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How Top Brands From Sports to Food and Apparel Are Reclaiming Customer Loyalty
Author: Toju Ometoruwa · August 15, 2023
In an era where digital interactions are becoming the norm, fierce competition and low switching costs are forcing businesses to rethink their loyalty programs.
Companies worldwide spend at least $75 billion per year on loyalty program management. Yet when it comes to the traditional loyalty points system, customers have become more fickle than ever. A study conducted by TechSee revealed that 38% of surveyed customers did not feel any loyalty to their brand and switched to a competitor after being approached.
Amongst the core drivers of this increase in churn is the lack of robust incentives. 40% of customers say churn could be avoided by offering a free product or service upgrade. Customer preference for upgrades has even gone up 8% from pre-pandemic numbers. Unexplored causes for churn include the lack of control over the rewards earned, as well as the inability to foster a sense of shared ownership and value creation between consumers and brands.
Moving beyond traditional point systems, a new type of rewards scheme has emerged that addresses these challenges for brands — Web3 loyalty programs.
By harnessing the power of blockchain technology, Web3 loyalty programs offer enticing rewards, secure transactions, and unique experiences to their members. This article will walk you through what Web3 loyalty programs are, how they function, the benefits they offer, and will even provide examples of innovative brands that have successfully launched their own Web3 programs, and the key traits that led to their success.
What are Web3 Loyalty programs?
A web3 loyalty program is a new type of customer engagement and rewards system built on blockchain technology. It involves using non-fungible tokens (NFTs) and cryptocurrencies to provide benefits and incentives to loyal customers. It is a part of the broader shift towards the 'web3' ecosystem, characterized by decentralized networks, peer-to-peer transactions, and digital ownership, often facilitated through blockchain technology.
How do Web3 loyalty programs work?
Web3 loyalty programs typically work by rewarding customers with NFTs or digital tokens for their patronage or engagement. The NFTs or tokens can have intrinsic value (like cryptocurrencies), offer access to exclusive content or services (like special discounts, early product launches, or free flights), or both.
Some of these programs operate on a tiered system, where customers can 'level up' to access more benefits or rewards. This level-up can be achieved by acquiring more tokens or holding onto tokens over time. In some cases, these tokens can be sold or transferred, turning loyalty points into tradable assets.
Benefits of Web3 Loyalty Programs
1. Customer Engagement: Web3 loyalty programs revolutionize how customers interact with brands. Through the use of blockchain technology and tokenized rewards, these programs can introduce game-like elements to the customer experience. This gamification can increase user engagement, making customers feel like active participants rather than passive consumers. The increased engagement can, in turn, foster brand loyalty and promote repeat business. Customers might be more inclined to engage with a brand if they know they'll be rewarded in tokens or NFTs that carry tangible value.
2. Interoperability: A major advantage of web3 loyalty programs is the interoperability of tokens or NFTs. Unlike traditional loyalty points, which are typically restricted to the brand that issues them, tokens or NFTs used in web3 loyalty programs can often be used across different platforms or even traded on various markets. This gives customers more freedom and flexibility in how they utilize their rewards, enhancing the perceived value and utility of these tokens.
3. Ownership and Monetization: The nature of blockchain technology ensures that customers truly own their loyalty tokens or NFTs. This is a significant departure from conventional loyalty programs where points are merely a representation of a reward but not a tangible asset. With web3 loyalty programs, customers can transfer, sell, or even monetize their tokens on different blockchain platforms. This potential for monetization gives these tokens a real-world value that far exceeds that of traditional loyalty points.
4. Transparency and Trust: One of the core principles of blockchain technology is transparency. Every transaction is recorded on a public ledger, providing a level of transparency that's unparalleled in traditional loyalty programs. Customers can verify the authenticity of transactions and rewards independently, which can significantly boost trust in the brand and the loyalty program. This transparency can also lead to fewer disputes over rewards and a smoother customer experience overall.
5. Innovation and Differentiation: Businesses that adopt web3 loyalty programs position themselves at the forefront of technological innovation. This not only differentiates them from competitors but also makes them attractive to tech-savvy customers and early adopters who appreciate brands that are forward-thinking and technologically advanced. In a highly competitive market, this edge can be a significant advantage.
6. Customer Data Security: Traditional loyalty programs often require customers to share personal information, which is stored on centralized servers and can be a potential target for hackers. However, web3 loyalty programs rely on blockchain's decentralized nature, which can provide a higher level of security for customer data. The decentralized nature of blockchain means that data is distributed across a network of computers, making it harder for unauthorized individuals to access it. Moreover, customers can interact with these programs without having to provide an excessive amount of personal information, further enhancing privacy.
Examples of Web3 Loyalty programs
Warner Bros. Discovery Sports:
Warner Bros. Discovery Sports has partnered with NFT gaming company Immutable X to launch 'B/R Watch 2 Earn', a blockchain-based trivia and fan rewards program. Viewers can earn digital tokens by answering trivia questions, which can be redeemed for NFT video highlights or other merchandise. The company also plans to offer unique moments from their NBA broadcasts as collectibles.
