Blockchain + Brands + Loyalty

In the past 2 months, I am helping a startup as a consultant before I pick my next role. In the meantime, I was exploring a few ideas and tried to build an MVP around it. 

This pandemic has opened a lot of new avenues for many as well as shut doors for many. But a lot of new things are evolving due to this. This article talks about how blockchain can be utilized to build a customer loyalty system and the use cases around it.** This article will talk about the idea along with the hypothesis, market potential and validation. I would love to talk with people who would like to take it further. 

Cryptocurrency: A cryptocurrency token for every brands

Every other cryptocurrency revolves around its monetary value and the proliferation inside their ecosystem. Bitcoin(BTC) made everyone realize its potential usage with its ~$200B USD market cap even though many business segments are still yet to adopt it.

Every other business wants to have a loyal user base and it is very difficult to maintain with the current ecosystem to make a customer stay for a longer term. This use case is applicable potentially to any business or an organization who has a network of loyal customer base and how to grow it using crypto coins. It could be an ecommerce platform or a political party or a group of people from a particular community. A college can implement a blockchain to distribute and exchange books, money or fees within and between their group of students and other staff members. At any point of time, the cryptocurrency can be converted back to a fiat currency(USD/INR/etc.)

Practical Use cases

The idea is to build this as a platform for brands where they can launch their token quickly. It should potentially work with a lot of other external API endpoints as a plug and play product. Every brand and business uses multiple third party products to run their day to day activity. Cryptocurrency has a lot of use cases with those third party tools to improve loyalty. A few examples are,

Newsletter platforms: Circulate tokens to all the users who signs up

Braintree/Stripe like payment gateway: Send thankyou tokens to your client for making the payment

Referral: Referring a new customer to your platform, referring an employee in your company

Github: Reward users for a useful pull request

Asana/Jira/Trello: Reward team members for completing a task

Typeform/Survey monkey: Tokens for people who answers your feedback/survey

Shopify/Magento: Tokens to people who makes a successful purchase

Explanation

Currently every other brand is having their own ecosystem with their loyal user base. And users will receive loyalty points on their every purchase and they can later redeem it to buy more products or as a discount on their next purchase.

**What if there is a provision to convert those loyalty points into Bitcoin(BTC) or Ethereum(ETH) or to a fiat currency?Assume, there is a consumer brand ABC who has a loyal customer base of about 10M. They are offering loyalty points on every other purchase whether it is through an ecommerce portal or a retail POS system. Now the company wants to roll out crypto for all their loyal user base instead of loyalty points and reward programs. 

They offer their own token called ABCz to all their customers who make a purchase more than 1$. Every subsequent dollar above 1$ gains 1ABCz token.* ***Now the users can own those tokens and redeem whenever they want. But if they keep it for a longer period, the value will grow, sometimes exponentially. That is the advantage. 

Market potential

Remember Facebook is building their own blockchain network for their user eco system? The idea will work with pretty much any brand and business who has a larger user base. Larger the network, larger the benefits from the blockchain. 

Why a business needs to implement their own crypto?

86% of customers are enrolled themselves into loyalty programs to gain reward points and more than 71% of customers said that reward points are useful to be a loyal customer for a brand. (Deloitte and Bond insights).

What are all the advantages for a brand to use their own coin?

• Brings down Customer Acquisition Cost(CAC). But how? — explained below
• More visibility to the brand
• Low implementation and maintenance cost
• Need not buy someone else’s loyalty system
• Better way to increase user base in Social media and other platforms with better engagement

How a brand can offer their token for their users?

• Send out tokens to user wallet after a purchase
• Give token for spending time on your mobile app or website or for visiting a particular product page
• Send a token for every tweet with a hashtag or posting on any other medium like Facebook/instagram
• Through clickable links to their email 
• Through QR codes for the users who scans a particular QR code at one of their retail outlet or a particular page in their website
• Give out free tokens to everyone who signs up and increase it by 10x tokens once they make their first purchase

Why the customer wants to have a crypto coin instead of loyalty points?

• Option to redeem it instantly into a product or another token or as a fiat currency
• Use the crypto between multiple brands and platforms
• Exchange your tokens with other people
• Token price will be keep fluctuating and potentially the value will increase when the user base and transactions grows 

**Monetary value of a **Cryptocurrency

This is where all the investors are interested in. Same as the stock market. A crypto monetary value will be decided by its network effects inside the ecosystem. When there are more people holding and exchanging the crypto currency, the value will increase. Larger the network, the larger the price point. 

How it works?

The MVP is built on top of Ethereum blockchain. Ethereum(ETH) is one of the popular blockchain after Bitcoin(BTC). The implementation helps a brand or an organization to quickly release their own Cryptocurrency with their branding in it. 

**

*Brand ABC can launch ABCz Token. ***

A pegged sidechain system allows you to enable Ethereum or any other ledger data to be transferred between multiple blockchains. It means that you will destroy a few Ethereum and convert that into some other currency. In practical terms, you will send Ethereum to an address where it can’t be spent. While doing this, you will receive a new token in exchange for it. This is one way peg. You can’t convert that into Ethereum again. Sidechain is a concept on top of it where it allows you to create two way peg that lets you move it back and forth. 

Instead of destroying Ethereum and making it uanble to spend, you create smaller blocks and lock them there. These blocks won’t belong to any address, instead they are controlled by Ethereum script. Each block you lock this way, you get a newly created ABCz token. You can send it to anyone as you wish, pay them or whatever you want to do. These blocks can be destroyed and converted back to Ethereum by attaching necessary proof. 

Once after the launch, the brands can give out equivalent amounts of tokens based on their current loyalty points. The initial price of a token is set by the potential of the brand and user base in the similar way of a company IPO. From there the price will increase.

*From the MVP, a brand can quickly launch their own CryptoCurrency with their branding in it. And they can easily swap out their existing rewards system. *

Validation

Whenever I talk to people about implementing this, the first question is, “how much does it cost to invest in this blockchain?”. The answer is, based on your current budget on the whole loyalty platform implementation and associated cost. Start with half of it. 

I spoke to three brands and an institution and showed the demo and one of them is keen on seeing this with a closed loop of customers first before implementing it to their entire 7M+ user base. The institute is ready to try it out within one of their campus with some additional changes. 

**P.S: There are multiple use cases and not just limited to brands. If any one is interested, DM me to build on top of this and to take it up. **

#loyalty #brands #cryptocurrency #blockchain #ethereum