Loyalty programs are extremely prevalent these days; it seems everywhere you might make any kind of purchase offers you a rewards card. While some retailers do loyalty better than others, consumer opinions of these kinds of programs are varied.
Accenture found that 23 percent of global consumers demonstrate a negative or non-existent reaction to loyalty programs. Furthermore, it's estimated that up to 76 percent of rewards from these programs sit in accounts, unused and forgotten about. That’s three-quarters of a customer base that's considered “loyal” but isn’t actually being incentivized by anything.
Loyalty programs are facing three main stumbling blocks when it comes to customer engagement:
- Too many loyalty programs to keep track of: According to the 2015 Colloquy Loyalty Census, the average U.S. household participates in up to 29 loyalty programs. Twenty-nine programs doesn’t sound terribly loyal, does it? But that aside, managing that many programs on top of our regular busy lives is pretty much impossible. No wonder rewards get forgotten.
- Difficulty redeeming points: Every program has its own set of rules and restrictions when it comes to redeeming points, and very often the rewards aren’t worth the hassle. Not to mention, many retailers require you to amass so many points before any reward is in sight that it becomes less of a priority to work toward them. If I have 3,000 points but it takes 50,000 before I can claim anything, I'm unlikely to bother.
- Lack of interest in rewards offered: How often do you get presented with a retail reward that you’re actually excited about? Tiny product samples and tote bags just don’t cut it if you want to really encourage customer loyalty.
Considering that customer retention is not only cheaper to undertake than customer acquisition, but can also mean more long-term profits, it seems like loyalty is due for a makeover.
Could blockchain be the answer?
Blockchain may have entered the public consciousness as the technology that powers cryptocurrencies like Bitcoin and Ethereum, but its potential extends much further.
Blockchain is a decentralized public ledger of chronological transactions. That sounds complicated, but essentially it means that each step of a transaction must be completed and verified before the next step can occur. Decentralization means no single party owns the record of the transaction, therefore it's much more difficult to hack or tamper with.
This kind of end-to-end verification takes data security to an entirely new level, and presents many opportunities to restructure the way we conduct all kinds of transactions.
Let’s examine how blockchain can help retailers mitigate the issues discussed above:
- Too many loyalty programs to keep track of: Blockchain technology is now powering consumer applications that allow customers to register all of their loyalty program memberships in a single dashboard. Once registered, consumers can manage their points balances from the app.
- Difficulty redeeming points: Blockchain verifies each transaction from every retailer and streamlines the back-end process of applying points and then converting them to “tokens” within the app. Converting points from disparate programs to a single currency takes all the guesswork and limitations from the redemption process. Your Sephora points, your Walgreens points and your Old Navy points can all be combined to enable you to get to better rewards, faster.
- Lack of interest in rewards offered: To inspire real loyalty, retailers need to get personal. According to Epsilon, consumers who believe personalized experiences are very appealing are 10 times more likely to be a brand’s most valuable customer — i.e., those expected to make more than 15 transactions in one year. Consumers who believe companies are doing very well on offering personalized experiences shop more than three times more frequently.
In addition to enabling the combination of points by converting them all to a single currency to earn better rewards, blockchain also provides the level of data security that allows retailers to collect the information they need to deliver truly personalized rewards.
Imagine feeling confident enough in a retailer’s security measures to share personal information about your interests and needs. And think of the rewards they could offer you armed with that insight? Timely, relevant and personalized rewards are what inspire real loyalty to a retail brand. Blockchain makes that possible.
Loyalty programs have come a long way since the days of the sub shop punch cards; it’s time to power them with a technology that makes them meaningful to consumers and drives true loyalty for retailers. It’s time to embrace the blockchain.
Leonid Shangin is the CEO and co-founder of SLP Network, a decentralized exchange platform for loyalty programs.
Related story: 5 Ways Blockchain is Changing E-Commerce
Leonid Shangin is a leader in the customer loyalty space. He worked as a Management Consultant for McKinsey & Company and then as a Senior Business Development Manager for LaModa, one of the largest eCommerce retailers in Russia. After departing LaModa, Leonid founded SailPlay, the leading customer loyalty platform with over 100 clients around the world that includes organizations such as Estee Lauder, Sephora, and Papa John's.