Bonuses or Discounts: What’s More Profitable for a Business? The Full Loyalty Math in 2025

The topic of “bonuses versus discounts” is one of the most important in loyalty.

But this is exactly where most business owners make a mistake.

At first glance, it seems that a 10% discount and 10% in bonuses are the same thing.

In practice, these are two completely different financial models with different logic, different cost, and different impact on LTV, margin, and repeat purchases. 2025 has shown: a discount almost always reduces profit, while bonuses and cashback increase customer return rates and cost significantly less. Why is that? Let’s break it down in detail.

What Is a Discount from an Economic Perspective

A discount is a direct reduction of a business’s revenue. It:

• cuts your margin immediately,
• doesn’t require the customer to return,
• provides no cumulative effect,
• doesn’t shape behavior.

If a customer receives a discount once, they don’t feel obligated to come back.

They’ve already received the benefit — and that’s it.

Mathematically, a Discount = Lost Profit

Let’s say the bill is 300 UAH, with a 10% discount.

• The customer paid 270 UAH
• 30 UAH — lost profit
• These 30 UAH will never come back

If the product margin is 20%, then:

👉 a 10% discount burns half of your margin.

👉 with a 15% margin, a 10% discount almost wipes out your profit.

That’s why a discount is a tool for short-term promotions, not a loyalty mechanic.

What Are Bonuses (Cashback Within a Loyalty System)

Bonuses are not money — they are a promise of future value. For a customer to use the bonus, they must:

1. come back,
2. make another purchase,
3. redeem the bonuses on the next order.

This is the core of loyalty — the customer returns on their own so they don’t lose what they’ve accumulated.

The Economics of Bonuses

The same bill: 300 UAH, 10% bonus → the customer receives 30 bonuses.

But:

• bonuses do not reduce the amount of the first purchase
• bonuses only cover the cost price (for example, 12 UAH instead of 30)
• some bonuses are never used
• bonuses stimulate a repeat purchase

On average in HoReCa and retail:

20–35% of all bonuses are never redeemed, and redeemed bonuses reduce profit 2–4 times less than a discount.

So where a discount would cost you 30 UAH, bonuses actually cost from 6 to 14 UAH.

Now the main question: what is the difference between discounts and bonuses

Criterion	Discount	Bonuses
Action	immediately	later
Cost for the business	high	2–4 times lower
Requires a repeat visit	no	yes
Affects LTV	no	yes
Affects average check	no	yes
Reduces margin	always	partially
Not fully redeemed	impossible	yes, 13–35% of bonuses “expire”
Shapes customer behavior	no	yes

The conclusion is obvious:

Bonuses are the continuation of the relationship. A discount is the end of it.

What is cashback? And how is it different from bonuses and discounts?

There’s a common misconception in marketing: many think that cashback = discount. But that’s not true.

A discount is a reduction of the price right now.

Cashback is the return of part of the amount after the purchase in the form of points/bonuses.

Bonuses are an internal currency for future purchases.

So cashback is essentially one type of bonus system.

The difference between bonuses and cashback

Bonuses can be:

• a percentage of the check (cashback)
• fixed bonuses
• gift bonuses
• tier bonuses
• bonuses for N purchases

Cashback is always a percentage. For example: 5% from every purchase.

Bonuses can use any mechanic — from “every 8th coffee free” to loyalty tiers.

But economically, bonuses and cashback work the same: the customer returns → bonuses cover only the cost of goods → profit is preserved.

Why cashback and bonuses are more profitable than discounts — mathematical comparison

Let’s assume:

• receipt: 400 UAH
• margin: 25%
• discount: 10%
• bonuses/cashback: 10%

If the discount is 10%

The business receives: 400 − 10% = 360 UAH in revenue

Losses: 40 UAH This is 40 UAH of pure, permanently lost profit.

If bonuses are 10%

The customer receives 40 bonus points. To use them, they must come back. Let’s assume they return and spend them.

Cost of goods is 40% → real cost for the business:

👉 40 bonus points = 16 UAH in cost

This means the business owner:

• keeps the full revenue from the first purchase
• loses 2.5× less
• receives an additional visit
• increases LTV

This is the fundamental difference.

Why bonuses and cashback increase visit frequency

Psychology works like this:

• people don’t like “losing” what they’ve accumulated
• bonuses feel like “my money”
• even small amounts create a return-effect

When a customer has 20, 40, or 120 bonus points, they come back to use them. And once they return — they buy more.

According to business data:

• visit frequency increases by 20–35%
• average check is 15–25% higher
• repeat purchases grow 1.5–2×

None of this happens — and never will happen — with discounts.

Why discounts create a “discount-expectation culture”

If customers get used to discounts, they no longer want to pay full price. They wait for Black Friday, promos, special deals.

This destroys the perceived value of the brand. But a bonus-based loyalty program works the opposite way:

• “you earn bonuses” — a positive emotion
• “I have a balance” — a reason to return
• “I want to reach the next level” — engagement

Bonuses create a sense of progress. Discounts create a feeling of “I don’t want to pay full price.”

When discounts are actually needed

A discount isn’t bad. It just shouldn’t be a loyalty mechanic.

Discounts make sense when:

• you need a fast flow of new customers
• clearing out inventory
• opening a new location
• a 1–2 day promo
• an offer to influence seasonality

But in a long-term loyalty program — no.

When bonuses/cashback are the best choice

Always, when the goal is:

• increase repeat purchases
• raise LTV
• build a habit of visiting your business
• reduce advertising costs
• grow your customer database
• make marketing predictable
• stimulate frequent visits

If you add levels (Silver/Gold/Platinum) — it works even better.

The main conclusion

If a business gives a discount — it spends money. If a business gives bonuses or cashback — it invests in repeat purchases.

Discount = today the customer pays less.

Bonuses = tomorrow the customer returns and pays again.

A discount does not create loyalty. Bonuses create behavior.