Loyalty 3.0 - Web3 Pushing The Envelope For Loyalty Program

Customer loyalty meets Web3 innovation. Team Token Dispatch delves into how NFTs are revolutionizing the way brands reward and engage with their customers.

It has never been more expensive for brands to acquire and retain customers. While the democratization of e-commerce infrastructure is making it easier to create a new brand, it also gives consumers more choices than ever. Social media feeds and search result pages have become battlefields, intensifying with recent privacy changes from Apple and Meta.

Brands Meet Web3

Starbucks announced the debut of Starbucks Odyssey, which combines the coffee chain’s existing rewards program with a new NFT platform set to launch later this year. GameStop announced new NFT trading cards for its virtual game Gods Unchained that will be available to members of the retailer’s loyalty program. The international sailing competition SailGP also unveiled plans for a Web3-powered loyalty program built in partnership with sponsors Oracle and the blockchain protocol Near.

Rather than simply making money off NFT sales, companies are experimenting with new ways to engage customers over extended periods via loyalty programs. Although companies are still building out what these might look like, they could give members access to communities, exclusive content, and new online and offline experiences.

Startups are also working on various Web3-enabled loyalty programs for brands. The NFT brand loyalty startup Hang sees a way for a beer brand like Budweiser — one of Hang’s clients — to find new ways of building loyalty when people buy beer from various places such as gas stations and grocery stores by letting customers get points regardless of where they bought their beer. Meanwhile, the QR code startup Flowcode partnered with POAP Inc. — another crypto-enabled startup — to create new ways of letting people earn NFT badges when they visit physical places and events.

How does interoperability apply to loyalty?

Today, all the loyalty programs you are a part of across your favorite brands — like Bloomingdales, Nordstrom, Sephora, or Starbucks. Your loyalty account is locked within the individual site or platform, incompatible with anything outside. Starbucks’ Rewards program is more extensive than many banks, yet all you can do with your stars is buy coffee. Even though the information stored about you in each of those accounts is nearly identical, users can barely use them interchangeably.

Loyalty programs of today are siloed non-composable systems. Each platform has created its method of collecting, storing, and managing users. Since these systems have all been engineered independently, it would be difficult for these platforms to be composable, even if they wanted to.

NFTs (composable components) can be used as a customer’s loyalty status within a brand. Customers now verifiably own their loyalty status through their loyalty NFT (their “account membership”). These loyalty NFTs can seamlessly provide membership credentials to apps and websites across numerous brands and platforms.

Web2 Loyalty Loop

A consumer Loyalty Loop is a model that explains how consumers go from deciding on a purchase to maintaining brand loyalty through several steps. It works as follows:

1. Consumers onboard the brand through a sign-up mechanism, generally with their email as the unique identifier.

2. Consumer transacts with the brand.

3. The consumer is rewarded based on the frequency of their purchases.

4. Rewards build as the consumer continues to transact.

5. A “tier” status is applied with a “leveled up” reward opportunity.

6. Consumer stays with the brand rather than leaving for something new.

7. Repeat the loop from step 2 onwards.

Web3 Loyalty Loop

Web3 makes building deeper consumer relationships easier. Here are what the loyalty loop looks like in web3:

1. Consumers onboard to the brand by connecting their digital wallet, with their wallet address as the unique identifier.

2. Consumer transacts with the brand by connecting their wallet to the brand’s eCommerce site or app.

3. The consumer is rewarded based on the frequency of their purchases via the blockchain, where transactions across multiple brands can be documented.

4. Rewards build as the consumer continues to transact. Rewards can accrue in the consumer’s digital wallet as a monetary sum, token-gating, or unique 1:1 digital token (NFT) that unlocks utility/access.

5. A “tier” status is applied with a “level up” reward opportunity. Consumers can receive a unique digital asset airdrop that denotes their status via the blockchain.

6. Consumer stays with the brand rather than leaving for something new.

7. Repeat the loop from step 2 onwards.

The next wave in loyalty will be about the new capabilities Web3 delivers, centered around ownership, interoperability, and value portability. While the definition of Web3 often varies depending on who you talk to, it’s clear that a digital world with crypto/blockchain functionality at its core has the potential to radically change consumer experience, loyalty program rules, and community building.