Attracting and retaining customers has long been a major headache for businesses around the world. Companies use several ways to get these customers, and one of them is loyalty programs. These programs have been quite effective in retaining customers. But loyalty programs are not perfect. They have challenges, such as geographic limitations, limited reward options, complex redemptions, etc.
All of these issues affect the overall effectiveness of loyalty programs. But Web3 and blockchain technologies like cryptocurrencies and non-fungible tokens (NFTs) can solve these challenges and redefine loyalty programs. Let’s discuss how.
What are loyalty points?
Loyalty points are incentive programs used by companies to encourage customers to spend on their products. Users get more points based on how much they spend, which can be redeemed for more products or better quality services with the company. Loyalty programs are quite common, with everyone from airlines and hotels to Starbucks offering them in one form or another. Even credit card issuers now offer loyalty points.
How Web3 technologies can improve loyalty programs
Proponents of Web3 technologies are quick to point out their revolutionary capabilities for almost every industry. While skeptics may question this in other areas, blockchain technology has clear applications for loyalty programs. These include:
Management of multiple loyalty programs
One of the reasons for the inefficiency of loyalty programs is low customer refund rates. This is essentially not the customer’s fault. The same brand can have several loyalty programs, making management difficult for customers and users. Then, loyalty programs are complex and force customers to do a lot of mental math before redeeming their points. With blockchain technology, customers could redeem points in real time and even combine multiple loyalty programs into one.
Attract a younger audience
While existing loyalty programs might work for the older generation, millennials and younger generations are increasingly becoming the primary customer base for businesses. New developments like Web3 technologies will appeal more to these age groups. For example, Gen-Z has interest and buys experience in NFTs, followed by millennials. Therefore, offering loyalty programs based on these technologies would likely attract and retain this user base.
Expand reward options
Most loyalty programs offer points that users can only redeem and use on company products or services. While this encourages customers to continue patronizing the business, it can limit the user experience. The addition of blockchain technology could change this, providing multiple reward options for rewards. For example, points could be converted into cryptocurrency and there could be digital collectibles as rewards.
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experiential loyalty
The integration of Web3 technology for loyalty programs could also lead to innovations, such as experiential loyalty. This can improve customer engagement with the brand by rewarding them as a customer and making them a member of the brand’s community. Experiential loyalty is an immersive form of a loyalty program made possible with blockchain where users not only earn points but also digital collectibles. Gamify the experience. this is already Playing out with various move-to-earn platforms, and while it may take years, it will rebrand the entire loyalty program.
However, any impact that Web3 technologies have on loyalty programs will depend on the implementation. Beyond the marketing and hype, there must be a deliberate approach. Such an approach should adopt the following recommendations to be effective:
Start as a complementary loyalty program instead of a substitute
One mistake many businesses are making is imposing blockchain-based loyalty programs on their customers. While blockchain technology has seen a lot of adoption in recent years, it is still not completely mainstream. For it to work, it is best when it is a loyalty program in addition to the existing one, giving users the option of voluntary adoption and allowing companies to slowly integrate Web3 into their business, since there is no immediate pressure on the success of the program.
Prioritize user experience
A major issue with any implementation of blockchain technologies is the user experience. Most user interfaces fail to bridge the gap between blockchain technology and the old internet. This has limited the adoption of blockchain technology and could also affect any loyalty program that decides to use it. But it is possible to design a great user interface that removes the technicalities of blockchain technology so that users don’t even know they are interacting with the technology. This is what I call “Web 2.5”, where users participate in Web3 but have a Web2 interface. Gradually, they are educated and introduced to more advanced Web3 concepts and applications.
Manage trade and speculation
Any business that includes NFTs as part of their loyalty program will likely include the ability to trade said NFTs. However, NFT trading can easily attract speculators, which can affect the experience of organic users, who are the actual customers of the business. Therefore, the company would have to design the rewards program to target the right customers and discourage or at least minimize the impact of such speculation.
Conclution
Loyalty programs are great, and many consumers choose certain brands because of these programs. But they can get better and blockchain technology can get better. Unsurprisingly, many brands already recognize this and are taking advantage of it. However, there is still a long way to go before they become widespread, and it is important to take the right approach so that any impact is sustainable.
Brian D. Evans is a Web3 investor, an Inc. 500 entrepreneur, and the founder of BDE Ventures and ReBlock Ventures.
This article was published via the Cointelegraph Innovation Circle, a vetted organization of top executives and industry experts in blockchain technology who are building the future through the power of connections, collaboration, and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.
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