Why blockchain is a smart solution for loyalty programs
Advocates, fans of and investors in Blockchain can claim dozens — even hundreds — of reasons they’re in favour of the technology.
As an investment vehicle, 2017 was a great year for anyone backing cryptocurrencies. Entrepreneurs in this ecosystem are realising its enormous potential in many ways. Making use of the technologies inherent features and capabilities to disrupt and create value across numerous sectors.
From finance to healthcare, gambling to shipping and logistics, Blockchain and ‘smart contracts’ technology is starting to play an active role in dozens of value chains, some far removed from our own cryptocurrency ecosystem. Businesses that, until recently, have only vaguely heard of ‘Blockchain’ and ‘cryptocurrencies’ are now benefiting from the work of entrepreneurs who’ve been involved in this space for years.
Why Loyalty Programs Need a Reboot
Most loyalty programs are a variation on the same theme.
Generating revenue from existing customers is cheaper than attempting to acquire new ones. Ask anyone in retail, hospitality and any sector that relies on repeat, reliable revenue from customers. Businesses in competitive markets benefit enormously from a loyal, core group of customers — some of whom are brand advocates online; which means you need to keep sweet those that spend the most.
Before implementing a loyalty scheme, brands need to know what one unit of currency is worth in points, or anything that denotes a non-currency scoring system. For example, $1 spent = 4 points. Spend enough real money to accumulate sufficient points, and customers can redeem those in a ‘real money’ format, reducing the price of a large purchase, or giving them a discount on something special, exclusively for loyal customers.
Sounds simple enough.
Buy eight books, get one free.
Ten coffees, get one free, with a cookie.
Should be easy enough that brands of every size can implement a similar scheme. Except, it isn’t, not in reality. Businesses are spending up to $20 billion on software that improves the ROI of loyalty schemes.
Traditional loyalty schemes are difficult to set-up. Customers need to be encouraged and reminded to keep using them, especially when they involve remembering a separate card at the point of sale. Even those that use apps instead don’t have active user-bases. Customers get fed up with them, or forget, often deleting apps and leaving loyalty cards in cupboards and drawers.
Small retailers and online stores, those that would benefit from repeat custom from loyal customers and brand advocates often can’t afford to maintain and renew schemes. Most attempts to run them are abandoned.
This is a problem, in our experience running GIFTD, we have solved for over five hundred e-commerce retailers, improving revenue 17%, on average, for clients.
Blockchain: Improving loyalty programs
Our solution is BitRewards, a spinoff from this successful business, because with Blockchain we can solve broken loyalty schemes and rewards challenges, creating more value for retailers, consumers, the community and investors.
BitRewards is a blockchain loyalty platform and ecosystem that enables retailers to reward their customers’ purchases with crypto-currency tokens, known as BIT. Retailers will be given access to the technology and platform for free, initially encouraging adoption amongst GIFTD customers and those in the sector looking for a new solution to their loyalty challenges.
Here are four ways BitRewards fixes the main pain points of loyalty programs for retailers:
Account inactivity: Every customer will be given a single wallet, accessible from the website of any participating merchant, or from a web or mobile app. There is no need to register for a standalone loyalty program of each retailer, and the acquired tokens can be redeemed with any other network member.
Low redemption rates: BitRewards transfers value into tokens and credits them directly to the customer’s wallet. The value of the rewards denominated in crypto-currency is poised to go up along with the growth of the crypto-economy. Customers will also be receiving regular reports and offers from the stores where they made their purchases, which will help encourage them to spend again with that retailer — using their wallet — or spend them with another retailer who’s part of the BitRewards network.
Reduce customer service costs: Instead of smaller retailers providing their own rewards-focused customer service support, BitRewards will provide centralised support for retailers, who can also provide technical guidance, support and quality assurance.
Reduce marketing costs: User acquisition today is one of the most costly activities of any retailer. Statistics say that the average conversion of traffic into purchases in e-commerce comes to 3%; however, the real figure is closer to 1%. Studies also show that acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one.