In today's economy, customer loyalty is highly sought after. With intense competition among retailers, brands don't want to just retain and reward customers, but also keep their brand relevant and foremost in customers' minds. As customer-centric business models become the norm, loyalty programs are a strategic investment that companies can't afford to overlook.
With the loyalty management market expected to be worth $10.9 billion by 2024, "doing it right" is crucial. Trying to stand out in an increasingly saturated space, more companies are beginning to realize how blockchain can help them reimagine the customer experience and meet their customer retention goals.
The Challenge
Traditional loyalty programs present challenges for both companies and customers.
Organizations are concerned with estimating liability, personalization, improving conversion rates and uniformity among channels. From the customer side, there are challenges with restrictions and rules, reward options and the most common problem: losing track of accumulated rewards points. This isn't surprising given that the average U.S. household participates in up to 29 different loyalty programs.
Armed with this information, companies that want to stay top of mind are looking to develop easy-to-use, secure and flexible programs that engage their customers. Blockchain has the potential to improve loyalty programs for both companies and consumers.
Where Blockchain Adds Value
As most people will attest to, trust is crucial to establish brand loyalty. Blockchain's ability to create transparency makes it an attractive option for organizations hoping to gain and maintain the trust of their customers.
Improving Security
Unsurprisingly, security resonates as a top concern among customers. With so much personal data involved, brands cannot afford to be cavalier about security. Blockchain allows customers to exchange tokens for rewards without compromising private data. Blockchain is also decentralized, so data doesn't reside in any single location. In addition to keeping customers' data safe, it can also help minimize errors and fraud through smart contracts. Transactions on a blockchain ledger are cryptographically secured, immutable and time-stamped, increasing transparency and making everything trackable.
An example of this in action is American Express, which developed a blockchain solution in-house using Hyperledger Fabric. Rather than the blockchain recording personal information, such as card details, data is tokenized. When a consumer purchases something, the blockchain stores the associated transaction details, which can then be used as triggers for a smart contract.
Reducing Costs
With blockchain's ability to execute programs in almost real time, companies can decrease both administrative and personnel costs. For example, a blockchain-based partnership between two companies can be set up to enable exchanges by the customer with no centralized management. Smart contracts can be used to enforce contract terms, automate processes and reduce organizational costs.
Loyyal is a blockchain-as-a-service platform that provides the blockchain architecture for loyalty programs to run their programs better. In cases such as large airlines, who have hundreds of partners, the process of earning, redeeming and reconciling mileage points can be incredibly complex. Smart contract-driven efficiency means more profitable partner programs and a better customer experience.
Increasing Flexibility
Short expiration dates of benefits are one of the main reasons customers opt-out of loyalty programs. To eliminate this issue, blockchain can allow reward programs to operate similarly to a cash-back program, where the currency is stored in a digital wallet and redeemable at any point.
It should come as no surprise that people want to earn rewards regardless of the channel they're using. Using blockchain to create a multi-channel network can enhance customer satisfaction by making it easier to redeem rewards.
Blockchain also offers the potential to connect different programs across brands, creating a consolidated loyalty network. The customer accumulates generic loyalty rewards within a single "wallet." By using a universal loyalty cryptocurrency, rewards can then be redeemed from any of the partner companies. A KPMG study found that this type of tokenization can boost a consumer's engagement with companies by increasing flexibility and cutting some of the restrictions that come with traditional reward programs.
One example of this approach in action is the Rakuten Group, offering 70-plus services in Japan and around the world. Their services are connected through a single membership ID and loyalty points program. Using a branded token (Rakuten Coin), they are solving the issue of having reward points scattered across numerous loyalty programs. Recently, Rakuten Wallet announced that their loyalty points can now be converted to BTC, BCH, and ETH — a move that offers even more flexibility to reward collectors.
Challenges To Overcome
While there are a lot of exciting applications for blockchain within this space, it's not without its caveats. When integrating programs, there are upfront costs involved to break down siloed systems, maintain data security and coordinate multiple intermediaries.
In situations where loyalty programs incorporate multiple brands, there can be a reluctance for some companies to share personal information and fears over losing control over data. Finally, as with other blockchain applications, scalability can be a challenge.
Opportunities To Innovate
In spite of these considerations, there is a lot of potential. By empowering customers with control, creating a permanent record and building on that trust, brands can establish a rewards program that reduces errors, cuts costs and empowers their customers.
In the midst of a pandemic, one sector that's increasingly focused on customer retention is supermarkets. To retain customers, loyalty programs are being launched that focus heavily on personalization and take into account the huge move toward online shopping. Having more flexible reward programs lets customers earn points for gas, groceries and shopping online or through mobile apps. While this is only one example, companies across the board are adapting to a new normal and pushing forward with innovative ways to serve their customers.
While every new technology innately comes with challenges, blockchain has the potential to bring more transparency, efficiency and flexibility to the customer experience. By harnessing the full capabilities of this technology, brands have the potential to create secure and flexible reward programs that not only delight and retain consumers but also improve their bottom line.
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April 29, 2020 at 06:31PM
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Improving Customer Retention And Loyalty Programs With Blockchain - Forbes
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