Loyalty reward programs have been around for quite a long time and are still used by a wide range of merchants trying to increase their brand awareness, customer retention, and, of course, sales. Whether these programs actually deliver their full potential, though, is a totally different story. Apart from time delays and high transaction costs, merchants are also called to deal with customer account inactivity, low redemption rates, low client retention, and, perhaps most importantly, liability issues from unclaimed rewards.
Although the number of enrollments to merchant loyalty programs has increased by more than 25%, less than 45% of customers ever use them. The good news is that the now fractured market can find a beam of light in blockchain technology. Industry leaders, such as Deloitte
, claim that blockchain technology can improve reward programs while boosting customer loyalty at the same time.
What are the Reasons for failing loyalty programs?
According to the 2016 Bond Loyalty Report
, customers that do not redeem are almost 3X more likely to turn to another loyalty program. It is believed that the primary reason for the high numbers of inactive members is that people find loyalty programs to be rather confusing. This could change with uniform management systems and an integration of many different programs into an interlinked loyalty network.
Studies have also found that customers now prefer to use their mobile devices and their social media accounts to engage in loyalty programs. However, the Bond Loyalty Report states that only a handful of consumers registered to loyalty programs know if their program offered a mobile version. It has been evidenced that if there was a single app that could allow them to access multiple loyalty programs (i.e. a digital wallet), it would not only reduce the time lag but also improve customer experience.
Why is blockchain technology the future?
Blockchain technology allows everyone involved (merchants, customers, administrators, etc.) to interact with one another without compromising privacy or competitiveness, and without the need of intermediaries. Instead of using third parties to create, redeem, and exchange loyalty programs, merchants across all industries are now provided with the opportunity to have secure interactions with their customers via the use of cryptographic proofs.
Small operators can find blockchain technology particularly appealing, given that they can use blockchain through social media and digital wallets, and interact with other loyalty rewards platforms through smart contacts. They can also offer their clients loyalty points that can be redeemed in a wider network, which gives the customers more freedom. However, a blockchain-based network can also provide a viable trade-off to programs that already have some degree of interlinked networks, considering that they get to choose how they want their customers to interact with their rewards programs.
Blockchain platforms do not store sensitive customer information and they are extremely difficult to hack (points are tokenised and each has it own, unique identities). Finally, blockchain-based programs allow providers to credit points faster by enabling the transactions to be accessed by several parties in near real time.
What is “Elements”?
is a cryptocurrency that aims to create a currency which will be accepted across a wide range of merchants and industries. Its purpose of creation is to help combat the main pain points in today’s loyalty points systems, such as liability problems.
With Elements, consumers may use any e-wallet they feel best serves their needs and requirements and participate in different loyalty programs. They can store their points in a single wallet, which cuts the confusion related to using loyalty programs and gives them more freedom to use their earned points with more flexibility. For example, Elements allows them to either exchange the points earned for other currencies, be it cryptocurrencies (i.e. Bitcoin) or flat currencies (i.e. Euros, U.S. Dollars, etc.), or purchase products from merchants.
Whether Elements will manage to take the rewards world by storm is not yet clear. However, it certainly has the potential to disrupt a somewhat stagnant industry.