Punch cards
Punch cards, otherwise known as stamp cards, are used quite extensively by the hospitality industry. A cashier stamps a shopper's card - typically made of cardboard - whenever a customer purchases an item in the shop. When the shopper attains a certain number of stamps, they they can be redeemed for a reward.Stamp cards function well for business that offer a small variety of small ticket items. That is, merchants that specialise in one class of products that are affordable and exhibit a tight distribution in the price range (price variation between the cheapest and the highest priced item in the range).
What are the reasons behind these constraints? Mainly, because stamps are atomic elements that are too reductive to represent the value of the transaction - they only capture the presence of the transaction. Sold items must be within everyday budget. Otherwise, the consumer will not likely buy the requisite amount of items to qualify for their reward. Constraining the price spread goes hand-in-hand with the atomic nature of stamps and renders rewarding fair across a broader spectrum of goods sold by the merchant.
As it stood, punch cards applied to items that were bought for personal consumption. Because a person is only able to consume a limited amount on their own, this attribute naturally constrains liability as a limited number of stamps can awarded. When constrasted to purchasing products from a supermarket - the customer is shopping not merely on their behalf, but also on behalf of their loved ones. A consumer purchasing in bulk might immediately attract a reward which effectively reduces the rewards program to a mere price cut. This negates the point of rewards programs, which are installed to improve customer retention without an associated lowering of the product price.
Rewards are ordinarily constrained to one type of item offered by the merchant. E.g. receive a free small beverage for every 10 purchases. This reduces the use of the program to the consumer, as their choice of rewards is seriously constrained.
Points
Rewards points are effective for businesses with a wide product spectrum and a significant variability in prices. E.g. a clothes store that sells fashionable goods may have berets starting at $15 and designer dresses priced north of $1000.The principal advantage of loyalty points over punch cards is that points capture the value of the transaction and cater to merchants that carry a broad product range that exhibits a wide variance in price. As points are naturally unbiased, the products don't have to be affordable. Expensive sales are simply subject to a bigger number of points to reward the customer for their outlay.
Reward conversions are also normally related to the price of the products. For instance, 5,000 points might qualify a consumer for a $100 gift card, that may be used to buy any product in the store's repertoire. This presents the customer with a choice, and increases the benefit of the rewards program.
