Bringing Loyalty to the Blockchain
“My whole thing is loyalty. Loyalty over royalty; word is bond.” — Fetty Wap
Everyone values loyalty. Whether you’re the king of trap music, a mob boss, or a small business owner, you understand the importance of having someone to depend on. That’s why it’s no surprise that companies large and small go through such trouble to cultivate loyal customers, and to reward them for their patronage. A well-executed customer loyalty rewards program can mean the difference between success and failure — so why haven’t businesses figured out a better way to implement them?
At a very simple level, the main problem with realizing an effective loyalty rewards program is one of data storage. After a business has decided the parameters of an effective and enticing program (i.e. what value of purchases equals what value of reward), the question becomes mechanistic: how to best store the customer’s record of transactions and alert customers when they can redeem their points (or whatever credit the system uses)?
Of course, loyalty rewards programs can take many different forms. To start, let’s look at two common rewards program archetypes: café stamp cards and airline frequent flier miles. These two types of programs, while fundamentally similar concepts — IOUs for products that can be redeemed by customers — represent polar opposites in terms of program execution. One is as technologically simple as possible, while the other requires complicated systems for tracking airline miles redemption and points earned. For one, retailers must deal with customers losing their cards or delaying a line as they try to consolidate ten frozen yogurt stamps for that free swirl. For the other, airlines must to develop their own sophisticated systems for tracking data and redeeming miles, adding even more overhead to an already complicated business. Whether complicated or simple, both systems are fallible and subject to manipulation.
These same issues, however, make gift cards and loyalty rewards programs perfect for the blockchain. Transactions are infrequent (1–2 times a day max for a customer), negating the currently high transaction costs for storing information on the blockchain (though we expect transaction costs to drop significantly with the implementation of Plasma). The credits being stored are of potentially high value, meaning the security of the blockchain is even more paramount than for the storage of other commonplace data. Finally, implementing a new loyalty rewards program or gift card system would require little overhead and no extra cost due to BlockMason’s recently released Credit Protocol (which has an upcoming token sale you should check out).
As we explained in a previous blog post, the Credit Protocol’s versatility makes it a powerful tool for any number of applications, including implementing retail value redemption programs like those described above. The Credit Protocol provides a standard, safe way for companies to store and record data about customer purchases, credit, and loyalty points earned depending on the nature of the program. While individual stores may choose to build their own use-case contracts to implement atop the Credit Protocol, BlockMason is currently developing a gift card and loyalty program template, known as GiftChain, which will be free to use for any company. Once the contract is live, it will be simple for companies to add on various front-end interfaces and implement their own custom gift redemption or customer loyalty program that best suits their needs.
Through GiftChain, retailers may design gift card and loyalty programs of infinite variety, limited only by the imagination and desires of the retailers using the application. For example, loyalty programs need not be based on the straight redemption of points for products. Customers who reach certain purchase levels could unlock access to periodic sales or special deals by revealing promo codes in the GiftChain app. For content-based websites, a certain number of verified visits to the site could unlock premium content. Reaching a high spending tier could trigger invitations to special events — such as cocktail parties or group outings — or even trigger discounts to third-party programs, such as baseball games.
Additionally, because all of the code is open source, it is easy to imagine a developer building an interface on top of the GiftChain application that connects multiple businesses in a single loyalty program. Customers who go to multiple stores in the same program could have access to dual promotions, or redeem their points at one of several different retailers.
It’s said that loyalty must be earned — now, thanks to Giftchain, every retailer will have that power. Putting gift cards and loyalty rewards programs on the blockchain secures high value data and allows even the smallest retailers access to the battle-tested marketing techniques of major corporations. Security and access: the power of the blockchain at its finest.
