Loyalty programs have changed significantly from basic retail stamp programs to today’s omni-channel and multi-partner programs. In this post we dive into the evolution of loyalty programs with the hope that it helps you to consider how you can remain on the cutting edge of what we believe will be an industry with continued innovation.
Centuries ago merchants in the US began giving out proofs of purchase to customers that would be collected and exchanged for items in store or via a catalog. A popular certificate that could be collected was from the Grand Union Tea Company. This initial introduction and practice of customer loyalty spread like wildfire compelling merchants to use the tactic through the 1800s.
Fast forward to the end of the century, S&H Green Stamps created the first widespread retail coalition loyalty program by selling stamps to supermarkets, department stores, and gasoline stations among other retailers. These stamps would then be handed out to customers that could redeem them for rewards from a redemption center or mail in catalog. At the time it was state of the art innovation and is the basis of many of the customer loyalty marketing tactics that are used today.
Over time, loyalty programs evolved in the way they tracked customers and their communication with them. Early innovators began offering coupon promotions on boxtops. Examples include companies like Kellogg’s – the first to offer a cereal premium, and Ovaltine – who offered labels and tops that could be collected in exchange for premiums.
In the latter half of the 20th century, the first frequent flyer program was introduced by American Airlines, followed by the immediate reaction of United Airlines to start their own program. As technology began to improve, so did the personalization and individualization capabilities of loyalty programs. As a result, improved communication based on customer data became more common. These personalization capabilities enabled programs to take their communication with members one step further by segmenting and differentiating program members to communicate more efficiently with offers that were more relevant to them. The advent of these capabilities paved the way for coupons and promotions to be sent to customers through various channels and touch points.
Only a few years ago, card-linked offers began to gain popularity as a new marketing technique and have been implemented by most financial institutions and technology companies in the sector. Card-linked offers connect offers and discounts directly to a consumers credit or debit card, that can be redeemed at the point of sale.
With loyalty becoming a facet of everyday life and membership to many loyalty programs being more common, customer interaction with the program became just as important than the transaction itself. The focus of the loyalty program is no longer limited to earning points and redeeming them for rewards, but active engagement with the program and the brand. For example, sharing one’s affinity for a program, spending time within the program or visiting the site regularly are all common earn opportunities for today’s loyalty programs. With customers becoming more engaged with the programs, providers are able to interact with the customer throughout their journey to increase loyalty and build a connection.
The loyalty landscape will continue to change over time. However, one thing is for certain – the goal of any program is to make engagement and retention stronger on an individual basis and to provide a more customized experience. In doing so, programs can be used to drive behavior beyond loyalty program engagement, such as making purchases, promoting the brand or any other actions that a program deems valuable. Now that is loyalty.