Incent: Chasing growth without liability
We need a new model of growth — one that doesn’t leave us open to financial destruction
Czech economist Tomas Sedláček wrote that the problem with our economy isn’t depression, it’s manic depression. Monetary policy favours boom-and-bust by encouraging businesses and individuals to over-borrow when interest rates are low during a downturn, penalising them when the economy recovers and rates rise again, thereby paving the way for the next crash. (Although banks have been empowered with so-called macroprudential tools that go some way to addressing this, they do not get to the heart of the problem.)
‘We have to get out of the manic-depressive cycle within which our economic everyday reality operates. And to do so, we have to pay more attention to the manic than the depressive phase, and we have to change the general goal of economic policy. Instead of maximizing the gross domestic product, the goal should be to minimize debt.’
Loyalty and liability
It’s something that affects companies that invest to grow, but on the micro scale, a similar dynamic impacts every business with a loyalty programme. The reality is that every reward point that is issued in a traditional loyalty scheme may have to be redeemed — representing a liability for the issuing business. If rewards issued during a good period of business are redeemed when profit margins are lower, this can have a serious impact, whether we’re talking end-of-month cashflow issues or something on a larger scale. Thus the parameters of most loyalty programmes are carefully calculated, and some businesses impose conditions on the redemption of points — which may expire after a given period of time, for example. That makes them less attractive to customers, and therefore undermines the potential of their positive impact for the issuer. More broadly, loyalty schemes are predicated on the perverse principle that only a limited proportion of customers should cash in their points.
Incent offers businesses a way of not only increasing their ‘GDP’ — their revenues — but decreasing or eliminating the liability that is generally associated with loyalty schemes. In other words, it represents a form of investment where the costs are limited, controllable and known up-front.
What Incent does not do is offer a better, more efficient but essentially still the same version of traditional loyalty programmes. We consider that idea has been tried and found wanting, and streamlining it will not solve its fundamental problems.
What Incent does do is turn the model upside-down and offer new, different and better incentives for customers to return to a merchant — and merchants the confidence that returning customers can only help and never harm their bottom lines.
Monopoly money vs real cash
Regular loyalty programmes provide customers with tokens like Monopoly money that can only be redeemed within the walled garden of the issuing business. Frequently, redeeming these is more trouble than it’s worth and they go unused; if they are redeemed, it is often grudgingly and on the grounds that they will otherwise go to waste.
Incent instead offers a universal token of loyalty: not Monopoly money but a form of configurable ‘smart’ money. Because this is designed to increase in value with adoption, it is both spendable cash and an attractive investment to hold in the medium-to-long term. Rather than grudgingly return to a store to spend otherwise worthless points, why wouldn’t a customer revisit a store that paid them in such an attractive appreciating asset? And why would they not cash out the same asset for goods and services once it had significantly appreciated in value? Why would they not choose a store that offered them something with real value over a store that locked them into a deal they never wanted?
For merchants, why would you choose the potential liabilities of a traditional loyalty scheme when known and minimal liabilities were a viable alternative? Why would you not want to attract custom from Incent holders who will want to pay in this appreciating asset and secure more with every purchase? And why would you not want to take advantage of the cross-selling opportunities that exist by being in this new network — one that places your business in the hands of everyone who holds a smartphone loaded with the Incent app and currency? (And, since your business will both be benefitting from and helping drive Incent adoption, there’s a good chance you will want to hold some yourself.)
Once the propositions for customer and merchant are grasped — and our market research has shown they are compelling — then the proposition for the investor at crowdfund should be clear.
To find out more, visit the Incent website, join our Slack or register for the ICO.
