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Transaction costs related to the issuance and redemption of reward tokens are much lower on the blockchain since they do not require a third-party.Blockchain also significantly reduces system management costs, thanks to smart contracts that automise processes, all while reducing costs related to instances of error.
Generally while establishing a joint loyalty program, it requires establishing the B2B communications needed to maintain the accounting aspect of the loyalty points, where each party has to audit transactions and secure data from fraudulent attacks.
This is one of the reasons that establishing and operating joint loyalty programs can quickly become a complex and expensive effort.
All brands on the network decides how and with whom the customer uses these rewards, but from a consumer perspective, his/her ability to access and manage them is practically frictionless.
Blockchain can enable a transaction to be recorded and accessed by multiple involved parties in near real time, increasing the chance that a loyalty rewards program provider can cut through coordination inertia to credit points faster.
Blockchain creates an immutable and time-stamped distributed database entry of every single transaction ever made, making each transaction and its record easily traceable, but also rendering them irreversible, preventing double spending, fraud, abuse, and any other type of manipulation of the transactions.
Loyalty programs based on Blockchain where smart contracts will automate all transactions will make the management of loyalty programs smooth and autonomous.On top of this, brands themselves benefit from having access to an ecosystem of already loyal customers, which again reduces data acquisition costs.Through a trustless, decentralized technology solution, blockchain is centralizing the customer’s loyalty programs.A key driver of this notable millennial brand loyalty here seems to be loyalty rewards.While price matters (across all generations), millennials are more likely than any other generation to stay loyal to a brand because of its loyalty rewards In contrast, the older Gen X’s brand loyalty is driven by price and bargains.One of the major reasons for this is that when this complex system is to be implemented(set-up) technically, it can be both expensive and tedious to set up, and demand a significant investment of time and money.Blockchain can be used to connect different owners of loyalty programs and make the points they distribute interoperable.And we haven’t even touched the security aspect yet.In 2017, 11% of attacks on existing financial accounts (not involving payments on credit and debit cards) were on loyalty accounts, compared with 4% in 2016.In the US alone, consumers hold more than 3.3 billion memberships in customer loyalty programs.There is a term called “breakage” used in the loyalty industry to refer to reward points that are not redeemed.