Rewards or loyalty programs should be a marketer's dream. They feed on the psychological mechanism of reciprocity to make you feel special, returning kindness for kindness, and your brain drools dopamine all over itself every time it gets a new, novel treat. And a new rewards program survey from blockchain-based company Universal Reward Protocol proves these programs aren't like cod liver oil to people, especially when they've got a digital component:
- Nearly 80 percent of consumers feel that rewards programs could benefit their shopping experience.
- 73 percent of consumers like receiving promotional notifications from stores they frequent.
- Nearly half (46 percent) of shoppers prefer digital rewards programs.
- 57 percent of consumers are comfortable sharing their data with stores that they frequent.
- Over half of consumers will download an available app for a retailer.
So why, pray tell, is the return from these programs so abysmal for companies? Well, you know those little things called time and convenience? Businesses are missing the mark in delivering those elements within their programs, with nearly 50 percent of survey respondents reporting they felt traditional rewards programs are too much work. About 80 percent toss a punch card before they ever get anything from it. And in an era where "do what you want whenever" has become a mantra, 43 percent say the programs that are out there are too restricted.
URP's CTO and co-founder, Louis Millon, expands further on the problem:
"One important insight is that privacy is becoming more and more important, with shoppers becoming more mindful of whom they share personal data with, and what is done with this data. [...] A second important takeaway is that, although shoppers like loyalty programs, the sheer multiplication of rewards programs makes it too painstaking for them to redeem all these captive points, leading to waste and inefficiencies."
The URP fix
URP has developed a blockchain-based protocol that lets you reward shoppers for pretty much any shopping behavior (e.g., sharing a location or buying something specific). Customers can earn cryptographic tokens for providing this data. They then can redeem the tokens with any company within the URP network or, if they prefer, exchange the tokens for fiat money. At the same time, the companies can use the customer data to build exclusive offers that are much more personalized. The blockchain foundation means better transactional transparency and security for everybody involved.
Millon asserts that you still can get a good ROI as an individual business with the approach, even though the tokens are redeemable anywhere in the network. The key is simply to remember that the point of any rewards campaign is real interaction with your customers. As long as you personalize your offers with traditional tools and those within the URP system, you can seem more attractive to customers, hold their attention and loyalty, and maintain a competitive edge. To that purpose, URP is looking into a mechanism that would let you "sweeten the deal" for particular offers for shoppers you have recently rewarded. With that mechanism in place to provide a better dollar value to buyers, shoppers have an even stronger incentive to redeem their earnings with you.
"On the shopper side, the URP mobile app will be integrated with 'self-sovereign identity systems' (SSIS), which will make logging in and managing the wallet and cryptographic keys transparent to the user, and using the system as simple as a normal app. On the retailer side, we will strive to integrate the protocol even better with solutions in the ecosystem, including with the maximum of decentralized applications able to analyze different facets of the shopping behavior, technologies that allow the protocol to be faster and more secure, etc."
The one big potential glitch
The clod of mud gunking up URP's gorgeous bowl of cornflakes? Scalability. Right now, current public blockchain systems can handle only about a dozen transactions per second, which is barely a drop in the bucket compared with what retailers would need URP's system to handle. URP hopes to overcome this hurdle by developing a sidechain (private blockchain) and combining it with the Ethereum public blockchain. A system that pairs the tokens and smart contracts between the chains would bridge those two main components. The goal is to publish a proof of concept for the protocol by September.
While URP believes it's currently ideal to keep the new protocol within a separate, plug-and-play model, the company is realistic about the future. The assumption is that, one day, all blockchain applications, including URP's, will see payment systems integrated with blockchain to allow token or ETH payments.
"We like to think we are introducing something new," Millon says, "under the form of a universal point that can be exchanged for fiat money, and shifting the focus on personal data to giving absolute control to the shopper whom they wish to engage and share data with. It might be an incremental innovation rather than a radical one, but these are usually the ones that become successful."
That said, URP's protocol is a great example of how a business technique that looks old-school or even dead often just needs a modern makeover to serve years into the future. You don't have to ditch the loyalty concept, and, in fact, customers want these programs. The jury is still out on everything blockchain will transform, but since this is one of the few applications so far that can give you something tangible for free, we'll consider it a definite win.