Web 3.0: The Next-Gen Customer Loyalty-Based Business Models
The global pandemic led to the rise of ecommerce, technological disruptions, and changing consumer behaviour. Conscious consumerism prompted the re-evaluation of companies’ strategies on how to keep consumers involved, retained, and loyal. Companies are embracing new business models that can expand the potential of loyalty schemes, ensure borderless reach, and deliver a wide range of benefits and experiences to customers.
In a changing marketplace, consumers are demanding products and services that are specifically tailored to their needs, supported by convenience, quality, and relevance Companies have started testing and introducing new business models with new personalised experiences. Brand loyalty has been disrupted in a time of digital transformation, which requires new integrated ecosystems to be established across the whole customer experience journey (CXJ) and Omni channels of operation, i.e. digital, social and mobile, alongside traditional platforms. Brand loyalty programs need to adapt to changing consumer behaviour, embrace transparency and build brand purpose, appeal to consumers most engagingly and effectively, and provide rewards that are unique and personalised.
A focus on transactional loyalty programs, where rewards usually equate to a price, is no longer the key to retaining customers. These are considered outdated, very complex, and often ineffective, with a multitude of options on the market. They deliver limited value, focus mainly on the transaction rather than the whole customer experience journey (CXJ), capture only one market/segment, and allow redemption only with one specific brand. Instead, there is a need for more attention to the customer experience and building an emotional connection with the client throughout their whole shopping journey that brings more value, earns trust, and creates a bond. This requires customer loyalty schemes to be very agile, adaptive, and multidimensional, combining price-based benefits with emotional experiences and continuous interaction with loyalty members.
Decentralised platforms, which combine blockchain technology and non-fungible tokens (NFTs) that can deliver value for all customers alongside new channels to redeem loyalty rewards with digital assets supported by exclusive personalised benefits and enticing experiences with more flexibility. Eco-conscious behaviour and sustainable consumption have taken a central place among consumers, that are favouring customer-centric green experiences. Loyalty programs that reflect environmental credentials will acquire, engage, and retain customers on a large scale during Web 3.0.
How to design the Next-Gen Customer Loyalty-Based Business Strategy?
When designing a next-gen customer loyalty strategy, the main aspect for companies is to balance the customer value proposition with the business economics and value creation for the company. Companies need to make sure that their consumer value proposition strictly reinforces their objectives. Companies need to identify features and benefits that consumers value most but cost them very little. Companies must have a clear understanding of what value proposition they’re willing to give away to the right targeted customers.
The Next-Gen Customer Loyalty-Based Business Models that are gaining popularity globally are as follows:
1. Hyper Loyalty: Organisations are increasingly embracing hyper-loyalty as part of their business models through diverse subscription options, membership clubs, fractional share schemes, or cryptocurrency offers. Subscribers are participating in consumer micro-networks, which allows them to benefit from hyper-personalised offers, new product launches, events, co-branded initiatives, and interactions with brands. This holistic view of customer behaviour boosts brand engagement and strengthens consumer retention.
2. Engagement Loyalty: Engagement-based loyalty programs build deeper customer relationships and long-term connections with customers. As consumers become more purpose-driven, the nature of rewards customers expect is also changing, with more focus on experienced-based perks. Experience-based perks increase loyalty and help boost retention and experiences must be exclusive, immersive, and entertaining to help form meaningful emotional connections based on shared values. The application of digital tools will also continue to grow in the loyalty space. The use of non-fungible tokens (NFTs), blockchain, gamification, and the metaverse will help bring more exclusivity to the offer and will be the big driver of customer retention and revenue.
The Italian fashion company Prada is working with the gaming player Ubisoft to include its Prada Linea Rossa line in Riders Republic outdoor sports playgrounds in the US National Parks. Three different Prada outfits are offered to loyalty members to choose from: The Flame, Wild Stripes, and Camouflage Rock. These in-game skins for the video game characters allow members to virtual snowboard, ski, or cycle, all dressed in Prada. The brand wants to expand customer reach and increase user retention and aims to attract young consumers who cannot afford to buy luxury goods physically.
