Loyalty programs have come a long way since their inception, evolving alongside consumer preferences and technological advancements. What began as a simple gesture of gratitude—retailers handing out stamps to encourage repeat purchases—has evolved into a sprawling ecosystem of points, perks, and digital platforms. But despite their growth, today’s consumers are showing signs of fatigue. Travel loyalty program members are increasingly disloyal, spreading their spending across brands and expecting more than just transactional benefits.
In this blog post, we'll take a trip down memory lane, exploring the fascinating journey of loyalty programs from their early beginnings to their current state. By understanding the history of loyalty programs, we can better appreciate their continued relevance and identify emerging trends in the industry.
The Early Beginnings: Trading Stamps & Mileage Programs
The concept of loyalty programs dates back to the late 19th century when retailers started using trading stamps as an incentive for repeat business. Customers would receive stamps for every purchase, which could later be redeemed for products or services. This simple yet effective concept laid the groundwork for modern loyalty programs.
Fast forward to the 20th century, and the introduction of airline mileage programs marked a significant milestone in loyalty program history. In 1981, American Airlines launched the first-ever frequent flyer program, AAdvantage, allowing passengers to earn miles based on their flight distance.
This marked a pivotal moment: the travel industry had turned loyalty into a scalable, strategic business tool. Airline and hotel programs followed suit, offering customers the chance to earn miles or points for purchases and redeem them for exclusive rewards. It wasn’t just about encouraging loyalty anymore—it was about monetizing it.
The Digital Leap: Rewards Cards, Apps & Scalable Programs
As technology advanced and loyalty programs grew in popularity—digitization took hold and loyalty programs adapted to the changing landscape.
Plastic membership cards and digital rewards apps replaced punch cards and paper vouchers. Retailers, airlines, and hospitality brands adopted points-based systems that let customers accumulate and redeem rewards with ease.
During the late 20th century and early 21st century, businesses embraced these loyalty program formats, offering customers rewards for repeat business. Points could be earned on every purchase and later redeemed for products, services, or discounts, while rewards cards served as a convenient method for tracking and accumulating points.
This shift also opened the door to B2B revenue models. Travel brands began selling loyalty points in bulk to financial institutions. In 2019, United’s MileagePlus program generated $3.8 billion by selling miles to third parties—representing 12% of its total revenue. What began as a way to keep customers coming back had become a significant profit center.
Give Loyalty Rewards Members Memories That Will Last a Lifetime with Travel Rewards
Modern Loyalty: Personalized or Impersonal?
With the widespread adoption of smartphones and mobile technology, loyalty programs entered a new era of personalization. Mobile apps allowed customers to access their loyalty accounts, track points, and redeem rewards right at their fingertips. Businesses could now send targeted offers, promotions, and rewards to customers based on their location, preferences and purchase history.
The increasing importance of data analytics has also played a significant role in shaping loyalty programs. Companies can now analyze customer data to tailor rewards and promotions, creating more personalized and engaging experiences. This data-driven approach to loyalty has led to the rise of tiered programs, offering exclusive benefits and rewards to the most valuable and loyal customers.
But as McKinsey research points out, many travel brands have fallen short of delivering on this potential. Despite having access to vast amounts of customer data, most still underutilize it for true, real-time personalization. The result? Loyalty programs feel more like automated marketing tools than meaningful experiences.
Only 20% of travelers were "delighted" by a recent travel experience, according to McKinsey's 2023 loyalty survey.
Meanwhile, customer expectations have shifted. Today’s travelers care less about earning and burning points and more about feeling valued. They want experiences worth paying for, seamless service, and recognition of their loyalty beyond just perks.
The Loyalty Paradox: More Members, Less Loyalty
Ironically, as loyalty programs have grown more sophisticated, customers have become less loyal. McKinsey's data shows that members typically belong to three or four programs in each sector and split their spending across brands—even those they claim to prefer.
Younger generations in particular are more likely to consider and transact with a wider variety of travel providers. And many customers are frustrated with the devaluation of points, shrinking benefits, and rule changes made post-pandemic.
"Loyalty is about more than a program, a department, or a tangible redemption offer. True loyalty is won through a genuine desire to forge bonds with customers" — McKinsey
The Future of Loyalty Programs: Blockchain & Gamification
As we look to the future, emerging technologies such as blockchain and gamification are expected to shape the next wave of loyalty programs. Blockchain technology has the potential to revolutionize loyalty programs by creating a secure, transparent, and decentralized system for tracking and redeeming rewards. This could lead to improved customer trust, reduced fraud, and the ability to exchange rewards across multiple platforms and programs.
Gamification, the process of incorporating game-like elements into non-gaming environments, offers exciting possibilities for loyalty programs. By incorporating elements such as challenges, leaderboards, and rewards, businesses can create more engaging and interactive loyalty experiences. This can lead to increased customer retention, loyalty, and overall satisfaction.
Where Loyalty Goes From Here
Outside of technological updates, the future of loyalty lies in a mindset shift: from transactional to experiential. According to McKinsey, experience now outranks traditional perks as the biggest driver of repeat behavior. Brands that invest in making their customers feel recognized and cared for will stand out.
Key imperatives for modern loyalty programs include:
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Experience-first design: Delight customers with frictionless, surprise-and-delight moments—like Delta’s in-flight Wi-Fi for loyalty members.
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Hyper-personalization: Use AI and customer data to create tailored journeys and segment audiences to the "segment of one."
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Smarter partnerships: Collaborate with platforms and brands that extend value and convenience (e.g., Marriott + Uber).
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Omnichannel execution: Ensure loyalty is embedded across touchpoints—from mobile apps to front-line staff to post-trip engagement.
The Switchfly Take
Loyalty programs have experienced a remarkable evolution since their humble beginnings as trading stamps. Today, they are sophisticated, personalized, and data-driven, offering customers unique experiences and rewards that cater to their individual preferences. As technology continues to advance, loyalty programs will undoubtedly continue to adapt and innovate, shaping the future of customer retention and loyalty.
At Switchfly, we believe travel rewards should be aspirational, flexible, and easy to use. That’s why our platform is built to support dynamic packaging, AI-powered recommendations, white-labeled booking engines, and seamless integration across customer touchpoints. We help loyalty programs deliver on the promises today’s travelers actually care about: personalization, freedom of choice, and unforgettable experiences.
Switchfly is the leader in helping loyalty programs offer travel benefits that customers are excited to use. To discover what’s possible with Switchfly, connect with us today.
