points, perks or tiers.

If the reward comes first and the behavior second, the program tends to become an expensive giveaway. Most consumer programs aim at one of four behaviors:

• Purchase frequency: more visits or orders in a period.
• Basket size or share of wallet: more spend per visit, or more of the customer's category spend.
• Category reach: buying across more departments or product lines.
• Retention or reactivation: keeping customers longer or bringing lapsed ones back.

As an illustration, a grocery brand may prioritize visit frequency because habit drives its economics, a specialty retailer may prioritize category reach because margins improve when customers buy across departments, and a subscription business may focus on tenure. Before launch, the team should be able to answer one question: which customer action is this program paying for?

How do you make the first reward feel reachable?

Put a first reward within a normal purchase rhythm and show progress toward it, because customers judge value by how far away it is as well as by its size.

A reward can look generous on paper and still feel weak if it is far away or the path is unclear. Two research findings support this, though both come from specific settings rather than every category. Nunes and Drèze's work on the endowed progress effect found that "people provided with artificial advancement toward a goal exhibit greater persistence toward reaching the goal" (Journal of Consumer Research, 2006). In a café reward program, Kivetz, Urminsky and Zheng found that members "purchase coffee more frequently the closer they are to earning a free coffee" (Journal of Marketing Research, 2006).

A practical rule is to build two value moments:

1. An early proof point. A welcome credit, a head start or a near-term first reward that shows the program works.
2. A stronger later benefit. A reward or status that recognizes continued behavior.

Set the first threshold too high and the program teaches members to wait rather than participate. Set it too low and it pays for purchases that would have happened anyway. For categories bought only once or twice a year, use an enrollment benefit or non-purchase actions, such as completing a profile or writing a review, as the early proof point.

As an illustration, a program that awards 1 point per dollar and a $5 reward at 100 points returns 5% of spend before breakage. If a typical member spends $40 per visit, the first reward arrives on the third visit; at 500 points it would take 13 visits, which for a monthly shopper is more than a year.

Which reward structure fits which behavior?

Match the structure to the behavior: spend-based points for basket size, visit-based rewards for frequency, tiers for top customers, paid membership for recurring utility, and hybrids for mixed goals.

Customers may say they prefer immediate discounts. That can be the right answer for price-sensitive segments, but it is not automatically the right long-term model, so check the format customers say they like against the behavior and margin the business needs. Earning does not have to be tied only to spend. Brandmovers built SoCal Explorer for Metrolink, Southern California's commuter rail, which rewards "both transactional and non-transactional rider behaviors" with points for every mile traveled; the program recorded a 60% active engagement rate among enrolled riders and +15% average monthly transactions among members (disclosed by Brandmovers). These are program results rather than a controlled comparison.

How do you build benefits worth more than they cost?

Combine enough economic value to feel real with access, convenience, recognition and service benefits that members value more than they cost to deliver.

Members do notice value. In Deloitte's 2025 survey of US loyalty members, 72% said loyalty programs make them more likely to spend with their preferred brand, and 80% said they "get more from the brand because of the loyalty program" (Deloitte, January 12, 2026). But not every benefit has to be funded as a discount. Benefits such as early access, priority service or flexibility may be worth more to members than they cost the business, but treat that as a hypothesis to test: priority service needs staff, and early access can pull forward sales that would have happened at full price anyway. Survey or pilot each benefit before scaling it. Some examples:

• A retailer combines member pricing with early access: the price supports savings, and access sets the program apart.
• A quick-service brand uses fast rewards and relevant offers, because speed matters more to its guests than a large catalog.
• A service business offers priority issue resolution, which improves treatment without deeper discounting.

A useful screen: does this reward make members feel they save money, get better treatment or get something more relevant? If none of these, it is probably decoration. To learn which benefits members actually value, compare what members say in surveys with what they do: which rewards they redeem, which offers they open and which benefits they use before renewing. Where the two disagree, trust behavior, and test the shortlisted benefits in a pilot before funding them across the program. A broad rewards catalog can add choice, but too many low-interest items dilute it.

Why is redemption the proof point?

Redemption turns a rewards program from a promise into an experience, and members who redeem tend to spend more than inactive ones, so make redemption easy, visible and quick.

McKinsey reports that "a typical active loyalty-program member spends 10 percent more than someone who is enrolled but not active, redeemer members spend 25 percent more than enrolled but inactive members" (McKinsey, Next in loyalty, 2021). That is a comparison of member groups, not proof that redemption causes the extra spend, but it shows why redemption matters. Deloitte's 2025 survey found that "40% of all respondents admit to sometimes forgetting to redeem."

