When a concept is new, creativity can seem limitless.
The shackles of precedent have yet to clamp their iron grip around the imaginations of entrepreneurial marketers. When things are new — be it a technology, a product, or simply an idea — that feeling of “freshness” can be inspiring.
And there’s nothing fresher right now than cryptocurrency. While the sheer novelty of the technology might have baffled some and perplexed others, enterprising loyalty operators are fast integrating cryptocurrencies into their rewards structures.
Let’s recap the basics: a cryptocurrency is a digital financial system that doesn't rely on traditional banks to operate transactions. It’s a peer-to-peer system (meaning a decentralized platform where two parties interact with one another) that can enable anyone to send and receive payments, no matter where they are. No physical money is toted around or exchanged in the real world — instead, cryptocurrency payments exist as digital entries to an online database describing specific transactions. This database is known as a “ledger”, and the actual monetary holdings are stored in digital wallets.
Who Is Using Cryptocurrency?
Naturally, cryptocurrency as a reward won’t feel enticing to just everyone. A firm understanding of the customers that are attracted to these financial systems is crucial for establishing programs that will perform. Right now, it’s primarily Millennial and Gen Z customers who are literate in the emerging uses of technology, and who are embracing the benefits of cryptocurrencies. For these customers, the use of cryptocurrency technologies adds a great deal of value to existing loyalty programs.
But getting even more specific can help round out these demographic personas, helping brands focus in on narrow cues for a hyper-targeted strategy. For example:
- Twice as many men as women invest in cryptocurrency (16% of men vs. 7% of women)
- Crypto is the only financial vertical that has a higher participation rate among younger adults than older adults: 15% of those 18 to 34 years old own cryptocurrencies, compared with 11% of those ages 35 to 64 and 4% of those 65 and older
- People of all races are about equally likely to own cryptocurrency: 11% of Whites, 11% of Blacks, 10% of Hispanics, 14% of Asians, and 13% of people of another race all lay claim to crypto investments
- 27% of consumers with income over $100K claim to be very familiar with cryptocurrencies, compared to 13% with income under $75K
- 13% of college educated consumers own cryptocurrencies, compared to 8% of non-college educated consumers
Why Should You Pay Attention?
There are many more reasons to list, but to get some tactical thought starters spinning in your minds, here are three major reasons why cryptocurrencies might benefit your loyalty strategies:
1) The Excitement Factor
Oftentimes, the best rewards have that special spark of newfound innovation to get customers talking. Cryptocurrency is the hot topic right now, and if brands can make the concept simple to understand and accessible to engage with, it can swiftly spur important behaviors such as registration, purchase, repeat participation, and more.
2) Superior Security
Cryptocurrencies are incredibly secure; because they are based on cryptography and blockchain security, decentralized payments can harbor robust customer protections. This can be a huge boon for loyalty programs, especially in the face of rising loyalty fraud and publicized security breaches which have plagued the industry in the past decade. However, despite these facts, there may be a lingering wariness of cryptocurrency legitimacy, which brands will have to fight with accurate knowledge and transparent information.
3) Reduced Management Costs
Blockchains are not only efficient, but their decentralized nature means that operational costs can be significantly reduced. Cost savings from mitigated error and fraud; from faster, more efficient points turnover; from social media possibilities enhancing communications amplification; and from the independent creation of blockchains that bypass third-party rewards purchases can all ladder into financial benefits for brands in the short and long-term.
This is all just a fundamental introduction to the concept of cryptocurrency empowered loyalty. For the next article in this series, we’re going to cover specific loyalty program activations leveraging cryptocurrency as rewards, and the reasons it works for the brands that execute them.