How Blockchain Is Shifting Loyalty Programs

By some estimates, it costs five times as much to acquire a customer than to keep an existing one. Thus fostering customer loyalty is vital for many companies, especially ecommerce. Ecommerce merchants have hundreds of possible technologies and methods to boost customer loyalty, but blockchain engineering and blockchain-based crypto tokens provide unique benefits.

Points vs. Tokens

Many customers have come to associate devotion with points programs, like from airlines, hotels, and charge cards. With those programs, the link is clear between the current purchase and potential gains. However, as much as 70 percent of customers are reportedly not certain how many loyalty points they have with their preferred brand.

Loyalty programs can affect a retailer’s bottom line with startup, promotion, and reward costs. As a public ledger, blockchain technology could be an inexpensive way to store and share reward point balances and activity. Unlocking this information possibly opens up more ways for customers to be aware and use their points, which strengthens brand loyalty.

The objective of rewards programs is to promote consumers to buy more. But companies are beginning to replace point-based programs with crypto tokens, as seen in recent statements by Malaysian airline AirAsia and ecommerce giant Rakuten. Both are migrating their loyalty points programs into blockchain-based tokens.

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When assessing tokens vs. loyalty points, consider these criteria.

  • Fungibility. Money is an established incentive. But most loyalty points are only redeemable for services and products. Except for some credit card programs, loyalty points frequently don’t have any real cash value. Tokens, on the other hand, are generally traded on a market, so customers can easily and instantly convert them to actual money or other crypto tokens. This fungibility can add tremendous flexibility and value to the consumer. Retailers, however, will have to make sure it achieves their objective of higher sales.
  • Application principles. Businesses often exercise broad discretion in establishing their loyalty-points programs. Minimum spends, expiration dates, points devaluations, and other program changes are common. The end result is complexity that can lower the incentive and ability for customers to redeem, according to an estimated 48 trillion loyalty points unredeemed by customers globally. Conversely, tokens are unrestricted, possibly reducing the redemption confusion.
  • Client perception. Consumers normally understand loyalty points, even if app complexity makes it hard. Tokens and cryptocurrency, however, are still in the hype cycle or unknown by the majority of consumers. This hype may create higher perceived value (and thus increased devotion ), or it might turn consumers off. Regardless, crypto tokens have consumer-adoption challenges that loyalty points don’t. Businesses using tokens will need to overcome this through education and smart user experience.

Consumer Data

Loyalty programs can also provide companies with much data about engaging consumers to tailor products, services, and advertising campaigns. However, consumers are more sensitive than ever about exposing their private info. This sensitivity will probably increase.

Companies like Bloom, Datawallet, and Pillar capitalize on the exceptional security elements of blockchain technologies to give users more control of the data. Retailers can create their personal blockchain to protect consumer information better or can associate with one of the numerous jobs building that functionality internationally.


So which companies provide blockchain technologies for loyalty programs? Here are just three leading players.

  • Qiibee enables businesses to conduct their own branded loyalty programs on the blockchain, creating custom tokens as rewards and assisting merchants with installation and rollout.
  • Loyyal includes a network of merchants using the blockchain to boost consumer loyalty network-wide.
  • DigitalBits provides a market for loyalty points, allowing consumers to exchange or buy points if the brand participates.

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