The Early Beginnings & Evolution of Loyalty Marketing

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Loyalty programs have become a vital component of many companies’ customer retention strategies. An ever-increasing number of corporations, from fuel stations to fast food joints, are turning to loyalty marketing to solidify and retain their client base.

Interestingly, the rewards program concept is not a recent one, having existed in one form or another for more than 200 years! From coupons to tickets to mobile apps, the growth and evolution of loyalty marketing has certainly been fascinating.

A token of thanks

For hundreds of years, companies have been exploring various strategies to better retain their client base. Research shows that retaining existing customers is far more profitable than simply acquiring new customers.

Back in the late 18th Century, a US Merchant picked up on the idea of turning first-time customers into repeat customers.

In what is considered to be the first form of “loyalty program”, the merchant began issuing copper tokens to customers who had made purchases. These copper tokens could then be redeemed for goods in-store. Throughout the next century, copper tokens became widely used by merchants to reward customers.

The stamp of approval

During the late 19th Century, merchants and retailers began to realise that tokens were not a very cost-effective method of retaining customers.

As a result, people began transitioning away from copper tokens to stamps. Coca-Cola pioneered loyalty marketing by issuing coupons that could be redeemed for a free sample glass of the beverage. Also among the first companies to make the switch was S&H Company, which started issuing S&H Green Stamps to other businesses. These businesses would then use these stamps as a way of rewarding their loyal customers.

Green Stamps became an incredibly popular form of a loyalty marketing and was widely used until the mid-20th Century.

Loyalty in a box

The mid-1900s saw firms looking for new and inventive ways of building customer loyalty. Boxtops represented the next step in this evolutionary process.

Boxtops are essentially coupons that have been printed onto the packaging of a particular product. Consumers could then cut out these coupons and redeem them at various retailers.

It was Boxtops that ushered in the era of brand-specific loyalty. One of the pioneers of this loyalty program was Betty Crocker, who introduced the Boxtop coupon during the 1930s.

This customer retention strategy proved hugely successful, running up to the early 2000s.

Frequent flyers start taking off

The 1980s saw the advent of the famed frequent flyer program. In 1981, American Airlines became the first airline to offer a frequent flyer miles rewards program. The program was called AAdvantage and was designed to encourage customers to continue flying with their airline.

Other airlines soon followed suit, with United Airlines being the next to introduce a frequent flyer program, known as Mileage Plus. The frequent flyer loyalty program is still being used by these and many other airlines today.

This type of loyalty marketing soon found application in other industries. In 1983, for example, Holiday Inn introduced its own loyalty program, rewarding customers for their continued patronage at the company’s various hotels.

An evolution of loyalty marketing is on the cards

The mid-1990s saw the popularisation of card-based programs. Many firms started introducing store loyalty cards. Customers would be awarded points based on the value of their in-store purchases.

Not only did this encourage customers to frequent the relevant store, but it also provided firms with a way to collect all kinds of customer data, allowing them to better segment and target their client base.

This is still widely practised today, with many large retailers still offering loyalty cards. Some retailers have taken this a step further, offering in-store deals and discounts to cardholders only.

There’s an app for that

The rise of e-commerce has resulted in the current loyalty program landscape being dominated by mobile apps.

Many stores offer clients their latest discounts and deals by way of their mobile apps, which provides a convenient alternative to carrying a loyalty card.

Numerous famous brands, such as McDonald’s, have successfully harnessed the power of the mobile app, going as far as offering daily app-only deals to customers.

The current trend has also seen a bit of a shift away from brand-specific loyalty programs, with many websites and apps offering a “one-stop-shop” experience.

For example, UberEats provides discounts at numerous restaurants for ordering via their app. Customers can select from a range of restaurants without having to visit each site, select their option and pay, all conveniently from one app.

An added feature of the mobile app loyalty program is that companies can stretch rewards beyond simple spending. Customers are now able to earn rewards by liking or sharing posts on social media or referring friends. The possibilities have become endless!

The way forward

It’s safe to say that loyalty marketing will continue to evolve as businesses seek to find new ways of engaging their customers. This evolution will be driven by several factors, including:

  • A company’s ability to create a personal connection with their customer.
  • An understanding of the ever-evolving needs of its clients.
  • The ability to enhance the client’s overall experience when using a particular brand.
  • The type of technology available.

As companies continue to evaluate these and other factors, their approach to loyalty marketing will inevitably shift to meet every new level of expectation.

Discover more about loyalty programs and why they matter to your business to learn about the benefits of rewarding your customers.

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