Web3 loyalty: 5 ways to attract and retain customers
The Web3 loyalty opportunity is to attract and retain Gen Z & Millennial customers in new ways with Web3 experience tokens
Brands are looking for an on-ramp into Web3. Often, they’re doing so with a sense of FOMO — fear of missing out — as they race to capture the hearts and minds of Generation Z and Millennial consumers on these emerging platforms.
In the past several years, this Web3 loyalty and marketing efforts have revolved around issuing collectible Web3 tokens to customers — but these collectibles have had little lasting staying power. Once the novelty of the collectible Web3 token wears off, users lose interest.
The next, and long-lasting, wave of Web3 loyalty involves engaging customers with utility and value in their tokens, including:
- Enabling customers to connect with brands in a deeper way using Web3 loyalty tokens
- Allowing customers to have greater value from branded interactions via rewards, offers, and exclusive experience to token holders
- Giving users control over their privacy
- And placing customers at the center of the Web3 loyalty program, giving them control over how they interact with loyalty experiences and how they redeem their rewards
Web3 loyalty concepts
At its core, Web3 loyalty offers brands ways to attract and retain customers using decentralized technologies, facilitated by a blockchain. A blockchain is a distributed ledger that records and verifies transactions sent to it.
These transactions can be sent by a customer, a brand, or another organization (including those that facilitate social impact, more on this later) and represent verified events or experiences with the brand. Participants interact with the blockchain via digital wallets, which contain a wallet address used to identify where the transaction is coming from.
For example, in a Web3 loyalty program, a brand can send a Web3 experience token to a customer’s wallet address. This Web3 loyalty token is recorded on the blockchain, and is verifiable as an authenticated experience that the customer has had with the brand.
A brand can then attach loyalty points, rewards, or other perks to the customer holding the token. The customer can then showcase the tokenized experience via their digital wallet, and can redeem the loyalty rewards attached to the token with the brand.
In short, some Web3 loyalty concepts that come into play in these loyalty programs are that:
- Transfers, events, and, payments on the blockchain are governed by a smart contract, which is a set of programmatic rules that distribute Web3 tokens, rewards, and other data
- The authenticity of Web3 loyalty tokens and events are cryptographically signed on the blockchain
- Blockchain participants can inspect & trace ownership history of tokens assigned to a wallet address
- The blockchain transaction ledger is immutable — in other words, it can’t be changed
Although there’s many buzzwords surrounding Web3 technologies — including some of the terms above like smart contract and immutability and other related ones like decentralized autonomous organization (DAOs), non-fungible tokens (NFTs), and more — this guide aims to simplify how brands can attract and retain Millennial and Gen Z customers using Web3 loyalty.
What is Web3 loyalty for brands?
Traditionally, companies have launched loyalty programs to encourage repeat business from customers. These have ranged from the simple (like a punch card at a local bakery that lets customers earn a free croissant on their fifth purchase) or the complex (like a multi-tiered hotel loyalty program with different status levels, offers, and earning opportunities. The thinking among loyalty marketing practitioners has been that it’s easier to keep a current customer and expand their lifetime value, than it is to deploy marketing budget and channels to acquire a new customer.
With Web3 loyalty, customers are at the center of the loyalty program because they control the digital wallet that is used to access loyalty rewards. When a customer interacts with a brand — whether that is by purchasing a product, participating in an event, or engaging in a brand activation — they can receive a Web3 loyalty token.
Then, benefits — like a free stay at a hotel, loyalty points, or an exclusive customer experience — can be attached to that token that customers can redeem. The difference in Web3 loyalty programs is that the customer is at the center of the loyalty experience — they can choose what data they wish to provide beyond their wallet address, and they can choose how they earn, redeem, or transfer their loyalty rewards (if enabled by the smart contract).
Why to consider Web3 loyalty
Web3 loyalty offers new ways for customers to interact with brand loyalty offerings, including providing the following benefits:
Privacy. In our recent survey of U.S. consumers about Web3, privacy was the most important factor that drives engagement with Web3. At a minimum, users provide a wallet address to receive a Web3 loyalty token, and they can choose to provide other data (like a mobile phone number) to receive other benefits or receive additional offers.
