From Tokens to Coupons to Apps – A Brief History of Loyalty Programs

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One of the first things you learn in business is that returning customers are more profitable than new ones. While it's unclear if they knew this back in 1793, the earliest record of a loyalty program, one thing is certain. The idea of rewarding and incentivizing customers to 'come back soon' was a stroke of genius.

Loyalty programs continue to evolve, and thanks to advances in tech and the democratization of online retail, consumers can join a loyalty program pretty much anywhere they spend money. And whether it's their Air Miles, LeoVegas bonus, or one of their many gas station points cards, people take their loyalty programs seriously. There are even laws in place to protect consumer rights around rewards points.

So how did loyalty programs start, and how have they changed over time? Keep reading to find out.

1793 – Loyalty Programs Go Viral

Legend has it that merchants in the United States began (or at least modernized) the loyalty program by giving their customers copper tokens they could collect and redeem for in-store purchases. Whoever was the first to do it, the idea spread like wildfire among business owners, and it soon became a part of the shopping routine.

Loyalty Programs Get More Efficient

About a hundred years later, in the early 1890s, business owners realized that they were spending money unnecessarily by giving away copper coins. So companies like Green Shield in Britain and the S&H Company in the States began printing stamps and offering them to select merchants to use in place of copper coins. Consumers could redeem the stamps for gifts from their catalogues or affiliated retailers.

This idea was revolutionary and is still in use today by companies like Air Miles and Costco. The stamps were still around until the mid-20^th century. 

20^th Century Loyalty Programs

The 20th century saw the birth of the coupon around 1929 when Betty Crocker began printing coupons on their box tops. They offered purchasers points they could collect and use to redeem for products in their reward catalogue. The program lasted almost about 75 years, finally coming to an end in 2006.

In 1981, American Airlines started one of the most popular rewards programs in history – Frequent Flier Miles. It would reward customers by giving them in-flight upgrades and proved the value of experiential rewards. It was also the first to collect consumer data. 

Since then, we've seen the coming (and now going) of card-based loyalty programs that used a similar approach as the stamps. 

Now it's all about the apps (for retailers) and memberships for online retailers. These iterations of the loyalty program allow businesses to offer rewards and promotions to members, keep in constant communication with their customers, more efficiently get to know their customers' habits and can even be used to complete sales in the case of apps.