Over the last weeks, in my exploration to what could drive crypto into mainstream and what could transform people from speculators to users,I’ve been writing about wallets, payments, staking and crypto debit cards. An area that I have not touched yet, is customer loyalty programs. In a post coronavirus world, it will be a long haul before we are back to business as usual. More now than ever before, customer loyalty is critical to the success of any organization, but most loyalty programs are complicated and clunky. Out of the total points earned, 30% are never redeemed. The majority of the programs require people to sign up for another credit card they don’t really need. In theory most programs are useful, but the reality is that they are full of hidden restrictions and red tape. Even the simple coffee punch cards are more likely to be lost than ever actually redeemed. Customer loyalty can make or break companies and blockchain can make or break customer loyalty. Customer loyalty could be crypto’s path into mainstream.
The breadth and variety of loyalty programs can be mind blowing, ranging from Virgin Atlantic’s tiered points program (Virgin Atlantic Flying Club), which connects to rental cars, airport parking, hotels, and massage services, to Amazon Prime which provides free shipping and media services, and to Patagonia’s and eBay’s Common Threads Initiative, which allows customers to resell clothing bought from Patagonia on Ebay.
Loyal customers are the primary driver of any for-profit business and loyalty programs are vital in the customer journey. You can find loyalty programs in every industry. The global loyalty program market was valued at $172.5 billion in 2018. Loyalty programs market in North America were valued at $72 billion in 2018 and growing at 2-4 percent.
To understand their importance, let me share some stats:
- More than 90% of companies have some sort of loyalty program.
- The average consumer belongs to 14.8 loyalty programs.
- The average U.S. household participates in 29 different loyalty programs.
- 50% join a loyalty program to earn rewards on everyday purchases.
- 57% spend more on brands to which they are loyal.
- 37% are willing to pay to upgrade to an enhanced tier of a loyalty program.
But today, to exchange points people need to navigate a complex maze of systems and processes. A high percentage of consumers indicate that they are not connected with their loyalty programs. Millennials are not inclined toward loyalty programs that require them to carry physical loyalty membership cards.
Loyalty programs are ripe for disruption and blockchain is the answer.
Blockchain can streamline execution and administration of loyalty programs, giving all participants near-real-time transparency.
For consumers managing an array of programs, blockchain could provide instant redemption and exchange for loyalty points on a single platform. With a single wallet to store digital loyalty rewards, consumers would not have to hunt for each program’s options, limitations, and redemption rules. Every merchant would have permission to access a distributed ledger that hosts the loyalty program, in a way that would not let them view transactions with other merchants.
While all loyalty programs are vulnerable to a blockchain revolution, the travel industry faces the biggest risk. Travel loyalty programs are complex. They involve multiple currencies and different retailers. In some cases, loyalty points differ by journey component (flight, car rental, hotel, dining), leading to fragmented point collections.
We are already seeing several initiatives in this area.
Two years ago, Singapore Airlines launched a blockchain digital wallet based on KrisFlyer, its air miles program. The wallet enables flyers to convert their unused airline miles into reward points. If the unused miles are not sufficient for redemption at the airline, they can be tokenized as reward points. Consumers can redeem them at merchant outlets including fuel, retail, food and beverage, that are not directly participating in the air miles program.
American Express launched a distributed ledger that allows merchants to offer Amex reward points to their consumers on their respective mobile apps or websites, not depend on a credit card as a channel to offer reward points. The distributed ledger provides Amex with insights on products and services that consumers purchase. These insights are not available to Amex with credit card purchases, which normally contain the merchant’s name, but not details of the items purchased.
Last year, Japan’s largest e-commerce site, Rakuten, announced the launch of Rakuten Coin, that will be used to power a blockchain-based loyalty program designed to attract customers interested in cryptocurrency.
Trippki enables hotels to reward their guests with TRIP tokens that are cryptocurrency issued on the Trippki platform, built using Ethereum. TRIP tokens can be redeemed against hotel room bookings on the Trippki platform. Hotels can launch bespoke reward programs using the Trippki platform to meet the varied needs of the traveler community rather than provide standard reward offerings that are widely available in the market. Guests staying in hotels booked through Trippki can get rewarded with TRIP tokens for writing reviews.
With an enormous amount of loyalty points never being redeemed, it’s obvious that they are of little to no value for many customers. Turning loyalty points into cryptocurrency tokens would make it easier for consumers to get real value out of the points they earn. With digital loyalty points, just like any other digital asset, consumers could hold and watch their value grow, use them where they earned them, exchange them for tokens from another retailer, or trade them for cryptocurrencies or even fiat currency.
Loyalty programs are possibly the ideal path for placing cryptocurrencies in hand of millions of consumers and driving mainstream adoption. From a consumer perspective, the process is seamless. Even consumers who are hesitant to buying cryptocurrencies, could earn crypto, without any risk. If more loyalty programs were to implement blockchain, cryptocurrency could take off like a rocket with millions of new users and use cases.
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