5 ways blockchain increases customer loyalty, according to qiibee
The problem with a lot of rewards programs today is that they're bad. Blockchain can help.
qiibee is a Swiss-based cryptocurrency project which aims to put loyalty itself on the blockchain. Specifically customer brand loyalty in the form of company tokens.
It's increasingly looking like the future of loyalty programs, with some prominent airlines having already shifted elements of their prominent frequent flyer programs onto the blockchain. Not planning on being left out, credit card companies are also exploring the new territory. American Express has already unlocked some novel benefits in a trial run in the form of much more granular control over matching specific products, stores and customers.
eCommerce giant Rakuten, which also happens to operate the world's largest and most valuable customer loyalty program, is also moving it to cryptocurrency on the blockchain.
Even Daimler Chrysler is exploring its potential, with what looks like a simultaneous test of blockchain potential in the form of MobiCoin. That's an interesting one, not only because rewards points are way beyond the usual purview of car makers, but also because it's specifically looking at how administering rewards points can shape behaviour like safer driving, rather than just driving purchases.
The ability to easily and programmatically give real rewards to customers is an extremely powerful tool. If a brand understimates the potential of these types of programs, it might be because they're still thinking of what rewards programs used to be, rather than what they can be with the addition of blockchain technology.
qiibee is a platform specifically designed to let brands easily design, offer and manage their own customer loyalty cryptocurrencies.
So on the one hand, CEO and co-founder Gabriele Giancola naturally has a vested interest in talking up its potential. On the other hand the mass migration to the blockchain space for rewards programs makes it pretty clear which way the wind is blowing, and few people are in a better position than Giancola to explain why the wind is blowing that way.
The usual paradigm is for a business to buy customers. There's something to be said for delivering a quality product or service, but marketing of any kind is all about buying customers - spending money and receiving customers in return. That's what freebies and rewards are all about.
In its simplest terms a good program will get more customers for less, so almost by definition the best programs have to be on the blockchain, simply because it's so much cheaper.
"From the technical implementation right through to the costs of the rewards themselves, loyalty programs can be both expensive and tedious to set up, and demand a significant investment of time and money," Giancola says. "Transaction costs related to the issuance and redemption of reward tokens are much lower on the blockchain since they do not require a third-party. Blockchain also significantly reduces system management costs, thanks to smart contracts that automise processes, all while reducing costs related to instances of error."
"On top of this, brands themselves benefit from having access to an ecosystem of already loyal customers, which again reduces acquisition costs."
2. Bolsters engagement
One of the downsides of trying to use loyalty programs to attract new customers is that for a customer to become a loyal customer they need to become a customer first.
It's not an unsolvable problem though. The purely digital nature of blockchain-based programs, and the ability to program it almost as needed, means a loyalty program can be slipped in or deployed almost anywhere to reach the most valuable future customers, and put at the front and centre of that future customer's ongoing experience.
"Loyalty programs are not only difficult to set up, but it is difficult for brands to attract new customers by means of a loyalty program. Blockchain is flipping this on its head by introducing loyalty at the start of the customer journey, as opposed to at the point of purchase," Giancola explains.
"In other words, loyalty points are no longer an afterthought when they can be exchanged within the brand, with other brands, or for cryptocurrencies or fiat. Better still, the potential for loyalty points to rise in value and get the customer more attractive rewards creates excitement that was never before a part of the loyalty program experience. Customers are also then driven to check their loyalty programs more frequently since the reward options are more varied, thanks to an ecosystem connecting different programs."
3. Loyalty through security
"All transactions recorded on the blockchain are cryptographically secured, meaning that participants of the network have their own private keys (akin to their own personal digital signature). Blockchain's immutable and tamper-proof nature also means that every transaction is traceable, which eliminates the potential for fraud or other misuses of the system (which is, again, connected to costs)," Giancola says.
"Additionally, as there is no single point of failure, customers no longer have to worry about the storage of their private data with large retail companies. On the blockchain, data is stored across the network, which makes it inaccessible via a single entry point. All of these features make customers more comfortable with sharing their details, as well as executing transactions on the blockchain."
The "realness" of these types of rewards points, which might have a clearly denominated dollar value and in the future could even be shown in a customer's bank account alongside their other owned moneys and digital assets, is closely tied to their security. This element is key to actually making more people care about and value their hard-earned loyalty rewards.
4. All in one place
Even if the rewards points aren't right next to the customer's actual bank details, they can still be all in one place through platforms like qiibee.
"Customers often suffer from 'loyalty program fatigue' due to the vast number of programs available, which subsequently leads to loyalty program inactivity" Giancola says.
And no matter how you slice it, making it much cheaper and easier for a company to create and manage rewards programs probably isn't going to help.
But it's already a problem, and blockchain technology is the best way to mitigate it. A standardised loyalty rewards ecosystem, where customers can collect all of their points in the same digital wallet which they can in turn use for all of their transactions, is how to manage it.
Once enough rewards programs migrate onto the blockchain, and the standardised storage and use it can offer, those which haven't yet made the leap will become extremely unweildy. No one's going to keep clipping coupons for one brand, or even remembering a username and password and signing into a separate website, when all their other favourites and already in the palm of their hand and all in one place.
"Blockchain provides a frictionless system, whereby customers can conveniently store all of their collected points in a digital wallet and use the same to make transactions, therefore encouraging engagement," Giancola says. "Blockchain also connects different owners of loyalty programs and makes the points they distribute interoperable: customers no longer have to keep track of dozens of different programs and can do so from their respective wallets. Customers can also exchange their loyalty points with other users, which again increases their utility."
5. Real value
What if loyalty programs just aren't very good? How on earth is a free carwash coupon a good reason to buy a certain type of car? And how is a free bottle of wine a good reason to change banks?
They're not, but that doesn't stop them from being offered for lack of a better option.
This search for meaningful rewards to offer customers (pictured) is probably one of the main reasons why the rewards card market is booming, and you only need to look at its runaway success to see how much these kinds of rewards mean to people. But for brands, it's still relatively inflexible and won't usually be very accessible to most.
In true blockchain style, cryptocurrency rewards programs can make these kinds of benefits much more accessible to more brands, essentially lowering the barrier for entry.
"Customers often complain about the lack of reward options available with loyalty programs, and along with the lack of cohesiveness it’s easy to see why customers would abandon their loyalty programs," Giancola says. "With blockchain, tokens that brands give out are tied to other digital assets which renders them valuable in another sense: customers are no longer forced to spend their loyalty points with a specific brand, or even other brands within the ecosystem, as they can choose to sell their tokens for fiat and spend the money in the real world!"
"More importantly, these tokens can rise in value without any further investment from the customer."
"Blockchain’s merits are manifold and effective for tackling the loyalty market’s inherent issues: for brands, blockchain significantly reduces costs, tackles security issues, and increases customer engagement, while for customers, this means a convenient use of different loyalty programs in one go while profiting from a myriad of redemption options, which ensures that they will stick around in the long run."
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA