The 2024 Loyalty Review: Blockchain's Promise for Brands

To succeed in web3, brands must understand that the future of loyalty is not about locking customers into closed systems. It's about giving them freedom: freedom to own their data, control their rewards, and interact with brands on their own terms. Loyalty programs have never been more popular, but they have never felt more dated either. As the inflation crisis subsides, customers continue to exchange personal data for offers, gaining access at “normal” prices while non-members pay a premium.

This tactic, although counterintuitive, is working. According to Antavo Global Customer Loyalty Report 202367.7% of companies have made plans to boost investment in loyalty programs to retain customers in the face of inflation. And 79% of American consumers have taken the bait and spent more on brands that offer loyalty benefits. information Statesman.

However, this struggle to increase loyalty has revealed that traditional loyalty programs are losing relevance. But there is a solution on the horizon. Blockchain technology has emerged as a potentially radical alternative to tried-and-true loyalty. programs that many brands still have.

Walled gardens and limited use cases

Anecdotally, traditional loyalty programs have operated within walled gardens where customer data is isolated and rewards are limited to specific use cases. These models have long relied on third-party cookies and opaque data. practices to prosper.

However, as privacy regulations tighten and cookies are phased out, these models are rapidly losing their viability. The result? Loyalty inefficiency due to unused points, shallow engagement, and fragmented data. Additionally, with data breaches becoming common, consumers are increasingly cautious about how their data is collected and used, and many are opting out of loyalty programs altogether.

In the digital age, traditional loyalty frameworks have begun to break down. Today, customers no longer have to settle for being trapped in closed systems and brands can no longer take customer acceptance for granted. Instead, brands must present compelling arguments for why sharing personal information is worth the customer commitment.

This is where the blockchain comes into play. Because if traditional loyalty programs are like store gift cards that can only be used in one place, blockchain-based loyalty is like cash: fungible and usable almost anywhere without revealing the customer's identity.

Within this framework, smart contracts ensure transparency, while user-owned wallets return control to consumers, redefining the value exchange between brands and their sponsors.

Renewing loyalty one block at a time

Imagine a loyalty program that runs seamlessly in the background, powered by blockchain but invisible to the user. Shoppers earn tokens for purchases and interactions, redeemable for discounts, experiences, or even exchangeable with others. Unlike traditional points, these tokens belong entirely to the consumer and are stored securely in a digital wallet.

Dynamic nfts <a target="_blank" href="https://www.coindesk.com/learn/what-are-dynamic-nfts-understanding-the-evolving-nft” target=”_blank” rel=”nofollow”>offer A look at the future of chain loyalty. These tokenized, customizable assets evolve with user participation—think nft badges that unlock exclusive products or benefits, like Lululemon rewards that let you earn a free month of personal training at their gym. These dynamic tokens can be tailored to the customer experience. By leveraging ai, brands can add security measures, such as verifiable credentials, to the mix to help create personalized experiences.

Now, with verifiable credentials in this framework, users can share only the information they choose, while brands can use modular on-chain tools to create personalized loyalty experiences tailored to individual preferences. The result is a loyalty program that seems less intrusive, more authentic and more engaging than traditional media.

Although we are still incredibly early in knowing these potential benefits, the idea of <a target="_blank" href="https://www.coindesk.com/tech/2024/08/08/near-pushes-signatures-on-mainnet-in-growing-trend-of-chain-abstraction” target=”_blank” rel=”nofollow”>technological abstraction has been a major driving force behind this paradigm. Some have even compared this evolution to the rise of cloud computing (such as amazon Web Services), where consumers don't see the technology they interact with, only the optimal user experience it creates.

Opt for the future of loyalty

As cookies disappear and data privacy concerns rise, an increasing number of brands are asking a critical question: “How can we make loyalty programs so attractive that users choose to actively participate?” “

The answer lies in creating experiences that are genuinely valuable to customers. Gone are the days when you bought 10 and got 1 free. These traditional incentives (which no longer feel like incentives) can now be replaced by chain rewards, such as collectibles, leaderboards, or token-based experiences.

Brands still need to tread carefully when entering this new paradigm. Superficial attempts to bring products into the chain have failed spectacularly at web3. After years of refinement, the general consensus is that simply tokenizing existing loyalty programs without rethinking the value propositions is a recipe for experiences to fail.

As blockchain technology matures, brands embrace it paradigm They will thrive, unlocking transformative rewards not only for their customers but for themselves along the way.