Rolling Loud: Rolling Loud, the world's premier hip hop music festival, introduced a unique Web3 loyalty program in 2023 called Loudpunx. This program involved the minting of 2,435 NFTs, each priced at 1.5 ETH, that served as lifetime passes to any Rolling Loud festival worldwide. These NFTs also gave holders exclusive access to a VIP lounge at festivals, unique online content through the Loudpunx Discord channel, and special advantages when shopping at the Rolling Loud online merch store, thanks to Uptop’s Shopify integration. Additionally, Loudpunx ownership can be transferred, and with it, the associated privileges.
Starbucks has launched a web3 loyalty program named 'Odyssey'. They introduced their first NFT collection called 'Siren', which sold out quickly. These Stamps provide bonus points which are used to level up in the Starbucks Odyssey experience. If a Stamp is sold or transferred, the associated points are deducted. The program has attracted both collectors and traditional customers, and Starbucks plans to expand its utility over time.
Wow Bao, the fast-casual Asian street food concept, has introduced a web3 loyalty program called the Hot Buns Club. Built on the Polygon network in partnership with Flaunt, the program transforms Wow Bao's iconic bao buns into vibrant digital collectibles which offer loyalty benefits and can be traded, sold, or gifted. The program is accessible to all customers, even those without cryptocurrency knowledge. This has been achieved by eliminating complex crypto-related processes through Flaunt's user-friendly platform.
AirBaltic launched their web3 loyalty program called 'Planies' in late 2022. After the launch of their NFT collection, the airline allowed for the staking of NFTs in exchange for benefits such as extra loyalty points, business class upgrades, and free flights. The Planies community has been growing and they have a promising roadmap for the future.
YSL Beauty is furthering its web3 loyalty program through collectible NFTs, after attracting 24,000 new wallet owners during its first NFT drop. So far, they've released three NFT collections to study new customer behaviors around loyalty programs and customer retention management. One collection tied to its popular product range, Black Opium, was particularly successful. Customers who purchased a Black Opium product received a "Beauty Night Block" NFT as a gift, which came with various benefits and exclusives, and drove engagement on YSL's own channels.
Adidas: Adidas has introduced an innovative NFT release that features a selection of virtual sneakers which can be experienced in augmented reality (AR) via a mobile application. These digital shoes are designed with the capacity to evolve, receiving periodic updates that add new designs and features. Sold in limited quantities with prices ranging from $10 to $1,000, these NFTs signify Adidas' wider strategy to embrace novel digital technologies and captivate younger demographics. By providing exclusive and distinctive experiences through NFTs, Adidas aims to establish lasting relationships with its customers. The introduction of the evolving NFT release underscores the untapped potential for NFTs to be utilized for marketing and branding purposes, extending beyond their conventional applications in art and collectibles.
Common Traits for Successful Web3 Loyalty Programs
Analyzing the successful web3 token loyalty programs from the brands mentioned above, we can identify a few common traits that contributed to their success:
1. Value Proposition: Each of these programs offers a tangible and often exclusive value to the customers. Whether it's Warner Bros. offering unique NBA broadcast moments as collectibles, Starbucks' Siren NFTs providing bonus points for the Odyssey experience, or YSL Beauty's "Beauty Night Block" NFTs providing various benefits and exclusives, the value proposition is clear and compelling.
2. Engagement: These loyalty programs engage customers in innovative ways, leveraging the excitement around blockchain technology and NFTs. Warner Bros. uses trivia questions to engage viewers, while Adidas uses AR to provide an immersive experience. Wow Bao and YSL Beauty turn their products into collectible NFTs, further enhancing customer engagement.
3. Interoperability: The tokens or NFTs in these programs can often be traded or sold, offering customers flexibility and the potential for monetization. For instance, AirBaltic's Planies can be staked for additional benefits, while Rolling Louds Loudpunx’s and Wow Bao's Hot Buns Club digital collectibles can be traded or sold.
4. Ease of Use: Despite the complex technology behind them, these programs are designed to be user-friendly, making them accessible to a broad range of customers. Wow Bao's partnership with Flaunt has enabled customers with no cryptocurrency knowledge to participate in the Hot Buns Club, while Starbucks has ensured that the Odyssey program is simple to understand and participate in.
5. Long-Term Vision: Each program has a clear long-term vision and roadmap. Whether it's Starbucks planning to expand the utility of its program, AirBaltic growing its Planies community, or Adidas aiming to establish lasting relationships through evolving NFTs, these brands are invested in the future of web3 loyalty programs.
6. Brand Differentiation: These programs help brands to differentiate themselves in competitive markets. By embracing web3 loyalty programs, these companies are positioning themselves as innovative and forward-thinking, appealing to tech-savvy customers and early adopters.
In conclusion, Web3 loyalty programs are revolutionizing customer engagement, leveraging blockchain technology to offer unique experiences, incentives, and tangible benefits. Companies like Warner Bros. Discovery Sports, Adidas and Starbucks are successful examples of brands that have embraced this technology to create valuable, engaging, and user-friendly loyalty programs that empower customers and foster brand loyalty. Key traits behind their success include a clear value proposition, customer engagement, interoperability of rewards, simplicity of use, a forward-thinking vision, and brand differentiation. As the business landscape becomes increasingly competitive, Web3 loyalty programs represent an innovative solution to enhance customer retention and loyalty by fostering a sense of ownership and mutual value creation, marking the beginning of a new era in customer-brand relationships.
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