2024’s loyalty overhaul: Blockchain’s promise for manufacturers

To succeed in web3, brands need to understand that the future of loyalty isn’t about locking customers into closed systems. It’s about setting them free—free to own their data, control their rewards, and engage with brands on their own terms. Loyalty programs have never been more popular, but they’ve also never felt so outdated. As the inflation crisis eases, customers continue to trade personal details for deals—gaining access to ‘normal’ prices while non-members pay a premium.

This tactic, although counterintuitive, is working. According to Antavo’s 2023 Global Customer Loyalty Report, 67.7% of businesses have made plans to boost investment into loyalty programs to retain customers in the face of inflation. And 79% of American consumers have taken the bait, spending more with brands that offer loyalty perks, reports Statista.

Yet, this scramble to boost loyalty has revealed that traditional loyalty programs are losing relevance. But there is a solution on the horizon. Blockchain technology has emerged as a potentially radical alternative to the tried and no longer true loyalty programs that many brands still hold onto. 

Walled gardens and limited use cases

Anecdotally, traditional loyalty programs have operated within walled gardens where customer data is siloed, and rewards are limited to specific use cases. These models have long depended on third-party cookies and opaque data practices to thrive.

However, as privacy regulations tighten and cookies phase-out, these models are rapidly losing their viability. The result? Loyalty inefficiency through unused points, shallow engagement, and fragmented data. Additionally, thanks to data breaches becoming garden variety, consumers are increasingly erring on the side of caution over how their data is collected and used, with many opting out of loyalty programs altogether.

In the digital era, traditional loyalty frameworks have begun to crumble. Nowadays, customers don’t have to settle for being trapped in closed systems, and brands can no longer take customer buy-in for granted. Instead, brands need to make a compelling case for why sharing personal information is worth a customer’s engagement.

This is where the blockchain comes into play. Because if traditional loyalty programs are like store gift cards that can only be used in one place, blockchain-based loyalty is like cash: fungible and usable almost anywhere without revealing a customer’s identity.

Within this framework, smart contracts ensure transparency, while user-owned wallets put control back in the hands of consumers, redefining the value exchange between brands and their patrons.

Revamping loyalty one block at a time

Imagine a loyalty program that runs seamlessly in the background, powered by blockchain but invisible to the user. Shoppers earn tokens for purchases and interactions, redeemable for discounts, experiences, or even tradable with others. Unlike traditional points, these tokens belong entirely to the consumer and are securely stored in a digital wallet.

Dynamic NFTs offer a glimpse into the future of onchain loyalty. These customizable, tokenized assets evolve with user engagement—think NFT badges that unlock exclusive products or perks, like Lululemon rewards earning you a free month of personal training at your gym. These dynamic tokens can be tailored to a customer’s experience. By leveraging AI, brands can add security measures like verifiable credentials into the mix to help create personalized experiences.

Now with verifiable credentials in this framework, users can share only the information they choose to, while brands can use modular tools onchain to build custom loyalty experiences tailored to individual preferences. The result is a loyalty program that feels less intrusive, more authentic, and more engaging than traditional means.

Although we’re still incredibly early to these potential benefits, the idea of tech abstraction has been a major driving force behind this paradigm. Some have even likened this evolution to the rise of cloud computing (like Amazon Web Services), where consumers don’t see the tech they’re interacting with, just the optimal user experience that it creates.

Opting-in to the future of loyalty

As cookies disappear and privacy concerns about data grow, an increasing number of brands are now asking themselves a critical question: “How can we make loyalty programs so compelling that users actively choose to participate?”

The answer lies in creating experiences that are genuinely valuable to customers. Gone are the days of buy 10 get 1 free. These traditional incentives (which really don’t feel like incentives anymore) can now be replaced by onchain rewards like collectibles, leaderboards, or token-gated experiences.

Brands must still tread carefully when entering this new paradigm. Shallow attempts to bring products on-chain have failed spectacularly on web3. After years of refinement, the general consensus is that simply tokenizing existing loyalty programs without rethinking value propositions is a recipe for experiences to fall flat.

As blockchain technology matures, brands embracing this paradigm will thrive, unlocking transformative rewards not only for their customers but for themselves along the way.