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This recent article by Powerledger's Anya Nova dives deep into the world of Web3, specifically discussing the hype around Web3 loyalty programs and what it entails for businesses who may be interested in starting their own version of Web3 loyalty programs.
Crypto has had a hard year. But the underlying blockchain technology seems to be going from strength to strength.
There is a lot of hype around Web3 loyalty programs, Starbucks, for example, are launching the beta test of its highly anticipated program, which combines traditional loyalty rewards, NFT technology and introduces an element of gamification.
With technology offering new ways to reward consumers, it’s time to take a closer look.
Web1 was about using the internet to publish the information you’ve already published elsewhere. Web2 is about tapping into the capabilities of the internet to create new services, such as Facebook, Amazon and Netflix, with an increased focus on user generated content being made accessible. Web3 is about respecting the individual’s rights to their data, their art and their digitized assets, letting them own the content the users have generated themselves, while providing new ways to connect, create and trade in a decentralized way using blockchain technology.
Web3 describes a broad range of emerging internet applications for blockchain technology, including a decentralized, public database that allows information to be securely recorded on a network of computers rather than verified and controlled by centralized entities.
Central to this evolution from Web2 to Web3 are four distinct blockchain-enabled applications: fungible tokens (cryptocurrencies), non-fungible tokens (NFTs), decentralized autonomous organizations (DAOs), and metaverses. In combination, these all work together to allow the user to own and have more control over their own data, and if implemented with a carefully considered approach, can allow for an increase in interaction between businesses and their customers.
So what is a Web3 enabled loyalty program, and does your brand need one?
Web3 loyalty programs reward you for purchasing goods and services with custom tokens; these could be tokens that are redeemable for retailer benefits, may have a monetary value and be able to be exchanged for real currency by customers, and some may include beautiful artistic NFTs. These tokens and/or NFTs are very often tradeable within the blockchain ecosystem. A good rewards program does not keep you locked in - ideally the customer can always withdraw their rewards and artwork they have earned to their personal wallet.
No wonder the interest is high.
So, should every brand create a Web3 loyalty program? And which Web3 loyalty programs are most likely to succeed?
If your brand does not have a traditional loyalty program, it’s time to pause and ask why? Perhaps, you are a monopoly and your customers are already locked in to using your service, but many NFT royalty programs are aiming to disrupt these monopolies using the technology Web3 facilitates. Web3 programs cost money to develop and maintain, so you may ask what is there to gain from spending your brand’s resources on rewarding customers?
Alternatively, you might already know everything there is to know about your customers. Their name, address, and habits. So the data that is typically collected as part of any loyalty program is of no use to you, as you already have it. Is there something else about your customers that you don’t know and is critical for your business to know?
Do you have a deep understanding of loyalty programs? Are you already engaging directly with your customers? Do you have in-house capabilities for blockchain technology? If the answer to these questions are “no”, you will need to rely on consultants every step of the way, both for setting up a loyalty program and for utilizing blockchain.
Do you see a pathway for a loyalty program to become a revenue center? If not, it’s unlikely to be sustainable. At the very least, you need to have a clear view of the number of new customers that such a program would generate, the positive impact that such a program is predicted to make on customer retention and acquisition, or a clear view of what other value the loyalty program can add to your existing business
Do you understand the legal and tax implications of creating, trading and disposing of your brand’s crypto? Are you comfortable with those?
Tokens are an integral part of any Web3 loyalty program. So consider your customer. What demographic do they fall into? Are they younger and more likely to appreciate the opportunity to receive tokenized rewards or even crypto, or does crypto have a negative connotation to them or is it something they don’t understand? Have you inquired with your customers, or surveyed them about their appetite to get involved? These are all important questions to consider when designing a sustainable loyalty program that will add value to your business
Finally, tokens are not considered as valuable if you cannot trade them, at least in the minds of most crypto users, and this is especially true when it comes to crypto savvy users who are familiar with NFTs and collectibles. Have you considered your position on tradeability? Do you want your customers to be able to trade with each other or even exit your program? Or do you open it up wider and allow your customers to trade with anyone in your industry, your competitors even? Do you want to impose any limits to trading, which will limit the attractiveness of your Web3 loyalty program? Or do you embrace the open world of token trading and let your brand’s tokens be bought and sold by anybody, including speculators? How do you still meet your customer goals if your token is no longer owned by someone who had any association with your business? If you want to restrict your token to be owned by your customers only, then are you confident your customers appreciate the value your token provides, or do you plan to allow them to use an off-ramp into fiat, and if so, will you be providing this?
Is there a way for you to partner with an organization that already has a tradable token, such as Powerledger’s POWR token?
These questions are an excellent starting point for any brand wanting to consider a Web3 loyalty program with their eyes wide open, both to the business potential and the cost of developing such a program.
For those that ascertain that the Web3 loyalty program is right for them and their customers the benefits are numerous.
These applications promise to increase peer-to-peer interactions, enabling fair compensation to customers by large companies for their data, and facilitate access to user networks at a much lower cost than is currently possible.
These distinctions make Web3 both a natural evolution of Web2 and a broader paradigm shift that may fundamentally alter the online interface, organizational structure, business practices, and most importantly their relationship with their customers.