How to Calculate Points Needed for a Reward

Setting the right number of points for each reward is key to a successful loyalty program on Ostana. This Knowledge Base walks you through how to:

• Calculate how many points a reward should cost

• Understand the value of each point

• Maintain a profitable earn/redeem structure

🎯 Objective

Your goal is to define how many loyalty points a customer needs to redeem in exchange for a reward (e.g., $5 off, free product, etc.) — without hurting your margins.

🔢 Step 1: Understand the Core Formula

The basic formula used to set reward point cost is:

Points Needed = Reward Value ÷ Point Redemption Value

🧮 Step 2: Calculate the Point Redemption Value

Point Redemption Value = The dollar value of 1 loyalty point when redeemed.

This is not automatically fixed — you determine this value based on your:

• Profit margin on products

• Average transaction value

• Customer loyalty behavior

• Desired ROI from loyalty redemptions

👇 Example Calculation

Let’s say:

• Your average margin on a product = 50%

• You want to offer a $10 reward

• To stay profitable, you want that $10 reward to only cost you $5

So, let’s assume:

• Customers earn 10 points per $1 spent (i.e., 100 points for $10 spent)

To protect your margins, you want every 100 points to equal $5 max, not $10.

That means:

Point Redemption Value = $5 ÷ 100 pts = $0.05 per point

You now know that 1 point is worth $0.05 when redeemed. This ensures you’re giving away value within your profit buffer.

📊 Step 3: Calculate the Points Needed for a Reward

Use your redemption value from Step 2 in this formula:

Points Needed = Reward Value ÷ Point Redemption Value

For example:

• Reward Value = $10

• Redemption Value = $0.05

Points Needed = $10 ÷ $0.05 = 200 points

So, customers need 200 points to redeem that reward.

🛠 Step 4: Set Up the Reward in Ostana

1. Go to the Rewards tab in your Ostana dashboard

2. Click Create Reward

3. Fill out:

   • Reward Name (e.g., "$10 Off")

   • Points Required (e.g., 200)

   • Description (e.g., "Valid on all purchases over $25")

   • Image (optional but recommended)

   • Availability Rules (e.g., only for Gold members, expires in 30 days)

4. Click Save & Publish

💡 Best Practice Tips

🧠 Example Matrix

📤 Optional: Add Redemption Rules

In the reward setup screen in Ostana, you can:

• Set min spend requirement (e.g., only redeemable on purchases over $25)

• Restrict to specific tiers (e.g., Gold or VIP)

• Set usage limits (once per customer)

• Add expiration windows (e.g., valid 30 days)

🔍 FAQs

❓How do I know my reward is profitable?

Use this rule of thumb:

Total Points Required × Point Redemption Value < Product Cost

If you’re giving away a $10 item, make sure the cost to you is covered after the customer earns and redeems points.

❓Can I change the point redemption value later?

Yes, but only if you're on the Elite Plan. On Starter or Pro, the redemption value is fixed to the Ostana default (usually 10:1 ratio).

❓Can customers redeem part of a reward?

No. Rewards in Ostana are redeemed in full once the customer has enough points.

❓Where do I check how often rewards are redeemed?

Navigate to:

Reports → Reward Summary Report

This will show redemption rates, points used, and reward popularity.

✅ Summary

• Calculate your point redemption value based on margins

• Use the formula: Reward Value ÷ Point Redemption Value = Points Needed

• Set up rewards with clear descriptions and visuals

• Monitor redemptions and adjust if customers are redeeming too fast or too little