Why Loyalty Programming Needs Blockchain Technology to Grow

How many loyalty programs are you a part of?

Your grocery store? Your favorite clothing stores? Your neighborhood gas station? The hotel chain you typically use when traveling for work or pleasure?

The average American household is enrolled in between 9 and 19 loyalty programs, according to Colloquy. That number isn’t surprising when you think about how many outlets we use in our daily lives. Not to mention, most loyalty programs don’t require you to sign up for a credit card or provide much more information than your name and email address, and often we are incentivized with discounts to join, so it’s easy to enroll.

But you might be surprised to find out that only 5 to 12 of those programs see active use, and 76 percent of bonus rewards such as points and miles go unused.

So where is the disconnect? Why, if there is little to no effort required on our parts to redeem these rewards, do we leave them unused? It turns out there are multiple reasons.

Sometimes, users sign up for a loyalty program because they wanted a single-use discount, but never intend to patronize the business frequently enough for rewards to matter. Sometimes users find it too difficult to redeem or transfer their rewards so they simply don’t bother.

Often, consumers find that the rewards offered are not something they are interested in, or don’t seem to translate to anything tangible. (I need 127,000 points to claim that perfume sample from Sephora, you say? And I have 2000? Great. I don’t even wear perfume.)

Lack of trust can also be a major barrier. 43 percent of respondents to Accenture’s consumer loyalty survey switched providers because they lost trust in the company, and 38 percent stated that trust (e.g., personal data security) is the main factor in their loyalty to a brand.

How can blockchain help?

You’ve probably heard of blockchain mostly alongside news of cryptocurrencies like Bitcoin, but its potential goes far beyond that. Blockchain can actually help brands alleviate some of the issues addressed above, and give loyalty programming the jumpstart it needs to be a significant factor in customer acquisition and retention.

Blockchain technology can integrate with user interfaces and point of sale technology to streamline the process of reward redemption. It essentially creates a secure environment wherein users can easily redeem rewards without jumping through hoops and dealing with restrictions, and brands can track transactions and reward redemptions to continually improve their offerings.

The data security of blockchain can also address the issues of irrelevant rewards and general lack of trust in a brand.

Personal information, including likes, interests and past purchase behaviors all help brands determine what kinds of rewards would be appropriate for each individual customer, but they need a way to ensure that users can be sure that their information is safe. Blockchain offers consumers the confidence they need to share the information necessary to increase the relevance of their loyalty program.

Blockchain and Loyalty: Growing Together

There is vast revenue potential in loyalty programs; Accenture’s study notes that 66 percent of US consumers spend more on brands to which they are loyal.

At the same time, the global blockchain technology market is predicted to reach 339.5 million U.S. dollars in size and is forecast to grow to 2.3 billion U.S. dollars by 2021.

As blockchain leaves the niche cryptocurrency market and finds application across major industry verticals, loyalty marketers will be able to adapt the technology to suit their own needs and those of their customers. Blockchain could soon enable more relevant rewards offers and an easier way to redeem them, and for brands, drive more traffic to their businesses and deliver higher ROI on loyalty programs overall.