Brands must symbolize their loyalty and rewards programs
The adoption of non-fungible tokens has served as a convenient entry point for users joining the crypto economy, mainly due to their respective fandoms and the benefit-centric nature of tokens. For example, if you are a Lebron James super fan, you can understand why “The Block” of the 2016 NBA Finals is valuable on NBA Top Shot without understanding the blockchain. But when it comes to brands, stablecoins are likely to become the biggest entry point.
Reinventing Reward Points
Selling to existing customers costs brands less than acquiring new ones, which is one of the main reasons why over 90% of businesses have some type of customer loyalty program. Reward points are one of the most effective methods of increasing both customer loyalty and revenue. For example, Starbucks Rewards is one of the most successful rewards programs. It has more than 19 million members, with the exchange of points responsible for nearly 50% of the company’s turnover. Starbucks uses Starbucks Rewards to align with its business goals in a way that adds value and increases customer engagement through a fun and fun approach.
Starbucks’ approach to reaching the masses is very different from that of Neiman Marcus, which focuses more on status and exclusivity through its InCircle tiered VIP rewards program. When an InCircle member moves up through the ranks, they unlock access to concierge services that help clients plan extravagant vacations or attend sought-after events. Effective loyalty programs aren’t a one-size-fits-all solution, but a carefully designed program can work wonders for revenue, engagement, and retention. The evolution of digital assets now allows brands of all categories to offer their consumers a unique and memorable experience.
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The limits of loyalty and rewards programs
While it is undeniable that loyalty and rewards programs are an essential component of the consumer-brand relationship, they have their limits. Complexity, lack of liquidity and interoperability are some of the main obstacles to extending loyalty and rewards programs to more customers. The lack of clarity around the rules of the program leads to a lot of value left on the table.
According to a report published by Clarus Commerce, 75% of consumers want to be rewarded for their engagement beyond their purchase. That alone signals the need for innovation and creates a huge opportunity for brands to revolutionize the loyalty industry.
Regarding liquidity, the use of most points and rewards is limited to their respective brand ecosystem; consumers cannot redeem them at another company. Hotel brands such as Hilton, Hyatt and Marriott allow points to be awarded used like cash within a certain threshold. However, this is only allowed during hotel stays – and in most cases, points are valued differently from dollars. Not to mention issues like blackout dates or the limited number of rooms available for points. Because these programs lack interoperability, the points are trapped behind a walled garden, limiting the movement of value. Impeded value transfer and lack of communication between programs results in lower customer engagement and, in some cases, canceled points.
If point systems were more like cash in their ability to be spent, they would be much more successful. Despite these varying degrees of liquidity, what seems clear is that brands embracing this change are seeking to grab the attention of consumers by introducing as much flexibility as possible in the use of points currency.
Enter: Branded stablecoins
A branded stablecoin is a stable price digital asset issued and supported by specific brands, companies or institutions or groups of. Branded stablecoins, which can be integrated directly into consumer applications, offer brands a new way to connect directly with customers and gain insight to regain market share from their competitors. Because blockchain and cryptocurrency remain strange concepts for most consumers, it is essential to have a seamless experience where users may not even realize that blockchain technology is powering the system.
Related: Cryptocurrency and the rise of the user-generated brand
Using secure and transparent decentralized ledger technology, brand stablecoins provide marketing information to brands about the identity of their biggest fans. At the same time, branded stablecoins entice and reward customers for their loyalty. Brands can store users’ purchase histories on the blockchain and then apply the associated savings to their future purchases. It is similar to loyalty points but less complicated, more liquid and ultimately more useful. Other features could include removing the need for a credit card or even granting interest on branded stablecoin savings to entice customers to keep.
A rougher access ramp before take off
While branded stablecoins are a step in the right direction, token reward systems are still a form of centralization. A third party – in the form of a brand, a bank, or both – may be present to achieve individual stability, bridging the gap between traditional finance and crypto. The advantage of this centralization is that it potentially presents a more intuitive experience for the user, where they do not have to download different applications or acclimatize to a new process. However, brands might have to make a tough decision between a centralized, frictionless user experience or a decentralized, bumpier ramp.
There’s also the brand’s bottom line to consider: Minting and redemption costs can be high due to high gasoline costs. Combined with the costs of operating, auditing and brand compliance – and combined with interoperability with existing banking systems – this could present costly barriers to entry. The regulatory uncertainty is making the waters even more murky. Brands might have to decide to take a loss up front for deferred future benefits. These are nuanced and critical decisions that brands will have to make.
Consumers feel empowered and perceive greater value when they receive currencies in their app instead of receiving points. For many, brands are a symbol of identity. Let’s say Gucci identifies you as an Ambassador and sends you Gucci tokens to thank you for posting positive articles about the brand on social media using your public “GucciCoin” tag. If you own a certain amount of “GucciCoin”, you can access an elite community, whether it’s a physical space (an exclusive event, a concert, an in-store showroom, etc.) or an online space. line.
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Maybe you even have access to advanced or limited edition merchandise discounts that others wouldn’t and receive an NFT that lets you showcase your status. Branded stablecoins are a win-win solution for brands and customers, allowing consumers to signal their support as brands increase their engagement and loyalty.
Branded Stable Coins provide a gateway to an interoperable, fluid and frictionless future. Someday, maybe not that far away, a customer will have a digital portfolio filled with all of their favorite brands, a global ecosystem opening the floodgates for mass adoption.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research before making a decision.
The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Michel gord is the Managing Director of the DigitalBits Foundation and Founder of GDA Capital. He has contributed to some blockchain ecosystems including TRX, LRC, and ONT. He was also the first enterprise blockchain developer at the Toronto-Dominion Bank (TD Bank Group), one of Canada’s largest banks.