According to the latest Bond Brand Loyalty Report, memberships across industries continue to rise and now average 14.8 per person. But - considering total global spend on loyalty programs is estimated to be $323 billion in 2019 – a more critical statistic is: on average people are active in less than half (6.7) of the programs they belong too.
More often than not, loyalty programs do not drive loyal behavior.
The travel sector has some of the lowest satisfaction rates, according to Bond’s survey of 55,000 consumers in more than 20 markets around the world. Only 37% of hotel loyalty members and 38% of car rental members say they are satisfied with their programs; airlines, meanwhile, fare slightly better at 42%.
Says the report, “In the travel industry alone, Bond estimates billions of dollars in customer spending is left on the table when brands fail to address the 14% gap in customer expectations versus current experience along the travel journey. By re-tooling travel loyalty programs and closing the gap to better meet expectations, customer spending in the travel category alone could grow by $5 billion."
Could blockchain provide a solution - both for companies looking to bring down program costs and boost loyal behavior and for customers looking for faster reconciliation and more plentiful earn-and-burn options?
KornChain founder and CEO Animesh Ghosh is one of a growing number of voices who answers that question with a resounding yes.
Founded in 2018, KornChain is creating a blockchain-based global loyalty points exchange marketplace called LoyalT. The company is one of 13 startups in the latest class of IAG’s Hangar 51 global accelerator program.
“The loyalty industry has been deprived of technology,” says Ghosh, who comes from a background in finance and banking.
“Some bigger players have a huge amount of loyalty points sitting in their balance sheet that is unredeemed and that is a liability. Then they have to amortize - which nobody wants that. If you have too many loyalty pints unredeemed, that means only one thing: that your loyalty program is not working.”
By using blockchain’s smart contracts to define and automate - and therefore expedite – the entire rewards process, companies decrease the administrative and personnel costs of their loyalty programs.
And by creating a hub for partnerships with built-in security, transparency and rules, loyalty members can easily earn rewards from multiple providers and exchange them on the network without any cost in the form of “lost” points, thereby incentivizing behavior to earn rewards.
“The market today is prohibitively expensive,” Ghosh says.
“There is a [loyalty] company... that if you have some points, let’s say Delta Air Lines points and you want to convert to Icelandair, they would absorb 70% of the value of your loyalty points. That is the situation in the market. We want to make it zero for the customer.
“In our case if a company has a loyalty program and they want to allow customers to use them somewhere else, that customer is not going to lose anything. We make money only from receiver end, where we are bringing money to them in the form of loyalty points.”
In addition to working with IAG and other large companies that he cannot yet name, Ghosh says KornChain is working to onboard a variety of small- and medium-size businesses in more than 20 countries that could create new options for their loyalty members if they join the system: For example, a local coffee shop's customers could use their rewards on a British Airways flight.