The MuCo Future (Part 1)

Loyalty 2.0

We are all members of various loyalty programs. We earn points proportionate to the spend we do with brands. Airlines, credit cards, hotels, restaurants, bookstores, high street fashion, ecommerce sites – many of them give us points linked to our transactions. This is what I call Loyalty 1.0.

Then there is Loyalty 2.0, a new idea I proposed in a recent essay. It is about rewarding our non-monetary assets in our engagement with brands: attention and data to begin with, and extending to our network (referrals) and voice (reviews). The common theme across these is time. The more time we spend with the brand, the greater the likelihood of present and future purchases. As I wrote:

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.

… 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.

… Loyalty 2.0 is run by rules, not rulers. This is where the intersection with Web3 comes in. A DAO (decentralised autonomous organisation) is the right home for a pan-brand Loyalty 2.0 program.

… The economic opportunity is huge: $200 billion is being wasted annually in spending on the adtech platforms on reacquisition and wrong acquisition. This is money which should be split between customers and brands. To disintermediate Big Tech’s centralised monopolies needs the disruptive innovations of Web3: a decentralised blockchain-based DAO-managed Loyalty 2.0 platform.

In that essay, I went on to describe an entity called MuDAO, a pan-brand blockchain-based decentralised platform for earning and redeeming loyalty tokens not necessarily linked to spending. In this essay, I will dig deeper into the MuDAO entity – I call it MuCo in this series because it could have some parts which exist in the Web 2.0 world also.

In the context of MuCo, the one question that has come up in multiple conversations is: how will we demonstrate the utility and value of Mu tokens? Why will brands want to give them? Why will consumers want them? This is what I will dig deeper into in this series because only if it’s an exchange that both sides want will we be able to build a profitable business.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.

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