Cryptocurrency and blockchain technologies have provided a fresh perspective towards solving business problems and have attracted huge interest from professionals from a wide variety of fields. These technologies have become immensely popular due to their open source nature (many popular blockchains are open source), minimal infrastructure costs and reputation for being secure and immutable. One such potential application of blockchain technology is in the field of consumer loyalty programs.
Traditionally, loyalty programs have been expensive to run with businesses needing to make significant investments in technology and/or expensive third party services. Such programs also require new users to go through a time consuming sign up process. Users on the other had, whenever they sign up for such programs need to repeatedly share their personal information.
An important reason why businesses run loyalty programs, besides increasing their sales – is to understand customer behaviour. However, the average user does not actively use most of these programs because the value of the incentive provided is usually not worth the hassle of carrying another card or downloading another app. What’s worse, customers are unable to swap earned loyalty points for programs they are more interested in. This leads to users getting apathetic towards such reward programs, robbing businesses of the chance to capture vital customer data.
Blockchain technology provides ways to address the issues with legacy loyalty programs by giving businesses and their customers an option to deal in common, universally accepted cryptocurrencies. Under the new-age blockchain based loyalty programs, customers earn cryptocurrencies as discounts, cashbacks or reward points. Multiple businesses accept the same cryptocurrency as payments, so customers can use earned loyalty points in ways they wish. Even minimal amounts of rewards do not need to go unused – these could be aggregated and exchanged for discounts against more products and services.
Some analysts criticize coalition loyalty programs where businesses use common reward points to be detrimental to business interests since customers can take away cryptocurrency earned from your business to shop at other places. Also, customers could bring in cryptocurrency earned elsewhere to buy your products, thus seemingly not contributing to your sales as much they would have by utilizing your own loyalty points. However, recent trends suggest to the contrary – that benefits of coalition loyalty programs could far outweigh perceived inadequacies by driving participation and encouraging users to spend more.
So what’s in it for merchants?
- Many more merchants who previously could not afford to deploy their own loyalty program can now do so. The cost to implement a coalition loyalty program based on blockchain technology is expected to be significantly lower than before.
- Merchants can expect more customer visits and increased sales due the heightened spending stimulus provided by reusable reward points.
- Businesses stand to gain better understanding of customer behavior better due to more available data.
- Merchants can employ innovative techniques to attract customers based on their spending habits, demographics or location.
What’s in it for consumers?
- Users can avail the benefits of more loyalty programs without having to give up their personal information each time to sign up for such programs.
- Users could manage and reuse all their reward points using one single app or rewards card. Collecting reward points could be as simple as scanning a QR code or swiping a ‘universal’ card.
So where is the action happening?
Sure enough, last 2-3 years have seen a lot of activity this front, and a few early movers have taken lead in implementing cryptocurrency based loyalty programs. Following is a list of 10 such blockchain projects with the same general idea, but vastly different implementations:
|Loyyal (Company)||http://www.loyyal.com||–||Hyperledger Fabric|
|Loyalty Coin||https://www.loyaltycoin.ch||LYC||Graphene (BitShares)|