Using tokens as a brand loyalty tool

Introduction

In today’s highly competitive economy, customer loyalty is very valuable. Companies not only want to retain and reward their customers, but also to keep their brand visible in order to more easily be part of customer choices. 

Loyalty programs are therefore a strategic investment that companies cannot afford to overlook as part of customer-centric business models.

Businesses in commerce are well aware of its importance, especially with rising customer acquisition costs and new competitors emerging every day.

Securing a loyal customer base is important because it ensures regular revenue and spreads positive opinions about the company. Studies on customer behaviors have shown that loyal customers produce over 40% of a brand’s revenue on average.

The situation

Traditional loyalty programs present complexities for both companies and customers. Companies have to face costly management and uniformity across channels. Customers, on the other hand, must manage numerous loyalty programs, with different and incompatible rules. In addition, customers have to make purchases they don’t need in order to avoid losing their accumulated points. Research shows that 33% of millennials do not appreciate this type of program for these very reasons.

Based on this, companies that want to be effective are looking to develop loyalty programs that are easy to use, secure and flexible. Blockchain has the potential to improve loyalty programs for both companies and consumers.

Several companies have already moved in this direction, for example Singapore Airlines, Cathay Pacific, and American Express.

Why Blockchain

Blockchain‘s ability to create transparency and security, thanks to the immutability of data, makes it an attractive option for organizations hoping to earn and maintain the trust of their customers through customer-appreciated loyalty programs.

The idea is to reward loyal customers with points that are tied to tokens managed on the blockchain.

Security

A survey of just over 2,000 people showed that 71% of consumers are less inclined to join a loyalty program that requires personal data beyond a name and phone number.

In fact, security and privacy of personal data are top concerns among customers. As a result, brands cannot afford to ignore them. 

Blockchain allows you to address these customer concerns about data privacy and security. The peer-to-peer nature of blockchain reduces the chances of a privacy breach. Additionally, because the data in the database cannot be altered, there is no risk of information manipulation and all data is stored securely in the blockchain.

Furthermore, once the customer receives the tokens, there is no risk of transaction deletion, expiring or losing value. This ensures a loyalty system that is not only secure but also transparent and fair.

Interchangeability

The introduction of blockchain gives the ability to use loyalty tokens that are interchangeable between different loyalty programs and do not lose value over time. 

Blockchain also allows customers to exchange tokens, a possibility that is not available in traditional loyalty programs and is certainly of interest to customers. A customer not interested in their airline miles could exchange them for points for purchases at a supermarket, for example.

The interchangeability of tokens across loyalty programs – from miles to points for discounts at favorite restaurants – allows to save the customer from a rigid process with no flexibility and limited deadlines. This ensures that the consumer can maintain loyalty to a variety of brands at once, rather than just one. 

This model is also being applied territorially, with loyalty cards that allow for the collection and use of points at retail shops in a certain area. An example is the myLugano card issued by the city of Lugano (Switzerland) and also based on a blockchain infrastructure.

Loyalty program platforms

Those who want to implement a loyalty card for their business don’t need to make it themselves or have it made from scratch. In fact, they can rely on blockchain platforms that already offer this type of application. Here are some examples: Qiibee, Loyyal, Permission.io, DigitalBits.

These kinds of platforms lower the entry barrier and allow even small companies to have their own loyalty program.

Conclusions

Blockchain-supported loyalty programs are still in their infancy. In fact, since 2018, the first tests and later the first implementations have started. But there are already several examples from prominent companies that show that the concept is feasible and promising. 

The fact that these kinds of solutions are convenient for both companies and customers will lead to an ever-increasing adoption. The existence of ready-made platforms and the easy integration into existing loyalty programs will also drive the process.

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