Cryptocurrencies are the perfect alternative to loyalty points. Here’s why.

Most blockchain loyalty programs which have launched in the last few years have been start-ups who have developed their own cryptotoken. They’ve run successful ICO’s, built a platform and are now busy trying to persuade retailers and members to participate in their program. And for the most part, they’re struggling.

As I’ve written about in previous articles, it’s incredibly difficult to sign-up retailers to buy a loyalty currency to reward their customers with. It’s equally hard to convince a customer to become a member. And once the program is up and running, it’s really, really difficult to stimulate ongoing engagement with the program.

How is it that the big loyalty programs continue to enjoy such phenomenal success? They have millions of members and people will consciously change their shopping behaviour to amass more of their loyalty currency.

The first reason is they all started with large customer bases; think banks, airlines and supermarkets. It’s much easier to start a new loyalty program if it can be layered over an existing, engaged customer base. For the most part it’s a terrible idea to try and launch a new loyalty program without either a retailer network or a large member base ready to go.

The second reason is they have highly-desirable loyalty currencies. While the currencies weren’t always highly-desirable (i.e. when they were just launched), they have grown to be so in the eyes of the members base who clearly understand and appreciate the value they can unlock (e.g. free flights).

The new blockchain loyalty programs assumed that a new type of loyalty currency, the cryptotoken, would be even more appealing than established loyalty currencies because they have the potential to increase in value over time. In practise, this doesn’t seem to be bearing out. This may be because most of the cryptotokens have plunged in value as a result of the current bear market, eroding the value of member account balances. It may also be because the new cryptotokens just haven’t earned ‘highly-desirable’ status yet.

A world-first study at the University of NSW in 2017 showed Ether cryptocurrency was significantly more desirable than popular loyalty points amongst participants. While this may appear to be an argument for cryptotokens over loyalty points, it’s actually a more plausible argument for desirable-currencies over unknown currencies. In truth, Ether more closely resembles a popular loyalty currency than a new cryptotoken.

This is because, just like frequent flyer points, Ether is widely-known and drives extensive engagement (over US$1bn daily trading volume in the current bear market). Ether is a known product, a brand. It’s liquid, easily tradeable and yes, highly-desirable.

Thus, companies looking to build a blockchain loyalty program should consider utilising a major cryptocurrency to drive member engagement as an alternative to creating their own cryptotoken.

In many ways, major cryptocurrencies deliver significantly more benefits than most popular loyalty currencies. While desirable, points and miles are expensive for retailers to buy, are restricted in what they can be redeemed on and they expire. They also tend to be part of relatively localised programs. In contrast, major cryptocurrencies are cost-effective to buy (no excessive margins earned by the loyalty program operator), they can be bought and sold all around the world and they never expire.

Blockchain loyalty absolutely has a role to play in reinventing the loyalty industry, but only if it delivers something which in the eyes of members is more appealing than what they can currently access. While cryptotokens have the potential to play a part, the most immediate opportunity is using the major cryptocurrencies to reward loyalty and drive deeper engagement. This is an area which is likely to see significant growth. I predict over the next five years, more people will come to own cryptocurrencies via participation in loyalty programs than they will from exchange trading.


Philip Shelper is a loyalty management 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. Buy the book.

www.blockchainloyalty.io is a global resource centre for everything blockchain loyalty.

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