am somewhat convinced that back in the 1970s when the airlines introduced the first rewards/loyalty card programs, they had little or no idea as to where these programs would eventually lead.

As a matter of fact, the programs were not originally developed to do what they are now. The airlines were merely trying to track what routes were most widely used to give a better idea of how to schedule limited jet hours and charge accordingly.

Current estimates show that 75% of all shoppers in the United States belong to one loyalty card program or another and that over one-third of all consumers belong to two or more of them. Analysts say that American companies spend over $1.2 billion tracking and rewarding consumers for their loyalty and for the data generated by such efforts. It would seem to be a phenomenon that has truly hit epidemic proportions.

What is really a relatively inexpensive way to track consumer data has changed the attitude of the average consumer from a one-price-fits-all standard, and introduced the "I-am-more-special-than-you" attitude permeating both the American and global marketplaces.

More than ever, American consumers in particular expect special treatment through rewards points that they amass by spending with one merchant or organization.

Loyalty programs today come in many forms; all sorts of rewards are offered through a variety of methods, levels and tiers. Consumers earn everything from roundtrip airline tickets to paradise, to free mocha-caramel-latte-frappachinos and hefty discounts on auto purchases.

Most programs are designed to do the same thing-reward loyalty and incremental sales while storing pertinent data about who buyers are, and how and what they are likely to buy. Ultimately, loyalty programs should offer value to both the consumer and to the retailer; otherwise, they're purely a waste of time.

Initially, when the airlines created rewards programs, there really wasn't anything to compare them to. They provided information that had previously not been available anywhere: At the time, there were no companies gathering information and generating dossiers on American consumers or telling marketers how to exploit that data.

The airlines were merely looking for a way to track where people were flying so that they could more efficiently provide more airplanes to those destinations. You might remember that the government controlled airline pricing at the time.

Competition based only on price was difficult, until a marketing genius came up with a bold new idea: If the carriers could capture customers' hearts by offering perks beyond better fares, their passengers might just stay loyal to one airline over the other.

Bingo! The loyalty card was born.

Naturally, over time, simple has become complex and the loyalty concept has since spawned a variety of consumer options. The type of information gathered has changed, too. Loyalty has evolved to make it more and more difficult for consumers to leave one merchant to do business elsewhere. Not only has it become crucial to provide more to consumers to keep them loyal, it's essential to make sure that the data merchants retrieve are put to effective use.

Unfortunately, I've found that many companies are spending great amounts of time, money and effort tracking and gathering data and are not necessarily getting all that they could for their efforts. There is a right way and a wrong way to implement a loyalty program.

If a program isn't helping to retain customers, increase traffic and generate more profits, then why bother? For instance:

• Many companies tend to not do enough with data generated from their loyalty program to make the average consumer feel special.
• Many companies have figured out how to deliver satisfaction, but they have not yet figured out how to earn loyalty.
• Most companies do not analyze their data appropriately and truly have no idea whether their giveaways are making any difference.

Loyalty can be such an important cog in the wheel of gaining a foothold on the competition. However, it is critical at this stage of the loyalty craze that we know exactly what the rewards programs should accomplish.

If we're merely looking to give away free stuff without knowing who we're giving it to or why, the program is a waste of time.

There are many marketing research companies that do nothing but gather and evaluate data retrieved through loyalty programs; they generate elaborate reports that tell retailers what consumers are buying, what they're willing to pay, what their income levels are, etc.

There are no guarantees that a loyalty program will perform exactly the way it was intended. Determining the outcome can be more art than science, but with adequate planning, I have found that many companies can and do have successful programs.

Here are a few suggestions to follow in developing a loyalty program:

• Make sure there is a genuine bonus tied either directly or indirectly to consumer purchases. One good example is the GM Rewards Card that actually offers a rebate toward the purchase of a vehicle.
• Create the perception of value to consumers with offers of cash, exotic vacations or a range of rewards options.
• Timing is important. Merchants must allow consumers to cash in their rewards when they want to use them. The more delayed the reward, the less powerful its impact.
• Make sure that the reward enhances the value proposition of the product or service.
• Account for the cost of the rewards and the value that retailers will earn.
• Merchants must maximize the buyers' incentives to come back and buy again.
• Be aware of conditions in your market segment when preparing the loyalty program to determine if it will be worth the effort.

Steve Eazell, a 15-year veteran of the payments industry, is the Director, National Sales and Marketing for San Diego-based Secure Payment Systems, Inc. (SPS), a national provider of value-added services, including electronic check and stored-value gift card services. For more about SPS, visit www.securepaymentsystems.com. E-mail Steve at: seazell@securepaymentsystems.com.