As early as the 1700s, retailers started implementing programs to create loyal customers. Today, technology has empowered the customer with more information, choice, and flexibility than ever before, and created a retail climate in which customers demand more than just “perks” to influence their buying behavior.
Read below a high-level history of Customer Loyalty Programs and their evolution over time and loyalty trends that continue to impact the market today.
1700s – 1800s: Early Beginnings
Retailers began giving customers Tokens of Appreciation to be used as in-store currency for future purchases. This model remained popular for some time, thus influencing program models for years to come.
In the 1800s, retailers began to innovate by introducing stamp-based programs and offering double, triple, and quadruple stamps to win customers and encourage repeat visits.
1900 – 1980: Stamp Collection Programs & the Consortium Management Model
Stamp collection programs continued to remain popular into the 1900s with the evolution of various branded and retailer-specific implementations of this model.
S&H is likely the largest and most well-known program to introduce the consortium model, wherein different retail brands across different retail categories (i.e., grocery, convenience, and department stores, etc.) all participated in the same program by providing a token of value — in the S&H model, Green Stamps — that customers exchanged for rewards that may not have been offered or provided by any of the participating retailers.
1980s – 2000: Vertical-Specific Programs
The 1980s introduced vertical-specific loyalty models, including frequent flyer programs and hotel rewards programs. American Airlines’ Frequent Flyer program is widely recognized as the first full-scale loyalty program of the modern era. In addition to the McDonald’s Monopoly program, which is still active today, the first credit card cash-back program and rental car program were also introduced during this period.
Card-based programs, such as the CVS Extra Care program, grew in popularity in the 1990s. Card programs, compared with earlier models, were easier for retailers to monitor and manage. They also had the capability of storing rewards mechanics and balances in a centralized remote application and database under control of corporate headquarters.
At this stage, programs relied heavily on analog registration and offer delivery that required paper enrollment forms, basic but clunky web experiences, and offer delivery via physical mail or printed receipts at the POS (which, ironically, were delivered after a transaction and therefore were not successful in generating increased basket size during the existing store visit).
2000 – 2019: Digital & Social Loyalty Programs
Alongside a rise in the adoption of e-commerce and digital experiences, retailers began to introduce personalized and multi-channel programs in the early 2000s. Kimpton launched the first personalized loyalty program based on customer preferences, Best Buy introduced their points-based program in which points could be exchanged for in-store credit, and Starbucks launched a frequency-based program that required linked payments in order to participate.
More customer data became available compared with any previous period and the ability to reach customers through new and interesting channels (like mobile apps) opened the door for increasingly unique, personalized experiences both in-store and online. During this enlightening period, web-enrollment forms became popular and basic digital experiences improved. Retailers started experimenting with and introducing branded mobile apps to engage customers outside of physical retail (i.e., offsite).
2020 – Future: Modern, Intelligent, 1:1 Customer Activation Programs
As we enter a new decade with increasingly tech-dependent consumers and the proliferation of connected smart devices, customer loyalty must evolve to consider precise and purposeful 1:1 Activation as the root of customer relationships that, in turn, create loyal, profitable behavior.
Successful modern Activation programs create a unified view of the customer via a Unified Member Profile, which enables retailers to serve hyper-personalized and relevant content and experiences that steer a greater Share of Wallet to their brand.
Spend-and-get programs are no longer delivering the returns required by retailers, nor are they motivating customers to behave in profitable ways. An omnichannel Activation strategy that leverages a customer’s personal motivations, behavioral tendencies, habits, and preferences will become the differentiator that drives returns.
To learn more about how retailers need to utilize data — in real-time — to understand customer spend and behavior to Steer the Wallet to their brand using cross-channel experiences and more, download our white paper The Evolution of Customer Activation.
Do you want to learn more about loyalty programs and their evolution over time, and how you can create future-forward programs that aim to expand the customer relationship from purely transactional to personalized engagement?
Download our “The Evolution of Customer Activation” white paper here.