A History Of Loyalty Programs, And How They Have Changed
Loyalty and rewards programs have become commonplace in today’s society. Traditional brick and mortar stores are using them to keep pace with the evolving ecommerce world, and ecommerce sites are using them to boost retention and drive down acquisition costs.
But how and when did loyalty programs get their start, and why have they become so popular just recently? It is time for a lesson in the history of loyalty programs.
The Very Early Beginnings (1700)
Some believe that the early roots of customer loyalty programs started with “premium marketing” in the late 18th century. American retailers began to give copper tokens with purchases that could be redeemed for product on a future purchase.
This customer retention strategy would remain popular throughout the 19th century and would pave the way for the loyalty programs we know today. Let’s continue through the history of loyalty programs.
Transition to Other Forms of Loyalty (1800)
Retailers quickly learned that using coins as a retention strategy was a costly way of promoting loyalty and they began to transition to less expensive options. In the late 19th century around 1891 stamps replaced coins in “loyalty programs”.
Green Shield stamps became one of the first retail loyalty programs and could arguably be considered a predecessor of what Air Miles and Aeroplan do today. The company awarded stamps for purchasing at select retailers that could be later redeemed for catalog products.
At this point in the history of loyalty programs we can start to see programs as we know them taking shape.
Modern Loyalty Programs (1900)
Loyalty programs would continue being lead by stamp collection programs into the early 1900’s when individual brands and retailers started to introduce new ways to engage customers. Box tops were one of the original brand specific programs.
Betty Crocker introduced their box top program in 1929 which marked the start of brand specific loyalty programs in different retailers. Box Top programs would lay the framework for loyalty programs as we know them today.
The late 1900’s saw the birth of one of the most well known and famous loyalty programs ever created. 1981 was the year that American Airline’s started their Frequent Flier program. Often regarded as the first full scale loyalty program of the modern era. The program revolutionized customer loyalty and now boasts over 50 million members!
The later part of the 1900’s would see retailers adopt what I call loyalty aggregators, programs that give points regardless of retailer. The points accumulated can then be used to purchase items on a separate website. These programs are the bigger brother of the earlier S&H Green Stamps program. Some popular programs like this in Canada are Air Miles and Aeroplan.
Card based retail loyalty programs also gained popularity in 1990’s. Retailers were looking to implement in-store loyalty that was easier to keep tabs on than collecting stamps, or currency. These types of programs are still popular today, just look in your wallet and see how many loyalty cards you can pull out.
Card based programs and loyalty aggregators are still popular today, but the emergence of ecommerce has started a new chapter in the history of loyalty programs.
Loyalty Programs Today
With the rise of ecommerce and payment infrastructure it is now possible for anyone to start a reward/loyalty program for their store or site. A loyalty program is no longer reserved for the big boys in the retail space. In fact many of the most successful programs are online and on mobile.
One of the best examples of a loyalty program optimized for mobile is Starbuck’s program. The mobile app acts as a rewards program and a mobile payment method all at the same time. If you are looking to model a mobile loyalty program I would read “Loyalty Case Study: My Starbucks Rewards”.
Loyalty programs have evolved through their history, they used to reward customers for spending a certain amount at a store, but today are so much more. With a loyalty program today you can reward your customer for all sorts of actions above just dollars spent.
A loyalty program today can reward customers for sharing products and purchases on social media to extend the reach and marketing scope of a store. It can also reward customer referrals to continuously drive new customers to a store and grow revenue. The options are almost endless with online loyalty programs today, it is just important that you use a program to move customers along a customer journey.
The customer journey is a way of showing all the stages a customer will be in when interacting with your site. Offer rewards and incentives to move a customer through this journey and you will have a successful and powerful loyalty program.
eCommerce loyalty programs have eliminated the need for physical cards and make program adoption much simpler. Is this the final chapter in the history of loyalty programs? Not a chance, loyalty will continue to evolve and become even more powerful and dynamic.