WHITE PAPERRekindle Loyalty Programsusing BlockchainAbstractWhile certain organizations are still evaluating thepotential impact of the blockchain technology, itis quickly emerging as a disruptive force,especially in the context of loyalty and rewardsprograms. High tech firms may have alreadyleapfrogged into the pilot phase, testing thistechnology across various non-financial functions.These firms could also consider creating ablockchain-powered loyalty network to disrupt thetraditional loyalty program practices—eliminatingthe limitations and inefficiencies, and heighteningcustomer experience with secure and immediateredemption options across vendors. This paperbrings forth the pain points associated withtraditional loyalty programs, and highlights howblockchain can help plug these gaps.
WHITE PAPERLoyalty and Rewards Program:As it Stands TodayIn today’s hypercompetitive landscape, most enterprises areadopting customer-centric business models to gain marketleadership. Customer engagement and retention being the corefocus areas, loyalty programs are becoming increasinglyeffective as strategic investments. Unsurprisingly, consumersare highly appreciative of businesses who give them preferentialtreatment, rewarding them for their purchasingdecisions—evident from the 2017 Colloquy Census.1 The reportreveals that 3.8 billion customers hold memberships in customerloyalty programs in the US alone.While the loyalty management market will be valued at USD24.59 billion by 2021 , many organizations are still not able tomeaningfully engage with their customers. The high techindustry comprises product and service companies, and boththese segments are very big on reward programs. For productcompanies, these programs focus on broadening the brandrelationship through cross-selling of services, peripherals, orcompanion devices. For services on the other hand, rewardprograms aim to increase customers’ usage of the servicesoffered.Customer sentiments across various industry reports, however,paint a slightly grim picture. Some 57% members don’t knowtheir reward points balance, only 25% members are satisfied3with the level of effort needed to earn a reward , 33% highlightdifficulties in using the rewards because of various terms andconditions, and 36% say their points or rewards expire beforethey can use them.4One possible solution could be to integrate different programs(across brands) into a consolidated loyalty network—enablingcustomers to earn points from multiple schemes under onewallet that can be used at multiple outlets. But, this addressesonly part of the problem. Moreover, businesses are oftenhesitant to share existing customers’ data. On the other hand,there are significant monetary implications as well, not tomention the challenges pertaining to the integration of siloedsystems and databases, data security, and coordination ofmultiple intermediaries.
WHITE PAPERBlockchain to the RescueMore commonly known as the technology behind thecryptocurrency Bitcoin, blockchain can be leveraged to enable aledger of transactions across participant networks. However,leveraging its full potential will require real-time integration orsynchronization with related applications, which in our case willinclude CRM, ERP, databases, e-wallets, and other loyaltyprogram platforms.With a blockchain-based loyalty program solution in place,enterprises stand to gain in terms of:An integrated system: A common digital wallet can be usedby participating loyalty providers to credit rewards. Thisprovides complete control to providers and consumers alike—theformer being able to set the rules that will govern howcustomers can use the rewards, and the latter having full controlto access and use these points as they deem fit. Moreimportantly, this can also allow customers to transfer unusedpoints to a friend or family member registered on the sameloyalty network. This solution makes it easier for new partnersand vendors to join the program, in turn, giving consumersmore options to choose from.Reduced OPEX: By making upfront investments on blockchainand saving costs in the long run, companies can drive downcosts considerably. This technology will require animplementation plan centered on:nSystem management: Using smart contracts, businesses canminimize systemic errors and fraud to ensure secure andtransparent transactions.nTransaction ease: More trust in the transactions will permitprogram providers to bring down minimum points’requirements for redemption, in turn allowing customers touse points more frequently.nLowered acquisition costs: When integrated with social mediaplatforms, such a solution can help participating companiesgain better access to customer sentiments, likes, and dislikes.Using this information, companies can customize theirofferings to suit customer preferences, thereby serving as acustomer acquisition and retention mechanism. This way, thesolution can help in bringing down the cost of acquiring andretaining customers.
