Blockchain Loyalty and Rewards Programs

Traditional loyalty and reward programs are at a crossroads as a result of an inability to adapt and meet demands from customers. Users sign up for these loyalty programs with the expectation of increasing earning capabilities, clear terms, and ease of redemption, but are often faced with convoluted processes to earn rewards and find it even more difficult to spend them. Instead of earning loyal customers, these loyalty reward programs are causing companies losses in revenue and customers. As technology continues to play a larger and more integrated role in society, it is important that your business’ loyalty programs adapt and follow suit.

Your business can leverage blockchain to create new rewards programs from the ground up, or update and improve your existing loyalty programs. Though blockchain-based loyalty and reward programs are still in their early stages of adoption, the benefits are already there and ready to implement.

This article will cover a variety of ways to increase brand loyalty and improve loyalty programs for your customers. The possibilities of blockchain implementation provide tremendous potential for a loyalty consultant, as it opens up previously untapped capabilities.

Looking for a more technical deep-dive in to loyalty innovation on blockchain? Have a look at our loyalty on blockchain patent announcement.

Blockchain loyalty rewards programs for different industries

Before we discuss blockchain implementation for brand loyalty, let’s look at traditional loyalty systems. Though these systems are still the standard, there is technology in place for implementing innovative Loyalty as a Service blockchain solutions today.

Airlines

Airlines are one of the first industries someone thinks of when it comes to loyalty programs. They have systems in place to earn frequent flyer miles, but when it comes to redemption, the structures are often convoluted and rules constantly in flux. Many of the top airline loyalty programs are removing their redemption charts and, as a result, reducing transparency for their customers. Travelers signed up for these reward programs are finding it so difficult to redeem their miles and points that they are paying contractors to help them.

Airlines are not only making it more difficult to redeem rewards, they are devaluing the miles their frequent flyers have already earned. Earlier this year, American Airlines increased many of their AAdvantage awards by 56% causing a debate as to whether it was worth remaining loyal to the airline.

American Airlines was not the only devaluation in 2019 and certainly won’t be the last, but how can blockchain help if airlines don’t put their customers first? Dragonchain believes that by introducing new ways to earn miles, truly grounded in customer loyalty, airlines will not only regain customer trust, but more loyal customers.

Dragonchain’s Loyalty as a Service enables airlines to implement rewards for their loyal customers in new ways. Instead of giving rewards only for the number of miles flown, airlines could reward frequent flyers based on their time spent in flight. Airlines could also add a 'miles boost' proportional to the amount of time a flight is delayed, number of previous flights, miles accrued, or a combination of these and other factors to ensure they are rewarding their most frequent and loyal customers.

These systems could be used in conjunction with automated partial refunds through smart contracts, and the option to be compensated in the form of tokens or loyalty points instead of cash. Additionally, customers could have the ability to immediately redeem these points during the flight for extra services or discounts. These are just some of the many new implementation options to consider while using distributed ledger technology.

Just think about modeling the point system to reward the actual loyalty instead of rewarding those good at gaming the system. Consider the example of customers earning miles by flooding an airline with credit card applications. These customers are often rewarded with more points than actual long time loyal customers. This is very detrimental to brand loyalty. Time-based loyalty together with blockchain may help mitigate this.

Retail

- Coffee chains like Starbucks

- Sandwich shops like Subway

- Companies such as Uber and Lyft can differentiate more from one another

- Spotify can add loyalty points to their monthly subscription model, or reward early access to new songs from their favorite artists based on streams and loyalty tracked on the blockchain.

- AirBnB can re-imagine loyalty and rewards for house owners and tourists

- Netflix, endless possibilities too! They know exactly how much time someone spends watching. Just imagine what is possible with time-based loyalty here.

Any enterprise can re-imagine loyalty and rewards programs in various ways, with Dragonchain’s blockchain platform running in the background.

• Rewarding based upon time itself - - long time and repeat customers get major bonuses
• Rewarding feedback (negative and positive) will lead to better information for the business - - and can be weighted based upon the loyalty of the customer and quality of the feedback
• Modeling and modifying the loyalty system based upon real data that is provable and high quality, on blockchain
• Interoperability for large corporations with multiple brands
• Interoperability for partner systems

Rewarding based upon time itself

At Dragonchain, we have our own experience with blockchain loyalty programs. Dragonchain has its own utility token called Dragons, which are tokenized micro-licenses. Dragon holders are able to benefit from our immutable time capabilities as a means to measure and reward loyalty. This system allows you to reward customers for their time and create more transparent and reliable loyalty programs. With TIME, you are able to design a robust tokenomics strategy through the use of time-based loyalty incentives. Rewards based upon time itself can be applied in a variety of ways; embedded in to the tokenized micro-license itself, as a score on top of a token, and even without the need of a token.

Customer loyalty in general

Whether you were on the side of the customer or the business in charge of it, chances are you have worked with one or more loyalty programs. Regardless of your experience, you have no doubt noticed areas where loyalty programs could be improved, inefficiencies and inconsistencies which blockchain implementation and tokenization could help eliminate. According to Deloitte, only 50% of loyalty program members are actually active participants, and of that half, 20% have never redeemed any rewards at all. It is in every brand’s best interest to make loyalty programs future-proof and remove the obstacles in the way of a positive customer experience. By making loyalty programs more efficient and user-friendly through blockchain, companies can turn them into something that audiences actively seek out, increasing customer engagement.

