2024’s loyalty overhaul: Blockchain’s promise for brands | Opinion

by

As a seasoned CEO with over 15 years of experience in developing consumer-focused products, I’ve seen the rise and fall of various trends in the tech and marketing landscapes. However, the potential of blockchain technology to revolutionize loyalty programs is something that truly excites me.

Having worked with a diverse range of industries, from art startups to healthcare and high fashion, I’ve witnessed firsthand how traditional loyalty programs can feel outdated and inefficient. The shift towards blockchain-based solutions offers a breath of fresh air, promising a more transparent, secure, and engaging experience for both brands and consumers.

In my previous roles at Gin Lane and Pattern Brands, where we helped launch over 50 successful startups, I’ve learned the importance of staying ahead of the curve and embracing innovation. The potential benefits of this blockchain paradigm are immense, not only for customers but also for brands that are willing to adapt and evolve with the times.

That said, I’m under no illusion that this transition will be easy. Shallow attempts at bringing products on-chain have fallen flat in the past, but as blockchain technology matures, I believe that those who embrace this new paradigm will reap transformative rewards.

In closing, let me share a little joke to lighten things up: I’ve been told that when it comes to adopting new technologies, some brands are like my cat – they’ll take their sweet time and only jump in when they feel it’s safe. But once they’re in, they can’t get enough! So, let’s hope the blockchain doesn’t end up being a kitten toy for too long, and instead becomes the purr-fect tool for enhancing customer loyalty and engagement.

In the realm of web3, it’s crucial for brands to recognize that traditional loyalty isn’t about trapping customers within confined systems. Instead, it’s about liberating them—empowering them to manage their data, claim their rewards, and interact with brands on their preferred terms. Loyalty programs are currently booming, yet they often seem antiquated. Even as the inflation crisis subsides, consumers are still willing to exchange personal information for discounts, enjoying ‘standard’ pricing while non-members are charged extra.

This strategy, though seemingly against common sense, is proving effective. Based on Antavo’s 2023 Global Customer Loyalty Report, about 67.7% of companies are planning to increase their investment in loyalty programs to keep customers amid inflation. Moreover, as per Statista’s findings, approximately 79% of American consumers have increased their spending with brands that provide loyalty rewards.

As a seasoned analyst with years of experience studying consumer behavior, I have witnessed the evolution of loyalty programs and their impact on customer retention strategies. However, my recent observations have led me to question the relevance of traditional loyalty programs in today’s fast-paced digital world.

I remember the excitement when I first started analyzing these programs; they seemed like a game-changer for businesses looking to keep customers coming back. But over time, I noticed that many of these programs have become stale and outdated, no longer providing the same level of engagement or incentive as before.

But fear not! There is hope on the horizon. Blockchain technology has emerged as a potentially radical alternative to the traditional loyalty programs that still dominate the industry today. With its decentralized nature, security, and transparency, blockchain offers a more efficient and innovative way for brands to reward their customers in a fair and trustworthy manner.

As someone who values innovation and efficiency, I believe that blockchain technology has the potential to revolutionize the loyalty program landscape and create a new era of customer engagement and retention. Brands that embrace this technology will be better positioned to meet the needs of today’s tech-savvy consumers and stay ahead of the competition.

In conclusion, it is clear that traditional loyalty programs are losing their luster, but blockchain technology offers a promising solution for brands looking to remain relevant in the digital age. As an analyst, I am excited about the possibilities this technology presents and eager to see how it will transform customer retention strategies in the years to come.

Walled gardens and limited use cases

From anecdotal evidence, conventional loyalty schemes often function in self-contained environments where customer information is compartmentalized, and benefits are confined to particular scenarios. Over the years, these structures have relied heavily on third-party cookies and obscure data handling methods to flourish.

As stricter privacy rules take effect and cookies become obsolete, these models are quickly becoming less effective. The consequence? Inefficiency in customer loyalty due to unused rewards, limited interaction, and scattered information. Moreover, because data breaches have become common occurrences, consumers are growing more wary about how their data is gathered and utilized. As a result, many are choosing to abandon loyalty programs entirely out of concern for their privacy.

