Why Loyalty Programs Belong on the Blockchain

McKinsey published an article in 2011 that contained two very different statistics regarding customer loyalty programs. On the one hand, they claimed that well-designed loyalty programs could generate as much as 20% of a company’s profits. On the other, their analysis of U.S. retailers found that companies without loyalty programs were experiencing better comp increases than companies with them. While correlation isn’t causation, the takeaway is clear; poorly designed loyalty programs — at best — have no impact on companies’ bottom lines and at worst become liabilities. If you’re a company looking to starting a loyalty program, you should take the time to get it right.

At ReChain, we don’t see blockchain as just the hot tech trend of the moment. We believe a blockchain offers real solutions for brands looking to make the most of their loyalty program. Here’s why.

Blockchain Stores Data Immutably and Transparently

A recent headline in The Economist read, “The world’s most valuable resource is no longer oil, but data.” When gambling giant Caesars declared bankruptcy, creditors valued customer data in their Total Rewards loyalty program at $1 billion. Loyalty programs are one of the most effective tools companies have for collecting data, which is why that data needs to be stored in a fraud-proof, loss-proof, highly reliable system — just as a company who owns plenty of gold bars would rather keep them in a vault than a closet! Blockchain fits the bill for these data storage needs. Due to its decentralized nature, blockchain data is immutable and accessible from anywhere in the world.

Blockchain Minimizes Friction and Maximizes Efficiency

The average American household participates in 29 different loyalty programs but is active in only half of them. Many of those unused token reward systems — and many of the active ones as well — fail to maximize benefits for consumers or companies because they’re a pain to use. Customers may find checking their rewards wallets point balances cumbersome or might wonder if their points balance is accurate, thanks to delays in adding or subtracting used or earned points. Companies maximize their programs’ utility when they can create personalized token reward offers and communications that relate to customers’ lifestyles, but building systems that allow them to do so quickly and accurately is a slow and sometimes prohibitively expensive process.

Because blockchain-based loyalty programs store customer data in an immutable, transparent database, companies can update consumers in real-time, minimizing delay and inefficiency. Smart contracts built into Ethereum and similar blockchain protocols can even automate loyalty program actions, further lessening administrative costs while improving programs’ speed and efficacy.

A Blockchain Lets Brands Work Together

Customers lose out on about $100 billion unredeemed loyalty points every year, and companies lose out because they miss out on repeat business. Among other things, these wasted points are an effect of loyalty program overload. Customers’ loyalty program participation is usually spread out over many brands, making it difficult for them to reach redemption points in any one program. The result is customer disengagement — a lose-lose for both consumers and companies.

Because blockchain transactions are peer-to-peer, companies can use a blockchain as a database for sharing loyalty information. Instead of juggling centralized loyalty programs, customers in a blockchain-based loyalty program like ReChain can redeem points earned with one partner business at another partner business. Because customers have more flexibility in how they get to spend points, they stay engaged in the ReChain network. All companies who participate in the network benefit from engaged customers, customers get to spend their loyalty points when and where they please, and expensive, foregone points come to an end.

The ReChain Platform

We started ReChain because we knew the world of loyalty programs needed a significant change. We built ReChain on top of a blockchain because it offers the unique benefits of blockchain technology like transparency, cryptographic security, smart-contract usability, and more. Customers who join ReChain will get a blockchain rewards wallet, which automatically and instantly records their data safely, and provides an incentive for them to share it with brands. Because users can keep track of all of their loyalty programs via one wallet instead of dozens of different applications, customer fatigue from loyalty program overload is minimized. And because customer loyalty data is stored in a blockchain-based database, the chance of data loss, corruption, and fraud are mitigated; with this solid technological foundation, ReChain and partner brands will work together to offer customers appealing, personalized, and socially aware offers and content, and customers who agree to share their information can get custom-fit offers from multiple brands.

Loyalty programs can be a goldmine for companies or a weight around their neck, and for too many companies and customers, loyalty programs provide a lot of hassle and few benefits. Fortunately, ReChain is leading the way towards a more functional, win-win loyalty system.