1.0 vs 2.0
We can now do a comparison between existing Loyalty 1.0 proposed and the proposed Loyalty 2.0 ideas.
| Attribute | Loyalty 1.0 | Loyalty 2.0 |
| Rewards for | Transactions (Money) | Attention and Data (Time) |
| Where | PoS: Offline, Website, App | App; Push Messages (to begin with) |
| Owner | Single Brand; Centralised | Multi-brand; governance via a DAO |
| Earnings | Points | Web3 Tokens |
| Storage | Brand Database | Blockchain |
| Redemption | Brand Catalog / Store | Exchange / Marketplace |
| Redemption Ease | Hard (in most cases) | Easy |
| Value Decision | Brand | Market |
| Can be debased | Yes | No |
| Can be traded | No | Yes |
| Can be transferred | No (in most cases) | Yes |
| Value over time | Stays flat or decreases | Will increase with utility |
| Expiry | Yes (in most cases) | No |
| Rules | Determined by brand | Encoded in “smart contract” |
| Anonymity | Not possible | Possible |
| Security | Low | High |
As can be seen, there are many differences between Loyalty 1.0 and 2.0. Loyalty 1.0 programs are all around us; Loyalty 2.0 platform has yet to be created. To begin with, there is almost no overlap between the two types of programs. While the sole focus of Loyalty 1.0 is to drive and reward transactions, Loyalty 2.0 focuses on the upstream: attention, whether it is in push messages or later on the brand’s digital or physical properties.
Loyalty 1.0 aims for retention and repeat purchases in commoditised markets. It aims to influence behaviour with the prospect of a future reward. Loyalty 2.0 solves the problems of attention recession and customer data poverty, both of which are the priors in the customer journey. If a customer is not listening to a brand, it is hard to get them to the brand’s property for a transaction. In the pre-digital world, when it was not easy to know each individual customer, the only possibility of a loyalty program was based on transactions. The digital world has opened by the prospect of nurturing customer relationships via targeted messages, nudges and personalised recommendations.
Cristina Ziliani and Marco Ieva write in their book, “Loyalty Management: From Loyalty Programs to Omnichannel Customer Experiences”:
In today’s world, marketing is largely based on the goal of earning long-term loyal customers, and long-standing loyalty tools – transformed by the information revolution into datarich, interactive touchpoints – have become the enablers of loyalty-oriented and customer-centred omnichannel strategies that are shaping the consumer world…The rise of digital has added a new online dynamic and along with it, inevitable challenges and opportunities. Over more than a century, a variety of loyalty tools and practices have arisen and diffused across industries and countries. The paraphernalia of loyalty management has taken manifold forms from tickets, tokens and stamps to plastic cards, vouchers and coupons to digital wallets, wish lists and personalized journeys.
…Over the past three decades loyalty management has undergone three phases. From 1980 to the end of the twentieth century, it meant running a loyalty programme. Since 2000, companies have shifted their focus towards harnessing the ‘invisible’ advantages of such programmes: the insight they offer into the world of their customers, the opportunity this gives them to develop and manage positive relationships with those customers, and the value created by being able to use scheme data to inform decision-making and shape targeted marketing efforts to retain, upsell, cross-sell or reactivate their customer base. Today, in 2019, we are entering a new phase. Loyalty management is increasingly now being identified with the design and management of a quality customer experience across the various touchpoints that connect the customer and the brand and through which the customer journey evolves.
Loyalty 1.0 was built for the offline world; Loyalty 2.0 is made for the digital-first world. Loyalty 2.0 builds on the work done through the decades in loyalty. It moves loyalty higher in the funnel and earlier in the journey; attention retention is the first step in the customer relationship. Without attention, there is no retention; brands face churn and continuous high spending on acquisition and reacquisition which erodes profitability.
