The technology behind Bitcoin can be applied to retailer loyalty programs to make them more appealing to consumers and easier for merchants to run.
As the holiday shopping approaches, retailers’ loyalty reward programs take center stage. U.S. consumers are still enthralled by the opportunity to be rewarded for their brand loyalty. They count 3.8 billion cumulative loyalty program memberships among them, according to Colloquy.
However, customers who participate in loyalty programs are sitting on at least $100 billion in unclaimed loyalty points. The scale of unclaimed points suggests participation is these programs is much easier to initiate than to redeem for value.
There are several reasons why consumers don’t redeem loyalty points. First, most retailer loyalty programs are too complex and confusing with too many rules for how to earn and redeem points. Some consumers are even unaware they have earned any points. For retailers, this complexity also means it’s more expensive and technically difficult for them to easily maintain a robust database of how their members use points.
Second, most loyalty rewards points expire, which defeats the whole purpose of the program for both consumers and retailers. This often leads to customers feeling like the loyalty program was overhyped and can damage retailer brands.
Third, the sheer volume and variety loyalty programs have made it difficult for consumers to be actively engaged. Consumers tend to earn points among only a relatively small number of programs. A recent study by Accenture concluded that 77 percent of consumers are participating in at least one retail loyalty program, while 46 percent are enrolled in at least one hotel program, and 40 percent are engaging with at least one airline loyalty program.
Finally, point redemption becomes more difficult when brands don’t have enough retail partners that universally accept their loyalty points.
But all hope is not lost. Enter “the blockchain.”
A blockchain is a highly secure and decentralized digital ledger system that allows retailers to create better, nearly frictionless solutions to today’s loyalty reward program problems. How? Blockchain technology creates transaction records shared across a network of computers. In the case of a loyalty program, every transaction creates a new block of information for every reward point created. These “blocks” of information are “chained” to previous blocks, which are then shared across a network. Hence, the term “blockchain.”
