August 14, 2023
6 min read

From Yesterday to Tomorrow: An In-Depth Look at Retail Loyalty Programs

Loyalty programs have been a long-standing part of the shopping experience. From physical tokens and coupons to keychain loyalty tags and emails – everyone has taken part in a loyalty program of some kind. As the industry advanced, these programs shifted to reflect the latest customer trends and preferences.


Today, retail loyalty programs are more sophisticated than ever. With personalized promotions that come directly to a consumer's chosen digital touchpoints, we're rounding the corner into a new era of loyalty.


Let's dive into how far loyalty programs have come and where they're headed next.

How Have Loyalty Programs Evolved?

According to a New York Times article, the first reported loyalty program came about in New Hampshire in 1793, when a merchant gave out "copper tokens" that could be collected and used in future visits. This bare bones approach is similar to modern loyalty programs in that its sole purpose was to encourage repeat visits from shoppers.


Fast forward to 1921. Betty Crocker implemented a rewards program in which consumers could find coupons for silverware in the bottom of their cereal boxes. The program incentivized consumers to buy enough cereal to collect the coupons for an entire matching set of silverware.


And finally, in 1981, American Airlines launched the first ever frequent flyer program, which provided loyal customers with free or discounted flights in exchange for accrued miles flown. Other hospitality brands followed suit. Hyatt, Marriott, Southwest Airlines and more developed their own loyalty programs soon after.


While we've come a long way from copper tokens, these loyalty program examples set the foundation for the experiences we know and love today.


Loyalty Programs Today

Loyalty programs are even more important than ever. In fact, Mintel found that 90% of U.S. adults belong to at least one loyalty program. Meanwhile, Bond reported that the average consumer has 14.8 loyalty cards.


Loyalty programs create a lot of value for shoppers – especially during difficult economic periods. These programs are designed to help strengthen the customer's relationship with their favorite brands and retailers, but they also increase a shopper's number of visits and basket sizes.


In recent years, personalization has begun to play a role in loyalty programs. This helps ensure relevancy on promotions and discounts that improve redemption rates. But this "introduction" to personalization in loyalty is just the beginning.


What's Next for Loyalty Programs?

The loyalty programs of the future will focus more on true loyalty, as opposed to financial loyalty. The key difference here is that true loyalty is derived by a real connection to the brand or retailer whereas financial loyalty is driven by the extrinsic rewards.


AI-driven personalization, available in GK's latest solution, GK Engage, is the key to taking loyalty programs to the next level. This technology can automatically analyze customer behavior and determine the right coupons, recommendations and outreach to connect with each shopper.


For example, one shopper might respond well to a buy-one-get-one deal. Another might be more pleased by a reminder notification that they forgot to buy jelly to go with the peanut butter in their cart. In the first example, the shopper's loyalty cost the retailer a portion of their margins. In the second, the value was purely relationship-building. Both types of outreach were delivered instantly by AI, meaning that marketers can spend time strategically improving their shopper relationships instead of managing individual transactions.


By incorporating personalization, retailers and brands can develop true loyalty. And, as retailers and brands explore the vast amounts customer and transaction data and robust analytics they now have, loyalty programs can grow to become more relevant for shoppers and more profitable for the business.


How Will You Transform Your Loyalty Program?

With GK, retailers and brands can use their data to create relevant loyalty programs based on highly contextualized and personalized connections, which enable the business to increase customer lifetime value.


Click here to learn more about GK Engage and contact us if you're ready to personalize your loyalty program with GK.