“The biased (non-random) behavioural response (purchase) expressed over time by some decision-making unit with respect to one or more alternative brands out of a set of brands and is a function of psychological processes.“

(Jacoby, 1971)

The convoluted nature of the definition attests to the fact that a) it’s hard to pin down exactly what loyalty is, and b) the need to distinguish the difference between true loyalty and zombie-like repeat purchase.  Why would anyone care about the difference?  I’m glad you asked…it’s because zombie-like repeat purchase behaviour is more vulnerable to disruptive influences than true loyalty.  True loyalty comes with extra stickiness – it’s like a two-part glue because with loyalty there is both a behavioural and an emotional agent at work.  And, like two-part glue, it’s not strong enough until both elements are combined.

Lesson one: the early days

Loyalty is not about forcefully locking people in.

In the UK in the mid 17th century a wide range of trades (innkeepers, apothecaries, grocers, fishmongers, ironmongers) issued their own form of currency; copper trade tokens.  The practice came about because civil war had left the country short of officially minted small change. There’s your moment of disruptive change. These merchant tokens were given as change on purchases of everyday items.  They could be used against future purchases, but only from the original issuer.

On the surface, it looks a bit like the origins of a loyalty scheme.  But this isn’t loyalty.  The best loyalty strategies create stickiness, but not in a way that overtly eliminates choice or forcibly locks the customer in.  The copper token tactic was not true loyalty because it didn’t create both behaviours and emotional reasons for repeat purchase.  It wasn’t a reward, at best it was barter, and at worst it was criminal!

Lesson two: an early version of the pound store

Great loyalty tactics have both the customer and the economic landscape at their hearts.

In 1884 Michael Marks, recently arrived in the UK from Poland, opened a market stall in Leeds. He noticed that the products that sold best were those at the one penny price point.  This led to his famous Penny Bazaars and the slogan ‘Don’t ask the price, it’s a penny’.  With the help of a new partner, Spencer, the Marks grew the business we know today as Marks & Spencer. 

Marks created the original Pound Store.  Now some would argue that this isn’t loyalty.  But I’m adamant it is.  Marks had created the perfect conditions for loyal behaviour because he had tapped into a natural behaviour and personal circumstances of his customers. 

For Marks & Spencer this was the right strategy for a moment in time – but not a lasting one.  The penny pricing continued until the First World War, when goods became expensive and hard to get. Responding to the social and economic circumstance, Marks & Spencer made a savvy forward strategic move.  Rather than clinging to a tactic that had worked for them in the past, they turned their stores into pleasurable destinations, and shifted their pricing model so that they could sell a wider range of reasonably priced goods that people really needed.

So what might this mean for the pound stores of today? One Manchester suburb boasts a ‘Poundland’, ‘Poundstretcher’, ‘Around a Pound’, ‘Pound Express Plus’ and ‘Pound Bakery’, all vying for a place in the hearts of local punters.  But how will they sustain loyalty in a climate where shoppers are increasingly informed about price, and where the pound price point is no longer sustainable? It’s probably time to take a leaf out of the original M&S playbook.

Lesson three: childhood memories made from cereal boxes

Loyalty is much more than a dangled carrot.

Kelloggs invented the on-pack promotion tactic in 1909. I’m sure many of us have fond memories of cereal packet promotions from our childhoods. For me, the pinnacle had to be the 1970s free intercity rail tickets offer.  It felt like we went everywhere that summer, York, Torquay, Didcot, Bournemouth (my 10 year old self confirms that this was indeed ‘everywhere’). My parents clubbed together with other parents, and we collectively ate our way through unhealthy quantities of Kellogg’s cereal.  And when we’d visited everywhere we could, with every combination of childhood friend or cousin we had, we went back to eating what we liked again from Nestle.

The point here is that this promotion was genius. But it wasn’t loyalty.  It was short-term frenzied repeat purchase.  Although it created long term memories and superb short-term value, it generated zero loyalty. So this tactic almost met the standards for two pack glue like loyalty, but the glue went off too quickly and it was not sticky enough.

Lesson four: The wild (mid) west and the origins of frictionless purchase

Whatever you do it has to be frictionless.

US retailer Sears’ growth took off at a time when farms and villages had no convenient access to retail outlets. Sears capitalised on the introduction of rural free delivery (1896) and of parcel post (1913) by the U.S. postal service to send its merchandise to even the most isolated customers.  You could order from the comfort of your own home. You could pay a fair price. They would ship the goods straight to your door. This was fresh, utterly ahead of its time and undeniably customer centric. The Sears’ model built relationships, trust, and desire which acted as a form of defence against imitators for decades to come.  But as history has shown us this did not last forever.  Sears lost its freshness, tried too hard to imitate the high street and then fell behind the ecommerce curve. It no longer had a two-part glue-like loyalty formula – neither loved nor convenient, it came unstuck. 

Lesson five: The dawn of the loyalty scheme as we know it today

Don’t rely on partners alone – think of loyalty as a mix.

The first truly recognisable loyalty programmes emerged with S&H Green Stamps.  Established in 1896 Sperry & Hutchinson sold their S&H Green stamps and redemption books to retailers.  The retailers then gave these away to their customers, who could collect them and exchange them for products in the S&H catalogues or at their redemption centres known as S&H Premium Parlors.  The scheme was copied in the UK by Richard Tompkins and really took off when Tesco founder Sir Jack Cohen signed his grocery chain up the Green Shield scheme in the 1960s.   

S&H had its heyday in the 1960s, but the 70’s marked a turning point.  Stamp sales to retailers fell (we all look for ways to cut back in recession) and at the same time the rewards increased in price – meaning that the holders of stamps had to collect far more to redeem rewards.

The lesson learned? Be wary of over-reliance on partner offers for loyalty rewards.  It’s much better if you have a blend of self generated rewards and a few robust select partners.  Be wary of relying on points redemption alone.  It could become vulnerable to inflation.

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So there you have it.  Five lessons with direct relevance to today.  And if I had kept on digging, I am sure that there would have been many more.  The two key takeaways are to never lose sight of the fact that loyalty is a two part glue and always ensure that you move with the social and economic situation.