The Evolution of Loyalty Programs

Today, loyalty programs are everywhere – from small retail stores to airlines and online platforms. From the early days of introducing loyalty programs to the modern digital age, this concept has undergone an evolution. Let’s take a closer look at how customer loyalty programs have changed over the years.

The introduction of loyalty programs can be traced back to the 18th century. It all started when retailers in America started giving customers copper tokens on their purchases. The customers could exchange these for future purchases of items in store. This grew on to be a common practice for customer retention throughout the century. The copper tokens were proving to be expensive for retailers in the long run, and hence the concept of customer loyalty took a newer shape.

In the 19th century, Green Shield Stamps were introduced. This, in a way, can be called as the first of retail loyalty programs. Customers collected stamps affixed to booklets and redeemed them at various markets, stores and gas stations. This became popular as customers used these widely. A new idea was introduced by Betty Crocker, a baking company. In 1929 their baking mix box tops carried coupons that could be redeemed. This gave birth to brand specific loyalty programs. And made way for the biggest idea, as we know it today – the frequent flyer program.

In 1981, American Airlines launched the first ever frequent flyer program! American Airlines computerized databases and started rewarding their customers, thereby encouraging them to fly with them over competitors. The AAdvantage, at one point, started being viewed as the best frequent flyer program in the world. Their customers could redeem air miles for flights. Other airlines entered the fray too. Customer loyalty programs had started gaining momentum and with more travel picking up, there were more customers looking to redeem air miles for flights and get more privileges.

From travel on to hospitality, in 1983 Holiday Inn was the first hotel to initiate a membership rewards program. This was followed by Marriott in the same year. Hotel rewards programs were flourishing as they rewarded their guests. This was being used as a customer retention program and strategy in a market that was getting more competitive. More than a decade later, loyalty cards entered the scene! In 1995, Tesco, the UK Supermarket brand, studied customer behaviour with the help of technology and started rewarding customers through loyalty cards! This revolutionized the loyalty industry. More cards soon appeared across brands and sectors.

The 2000’s saw the boom of the digital era and with it came the advent of many global rewards programs, for example credit card rewards programs. Retail chains and hospitality brands propagated their customer rewards programs too. Etailers started rewarding customers for engagement online, along with transactions. With the rise of ecommerce and digital solutions, mobile apps became the popular mode for rewarding customer loyalty.

Today, with marketing automation technologies, we are seeing the trend of the customer journey gaining vital significance as customers get rewarded at various steps. With data-driven marketing becoming mainstay and customer personalization a key for brands, artificial intelligence is being applied to customer loyalty programs too. We’ve come a long way, and the customer loyalty space continues to evolve.