Here’s why we won’t be investing in it…
The token sale for Gabrotech blockchain loyalty company is approaching with the 31st July set as a milestone on the company website.
Gabrotech will host a token sale for their ERC20 Gabro Token (GBO) which will start on the 31st of July, 2018 and end one month later on August 30th, 2018. The total token supply will be 1,000,000,000 with a hard cap of $50 million. The token price will be set as 5000 GBO to 1 ETH with a minimum purchase of 0.1 ETH.
According to the company website, the central problem Gabrotech seek to solve is that “for many customers the Loyalty Program Operators try to make it difficult for customers to redeem their loyalty points from the reward program because the program operators believe that expired loyalty points equates to a form of profit for them creating a negative relationship between the customer and the service.”
Their proposed solution is a unifying cryptotoken; GBO. Members will be able to cash in their points for GBO and according to Gabrotech use them to in order to ‘instantly redeem their preferred services, discount coupons, loyalty points, air tickets, hotel rooms, etc.‘
This approach appears to be relatively common for blockchain loyalty approaches, but it is flawed. The premise of the argument is that consumers often belong to many loyalty programs, each with their own currencies, rules and restrictions. This has led to a situation where tens of billions of dollars of points and miles are held in different accounts but at such a low value they cannot be used. By connecting all of these programs to a single blockchain program, members would be able to transfer them into a single token and bundle the value together, thereby unlocking the value and making loyalty great again.
Unfortunately, this utopian view of the future of blockchain loyalty is unlikely to ever eventuate, as the argument is built on misleading information. Most companies running their own loyalty program are doing so because they want to. If they wished to allow their members to pool their points or miles earned from multiple loyalty programs, they could have simply joined one of the many dominant coalition programs which have existed since the 1980s. They haven’t, either because they wish to keep the points and miles spend within their own ecosystem (thus ensuring the revenue doesn’t leave their walled garden) or because competitors have already joined the coalition program and locked them out with exclusivity provisions in the partner contract. In the case of the second point, they certainly wouldn’t want their members transferring their points or miles into tokens and pooling it with reward currency earned from their competitors, as there’s no competitive advantage for doing so.
In the event that a loyalty program allows for their currency to be redeemed on products outside their own ecosystem, they generally tend to structure their rewards range so the best value for members is to redeem on their own products (such as flights), with very poor values provided for third party products (such as gift cards and iPhones) in order to maintain most of the spend within their business. Some programs also allow their currency to be transferred into the currency of another program. When this happens, the conversion rates are generally very poor to dissuade members from doing it. To argue that a majority of companies will support a unifying blockchain loyalty approach which allows members to transfer their points or miles out of their ecosystem and maintain the value is pure fantasy.
Philip Shelper is a specialist loyalty consultant based in Sydney, Australia who obsesses about everything to do with loyalty and rewards. His company Loyalty & Reward Co are a leading loyalty consulting firm.
Phil is the author of “Blockchain Loyalty: Disrupting loyalty and reinventing marketing using cryptocurrencies.”
www.blockchainloyalty.io is a global resource centre for everything blockchain loyalty.
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