The history and evolution of loyalty programs
There are millions of businesses in the world doing different things, but in essence, they all want to retain their loyal customers who will return in the future. Loyalty programs were born as a result of this business need. The earliest known commercial loyalty program appeared as early as the 18th century. Today of course they are commonplace and an integral part of many businesses’ strategy.
The very early type of loyalty programs: Copper Tokens
In 1793, some U.S merchants began to give their customers copper tokens to redeem in future purchases. This type of loyalty program became more popular during early to middle 19th century. This idea of giving customers some rewards to attract them to come back soon flamed up and caught lots of shopkeepers’ eyes which led to many of them implementing this kind of copper token loyalty programs to offer to their customers. These people were not only the pioneers of the customer loyalty program but also paved the way for modern companies to innovate and bring value to their own business.
Trading stamps
Soon after, merchants realized that it was too costly to offer copper tokens as the means of loyalty program redemption. In 1896, S&H company started providing printed stamps known as S&H Green Stamps to various other businesses to use as a means to offer rewards to their loyal customers.
Soon the stamps replaced the copper tokens and became the most popular loyalty program on the planet — it once issued three times as many stamps as U.S. postal service. Customers would receive S&H Green Stamps at the checkout counter in various stores from department stores to small retails. With these stamps, customers with enough green stamps could redeem products from S&H redemption center. This practice was quite popular until mid-late 20th century.
(source: http://myauctionfinds.com/2010/06/09/licking-and-gluing-s-h-green-stamps/)
Box tops
During early 20th century, many companies tried to introduce new ways of implementing customer loyalty programs to the market. Box tops, the coupon printed on the package, was an individual loyalty program that Betty Crocker started to offer to its customers in 1929. These box tops coupons could later be redeemed for items that were listed on Betty Crocker’s rewards catalog. However, with the rise of other types of loyalty programs, Betty Crocker finally ended this program in 2006 after many successful decades of box tops.
(Source: https://www.mprnews.org/story/2006/11/28/bettycrocker)
Frequent Flier Programs
Customer loyalty programs, apart from rewarding customers, were also beginning to be designed to acquire data from customers especially for airlines industry. In 1981 American Airlines introduced the very first frequent flier program, AAdvantage, to loyal customers. This frequent flier program was considered one of the most modern and comprehensive type of loyalty programs at that time. It provided customers with brand new experiences on board their flights and was recognized for its innovative approach.
Soon United Airlines followed up by introducing its own loyalty program, Mileage Plus, to the market. This type of customer loyalty program was soon applied in many industries, such as hotels, hospitality and car rental industry, etc. Nowadays, all the airlines companies have their own frequent flier programs. In addition, most of the airlines have allied together to share the air miles to attract more customers and to retain the current ones just like the concept of the S&H green stamps.
Card-based programs
Nowadays, most of the stores from small coffee shops to all kind of businesses provide membership cards or other types of loyalty cards to retain customers. Card based programs has been popular and widely used means of customer loyalty programs since 1990s. When we open our wallets or take a look at our keys, it is not surprising to find loyalty cards inside our wallet or a membership tag on our keychains!
Another type of loyalty program evolved from card-based programs — the business membership program. It gave its members exclusive rights to make any purchase. The most famous business implementing this type of program would be the American wholesaler, Costco. In order to purchase in Costco, one has to apply for a membership first and also have to pay a certain membership fees every year to retain membership. The loyal customers of this kind of membership merchants are not only looking for discounts, but also special deals and good customer service and after-sales service. This type of customer loyalty program can strongly tie up the relationships between the merchants and the customers.
(Source: https://www.costco.com)
Customized loyalty programs via mobile apps
Recently, the nature of loyalty programs have changed because of the rise of ecommerce. The rise of technology has enabled merchants to provide better customer experience in different industries and to develop their loyalty programs in more innovative ways.
More and more merchants shift their means of customer loyalty programs from reward stamps, plastic cards, paper cards to mobile apps or other digital forms. A merchant nowadays can implement its own loyalty program easily either online or with mobile apps.
For example, Starbuck Stars, which is Starbucks’ rewards program, is one of the most famous and successful customer loyalty programs of the modern era. Every S$1 you spend in Starbucks will convert into 1 star as a reward. With enough stars, customer can redeem free drinks in the store. Additionally, Starbucks frequently sends promotions via Starbucks’ app to members to build up its loyal customers and keep their customers engaged, especially in the coffee red sea market.
Numerous companies including Grab, Best Buy, Target, Uber, etc have implemented similar strategies as Starbucks’ to build up customer loyalty. Nowadays, customers only need a smartphone to download the apps of the customer loyalty programs. Meanwhile, merchants can also proactively reach out to the customers who already have the apps to engage with them to maximize profits and to make customers build up loyalty.
(Source: http://www.starbucks.com.sg)
(Source: https://www.grab.com/sg/)
When we look back to 18th century, the very beginning of the customer loyalty programs, the copper tokens, shopkeepers only focus on building up the relationship with customers and rewarding those who spend in their stores to make them come back again.
Now in 21st century, the era of ecommerce, customer loyalty programs become more sophisticated and comprehensive. Shopkeepers now tend to reach out to the potential customers initially by social media referrals, content marketing and other types of digital marketing. The rewards are more tailored and customized to make the rewards more attractive to appeal more customers.
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