Are customer loyalty programs a good thing for retail? Should you have one? Do you participate in any? In part two of this article, I\u2019ll tell you a story about a hotel’s loyalty program from my own experience, and share with you both rational and emotional conclusions. <\/p>\n
You will, of course, decide for yourself. <\/p>\n
My story starts with a hotel in Austin, but the story of loyalty programs goes back to 1896, when Thomas Sperry and Shelly Hutchinson came up with an idea to improve retail cash flow. <\/p>\n Sperry and Hutchinson sold S+H Green Stamps to retailers, who gave them to customers that paid in cash instead of using store credit.<\/p>\n The First Loyalty Program<\/b><\/p>\n Customers flocked to stores that gave stamps. Filling stations, gift shops, and grocery stores gave them as bonuses with every purchase, based on the dollar amount of the purchase. <\/p>\n Eventually shoppers saved up books of stamps and redeemed them for gifts from the S+H Green Stamp catalog. Stamps could be redeemed for anything from furniture, to appliances, to life insurance. During the 1960s the S+H catalog was the largest publication in the US, and the company issued three times as many stamps as the US Postal Service. <\/p>\n S+H made money selling the stamps, and even more money because so many stamps were never redeemed. (Note to loyalty program planners: paper gets lost. Computer records don’t).<\/p>\n During the recession of the 70\u2019s when customers were afraid that each dollar they spent might be the last for a while, and retail sales were taking a beating, retailers cut every available cost of operation. The ongoing expense of Green Stamps became hard to justify. When the competition dropped the stamps and lowered prices by the same percentage, thrifty shoppers voted with their feet to forgo the reward and take the lower price. <\/p>\n By the time Sperry’s and Hutchinson’s heirs sold the company in 1981 only about 100 stores were still offering the stamps. <\/p>\n Why is Customer Loyalty Important?<\/b> <\/p>\n