Prior to the days of online shopping, and all of the technology that goes along with it, loyalty rewards programs were typically based on a punch card system. Consumers would receive a free cup of coffee, ice cream cone, or sandwich for every ten (10) times their card was punched at a local retailer.

The promise of that free item, whatever is may have been, was enough to entice people to keep coming back for more. In fact, it became a sense of pride when your card was punched for the 10thtime.

In essence, consumers felt as if they had reached a milestone. On the other hand, a lot of people lost their rewards cards or simply forgot to bring them to the store when making a purchase. Others gave up on the promise of a free item because they did not believe that they would ever reach that fabled 10th card punch.

That being stated, loyalty rewards programs have become far more sophisticated in the current day and age.

Thanks to advances in technology, loyalty, and rewards systems are far more engaging and relevant than ever before. They can also inspire real-time action thanks to portable Internet-enabled devices such as smartphones and tablets.

Since most loyalty rewards programs are easily accessible online, they enable retailers to provide customers with offers that entice them to earn more rewards. In fact, consumers not only look to conduct business with companies that offer benefits for return business, but they have also come to expect it.

According to a recent study, a whopping 80% of a company’s future revenue will come from only 20% of its existing customer base.

In essence, your customers have all the choice, which means your brand needs to take a more customer-centric approach in order to keep them loyal. If you provide them with a more personalized experience that engages them, they will come. While the thought of implementing a viable loyalty rewards program is the first step, it is key to ensure that the program is effective. The question that remains is how can retailers stand out from the competition?

First and foremost, loyalty rewards programs should offer customers more than a simple point system. Although consumers view loyalty rewards programs in a favorable manner, they are constantly on the lookout for new and innovative systems that they can benefit from.

Smart retailers are beginning to realize that loyalty rewards programs need to be more than a system where customers earn points that can be applied towards products when they accumulate to a certain amount.

Today’s consumers demand immediate results. They do not want to wait for the points to add up until they can receive a free item or significant discount on their next purchase.

For example, beauty retailer Sephora has seen an incredible amount of success with its Beauty Insider rewards program. In essence, it provides customers with access to exclusive beauty events and free makeup classes.

This serves two crucial purposes. Sephora customers feel the sense of being rewarded for their purchases on an immediate basis. Just as important, access to events and free classes keep customers engaged with the brand.

Customers that are highly engaged can directly influence purchases from their family, friends, and social media contacts. The bottom line is that loyal customers make far more referrals because they are your most passionate brand ambassadors.

In essence, the more purchases a customer makes, the more likely he or she is to talk about your brand.

Stay tuned for part II.