Loyalty programs have been around for decades and are still very popular with the public.
More than three-quarters of UK customers surveyed were a member of a loyalty program and roughly half agree that a loyalty program encouraged them to return to a particular brand.
Businesses reported that loyalty programs helped generate up to 20% of their profits, making them an important tool for repeat sales. It makes sense, then, that businesses would allocate a decent budget to their loyalty program.
The problem, especially for small businesses, is that loyalty programs have stagnated. Almost every business, big or small, offers some kind of loyalty scheme, leading to a lack of differentiation.
Total basket values also tend to be smaller at small businesses, making it extremely hard for customers to save enough points for a high-value redemption, leaving some to feel rather unrewarded for their loyalty.
The result is more than $360bn loyalty points laying unredeemed across the world, with a whopping £6bn unredeemed points in the UK alone.
New opportunities for loyalty schemes
While the state of play may look a little bleak, the good news is that there is lots of scope for innovation. A business that can offer personalised, hassle-free loyalty experiences and help their customers reach redemption targets will have a competitive advantage over those still stuck in the past.
For example, many small businesses stamp paper loyalty cards as it seems quick and cheap to set up and operate. However, customers can easily lose their paper cards, leading to frustration, while the business gains no insight into their customer at all.
Digitising loyalty programs will provide a much better experience for your customers while generating useful customer insights you can use for your marketing plan.
Once digitised, small businesses could also join a loyalty network so that customers can manage all of their loyalty cards from one app. This allows them to check their point balances, redeem points and view special offers, all on one app.
The problem is that there are plenty of such apps available in the market. Customers are left confused and eventually they give up.
Customers are left with limited choices to redeem points as most of the programs are stand-alone or part of a consortium with limited brands.
What this industry needs is to induce a momentum, make it exciting to collect those same points from the customers’ favourite brands.
Options for small businesses
There are a few solutions available in the market to exchange points between loyalty programs, thereby helping customers reach redemption targets quicker, yet these exchanges usually charge a hefty fee, sapping the value from customers’ hard-earned points. However, it is time when technological advancements are brought into the loyalty industry.
Possibilities to innovate are limitless, not only for large and multi-billion dollar businesses but also for small businesses, provided they realise the importance of it and instead of investing a lot on these technologies themselves, they can choose to join the available advanced industry solutions.
One such network on Blockchain is LoyalT. It enables businesses, from a local coffee shop to an airline, to let customers exchange and consolidate loyalty points for a high value redemption.
Take a small hairdresser, for example. Since customers only usually visit once a month or so, it would take a long time to earn enough points to redeem for the next haircut.
Customers are not attracted enough to consider this hairdresser over any other. However, if the customer was able to exchange their hairdressing loyalty points for airmiles, for example, then they would be perceived as higher value, encouraging customers to keep coming back.
When compared to a rival hairdresser down the road which still offers stamps on a paper loyalty cards, they will have a tangible advantage.
Unfortunately, since the current platforms tend to charge heavily, even to the businesses for facilitating the exchange, it becomes almost impossible for small businesses to consider joining such platforms. Yet, new technology is helping to change all that.
Blockchain is one such technology. It allows for the creation of a highly secure network of loyalty programs that can exchange points between them effortlessly and instantly, for next to no cost.
Blockchain-enabled loyalty programs
Using a blockchain-enabled loyalty point exchange network, as described above, small businesses would benefit from increased sales, customer acquisition and deep insights, all by offering their customers the ability to instantly exchange their loyalty points for other programs, such as airmiles or experience days.
Small businesses can utilize the rich data and insights to run precision marketing campaigns. Another advantage of such a network would be the speed and agility with which small businesses could set up and manage a loyalty program.
Rather than spending months on-boarding new technology, employing new staff to manage the program, and developing new processes for managing it, small businesses could join an existing network and be up-and-running within hours.
As such, our hairdresser could almost immediately out-compete with their rival by setting up a digital loyalty program with a free and instant exchange for other loyalty points, all within the same week.
Addressing security and data concerns
Blockchain, as a technology, is highly secure and the data is encrypted. It can also be used to automatically facilitate an exchange using digital smart contracts.
Think of the exchange like making a bank payment. Just like banks facilitate the payment of money from one account to another, a loyalty point exchange network facilitates the exchange of points between retailers. All this happens instantly and automatically in the background by an almost invisible transaction network.
Loyalty programs are undergoing a necessary revitalising process. Rather than sticking to outdated and stale loyalty program processes, forward-thinking companies are looking at ways to improve the experience for customers while generating more value for the business.
As loyalty networks make programs easier and quicker to set up, more small businesses will be offering loyalty points to their customers.
About the author
This guide has been written exclusively for ByteStart by Animesh Ghosh, an industry thought leader and expert in Blockchain, AI and IoT solutions. Animesh is also founder and CEO of KornChain a technology company that is building a global blockchain network for the loyalty marketing industry.
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