The idea of collecting loyalty points and getting rewards continues to be popular with customers. This is demonstrated by the fact that in the UK 77% of the population are members of a loyalty programme of some kind. Nearly half believe that loyalty programmes encourage their brand loyalty.
Here, Animesh Ghosh the founder and CEO of KornChain looks at how small businesses can utilise technology to make the most of loyalty schemes.
The benefit to businesses
Over the years, businesses have recognised that a loyalty programme is an important tool, particularly for retailers. As a result, businesses invest significant amounts in loyalty programmes, as these can generate up to 20% of business profits.
Stagnation in programme design
However, the industry has stagnated with a large number of look-alike programmes causing customer boredom. One primary drawback with current loyalty points is that it takes too long to reach the redemption threshold and the value is too low to excite customers. Despite huge participation and increasing memberships in loyalty programmes, customers are generally not satisfied by the way rewards can be redeemed and find it difficult to earn a meaningful reward. Moreover, the current methods of loyalty points exchange are very limited and expensive and there is little opportunity for a customer to pool points for a higher-value redemption.
Over $360bn worth of points lie unredeemed worldwide, £6bn in the UK alone.
What would a customer prefer?
What customers want are personalised, easy and hassle-free experiences. They want to feel truly rewarded for their loyalty and enjoy the power of choice and flexibility.
The good news for the loyalty industry is that there is plenty of scope to innovate, a lot of room for competition, and the opportunity for increased and improved interaction with the customers. What’s needed to make this a reality is a cost-effective and efficient way to manage loyalty programmes which will deliver a much better customer experience.
Customers also want to manage all their loyalty cards in one place, to view their available offers, vouchers, and gift cards, and to exchange and pool points for a higher-value redemption; for something they really want, something that feels like a genuine reward for their loyalty.
How can this be achieved?
To facilitate this loyalty, programmes need to go fully digital. Most of the small and independent businesses use paper cards and stamps to reward their customers, but customers tend to lose the physical cards or forget they had one. Additionally, paper loyalty cards don’t generate any insights about your customers. They can’t tell you what products they favour or how receptive they will be to various offers, for example. A digital loyalty programme and/or loyalty app can give you this information.
A way to re-engage customers through loyalty programmes could be to provide flexibility and more options on redemption by allowing exchanging points between programmes. Let’s take the example of a small independent café in Shoreditch. The café allows its loyalty points collected from coffee purchases to be exchanged for a spa day, Airmiles or money off their supermarket shop etc.
By allowing an exchange, this café increases the perceived value of their loyalty points, offering greater value to its customers and driving improved brand loyalty.
However, exchanging loyalty points has, to date, been time-consuming and expensive. Platforms offering loyalty point exchanges tend to charge hefty exchange fees, requiring customers to sacrifice a lot of their points’ value. But with recent technological advancements, such as blockchain technology, this will change.
Blockchain allows the creation of a secure network of loyalty programmes, which would facilitate the instant and effortless exchange of points. Every participating business would benefit from reduced costs of transactions and higher transparency and flexibility. It would also provide them with meaningful insights into their customer’s wants and behaviours, allowing them to create targeted campaigns.
For example, solutions like LoyalT use blockchain technology to cost-effectively integrate any business, of any size, from any industry into a single loyalty points exchange network. These solutions allow businesses to extend more value to their customers with a real-time loyalty points exchange facility while marketing their business to customers beyond their own programme members. Our Shoreditch coffee shop can offer Airmiles, or points of another business by opening up to an exchange.
The benefits for business
In return for offering an exchange of points, businesses will benefit from deep insights on customers’ shopping habits, helping generate more customer engagement through precision marketing.
SMEs especially can gain from being a part of an exchange solution for loyalty points. Not only will they be able to access a massive pool of customer data to help run precision marketing, but they can also get set up quickly and easily, facilitating point exchanges with huge global businesses at a very competitive cost. As such, small businesses, such as our Shoreditch coffee shop, can set up a digital loyalty programme and almost immediately start offering loyalty points on every purchase and open up an exchange to some of the highly-desirable loyalty programmes.
Security and data
Data use and privacy are hot topics. The joy of a loyalty network running on blockchain is that businesses own and control the data of their customers, minimising privacy concerns. Blockchain in itself is highly secure and the data is encrypted. Further, advanced digital contracts keep information secure and private.
Meanwhile, the network is a bridge between the business and its customers. A good way to describe it is to say that loyalty points are currencies and businesses are loyalty banks. The loyalty network facilitates the exchange, just like payment networks facilitate the transfer of money between customer accounts. Since blockchain automatically creates an unalterable ledger, it is impossible to falsify, making employee and customer fraud a thing of the past while keeping points wallets incredibly secure.
After existing for decades loyalty programmes are undergoing a transformation. With large businesses augmenting new technologies like Machine Learning, Artificial Intelligence, etc. to improve their marketing strategies to make programmes more desirable, SMEs need to rethink their approach to rewards.
With technology reinvigorating loyal programmes, even a small business can give added value to its customers by opening up to an exchange: streamlining the customer experience and allowing the business to provide personalised offers that customers will love.