Why Should We Implement Loyalty Programs Under The Blockchain Ecosystem?

Loyalty Programs have become a dispensable part of every marketing campaign. Many organizations spend a high budget on encouraging loyalty programs since they can enhance stable revenue and brand equity (awareness, association, and other intangible assets). However, many corporations find it challenging and difficult to attract customers’ engagement to their loyalty programs. In 2019, it is reported that users are only active in less than half of the 14 loyalty programs that they participated in (Loyalty Programs Report 2019, Bond). The researchers also found that negative user experience, the complexity of loyalty programs, and unsuitable reward offers are the main reasons disrupting the effectiveness of loyalty programs. In nowadays’ highly competitive market, entrepreneurs are moving from traditional loyalty programs to a digital platform to increase the quick and high engagement of customers. Hence, implementing loyalty programs under the blockchain ecosystem is believed to be a new loyalty trend in 2022.

An Early Forms of Loyalty Programs

The concept of attracting loyal consumers to brands was created in the 18th century. The first form of the loyalty program was receiving stamps printed into booklets after purchasing products or services. After that, rewards such as points, box tops, vouchers, and coupons are added as new forms of loyalty engagement. The previous concepts of loyalty programs brought many remarkable profits and customers to their brand. However, traditional loyalty programs are gradually considered to be not fast, inconvenient, and needed to be changed when social media (Facebook, Instagram, Twitter…) developed strongly. Although new trends of loyalty programs in the digital age such as sharing posts to receive rewards or collecting digital points via apps are adopted, there are some difficulties for the customer to attach to brands, as well as for brands to own and identify their actual loyal customers.

Disadvantages of Traditional Loyalty Program

There are various disadvantages that influence majorly on the rate of customer engagement. This article will name a few that strongly impact users’ interaction with brands.

Negative customer experience

The high requirement of reward redemption and the long-time collecting of enough points are the core reasons that affect customer experience when using loyalty programs. Application or point accumulation fraud also causes dissatisfaction among users.

Complicated Loyalty Programs

Each brand indicates a different type of loyalty program causing frustration to customers. People don’t need 50 separate loyalty cards or applications, but they still have to deal with hotels, airlines, shops, and financial companies… Additionally, it would be time-consuming and unnecessary to learn thousands of terms, rules, and the commission from various loyalty executives.

Unattractive Reward Offer

The valuable reward is the core key to encouraging customers to repurchase and keep sustainable relationships with brands. In a highly competitive market, customers’ expectations for the value of reward received is tremendous and should be prioritized. Loyalty programs are considered to be effective when they offer an equal or outweigh the value expectation of consumers.

Furthermore, it is challenging for brands and customers to successfully navigate the loyalty landscape due to high customer acquisition expenses, poor engagement and redemption rates, and so on. Thus, blockchain technology is an efficient solution that can decrease these issues of traditional loyalty programs. In this article, the author also mentioned the benefits of using blockchain-based loyalty programs.

Why should we implement loyalty programs under the blockchain ecosystem?

Convenient and User-friendly

A blockchain loyalty program can be helpful by bringing many reward programs under one standard platform. Customers might use a single wallet with blockchain to store all of their loyalty points from different schemes. Smart contracts are implemented via blockchain-based systems, which can automatically enhance loyalty programs and motivate customers to take action. Because of this, blockchain-based loyalty programs enable customers to compile generic loyalty incentives from every link in the chain into a single “wallet”. These rewards take the form of universal loyalty cryptocurrency. The earned cryptocurrency rewards may then be redeemed from any of the associated businesses. Therefore, users can freely make various choices without frustration from different engagement programs.

Lower management cost

The operation costs are reduced since the loyalty programs’ managers or third parties are replaced by the execution of smart contracts. Smart contracts are essentially programmable provisions of a contract between a business and its clients that take effect when they both meet specified requirements. Additionally, loyalty tokens, which are automated smart contracts between two businesses and a client, can aid in lowering the administrative expenses associated with processing and validating transactions.

More Security

Blockchain is commonly known as a secure distributed ledger. The blockchain’s transaction data and cryptography is protected and unchangeable. Public blockchains simultaneously promote transparency so that all parties may readily trace and verify transactions. Blockchains also deter fraud, misuse, and double-spending. The data of customers and transactions are safeguarded, and only tokens for blockchain loyalty benefits are traded.

Flexibility

The capacity to exchange reward points with a much bigger ecosystem of businesses forms the basis of flexibility in loyalty blockchains. The decision of how customers can use their loyalty points is still managed by the supplier of the reward. Nonetheless, by making it easier to access and manage points, clients are offered more flexible transactions. Furthermore, users can save their rewards as tokens and use them at any time they want. The flexibility, fast transaction, and trustworthiness are additional intangible values of blockchain-based loyalty programs.

The goal of a blockchain rewards program is to operate as a “system facilitator” that lowers costs and reduces the limitations of traditional loyalty programs. FADO Go is developing a new future technology that applies loyalty programs to the blockchain ecosystem to solve these problems. FADO Go believes that with this blockchain-based loyalty program, the negative factors such as insecurity, inconvenient usability, and low consumer retention will be eased. This new emerging technology is going to be introduced and launched in late October 2022. The functions, how-to-work, and information will also be mentioned in detail in the next articles.

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