Brief History of Loyalty and Rewards
Loyalty programs have existed for hundreds of years. Dating back to Sudbury New Hampshire where a merchant launched the first loyalty programs in 1793. Customers were rewarded with stamped “copper tokens” that they could accumulate and use for future purchases.
This method of boosting repeat business gained rapid popularity: loyalty programs began to proliferate across America in the 1800s and 1900s, featuring inventive forms of collectible stamps, checks, tickets, and coupons that could be redeemed for in-store or mailed items. Benjamin Talbot Babbitt revolutionized the loyalty game in 1905 when he introduced an expanded selection of rewards in his Mailing List of Premiums.
In 1981, American Airlines transformed modern loyalty programs by introducing a new currency: air miles. AAdvantage program members earned miles at a fixed value that they could later redeem for free flights, and later, for other premium status services with the introduction of a tiered system. Southwest followed suit, but instead of miles, they introduced "points" for the first time. The early 1980s and 90s witnessed the decline of loyalty stamps, coupons, and similar methods, and the dominance of points and miles programs that continue to this day. However, blockchain token rewards are now reshaping this landscape.
The issue at hand
According to the 2017 Colloquy Census, around 57% of members are unaware of their reward points balance. A significant portion (37%) loses track of their points altogether due to the complex nature of managing multiple programs, account details, and cards. Only 25% of members find the effort required to earn rewards satisfactory, indicating that 75% are dissatisfied[1].
The primary reason (57%) for abandoning a program is that it takes too long to accumulate points or miles[2]. Additionally, 33% encounter difficulties in using their rewards due to various terms and conditions, while 36% report that their points or rewards expire before they can utilize them. Lastly, 59% feel that the rewards offered are not valuable enough.
While the traditional loyalty programs have seen constant changes in the currencies they offer, their fundamental design has remained largely unchanged. However, customers have evolved, and their needs have shifted in our modern digital landscape. We have adapted to faster internet connectivity, mobile flexibility, and cross-platform applications. Yet, the unaltered structure of loyalty points programs has created gaps and distances between brands and their loyal customers.