A modest earn rate is easier to defend when redemption is easy, while hidden balances, delays, confusing rules or rewards that take effort to claim can undermine even a generous one. Progress bars, next-reward prompts and partial redemption options help members reach rewards. Easier redemption also raises reward cost as breakage falls, so model that cost before launch. Once members hold a status, losing it can feel like a penalty, so set renewal rules carefully and test them. Redemption also depends on operations: if point of sale, app, CRM and service teams do not show balances and eligibility consistently, members feel friction even when the reward logic is sound. The guide to redemption rates covers diagnosis in depth.

Which rules apply to rewards programs?

In California, covered businesses need prior opt-in consent before enrolling consumers in a loyalty program that offers benefits connected to personal data, and every program should publish clear terms.

• Financial incentive consent. The California Consumer Privacy Act says a business "may enter a consumer into a financial incentive program only if the consumer gives the business prior opt-in consent" that "clearly describes the material terms of the financial incentive program" (California Privacy Protection Agency, CCPA text, section 1798.125(b)(3)). This applies to businesses covered by the act, including those with "a gross annual revenue of $26.625 million or more (effective January 1, 2025) for the preceding calendar year" or that meet other thresholds (California Privacy Protection Agency, FAQs).
• Clear terms (good practice). State how points are earned, what they are worth, when they expire and how the program can change, and give notice before changes that reduce value.

Other states have their own privacy laws, so check each state where members live, including any rules on loyalty programs, points expiration and program changes. This is general information, not legal advice.

How should customer value and program value be measured?

Measure customer value and program value separately, test business results against a held-out control group, and review both together each month.

Enrollment alone says little. McKinsey's 2021 analysis also observed that "around two-thirds of established loyalty programs fail to deliver value," so the measurement plan has to show incremental results, not just activity. Comparing members with non-members can overstate lift, because customers who already buy often tend to be the most likely to join; a randomly held-out group of eligible customers, or a staggered rollout by region, gives a fairer baseline.

Read breakage carefully. High breakage reduces liability, but it can also mean rewards are irrelevant, thresholds are unrealistic or redemption is too hard. Treat it as both a finance measure and an engagement signal.

BLOYL™, Brandmovers' loyalty platform, supports points, tiered, punch card, subscription or paid membership and hybrid structures, non-purchase earning, a rewards catalog of 100,000+ options with automated fulfillment and A/B testing against a control group.

What is a practical design sequence?

Define the behavior, choose the structure, set the first reward, design redemption, test the economics and set the reporting rhythm, revisiting earlier steps if the economics fail.

1. Define the target behavior. Frequency, basket size, category reach or retention.
2. Choose the reward structure. Match it to the behavior rather than copying a familiar format.
3. Set the first value moment. Make the first reward reachable enough to prove the program works.
4. Design the redemption path. Make balances, rules and rewards visible and easy to use in every channel.
5. Test the economics. Check earn rate, expected redemption, liability growth and likely incremental margin, revisit steps 2 to 4 if the numbers do not work, and pilot against a control group.
6. Set the reporting rhythm. Review customer value, commercial value and breakage together each month.

Common failure points: thresholds that look financially safe but feel unreachable, too many low-interest rewards, reward costs funded without segment logic, redemption that depends on systems not ready at launch, and reporting that counts enrollments rather than active members and redeemers.

Conclusion

A rewards program's value to customers is not set by how generous it looks. It depends on whether members understand it, reach value early enough to care and keep engaging without the business losing control of cost. Strong design is mostly discipline: decide which behavior is worth funding, choose the structure that supports it, make redemption easy and check whether members' satisfaction turns into results the business can justify.

Sources

• Deloitte, "Reshaping loyalty programs in an era of value seeking" (January 12, 2026)
• McKinsey & Company, "Next in loyalty: Eight levers to turn customers into fans" (October 12, 2021)
• Nunes and Drèze, "The Endowed Progress Effect: How Artificial Advancement Increases Effort," Journal of Consumer Research 32(4), 504 to 512 (2006)
• Kivetz, Urminsky and Zheng, "The Goal-Gradient Hypothesis Resurrected: Purchase Acceleration, Illusionary Goal Progress, and Customer Retention," Journal of Marketing Research 43(1), 39 to 58 (2006)
• California Privacy Protection Agency, California Consumer Privacy Act text
• California Privacy Protection Agency, "Frequently Asked Questions"
• Brandmovers, Metrolink loyalty program case study