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To succeed in web3, brands must understand that the future of loyalty is not about locking customers into closed systems. It’s about setting them free: free to own their data, control their rewards, and interact with brands on their own terms. Loyalty programs have never been more popular, but they’ve also never felt more outdated. As the inflation crisis eases, customers continue to trade personal data for deals, giving them access to ‘normal’ prices while non-members pay a premium.
This tactic, while counterintuitive, works. According to Antavo Global Customer Loyalty Report 202367.7% of companies have this made plans to boost investment in loyalty programs to retain customers in the face of inflation. And 79% of US consumers have taken the bait and spent more on brands that offer loyalty benefits. reports Statistical.
Yet this battle to increase loyalty has revealed that traditional loyalty programs are losing relevance. But there is a solution on the horizon. Blockchain technology has emerged as a potentially radical alternative to the tried-and-true loyalty programs which many brands still hold on to.
Walled gardens and limited use cases
Anecdotally, traditional loyalty programs have existed within walled gardens where customer data is stored in silos and rewards are limited to specific use cases. These models have long relied on third-party cookies and opaque data practices to thrive.
However, as privacy regulations become stricter and cookies gradually disappear, these models are quickly losing their viability. The result? Loyalty inefficiency due to unused points, superficial engagement and fragmented data. Furthermore, thanks to data breaches becoming increasingly garden-variety, consumers are becoming increasingly cautious about how their data is collected and used, with many opting out of loyalty programs altogether.
In the digital age, traditional loyalty frameworks are beginning to crumble. Today, customers don’t have to put up with being trapped in closed systems, and brands can no longer take customer buy-in for granted. Instead, brands must make a compelling case for why sharing personal information is worth a customer’s engagement.
This is where the blockchain comes into play. Because if traditional loyalty programs are like retail gift cards that can only be used in one place, blockchain-based loyalty is like cash: fungible and usable virtually anywhere without revealing a customer’s identity.
Within this framework, smart contracts provide transparency, while user-owned wallets put control back in the hands of consumers, redefining the value exchange between brands and their customers.
Renew loyalty block by block
Imagine a loyalty program that runs seamlessly in the background, powered by blockchain but invisible to the user. Shoppers earn tokens for purchases and interactions, which can be redeemed for discounts, experiences, or even traded with others. Unlike traditional points, these tokens are entirely owned by the consumer and are stored securely in a digital wallet.
Dynamic NFTs offer a glimpse into the future of onchain loyalty. These customizable, tokenized assets evolve with user engagement. Think NFT badges that unlock exclusive products or benefits, like Lululemon rewards that let you earn a free month of personal training at your gym. These dynamic tokens can be tailored to a customer’s experience. By leveraging AI, brands can add security measures like verifiable credentials to the mix to help create personalized experiences.
With verifiable credentials in this framework, users can now share only the information they want, while brands can use modular tools onchain to build custom loyalty experiences tailored to individual preferences. The result is a loyalty program that feels less intrusive, more authentic and more engaging than traditional means.
While we’re still incredibly early on these potential benefits, the idea is… technical abstraction has been a major driving force behind this paradigm. Some have even compared this evolution to the rise of cloud computing (such as Amazon Web Services), where consumers don’t see the technology they interact with, but only the optimal user experience it creates.
Choose the future of loyalty
As cookies disappear and data privacy concerns grow, more and more brands are asking themselves a critical question: “How can we make loyalty programs so compelling that users actively choose to participate?”
The answer lies in creating experiences that are truly valuable to customers. Gone are the days of buy 10 and get 1 free. These traditional incentives (which actually don’t feel like incentives anymore) can now be replaced with onchain rewards like collectibles, leaderboards, or token-gated experiences.
Brands still need to tread carefully as they enter this new paradigm. Superficial attempts to introduce products into the chain have failed spectacularly on web3. After years of refinement, the general consensus is that simply tokenizing existing loyalty programs without rethinking the value propositions is a recipe for experience failure.
As blockchain technology matures, brands are embracing it paradigm will thrive and unlock transformative rewards not just for their customers, but for themselves along the way.
