The Coming Loyalty Capital Bull Market

Never heard of Loyalty Capital? Don’t worry, it’s a relatively new concept. My company is a startup in the loyalty and rewards industry. Our patent pending technology is introducing revolutionary value innovation to the industry, and with it the need to define new terminology.

In the context of our business, Loyalty Capital is the economic value created by the union of actions between and by two or more agents, such as a producer and a consumer.

Let’s use an example we are all familiar with, staying at a hotel. Two actions are required for that hotel stay to happen. One, the consumer has to value that hotel over somewhere else. Two, the hotel has to provide a hotel experience the consumer values over somewhere else. Without both actions, it’s not going to happen. When both actions do happen the value created is Loyalty Capital, which is the sum of the consumer’s loyalty to the hotel and the hotel’s loyalty to the consumer.

Here we have two agents: a hotel and a consumer. How do we maximizes the Loyalty Capital generated between and by these two? This is the challenge existing loyalty and rewards programs are trying to solve. Despite best efforts they’re struggling because there is a problem: value friction.

Back to our example, what if the consumer could pay for their room with a partner airline’s miles directly at the hotel counter? What if the consumer received their hotel points at check-in rather than a week after check-out? What if the hotel points were “smart,” autonomously increasing redemption value during the consumer’s stay and customized for specific services they’ve valued in the past? What if the hotel issued the consumer “In-Stay Points” that they could use to reward employees who increased the value of their stay, and in the process providing feedback to increase the value of future stays?

Would the consumer value that hotel more? Of course they would! As they value it more, Loyalty Capital increases, hotel revenues increase, and their satisfaction increases. All we need to do is remove that annoying friction.

Blockchain and smart contract technology remove that friction. Think of it as a frictionless value layer, a smart internet of value, that can be injected into any currently existing loyalty program or redemption network. With the introduction of a frictionless value layer the generation and sharing of Loyalty Capital becomes a dynamic, multi-lateral, multi-agent flow of both data and fungible value.

This paradigm shift in value innovation will propel the $117B/year loyalty and rewards industry into an explosive bull market expansion of Loyalty Capital generation.

Greg Simon
CEO & Co-Founder