i'm going to suggest an approach that seems to be working for us, though it is taking a while. my son is 3 1/2 as well. he pees on the potty when we are at home, but he actually tells us when he has to go. we are still working on pooping, he seems freaked out by it. and we are just starting to "venture out" with the pottying--today in fact.
we thought once he figured it out, he'd have it down pat because that seems to be the way he does most things. he didn't crawl until 10 mos, but was walking without crawling by 12 mos. KWIM? once he decides to do something it is just done. but pottying hasn't been this way. i think much of it is an awareness issue.
i do not suggest a yummy treat for just sitting on the potty. nate's treat for sitting on the potty used to be a piece of toilet paper because he found it fascinating. now if he sits and doesn't do anything he gets verbal encouragement, but no treats. treats and flushing are all reserved for when he actually goes. (he's still fascinated by flushing.)
i will say that he has always been very resistant to potty training. like he gets completely freaked out at certain points. if that happens we have always backed off that particular issue.
we first started by getting him to go naked. we tried and tried in the summer and he would cry for a diaper within 30 seconds, unless we were outside playing in the pool. then he'd be happily naked and pee freely. he'd watch it, too. then this fall, he decided he wanted to be naked all the time. (great timing, right? but his choice.) so we let him. and we worked on getting him to tell us if he had to go pee when he was naked. he seemed to get that pretty quickly but then as soon as i'd put underwear on him he'd start going pee whenever again. this is, i think, the awareness issue. we stuck with that for a while. just naked. we'd get him naked as soon as he got home. he started refusing to wear underwear because "they have holes in them." meaning when he pee'd in them they leaked. he didn't quite understand that underwear weren't supposed to catch the pee. even though we had talked about it before. we talked about it again, and he seemed to get it. (this has been in the last few months.) so now he was going when we were home and he was wearing underwear. good progress. but he'd still have accidents when he was wearing pants. only in the last couple of weeks, after having a couple of accidents in pants, has he seemed to get that he can't pee when he's in pants either.
it has also only been recently that he will tell me if he has pee'd in his diaper or pull up. "oh, no, i had an accident in my jammies or pants or whatever." he doesn't usually say he's had an accident in his pull up or his diaper. we are working on genuine accidents (didn't know it was coming) vs. laziness (just didn't want to say anything).
it has been slow. i probably could have pushed a bit harder in the beginning, but didn't feel like it. he is scared of the big potty, so he goes on his little potty. his little potty is in his bedroom next to his bookcase. it seems to be an area where he doesn't get overly distracted. (the bathroom is just so darn interesting!) he's actually going most of the time on the potty, at his own request.
he gets one piece of candy for going pee. and four for going poop (which hasn't happened yet).
i will say that the very first thing he did on the potty was poop. he did it once and his reaction was "i did it." in tears. despite our excitement, he was clearly freaked out by it. but he also went through a very long phase of wanting all of his bodily funcitons "back." one day he cried for 20 minutes because he noticed that he "lost" a tear when i was changing his diaper. and it is more than a little disturbing when your child tries to re-consume his own vomit because he wants it back.
he also pooped on the potty his very first day of pre-school. but we haven't been able to duplicate that one either. i'm more concentrated on pee'ing right now. he's pooped at least once in his underwear. i figure it won't take too many more of those before he decides to try the potty. currently, he hides to poop. and is very adamant about it. we ask if he wants to try pooping on the potty and he nearly has a breakdown. so we are just leaving it there for now. he has tried to poop on the potty at least once when asked, but he says "it isn't working." i think it might just take a bit longer for him to learn to control that.
good luck. i hope some of this saga helps. i'm here to say that it isn't always as simple as put them on and reward them. it is more about figuring out your child and what is going to help him figure it out. and for that everyone is different. i know that there is more that i'm forgetting, but i think this is long enough.