Today, loyalty programs are a part of every day life.
Their effectiveness is well-researched, which is why most major companies utilize them.
However, it goes without saying that not all loyalty programs are created equal.
They are easy to get right and even easier to get wrong.
There are three simple keys to launching an effective rewards program:
- Offer desirable rewards.
- Deliver tangible cost savings.
- Provide an engaging experience.
I believe blockchain can help on all three fronts.
So much so, that I argue that, in this day and age, it is pointless creating a rewards program that is not powered by blockchain technology.
Why Ordinary Reward Points are Pointless
When you really think about it, most reward points are just a fraction of a discount.
As a participant, your job is to amass enough points to chase down the discount dangling in front of you.
That means, the reward points themselves have no tangible value, they are just a tool that businesses use to slow down the process of giving you a reward.
That's why, as customers, earning these points is usually an emotionless process, something we only do out of habit.
If you're a store owner, customers like me would prefer it if your shop assistant would stop prompting us to present our loyalty cards.
However, since it's easier to take it out and let them scan it than to keep saying no every time we want to buy something off you, we'll usually just go along with it begrudgingly.
The fact is, reward points are usually not very exciting, desirable, or enjoyable...
...unless they are on the blockchain.
The Value of Personal Sovereignty
Blockchain was invented to transform how we manage value in the digital realm.
As stated in the first line of Bitcoin's whitepaper:
"[Bitcoin is] a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution."
- Satoshi Nakamoto
The underlying message being stated here is that we don't truly own the digital currency (and assets) that have been allocated to us within society's existing digital framework.
In reality, the financial institutions that manage our assets, the governments that regulate those institutions, and the corporations that influence those governments can have our assets taken away from us anytime they choose.
This has serious implications regarding what personal sovereignty means to us as individuals and as a society.
But more importantly, it underlines the simple point that digital assets are more valuable when no one can take them away from us.
If you're looking for proof, look no further than Bitcoin's value.
Bitcoin is only valuable because it's managed by a blockchain, if it ran on the same technology as today's loyalty points it would be worthless.
On the other hand, at the time of writing, the value of one Bitcoin had risen from $0.003 in 2010 to $10,109.72 against the U.S. dollar.
That's right, $1 worth of Bitcoin in 2010 is worth $3.3 million now.
Which means, either Bitcoin has risen in value, the dollar has fallen, or both.
Most of us are in agreement that the main benefit of Bitcoin compared to the U.S. dollar is that we could never lose our Bitcoin value due to our banks closing down, our economies crashing, or the powers that be freezing, seizing, or devaluing our funds through hyperinflation.
Therefore, it's clear that this rise in Bitcoin's price is mainly due to the personal sovereignty that Bitcoin's blockchain provides.
Businesses can offer their customers the same benefits.
Don't you think your customers would be much more interested in your reward points if they came with the blockchain promise:
"When you own one of our rewards, you own it forever, no one can take it away from you, and its value is evident."
No matter how you look at it, there is value in personal sovereignty, and forward-thinking business owners should try to find a way to make it benefit them and their customers, respectively.
The Value of Tradability
One of the most compelling benefits of blockchain technology is its inherent ability to facilitate secure and incorruptible peer-to-peer trades.
The fact is, nothing has economic value until someone is willing to buy it off you.
The purchase price of an item is its financial value—there is no other metric as definitive.
The amount a seller wants to sell it for isn't its true value, and the amount a buyer wants to buy it for isn't either.
The tangible value is determined when a buyer and seller meet in the middle and make a deal.
That's why, if something can't be bought or traded then it simply doesn't have economic value.
Loyalty points only have perceived value because you can trade them for a discount.
1000 loyalty points = $10 off your next hamburger
But when you only have 300 loyalty points that you can't do anything with, their value is so intangible that most people don't care for them.
Wouldn't rewards be much more valuable if you could trade them for other things too?
What if you could sell your 300 loyalty points for $3 cash or trade them for a ride to the shops?
All you would need to do is make a deal with your burger-loving friend and give her your loyalty points.
You would get $3 or a "free" ride, your friend would get the points she needs to buy her favourite hamburger, and the burger joint would gain a new customer.
Somehow, this simple burger loyalty program has suddenly turned into so much more—it's now a perpetual referral program.
With blockchain, businesses can enable shoppers to be generous or entrepreneurial with their rewards points.
They can say awesome things like:
Use our loyalty points to save money or trade and barter them with your friends!
I challenge you to find a person on earth who wouldn't prefer to receive an asset that they have the option to transact upon as opposed to a worthless dangling carrot.
The Value of Interoperability
Blockchain is inherently decoupled from walled gardens by design.
That means blockchain assets need to be integrated back into the websites, apps, and games we use, while continuing to be managed by an independent, decentralized network of computers.
This creates the perfect environment for cross-platform interoperability, because once you've gone to the trouble of integrating a blockchain asset into one website, app, or game, it's not that much harder to integrate it into other ones too.
This allows us, as users, to transcend past limitations that lock us into single-app ecosystems.
In effect, this makes it easy to transform separate websites, apps, and games into a cohesive decentralized ecosystem or a vertically integrated economy.
If we want, we can even take it further than websites, apps, and games too.
Blockchain assets can quite easily be integrated into any device, even cars, robots, and AI.
Here's a simple example.
Imagine going to watch Avengers: Endgame on cinema and the vendor sending you a blockchain asset that unlocks content in multiple platforms and devices.
- You play Fortnite, Clash of Clans, or Minecraft on PC, Mac, iOS, Android, Xbox, or Playstation and your Avengers token unlocks a valuable Thanos skin.
- You open the Marvel website and you can utilize an exclusive Thanos avatar in the forum.
- You jump into your car and Thanos provides directions to your destination, commanding you condescendingly.
This is not science fiction, it's actually possible right now.
The first company to utilize the interoperability of blockchain for overpowered-rewards is a government-regulated cryptocurrency exchange called Kriptomat.
The rewards program provides their users non-fungible blockchain assets that deliver discounts within the Kriptomat exchange and are also playable in multiple video games.
Kriptomat users can already acquire rewards and use them in a blockchain-powered game called Forgotten Artifacts.
There are also another 20 games in development that are integrating these rewards into their experiences.
Long story short, that means that right now traders can buy and sell cryptocurrencies on an exchange, earn blockchain rewards, and then jump through multiple gaming worlds using their blockchain rewards everywhere they go.
Are you not entertained?
What's more, because those items are on the blockchain, users can own them forever, trade them freely, or sell them for a profit.
Why would you ever want an ordinary reward point when you can earn a blockchain reward.
How is This Possible?
Kriptomat and the 20 games integrating their rewards are all utilising a suite of blockchain integration tools called the Enjin Platform.
Once you've integrated one blockchain asset into your game, it's not all that hard to integrate more assets—such as Kriptomat's.
That's how these projects have achieved the seemingly impossible task of coordinating a decentralized collaboration involving 20 games and a cryptocurrency exchange.
Interestingly, Kriptomat is also developing a rewards platform called Reewardio that will offer this technology to businesses want to utilize blockchain rewards without investing in R&D.
The point i'm trying to make is...
...if it's just as easy to create an ordinary loyalty program that only offers discounts
OR
a blockchain-powered loyalty program that offers assets that can be owned forever, traded freely, and used in multiple games, while also offering discounts...
...why would you ever choose to create a non-blockchain loyalty program?
If you know the answer, please let me know.