Cutting through the Blockchain-based loyalty programs hype
Recently there has been some exciting articles and press about blockchain loyalty programs. Some suggest that it will be the panacea for loyalty programs that have low usage and engagement rates. Now I really believe in blockchain. At Digital Alchemy, we have been trialing our own blockchain platform on a large loyalty program in Asia. However, I think it’s important to cut through the hype. Here are some things to think about:
1. The problem that most existing programs have is not their points technology, it’s the way they communicate to their customers. While programs are designed to build engagement with customers, generally speaking they are simply promotional vehicles for brands to spam customers with irrelevant offers. Just this year we have gone live with two brands with legacy programs and doubled their email open rates almost immediately by making communications relevant to customers.
2. Bitcoin through its vast open network has access to massive computing power, yet it only creates approx. 1800 bitcoins per day and takes 60 or more minutes for an individual transaction to be validated. Scalability in blockchain applications is still the main problem and although the technology is developing rapidly it’s not there yet.
The number of transactions per day is hard to gauge due to large peaks and troughs. As a reality check, the whole bitcoin network processes around 7 transactions per second whilst Visa currently does over 24000 transactions per second.
Blockchain no doubt creates a potential stepchange in the way loyalty programs will operate in the future. There is a dizzying array of cool things you can do with a blockchain based program. That’s why we have been investing in it for the past 3 years. But none of that will work unless programs fundamentally redesign their program communications away from promoting to customers towards engaging them.
Technology is not the panacea for bad marketing.