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3 Blockchain Benefits for Loyalty Programmes

Loyal customers are one of the most important driving forces beyond any successful business. Companies strive to provide the best customer experience and build loyalty rewards programmes for returning customers. Loyalty programmes are therefore considered to be one of the most effective ways for merchants to enhance the customers retention.   


Customer loyalty programmes are a good source of revenue for the businesses, however, they still require a well planned structure and management.  For example, the US households participate in 29 different loyalty programmes in average, according to the 2015 Colloquy Loyalty Census. As a result, customers end up with a labyrinth of point systems and redemption options, with a cumbersome process of exchanging points among programme partners. Customer loyalty programmes do not take advantage of the full potential because of their low client’s retention and redemption rates, delays and high costs. There might be several reasons for that but the most salient one is the lack of uniform management systems which triggers inactivity of the members. Therefore, loyalty programmes are in a need of innovation that would make them easier to use.


loyalty programmes


Here is where blockchain can help to streamline the process of loyalty programme management and elevate customer experience.


1. Cost Reduction

Blockchain could provide cost savings on 3 major levels: system management, transactional, and customer acquisition. For example, blockchain based loyalty programmes will be able to reduce system management costs with smart contracts that store secure and transparent transactions (such as issuance, redemption, or exchange of a reward) and eliminate errors and risk of fraud. This is achieved  by having one blockchain-based platform that connects all the programmes through the blockchain nodes, which can reach consensus about the transaction without having the need for middleman or clearing house.


2. Frictionless Experience for Customers

In this way, blockchain customers could store their rewards points received from an airline in a digital wallet and use the same wallet to redeem the points for a hotel reservation. Loyalty programmes providers could set up reward applications that connect the loyalty network to execute transactions for customers. Loyalty programme providers would be able to have overview of how their customers access and redeem the rewards points.


3. Real-Time Process in a Secure Environment    

Another advantage of using blockchain technology is that the transactions (such as issuance, redemption, or exchange of a reward) could be recorded and accessed nearly in real time. With blockchain technology customer experience could be improved significantly. For example, if you purchase a flight ticket, the airline could immediately transfer your loyalty points to your digital wallet. During your trip you could instantly access your points and redeem them with another network such as a hotel or make micro-purchase such as a cup of coffee.


In addition, blockchain database is immutable and irreversible. This kind of system makes every transaction traceable and also eliminates double spending, fraud, abuse, or any other compromisation of the transactions.



Did you enjoy reading this article? You might also be interested in reading: The Future of Transportation: Not Only Self-driving Cars but Also Blockchain.



Image Credits: Nick Youngson (Creative Commons 3) and Nick Webb (Flickr)

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