How Blockchain can REVOLUTIONIZE Traditional Loyalty Programs
Blockchain technology can remove many of the inefficiencies plaguing loyalty programs today. It can consolidate multiple broken programs into a unified, streamlined ecosystem that is rewarding for both the loyalty providers, as well as customers.
Here’s a look at some of the ways blockchain can shake things up in this very traditional industry:
1. Cost Reduction for Loyalty Program providers`
A blockchain based loyalty rewards program can help loyalty providers reduce costs on multiple levels — operational, transactional, safety and fraud prevention, as well as on customer acquisition. Since program providers and consumers will be able to transact (reward, redeem, exchange) with each other without the need of a third party processor or intermediary, there would be reduced system management costs, and increased efficiency in the administration of such programs. Smart contracts would enable secure and transparent transactions which would greatly reduce costs that could result from errors or fraud. Loyalty program providers would also have reduced liabilities on their balance sheets due to being part of a shared loyalty network
These program providers would also enjoy greater exposure from social media due to easy integration of blockchain-based loyalty programs with popular social media platforms. With a robust rewards program that engages customers, loyalty program providers can also enjoy reduced cost of acquiring new customers.
2. Connecting fragmented loyalty systems
Blockchain technology eliminates the need for customers to juggle multiple rewards programs on different platforms. Instead, all of the customers’ rewards can be stored within one digital wallet. Think of it as centralizing customers’ rewards programs through a decentralized technological solution. Loyalty providers would be able to choose whether they want their issued points to be redeemable anywhere, or within an ecosystem of brands and retailers in non-competing verticals (depending on the provider’s goal- is it to gain insight as to where they stand vs. others, or is it to promote loyalty to their own brand/store?) For example, a grocery store, a gas station, a pharmacy, and restaurants serving different cuisines can partner up to form an ecosystem where a token issued by any of the brands/retailers within the ecosystem would be acceptable amongst all the partners. From the consumer’s perspective, they would be free to access and manage their rewards without any friction.
3. Security and Fraud Prevention
One of blockchain’s most important qualities is its immutability. Since it chronologically records every transaction made, every transaction is traceable yet irreversible. This prevents illicit activities and fraud, transaction manipulation, and double spending of any rewards/loyalty tokens.
4. Transparency and real-time processing
Without the need for third party processors and intermediaries, blockchain can enable loyalty token transactions to be recorded and accessed in real-time. Traditional loyalty programs usually do not credit/update customer accounts immediately, resulting in unfavorable situations for consumers where they may have wanted to utilize their newly earned points, but weren’t able to do so.
5. Improved personalization for customers
In the 2016 Bond Loyalty Report, only 22% of the respondents said that they were satisfied by the level of personalization provided by loyalty rewards programs that they belonged to. Tokens are unique and traceable, and in an interlinked loyalty platform, would give rewards providers the unique ability to better leverage customer data for drastically improved offer personalization, without compromising customer privacy.
6. Creation of unique business opportunities and partnerships not possible with traditional loyalty programs
A loyalty platform that is an ecosystem of multiple brands and retailers can provide an incredible opportunity for brands to enhance the value of their existing loyalty program, while sharing the customer’s ‘love’ across multiple non-competing verticals. A blockchain based loyalty platform would allow partners of all sizes to be seamlessly added to the ecosystem, enabling smooth and efficient partnerships — both in the short, and long term.
And this goes beyond just brands and retailers — there could be all sorts of partnerships and opportunities created when specific actions and behaviors are rewarded within an ecosystem. (Organizations encouraging sustainable actions like coffee chains rewarding people who bring in their own cups? Governments rewarding good recycling habits?) Even large loyalty program providers who already have well developed programs could nurture unique and valuable relationships with other businesses and communities!
How a blockchain based loyalty rewards program benefits customers
Between hundreds of loyalty programs and cumbersome redemption processes, most customers don’t feel like they are getting value out of the loyalty programs they belong to.
I mean, loyalty programs are great, but that’s only if you can keep track of the tens of different types of points, miles, and rewards that you got at the café, the salon, and the restaurant down the road. What’s worse is that you can’t combine these points, and usually have to wait a VERY long time to finally redeem them for something.
A blockchain based rewards network can change that.
For customers, a crypto-token as a reward means that they are in control of their points — not the program provider. Due to real-time crediting, increased redemption options, and no loss of points through expiration or mimimum crediting requirements, blockchain-based rewards programs are also very favorable for customers.
A universal loyalty token would allow a customer to earn tokens from one brand/retailer, and redeem it at any of the other participating brands/retailers as they please, in real-time. Instead of having to juggle multiple program memberships, customers would be able to use a single wallet to manage all their loyalty memberships in one place. A blockchain-based rewards program would also allow customers to transfer their tokens to friends and family, unlike traditional points that do not allow such transfers. Engaged customers would result in an increase in redemption transactions, which would reduce costs per transaction for the loyalty provider too — resulting in a win-win solution for both!
To sum it all up…
Blockchain technology is still in its early, formative stages, but is already on its way to revolutionizing industries that have been at a technological standstill for decades. When it comes to loyalty programs, the technology can address the high costs, risks, and inefficiencies inherent to typical rewards platforms — by enabling a highly efficient, cost-effective, user-friendly, and seamless experience — for both the brands and their customers.
The loyalty industry is ripe for innovation — and blockchain technology is here to lead it.