How to show appreciation when career progression isn't possible

When staff are performing well you want them to feel appreciated. If they are consistently showing aptitude then often the expected reward is promotion. Unfortunately, varying factors can stop this from happening. This could be due to lack of availability of suitable positions or the emergence of a better candidate. Worse still, while they may consider themselves as an ideal candidate, you may disagree. Whatever the reason, if the situation is mishandled the effect on engagement can be catastrophic. So, how can those that miss out on promotion be pacified and kept onside?