Programs designed to encourage customer loyalty, are certainly not a new concept in retail. The first loyalty program is believed to have been the S&H Green Stamps program, launched in the late 19th century and distributed as part of a rewards program operated by the Sperry & Hutchinson Company. The program involved the earning of stamps one could collect and then trade-in for a variety of goods.
What is a Good Loyalty Program
To date, the Sperry & Hutchinson program started in 1896 remains one of the best examples of a pure loyalty program and pioneered many innovations we still see today. The company approached several retail organizations (primarily supermarkets, gas stations, and boutiques) and sold them stamps for use as “bonuses” to their customers. A retailer that distributed the stamps did so based on a “value of purchase” formula. The more the customer purchased, the more stamps a retailer provided them with.
The program was also the very first example of what most marketers refer to as “game-ification” in loyalty program design. The stamps were issued to customers in one, ten, and fifty point denominations and a series of 24-page books were issued by S&H for the customers to collect them in. Customers would accumulate the stamps, moistened the back of them, and stick them into the books. It took 50 points to fill a page and an entire book required 1,200 points. Once filled, the customer could exchange the books for special gifts such as household goods from the local Green Stamps store or via a mail-in catalogue.
Accounts from the time indicate that the program caused great competition amongst neighbours and family members. Achieving a full-book and being able to cash it in for a prize was an aspirational feat, similar to how modern-day customers aspire to hit a certain “status” in an airline rewards program, hotel guest program, or any points-accumulation plan. It was also the first program to modify a customer’s behaviour as they would specifically seek-out retailers who would offer the most stamps for the dollars they spent.
History of Backlash
The program saw its popularity peak in the 1960s. During this period, a UK-based S&H Pink Stamps program was launched to compliment the stellar growth of the program back in America. However, a lawsuit in 1972 would be the beginning of a decade of decline for the program.
In the Federal Trade Commission v. Sperry & Hutchinson Trading Stamp Co., 405 U.S. 233 (1972), the United States Supreme Court held that the Federal Trade Commission (FTC) could act against a company’s “unfair” business practices even though the practice wasn’t an antitrust violation, an incipient antitrust violation, a violation of the “spirit” of the antitrust laws, or a deceptive practice. Since labelled the “unfairness doctrine” theory in law, the ruling would prove to be problematic for S&H and similar stamp schemes operating at that time. The S&H program originally restricted the trading of stamps or re-selling them for any price. To prevent this, the company engaged in legal proceedings against individuals and merchants who tried to do this. The court case resulted in this being illegal with the FTC claiming this was “unfair and oppressive to consumers”.
The turbulent economy in the 1970s caused further problems. A slowing economy resulted in more and more retailers dropped out of the program and those who remained issued fewer and fewer stamps per dollar spent. This, combined with the court case allowing trading, saw the stamps begin a steady devaluation and even more merchants pulled out of the program. In 1981, Sperry and Hutchinson was sold by the founders’ successors and in 1999 was purchased again by a holding firm owned by a member of the founding Sperry family.
In 2000, the program had a “revival” as it moved towards a new digital platform and audience. At a fancy reception at New York’s Studio 54, new owners looking to monetize the well-known brand kicked off a new “greenpoints” program, as reported by Jennifer Lach in an Ad Age article in May of that year. At the time, roughly 100 stores remained in the original program and this revival was designed to bring the world’s first loyalty program to a whole new generation of customers with a new points system one could use across multiple retail channels.
While the program has had a turbulent history, it laid much of the groundwork for how modern loyalty programs function. The S&H Green Stamps program, along with other stamp and incentive schemes of the time, helped to build a loyalty industry today worth over $2.6 billion USD within the United States alone. A great achievement indeed.
Do you remember the S&H Green Stamps Program? Share your comments and memories below!