Someone recognize me!: Web3 and loyalty rewards programs
My pursuit of being considered a local, the importance of loyalty rewards programs, and how Web3 is changing what these programs can do
My dream as a consumer is to be a local somewhere. I’ve written about it before, and I’m sure I’ll write about it again. But it is pretty gratifying to feel that you mean something to a business that means something to you.
My pursuit of the local has manifested mainly within the confines of coffee shops. If you know me well, you know that I have one favorite coffee shop per place and am religious about returning to it. When I get to the shop, I try to be as friendly as possible without being weird and when I order, I keep my request consistent enough to be remembered.
My fascination with being a local spawned during my high-school job at Tate’s Bakeshop, where I watched my co-workers recognize customer’s faces and associate them with orders: the man with a coffee and an apricot scone, the woman with a half-dozen croissants, the guy with the weekly party plate of lemon squares. These people shaped the Tate’s community, establishing surprisingly strong relationships with the people behind the counter. Watching them made me eager to have that effect somewhere too.
For the most part, my pursuit of being a local has been an expensive and fruitless endeavor, with a few scattered success stories.
I became a local successfully at Huxton’s coffee shop in Sydney, Australia, where I studied abroad. Marcello, Huxton’s manager, eventually learned my name and cappuccino order. He would brew the cappuccino as we swapped surf stories and would return, throughout the morning, with free snacks he thought I’d like.
At Dartmouth, I tried (and failed) to become a local at Umpleby’s. Despite spending every morning there for four years, I never received anything for free, and they never did learn my cappuccino order. But I did build strong rapport with David, the barista, who still recognizes me when I return to campus and asks how post grad life is.
In Park City, there is the Daily Rise (shout out to Ben who is a subscriber!). In Boston, there is Greystone. In New York, there is Blackstone.
My innate sense to express loyalty in exchange for community and monetary benefits is far from original. Effective loyalty rewards programs are one of the most important revenue drivers for consumer businesses.
The average American consumer is a member of 16 loyalty programs. 84% of consumers are more willing to choose a retailer that runs a loyalty program over one that doesn’t, and those programs increase transactions per member by 3.5x and revenues by ~20%.
Loyalty programs are pretty fascinating things. They involve a significant level of consumer psychology, business strategy, and UI/UX design to pull off. A strong loyalty program is easy to navigate and personalized. While the average consumer is in several loyalty programs, usage rates for each are below 50%. To be used and be effective, loyalty programs must offer the consumer something they actually want. A good example of this is Starbucks which always seems to know that you love flat whites and cake pops and offers discounts on both when your loyalty has waned.
Recently, loyalty programs have undergone a massive capability shift, driven by technological advancements in Web3 and Generative AI that have unlocked capabilities in identifying, tracking, and rewarding consumer loyalty. While these programs used to be able to do cool things, now they can do really cool things.
Because Web3 and GenAI are mountainous topics in themselves, I’m splitting this conversation into two blog posts. Today’s is about Web3. The next one will be about GenAI.
Web3, although historically over-hyped, is a pretty neat technology. And by recognizing it as a technology (and not a cultural disruptor), we can approach it as an asset to innovation – celebrate the things it has proven to allow for and push aside the rest.
Web3 technology has brought many new capabilities to loyalty rewards programs. It has made it easier to collaborate across brands (as seen with this Starbucks and Delta collaboration), sell perks generated from loyalty programs that would otherwise have gone unredeemed, and perhaps most interestingly, it has allowed for a more direct relationship between a business and a customer.
Web3, specifically the distribution of non-fungible, non-tradeable tokens on a blockchain, can generate ID codes and metadata separating you from anyone else. This offers up a way to distribute and leverage people’s unique identities. These NFTs can be created for you, traced back to you, and represent you only. When non-tradeable NFTs enter the world of loyalty rewards and each loyal member is given their own individual token, they create an opportunity for a business to identify, without question, who the customer is.
The breakthrough here is a two-way relationship between a consumer and the business (specifically a non-e-commerce business like a restaurant).
While I might know that I’ve been to Kava a dozen times just to eat their zucchini chips, Kava likely has no idea that I’ve been doing that. Maybe they could figure it out if they took the time to trace my OpenTable account through their reservation records, but I could have just as likely saved the table for my parents to go. With NFT-based loyalty programs, the business is able to collect unique data on each customer in a way they couldn’t do effectively before. They can understand things like who visited, when they came, and what they ordered. They can then use this information to roll out tailored loyalty rewards programs. They can, essentially, identify you as a local sooner.
A neat start-up that is doing this already is Blackbird Labs, Inc. Blackbird ($11M Seed, 2022), started by former Eater and Resy CEO Ben Leventhal, uses NFTs to reinvent how loyalty, and subsequently hospitality, is approached in the restaurant industry. Blackbird works with a restaurant to create an NFT program with customized branding and rewards. Customers can then use their card to check in and earn perks. The rewards tend to revolve around benefits you would get if you were a local (discounts, free coffee, even your own personal mug) and as seen with their program for Williamsburg restaurant Gertie, your status at the restaurant can scale from “Neighbor” (on the first visit) to “Fam” (at fifteen visits).
The benefit to the consumer is quick recognition for loyalty and strong perks. The benefit to the restaurant is a clear plan for generating loyalty, a greater repeat customer base, and a way to revive and re-define hospitality in the 21st century. The benefit to me is, of course, an easier path to being a local.