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Everyone knows customer loyalty is worth its weight in gold. It’s cheaper, easier, and more valuable to get an existing customer to engage with your brand than it is for a cold stranger. Yet everyone also knows that improving customer loyalty isn’t easy.
McKinsey consultants have done a lot of research on customer loyalty, why it’s important, and what leaders can do to improve it. Their research has found that “top-performing loyalty programs can boost revenue from customers who redeem points by 15 to 25 percent annually, by increasing either their purchase frequency or basket size or both. However, we have observed that around two-thirds of established loyalty programs fail to deliver value, with many actually eroding value.”
Why is this the case, and what can be done about it? In this white paper, we’ll argue that blockchain technology is the solution for brands to create not only a thriving customer loyalty program but an entirely new brand experience.
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Research from McKinsey has shown that companies that have high-performing loyalty programs derive significant business value from those programs.
3 out of 4 members of top-performing loyalty programs changed their behavior to generate more value for businesses
are more likely to purchase more frequently
are more likely to recommend to others
are more likely to choose brand competitors
willing to pay a higher price to stay brand loyal
are more likely to purchase more frequently
are more likely to recommend to others
are more likely to choose brand competitors
willing to pay a higher price to stay brand loyal
The analysts argue that several macroeconomic factors are driving this trend to be more important than it’s ever been:
Micro-economic factors are putting downward pressure on businesses, necessitating value through customer loyalty
Roughly
50
%
of consumers report that they will switch product, brand, or retailer when faced with shortages.
The consumer price index rose by
8.5
%
from march 2021 to march 2022 in the United States, a 40-year high, 7.5 percent in the eurozone, and 7 percent in the united kingdom.
8.5
%
from march 2021 to march 2022 in the United States, a 40-year high, 7.5 percent in the eurozone, and 7 percent in the united kingdom.
The consumer price index rose by
10
-
20
%
from march 2021 to march 2022 in the United States, a 40-year high, 7.5 percent in the eurozone, and 7 percent in the united kingdom.
on average, a customer in the US belongs to 17 loyalty programs indicating a saturated landscape. However, there is low engagement with less than
50
%
active loyalty membership
Traditionally, companies create static, linear, one-size-fits-all loyalty programs that lacks engagement with the customer over time, which in turn fails to provide long-term value. Typical examples include airline miles per mile traveled, gas discounts per gallon purchased, or apparel points earned per dollar spent.
The lack of engagement could be due to many reasons, among them a lack of personalization that encourages more adoption. They can also frustrate customers because of their lack of transparency and fluctuating values. For instance, economists at Purdue and Chicago Booth discovered that as redemption expirations drew near, gas stations hiked up the price per gallon, believing that the customers’ long-term value had been secured: “The gasoline chains would lower prices at the beginning of the programs to attract participants and then crank up prices once consumers were invested.” Practices like these only harm consumers and overall business value.
A better solution would be to supplement those programs with dynamic, personalized offers based on the unique characteristics of your customers. In addition to tiering offers based on a linear metric like dollars spent or miles traveled, businesses could create offers based on activities that the customer enjoys, creating a positive feedback loop that increases engagement and lifetime value.
Establish loyalty program with basic functionality (eg, earn and burn, offers) with the ability to personalize at a high level
Introduce advanced features (eg, surprise and delight, paid) and unlock micro-segmentation/customer-levle targeting
Connect company’s own services, offerings and external partnership in one integrated experience to fulfill customers’ cross-sectoral needs.
Establish loyalty program with basic functionality (eg, earn and burn, offers) with the ability to personalize at a high level
Introduce advanced features (eg, surprise and delight, paid) and unlock micro-segmentation/customer-levle targeting
Connect company’s own services, offerings and external partnership in one integrated experience to fulfill customers’ cross-sectoral needs.
Build new sources of value - services, formats and journeys - with assets created by loyalty (eg, data, paid/subscription programs, retail media network).
Imagine that it could be this easy: As a marketing leader for a national fitness brand, you create a list of offers based on activity metrics from your top customers. These could include traditional, static metrics such as the number of gym visits, but they could also include dynamic metrics such as the intensity of cardio workouts based on beats per minute sustained for a certain amount of time, or even a number of burpees as recorded from a smart watch.
Taking it a step further, you could partner with suppliers in adjacent industries to expand your partnership, reach, and revenue with custom offers. For example, you could collaborate with Nike such that, when a customer buys a new model of shoes and performs a workout that month with those shoes, the customer earns additional perks not available to other program members.
That’s the promise of what blockchain technology can do for next-generation brands.
Many internationally-recognized brands are jumping headlong into blockchain-based loyalty programs. AdAge publishes a running list of brands and use cases for this technology, including Spotify’s gated playlists, Tribeca Festival’s special access passes, and Nike’s Dot Swoosh platform.
