If you reward your customers with loyalty points, you are confident they will spend them in your store. It is cheaper than giving material products because it is likely that a part of the points will never be redeemed. Customers can choose what they will spend their points on, making this incentive more attractive than fixed material rewards.
Your loyal customers are the best advocates for your brand and will make the best recommendations. They are worth investing in when it comes to incentivized referrals. By not allowing just anyone to refer your brand, you limit the fraud attempts. Moreover, you can then focus your marketing spending better and offer better (higher) rewards for that specific customer segment.