Should you be considering the use of blockchain to power your customer loyalty program?


Share on LinkedIn


Distributed ledger technology, commonly known as blockchain, is a technology that has received a lot of attention in the last few months, particularly as the underlying technology powering crypto-currencies like Bitcoin.

However, outside of crypto-currencies many entrepreneurs, large organizations, governments and technologists are exploring other applications of blockchain technology including everything from digital voting to the recording and protection of both formal and informal property holdings.

Given the broad range of possible applications of this technology, I’ve recently been wondering about how it can be applied to the sphere of improving customer service, experience and engagement.

So, I was intrigued to see an article, in March of this year, from Jeremiah Owyang and Jessica Groopman, industry analysts and founding partners at Kaleido Insights that asked: Analysis: Should Blockchain Power Your Customer Loyalty Program?

Their research had identified nearly a dozen companies from around the world that have announced an intention to launch either blockchain-based customer loyalty programs or branded crypto-tokens in order to encourage customer engagement.

Speaking to Owyang and Groopman, they believe that blockchain technology, due to it’s distributed and secure nature, offers a solution to many of the problems that many large customer loyalty programs face right now. Issues such as complexity, the integration and alignment of a large network of suppliers and partners, the calculation of balance sheet liability as well as data protection and security issues.

As such, they see great potential with blockchain in the customer loyalty space but caution that there is both a lot of hype in this space right now and that the tools for managing blockchain and the technology itself are still immature.

With those words of caution in mind and assuming that many of these underlying issues are addressed in the coming 2-3 years, here are three areas where blockchain technology could help deliver an improved customer experience:

1. An Overarching Customer Loyalty Program

Research sources suggest that the average customer is a member of upwards of 14 different loyalty programs but is only active in a handful. Moreover, many customers express frustration that they cannot redeem points earned with one brand’s loyalty program in other places. Therefore, it seems clear that an overarching customer loyalty program that utilizes a universal (crypto-) currency, powered by blockchain technology, where rewards can be earned and redeemed across many brands, is likely to be a compelling customer proposition.

The challenge with that is that it doesn’t seem likely that such an initiative will be driven by any individual brand. As Howard Schneider, VP of Loyalty Strategy at Kobie Marketing, says “Why would McDonald’s give away reward currency that could be redeemed at Burger King?”

That may be true but it does present an opportunity for someone whether that is a third-party loyalty scheme provider, a consortia of brands or even an individual brand that just wants to try something different.

2. Managing Complexity And Aligning Partners And Suppliers

Many customer loyalty and reward programs are becoming increasingly complex as brands, in an effort to make their programs ever more compelling, add more and more partners and suppliers to their loyalty ecosystem. This, in turn, is making them increasingly hard and expensive to manage.

This is another area where a blockchain-based solution could help. Kevin McMahon, executive director of mobile and emerging technologies at SPR, agrees and suggests that a blockchain solution could not only “improve the operation and execution of loyalty programs and reduce overhead costs” but it could also “provide an easier route to sharing data and loyalty program perks, without the hassles of having to strike individual agreements and integrations for each partnership”. Schneider adds that “some industries stand to gain more out of doing so than others” and that “it is likely that the travel industry and possibly financial institutions or retailers will be among the first to adopt this technology at scale”.

3. Increased Data Protection And Security

It seems like it is almost every day that we hear news about a new data breach involving the theft of customer data. This is having an impact on customers and how they feel about data security and privacy. So, whilst customers want to participate in loyalty programs, nearly 70% of them express concerns about the vulnerability of companies to cyber attacks.

According to Eric Marks, senior director at West Monroe Partners, this means that “the implications of an unsecure rewards platform are growing” and that brands should be considering blockchain as a solution when they are thinking about creating secure and future-proof loyalty platforms.

There is no doubt that there are still a range of concerns that need to be addressed surrounding the use and application of blockchain technology. These include everything from environmental concerns to the maturity of the technology to the standards employed. However, I have no doubt that that these concerns will be addressed and it is only a matter of time before we see blockchain technology applications deliver value to both businesses and customers in the loyalty program space.



This post was originally published on Forbes here.

Thanks to Pixabay for the image.

Republished with author's permission from original post.

Adrian Swinscoe
Adrian Swinscoe brings over 25 years experience to focusing on helping companies large and small develop and implement customer focused, sustainable growth strategies.


  1. Adrian, interesting article, yet let me challenge your train of thought somewhat by saying that none of the three points that you brought forward mandatorily requires blockchain.
    – there are overarching loyalty programs that work with a lot of different brands. The McDonalds argument is merely a saying that they do not run a loyalty program but a retention program. They are not looking for loyalty – or else they would argue differently
    – the cost drivers of overarching loyalty programs are the cost of the intermediary and then the lacking standardization of data. Participating in an overarching program so far needs an intermediary. A blockchain provider is just another one. Blockchain does not help in integration of the data. It still needs to be standardized to be valuable for all involved parties, including the customer
    – data protection and security would be achieved by consistent encryption of the data

    What is notably absent is the value for the customer/consumer. The problem with loyalty systems is that the more value they offer to this party the less valuable they are perceived as being for the companies that run loyalty systems.

    Just 2 ct from Down Under


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here