Web3 in Loyalty
Blockchain Technology Redefines the Limits of Loyalty Marketing. Here’s How

Setting up or revamping an existing loyalty program is not something new for most businesses over the last years. In fact, 9 out of 10 businesses have a loyalty program, based on .  

The vast majority of these programs are cashback or points-oriented, while a few of them have also tier-based logic to classify customers into different groups based on their purchase history and engagement levels. 

Although these programs can efficiently contribute to reducing customer acquisition costs and increasing retention and profitability, they all have one common issue: members don’t redeem their points!  

and this number itself raises questions whether or not these loyalty schemes take full advantage of their potential and consequently, what they can optimize to see these numbers decreasing. 

Web3 loyalty programs come as a solution to this concern since they don’t operate in such a centralized way and their redemption processes are much more flexible for the loyalty members. 

But first, what is a Web3 Loyalty Program?

Web3 loyalty programs are a whole new approach in retention marketing focusing on boosting engagement and benefiting both parties - customers and brands. 

A typical Web3 program uses blockchain technology to offer bigger transparency and security to its members that have much better control of their available rewards, when and where they want to redeem them. 

If there is one word that describes best this type of programs, that is “interoperability”. This technically means that members’ points or earned tokens go beyond the traditional platforms, and they can be used across various networks. 

This flexibility creates a new spectrum in loyalty marketing where users handle their rewards without having to worry about potential manipulation or errors that we typically observe on programs with more traditional technology mechanisms. 

Potential Web3 Reward Types

One of the core differentiating elements a Web3 program has to offer is the level of personalization it can reach. Personalization doesn’t necessarily have to do with some kind of financial incentive, but it usually extends to experiential and behavioral offerings. 

Some of these reward types can be the following: 

• Personalized Digital Merch: Sports brands like adidas are one of the players in the sportswear industry that rides this wave. By creating adidas Metaverse, the brand gave customers the ability to dress their profile picture avatars with one of the total 16 limited-edition wearables. This virtual gear was a type of personalization that adidas lovers could use to build their online fashion persona.
• Tokens for Workshops: Offering tokens that could be redeemed as access pass for workshop or other training session, is a loyalty solution that many tech companies should think of. The agenda of these workshops could vary from topics like programming and digital design or be even more specific to the company’s products and services. Participants would gain extra value by redeeming this reward since they would also be educated around certain areas of interest.
• NFT-Based Access on Events: The idea of early access to events and fun sessions is not something new or unique. However, this benefit could definitely be elevated and create a much more interesting experience for customers if they could join these events with NFTs. The concept remains the same, that is already familiar to loyalty members, but the approach is fresh and more engaging.
• Community-Bonding Challenges: Most businesses in the food and beverages industry have very standardized rewards for the loyal customer: free meals, vouchers etc. What if they could give members some tokens as a reward after participating in community challenges, such as sharing their dine-in experience on social media. These tokens could potentially be used as a ticket for future benefits.
• Decentralized Voting Rights: Although popular music streaming platforms like Spotify or Apple Music don’t have their own loyalty scheme, this Web3 type of reward could catch their attention. By providing tokens to loyal listeners and giving them the right to certain decisions, such as curating a playlist, they could foster even more the sense of community they’re trying to build and potentially their subscribed users.

Key Issues of Web3 Loyalty Programs

Before addressing all the pros that Web3 programs have brought upon their arrival, it’s quite important to highlight firstly some of the most common problems that loyalty programs currently face: 

• Declining engagement: The average U.S. customer is member to around 15 different loyalty programs. However, numbers say that he is active and engaged only to half of them. This trend is quite disclosing itself about the declining engagement character of these “old-school” programs.
• Redemption Constraints: As already explained, it’s quite common ground that most traditional loyalty programs are conservative when it comes to the redemption options they give to customers. These limitations mainly relate to geography, transaction touchpoints and rewards.
• Points lose their value: According to Jeff Wixted, VP of Product Management and Operations at Accertify, loyalty points lose their value more and more over the last few years across various industries, such as airlines, hospitality and retail. Although this value can’t be exactly calculated, he estimated that for the U.S. market it’s around $100 billion.

Benefits of Web3 Programs

All these challenges become smoother by implementing a Web3 technology program. Some of the key advantages of this type are the following: 

• Fostering Community and Participation through Decentralization: In traditional loyalty, the brand is the gatekeeper of all the decisions and processes. The roles change in Web3 loyalty since customers can also contribute with their input. Here lies the power of blockchain technology when it is used to foster communities and drive members’ participation upwards.
• Community Consensus and Governance: The decentralized character of these programs is the reason why they’ve also been named as more democratic. Their structure is more clear and aligns with some of the modern consumer values such as authenticity and appreciation.
• Immutability: Consistency and transparency are two of the most crucial aspects that a customer seeks after becoming a loyalty member. Web3 is there to serve this need thanks to the immutable nature of blockchain technology. This in return creates a stronger relationship between the members and the brand, that can’t take arbitrary decision without their agreement.
• Innovative Engagement Tactics: Gamification is one of the most prominent features in rewards programs lately. And if you mix this method with advanced augmented reality (AR) experiences or other trivial games, you get the a fresh and innovative cocktail on engagement. Cheers!
• Long-term vision: Brands like adidas and Starbucks, that have already implemented a Web3-oriented program, are colossal on their industry and everybody knows them. This demonstrates that they have a bigger, long-term vision to execute. They are committed to boost member engagement and grow; all through sustainable loyalty dynamics.

Successful Examples of Web3 Loyalty Programs

There are a couple of successful programs in the loyalty industry that have either extended their current system by incorporating Web3 technologies or completely revamped it towards a newer, more technological approach. 

Keep on reading to discover the ones that really create a buzz around their name. 

