Loyalty programs have come a long way since their inception in the late eighteenth century. In its earliest known form, a US retailer began rewarding customers with copper tokens in 1793. Customers could use these tokens for future purchases, thereby generating repeat business, which is the core focus of any loyalty program design. Several other retailers quickly copied this innovation and by late nineteenth century, consumers saw the first instance of a brand driven (as opposed to retailer owned) Loyalty Program.
The Grand Union Tea Company in Pennsylvania chose to bypass the retailers and sell their products directly to consumers, starting with door to door sales. They began rewarding customers with tickets, which could be collected and redeemed for a wide selection of products from their Catalogue of Premiums. This innovation of paper tickets (or stamps) and booklets for collecting the stamps was widely adopted by all the loyalty program operators. The customers would exchange the filled booklets for a wide range of rewards.
The pre-computer & internet days of running and participating in the loyalty programs were cumbersome. People had to track the stamps in books and then mail these to the distribution centers for redemption. Simultaneously, the supply chains were evolving to create multiple layers of stockists/distributors/dealers/retailers between the brand owners and the end customers. This resulted in the brand owners ceding the loyalty marketing space exclusively to the retailers.
The Impact of Computers & Internet
As technology progressed, so did loyalty programs. Computerization towards the end of twentieth century enabled massive amounts of data crunching and efficiencies of operation. In the 1980s, retailers began implementing Point of Sales (POS) solutions. They started using barcode scanners to track customer purchases. The lowered costs of operations meant more retailers and service providers adopted loyalty programs. American Airlines started the airline frequent flyer club and it was quickly replicated by almost every other airline. Restaurants & coffee shops started their coffee cards. Even some hospitals offered loyalty discounts on their OPD consultations.
At the turn of century came Amazon. They started mining the customer data with “Other customers who bought this also bought…” and the world woke up to the power of data science. The retailers realized the benefits of correlating all the loyalty data that they had been collecting all this while. They also started getting relevant insights out of the data goldmine – generating personalised recommendations for the shoppers and in turn higher business for themselves.
With the rise of the internet and mobile technology, loyalty programs have undergone a major transformation. Online retailers, such as Zappos, have implemented loyalty programs with a wider application. Their programs allow customers to earn points not only for purchases, but for other activities like reviews, and referrals too.
In recent years, loyalty programs have become even more sophisticated. Companies are now using data analytics and artificial intelligence to personalise rewards based on a customer’s buying habits and preferences. Some programs even use gamification elements, such as leaderboards and badges, to increase engagement and motivation. In conclusion, over the last century, there have been thousands of loyalty programs; and almost all of them are operated by customer facing entities. The consumer brand owners have got left behind somewhere. But that was the case so far. As now, Brand Wallet brings you a loyalty program for consumer brands with omnichannel application.
