Unblocked

by Alison McCauley

  As loyalty programs collide with blockchain capabilities, relatively feature-rich loyalty incentives could be offered by just about any size or maturity business. No longer will extensive program development or the buildout of a complex support infrastructure be necessary. Industries that were never able to effectively leverage old reward point structures may find new opportunities in this next-gen version. Service providers will likely spring up to assist businesses with every aspect of these loyalty campaigns, making them “turn-key accessible” to virtually every merchant, organization, or even home-based seller.

  Brands will need to keep a close watch on the evolution of the loyalty points space so they can effectively respond. While early, one could imagine that consumers may begin to expect rewards at every turn—every ad they watch, every share they post, and at every point-of-sale transaction. This could depress the value of an endorsement (“he’s doing it just because he’s getting rewards”). Because having multiple partners on a single platform increases the value of the rewards on that platform, there may be great pressure to join a network in order to remain competitive. Consumers may develop distaste for the lock-in that typifies today’s programs. But if these next-gen loyalty networks become commonplace, the competitive advantage of any one brand’s approach may diminish. Over time, consumer interaction with these programs could look less like loyalty and more like a transaction-level preference for whomever happens to be offering the best reward at the time.

  Brands will need to think very carefully about how to design and participate in these next-gen programs to ensure they effectively reinforce the relationship customers have with their particular brand. There could be benefit to brands by moving early to develop a blockchain-based loyalty platform that is attractive to both their business and their customers. Early movers could set a precedent for the governance of these new networks, the design of the incentives, the regulation of who owns the customer and has access to their data, and the rules for the program. But while there are many highly regarded brands that have put out a press release or other indicator that they will use tokens in a loyalty program, actual implementation must move in lockstep with the maturation of the space.

  The Power of Partnership

  It is true not only of loyalty programs that the more opportunities for redemption, the more valuable it becomes to the consumer. This is true for the use of any incentive—the more places a token can be used, the more utility value it holds. For this reason, blockchain-based tokens are most powerful when tied to a thriving ecosystem of participants and partners.

  To be a “success,” tokens have to earn liquidity in the marketplace, and connect to a thriving ecosystem where they can be directly earned and spent. While thousands of tokens exist today, there will be a much smaller number that gain long-term prominence. They may be optimized for different uses—there may be a dominant token (or a set of several) for media, another for education, and yet another for gaming, for example, but regardless, the winners will have a booming ecosystem and vibrant mini-economy. Watch carefully and be deeply thoughtful in picking teams, making alliances, and selecting platforms.

  But do partner, wisely and often. Partnerships will be an important component of success to businesses in a blockchain world, and the successful businesses of tomorrow will become increasingly adept at navigating these alliances to mutual gain. As we evolve to a more collaborative relationship between customer and business, we could also evolve to more collaborative relationships among businesses themselves, aligned by a common mission and vision for the customers they serve.

  Partner wisely and often. Partnerships will be an important component of success to businesses in a blockchain world, and the successful businesses of tomorrow will become increasingly adept at navigating these alliances to mutual gain.

  The Beauty of System-Wide Alignment

  When orchestrated well, tokens could be used to align all stakeholders toward a common goal to drive the organization forward. This includes not only individual customers and networked communities of customers, but the ecosystem of partners and even employees and investors as well. The lines separating the roles of these contributors could blur as motivations and actions move in concert. Applied especially against missions that advance society, this is when these potent incentives turn beautiful—and could bring great long-term success to the organizations that master it.

  The Dangers of a Coin-Operated World

  From a social science perspective, I cannot emphasize enough the grave responsibility that comes with this powerful tool. There is a flip side of token-fueled, gamified technology. One day, we may all be interacting with multiple token economies on a daily basis. If and when this happens, we will need to be more mindful about how we humans stay in control. The feedback loops, the immediate gratification, and the manipulation of micro-behaviors that tokens enable (especially combined with gaming fundamentals) mean that tomorrow’s applications could be plugged more directly into our chemical circuitry. They may constantly reward us for participating, and could become addictive in nature. We will need to work harder to make sure the technology is serving us—versus us serving it.

  We can use gamified applications to help us exercise more effectively, eat more healthfully, learn new job skills, build important sources of income, and connect more deeply to our communities—or we could let them alter our belief of what’s important. We’ve seen how hard it is to strike this balance with Web 2.0 (think of the teen who starts to tie his sense of worth to the number of Instagram followers he has). It will be harder as we are surrounded by more and more token economies vying to influence our behavior.

