October 6, 2015    3 minute read

Consumer Loyalty: 200 years and counting

   October 6, 2015    3 minute read

Consumer Loyalty: 200 years and counting

This year the loyalty program celebrated its 222nd birthday. Like a fine wine it seems to have only got better with age… but now it’s corked.

Back to Square One

Let’s glance back to 1793; the birth of the loyalty program.  In a bid to increase customer retention, a U.S. merchant started handing out copper tokens to consumers with every purchase that could later be exchanged for items in store.  This trend grew over the following century and in 1891 the stamp replaced the coin as the newest and most efficient form of loyalty.  It was so popular in fact, that for a short period three times as many stamps were issued for loyalty than by the U.S. Post Office.

Present Day

Flash forward to 2015; there has been a geometric explosion in loyalty programs as consumers can now receive points, cash back and other attractive benefits all through a mobile app.  Gone are the days of having to shop in-store, so how does a brand ensure loyalty when consumers can shop from anywhere in the world and nearly every retailer offers a comparable internal loyalty program?  Consumer attitudes have changed, expectations are increasing and practicality is becoming increasingly important.

An article published in Forbes last year stated ‘Bond Brand Loyalty’s 2014 Loyalty Report found that the way to a millenial’s heart is via loyalty programs, with six in 10 respondents in this age category reporting they would switch the brands they buy if it meant receiving more benefits.’

How to Answer the Problem?

Arguably, this lies within the existing CLO (Card-Linked Offer) model.  Whilst the CLO space is largely occupied by credit cards such as Tesco MasterCard, American Express and Avios Credit Cards, in today’s competitive market loyalty is a business imperative and there is a growing gap for something more exclusive.  The consumer needs to feel empowered and have the ability to tailor their own rewards to satisfy demand.

Now, there are companies that can facilitate such a transaction.  New businesses have developed CLO technology to work with a consumer’s existing debit or credit card, tackling the issue of new card applications and lengthy activation periods.  By working with these firms, third-party companies (or retailers themselves) can securely monitor transactions made in partnered retailers and apply tailored rewards to meet the needs of individual consumers.

We have seen a shift away from mass acquisition to targeted retention as companies realise it is more expensive to engage new business.  This new breed of loyalty initiative has made access, interest and reward levels more engaging whilst reducing upfront investment and increasing long-term profitability for retailers.

The Time is Now…

…and it couldn’t be more perfect; with UK Consumer Spending growth currently at a 5-year high and Consumer Morale levels surging to a 15-year high, there is significant opportunity for a new player to take the market by storm, but who will be first to pour a glass?

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