WHITE PAPERStreamlined and transparent process: Near real-time creditof rewards points allows them to be readily redeemable, if theprogram provider allows. In addition, by maintaining a timestamped distribution database for every transaction, blockchainensures each record is traceable and every entry is irreversible.Such a platform of interlinked loyalty programs opens up newbusiness opportunities, both for large and small operators. Largeoperators with already established programs can adopt newservice models and offer value-added services to otherbusinesses, while small operators can connect with other playersin the industry, and scale up their business. Figure 1 highlightsthe journey for partners on the loyalty network—opening updifferent avenues across touch points, for analytics,segmentation, personalization, sales prediction, cross-selling,up-selling, and so on.Negotiate partnership termswith program providerJoin Blockchain-basedloyalty networkParticipate in co-brandingand joint marketingcampaigns with othersellers on network23Enable credit andredemption of loyaltypoints across the network4Promote oﬀers to availusing loyalty points516Sell goods and services toloyalty customers in thecurrency of loyalty points7Give additional loyaltypoints to customers basedon own marketing oﬀersUseOnboardPhasesEvangelize the positivecomprehensive customerfeedback on platform toenhance salesEvaluate12Manage121110Conduct customer analyticsbased on common customerdatabase on blockchainTrack customer satisfactionthrough joint surveys onloyalty network9Manage loyalty programand ongoing marketingcampaigns8Manage customer queries aboutstatus, wallet, redemption ofloyalty points, etc.Figure 1: Partner Journey in a Blockchain -based Loyalty NetworkMaking a Case for a Blockchain-poweredLoyalty Program in the High Tech IndustryAs an early adopter of the blockchain technology for nonfinancial functions, high tech firms can benefit immensely byapplying it to their loyalty programs.Imagine a loyalty consortium comprising:nCompany A: An imaging and printing products makernCompany B: A consumer electronics brandnCompany C: An online electronic accessory retailer
WHITE PAPERWithin this blockchain-powered network, Joe, a registeredloyalty program customer of Company A, has bought a homecomputer. He earns some loyalty points on purchase. Later, hebuys a gaming console from Company B and avails aconcession using his existing wallet points. Here, he not justearns loyalty points, but also gets an online discount voucherfor buying gaming accessories. He uses this voucher toupgrade his gaming controller from Company C’s ecommercesite and earns instant points. He then goes on to place anorder for a Bluetooth speaker. This entire cycle reveals how Joeis able to use his points interchangeably and in real-time wheninteracting with different merchants.Such a multi-channel network will enhance overall customersatisfaction through easy redemption services and improvedloyalty experience. These companies can accordingly captureand analyze customer data for segmentation and profiling, anddeliver personalized offers to customers. In the longer run,companies can launch bundled offerings and joint campaignsbased on the segments identified. Not only does this extendthe reach to a larger customer base, it also helps cut downadvertising and branding expenses, increase sales, andimprove brand recall and customer stickiness.No wonder, one of the world’s largest high tech conglomerates,Hitachi is already exploring blockchain for its 150 millionmember rewards program.5 By testing this technology, theenterprise is keen to determine whether it can meet highvolume transaction system demands and be used as aneffective rewards distribution mechanism.It is clear that the blockchain technology, through its smartcontract feature, is poised to rewrite the rules of interactionbetween parties. For consumers, this becomes a one-stop shopfor all their loyalty program needs. And for merchants andvendors, such a platform provides limitless possibilities throughshared customer data, co-branding, and joint marketingcampaigns.A New Frontier for Brand EngagementBlockchain is not going to replace existing loyalty systems, butwill act as a facilitator that will interact with legacy systemsthrough smart contracts, and drive improvements in theexisting processes. To embark on this blockchain journey,organizations will need to make some strategic choices such as
WHITE PAPERcost-versus-benefit analysis. Given the disruptive power of thistechnology, we recommend high tech companies to make aforay right away. Organizations can start small by building aproof-of-concept that focuses on an internal scenario, and thenextrapolate to external use cases, finally broadening the scope.While this may spell huge investment in terms of money andeffort, but eventually, all of it will be worthwhile.References Colloquy, U.S. Customer Loyalty Program Memberships Reach Double Digit Growthat 3.8 Billion, 2017 Colloquy Loyalty Census Reports (June 2017), accessed September26, 2017, rts/ MarketsandMarkets Research, Press Release, Loyalty Management Market worth4.59 Billion USD by 2021, accessed September 26, s/loyalty-management.asp The Loyalty Report 2017, Get Intimate with your Customers, accessed September26, 2017 rt Vantiv LLC, Who’s cashing in on rewards programs, accessed September 26, payments/shoptalk-rewards-programsinfographic Hitachi, Hitachi tests Blockchain technology with 150 million PointInfinitymembers, March 2017, accessed September 26, members
WHITE PAPERAbout The AuthorIshu BhatnagarIshu Bhatnagar is a BusinessAnalyst with the Digital andEnterprise Transformationgroup of TCS’ High Techbusiness unit. With over 6years of experience, he isresponsible for marketing, presales, and business analysis inthe high tech domain.Bhatnagar is also responsiblefor driving IoT and Blockchaininitiatives, supporting digitaland enterprise transformationsfor TCS’ clients the world over.He has a Master’s degree inBusiness Management from theGreat Lakes Institute ofManagement, Chennai, India.ContactVisit the Communications, Media & Technology page on www.tcs.comEmail: [email protected] to TCS White PapersTCS.com RSS: http://www.tcs.com/rss feeds/Pages/feed.aspx?f wFeedburner: http://feeds2.feedburner.com/tcswhitepapersTata Consultancy Services is an IT services, consulting and business solutionsorganization that delivers real results to global business, ensuring a level ofcertainty no other firm can match. TCS offers a consulting-led, integrated portfolioof IT and IT-enabled, infrastructure, engineering and assurance services. This isdelivered through its unique Global Network Delivery ModelTM, recognized as thebenchmark of excellence in software development. A part of the Tata Group,India’s largest industrial conglomerate, TCS has a global footprint and is listed onthe National Stock Exchange and Bombay Stock Exchange in India.For more information, visit us at www.tcs.comAll content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here iscorrect at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributedin any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademarkand other applicable laws, and could result in criminal or civil penalties. Copyright 2017 Tata Consultancy Services LimitedTCS Design Services I M I 11 I 17About Tata Consultancy Services Ltd (TCS)
computer. He earns some loyalty points on purchase. Later, he buys a gaming console from Company B and avails a concession using his existing wallet points. Here, he not just earns loyalty points, but also gets an online discount voucher for buying gaming accessories. He uses this voucher to upgrade his gaming controller from Company C's .