Customer loyalty programs have been around for more than 100 years and are experiencing a resurgence, as the economy forces consumers to contemplate value. The history of customer loyalty programs is interesting and varied with only one constant: companies are trying to win the hearts and minds of customers. One of the earliest customer loyalty programs was S&H Green Stamps. They began their program in 1896, but reached their zenith in the 1960's and 1970's. S&H represents a period in our history when consumers did not "shop" price, but were rewarded for their loyalty to merchants with green stamps redeemable for a host of consumer goods. This form of non monetary reward or "alternative currency," attained a certain value and this alternative currency has evolved into the customer loyalty programs of today.



According to Jupiter Research, more than 75% of consumers today have at least one loyalty card, and the number of people with two or more is estimated to be one-third of the shopping population. According to consulting firm Gartner, U.S. companies spent more than $1.2 billion on customer loyalty programs in 2003.

To distinguish a good program from a bad one, marketers have to understand how people are motivated. Surprisingly, when given the choice of cash or a promotional incentive such as airline miles, consumers will often choose the miles thinking that if they have money they will pay a bill and not do anything "fun" with the perk.

Just as trading stamps were an alternative form of currency in the past, digital currencies including music downloads and ringtones are the currency of the moment.

Coca Cola recently launched Rewards4Promos. When a consumer purchases a specially marked 20oz Coke, he texts the code (under the cap) to 36569 (ENJOY), confirms his birthday and gets a text message that tells him whether he won a $20 cash card. If he don't win the money, he can enter his redemption code to receive bonus offers that are good for music downloads, instant discounts, exclusive Coca-Cola offers and cash back deals for charities. Marketers and consumers both win with this promotion as the marketers attain valuable information and the consumer receives a reward.

Return on investment makes customer loyalty programs more important than ever. Studies have shown that it is 7-10 times more expensive to entice a new customer than it is to retain a past one. Through customer loyalty programs, marketers can:

1. Retain customer contact information: An up-to-date and working customer database can double the value of your business.

2. Offer motivation to repeat customers: Repeat customers spend 33% more than new customers.

3. Develop long-term connections with customers: Customer expectations are higher than ever and businesses who give them something back win their loyalty.

There is value in cultivating a loyal customer. According to Parago, eighty-two percent of Americans participating in customer loyalty programs have referred friends and family to their favorite loyalty programs. In today's very competitive market, implementing customer loyalty programs will provide the consumer a reason to stay loyal. Repeat customers and long term relationships will differentiate your company from the competition. In today's economy as so many companies are proving, loyalty marketing programs could mean sustainability or failure.