Cash rewards or free products? Choosing what to give your regulars
Cash off is instantly understood. A free product feels more generous than it costs. Both work — they just suit different businesses, and the difference shows up in your margin.
When cash-style rewards win
- Your basket sizes vary a lot, so a free item would sometimes be far too generous.
- You sell goods with thin margins where giving product away hurts.
- You want the reward to feel like money the customer has earned, not a giveaway.
When free products win
- You have a low-cost, high-appeal item — coffee, a side, an add-on service.
- You want the reward to bring people in rather than reduce what they pay.
- You would rather protect your prices than discount them.
The margin maths, briefly
Add up the gross margin across one full card, then keep the reward cost under a comfortable share of it — many local businesses aim for a tenth or less. A ten-visit card with $2 margin per visit gives you $20 of margin, so a reward costing under $2 keeps the program clearly profitable.
Where scratch rewards fit
Scratch-and-win sits between the two: most prizes are small, one is worth talking about, and the surprise is what people remember. Because the odds are decided on the server rather than on the phone, your payout stays predictable.
Pick one, measure, then adjust
Run a single reward type for a month, look at repeat visits and reward claims, and change one number. Businesses that keep swapping reward types never learn which one their customers respond to.
