The four common structures
Stamp or punch cards count visits toward a fixed goal. Simplest to explain, best fit for frequent low-ticket purchases — coffee, lunch, car washes, haircuts.
Points accrue in proportion to spend and are redeemed against a catalogue. Better when ticket sizes vary a lot, worse when customers have to do arithmetic to know what their balance is worth.
Tiers unlock permanent status at cumulative thresholds. Effective for high-value customers, overkill for a business with fewer than a few hundred regulars.
Cashback returns a percentage as store credit. Easy to understand, but it is a discount by another name and trains customers to expect one.
What the business gets out of it
The reward is the visible part; the customer list is the valuable part. A program tells you who your repeat customers are, how often they come, and which ones have stopped — none of which a cash register reveals.
That said, be sceptical of the ROI figures loyalty vendors publish. Programs shift behaviour at the margin, mostly by pulling forward visits that would have happened anyway. The honest case is retention and data, not a step change in revenue.
Choosing one for a small business
Ask three questions. Does the customer have to install anything — if yes, expect most of them to decline at the counter. Does it need POS hardware or an integration — if yes, add that cost and setup time. And what happens to your customer list if you leave.
For most small businesses the honest answer is a stamp card with a reachable goal, no app, and no hardware. Anything more elaborate tends to go unused.