How Blockchain Revolutionizes Loyalty Programs

FADO Go
5 min readDec 19, 2022
How Blockchain Revolutionizes Loyalty Programs

In recent years, the blockchain technology trend is spreading into many industries such as finance, game, arts, logistics, etc. There’s a field in marketing that could be a big revolution for many companies from different industries. It is a loyalty program, a marketing tool for better customer retention and engagement. To understand how the chain could improve your company and customer relationship, this post will show you some basic information about traditional loyalty, blockchain, blockchain loyalty highlights.

Traditional loyalty and their biggest pain point

Customer loyalty will bring more sale to brands, 67.7% of companies plan to increase or significantly increase their investments in customer retention in the inflation crisis and potential recession (Antavo’s report), many companies realize this key factor and try to win their customer’s heart by ton of incentive as voucher, gift, free shipping. A huge amount of money is being spent by businesses around the world for customer loyalty programs, however, because of their popularity and lack of distinction, customers now less appeal to those programs, causing a serious drop in customer engagement. More than half of the loyalty memberships in the US are inactive, while annual point redemption stays at a measly 3% (Mintel’s report).

Traditional loyalty programs have an unpleasant user experience since they are widely fragmented, expensive to run and administer, lack digitalization, which causes delays, are vulnerable to fraud, and are very limited.

What is blockchain technology in brief?

Blockchain is a decentralized platform that stores data on every transaction ever made. It operates on consensus protocols, produces a digital ledger of transactions, and lets network users make changes to the ledger in a verifiable, safe manner that is spread throughout the network.

A distinct algorithm-generated token is created and associated with each new digital transaction that takes place (for instance, when a loyalty point is issued, redeemed, or traded). Tokens are distributed over the network in blocks (for instance, every 10 minutes), updating all ledgers simultaneously. Without the need of middlemen or centralized databases, new transaction blocks are authenticated and connected to earlier blocks to provide a robust, secure, and verifiable record of all transactions.

How can blockchain make loyalty programs better?

  • Cost savings

A blockchain based loyalty rewards program can assist loyalty providers save costs on numerous levels, safety and fraud protection, as well as on client acquisition. Since program providers and customers will be able to interact with one other without the necessity of a third party processor or middleman, there would be reduced system management expenses, and enhanced efficiency in the administration of such programs. Secure and transparent transactions made possible by smart contracts would significantly cut the expenses that may arise from mistakes or fraud. Due to being a member of a shared loyalty network, loyalty program providers would also have less obligations on their financial sheets.

The straightforward integration of blockchain-based loyalty programs with well-known social media platforms will help these program providers gain more media exposure social networks. By attracting customers with enticing rewards programs, loyalty program providers may lower the cost of gaining new clients.

  • Accountability, reporting, and auditing through transparency and real-time processing

The blockchain can enable real-time recording and access to loyalty token transactions without the use of intermediaries or third-party processors. Traditional loyalty programs sometimes take some time to credit/update user accounts, which puts customers in a bad scenario where they may want to utilize their freshly acquired points but can’t.

Blockchain can be used to automatically settle joint campaigns, affiliate program accounts, and even campaigns that have been uploaded to a decentralized network. Instead of setting the specific activity terms of the loyalty program, you can upload a smart contract to the network, and the network will handle the business conditions and provide the necessary reports.

  • Enhanced customer personalisation

In the blockchain world, you may not be able to identify your customers, but you can know how much money they have in their digital wallets. Given that tokens are unique and traceable, they will allow reward providers to better leverage customer data to enhance offer personalization without sacrificing user privacy.

  • Bringing disparate loyalty systems together

Customers no longer need to set up several rewards programs on various platforms thanks to blockchain technology. All customer incentives, as an alternative, can be kept in a digital wallet. Imagine it as the centralization of client incentives programs using distributed technological solutions. It will be up to loyalty program providers to decide whether they want their points to be redeemable everywhere or only inside a network of non-competitive vertical brands and merchants (depending on the goals of the provider — better understanding their relative status of others). may foster greater adherence to one’s own company/store? For instance, diverse types of eateries, petrol stations, pharmacies, and grocery shops can work together. Tokens produced by any brand or merchant inside the ecosystem will be accepted by all partners to build an ecosystem. From the standpoint of the customer, they have complete freedom to manage and access their incentives.

  • Easily implement Cross-sell programs between brands

Assume your company is contemplating a cross-sell effort with another brand. Firms in fashion, such as apparel, shoes, or accessories, frequently offer similar programs, as do businesses in cosmetics, such as fragrances and lipsticks. The primary goal of this activity is to boost income and brand exposure by sharing the consumer base. Back to the point, if both parties are using the traditional Loyalty Program, converting the value between the two types of bonus points will be very difficult. Usually, the two parties will have to negotiate, but there may still be cases where the agreement is not accurate due to a lack of information or negotiation ability on the part of the two parties. In this case, Blockchain Loyalty Program can assist since, thanks to a transparent method, all information uploaded to the network cannot beedited, allowing us to provide an authentic reward points redemption framework between brands.

Cons of using blockchain for Loyalty

The biggest disadvantages of using blockchain for loyalty rewards programs include high initial development and implementation costs and the potential loss of control over data.

Another possible downside of blockchain-based loyalty-rewards systems is that businesses may lose some control over their data, which they now have with their traditional loyalty-rewards platforms.

Conclusion

As we can see blockchain in loyalty is becoming more realistic day by day, big companies such as Starbucks have launched their own blockchain loyalty app Odyssey. Businesses around the globe should take advantage of this trend to drive your company. FADO Go Loyalty was born to help brands get into the web 3.0 loyalty world by the most easy way. Our platform will provide fully established features that a basic loyalty program serves, but more than that we have exclusive features backed by blockchain technologies with all benefits we mentioned above. Let’s raise the bar for your customers’ experiences.

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FADO Go

A blockchain-based platform that facilitates cross-border shopping by connecting consumers, brands, KOLs, and logistics providers on a decentralized network.