A brief history of customer loyalty
Incentivising customers to come back and spend their money with you is as old as commerce itself. Today, loyalty and rewards programs are everywhere, with high street retailers using them to keep pace with each other – and their online competition - to boost retention and reduce their acquisition costs. To understand how customer loyalty is evolving, it’s helpful to take a look back to understand where it has come from.
The evolution of customer loyalty
In 1793 in the US, a merchant started giving out collectable copper tokens that could be exchanged by his customers for items in-store. This practice caught on with other merchants and had become commonplace by the 19th Century.
By 1891 the first trading stamp system, Blue Stamps, was introduced. This enabled customers to collect stamps and affixed them to booklets, which could then be redeemed for store products.
The next big loyalty innovation didn’t really arrive until the 1980’s when American Airlines launched the first full-scale loyalty marketing program of the modern era: frequent flyer miles.
By the 1990s card-based retail loyalty programs such as Tesco’s Clubcard (1995) and Boots Advantage Card (1997) had gained popularity among retailers looking to implement in-store loyalty that was easier to keep tabs on than collecting stamps, or currency.
Customer loyalty: how many loyalty cards do you have?
This lead to the glut of the paper or plastic stamp cards that are still popular today, just look in your wallet or purse and see how many loyalty cards you pull out!
By 2010 Card Linked Offers (CLOs) were introduced as a new loyalty marketing technique for brands, retailers and financial institutions, stemming from a rise in popularity of both mobile payment and coupons. CLOs connect offers or discounts directly to consumer’s credit or debit cards, which can then be redeemed at the point of sale.
Customer loyalty today
Loyalty programs today are about much more than simply rewarding customers for spending a certain amount at a store. With the right loyalty program you can now reward your customers for all sorts of actions above just £s spent.
Technology is already allowing the larger high street brands (those with the deepest pockets) to integrate store locators, payment vehicles, loyalty programs, and even games in a single app that’s always at their customers’ fingertips. Convenience, rewards, ease of use and a fun experience combine to build habit, loyalty, engagement and advocacy.
These big brands are starting to enjoy huge trade boons largely because of their mobile apps, which offer loyalty, ordering & collection and mobile payments.
One of the best-known examples of a loyalty program optimised for mobile is the My Starbucks App program, which acts as a rewards program and a mobile payment method all at the same time. By 2015 21% of Starbucks’ $19.2bn annual revenues were coming via their mobile app. Here in the UK in 2016, Domino’s Pizza processed 35% (£70m) of all their orders via their mobile app.
With the rise of m-commerce and payment infrastructure it is now possible for anyone to start a reward/loyalty program for their store or site. This means these loyalty programs are no longer reserved for the big retailers.
A loyalty program today can reward customers for sharing products and purchases on social media to extend the reach and marketing scope of a store. It can also reward customer referrals to continuously drive new customers to a store and grow revenue.
The options are almost endless with online loyalty programs today, as you help to move customers along a journey. The customer journey is a way of showing all the stages a customer will go through when interacting with you and your business. Offer rewards and incentives to move a customer through this journey and you will have a successful and powerful loyalty program.
Customer loyalty for small & independent businesses
So what does this mean for small and independent businesses?
Indy businesses - those who bring bring colour, diversity and community to our high streets - are sadly at risk of being left behind.
Because they tend to lack the skills and resources to develop and implement tools themselves, most small and independent businesses risk being stuck on a diet of paper loyalty, poor customer engagement, and little or no return on investment.