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How Blockchain Can Improve the Loyalty Program Experience

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by Maria Konash · 4 min read
How Blockchain Can Improve the Loyalty Program Experience
Photo: Merchant Maverick

Now, when blockchain is making its entry into the world of loyalty programs, it proves its ability to solve the problems native to the sphere.

Loyalty programs can be an attractive proposition for customers. The opportunity to earn points in return for rewards is a familiar concept, and brands rely on the power of such programs to inspire repeat business.

The appeal of loyalty programs is almost timeless — one survey reports that 86% of consumers across all age demographics said they have signed up for a loyalty program to collect points for rewards.

However, the same survey also showed that 75% of consumers said they actively participate in three or fewer loyalty programs. Therefore, it’s crucial for brands to make their programs stand out from the competition. Unfortunately, not all of them succeed, as the sphere is plagued with problems, which not every brand has the power to cope with.

So, what are these problems? Here, we highlight a few.

Making the Reward Threshold Too High

Starbucks Rewards is one of the most popular loyalty programs in the US; however, it drew the ire of its customers in 2016 when it changed its rewards criteria.

Loyal customers who were buying lower cost plain coffees had to spend more to get the same rewards. Starbucks’s popularity scores took a temporary beating as a result of customers tweeting their dissatisfaction with the change.

Offering Unappealing Rewards or Irrelevant Promotions

Microsoft also managed to annoy its XBox Live user base, simply by giving a birthday gift. Seems ungrateful?

Well, firstly Xbox Live users were already paying $50 each year to access the platform, which competitor companies offer for free. Then consider that the incentive program designed to soften the payment blow, Xbox Rewards, gave a birthday gift to customers that had an equivalent value of $0.25. The customers were rightly riled.

Expiring Points

The points have zero value if they expire before customers can redeem them. One survey showed that nearly a third of consumers said this was their biggest gripe with loyalty programs.

Low Member Engagement

One reason that points expire is that customers can suffer from an overload of loyalty programs. Having to keep track of multiple registrations, physical cards, smartphone apps, logins, and passwords causes fatigue.

If customers aren’t engaged by the program and its rewards, it doesn’t justify itself.

Making It Too Difficult to Redeem Points

Airlines have come under fire for this heinous loyalty program misdemeanor.

Time magazine has previously reported that the niche role of “award booking consultant” now exists purely because airlines make it so difficult to redeem frequent flyer miles.

If a customer has been loyal enough to accrue enough points for a reward, then surely, it’s counterintuitive to make the process of claiming it fraught with obstacles.

The Solution? Blockchain Loyalty Platforms

Blockchain-based loyalty platforms are now starting to emerge, and they are coming up with some innovative solutions to these problems. One example is Resto, a blockchain loyalty scheme targeted at the restaurant sector.

Resto uses the concept of digital tokens as loyalty points. Any restaurant or food service operator can sign up and allow customers to accrue a percentage of each check as Resto tokens. Customers can download a smartphone app to manage their token balances and spend them at any participating restaurant.

A platform like Resto offers customers a single point of access for loyalty points accrued from multiple different outlets. This helps to increase engagement, as customers can spend their tokens at any participating outlet, not just the one where they collected the points. Tailored promotions are more relevant for customers than bland, generic offerings.

The tokens have no expiry date and are even redeemable for cash if a customer wants to exchange them on a cryptocurrency exchange. Tokens are redeemable without any threshold value imposed, and with no barriers or difficulties in spending or exchanging their tokens.

A More Consumer-Centric Future for Loyalty Programs

Brands have a vested interest in ensuring that loyalty programs are done right. Blockchain is showing massive potential in the area of loyalty programs, solving existing problems to the benefit of customers.

Given that customers tend to vote with their feet, it’s likely that the future of loyalty programs will be found on the blockchain.

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