Customer control. Web3 loyalty also provides customers with control about how they earn and redeem their loyalty tokens and rewards, placing them at the center of the Web3 loyalty program.
Authenticated experiences. Brands can authenticate and verify experiences in which customers participate, allowing customers to then showcase in their digital wallets. For example, a rainforest resort in Costa Rica can issue “jungle zip-line” experience tokens to guests, allowing users to show that they’ve participated in this once-in-a-lifetime experience. Brands can then attach rewards to this experience token, like additional discounts, offers, or experiences.
Customer segmentation. Along with the authenticated experiences point above, Web3 loyalty allows brands to further segment their customer groups and connect with specific customer segments via Web3 tokens. Since Web3 experience tokens represent a unique experience, status, or membership tier of a customer group, brands can issue additional rewards to those customer groups to encourage repeat engagement.
On-going programmatic value delivery. One of the most compelling aspects of Web3 loyalty is that brands can programmatically attach additional future benefits to Web3 experience tokens in order to deliver additional value to users and drive additional engagement with them.
Co-existence with other loyalty programs. Another compelling aspect of Web3 loyalty is that it’s not an either/or decision for brands. Companies can layer in Web3 loyalty as an additive program for customers, and run Web3 loyalty alongside traditional loyalty programs. This allows organizations to experiment with Web3 loyalty as a way to attract and retain new Gen Z segments, and find Web3 loyalty programs that work best for them, their industry, and their customers.
Web3 loyalty rewards and redemption types
As mentioned, Web3 loyalty rewards can be attached to experiences, and customers can then redeem those rewards for discounts, offers, or special experiences. In traditional loyalty programs, customers have generally accrued points, which then can be redeemed for free product. Using Web3 loyalty, brands can think broadly about the reward types they attach to their experience tokens, expanding beyond offering just free product.
To appeal to Gen Z and Millennial customers, who may or may not not engage with traditional points-based programs, brand can expand their Web3 loyalty rewards concept to include:
- Brand experiences. Exclusive experiences, like trips, community gatherings, and events
- Merchandise. The ability to redeem Web3 loyalty rewards for branded merchandise.
- Exclusive content. Access to exclusive curated, brand-safe content available only to certain Web3 token holders
- Social impact. The ability to drive social impact by holding a Web3 token, including blockchain-based programmatic donations to social and environmental causes.
These benefits are enabled by different Web3 loyalty redemption modes, such as:
- QR codes. Customers can present a QR code on their smartphone to access a Web3 loyalty reward, like gaining access to an exclusive event. These QR codes are delivered to customers when they validate their token with an easy-to-use process. The QR code can then be scanned with any smartphone to authenticate customers for their reward (like admitting them into the special event).
- Coupon codes. For other Web3 loyalty rewards, like special product offers or discounts on merchandise, customers can be presented with a coupon code after they validate their token. They can then enter the coupon code that works with your existing e-commerce system.
- Token-gating. For access to exclusive digital content — like behind-the-scenes interviews, online events, and membership-based communities — brands can token-gate the content, only allowing access to it when a user presents a specific Web3 experience token. To do this, a user connects a digital wallet to the online experience, and then the brand can verify that the user holds the correct token credentials before admitting them to the event or membership experience.
Web3 loyalty experience token attributes
Using the Web3 loyalty ideas we’ve discussed here, a Web3 token transforms itself into something beyond a collectible — it becomes a tokenized representation of a customer experience, embedded with utility that provides value to the user. In this way, it delivers value along multiple dimensions to the customer, including through:
- Media of iconic experiences. Capture once-in-a-lifetime experiences for your customers by including media (like images, video, music and commissioned artwork) as the base of your Web3 token)
- Local community tie-ins. Contextualize your token to the customer’s experience by associating it to the local community, including through local artwork or causes.
- Embedded rewards and benefits. Deliver ongoing value to customers by attaching rewards, offers, discounts, and benefits to your Web3 loyalty token.
