Design a loyalty program for this store from its own data. Audit retention first: if evidence points at acquisition, basket size, lifecycle timing or subscription, say so and stop. A program built on the wrong diagnosis quietly costs margin for a year while the number it was meant to move stays flat.

FIRST, CHECK WHAT ALREADY RUNS

Read whether a loyalty app is installed, how many members it has, and what it has issued. Diagnose that program rather than designing over it: proposing one the merchant already runs ends the conversation.

DERIVE EVERY NUMBER FROM THIS STORE

If you cannot point at the figure that produced a threshold you are guessing; say so rather than presenting it as designed. Never copy another brand's dollars: they carry that brand's basket and order frequency with them.

Tier thresholds. Compute trailing-12-month spend per purchaser, sort descending, read the figure at the top 15% (tier 2) and top 4% (tier 3). Round to a number a human would say: $150, not $147. Check the revenue share each slice holds: if the top 4% holds a fifth of revenue the perks are affordable; if the top decile holds barely a third there is no whale class, so use three tiers.

Sanity-check first: a stricter percentile must carry a HIGHER threshold, so the top-4% figure cannot be below the top-15% figure. If it is, the query is wrong, and that error propagates into every perk and cost estimate downstream.

First rung from AOV, reachable in one or two orders. Point expiry from the median gap between orders: two to three times it, never sooner, and warn first. Referral minimum order above AOV, or the reward subsidises a below-average basket.

TIERS ARE EARNED BY SPEND, NEVER BY ACCUMULATED POINTS

The most common error, and self-defeating: if status runs on the same points members spend, redeeming a reward demotes them. Members hoard, the currency stops circulating, the program inverts its purpose. Spend sets status; points are for spending. Trailing 12 months, not a calendar-year reset.

THE ARITHMETIC

redemption_ROI = (reward_value / (units_required / earn_rate)) x 100

~1% is the safe default. Richer can be right, but that is a margin decision: state the cost as a percentage of revenue rather than burying it in a points table.

Where 1% and "reachable" collide. Below a certain basket they are incompatible: at $58 AOV two orders earn 116 points at 1 per dollar, which at 1% buys a $1.16 reward. Nobody joins for that. Name the lever you pull: make the first rung NON-MONETARY (free shipping, a sample, early access carry perceived value above marginal cost, sidestepping the ratio; usually right on a low-AOV catalog), or run richer than 1% and say the number out loud. Moving the rung further out does NOT work: five orders at $58 is $290, still $2.90. Distance cannot rescue a rate too thin for the basket. Never quietly ship a $1 reward, nor keep the 1% label while the ladder pays 5%.

Ladder shape. At least five rungs. Keep monetary rungs on a flat arithmetic step so the next reward is always the same distance away; geometric spacing makes each feel further than the last, the opposite of what a ladder is for. Hold redemption ROI FLAT across monetary rungs: if it rises you have built an incentive to hoard. Put escalation in the tier multiplier, which rewards sustained spend rather than a sitting balance. Top rung not convertible to money.

Ranges: earn 1-5 units per $1; signup bonus $0.50-1.00 of value; referral $8-15 each side; multiplier steps of ~0.25x. Read a multiplier as cost: a 1% base at 1.5x pays 1.5% on your best customers. Cap what a member earns without buying below the first rung, or you have built a way to farm rewards.

IF CONTRIBUTION MARGIN IS UNAVAILABLE

Do not dead-end, and do not invent one. Design at a stated planning assumption, labelled as an assumption not a finding. Show what changes if it is wrong: cost as a share of revenue at a low, middle and high margin, plus the break-even repeat-rate or AOV lift at each. Make margin confirmation a launch gate: designed now, live once the merchant confirms it is affordable.

PIN THESE DOWN, OR SOMEONE DECIDES THEM SILENTLY

- What earning applies to: post-discount merchandise subtotal, excluding tax, shipping and gift cards. Earning on the pre-discount total lets a sitewide sale inflate every balance.
- How the multiplier compounds: it multiplies the EARN RATE, not redemption value. Left undefined, implementations have shipped at 6% by stacking both ends.
- Product rewards costed at COGS, shown at retail: that gap is why they beat dollars off. State both.
- Breakage: from the incumbent program's history if there is one; otherwise model a band, not a point estimate, and track liability monthly.
- Redemption stacking: whether a reward rides on a discount code, bundle price or subscription discount. The most expensive unstated rule.
- Eligible SKUs by name, preferring high retail-to-COGS items with stock depth. "Free full-size product" is not buildable.
- Capacity for any experiential rung: how many a month, who delivers it, what happens when demand exceeds supply.

OUTPUT

Tier table with thresholds and the percentile each came from; reward ladder with units, value and ROI per rung; earning and mission values with the no-purchase cap; referral terms; expiry; the definitions above; cost as a share of revenue with the margin assumption stated; and the first three things to measure after launch. Keep measured figures apart from modelled ones.