A loyalty point has two prices: what a customer pays to earn it, and what you pay when they spend it. Get the ratio between them wrong and you either run a programme nobody engages with or one that quietly eats your margin.

Start From the Redemption Value, Not the Earn Rate

The instinct is to decide how many points a dollar earns. Work backwards instead.

Decide what percentage of revenue you are willing to return to members, then build the points ratio to produce it.

If you are comfortable returning 5%, and a point is worth one cent on redemption, then one dollar spent should earn five points. If you want to return 3%, one dollar earns three points.

That is the whole calculation.

Expressing the reward as a percentage first is what stops the programme from drifting.

Five per cent is a common ceiling for a DTC brand with healthy gross margin. Below 2%, the reward can stop registering as meaningful. Above 7% or 8%, you are effectively running a discount programme with extra steps, and a permanent discount may be better delivered through pricing.

Keep the Numbers Round and the Reward Reachable

A point worth exactly one cent, with a reward that costs 500 points and delivers $5 off, is much easier to understand than a point worth 1.3 cents with a 437-point reward.

Members should be able to do the arithmetic in their head. A member who cannot quickly understand the value of their balance is unlikely to get excited about earning more.

Reachability matters more than generosity Antavo GCLR 2026.

Antavo's Global Customer Loyalty Report 2026 found that 49.1% of consumers say it takes too long to earn rewards. LoyaltyLion's March 2026 survey found that 64% would stop participating for the same reason, while 52% were likely to quit when there were too few ways to earn LoyaltyLion, Loyalty in 2026.

A member should ideally be able to reach their first reward by their second or third order.

If your average order value means the first reward takes six purchases to reach, lower the first threshold specifically, even if it breaks the standard ratio.

The first redemption is what turns an enrolled member into an active one.

Points for Things Other Than Buying

Earning routes that do not directly cost you product margin are often the cheapest points you will ever issue.

A product review, photo review, converted referral, birthday added to the profile, or SMS opt-in can each create measurable value for the brand.

The value of those actions can exceed the cent-denominated cost of the points you issue in return.

This is where loyalty, review and UGC programs and SMS marketing stop being separate projects and start reinforcing the same retention system.

Referral mechanics have their own economics and are covered in these referral program ideas.

Expiry, and Why It Costs More Than It Saves

Expiring points may improve your liability position, but it can damage the customer relationship.

Antavo found that 41.1% of consumers had left a programme because they were frustrated by expiring points. Its research also found that 26.2% of points go unspent, with 11.9% expiring outright Antavo points breakage release, 3 February 2026.

If you need an expiry rule for accounting reasons, make it activity-based rather than based on a fixed calendar date.

For example, points can expire after twelve or eighteen months of no account activity, with the member receiving two email warnings before expiration.

That turns expiry into a reactivation trigger instead of a grievance.

Model the Liability Before You Launch

Assume full redemption, not breakage.

Take projected member revenue, apply the return percentage you set at the beginning, and check whether the economics still work after gross margin, discounts, shipping, and returns are included.

If the programme only works because you assume a quarter of members will forget to redeem their rewards, redesign it.

We set the ratio against a brand's actual margin structure as part of our loyalty program services.

The broader cost structure is covered in what a loyalty program costs, while the complete return model is in the loyalty program ROI playbook.