- Social impact causes. Deliver benefits that drive impact by programmatically donating to social or environmental causes that resonate with your customers.
- Brand associations. Let the Web3 loyalty token augment your brand story through the convergence of all of these attributes
Example Web3 Loyalty Program Design
To tie it all together, consider this example of a Web3 loyalty program that was designed to engage new and emerging Millennial and Gen Z customers.
Using Web3 to attract new Gen Z and Millennial guests
For guests who come to explore its mountain trails in the summer, one forward-thinking, technology-enabled, independent hotel looked to drive innovation in other aspects of its guest experience. Using Web3 loyalty, it sought to expand its customer base and attract new audiences outside of its traditional demographic — especially Gen Z and Millennial digital natives.
Launching a Web3 loyalty program
To do so, it designed a Web3-enabled loyalty program that uses digital tokens to deliver rewards, perks, and offers to its guests. When guests make a reservation, they’re prompted to enter their digital wallet address, which is then stored in the guest record in the hotel’s property management system.
Transferring tokens to guests at check-in
For guests who need a digital wallet, a brief landing page explains the benefits of the Web3 loyalty program and provides simple instructions on how to obtain a digital wallet. Then, when a guest arrives at the property and checks in for their stay, the virtual concierge team issues them their Web3 loyalty token.
Keepsake, multimedia Web3 loyalty mementos attract new audiences
The guest benefits from a digital memento of their stay that they can showcase in a digital wallet. In fact, the Web3 loyalty token is designed as a keepsake memento of the guest’s stay, through multimedia video that captures iconic images from the area’s trails, ski runs, and rustic lakeside towns.
Engaging guests with Web3 loyalty rewards
The hotel wanted digital tokens to be more than just collectibles for guests, so it designed Web3-enabled rewards as part of its digital Web3 loyalty program. As part of this Web3 loyalty program, guests who hold the digital token in their wallets can see a list of offers and perks the hotel has negotiated with local vendors — including nearby restaurants, shops, and tour providers.
Delivering Web3 loyalty rewards to guests
When guests redeem a reward, the Web3 loyalty system checks to see if the guest holds the correct Web3 token and if the reward has been redeemed previously. If the guest is eligible for the reward, they receive a QR code to present to the vendor and claim the offer.
Flexible Web3 loyalty reward redemption options
The loyalty redemption is designed to be frictionless — no app download or install is required to redeem the reward. In addition, the vendor can invalidate the reward for future use simply by scanning the QR code using any smartphone camera.
Using coupon codes or Web links for reward redemption
The resort also designed its program to take advantage of additional flexible loyalty redemption options in to present coupon codes to guests for certain rewards, instead of QR codes. The coupon code option enables vendor partners who wish to offer a discount code to participate in the program. Vendors can also provide Web links that are shown to customers after token verification — which are useful for funneling customers directly to an external Web page or e-commerce site to redeem their reward.
Looking to the future with Web3 loyalty
In the future, the hotel has options to expand its Web3 loyalty program from its original design, including through:
Automating token issuance to guests through webhooks to its property management system that deliver tokens to a guest’s digital wallet on check-in
Issuing tokens that drive social impact for the surrounding community — partnering with local organizations that receive a programmatic donation via the blockchain from token issuance or usage.
Collaborating with local artists to develop iconic, seasonal imagery for its digital tokens that not only drive continued interest in the Web3 loyalty program, but also give back to the local community.
Five ways to accelerate Web3 loyalty with customers
By now, with all these options for launching Web3 loyalty with your customers, you may be wondering where to start (and hopefully not overwhelmed with the breadth of opportunity). To start, consider the following five ways to help jump start and grow your Web3 loyalty initiative.
1 — Start with a lightweight Web3 loyalty program that captures customer experience
Get started by experimenting with a lightweight loyalty program for your customers. Issue a specific digital Web3 token for customer experiences that use beautiful images, art, and video to tell your brand story and memorialize the once-in-a-lifetime experience you offer to them. And consider how you can run this lightweight program alongside any current points-based programs to experiment with attracting new audiences (Millennials and Gen Z) with channels that they’re attuned to use.
