Loyalty Points and Social Tokens

The last edition of Pacenotes discussed some points from Lana Swartz’s book New Money. This week I’d like to highlight a few examples from her chapter on loyalty points.

Loyalty points are probably the closest analogue social tokens have to existing systems for groups of users or customers. The examples that spring to mind might be airline miles, or Starbucks’s points system.

Indeed, Swartz starts her chapter on loyalty points with a thumbnail portrait of the Starbucks Card system, which had $1.2 billion worth of credit loaded into it by customers in 2016, making it the biggest prepaid debit company in the US at the time. She quotes the economist Michael A. Turner:

“Rewards programs are part of the fiber of the American economy. They are woven through both the warp and the weft. Over time, they have become both pervasive and popular. In fact, it is hard to imagine a scenario in which consumers do not expect rewards programs, including for travel, shopping, grocery, and credit,”

Starbucks customers who lock up their funds inside the Starbucks Card system get all sorts of incentives: free drinks, discounts and access to special products. That sounds more than little like the weird and wonderful world of defi, doesn’t it? In defi, users get rewarded for depositing their funds into decentralised protocols — but the rewards might come with a little less caffeine and sugar.

The whole idea behind rewarding usage is to engender loyalty between the customer and the brand. This can be done in “soft” ways, like with smart marketing and unique aesthetics — I just wrote about the work of the animator pplpleasr, who’s in demand with defi protocols for her “high quality memes”—or with “hard” incentives like simply paying customers to use the product, in the form of yield farming or free drinks.

Loyalty programmes lay bare one of the tenets of the idea behind money: that money is what people say is valuable. But it also goes a little deeper than that. Swartz quotes Hyman Minsky here: “Everyone can create money. The problem is to get it accepted”. Swartz talks about a future in which money plurality may be commonplace, and focuses on the “corporate currencies” from brands like Starbucks.

If these are corporate currencies, then what sorts of communities do they serve? Swartz’s idea is that of the “transactional community” or “networks of shared trust in the communities themselves — their institutions, members and structures of feeling.”

Currency, insofar as it produces transactional communities, is the ultimate branding tool

Why are corporate currencies proliferating now? Mainly it’s because the dominant form of money—state-sponsored fiat money—is undergoing a bit of a crisis. The institutions that back fiat money are facing an erosion in public trust and regard. “For corporations offering branded, for-profit, trust as a service, it is an opportunity,” Swartz writes.

With that, I’m going to pull out a few highlights that discuss loyalty schemes in various contexts:

• Truck driver loyalty schemes Where there are customers, a transactional community grows. Truck drivers collect loyalty points from a variety of petrol stations, highway stops, and other vendors as they criss-cross America. They gather on forums and message boards to trade tips on the best earning and redemption strategies. This is much like the elite business traveller on FlyerTalk, so “the logics of loyalty” are not limited to the business class, Swartz observes. “Truck driver rewards codify and map this economic subject position and its transactional community.”
• The production of status Airline miles can be redeemed for free flights and other hard incentives, but they also generate status within a specific sphere — think of the airline lounge separated by miles status. This status is “differential and relational”— a platinum lounge member enjoys status in the airport but not necessarily outside it, and it’s this closed loop that locks customers into “golden handcuffs” within this transactional community, even if they aren’t happy with the service.
• Collecting points is play Creating a loyalty scheme inevitably invites attempts to game it. And people seem to really enjoy coming up with these strategies to beat the system. It’s a kind of “playful mischief” that paradoxically reinforces the hierarchy of the community while resisting the corporate impulse. Endlessly figuring out schemes to get more airline miles by following YouTubers, discussions on forums, and so on among the airline miles hackers are among “These are ”the pleasures of belonging in a transactional community” Swartz writes.
• The future is medieval If we live in a world of competing monies today, we’re reverting to the mean. Historically, we’ve lived in a multi-money world more often than not. She introduces the idea of the “Gutenberg parenthesis,” from Thomas Pettit and Lars Ole Sauerberg, which is that modernity and mass media is a unique schism; the digital world takes us back to a style of socialising that has more in common with the pre-Renaissance than the last 500 years. “It will be a world whose plurality of association, even fragmentation, will resemble feudalism more than the Roman empire. In such a world, one currency cannot possibly meet all the needs of a diversified region’s inhabitants,” writes Pettit.

Just to synthesise some of the points from above. In designing transactional communities of social tokens users, it’s important to keep in mind that token schemes are powerful not just because of financial incentives, but also because of social incentives. The token scheme can generate status: think of Discord roles, special reaction emoji, access to certain parts of the server and so on.

But token schemes can also be gamed. That’s part of the point. If your transaction community is actively gathering to figure out how to crack your code, you’re doing it right. In this sense, it might be counter-intuitive to think that making a scheme more complex rather than simpler, creates a kind of game for community members to take part in. Points are play.

As for what communities to design for, think of trucker loyalty schemes the next time ‘loyalty points’ conjures up images of plush and anodyen airport lounges. Transactional communities cut across geography, class and profession. There are some super interesting niches out there that can be bound up with their own social monies.

The macro trends are pointing in the direction of more types of payments and monies, not fewer. That’s what the “Gutenberg parenthesis” idea tells us. Keeping a proliferation mindset means potentially generating social tokens at more and more granular micro levels.

And that’s it for this edition of Pacenotes!