The size of loyalty schemes globally has been valued at $1.94 billion in 2016 and is projected to reach $7.305 billion by the end of 2022.

This represents a growth of 24.73% per annum, as companies desperately seek to attract and retain customers’ attention and their repeat business. Increasing online sales and the impact of technology, as millennials use mobile devices to shop, is helping to stimulate more companies to put additional resources into loyalty programs. But why bother?

Source: Shopify

As the above chart illustrates, if you can retain customers it can lead to a significant increase in revenue. This explains why loyalty schemes are seen as being an important part of the marketing mix for many organizations.

The concept of loyalty programs is thought to go back to the 18th century, with “premium marketing” in America. This was when retailers gave their customers copper coins with their shopping, which could then be used at a later date to make further purchases. However, it was not until 1958, when Green Shield stamps first started to appear in the UK, when those modern loyalty schemes took hold. We have now seen an explosion in the number of loyalty schemes which, in turn, has led to customers being disillusioned and feeling “why bother?”, as it results in them being signed up to a “cornucopia of programs”. However, how often can their loyalty points be redeemed for anything meaningful?

Blockchain technology can help us instead of signing up to dozens of different schemes, a customer can join a network that offers reward points which aren’t just redeemable at one company but are with any business in the loyalty schemes network.

Blockchain technology makes this possible by keeping a record of all of the transactions that can be accessed by the whole network. Instead of having separate accounts for all your airline miles and a wallet overflowing with paper-based cards, which get stamped every time you buy a coffee, a Blockchain platform securely holds and enables the sharing of the data, without breaching data protection legislation. While providing greater security and transparency for customers, for retailers this type of loyalty schemes can also be less expensive to create and maintain. 

Purdue University has developed X-Blockchain, allowing customers to buy goods and services, and be rewarded within a loyalty scheme and receive points. The companies that are part of these loyalty schemes and who pay for the points have access to “shredded data”—meaning any personal or confidential information has been removed. 

Source: Perdue University

Mohammad Rahman, an associate professor at Purdue's Krannert School of Management, and who leads the research team said. "This technology enables two people to confidentially exchange rewards points from perhaps a coffee chain for airline rewards points at a rate that both find acceptable and this is not disclosed to any third party, including our platform." In effect, technology is used to “code data” by removing sensitive information and enables access to the non-private data which is still very valuable for marketers.

Using Blockchain technology in loyalty schemes to collect and store rewards enables customers to redeem their points more easily, and therefore make loyalty schemes more appealing. 

If we are to see Cryptocurrencies being given to users for their attention and patronage, as a way to entice them to spend more time on a website and/or make more repeat purchases, etc, then we will need to see more initiatives such as the one from Purdue University. Using Blockchain technology means that data can be held securely, and only the relevant data is shared with those who are entitled to have access to it. It also gives customers more flexibility and transparency, so leading to greater engagement with the brands and retailers who are sponsoring the loyalty scheme.