In an age where organizations are struggling to maintain a competitive edge, customer loyalty programs could be a key differentiator. Loyalty programs have existed as a marketing/ promotional strategy for many years, and whether we like it or not, most of us are enrolled in some loyalty program or the other. From an organization’s perspective, loyalty programs are one of those key factors, which if implemented correctly, can boost customer retention and acquisition.
The first recorded loyalty scheme was introduced in ancient Egypt, known as the Beer and Bread Tokens, according to Professor Barry Kemp, in Ancient Egypt: Anatomy of a Civilization. These were tokens made of wood and plaster in shapes of beer jugs or breads and awarded to workers for their work and temple time, which could be redeemed at the market for beer, bread, or any other commodity. Some might argue this was a societal exchange system developed due to a lack of fiat currency, but others would contend that is exactly what a loyalty system is – a non-fiat exchange system based on a tokenized currency.
Over the years, many such loyalty systems have taken shape and advanced this concept further. Today, we have several organizations offering their own loyalty programs and platforms, which seek to deliver added value to customers. However, there is a reason why loyalty reward programs across industries are not able to realize their full potential, despite growing so rapidly over the last 20 years or so.
With the proliferation of social media, consumers today want everything instantly. Right from getting their food delivered, to booking an airline ticket, consumers expect all transactions to be instantaneous, and hassle free. According to the 2016 Bond Loyalty Report, out of a randomly selected 280 loyalty programs across industries, the percentage who were active members was higher but still only stuck at 50%; and of those 50%, a full 1/5th had never redeemed their loyalty rewards. Factors like account inactivity, lower redemption rates, time delays, higher maintenance, transaction, and customer acquisition costs also impact customer retention. Customer inactivity on loyalty platforms can prove to be counterproductive since unclaimed rewards are accounted for as liabilities on the company balance sheets. The Loyalty Report further says that loyalty rewards program members who do not make redemptions are 2.7 times more likely to defect from a program and join another.
One solution for this problem is to integrate disparate loyalty programs onto a single platform network. This will minimize the member defection problem, keep maintenance costs low, and will ensure maximum redemption benefits for its members. However, the problem with this solution is having a standard digital infrastructure and consistent obligations to protect competitive proprietary information to each of its partnering organizations.
This is where blockchain comes into play and becomes an ideal remedy for the GenZ loyalty programs. Read More
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This authored article by Hardik Roy was published in PCQUEST