# What is gross margin, and why does it set your reward?

This is what is left from a sale after what it cost you to make. It tells you what a reward really costs. A $5.50 coffee that costs you $1.65 to make costs you $1.65 to give away, not $5.50. Pricing a loyalty programme off the menu price is the most common mistake there is.

Source: https://fidella.app/glossary/gross-margin
Last reviewed: 2026-08-30

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If you take one number into a decision about your reward threshold, take this
one.

## The mistake it prevents

Owners look at a menu price and conclude the programme is expensive. The
giveaway costs you the input cost, not the retail price, and the gap between
those two is usually large.

## Using it

Cost of the reward divided by the revenue generated over the threshold gives you
the programme's cost as a percentage of revenue. Compare that against what you
would pay for the same outcome through advertising.