2 — Deliver rewards and benefits to Web3 users
Attach exclusive rewards and benefits to your Web3 loyalty token to deliver value to your customers. In addition to free product that users can earn when they interact with your brand, consider other loyalty opportunities also, like admission to exclusive events, special one-off content, membership-based communities, merchandise, and other customer experiences. Plan how you can offer additional value to your Web3 loyalty program over time to keep users engaged and involved.
3 — Include social impact in your Web3 loyalty program
One compelling attribute of Web3 loyalty that we’re hearing from customers is attractive to their users is the ability to include social impact initiatives. For many Gen Z / Millennial customers, what a brand stands for is as (if not more) important than the products a brand offers.
To this end, consider how you can drive impact marketing for local social and environmental causes that resonate with your customers, how you can support local and culturally relevant artists via the media in your Web3 token, and how you can use blockchain-based donations and on-chain climate sustainability programs to programmatically drive change and impact in concert with your customers.
4 — Consider delivering an “access pass” to customers
Digital access passes are an innovative way to use Web3 technology and provide unique and memorable experiences for customers. These passes represent multiple area experiences that can be redeemed at a variety of local vendors, such as local tours, outdoor adventures, cooking classes, wine tastings, and event admissions — and are authenticated by a Web3 token that a customer holds.
Redemption is as simple as scanning a QR code with a smartphone for partner businesses (no downloads or installs required). And when you collaborate with other businesses to offer additional rewards and benefits for customers, it extends the value of your Web3 loyalty program and generates enthusiasm for the overall initiative.
5 — Streamline redemption options
Finally, make sure your customers are able to redeem the Web3 loyalty rewards in a variety of ways that are intuitive and simple for them. Whether that’s through QR codes on their smartphones or coupon codes that they can enter into existing e-commerce systems, the goal with this (and any emerging technology) is to help your customers transition easily into a new paradigm as seamlessly as possible.
Implementing Web3 loyalty use cases for your brand
Using Web3 loyalty tokens to attract and engage new audiences requires a strategic approach — and often requires rounds of stakeholder persuasion and buy-in to implement this emerging technology.
As you deploy new Web3 loyalty projects in your company, consider the following:
1. Plan
First, make a plan to attract and engage your audience. This involves framing a digital use case that aligns with your brand’s values and goals, defining a workflow for how the Web3 loyalty tokens will be used, and establishing metrics to measure success. Additionally, you should create potential marketing messages and a marketing plan to promote your use of Web3 loyalty technologies.
2. Pilot
After you’ve created a plan, you need to determine pilot locations/properties/destinations, along with dates. This allows you to test the effectiveness of your Web3 loyalty tokens strategy in a controlled environment before scaling it to a larger audience.
3. Measure
Once you’ve launched your pilot, it’s essential to measure results against pre-defined success criteria. This enables you to assess the impact of your Web3 loyalty tokens strategy and make data-driven decisions about how to optimize it.
4. Learn and grow
Finally, you should make any needed adjustments based on what you’ve learned during your pilot. If the pilot is successful, you can plan to scale your Web3 loyalty strategies to attract and engage new audiences across your entire brand.
By following these steps, you can ignite and attract new customers audiences using Web3 loyalty tokens in a way that aligns with your brand’s values and goals. Additionally, you can measure the success of your strategy and make data-driven decisions to optimize it for maximum impact.
Driving Web3 loyalty with customers
The promise of Web3 loyalty is to place customers at the center of loyalty programs, enabling them with privacy and control of how they earn and redeem rewards. Along with these customer benefits, Web3 loyalty offers compelling advantages to brands, including the ability to authenticate customer brand experiences, segment (and communicate) with customers in new ways, deliver ongoing programmatic value, and co-exist with traditional loyalty programs.
While many brands initially hopped onto the Web3 marketing train with a variety of collectible tokens, the opportunity now is to deliver utility and ongoing value to customers — creating brand experience that your customers will want to share with others, and, in the process, rewarding them for their loyalty to your company.
Learn more about Web3 loyalty with PicoNext.
