For decades, businesses have offered loyalty programs to reward customers who have been with the company for a long time. This is usually done via centralized systems that issue points, miles, or credits with limited flexibility and frequent expiration dates.
However, customer expectations have changed in this regard. Blockchain technology is giving brands a new way to deliver that experience through tokenized rewards. Crypto-based initiatives demonstrate that the company is forward-looking and more cost-effective for the business in the long run.
The Problem with Traditional Loyalty Programs
Traditional loyalty programs don’t always deliver real value. Points received in different ways can rarely be combined and mixed or transferred across different partners. Many programs also have expiration dates for points, and those points then lose all their value.
For brands, these programs create accounting liabilities and ongoing administrative costs. It takes work, effort, and expenses to run a centralized database. Customers usually see loyalty programs as discounts, not experiences. That’s why many brands are exploring other, more novel options, and blockchain is the most popular.
What Is Tokenized Loyalty? A Simple Breakdown
Tokenized loyalty programs issue rewards using blockchain technology instead of traditional databases. These rewards could come in the form of fungible tokens, stable-value digital credits, or non-fungible tokens used for perks. The best crypto sports betting sites were the first to introduce them, but they are now available across many industries. Experts such as those from CCN claim that crypto-based betting sites enable easier transfers and a better customer experience.
Fungible tokens can be used across different platforms, and their ownership is verifiable and secure. Smart contracts allow for distribution to be automated, fair, and transparent. The system increases utility and engagement, rather than encouraging speculation.
Why Brands Are Moving Toward Crypto Rewards
Tokenized crypto rewards offer several benefits to the brand. It shows that the company is focused on customer engagement. Digital collectibles, gamified missions, and exclusive token-gated experiences create a stronger bond between users and the businesses offering services.
Operations are also much simpler when cryptocurrencies are used. There’s a new revenue opportunity with tokenized rewards. Brands can create limited assets of their own, and they can be bought and sold like any other crypto asset.
Finally, wallet-based interactions provide richer customer insights. Businesses learn how customers and clients use their crypto reward programs, and can tailor their market efforts and offerings to their individual needs.
Real-World Examples of Tokenized Loyalty
Several major brands have already adopted this approach and achieved good results. For instance, Starbucks Odyssey rewards customers with blockchain-based NFT “Journey Stamps”. These are earned through purchases and interactive challenges. However, the project was canceled after a while.
Nike’s.The SWOOSH platform features digital assets in the form of NFT collectibles. They provide the holder with access to limited product drops and brand experiences usually tied to launches.
Lufthansa’s Uptrip program allows passengers to collect NFT trading cards for every flight they take. The collections are traded for benefits like lounge access, miles, or status perks. Singapore Airlines’ KrisPay uses blockchain infrastructure to convert loyalty miles into digital tokens that can be spent instantly with retail partners.
Benefits for Consumers
For customers to adopt tokenization, the way rewards are perceived must change. Customers own and control the reward in a way they can’t with points. The rewards can be transferred, and they don’t have an expiration date. Users can also exchange them across participating brands.
A single digital wallet can hold rewards from multiple programs. The tokens can also be used to unlock exclusive events, limited digital collectibles, and VIP access. It creates a sense of loyalty among users and the businesses that offer rewards.
Challenges Slowing Mass Adoption
There are also challenges to mass adoption that are preventing the new reward system from becoming the norm. The biggest one of these is onboarding friction. New users don’t know enough about the tech, and some are still scared of it.
Regulatory uncertainty around crypto assets is also a problem. There are always new ways to use them, and this one is so novel that the regulators haven’t considered it.
Most of these problems could be fixed with consumer education. Brands need to work on it, but they can fix the trust and sustainability concerns. The key is to make the underlying technology invisible and to focus on the ease of use.
To Sum Up
Loyalty points are common among brands looking to attract new customers and reward those who have been with the business for a long time. Lately, companies have been using crypto rewards for the same goal. It has numerous benefits for both businesses and customers who use their services. Onboarding takes a while, as many users aren’t yet familiar with the technology, but it’s an exciting new revenue option.