For consumers, loyalty programmes can be limited in value, difficult to combine and easy to forget about. For retailers, they’re inflexible, expensive to run and difficult to drive value from, writes Libra Incentix’s Andrew Doxsey.

Major retailers are running individual programmes that only allow customers to redeem earned rewards in a narrow environment.

Users have to jump through hoops to exchange points, which results in low value for both business and the customer.

Five problems with loyalty programmes

1. There are too many of them

On average, each consumer belongs to almost 15 loyalty programmes – but over half are inactive. 

2. They’re inflexible

This inactivity is a symptom of inflexibility. If points accrued in a loyalty programme are only redeemable with the issuer, there’s no repeatability or reinforcement so the points simply get forgotten. 

3. They represent poor value exchange

Even where brands enter coalition loyalty models (for example, an airline allowing its points to be spent on car rentals, hotels, etc) this still doesn’t represent a good value exchange. The points spent with secondary partners are worth less than if they were spent with the airline itself, so the consumer isn’t getting a like-for-like reward. 

4. Redemption is complicated

Coalition models are also a headache for enterprises. If you’ve got millions of customers redeeming points in multiple locations with different values and redemption rules, reconciliation is extremely burdensome.     

5. It’s also very expensive

Loyalty programmes typically have huge teams of people managing them. This discourages innovation and personalisation because, the more complex and bespoke a programme, the more heavy lifting needs to be done to make it work. 

How blockchain changes the game

Fortunately, there’s a better way.

By operating over blockchain, all the different rules governing a loyalty programme can be embedded in a smart contract.

No negotiation is required, and every part of the chain is transparent and indisputable. 

If a point gets spent with a merchant at a certain value, there’s no possibility the value is incorrect because the logic chain wouldn’t allow it. This eliminates the need for huge teams to manage reconciliation and provides an opportunity to offer more value to consumers. 

Multiple loyalty programmes can be consolidated across multiple industries and in multiple countries, allowing them to be redeemed in a borderless fashion.

Points become interchangeable because they’re all backed by the same platform within the blockchain.

This is the future: giving consumers true value by expanding the potential of loyalty programmes so they can be used globally to unlock greater discounts; or even traded, sold or converted to cash. 


Andrew Doxsey is the co-founder of Libra Incentix