How does blockchain technology revolutionise customer loyalty programs, creating value for businesses and customers in the digital marketplace?
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Revolutionising loyalty through blockchain: The tokenization breakthrough

How does blockchain technology revolutionise customer loyalty programmes, creating value for businesses and customers in the digital marketplace?

Blockchain is the core building block of Web3 systems that are characterised by peer-to-peer interaction as well as immutable data structures and traceable records. Taken together, the properties of blockchain allow for the online transfer of value without intermediaries. Through the use of tokenization, the process of converting rights to a digital or physical asset into a digital token on a blockchain, companies can create units of value that are easy to trade for their customers and can be enhanced with countless additional features, such as creating a community around them. The benefits of tokenization have already been illustrated in industries such as finance, supply chain and logistics, energy, real estate, gaming, healthcare, and arts.

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In this study, comprising a content analysis of 5,095 Twitter (X) tweets as well as a survey of 206 consumers, we present a compelling case for blockchain’s ability to redefine business-to-consumer (B2C) relationships, proposing a novel approach to loyalty programs that leverages the decentralisation and security inherent in blockchain technology. This innovative framework promises to address common pain points in traditional loyalty schemes, including limited flexibility, slow accrual rates, and cumbersome redemption processes.

The transition towards blockchain-based loyalty programs is depicted as not merely a technological upgrade but as a strategic move towards more transparent, user-friendly, and value-driven customer engagement practices. By embedding principles of the sharing economy into loyalty schemes, blockchain technology facilitates a more inclusive, equitable, and mutually beneficial ecosystem for both businesses and consumers.

The potentials

Based on an analysis of existing use cases and the academic literature, we identified five important areas in which blockchain can fundamentally improve existing loyalty programs: usage, accrual, relevance, expiration, and transferability. Specifically, the technology allows for easy trading of tokens among peers, which vastly increases the application possibilities by extending the choice of desired services and products. The accrual of points can be made easier, and benefits can be made available for immediate redemption. The technology can also be used to personalise offerings while customers simultaneously stay in control over the private data they want to share.

Additionally, the expiration of offerings can be made more flexible and the combination of features, such as easier usage, faster spending, and transferability, can help to create systems with increased versatility and throughput. Finally, the transferability of tokens can be easily increased through blockchain, a peer-to-peer ledger designed to minimise transaction costs.

The clever application of blockchain technology can breathe new life into outmoded loyalty programs and open up new ways for customer retention.

Horst Treiblmaier

Empirical insights: A consumer-centric perspective

The research methodology employed a unique dual-study approach to capture and analyse consumer sentiments toward blockchain-enabled loyalty programs. The first part of the study involves a comprehensive sentiment analysis of online discussions and social media platforms, aiming to gauge public perception and acceptance of blockchain in the context of loyalty programs. This analysis revealed a predominantly positive outlook toward the integration of blockchain technology, highlighting its potential to enhance program attractiveness and user engagement. In summary, the blockchain-based loyalty program got a better evaluation along all the categories that we investigated, as compared to its traditional counterpart.

The second part of the study consists of a detailed survey conducted among a diverse group of consumers. The survey results affirm the social media findings, with a clear consumer preference for blockchain-based loyalty programs over traditional formats. Key aspects such as faster point accrual, increased program relevance, the permanence of earned points, and the ability to transfer points between users were particularly valued by the respondents. These preferences underscore the growing demand for more adaptable, user-centric loyalty solutions in the marketplace.

How does blockchain technology revolutionise customer loyalty programs, creating value for businesses and customers in the digital marketplace?
Credit. Midjourney

Strategic implications and the path forward

The study’s findings serve as a catalyst for both theoretical and practical advancements in the field of marketing, specifically in the design and management of modern loyalty programs. For practitioners, the research offers actionable insights into how blockchain technology can be harnessed to create loyalty programs that are not only more engaging and rewarding for consumers but also more cost-effective and efficient for businesses. The emphasis on flexibility, speed, and user empowerment aligns with contemporary consumer expectations, providing a competitive edge in a crowded market.

From an academic perspective, the research opens new avenues for inquiry into the intersection of blockchain technology and marketing strategies. It calls for a deeper investigation into the long-term impacts of blockchain on consumer behaviour, loyalty program dynamics, and the broader marketing ecosystem. As businesses and researchers navigate these uncharted waters, the potential for innovation and transformation in loyalty program design and execution appears boundless. By using the concept of the sharing economy as a general framework, academics can get a better understanding of how the tokenization of loyalty programs can help to provide value for businesses and their customers alike.

Conclusions

In conclusion, the study highlights blockchain technology’s role as a pivotal force in reshaping the landscape of customer loyalty programmes. Advocating for a shift towards more transparent, flexible, and consumer-friendly loyalty schemes not only provides a blueprint for future innovation but also reinforces the importance of adapting to the evolving digital economy. As we move forward, the integration of blockchain into loyalty programs represents not just a technological advancement but a fundamental rethinking of how value is created and shared within B2C relationships.

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Journal reference

Treiblmaier, H., & Petrozhitskaya, E. (2023). Is it time for marketing to reappraise B2C relationship management? The emergence of a new loyalty paradigm through blockchain technology. Journal of Business Research159, 113725. https://doi.org/10.1016/j.jbusres.2023.113725

Dr. Horst Treiblmaier is a Full Professor and Head of the School of International Management at Modul University Vienna, Austria. He has worked as a Visiting Professor at Purdue University, the University of California, Los Angeles (UCLA), the University of British Columbia (UBC), and the University of Technology in Sydney (UTS). His research interests include the economic and business implications of blockchain, as well as the evolution of the token economy. He teaches blockchain-related topics and is a frequent speaker at academic conferences and industry events. In 2022, he was awarded the Blockchain Frontier Award by the Blockchain Research Institute (BRI).

Elena Petrozhitskaya, IT Project Manager at Allianz Technology GmbH, Vienna, boasts an MBA from Modul University Vienna (2021) and an MSc from Novosibirsk State Technical University (NSTU, 2010). Her industry tenure, with a focus on FinTech and insurance, complements a keen interest in blockchain technology. This convergence has fuelled her research in the area of blockchain-based loyalty programmes.