History of loyalty currencies

What opportunity is there for cryptocurrencies within loyalty programs? Loyalty program providers now have a viable and attractive alternative to rewarding their members with loyalty points or miles. To understand this significance, it is essential to review the history of different currencies within loyalty programs and observe that the major currencies of the day tend to be swapped out periodically for something different.

Egyptologists have uncovered evidence that ancient Egyptians practised a type of reward program similar to modern frequent flyer programs, including status tiers and the ability to redeem on a wider variety of rewards.

In Ancient Egypt: Anatomy of A Civilisation[1] Professor Barry Kemp reminds us that for much of the pharaoh’s thousands of years of rule, they didn’t have money. It simply wasn’t invented yet. Instead, they used a system quite similar to a modern loyalty program.

Citizens, conscripted workers and slaves alike were all awarded commodity tokens (similar to loyalty points or miles) for their work and temple time. The most common were beer and bread tokens. The tokens were physical things, made from wood, then plastered over and painted and shaped like a jug of beer or a loaf of bread.

Interestingly, the more senior people in the hierarchy were rewarded with the same tokens but received bonuses. The Rhind Mathematical Papyrus details examples and mathematical equations regarding how higher positions, such as the skipper, crew leader and doorkeeper, received double bread tokens compared to the rest of the crew. This could be construed as a variant of the status tier bonus, where certain members earn bonus points for transactions to reward them for their loyalty and value to the company.

Interestingly, the tokens could also be exchanged for things other than bread and beer. Those high up enough to earn surplus tokens could redeem them on something else, in the same way that frequent flyer members with lots of points can redeem them both on flights and on non-flight rewards such as iPads, KitchenAid mixers and Gucci handbags.

A more modern history of loyalty program currencies can be traced to the 1700s.

In 1793, a US retailer began rewarding customers with copper tokens, which could be used for future purchases, thereby generating repeat visits which is the core focus of loyalty program design. The idea was quickly replicated by other retailers.[2]

The Grand Union Tea Company was formed in 1872 in Pennsylvania. The owners chose to sidestep retailers and sell their product directly to consumers, starting with door to door sales. They began rewarding customers with tickets which could be collected and redeemed for a wide selection of products from the company’s Catalog of Premiums.[3] As part of the research for this book, I was fortunate enough to acquire the 1903 version of the Catalog of Premiums. In addition to listing the full product range and prices (coffee, tea, spices, extracts, baking powder soap and sundries), it lists 17 pages of rewards which include an Oak Roman Chair (100 tickets), lace curtains (120 tickets a pair), Ormolu clock (300 tickets) and dinner set Berlin 1903 (440 tickets). Customers could earn one ticket by buying a pound of coffee at 20 cents, two tickets for premium tea at 40 cents and one ticket for a packet of cloves at 10 cents. The catalogue proudly proclaims, ‘We advertise by giving presents with our goods, thus SHARING WITH OUR CUSTOMERS the profits of our business. Remember, you pay less for our goods of same quality than at other stores, and get presents in addition.’ It’s surprisingly similar to a modern-day loyalty program promotional line.

In the 1890s marketers turned to the physical stamp to reward loyal customers. Customers earned stamps when making purchases and were encouraged to stick them into collecting books. The books could then be exchanged for a wide range of rewards. The Sperry & Hutchinson Company came to dominate this type of loyalty currency approach with their S&H Green Stamps, which could be earned from a range of different retailers in an early form of retail partner coalition program. Sperry & Hutchinson sold the stamps to retailers, who used them to reward customers. At one point, they claimed they were distributing three times as many Green Stamps as the US Postal Service was distributing postal stamps.

Every year Sperry & Hutchinson would release a print version of their catalogue Ideabook Of Distinguished Merchandise. In researching the scale of S&H Green Stamp’s, I managed to acquire their 1966 70th Anniversary Edition Ideabook Of Distinguished Merchandise,[4] which provides a fascinating insight into the scale and complexity of their operations when at the height of their popularity. In addition to being able to order rewards via post, members could visit a vast network of redemption centres, where the entire product range was priced in books of tickets. The 185 page catalogue contains over 2,000 products across 59 categories, a similar sized range to some frequent flyer program online stores. In my copy of the catalogue, an industrious young lady has worked her way through the toys’ pages, circling the items she desired and writing out the number of books she needs to claim everything on her list. It provides a sense of the process so many households around the world would have followed in deciding what rewards they wanted to aim for, with much discussion and debate ensuing.

The (pre-computer and internet) logistics for claiming a reward were extensive; the member needed to fill books with stamps, choose the reward products, fill out a separate order form for each reward, then send the books and order forms (plus applicable sales taxes) via first class mail to their nearest distribution centre. The overheads running such a massive operation were enormous.

The 1980s marked the beginning of the end for stamps. The recession of the 1970s created hardship for Sperry & Hutchinson as retail partners sought any way they could to cut costs. Around the same time, American Airlines launched the world’s first currency based frequent flyer program using a new currency (miles) which corresponded to how many miles a member had flown. Members could earn miles at a set value for free flights allowing them to easily identify what they could redeem their miles for. Brought on by increasing competition with the deregulation of the US airline industry in 1978, the American Airlines AAdvantage program was soon followed by similar plays from United Airlines, TWA and Delta Airlines. Other airlines around the world quickly replicated. In 1987, Southwest Airlines launched a program which awarded points to members for trips flown, irrespective of the number of miles. Qantas Frequent Flyer launched in Australia with points the same year. Soon after the launch of the early programs, hotel and car rental companies began partnering with the airlines and started offering miles (and soon points) as a way to grow their market share of the lucrative business travellers and high value leisure travellers the programs were designed to appeal to, creating a coalition of retail partners.

With the rapid expansion of the frequent flyer coalition models and their new currencies, other retailers soon replicated their approach and points and miles loyalty programs eventually became the dominant loyalty program currency, ending the ninety year reign of stamps.

From Egyptian tokens to copper tokens to tickets to stamps and then to points and miles; loyalty currencies rise and dominate and are then replaced by something more effective. With the rise of cryptocurrencies, can we now expect points and miles to follow in the path of copper tokens, tickets and stamps?

This is an excerpt from Blockchain Loyalty: Disrupting loyalty and reinventing marketing using cryptocurrencies (2nd Edition) by Philip Shelper.

Blockchain Loyalty is available at all good book stores. Buy it now.

[1] Barry J. Kemp, ‘Ancient Egypt: Anatomy of a Civilization, 2nd Edition’. 2005

[2] C. T. &. B. Innovator, “The Loyalty Evolution,” New York, 2016.

[3] Grand Union Tea Company, ‘Catalogue Of Premiums,’ 1903.

[4] S&H Green Stamps, ‘Ideabook Of Distinguished Merchandise 70th Anniversary Edition,’ 1966