The Missing Link
There has been a lot of discussion about the use of blockchain for loyalty programs over the past few years. And yet, there has been very limited progress and no breakout success. Why is that the case? I think that the missing link is attention and data.
The assumption being made in the writings and early implementations is that the tokenisation should begin with the existing rewards programs. As we have seen, all rewards programs are linked with transactions – with customers spending money and being given some sort of cashback in the form of points. This does not substantially change the game for brands and customers. Whether they get points, stars, credits, gold, miles or some cryptocurrency does not move the needle significantly.
The starting point needs to be at the top of the funnel in the brand-customer relationship: with a customer’s attention and data. Attention is critical for everything else that follows. In a world of too much information, individuals can be lost; messages find it hard to get through; connections cannot be easily established. To instil loyalty, brands must solve the attention problem. This means building a pipe, a hotline to their customers. This is where the loyalty app comes in – an app which, crucially, rewards them for their time and data. As I have written earlier: to get customers to pay for their attention, pay them for their attention – else the brand will end up paying Google and Facebook (Meta) 100 times more for the same customer’s attention. There is no loyalty program anywhere in the world for attention.
After attention comes data. Brands need to understand their customers better. While they can decode actions of individual customers on the website and app, the better approach is to simply ask customers and incentivise their actions (in this case, the data being provided voluntarily). How many brands ask us? How many brands offer us incentives for giving information about ourselves? In this case, the additional benefit is that we will also benefit from the personalisation in the offers that we receive. We want to be shown opportunities that interest us, that speak to us. Revealing ourselves is both an opportunity to earn points and to ensure future communications are targeted for our particular tastes.
User self-revelation enables the loyalty program operator to approach more potential clients for participation in the program and points issuance and sales. Imagine a user who, when they sign up for a Loyalty 2.0 app, goes through a series of screens regarding their possible interests. The more screens the user goes through, the more reward points earned. One screen mentions an interest in culture. The next breaks it down into music, performances, art. Potential partners are streaming platforms, museums, galleries. Similarly, a screen on sports interests can be followed by a more detailed menu of items – cricket, football/soccer, F1, e-sports. Each box checked is an opportunity for the loyalty program to grow and better serve the user.
Attention and zero-party data should become the two starting points for a next-gen loyalty program. Because the quantum of rewards that can be offered by a single brand is small, the program must necessarily be pan-brand. For such a program to be trusted by both the participating brands and their customers, it must not be under the control of a centralised entity, and definitely not Big Tech or any of the data brokers. This is where the construct of a DAO comes in. With the DAO comes the Web3 token, where value is set not by a single omniscient entity but by the market (voluntary transactions, mediated via an exchange). The token can be listed on an exchange and over time; as its utility grows, its value should also increase.
This is the opportunity for Loyalty 2.0. The financial benefits for brands and customers are huge. As I have explained earlier, 50% of the adtech spending is being wasted on reacquisition and wrong acquisition. Some of this $200 billion adwaste can go towards incentivising customers via Web3 tokens which would drive higher revenues and some of it can help brands reduce marketing spends. Together, brands can increase profits – rather than go around in Big Tech’s doom loop of spending. Loyalty 2.0 is thus an imperative for brands, a cornerstone for profitability.