Calibrate your program before November
Before you segment anything, your program has to be tuned to drive incremental revenue without eroding margin. A badly calibrated program is expensive and underdelivers on results. This is the foundation everything else sits on.
a. Set your cashback rate.
This is the single lever that decides whether your program changes behaviour or just leaks margin. Set it too low and the reward is invisible, so nobody shifts their buying. Set it too high and you hand away margin on orders you would have won anyway.
A customer spends £100 and earns 100 points (1 point per £1); 100 points convert to £10 in rewards (10 points = £1), so a 10% cashback rate.
In practice the right rate tracks your gross margin, since that is what you can afford to give back without going underwater.
| Gross margin | Cashback rate |
|---|---|
| Under 40% | 5 to 7% |
| 40 to 60% | 8 to 12% |
| 60 to 80% | 12 to 18% |
| Over 80% | 18 to 25% |
b. Set redemption thresholds (minimum spend).
The minimum spend to redeem should sit above your AOV. Below it, the reward just finances a purchase you already had, with zero incremental revenue. Above it, every redemption also nudges basket size up.
Do not overshoot either: a threshold set far above AOV feels unreachable and kills redemption altogether, which defeats the whole point of the program. Track your gross margin on each reward to set the threshold.
Example: AOV £150, set the minimum around £180, adjusted for the reward's margin.
c. Set reward expiration windows.
An open-ended reward sits idle and does no work. Give it a deadline short enough to pull the next order forward, benchmarked against your own repurchase cycle rather than an arbitrary date.
Example: If your average time between orders is 6 months, expire rewards after 3 to 4 months.
Do not go too short either: an expiry that feels like a gotcha erodes trust more than it drives urgency. The aim is to nudge the next purchase just ahead of its natural timing, so the reward drives a sale instead of waiting for one.
d. Define your VIP tiers on real revenue contribution.
Anchor the tiers on what customers actually contribute, not round-number spend thresholds pulled from thin air. Pull your data, analyze repeat cohorts by number of orders over 12 months, and size tiers as a share of your base.
The balance to strike is aspiration versus attainability: the top tier has to feel exclusive, yet stay reachable enough that mid-tier customers push to climb into it.
| Tier | Share of customers |
|---|---|
| Gold | 5 to 10% |
| Silver | 20 to 30% |
| Bronze | 60 to 75% |
