The Rise of Blockchain Reward Programs

Summary: I’m talking about the mental game of investing, especially as it applies to the crypto market. Subscribe here and follow me for weekly updates.

Starbucks. Singapore flights. Burger King. Clinic. Sales force.

What do all these companies have in common?

They have all launched reward programs built on the blockchain.

You have no idea how many companies have jumped into the world of blockchain. I didn’t know either, until I prepared for our latest webinar (full replay available for Premium members.)

A big thank you to my co-presenter Heather Lowe, Senior Attorney at Gravis Law, who taught me so much about this rewards program and how it is used by top companies. read on.

Rewards Program = Loyalty Program

You know bounty program, because you are probably in a dozen of them. Amazon Prime. Frequent flyer program. My local pet store has a punch card where we buy 10 bags of dog food and get the 11th free.

The bounty program is also called loyalty programme, because the idea is to build customer loyalty. Reward frequent shoppers, and they’ll shop even more.

Today, loyalty programs are increasingly digital. (Burn the punch card.) To see how Starbucks Rewards has become a digital growth engine for the company, watch this video. It’s worth your time.

How Starbucks Rewards scales to the blockchain.

This video has some interesting conclusions for companies and brands, which I’ll combine with the main conclusion of our webinar.

Treat the Rewards Program as an Additional Experiment

As the video illustrates, Starbucks Odyssey is a “add-on” to Starbucks Rewards. First, you join Rewards; then, you can take part in the Odyssey. It’s an experiment.

Because blockchain technology is so new, and most reward programs are so old, treating blockchain rewards as an “add-on experience” means they don’t have to be fully integrated, and it’s easier to close them if they don’t get caught. on.

Singapore Airlines, for example, lets you convert frequent flyer miles into tokens, which can then be redeemed for various partner benefits. Tokens are “add-ons” to traditional bounty programs:

What did the company gain from this initial experiment? It’s like when companies first started creating websites in the late 90s: the benefits are 1) engaging with early adopters on the Web, and 2) developing expertise with the technology.

Identifying early blockchain and crypto adopters can be very profitable: these are usually high earners who understand and use blockchain technology. (Like our BMJ community.)

And developing technology expertise can pay off (literally) far into the future: you build infrastructure, development talent, and internal systems.

Sitting on the sidelines, on the other hand, is a risk: once your competitors build their blockchain technology stack, it will be very difficult to catch up.

Fungible vs. Nonfungible is a Key Decision

As Heather explained so well in our webinar, exchangeable gifts and non-transferable gifts are two different things.

In a matched rewards program, each “point” is the same. (Think of them like tokens.) Our Rewards Program is exchangeable: You earn tokens that can be exchanged for exclusive merchandise, but every token is like every other token.

Non-fungible rewards programs act more like NFTs. Usually, you get a unique piece of art that acts as a membership card. For example, if you have the Bored Ape NFT, you get access to IRL events: just show your monkey at the door.

This week’s Apefest really shows that BAYC is:

– social club
– streetwear brands
– art collection
– Event organizer
– media collective

They/we are just getting started. pic.twitter.com/AFBtq8NQL0

— Josh Ong (@beijingdou) November 4, 2021

The commensurate rewards program is more like a traditional loyalty program. You usually earn tokens, similar to earning points, stamps, or punch card clicks. But interchangeable programs also have potential legal issues (see below).

Note that swappable tokens can take one of two forms: they can reward in existing tokens (such as BK Rewards, which awards small amounts of BTC and DOGE), or they can reward in specific tokens (such as the BMJ Rewards Program). we).

The non-exchangeable rewards program is more like club tickets. Legally, they are easier, which is why more big brands are going this route. Clinique, for example, provides an NFT that also comes with a free monthly product delivery:

The decision whether to use fungible or non-fungible is a key component of program design. As we discussed in the webinar, plan carefully when designing your rewards program: hard to change something later.

Attorney Up

The blockchain space is, of course, full of legal issues, which Heather explained well in the webinar. Some considerations

Securities law. This is the main thing: you must design the program in such a way that the tokens have a real use (i.e., usability), and will not be construed as an investment in the company (i.e., securities).

Remittance laws. Depending on how your program is designed, your token or NFT can potentially be interpreted as “money”, meaning registering as a money sender. (Difficult and expensive.)

Unfair/deceptive trade practices. You have to actually give in return. If you can exchange tokens for T-shirts, there should be T-shirts. If you can use the NFT to get into a party, there better be a party.

Data privacy laws. Depending on what you collect with a rewards program, you’ll need to let your subscribers know, and (in some cases) give them the ability to opt-out.

Tax. You (or your program participant) may be responsible for taxes on the prize. As Heather pointed out, tokens are properties.

In essence, you can’t build a blockchain bounty program without having reputable attorneys who truly understand the blockchain space. (We worked with Heather Lowe, who was great.)

Constantly Tweak and Fix

The big lesson from the video above is that Starbucks should test and iterate their Rewards program. They released version 1, studied how customers used it, then continued tweaking and improving until they found the formula.

If Starbucks – one of the biggest brands in the world – were to test and learn, then we would all be entertained. There is no magic formula, no sure path to success. You have to test and learn, tweak and improve.

As explained in the video above, Starbucks Rewards also functions as a prepaid card: if you load it with cash, you get double points. This essentially makes Starbucks a kind of bank, transacting billions of dollars, and holding the percentage as interest-free loans.

It’s an innovation that they didn’t roll with when they launched. It’s just going through testing and learning with millions of customers, and making all the little decisions in program design. nice UI. Seamless POS integration. Easy to understand.

From the customer’s point of view, the program “works.”

The technology is so new, and rewards programs are so unique to each business, that there’s no one-size-fits-all solution to get to the point where it “works”: it comes down to launch, customization, and refinement.

But it starts with one decision: get started.

Rewards Program for Investors

Since we are an investor newsletter, here are a few investment idea related to the bounty program:

1) Invest in companies that invest in blockchain reward programs. I wouldn’t make it the only reason to invest, but if a company has solid finances, strong management, and is selling at a fair price, a blockchain reward program could bode well. It says the company is investing in future technology, especially with high-income, early adopter customers.

2) Join a bounty program that offers high value tokens. I don’t eat at Burger King, because I care about my health. But if I do eating at Burger King, I might join BK Rewards, if only because I earn bitcoins on the side. It’s a Whopper with a side of sauce.

3) Get rewarded for the purchases you make. For example, a crypto credit card rewards you with bitcoins for everyday purchases. As long as there are no annual fees, and you pay off your credit card monthly, this can be a great way to earn crypto, at no extra cost.

There’s no point signing up for every blockchain rewards program, just as it’s not worth signing up for every traditional rewards program. It’s best to stick with brands you already use, and only go for gifts that really matter.

Investor Retrieval

The Blockchain bounty program should make us all very optimistic about the future of this industry. With these big brands joining forces, investing millions of dollars into technology, the future is looking even more…

… well, useful.

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