Customer Loyalty Woes? Blockchain is the Solution.
Quick question: How many customer loyalty programs are you enrolled in?
Chances are, you have about a dozen, at least based on estimates from the US. There are 3.8 billion loyalty memberships in America as of this year, according to Colloquy, Considering that there are 320 million Americans, that figure amounts to about a dozen memberships per person. Two years ago, the figure was 3.3 billion.
So why are we talking about customer loyalty woes when the numbers above look encouraging? That’s because the cracks are showing up in the customer loyalty facade. The growth rate of customer loyalty programs reached 15% in 2017. And while that is a great figure, it is no match to the 26% registered in 2015. Needless to say, growth is decelerating.
But the bigger question is this: how memorable or useful are these customer loyalty programs?
Customer loyalty on the small level: You and your points
Remember that each card has a distinct set of rules. Now multiply that by twelve, and we’re talking about a dozen different rules and points to take note of. You simply end up forgetting almost half of them. Worse, for the other half, those points are not flexible enough to let you redeem the stuff that you want the most.
Meaning, your rewards for any program are usually redeemable in a select few shops that the program connected with. This is understandable, because anyone who has done a business deal with another company is constantly hassled by the amount of paperwork involved before launching a certain loyalty arrangement between two different companies.
Hence, from your perspective, customer rewards either don’t stand out or haven’t become user-friendly and flexible enough.
This is quite crucial, because the two most important characteristics for a loyalty program is that it should “give great discounts and rewards” and be “easy to use,” according to Colloquy. And if programs miss on those two from the get go, well, good luck to companies who offer them.
Customer loyalty on the big level: Companies and their bottom lines
Even now, as customer loyalty programs grow significantly, companies are mostly unsure what the exact return of investment to their programs are. What’s sure is that repeat customers generate more revenue for most companies than people who switch brands from time to time.
And customer loyalty programs spell the difference between retained and lost revenues. Customers cite loyalty programs as a factor in why they stick with certain businesses like, say, banks. Four our of five people stick to their banks when they have great rewards for good customers, according to Deloitte, and that fraction rises to nine out of ten for millennials.
Actually, we assert that there is no such thing as an average loyalty program. Because regardless of the reason, people who don’t redeem their points are almost thrice as likely to switch brands and loyalty programs, according to Deloitte. As gaining market share is a zero-sum game, the customers you lose are ones your rivals add.
We haven’t even mentioned that expenses related to maintaining loyalty programs are sometimes considered as sunk costs, with companies sometimes reduced to wishing upon their lucky stars that their schemes work. Remember that unclaimed rewards are considered liabilities on balance sheets.
Hence, standing out in the customer loyalty space is a big game changer for companies who want to beat the competition.
Speaking of game changers…
The main takeaway from what we discussed above is that:
- Customers don’t care enough about a lot of their loyalty programs.
- Customers who don’t care enough about their points are more likely to switch brands.
- Companies only have limited rewards options for their loyalty programs.
- Companies spend a lot on loyalty programs and consider them as liabilities, not assets or investments.
These are but some of the pain points for customer loyalty. Hence, an ideal customer loyalty economy is one in which:
- Customers actively engage in their loyalty programs.
- Customers will care enough about their points.
- Companies are able to have their points reach more places than before.
- Companies turn what would have been liabilities into assets.
Well, we have a solution for that: blockchain. The same technology that gave Bitcoin and Ethereum to the world is the technology that can transform each industry, including customer loyalty, by revolutionizing the way deals and transactions are done.
Blockchain, the peer-to-peer, decentralized technology that verifies each transaction as it goes along and tracks every deal ever made, makes it possible for customers to use just one loyalty system for all their favorite brands, complete with a universal points system that enables more functions than before. It also enables companies to turn liabilities into assets and months-long loyalty arrangements between partners and even rivals into instant deals done through a few lines of computer code.
We’re going further into how blockchain can solve each pain point in the customer loyalty space over the next few posts, so stay tuned for more on how the new loyalty economy will look like in the future.
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