Often, the best rewards are unique to your audience. And this is true for physical rewards too.
What's a unique, more creative physical reward you know your audience would be excited to win?
For example, if you have a local newsletter, why not try local items as rewards? (Maybe sponsored by a local business)
Or — if your newsletter is in a specific niche like the travel or sports verticals — how about a branded luggage tag or a custom sports bottle?