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GUEST COMMENT How retailers of any size can create customer loyalty programmes that are genuinely rewarding

Loyalty programmes make shopping more rewarding and continue to be very popular with shoppers. Roughly 75% of UK shoppers are part of a loyalty programme and 50% agree that they drive loyalty to specific brands.

They are also popular with businesses, with up to 20% of profits being driven by loyalty programmes. Repeat sales are very important to any business, but especially those competing in the busy ecommerce marketplace, so a loyalty programme tends to be a cost-effective way of encouraging return visits and providing a point of differentiation.

That being said, loyalty programmes tend to look a little samey these days. You either collect points through purchases, get your Xth purchase free, or receive a heavy discount. As such, there is little point of differentiation between them.

What’s more, with so many loyalty programmes online, it is hard for customers to remember what points they have collected, and on which websites. If they can’t remember your loyalty programme, it is unlikely to drive the same level of brand loyalty. Perhaps that’s why so many loyalty points are sitting unused around the world ‒ $360bn worth of them, in fact ‒ with £6bn unspent in the UK alone.

Another issue may be the perceived value of the points. For many online retailers, customers may only return for a purchase every few months, collecting a few more points each time. At this pace, it could take months, or even years, for a customer to save up for a redemption reward. If the reward isn’t seen as particularly high-value and/or desirable, chances are customers won’t bother. If customers are unenthusiastic about the reward, it’s hard to imagine them being enthusiastic about your loyalty programme and, perhaps, even your brand. There is no exciting experience to enjoy, only a grind leading to a lacklustre reward.

From an ecommerce business perspective, low engagement in a loyalty programme isn’t going to create many insights into your customer behaviour. Understanding your customer is essential for any business, but can be hard for internet retailers as they don’t get the opportunity to interact with customers in the real world. Powerful analytics tools can generate incredible insights but, without customer data, those insights will be little more than guesswork.

Fortunately, new technology promises to make loyalty programmes an effective way to drive repeat custom, encourage brand advocacy, and generate useful customers insights…regardless of the business’ size.

Blockchain-enabled loyalty network

Loyalty points exchange networks have been around for some time. They allow customers to exchange the points collected from one retailer for points from another loyalty programme. Say you’ve collected some points from an online clothes order but you’re planning a holiday. You could exchange your loyalty points for airmiles and use them towards your trip.

The problem with these loyalty points exchange networks up until now is that they charge a hefty fee, reducing the overall value of the points collected. The fee is to cover the huge costs of technology and manual input, which also takes time and slows down the exchange.

However, new loyalty exchange networks, such as LoyalT, are implementing Blockchain technology to help facilitate the point exchange. Blockchain is a technology that has been developed specifically to facilitate the exchange of digital information. As such, it is highly secure and operates automatically in real-time. If a customer wants to exchange clothes points for airmiles, or vice versa, they can do so in real-time, reducing the cost of transaction for businesses and speeding up the exchange.

For online retailers, this would make it far easier for customers to save up and utilise loyalty points towards a reward that they really value. By exchanging points, customers can amalgamate their rewards points from across loyalty programmes into one pot, using it for a high-value redemption.

As well as exchanging points, a singular coordinated network would also make it easy for customers to earn and track points as well as find new retailers offering rewards. No more forgotten loyalty programmes, no more unspent points. Instead, you create a loyalty programme that is valued by customers, driving repeat sales and brand advocacy.

Businesses also benefit from a pool of customer data that can be used to generate useful insights for precision marketing. You may have customers that only return monthly, but they will also shop elsewhere online, leaving digital footprints that can be used to generate customer insights.

If you could access insights on seasonal shopping habits or age groups more motivated by special offers, for example, you would be able to offer specific customers specific discounts that they will love. Any business that is part of a loyalty network gets access to a pool of relevant data, meaning businesses of any size can benefit by looking at the footprints of their customers.

Speed and security

A loyalty exchange network only really has longevity if it is quick enough to offer real-time points exchange. This is because, in the future, loyalty points will need to be converted at the point of sale. For example, if a customer wants to claim a loyalty reward by amalgamating their points, they won’t want to wait several hours before completing their purchase. In fact, several hours later they may have changed their mind or forgotten. The exchange will feel cumbersome and may go unused. A real-time exchange allows customers to use their points wherever they want, whenever they want.

Fortunately, blockchain not only allows the real-time exchange of points but it is also very cost-effective due to the automation involved. There will always be a cost associated with running a platform, but a blockchain network can reduce the fee-per-transaction right down, making it very scalable. As such, any business of any size or maturity form anywhere in the world can set up and start running their own loyalty programme within the same week. The more businesses that join, the more options customers have, the more data businesses have, and the more cost-effective it is to run the network.

Blockchain also eliminates many security concerns by creating an indelible ledger of transactions. That means customer data is protected in the transfer, point fraud by customers or employees is near-impossible, and smart contracts ensure that no one is swindled in the exchange.

For internet retailers to compete in a crowded marketplace, they need something to help them stand out as well as access as much data as possible. Current loyalty programmes aren’t as effective at providing this competitive advantage as they could be, but a blockchain-enabled, automated loyalty exchange network could be a game-changer for many online businesses. It will not only provide a valuable point of differentiation, but the data and insights gathered from all those customer footprints will also help improve marketing efforts. Just be sure to look for an exchange that is cost-effective, fast, secure and provides great insights!

Animesh Ghosh is founder and CEO of KornChain

Main image: Fotolia

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  1. Making blockchain real for customer loyalty rewards programs, Deloitte
  3. Jeff Berry, “The 2015 COLLOQUY Loyalty Census: Big Numbers, Big Hurdles,” COLLOQUY, February 2015. 

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