Featured in DIYMarketers: The Evolution of Rewards Programs—Have We Gone Past the Point of Loyalty?

The Evolution of Rewards Programs—Have We Gone Past the Point of Loyalty? 

Originally published at DIYMarketers.com.

By Ray Clopton, CEO and President of  STS & Wilbur

 

Loyalty rewards programs began in the 1700s to help create repeat business, but today’s loyalty programs have morphed into something that often strays from this mission.

Many of our loyalty rewards programs today are as focused on gathering consumer’s personal information as they are in generating loyalty, if not more so.

Not surprisingly, this approach is not always creating loyalty—especially when a recent survey from Oracle found only 32 percent of customers believe reward offers they receive are relevant.

How did we get to this point?

THE HISTORY OF REWARDS PROGRAMS

Customer loyalty programs (or rewards programs) began in the 1700s, when American retailers first gave out copper tokens that could be used on future purchases. In the late 1800s, some retailers transitioned to giving out stamps instead, which were far less expensive than copper coins.

Then, in the 1900s, several leading brands introduced “box tops” loyalty programs. These coupons were printed directly onto packaging—typically box tops—and could be redeemed for premiums or rewards. Betty Crocker, for example, introduced a popular box top program in 1929.

It wasn’t until 1981 that American Airlines launched what many now regard as the first full-scale loyalty program of the modern era. Around that time, card-based loyalty programs also gained popularity, and some retailers also began to adopt “loyalty aggregators” or “coalition loyalty programs” that honor reward points across a network, regardless of the retailer at which they were originally earned. But, in time, this approach proved problematic for the most popular businesses in the coalition.

Take Plenti, for example, a coalition loyalty program that included AT&T, Exxon, Macy’s, Mobil and Rite Aid, among others. Once Macy’s and AT&T realized most Plenti members were redeeming rewards through them, they quickly saw they were on the losing end of this partnership.

This is also where data privacy concerns began to enter the equation.

Case in point: although the Plenti program has ended, American Express—as the new operator of Plenti—“will continue to use, share and protect your personal information,” and those who participated in Plenti “cannot revoke consent to share their personal data,” according to the program’s online FAQ. Ouch.

A MIDDLE-WAY SOLUTION TO LOYALTY IN AN AGE OF DATA PRIVACY CONCERNS

While we have come a long way since the days of copper tokens, stamps and box tops—and that’s a clear improvement—time will tell whether this data-infused approach to rewards programs is actually generating brand loyalty.

There is a middle-way solution that doesn’t regress to punch cards or demand customers to use data-tracking cards or apps: Mobile-based rewards programs that just ask for a customer’s first name and only text them with rewards updates.

These text-to-join platforms are easy-to-use and easy-to-join, and they empower small businesses to stay modern and “with the times” without wading into the treacherous cesspool of big data.

The success of a loyalty program, at the end of the day, is based on having one that customers can understand in 30 seconds or less.

If employees can explain the company’s loyalty program in two sentences, it will almost certainly be a success. But if a loyalty program is using technology or data collection as a novelty or moneymaker rather than to make it easier for customers to join and remain active? Fuggedaboutit.