POS 9 September 2025 3 min read

A loyalty programme that does not cost you margin

Points are easy to give and hard to cost. Running them on the POS record puts the cost in the same day’s numbers.

Loyalty is usually launched as a marketing project and reviewed as a marketing project. Enrolments are counted, redemptions are counted, and the programme is judged a success. What is rarely produced is the figure that decides whether it should continue: what it cost the branch in margin, against what it returned in incremental visits.

Short on time

Separate earning from redemption

Reward value cannot be judged from redemption count alone.

Watch offer stacking

Combining discounts and rewards can change the order margin.

Tie it to the POS order

One order record shows payment, earning and redemption.

Adjust rules after review

Review actual customer behaviour before widening or tightening the reward.

Why the cost stays hidden

A point issued today is a liability settled weeks later, often at a different branch, sometimes on a different item. If the loyalty platform is separate from the POS, the accrual and the redemption are recorded in one place and the margin effect lands in another. Nobody joins them up, because joining them up is somebody’s manual project.

WHAT AN HONEST REVIEW NEEDS

Cost of accrualThe margin value of points issued in the period, not the face value of the points.

Cost of redemptionWhat was actually given away, at cost, on the items it was redeemed against.

Incremental visitsVisits from members above their own prior rate — not total member visits.

Discount stackingHow often a reward was redeemed on an item already discounted.

That last line is where most programmes leak. A reward applied on top of a promotion produces an order with almost no margin, and it is nobody’s job to notice.

The version that works

If the reward is issued by the same system that knows the cost of the item, the question answers itself daily.

When loyalty runs on the POS record, each accrual and redemption sits against an order that already carries its cost of goods. The programme’s margin effect is then a report rather than a project, and it can be read at branch level in the same week rather than at group level after a quarter.

Design choices that protect margin

Exclude discounted items from accrual

The simplest rule, and the one that prevents most of the leakage.

Reward a visit, not a basket

Rewarding spend concentrates the cost on customers who were coming anyway.

Cap redemption value per order

Predictable worst case, which is what lets a finance team approve it.

Set an expiry, and honour it

An unexpiring liability grows quietly for years.

None of these make the programme less attractive to a genuine regular. They remove the cases where the programme pays for behaviour that was going to happen anyway.

PUT YOUR OWN NUMBERS IN