- Definition of Loyalty: The quality of being loyal/The quality of being loyal to a particular company or brand
- Translation Loyalty: Loyalty
- Synonym: Fidelity / Loyalty
Definition -Loyalty Program- The main objective of a loyalty program is, as its name suggests, to build customer loyalty, retain customers, and encourage them to make purchases more frequently. Recognizing and identifying customers and their preferences is the key to success.
Definition -Discount program- The main objective of a discount program is, as its name suggests, to offer customers a discount or competitive advantage in terms of price, so that they make more purchases regardless of the personalization or identification of the cardholder.
When did the first loyalty programs appear?
Loyalty programs and rewards have become a common feature of today's society. Both traditional stores and e-commerce use programs that improve customer retention and reduce acquisition costs. But do we really believe that we invented them today?
The closest thing to a loyalty program emerged in the US in the late 18th century. Convenience stores and other US retailers began giving customers copper tokens as a reward for their purchases, which could then be exchanged for products on future visits.
During the 19th century, the model was refined, becoming the basis for current programs. In the UK, the Co-op cooperative created the so-called Co-op Dividend tokens made of iron or zinc, with an associated monetary value that could be exchanged for cash twice a year on "divi-day" to make purchases in those establishments. The fundamental objective was to establish a retention and repeat strategy. This was a way of rewarding customer loyalty and recognition. Issuing copper tokens was an expensive way of rewarding customers, so more economical alternatives were sought, and in 1891 the first stamps were issued to replace the tokens.
Green Shield awarded stamps for purchases at certain retailers, which could then be redeemed for catalog products. Green Shield stamps became one of the first elaborate retail loyalty programs and could be considered a predecessor to what we see today. popular multi-sponsor programs such as Air Miles; Travel Club in Spain through brands such as Eroski, etc.
The Great Atlantic and Pacific Tea Company was another company that adopted this system to increase customer loyalty. In this case, a new model of "premium" incentive program was launched . A&P would give away coupons to exchange for luxury items available in its stores. By 1915, they had a catalog of more than 60 pages of redeemable items, not unlike what is done today . This type of program already contemplated customer segmentation.
Loyalty programs in the 20th century
Loyalty programs continued to be led by those based on collecting stamps until the early 1900s. That was when a new incentive model was incorporated into brands: "box tops, " where the top of the box became a personalized coupon for the brand that could be exchanged for a prize, either from the brand or from the store where it was purchased. Betty Crocker pioneered the "box top" concept in 1929, setting the stage for loyalty programs as we know them today. Along the same lines, other brands designed programs based on cutting out the brand name from the packaging and exchanging it for a gift catalog.
It was at the end of the 20th century when the big change in loyalty currency took place: from tokens and coupons, we moved on to points and miles. It was the latter that revolutionized the concept of loyalty designed solely to encourage daily consumption, creating a new model for companies offering "premium" services and less frequent consumption: the travel segment. Specifically, the pioneers were the airlines. This new loyalty model would be called the Frequent Flyer Program. The first large-scale frequent flyer program of the modern era was launched in 1981 by American Airlines, which revolutionized customer loyalty and has attracted more than 115 million members to its recently revamped AAdvantage Program(2021, post-COVID). The next globally recognized program was United Airlines' Mileage Plus. From that moment on, hotel groups, F&B, entertainment, sports, beauty, etc. embarked on the adventure of incorporating the launch of their own loyalty program as part of their strategy or collaborating with a program complementary to their sector, e.g., fly & drive.
In the 1990s, mainly driven by frequent flyers, card-based loyalty programs began to be created. The card would identify customers and be the first way to start processing data and monitoring passenger/guest movements...we couldsay that this was part of the beginning of CRM. Customers felt the need to have these cards, which often gave them privileged status. Although card-based programs are still frequently used by brands, today, the emergence of e-commerce has begun a new chapter in the history of loyalty programs: apps, e-cards, e-vouchers, e-gifts... all in one repository and accessible from your mobile phone!
Author of the text: Susan Miranda
Image from Freepik / Photo by Andrew Moca on Unsplash