  As you deepen your exploration of this space, my hope is that you will be thoughtful about the implications of the technology and your work. Importantly, there is a strong argument for this approach from a coldly quantitative perspective as well. In the blockchain era, the businesses that will thrive are those that do right by the community. Every community is composed of many individuals, and their stakeholders—parents, peers, and partners—who will all be watching to see who is serving their interests best now, and for the future.

  Throughout your journey, there will be opportunities to make decisions that impact your customers’ lives. I believe there is always an option to choose a direction that more symbiotically supports customers’ health, success, and happiness. And while at times there are short-term hard costs associated with this choice, the organizations that follow this path will enjoy longer, stronger relationships with customers, stronger communities, and long-term business results. This kind of symbiosis, in fact, will be a key driver of the new collaborative relationships that will typify this next era.

  Cautions and Considerations

  New incentive models present both threats and opportunities to existing businesses. While some of these cautions and considerations are very future-focused, they are meant to provoke your thinking about what could come. This is by no means an exhaustive list; it provides additional food for thought on how to prepare for this new paradigm.

  Cautions

  Overestimating (or underestimating) the value of tokens to the consumer

  In this early stage there are a lot of unknowns about how tokens will be valued by a consumer. Today, much of a token’s “price” is determined by speculative investing activity. But until tokens have reached broader acceptance from both consumers and merchants, we will not understand their true, nonspeculative value. While a token may look like it has a certain value associated with it, today that is only the value for someone who knows how to exchange it for other cryptoassets, traditional currencies (also called fiat), or the limited goods and services currently available for that particular token (if any). Research your customers’ mindsets to understand how they perceive token value, or experiment with incentive campaigns for a token’s already-enthusiastic users. And conduct lots of research to understand how this changes over time as the market evolves—perceptions could change rapidly.
r />   Trying to explain too much or too little

  Just as most consumers don’t understand the inner workings of your loyalty programs or what happens to get a PayPal payment from their account to yours, they will not understand the ins and outs of how tokens work. To the consumer, many of the details will be—and should be—opaque. Incentives should be communicated in a way that is exciting and attractive, and introduces near-zero friction.

  At the same time, make sure that more information is available for those who want and are ready to know more. The blockchain movement has high standards for open sourcing everything: code, governance, even how money is spent. Don’t make it look like you are trying to hide a cryptoasset. Make sure that those who want to understand more can.

  Treating customers like a social experiment

  Consumers are not rats. But if you overdo it on rewarding for small tasks before you know the nuances of how to do it right, they may feel like you think they are. Companies need to learn the nuance, for their particular industry, of giving both large and small context-aware, value-added rewards to different demographic and psychographic segmentations of customers, in different settings. At this stage, this is the work of pioneers—there are no best practices, and there are no guardrails. However, you may be able to be a part of establishing them, or can leverage the specialists who are sure to emerge.

  Considerations

  Understand what quality engagement and content means to you

  This early stage is also a good time to more deeply understand what kinds of engagement results in business value, and what that value is. Gallup research has found that customers who are fully engaged represent an average 23% premium in terms of share of wallet, profitability, revenue, and relationship growth over the average customer.134 But what does engagement mean in your business? What specific triggers or actions could potentially be encouraged through incentives?

  While it may prove elusive to quantify value for many forms of engagement, you can map out the relative value of specific actions and events that trigger a customer to more deeply engage with your product or brand (i.e., specific enough to be reflected in code). You can also map out “signals of quality” for influencer, social, or community content to better understand what drives value in that area. This kind of analysis can help you home in on what incentive models may be most compelling to experiment with first.

  Understand how your community, ecosystem, and mission intersect

  You’ve seen how in the blockchain world, power comes from aligning the interests and values of community and ecosystems. Study your universe to identify what drives your customers, what drives your partners, and where these interests intersect. Use this filter to give you a compass with which to assess other potential partners or members of your ecosystem.

  Find your crypto-savvy customers and collaborate with them

  Identify segments of your customer base or influencer network that are early adopters of cryptoassets, and bring them into the fold. These early adopters will likely have a unique profile and many characteristics may not be extensible across your broader customer base. However, they can help you bridge two worlds: your brand and the world of token economies. Talk to them, learn from them, and brainstorm with them. You will likely generate insights for how to start experimenting in the space.

  Use someone else’s application or platform to run test campaigns

  Grow your knowledge of how to use token-based incentives by testing campaigns on a blockchain application or platform that is gaining traction with your customer base (using their token). While not every company will be able to find an appropriate partner at this early stage, new players will continually emerge. Start by putting together a list of the kinds of companies that could be a potential fit, and keep watch on the space as it develops. Once you find a company that is a fit, work with their team to get practiced with different ways to target different kinds of behavior, and gain some early insight on how to measure the return to your business.