The reason for this adoption is clear: Brands are capitalizing on a huge opportunity. According to analyst firm CB Insights, global blockchain funding surpassed $26.8 billion in 2022. That’s because, according to one marketing researcher, “brands then design tailor-made marketing strategies appropriate for each marketing funnel stage”:
Create exposure to brand elements:
1. NFT product launch
2. creative NFT marketing actions
Leverage cross-selling by persuading consumer to buy:
1. NFT replicas of the physical products
2. Uniquely-designed brand NFTs
3. A bundle containing both 1 and 2
Increase perceived ownership of brand elements by designing a system of flexible ownership rights
Leverage customer engagement in NFT communities
Give consumers unique perks and access in NFT communities
Create brand attachment through improved loyalty programs, lore and storytelling
Create exposure to
brand elements
1. Token product launch
2.Creative Token
marketing actions
Pre-Purchase Stage
(e.g. Brand Awareness)
Leverage Customer engagement in token communities
Leverage cross-selling by persuading consumers to buy:
Purchase Stage
(e.g. Consideration, Purchase Intent,
Actual Purchases)
Give consumers unique perks and access in Token communities
Increase perceived ownership of brand elements by designing a system of flexible ownership rights
Post-Purchase
Stage
(e.g. Customer
Satisfaction)
Create brand attachment through improved loyalty programs, lore and storytelling
Increase perceived ownership of brand elements by designing a system of flexible ownership rights
This is crucial because attribution has always been a great challenge for marketers and customer experience leaders. Blockchain can make this part much easier. Because each transaction is recorded in real time on the distributed ledger that can refer back to the stages of the purchase funnel, marketing teams can correlate with precision what offers led to what transactions.
Further, marketing teams get customer attribution at the individual level rather than looking at aggregate customer data. Companies can also track how individual customers interact with a brand across different channels like websites, retail stores, mobile apps, and so on, even when customers are anonymous at some touchpoints. By tying together data about a customer’s interactions in each of these channels, companies can get a fuller picture of that customer’s behavior and personalize their experiences even more, further increasing engagement.
Finally, McKinsey analysts discuss eight levers business leaders can pull to improve their customer loyalty:
To simplify, we believe blockchain technology accomplishes each of these and more. Here are just 5 reasons why brands should get involved sooner rather than later.
Blockchain-based loyalty programs can improve your CX in several ways. First, instead of cumbersome onboarding from many traditional programs, Web3 technology allows members to sign in and pay with one-click or one-touch experiences.
Second, members can easily find rewards and perks from their community or others that interest them in easy-to-use, white-labeled dashboards.
Third, their data remains associated with their unique wallet identities. This creates a cookie-like experience where their assets and preferences travel with them wherever they happen to be, whether in-real-life (IRL) events such as concerts or digital (URL) events such as access to discounts and more. The cookie-like experience will be increasingly important as cookie technology gets phased out.
They say 80% of revenue comes from 20% of customers. Why not engage those customers with dynamic, hyper-personalized offers that provide real value to customer loyalty? Here are a few examples we’ve seen clients use blockchain offers to engage customers:
Over time, your blockchain-based loyalty rewards program will create what we call an incentive-loop flywheel. (We’ve written more about this in our manifesto.) This is an ongoing cycle of creating offers to attract new members and generate interest, converting those members by having them sign up or purchase the offer, delivering valuable benefits and an excellent member experience to those who have converted, and then creating new incentives and offers to further engage those members. This flywheel also involves identifying new cross-sell and up-sell opportunities to provide additional value to members while also increasing their lifetime value.
The key to success with this flywheel is to consistently optimize each stage of the process. Offers should be tailored to match the interests and needs of your target audience. The conversion process needs to be seamless and frictionless, as does the member experience in order to retain members and keep them engaged. Incentives and new offers should be highly relevant to members and enhance the benefits they are already receiving.
When done right, this incentive-loop flywheel results in a virtuous cycle where more members and more engagement leads to more opportunities, which then brings in more members. Optimizing the flywheel and keeping it spinning is critical to growth and success.
Blockchain-based membership tokens can represent access to a network of rewards and benefits across different brands and platforms. These digital tokens could take the form of art, graphics, or other media. They would enable brands to market to community members in a more personalized, peer-to-peer way by making the brands part of the community rather than just advertisers. The blockchain would provide a permissionless, decentralized environment for this kind of network.
Consider the gym example from earlier. Blockchain tech allows the brand to dynamically pay trainers through a smart contract that fits within an approved campaign. Through gamification, the gym can also form a community around their perks, working together to improve their fitness while also accruing blockchain-based rewards.
Become the first in your industry to transform how your brand connects to its audiences. And the best part is that it’s available to you today as a no-code platform to supplement your existing programs. A no-code solution ensures you’re up and running in no time, with minimal budget and wasted resources.
That means you can begin the implementation process without hiring a team of developers. A no-code solution ensures you’re up and running in no time, with minimal budget and wasted resources.
Blockchain-based loyalty programs can revolutionize brand engagement forever. Here's how it works.
Create on-chain memberships with a smart contract
One tap membership creation
One tap connect
Digital membership & dashboard created, perks revealed
Create perks members can earn via brand engagement, and allow trusted partners to offer affiliated perks to members for a fee.
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Get $10 off at Sean's Steakhouse
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Free ticket to a Baseball Game in 2023
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One free gift for you
Create perks members can earn via brand engagement, and allow trusted partners to offer affiliated perks to members for a fee.
Create perks members can earn via brand engagement, and allow trusted partners to offer affiliated perks to members for a fee.
This is a vision for how brands could engage with customers in a Web3 or decentralized internet environment, creating an entirely new brand experience. No need for cookies or old-fashioned tracking technology. Brands can have their own branded channels or communities where customers could participate, gain status, trade, earn, and receive rewards based on their level of engagement.
Deloitte researchers argue that this technology will completely change the way brands relate to their customers
We couldn’t agree more. Get started exploring how blockchain can revolutionize your loyalty program today.
