How to Use Blockchain to Enhance Customer Loyalty

Customer loyalty programs are a mainstay of e-commerce and retail. Most shoppers choose to shop only at their preferred brand,

• 62 percent of millennial shoppers
• 54 percent of the general population

It is a lucrative proposition to be the preferred brand. However, while everyone likes to receive rewards, most consumers are growing weary of customer loyalty programs.

Furthermore, industry sources say that 33 percent of millennial consumers dislike reward programs because there are too many cards to carry.

“Consumers love to get rewards, but many, especially younger shoppers, are put off by the hassle of collecting various kinds of loyalty points. Blockchain technology could make loyalty programs more appealing by making them both easier to use and more secure.”— Chris Shalchi, BigCommerce

So, given that the purpose of a loyalty program is to forge a better relationship with customers,  blockchain promises a way to transform a wallet that is overflowing with loyalty cards for airline miles, hotel rewards, fuel, and the myriad of other reward programs. Notably, with blockchain technology, all the individual accounts could be merged into one. Today, some retailers are exploring this technology to reinvent their customer loyalty program.

What is Blockchain?

People often associate blockchain with a cryptocurrency like Bitcoin. However, the technology is making great strides in accounting for any transaction, smart contract administration, and micro-credential recognition. Blockchain is a secure, decentralized public ledger for storing transactional data. Each block stores digital information. Moreover, each block has a unique hash that identifies it from and connects it to all the other blocks in the chain.

The information, once recorded and stored on the chain, is immutable, making the data very secure from fraud. Furthermore, establishing secure permissions to see portions of the data is one of its key strengths.

How Can Blockchain Reinvent Customer Loyalty?

“The easiest and most powerful way to increase customer loyalty is really very simple. Make your customers happy.” ― Kevin Stirtz, More Loyal Customers: 21 Real World Lessons to Keep Your Customers Coming Back

Blockchain technology is the right tool to improve customer loyalty programs. It quickly solves some of the logistical issues that keep customers from using them.

The essential driver of a blockchain customer loyalty program

So, instead of joining dozens and dozens of different programs for each business that a consumer is loyal to, they participate in a community network. The loyal community shops with firms in that part of their community. The business members of the network supply reward tokens to their loyal consumers. The tokens once issued, would not expire. They cannot be taken away, lost, or stolen. Moreover, they are redeemable with any business in the community network.

Blockchain technology makes this possible. It keeps a record of all the transactions. The whole community network can access the relevant portion of the records. So, instead of having many different accounts for the loyalty program, blockchain promises a way to cut down on clutter. Think of the exciting possibilities for bonus tokens for cross-promotions. For example, an obvious one — an airline adds 10 percent more tokens if you rent a car from a specific rental company, the premium increase to 20 percent when you stay at a hotel that is within the network. Alternatively, a winery and a restaurant could team up on “wine-paired” specials at the restaurant. The tokens from the winery and a restaurant would be automatically issued when you pay the bill. On the consumer side, you could readily gift token to friends, employees, and charities.

A brand can extend the same loyalty rewards across all its channels.

A huge advantage for businesses, these programs will be less expensive to create and support. They can also supply greater security and transparency for customers.

Is Anyone Already Doing This?

Chanticleer Holdings, an investor in several chain burger restaurants including BGR, Little Big Burger, and American Burger Co., is a wayfinder in blockchain customer loyalty through a collaboration with MobivityMind. Using this loyalty program, customers who eat at one of their restaurants earn a cryptocurrency called Mobivity Merit. The token can be redeemed across brands and traded freely through a secure blockchain system. I suspect a secondary exchange will appear so a customer can buy and sell their token for cash.

Blockchain is the Future of Customer Loyalty

The features of the technology make it an excellent application for Customer Loyalty Programs 4.0. Blockchain’s secure, decentralized ledger supplies an elegant solution. It eliminates many of the issues that consumers have with rewards programs — fraud concerns, inflexibility, and clutter. Moreover, it has the potential to build a broader community of brand loyalists.

Concluding Thoughts

“To get them hooked and booked for life, you must consistently feed them – value!” ― Bernard Kelvin Clive

Blockchain-driven customer loyalty programs are starting to gain traction. Moreover, it will be interesting to see if this trend fully emerges. It is a minimal risk way for retailers and merchandisers to test the technology. Blockchain, when teamed with artificial intelligence, is the new dynamic duo. The blockchain-based customer loyalty program can extend to a much broader community, supply more insight about customers, and increase customers’ loyalty.

Furthermore, a company can help support the customers’ interests in doing good. Members could easily share some of the rewards to causes and charities of their choice. A brand can partner with their customer and supply a token top-up.

Technology has exceeded human adaptability, so to ensure technology is beneficial for all; organizations require thoughtful oversight. Every organization needs to add a new board committee — a technological stewardship committee — to ensure their introduction and use of technology is beneficial for all. A customer loyalty program is an excellent way for both your board and management team to discover the power of blockchain.