When it comes to rewarding customers for their loyalty, there are usually two schools of thought: use punch cards or reward points. Let's look at both in greater detail.

Punch cards

Punch cards, also referred to as stamp cards, have been used quite extensively by the hospitality industry. A merchant stamps a customer's card, usually made of paper or cardboard, everytime a customer makes a purchase in the store. When the customer attains a certain number of stamps, they are eligible for a reward.

Punch cards work for business that sell a limited range of small ticket items. That is, shops that specialise in one kind of consumables that are affordable and have low variation in the price range (price difference between the cheapest and the most expensive item in the store).

Why these constrains? Principally, because stamps are discrete units that are too primitive to capture the value of the transaction - they merely record the occurrence of the fact. Products have to be affordable. Otherwise, the customer will not likely purchase the requisite number of products to qualify for their reward. Finally, limiting the pricing spread plays to the "token" nature of stamps and makes rewarding fair across a broader range of products offered by the store.

Historically, punch cards were offered on items that were purchased for immediate consumption. Because a human is only able to consume so much on their own, this trait naturally limits liability as a finite number of stamps can issued. Compare this to buying raw ingredients in a supermarket - the shopper is purchasing not only on their behalf, but also on behalf of their family. A customer purchasing in bulk may immediately qualify for a reward which, in effect, reduces the rewards scheme to an ordinary discount. This is contrary to the spirit of rewards programs, which are intended to induce recurrence without a perceived reduction in product price.

Rewards are typically limited to one type of item sold by the store. For example, get a free small beverage for every 10 purchases, where the beverage may be a tea or coffee. This reduces the appeal of the program to the customer, as their choice of rewards is seriously limited.

Points

Rewards points work well for businesses with a wide product range and a significant variability in pricing. E.g. A department store that sells clothes my have scarfs starting from $15 and couture dresses priced north of $1000.

The fundamental advantage of rewards points over punch cards is that the former capture the value of the transaction and, hence, cater to businesses that carry a broad product range that exhibits a wide spread in price. Because points are intrinsically fair, the products don't have to be affordable, nor everyday staple consumables for that matter. Large purchases are simply rewarded more points to recompense the shopper for their generosity.

Award redemptions are also typically tied to the price of the products. For example, 10,000 points might qualify a shopper for a $100 gift card, to be spent on any item in the store's repertoire. This gives the customer a choice, and broadens the appeal of the loyalty program.

What's right for your business

Whether you're a small cafe or a department store, MazeCard offers a variety of online turnkey loyalty solutions, ranging from simple punch cards to fully-fledged points-based systems, as appropriate for your business. By joining MazeCard, you become a part of Australia's fastest growing loyalty platform.

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