Web3 — Introducing Loyalty 3.0

Brand loyalty programs have been around for ages. Loyalty matters a great deal to brands, as the benefits of retaining existing customers by far trump the costs of acquiring new ones. Ask any brand manager or marketer, and they’ll tell you that creating and retaining loyal audiences has always been one of the toughest challenges for any company. While loyalty can’t be bought and must be earned by delivering a satisfying customer experience (CX), recognising and rewarding loyalty is a basic foundation for CX. That’s why most direct-to-consumer brands have some form of customer loyalty program going, driving retention by nudging and rewarding brand valuable behaviour. And for consumers these programs have become table stakes when making purchase decisions.

Some brands focus on a single-tiered program, with points tradeable or redeemable for a range of rewards or benefits, available to all; others focus more on status and exclusivity through a tiered rewards program or VIP club membership. Air miles loyalty programs are a good example, with flight bookings adding up to miles earned and redeemable for free flights and other (partner) offers. But miles also add up to elevate a frequent flyer to a more exclusive segment of customers, unlocking access to a range of exclusive member benefits and perks.

Today’s loyalty programs have become properly digitised, seamlessly enabling all steps in the customer loyalty journey: from data capturing to customer engagement, rewards and redemptions. Gone are the days of saving stamps in a loyalty booklet to manually redeem against bespoke offers or discounts (although, this technique seems to stick around as an effective short-term point-of-sale loyalty mechanism …). Through advances in data analytics and artificial intelligence, increasingly detailed loyalty and affinity patterns can be inferred, combining frequency, recency and monetary value of customer transactions with contextual cues. In turn, this treasure trove of actionable behavioural insights enables ever more granular personalisation and contextual customer engagement.

While loyalty programs have grown more sophisticated, their effectiveness in driving retention and optimising customer experience remains to be proven. Increasingly they have become hygiene factors, not moving the loyalty needle upward, but potentially driving churn if they’re missing or failing on the basics. What’s more, people have grown a little numb and cynical to loyalty programs, questioning their relevance, utility and real value due to points fatigue and distrust of the mechanics. Consumers are fed up with giving over their personal, transactional and behavioural data when all they get back is more personalised advertising and the illusion of non-attainable rewards.

While it’s undeniable that loyalty and rewards programs are an essential component of the consumer-brand relationship, they have their limitations. Complexity, lack of liquidity, and interoperability are some of the main roadblocks to expanding loyalty and rewards programs to more customers. The Future of Loyalty: Tokenized Rewards > TheCustomer

Enter tokens. In an earlier post I argued that brand tokens and NFTs can become the foundation for a more engaging digital consumer connection. Due to their composable and multifaceted nature, tokens can be used to authenticate product ownership, reward transactions, gate membership access, gamify engagement or even represent a customer’s unique profile within a brand (loyalty) community. Their versatility allows tokens and NFTs to be interconnected such that combined they serve as foundational technology for marketing leaders to engage their customers and drive brand loyalty in highly personalised and very effective ways.

Inspired by Justin Peyton’s framework for an imaginary tokenised airmiles program, a generic architecture for a tokenised loyalty program could look like this:

Adapted from https://becomingmetaversal.substack.com/p/smart-contracts-composable-nfts-and?s=rBy combining multiple token types and weaving them into an interconnected loyalty system, brands can now recognise and reward customer loyalty in the most individualised way. Effective loyalty programs are not a one-size-fits-all solution, but instead enable true one-to-one personalisation through a carefully tailored ‘segment-of-one’ program. Status tiers can be eliminated, and benefits and rewards can instead be delivered based on the unique collection of tokens a person holds in their loyalty wallet, as these tokens reflect a member’s true behaviours and preferences at an individual level.

NFTs in particular can support multiple use cases in a brand’s loyalty program:

  • NFTs as loyalty membership pass

     

    — non transferable (soul-bound) token serving as access point to a brand’s loyalty program and specific tiered or individualised perks and benefits

  • NFTs as member profile (PFP)

     

    — a membership pass with distinct profile artwork, potentially generative to show combination of unique traits based on actual member behaviour, transactions and preferences

  • NFTs as digital twin

     

    — authenticating ownership and augmenting end-to-end customer experience, transferring physical property into a digital replica

  • NFT gating

     

    — gating access to exclusive services, product releases, content etc. based on NFT ownership; tokengated commerce can also be used to access future NFT releases and airdrops, as well as exclusive access to community channels, in-person events and retail store activations

  • NFTs as gamification tool

     

    — play-to-earn mechanism wherein a brand can set a specific mission or goal for its customers to increase engagement and reward them based on their progress toward that goal

  • NFTs as brand collectibles

     

    — limited and rare collection of branded NFTs, used as loyalty or gamification rewards, or only airdropped to members of a certain loyalty tier

As they are composable, NFTs also have the ability to include future utility. As such NFTs can lead to an overall increase in loyalty and incentivise members to keep holding these NFTs in the future with hopes of receiving more surprise perks and benefits. Brands could either share their roadmap, keeping members informed on a regular basis to provide specific details about upcoming new benefits or experiences, or they may opt to surprise and delight loyal customers with new perks. Whether a token’s utility is transparently exposed by the brand’s community roadmap, or dripped as part of a surprise-and-delight gamified experience, it turns the promise of NFTs into ‘Never-Finishing Treats’.

Every NFT is authenticated as unique. This creates an enhanced sense of exclusivity and, consequently, value. Brands can therefore use NFTs to recognise their customers in a more fine-grained, ultra-personalised way. An NFT can unlock specific personalised privileges, such as unique benefits within a programme that might otherwise only have one or two tiers of differentiation. NFTs: The Latest Loyalty Currency? (collinsongroup.com)

The real 3rd dimension to brand loyalty however comes when brands embed a true community-first focus when overhauling their existing loyalty programs. Customers can share unique experiences within a branded digital space that uses NFTs as the currency for access and interactions with like-minded brand fans. A brand’s most loyal customers do not just want to feel valued, they are looking to add value as well. Being part of the a brand loyalty program goes beyond accessing exclusive perks to being trusted with specific brand building and brand experience responsibilities. By making customers a part of the team, brands don’t have to buy their loyalty — they can earn it. And by aligning incentives between brand owners and loyalty program members, the value that gets co-created can be fairly redistributed based on actual contribution. As such, tokenised loyalty programs have the potential to become networks of ‘agency’: the power to not only consume and enjoy, but also own and shape a brand, to share ideas and make them have an impact in something bigger than oneself.

Loyalty 3.0: Where consumers become owners (unusual.vc) The personalized nature and community potential of NFT rewards presents a new frontier for loyalty programs, and it’s waiting to be explored. Through providing exclusive access, encouraging participation through gamification, and becoming a large part of a consumer’s digital identity, brands can leverage tokens and NFTs to drive hyper-personalised engagement and retention. In the near future, NFTs will not only be used as proof of membership, but also of contribution and achievement, and even some degree of ownership or governance of a brand. NFTs will power a brand’s community ecosystem, aligning incentives amongst loyal brand fans, employees and stakeholder, and creating a sense of belonging and co-ownership that will add a Z-axis to brand activation through the power of collective agency.

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