3. Emotional Loyalty: Emotional loyalty is a deeper connection, which is formed when every communication and input customers receive from a brand makes them feel recognised and important. Emotional loyalty builds strong emotional bonds with brands, products, services, or providers. Emotional loyalty is a more significant dimension in keeping consumer brands loyal over the long term. The maxim that ‘people buy on emotion and justify with logic’ need companies and brands to understand at a deeper level their customer’s emotional need and wants. To win and retain the hearts and minds of the customer requires efforts in emotionally engaging them that strike a balance between their rational and emotional needs Those brands that invest to build and augment their customer’s emotional engagement through trust, recognition, empathy, and attachment will stand to gain a considerable competitive advantage during Web 3.0.
4. Green Loyalty: Eco-conscious consumer behaviour, and sustainable consumption have taken a central place among consumers globally, favouring customer-centric green experiences. Loyalty programs that reflect environmental credentials will acquire, engage, and retain customers on large scale. Many brands are working to reduce their carbon footprint and create social and environmental purpose and value. Green loyalty programs are adopted to support climate action projects, i.e. reforestation and renewable energy, at no additional cost to the brand They are also seen as tools to support brands that are genuine about sustainable causes and commitments, encouraging more recycling and reuse of products, or boosting in-store shopping as opposed to home delivery options. Brands donating loyalty points and rewards or supporting funds that finance projects and encourage sustainable living will further increase customer satisfaction. Importantly, however, these loyalty schemes must embrace an instant gratification rewards model to create goodwill and nurture eco-responsibility. The brands that will embrace green loyalty programs, and nurture sustainable behaviour throughout the whole customer experience journey (CXJ) will stand to gain a considerable competitive advantage.
5. Omnichannel Loyalty: Omnichannel loyalty programs engage customers across all channels and are accessible via a browser, mobile app, and in-store. These types of loyalty programs focus more on customer engagement than simply incentivising transactions. They are more interactive and feature high levels of gamification to create an immersive experience that encourages customers to interact with the brand even when they aren’t looking to make a purchase.
In omnichannel loyalty programs, customers can gain points from actions beyond making purchases. This includes taking surveys, rating products, or simply logging into their account. Brands can use the vast amount of customer data collected across different sales channels to provide users with a more personalised experience. This can be in the form of travel vouchers, media streaming subscriptions, exclusive access to the latest launches, spa/gym memberships, or similar experiential rewards based on the customer profile and interests.
Starbucks is expanding its loyalty programs that will combine NFTs and allow members to earn digital stamps through which they will access exclusive experiential rewards. NFTs will have point values that can help earn invitations to events, trips to its major coffee suppliers, virtual coffee classes, etc. By embracing immersive experiences, Starbucks wants to increase brand awareness and foster effective engagement, especially with its younger loyal members. By blending physical and digital channels, the brand can create hybrid experiences which attract customers who are interested in entertainment, gaming, and high-tech.
6. Community-Based Loyalty: Community-based loyalty programs focus on providing the opportunity for customers to interact with like-minded people that aligns with their thoughts and beliefs. The important thing is that customers will only join if the community syncs up with their personal preferences and interest. This helps in delivering more personalised services and enhanced rewards. Community-based loyalty schemes must be embraced with the help of new technology and in new digital realms, such as the metaverse, where new experiences and consumer perks can be offered.
The U.S.-based E.L.F Cosmetic Beauty brand is heavily capitalising on community-based loyalty programs. In 2021, the company started using the cloud-based application Oracle CrowdTwist Loyalty and Engagement, which helps them track consumer shopping behavior and preferences. It also delivers more personalised services, which enhances rewards and benefits. The company is trying to be a different kind of beauty company by building brands designed to disrupt industry norms, shape culture, and connect communities through positivity, inclusivity, and accessibility.
Brands must ensure that the value proposition provided by their loyalty schemes is firmly aligned with their customer needs, priorities, and expectations, continuously refined and adapted to withstand disruption and changing market conditions. The above Next-Gen loyalty-based innovative business models are required to differentiate brands in a highly saturated and competitive market. These innovative business models will help brands to drive the profitability of a loyalty program globally in the loyalty segment.
“Whether your company has started looking at its customers’ transaction-and-engagement data and understands how they’re interacting with brands?”
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