  Examples

  Entrepreneurs are using incentives to shape and align behavior across a diverse set of use cases. Time will tell if they will work out in the long run, but right now, here are a few projects chosen to give you a glimpse of just some of these.

  Swytch: Incenting Global-Scale Adoption of Renewable Energy

  A sophisticated team from investment banking, energy trading, and academia came together to create Swiss nonprofit Swytch to incentivize the world to adopt renewable energy at scale. They saw that while billions have been spent by governments to incentivize renewables, overall success has been limited. Carbon emissions continue to hit record highs and the threat of climate change looms larger every day. The team is developing a blockchain-based platform that seeks to verify and reward the production of sustainable and renewable energy through the Swytch token. By capturing data directly from IoT and smart devices and through market aggregators, Swytch can create immutable proof of production and dynamically allocate tokens. Swytch aims to serve as a globally standardized incentive for producers, and allow consumers to validate their own sustainable actions.

  The team aims to address key systemic issues that have held back the broad adoption of renewable energy: the lack of a global, easily tradable incentive mechanism; the difficulty of verifying and securing production data at the source; and the dearth of quality public data on where and how renewable energy is produced. The team has been cultivating partnerships from cities and corporations to build interest in the initiative. Eventually, they envision incenting consumer actions, such as the use of an electric vehicle.

  “We hope to accelerate the switch from fossil to sustainable energy, but in a highly equitable, decentralized manner,” explains founder John Henry Clippinger. “I think it is a very reasonable aspiration. Solar and battery power is getting cheaper and more decentralized, and people can be incentivized to not only transition, but actually produce and monetize their own energy. We want to make it as easy to develop your own solar energy business as it is to buy a car, and we want to open that up anywhere in the world. This not only creates a new infrastructure, but changes two fundamentals: the source of the energy and the source of value generation. Blockchains can help us move to this concept of the ‘prosumer,’ in which people are both producers and consumers of value. It’s a very different world.”135

  Mobivity: Aligning an Ecosystem of Brands and Consumers

  Mobivity Holdings Corp. touches 30 million Americans and tens of millions of transactions weekly through a proprietary platform that helps restaurant and retail brands such as Subway, Round Table Pizza, and Smashburger better understand customer behavior across thousands of brick-and-mortar locations. I sat down with CEO Dennis Becker to learn how his company, which is investing in a blockchain-based infrastructure, was thinking about the technology. “We see blockchains as an architecturally superior way to unlock new business models that solve problems these brands face,” he said. “It can serve as an enabling infrastructure that makes new kinds of interoperability possible. It can open up opportunities that no one has ever before attempted because they would be a logistical mess.”

  Dennis walked me through multiple layers to explain these opportunities. He started with a view into how blockchains can align the behaviors of an entire ecosystem of supply chain and food service operator brands. “Billions of dollars are moving from brand to brand to fund joint marketing,” he said. “But because their systems are proprietary and the data lives in silos, there is very little visibility into what is actually working, and very little control once those dollars go over the wall. It’s like a multibillion-dollar shadow economy.” Blockchains could provide an infrastructure that sits between brands, providing an interoperable data, accounting, and payment layer that could trace the redemption of a joint promotion directly to an individual franchise—and compensate them immediately. “By making it possible for these brands to talk to each other technically,” Dennis went on, “by giving them visibility int
o the same data, it can help bring them closer and align them on their value proposition.” This blockchain-driven infrastructure can also help companies that “have no way to leverage customer relationships across an umbrella of brands because each has its own centralized, proprietary data stores and infrastructure.”

  Dennis then walked me through the customer view. “There is an opportunity to create a more trusted relationship with the consumer, giving them more control, and giving both brand and consumer more value.” He described how consumers could choose to let a brand know a little bit more about them in exchange for more targeted, personalized offers. “Let’s say I want to try out ‘smart offers,’” he said. “I could let a brand look at my location or other data, and so when they reach out to me I can get more value out of it—more of what I want.” So, a coffee purchase this morning, followed by a sandwich at a different merchant this afternoon, could fuel a personalized discount for dinner tomorrow, with each transaction informing the brand, the consumer, and the consumer’s profile. The data could be stored in a “personal information wallet, not on a brand’s servers, and I could turn off a brand’s access whenever I want to.”

  “But,” explained Dennis, “it’s still very, very early.” His company is developing blockchain infrastructure in parallel with their existing platform so that “when business users are ready to experiment, the infrastructure is already there,” ready for them.