Customer Loyalty Programs

Customer Loyalty Programs

Customer loyalty programs is a widespread marketing tool that serves to encourage repeat business. Even the smallest discounts can lure customers back to the store. Retail chains issue their own bonus cards with a barcode in order to identify their customers and to entice them back with a promise of substantial savings. And these programs work. Any enterprise - small and big - can profit from the repeat business that their loyalty program engenders, but for the major retail giants their bonus cards bring them real and substantial rewards. 

The downside of using traditional bonus cards lies in the fact that the card issuance and the loyalty program maintenance does cost money. And the proliferation of these programs among retailers brings to customers the inconvenience of having to manage and carry at the same time dozens of these cards in their wallets - something that even the popular virtual wallets on their smartphones can't seem to completely resolve. Not to mention the difficulty of having to convince your new customer to add yet another piece of plastic to the already overwhelming collection of forty or fifty cards that she needs to remember having. 

The idea of using tokens for launching a customer loyalty program is already in the air. Especially given the highly insignificant costs of launching this program if we are to adapt it to the already existing development models. Not to mention all the hype of utilizing a cryptocurrency for your loyalty program because your customer loyalty tokens become, indeed, your own cryptocurrency! 

We at Bit-Labs have already developed our own token-based model, utilizing the Etherium blockchain, for launching a customer loyalty program for an online store. In general, the launch of your token-based customer loyalty program would follow these steps:

you issue a certain number of tokens whose value, for example, may equal the amount of your annual earnings;

we install a cryptocurrency-wallet module on your internet platform which adds "customer token management" as an additional option to your customer account management system;

we carefully calibrate the parameters for issuing customer rewards, e.g. "register yourself as a customer and receive your reward after your first online purchase;"

we add an option for a partial payment with bonuses - "claim your customer reward discount"  or "pay with your bonus points" to your online payment system. 

Your store's pricing policy will, in general, determine the policy of awarding bonus points to your customers. Here are some of the examples of the policies you may choose to institute:

your customers may cover 10% of their purchase with their bonus points;

red-tagged items may be covered in full by bonus payments, the rest can only get 10% bonus payment coverage. 

The launch of your customer loyalty program offers you a great way of inciting your customers to make a purchase by offering them their individual discounts. But your bonus reward system must be carefully planned and calibrated in order to avoid the possible worst-case scenarios where suddenly six months after their launch, all tokens happen to be withdrawn from circulation or where your customers find themselves unexpectedly  "swamped" with their tokens, unable to utilize them fully for their purchases. 

And for larger retail chains, the circulation of their own bonus points among their customers, their true de-facto private cryptocurrency, will allow them to take the next step and to launch their tokens on the secondary market through the existing cryptocurrency exchanges.  This is an ingenious way, provided that they proceed cautiously and protect their tokens from crashing, of raising funds for their business expansion or for compensating for their temporary cash deficiencies in the operation.  The new opportunities here are numerous, unique and great. 

Our concept for a blockchain-based customer loyalty program of an online store also provides for an option of bringing together the tokens of several online shops for a joint customer loyalty program where their exchange value is based on the initial agreement reached by the participating members. As a consequence, such a program encourages the establishment of a store partnership network where the bonus points, earned at one online store, can be utilized for purchases in another. This expands considerably the number of customers for each business within the network. 

And although bonus partnership programs, utilizing traditional bonus cards and uniting various stores in a single network, have been in existence already for a long time, the blockchain-based bonus partnership offers a greater number of opportunities and a greater flexibility for businesses to be more independent and to have a larger degree of autonomy in this decentralized system. If before, in a traditional joint bonus program, every store had to follow a single set of rules and guidelines for each individual member, in our new model individual stores control the emission of their own tokens and have a greater independence with their functionality within the system, including even the option of utilizing these tokens to attract investment, something that the traditional bonus cards could never hope to achieve. Each member on a blockchain network has a greater degree of flexibility and freedom than before and at the same time can derive maximum benefit from cross-selling within the network. 

If you are considering the benefits of setting up your own customer loyalty program, please let us know. Bit-Labs will be excited to work with you, utilizing our development models to serve your business needs.