Starbucks Odyssey

Starbucks already has one of the most successful and heavily discussed loyalty programs worldwide. So, it doesn’t come as a surprise that it decided to invest in Web3 technology as well. 

Two years ago, they introduced an extension of their current scheme named “Starbucks Odyssey”. The brand’s official announcement stated the following: “The experience allows members to participate in a series of entertaining, interactive activities called “Journeys”. Once a Journey is complete, members will earn collectible ‘Journey Stamps’ (NFTs) and “Odyssey Points” that will open access to new benefits and immersive coffee experiences that they cannot get anywhere else.”

In fact, there are three levels of benefits and experiences that members can unlock. These benefits and experiences could range from a virtual espresso martini-making class at the lower level to trips to Starbucks Hacienda Alsacia coffee farm in Costa Rica at the higher levels.

HUGO BOSS XP

HUGO BOSS is one of the fashion brands that stood out in 2024 after introducing HUGO BOSS XP; a new membership program that keeps some of the old good practices, such as points and tiers, but it mixes them with cutting-edge Web3 technologies. 

Loyalty members can now collect and redeem tokens (NFTs) through their purchases and other interactions they have with the brand either in-store or online. An example of token is the BOSS Frequent Visitor, which is given to members who check-in by tapping their mobile phone on different physical touchpoints in a BOSS store.

This way, the brand aims not only to attract new members but also deepen even more the relationship with the already existing customers. 

Lacoste UNDW3

Lacoste, the statement brand with the crocodile, has also its own Web3 oriented loyalty program called UNDW3. 

By joining this community of “Crocodiles”, members have to solve quests, move up the leaderboard and unlock exclusive perks. Each participant has an UNDW3 NFT card, which unlocks more features and utilities for the user as they complete more on-chain tasks.

airBaltic Club

The next case study comes from the air! 

airBaltic, an airlines company from Latvia, launched in 2022 an NFTs Rewards program for its passengers, called airBaltic Club. Through this program, passengers can gather “planies”, which are digital cartoon aircrafts stored on the Ethereum blockchain. 

Holders of those NFTs are able to receive airBaltic Club points or other loyalty benefits. Based on the number of planies they’ve collected and how long they keep them, travelers can get free tickets for future flights or upgrade their seats to business class.

Clinique Smart Rewards

Most beauty and cosmetics brands are quite conservative when it comes to their loyalty schemes, since the majority of them are points-based with free perks and rewards for its customers. Clinique is definitely an exception to this rule!

A few years ago, it revolutionized its loyalty program by incorporating blockchain technology allowing thus the customers to tokenize their rewards. This action gave them the flexibility to earn and use their benefits across various platforms. 

By applying this new approach, the brand managed to create much more personalized experienced for the loyalty members, by also increasing their level of satisfaction and minimizing troubleshooting on operations. 

VISA

Earlier this year, VISA made one of the most ground-breaking announcements in the loyalty space, after unveiling a Web3 engagement solution for its loyal customers. 

Based on its 80 million partners globally, this solution promises to make VISA customers even more engaged while shopping, booking their next travel, having a massage to relax or even taking a dinner at a restaurant. 

The versatile character of its usage is what makes this new engagement solution so unique, and VISA members who use it on every purchase they make are the ones that will be benefited more from their interactions with more points and rewards.

How to Structure an Innovative Web3 Loyalty Program

In case all these successful case studies have made your appetite for structuring your company’s Web3 loyalty program, here are some notes you should take before moving into action.

Leverage tokens

Customers are a bit sick and tired of the same transactional-based interactions. They demand more meaningful connections and experiences with their favorite brand’s loyalty program. 

To achieve that, you could issue tokens that go directly to your customers’ Web3 wallets. These tokens, that can also be redeemed for future interactions, are enough to offer them a unique experience to high value members. 

Use Smart Contracts

Smart contracts are the cornerstone of transparency in Web3 programs. They clarify all the rules and specifications around reward distribution, redemption, and program governance.

This sense of transparency works as guardian and eliminates common misconceptions that traditional programs are surrounded by, since all transactions and reward distribution is recorded on the blockchain. 

Create Friendly UI

The interface of a Web3 program can either skyrocket or damage it completely. So, that’s why it’s vital to keep it as friendly as possible for the end-users, who are not necessarily heavy experts on all technical aspects. 

By providing simple and step-by-step instructions on how they can participate, gain their rewards and then redeem them, you’ll be a step ahead and prevent any misunderstanding on their side. 

Implement Automations

By tactically updating your token users about their rewards and program’s specificities, you keep them engaged and remind them the reason why they deserve to be a member of this loyalty club.

Automations are your go-to method to build up these customer journeys, by showcasing all the available perks, what more they can do to upgrade their current loyalty status and mainly they should keep doing so. 

Collaborate with Other Web3 programs

All these may look overwhelming if your brand’s loyalty scheme follows a more traditional approach as of today. That’s completely understandable! 

If you’re thinking though of new ways to leverage your strategy, then maybe collaborating with other successful Web3 programs is the road you should take. Through this kind of partnership, you could take advantage of the benefits that this technology has to offer to your business by not replacing your traditional scheme at all.

Building and constantly maintaining customer loyalty is one of the key factors that define the longevity of a business. Traditional loyalty programs are the most common mechanism that brands are using to reach that goal.

However, given the technological advancements in the loyalty space, these traditional approaches look a bit rusty nowadays. Web3 technologies are quite promising, and their focus is to redefine these old practices by showing more interest in transparency, privacy, and digital safety. 

But in fact, all these values reflect some of core principles of loyalty marketing, that is boosting customer engagement, listening to their needs and addressing solution in a more personalized way, and at the end of the day make them feel valued and appreciated as members of a program.