In today’s digital world, the conventional structures of loyalty are showing signs of weakness. Modern customers are not confined to using only closed systems, and businesses can no longer assume they have automatic approval when it comes to purchasing. Instead, businesses must persuasively demonstrate why disclosing personal data will lead to a valuable customer interaction.

As someone who has been a part of numerous traditional loyalty programs, I can attest to their limitations. They are like store-specific gift cards that only offer restricted benefits and lack flexibility. On the other hand, blockchain-based loyalty systems represent a significant improvement. Just as cash offers universal spending power without revealing one’s identity, these new platforms enable customers to use their rewards almost anywhere, making them more fungible and convenient. I believe that this shift towards decentralized and secure loyalty programs will revolutionize the way we interact with businesses and reap the benefits of our patronage.

In this setup, smart contracts promote openness, whereas personal digital wallets return decision-making power to users, reshaping the interaction between businesses and their clients regarding value transactions.

Revamping loyalty one block at a time

Picture a loyalty system functioning effortlessly behind the scenes, fueled by blockchain technology yet unseen by the user. This system awards tokens for purchases and engagements, which can be used to claim discounts, exclusive experiences, or even traded with others. Unlike conventional points, these tokens are fully owned by the consumer and securely kept in a digital wallet for their sole control.

Dynamic NFTs provide a peek into the upcoming era of on-chain loyalty programs. These adaptable, digital assets change based on user interaction – imagine NFT badges that grant access to unique goods or privileges, such as Lululemon rewards providing a complimentary month of personal training at your gym. Brands can adjust these evolving tokens according to the customer’s journey using AI technology. By integrating AI, brands can also incorporate security features like verifiable credentials into the mix, enhancing the overall user experience.

In this system, users are now able to confidently share select details about themselves, as their credentials are verifiable. Meanwhile, brands can utilize flexible on-chain tools to design personalized loyalty programs based on individual tastes, thereby creating a more tailored, less intrusive, and more genuine user experience compared to conventional methods.

Even though we’re only beginning to see the advantages, the concept of technology abstraction is playing a significant role in this development. It’s much like the emergence of cloud computing services such as Amazon Web Services, where users don’t notice the underlying technology; instead, they appreciate the seamless and optimal user experience that it provides.

Opting-in to the future of loyalty

With cookies vanishing and data privacy becoming more of a concern, an growing number of businesses are pondering over a crucial query: “What strategies can we employ to design loyalty programs so appealing that users enthusiastically decide to engage?

The solution is found in designing interactions that genuinely benefit customers. In the past, we relied on offers like “buy 10 get 1 free,” but these conventional perks (that no longer feel like incentives) can now be swapped with digital rewards such as collectibles, rankings, or experiences only accessible through blockchain technology.

In this evolving landscape, brands need to approach with caution as they dive into this novel system. Attempts to hastily move products onto the blockchain in web3 have often resulted in disastrous outcomes. After much experimentation and fine-tuning, it’s widely agreed that merely converting existing loyalty programs into tokens without reconsidering their value offerings could lead to underwhelming user experiences.

As blockchain technology continues to advance, companies adopting this innovative approach are poised to flourish, gaining significant benefits not just for their clients, but also for their own growth and development.

Neil Mullins

Neil Mullins serves as the chief executive officer for Mojito, a web3 platform that fosters consumer interaction for brands. With more than fifteen years under his belt in creating consumer-centric products, Neil has collaborated with numerous businesses and products spanning from art ventures to healthcare and luxury fashion. Most recently, he was part of the management team at Gin Lane and Pattern Brands, a collective that has assisted in the conception of over fifty startups, including Sweetgreen, Hims, Harry’s, and Sunday Goods, collectively valued at more than $10 billion.

Read More

2024-12-30 16:16