Co-authored by Bryena Jyoti, PwC
Accelerated adoption of blockchain and crypto solutions by household brands has more companies exploring what may be possible with the technology. Because the possibilities of crypto and blockchain are seemingly endless, the gap between now and what’s next may feel miles wide and daunting for those looking to leverage the technology.
To overcome innovation inertia, enterprises can pilot projects where blockchain-driven principles like trust, ownership, identity, and transparency can make an immediate impact. One area in particular is brand loyalty and rewards programs.
Digital loyalty programs built on personalization help generate long-term relationships, foster community, and turn customers into brand advocates. Furthermore, well-run programs funnel valuable data on spending habits and preferences, helping brands test products, services, and messaging.
In a recent PwC survey of more than 400 executives:
- 70% said that the digital distribution of their loyalty programs improved customer loyalty.
- Over 60% increased their loyalty program budgets in the past planning cycle given favorable performance.
- More than 90% agreed that their loyalty programs should provide more rewards or benefits.
Many consumers use some combination of credit cards, airline mileage plans, or simple coffee punch cards to accrue rewards, points, upgrades, free products, cash back, discounts, and more.
However, consumer appetite for generic, transaction-only programs is waning. True brand affinity can occur where economic value and community connection meet. This requires brands to consider unique opportunities, while cultivating touchpoints and a sense of membership exclusivity.
Engage Customers, Increase Brand Loyalty, and Drive New Revenue Streams
Despite their popularity, company programs are often plagued by internal infrastructure limitations and usability issues. Customers may struggle to track or access rewards, and value rarely accrues across ecosystems, business relationships, or brands.
To unlock loyalty program potential, some brands are overhauling offerings with crypto. Popular fast food chains, for example, are offering rewards programs through tokenized assets and Non-Fungible Tokens (NFTs), while some banks are providing valuable crypto rewards to their loyal customers.
These aren’t mere crypto sideshows; they are ways to incubate tokenization initiatives connected to larger, future corporate use cases such as payments and mobile engagement.
Successful Sign ups Driven by Decentralized Identities
One of the core barriers to entry for legacy loyalty programs is onboarding. Clunky, intrusive, and repetitive signup sequences across programs lead to abandonment–and spark identity theft concerns with personal identifying information (or PII).
To solve this, brands can adopt a new framework for identity management: decentralized identity (DiD).
DiD allows users to generate and control their own digital identity using an on-chain identity wallet without depending on a single provider. This framework relies on zero-knowledge proofs–a cryptographic technique to “verify” identities without revealing the underlying sensitive information.
Importantly, this approach allows companies to avoid liability issues related to securing customer data.
A brand could support user creation of this decentralized identity (e.g., mint it as a token or NFT) and help users onboard into rewards programs easily and securely. Once the user has a digital wallet, a new world of transacting emerges. For instance, companies may tokenize loyalty points via stablecoins for convenient, often more secure, and transparent holding and spending across a range of interesting ecosystems.
Path to Crypto-Enabled Brand Loyalty
PwC concludes that brands should activate a data-driven personalization strategy to drive effective engagement and foster stronger individual connections with customers.
Depending on available resources, there are multiple ways in which companies can begin to map out their journey to implementation of a crypto-enabled loyalty program. Those with more capital and technical resources can develop their own framework and infrastructure and create a new loyalty solution from scratch. Others can work with fintechs and solution providers to outsource the heavy lifting with a tailored approach, or leverage existing platforms, protocols and relationships with other industry players for easier implementation.