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The Pain Points of Traditional Loyalty Programs
While loyalty programs have long been used to drive customer retention, many suffer from high operational costs and low engagement. Managing account inactivity can be particularly challenging, with unredeemed points often becoming financial liabilities.
Key challenges include:
☑️High transaction costs: due to third-party involvement in traditional transactional systems, transaction fees are relatively high (Simon Kucher, 2023)☑️Costly system management: outdated technology can lead to expensive system maintenance, draining budgets that could be spent on customer engagement (Ascendant, 2024)☑️Overall account inactivity: although consumers are enrolled in an average of 14.8 loyalty programs, they are only active in 6.7 of those (Reworth, 2023)☑️Low redemption rates: around 60% of loyalty points go unredeemed, highlighting the inefficiency of current programs and the financial liabilities they create for businesses (Spendgo, 2020)☑️Expensive customer acquisition: acquiring new loyalty members has become 222% more expensive over the past decade, pushing businesses to rethink how they onboard and retain customers (Business Wire, 2022)☑️Poor program engagement: many consumers cite time-consuming processes and lack of personalized rewards as reasons for not actively participating. Specifically, 42% of users find the effort required too high, while 41% feel the rewards aren't interesting enough to maintain engagement (Ebbo, 2023)☑️Theft or fraud: 72% of customer loyalty programs have reported some type of theft or fraud, contributing to the cost-inefficiencies of traditional loyalty programs (Chargebacks, 2024)
For businesses that run loyalty programs, customer inactivity is a common issue. Unclaimed rewards are liabilities on a company's balance sheet. Essentially, companies with a lot of outstanding loyalty rewards, have a lot of outstanding debt. Reshaping the customer experience becomes crucial to addressing these inefficiencies and improving overall program performance. The rise of blockchain technology provides a game-changing perspective on how to improve loyalty program performance, yet few have found the right formula for making it work.
“In 2023, tea retailer Boba Guys developed "Passport," a blockchain-based loyalty program. A pilot of the program was a success for Boba Guys — a 67% increase in monthly visits, a 65% increase in monthly spending, and an 800% return on investment.” - Solana, 2024
Fixing Loyalty Programs with Blockchain
Blockchain technology offers the potential to address some of the core issues of traditional loyalty programs by providing scalability, efficiency, security and transparency. These elements can reshape how reward systems operate. With blockchain technology, reward systems will revolve around tokenized economies. Brands like Warner Bros., Adidas, and Starbucks have already tapped into blockchain technology to create high-performing loyalty experiences.
By leveraging asset tokenization with blockchain technology, businesses can issue loyalty points as transferable digital assets, allowing customers to redeem rewards more flexibly. Because it can now be seen as a verified currency, the loyalty points represent more perceived value for consumers. Tokenization allows businesses to transfer and trade loyalty points, making them more versatile and valuable for customers. This encourages higher redemption rates and improves overall customer satisfaction.
It’s important to note that not every blockchain protocol fixes the issues as described in this article. Learn more about how revolutionizing customer loyalty is possible on Solana.
Consumer App, the Missing Piece
For blockchain technology to fully address the inefficiencies of traditional loyalty programs, it must be harnessed within a mobile application for consumers. A mobile-first approach leverages the advantages of blockchain by providing real-time access to loyalty points and rewards, increasing user convenience and driving engagement.
Here are the drivers that make the combination of blockchain loyalty programs in consumer apps a solid concept:
☑️Real-time access to rewards: blockchain’s ability to offer immediate, immutable transactions is only fully realized when users can access rewards at the tap of a button, making mobile apps critical.☑️On-the-go convenience: mobile apps allow users to engage with loyalty programs anywhere, anytime, increasing the likelihood of program participation.☑️Push notifications for personalized offers: mobile apps enable brands to send targeted notifications directly to users, reminding them of expiring rewards or new offers tailored to their preferences.☑️Seamless user interface: a well-designed app with an intuitive interface makes tracking points, viewing rewards, and redeeming them more user-friendly, boosting overall engagement.☑️Enhanced gamification: mobile apps make it easy to integrate gamification elements like leaderboards, challenges, and reward tiers to make loyalty programs more engaging and fun, while blockchain provides the input behind the scenes.
Without mobile apps, blockchain's advantages in transparency, security, and automation can't fully optimize consumer engagement in loyalty programs.
Benefits for Businesses
Launching a blockchain loyalty program in a consumer app provides numerous advantages for businesses, helping them overcome many of the challenges posed by traditional systems.
Cost reduction
Blockchain reduces the need for intermediaries and expensive infrastructure, lowering transaction fees and operational costs. Smart contracts can automate point distribution, redemption, and other processes, further cutting down on expenses related to system management.
Increased customer engagement
Mobile apps allow businesses to stay connected to customers by providing personalized push notifications and real-time offers. This consistent communication keeps the brand top of mind and encourages ongoing interaction with loyalty programs, all while blockchain works behind the scenes to ensure a frictionless experience.
Data security and transparency
Blockchain technology ensures that all transactions are tamper-proof and transparent. Businesses can guarantee the integrity of their loyalty programs, improving customer trust and satisfaction. Additionally, by leveraging blockchain-based rewards, businesses can gather data on member behaviour securely, allowing for better-targeted offers and rewards.
Interoperability for partnering opportunities
Tokenization creates the potential for businesses to form partnerships with other brands. These partnerships allow customers to earn and redeem points across different platforms, increasing customer satisfaction and expanding brand reach.
Benefits for Consumers
Blockchain-based loyalty programs provide clear benefits to consumers, solving many pain points found in traditional systems.
Real-time transactions
Blockchain enables instant redemptions, improving the overall experience and removing common frustrations associated with traditional loyalty systems.
Increased trust and control
Because blockchain is transparent, customers have full visibility into their loyalty point balances and transaction history, knowing it can’t be tampered with. This level of transparency fosters trust, giving consumers more confidence in the loyalty programs they participate in.
"81% of consumers need to trust a brand to consider buying from it" - Wisemotify, 2024
Better personalization
Mobile apps linked to blockchain loyalty programs can use consumer data more effectively to offer personalized rewards, ensuring that the loyalty program remains relevant and engaging for individual users.
Secure gamified experiences
Through mobile apps, loyalty programs can incorporate gamification elements like reward tiers, challenges, and leaderboards, while cNFT technology on the blockchain makes it a fraud-proof experience. This makes earning and redeeming points more fair, enhancing overall user engagement.
Introducing Crowny
By using blockchain technology, Crowny’s loyalty software solves these problems. Especially when using high-frequency incentive-driven interactions, like with the interact-to-earn model, efficiency is key. We leverage the powers of the Solana blockchain, which is one of the most efficient blockchains at this moment, to provide the best possible loyalty & marketing solution. Solana’s performance does not go unnoticed, as key industry players are making moves to cooperate.
“It's still early days, but Visa has already settled millions of dollars of USDC over the Ethereum and Solana blockchains between our clients" - Cuy Sheffield, Head of Crypto at Visa, 2023
Crowny offers businesses a seamless way to publish blockchain-based loyalty programs. The Crowny App, in which brands can launch their branded loyalty programs, offers a mobile-first approach. With the Crowny Platform, brands tap into plug-and-play solutions to easily launch their own token economy, directly on the blockchain.
It isn’t just a solution for today’s loyalty program challenges; it’s a future-proof platform that ensures both businesses and consumers can take full advantage of the power of blockchain technology.
Ready to kickstart your loyalty efforts? Book a demo today to see how Crowny can enhance customer loyalty for your brand. Let’s get started!
