One can say that in all strategic business related fields, loyal customers are the main drivers of growth and survival. Brands try to aim to enrich the customer experience by establishing and managing loyalty programs that are to provide optimal customer journeys. However, most times, companies face negative consequences as a result of ineffective loyalty programs.
Tokenization of loyalty programs is more than just an emerging trend, instead it is becoming a desired and forthcoming program for many companies in the CRM field. Brands who are willing to improve their service drastically, are looking at the innovative application of loyalty tokens that not only serve a better user experience but also benefits the brand’s operational budget. Industries that can most benefit are hotels, restaurants, retailers and other clientele-oriented companies.
Loyalty programs tend to be very attractive across all demographics despite numerous challenges (Retail Touch Point Study — recent survey reports), 86% of consumers across age groups stated that they have signed up for a loyalty program excited by the ability to collect and use points for rewards in the future. Moreover, the same survey also indicated that 75% of consumers actively participated in three or less loyalty programs. Conclusion is simple — companies need to create or evolve more compelling programs or just lose their market share. Another aspect to consider is that we sometimes forget the lifetime value of a loyalty customer experience is just as important as the acquisition and fulfillment experience.
Sample problems associated with Loyalty Rewards programs nowadays:
• Reward threshold is set to high
• Bonuses & promotions that are not compelling enough
• Fast-expiring bonus points
• Low member engagement
• Limitation of programs participants
• Expiration and blackout dates
• Bonus value which is reducing overtime
• Points redeeming is way too challenging*
*Where this may of been the “normal business” thinking to keep redemption costs low, it is now severely impacting overall customer experience thereby shortening or deteriorating the lifetime value of the customer.
Some airlines’ “less than ideal” loyalty programs are a good way to illustrate some of the opportunities in new crypto loyalty token programs. In some cases, the user experience is so challenged there is a new service to help customers with airline loyalty program management. A Time magazine piece states that there is now a trend/need for an “award booking consultant” to deal with the numerous complications that airlines create in redeeming frequent flyer miles.
If a customer has been loyal enough to acquire enough points for a reward, then surely, it’s counterintuitive to make the process of claiming it fraught with obstacles.
The main point of pursuit for brands is enhanced data management and customer processes aimed at the improvement of their existing loyalty programs or create new ones which are immensely better. Thus Distributed Ledger Technology (DLT) can innovate Customer Loyalty Program (CLPs) by solving long-time challenges launching and managing CLPs. In such cases, users can join a network of “partners” instead of countless disjointed programs.
Successful examples are emerging in the marketplace: back in mid-2018, Singapore Airlines was the first among air travel brands to take Blockchain/DLT seriously. The air travel company managed to launch the world’s first blockchain-based airline loyalty tokenized digital wallet. The application helps with ‘everyday spending’ of passengers’ digital KrisFlyer token miles in ‘point-of-sale transactions at participating retail merchants. In recent news, as we know it today, it is similar in strategy to Facebook’s intended Libra token.
“With blockchain-based digital token wallet, it is a straightforward process for participating merchants to connect with loyalty program in a familiar wallet metaphor for customers to make purchases with their tokenized miles,” — stated Jan Reinmueller. It also unifies customer’s data (i.e. purchases, location, category, etc.) across the network thereby leading to better analytics and decision support.
Setting and Managing Goals
By using digital tokens and customer wallet apps, brands can unify the language they speak with their customers. For example, the Singapore Airline approach made it possible to overcome specific issues:
• Better flying experience. Customers using KrisFlyer tokens can now convert their fly-miles into KrisPay tokens which can then be spent with various retailers in their ecosystem; using the digital wallet app. The more partners involved in its loyalty program and the ease of spending miles, SA could see customer loyalty rise for both the program and the airline.
• Improved data security. Accenture report states that protecting data privacy is a clear issue when it comes to passenger records, flight manifests and crew information. DLT with a security wrapper creates a very different and less risky way of managing and sharing this information through the use of authorized access requirements. This can go a long way for customers in feeling “safe” and increase your brand trust levels.
• Better unified data. All interactions and transactions across the SA’s ecosystem is now honed for better customer analytics and in some ways reduces other 3rd party data provider’s influence (i.e. Visa. MasterCard, Amex, etc.)
• More flexibility. Cryptocurrency/token -based loyalty programs are better than usual miles rewards programs which have limited usage and difficulty transfers to partners (i.e. hotels, rental cars, etc.)
• Investment possibility. While loyalty points depreciate over time, KrisPay tokens can become a storage of value due to its potential to be used on the world market and grow in price, resulting in more adoption among clientele; This helps Singapore Airlines not only manage their loyalty tokens as liabilities to be paid out but also as an asset.
• Enhanced integration. Blockchain technology makes it easier to onboard new partners and reconcile payments; such assets can be fungible with other programs, cryptocurrencies or traditional fiat money in future.
Brands, (i.e. airlines, hotel networks, local/regional retailers, etc) willing to accept the possibilities that blockchain/token technologies provide, show an apparent interest to innovate their loyalty programs. Blockchain/tokenized-enabled loyalty programs have great potential in this field, solving existing problems to the benefit of both customers and companies.
At the moment, there are also other companies pursuing cutting-edge solutions to join Singapore Airlines in a global blockchain adoption race — such as AirAsia or Cathay Pacific , which are aimed to implement blockchain based rewards programs.
As the market witnesses more successful examples of blockchain adoption, such token-based loyalty programs could become a legitimate source of funding and operation improvements for these businesses.