Blockchain is creating the next wave of loyalty and reward programs by adding more dimension, flexibility, clarity, and transparency to existing loyalty and rewards programs.

Loyal customers for your brand with blockchain

An American Express study revealed that 62% of millennials are likely to only ever buy a preferred brand, compared to 54% of the more wider and general population. In addition, 58% of millennials say that they will buy the same brand of products no matter what.

This comprehensive overview for Gen Y and millennials regarding loyalty and brand advocacy is rather impressive. According to Moosylvania 57% of millennials tell their friends about their favorite brands and 44% of millennials "show off" their purchases from their favorite brands. Further, Ipsos learned 66% of Millennials discover brands and products through social networking. With Dragonchain, friend referrals can be tracked and rewarded too.

Blackhawk Network showed 55% of millennials signed up for the reward and/or loyalty program for a brand or store that they are loyal to vs. 41% of Gen Xers and 36% of Baby Boomers. This is another clear indication that innovation is needed to get engagement numbers up again.

Redeeming points, rewards and other transactions

Possible topics: Current issues with redemption and expiration dates, difficulty to keep track of multiple loyalty programs, higher likelihood to redeem points which means more engaged and satisfied members and possibly higher spending, tokenization and flexibility to use points for the program or cash out elsewhere, no expiration.

Real-time rewards, real-time redemption, instant gratification

• More flexibility
• Better to track
• Hard to lose
• More difficult to defraud
• Better data for analysis and fine-tuning of the program

Increase efficiency and reduce bureaucracy

Although cost reduction is not the primary focus or intention, adding Loyalty as a Service to a chain could eliminate some costs as well.

• Lower transaction costs compared to other blockchains, elimination of third parties.
• Reduce system management costs with Blockchain as a Service.
• Automate processes with smart contracts.
• Reduce costs related to errors.
• Possible reduction of data acquisition costs, with access to a bigger ecosystem of already loyal customers*. *This does require participation of more stakeholders, and interoperability between blockchains with Interchain. Blockchain is all about connecting with others based on trust.

Concerns, misconceptions and solved issues

With most blockchain applications, loyalty reward programs are at an early stage. This does not stop ongoing innovations and development, startups building loyalty solutions, and real small medium and large enterprises from experimenting. Here is a brief overview of some of the current concerns, misconceptions and already addressed issues. Dragonchain’s flexible hybrid blockchain platform is perfectly suitable for all types of loyalty and reward programs on blockchain.

Scalability

With Dragonchain you have access to scalability that is limited only to the cloud, so theoretically unbounded. We offer multi-cloud and on-premise solutions for enterprises that come with our custom Blockchain as a Service model.

Consumer learning curve

Perhaps it is more important than ever to have different loyalty systems for different groups of brand ambassadors and customers. For now, traditional programs are sufficient for one group, while they may be unsuitable for the new generation. Millennials are much more familiar with cryptocurrencies, and therefore blockchain, compared to earlier generations. Still for many consumers the learning curve may be too high. This is why it’s important to build an application with the easiest user experience in mind.

Protection of data and privacy on blockchain

‘’It will be necessary to take steps to protect customer data and not just keep up with the EU General Data Protection Regulation (GDPR) regarding data protection. Only limited information can be stored on a shared network. The rest, which needs customer permission in order to be collected, must be stored separately’’, as correctly stated by Forbes.

Dragonchain’s blockchain architecture allows compliance with GDPR and other similar data protections around the globe, without any loss of performance, flexibility and scalability.

Customization and personalization

Now that we know how to protect the customer's data and how to respect their privacy on chain, we can also explore new ways of customization and personalization. There’s an ever-growing demand for exclusive offerings and unlock-able programs based on a user's past history. This is one of the ways brands should differentiate themselves from competitors. The digital world and blockchain loyalty rewards, combined with self sovereign identity, unlocks transformative ways to meet customer needs for more precise and customized offers.

Expiring points

Anyone working in the loyalty industry knows expiring points hurt the program. It indicates a negative impact on the amount of participants and a loss of engagement.

Low member engagement

The expiration of points/rewards affects nearly a third of consumers. On top of this, the market is saturated with an enormous amount of differing programs. Consumers must track different (and often overly complex) registrations, too many physical loyalty cards to carry, countless apps on their smartphones and other devices, not to mention all the different logins and passwords.

Why Dragonchain’s blockchain platform is suitable for your loyalty and rewards application

The enterprise-grade infrastructure

Rather than create and maintain your own blockchain infrastructure from scratch, consider taking advantage of Blockchain as a Service for enterprise use through our public-private hybrid blockchain platform. We allow you a fast speed to market without the common barriers found in other blockchains.

• Ease of use and flexibility
• Interchain and interoperability

Brainstorm with us

Are you considering the use of blockchain for your next generation of brand ambassadors? Are you ready to start experimenting and implementing additional utility to already existing loyalty and reward programs? Reach out to our business development team and let's brainstorm ways to increase your customer's loyalty using blockchain.