Digital assets, NFTs, cryptocurrency – terms that were reserved for only the most forward-thinking technology businesses have come to the mainstream, and businesses are experimenting with adding these features to their customer loyalty efforts. However, because the adaptation process is still in its infancy, brands face a myriad of challenges in how best to incorporate them.
By partnering with a digital asset company like Bakkt, brands can serve their existing loyalty redemption business while treading confidently into this new landscape and offer their customers the latest in personalized loyalty.
Mark Johnson, Loyalty360 CEO, spoke with Nancy Gordon, Chief Product Officer of Loyalty and Rewards at Bakkt, about the company’s view on where loyalty is headed, along with how brands can utilize this new technology to drive more personalized experiences, engagement and, most importantly, customer loyalty.
As a digital asset platform, Bakkt unlocks crypto and drives loyalty to create delightful, connected experiences for a broad range of clients. Every product Bakkt offers is about driving loyalty.
Balancing Emotional and Rational Loyalty Efforts
Brands and industries have different definitions for customer loyalty, but at Bakkt, it means customers engage with one brand even when faced with a meaningful competitive alternative.
“Customers are faced with alternatives daily,” says Gordon. “Something has to trigger them to want to do business with you when they are presented with options.”
Loyalty is often broken down into two sides: rational and emotional. Emotional loyalty is the pull a customer has toward a brand. It is often intangible and difficult to measure. Because of this, many brands lean toward rational loyalty. Rational loyalty is easy to measure; it is tactile and involves a structured rewards system. Customers get rewarded for a certain behavior, typically in the form of points or discounts.
Bakkt recently conducted a study to determine how consumer behaviors have shifted in response to the pandemic, inflation, supply chain struggles, and the economy. The results revealed consumers are now drawn more by the promotion than by the brand. This gives brands an opportunity to develop an approach to engage with customers both rationally and emotionally to stay top of mind.
At Bakkt, the company works with its partners to provide these engaging experiences to grow rational and emotional loyalty for the companies it serves. It vets its experiences in its partner channels and puts an emphasis on creating seamless customer journeys that enable these experiences.
Assisting Businesses in a Digital World
Brands want to be top of mind with customers and often offer loyalty rewards in the form of points and other digital assets. Bakkt drives loyalty by offering compelling content and experiences such as gift cards, experiences, travel and merchandise that essentially function as ecommerce sites where customers can shop to redeem their loyalty points as well as alternative forms of payment.
In addition to providing these turnkey fulfillment services, Bakkt also helps brands participate in the newly emerging digital asset economy. This includes capabilities such as paying with points, points exchange, or exchanging traditional assets into digital assets such as crypto.
Bakkt primarily works on loyalty initiatives for financial institutions and travel and hospitality companies. The client roster continues to expand outside of these sectors with the addition of subscription services, retail, and restaurants.
Push Boundaries, but Stay True to What Works
Loyalty managers work hard to prove the value of the program to their business and the ROI it generates. Bakkt is in the business of supporting these initiatives and meeting the programs where they are, while simultaneously pushing the boundaries.
“To do that, you look at pain points and areas of opportunity,” Gordon explains.
Bakkt offerings are driven by a variety of different insights:
- The macroeconomic environment
- Customers and lifestyle preferences
- Proprietary research
The company reaches out to clients and customers directly to see what is and is not resonating in the loyalty industry both from a global perspective and across sector models.
Taking the Crypto Out of Cryptocurrencies
Digital assets comprise a growing $1.6 trillion marketplace. Customer loyalty is a prime recipient for emerging assets like NFTs, crypto, and tokenization as a whole. These digital assets can be used as program incentives, and new technologies can be utilized to modernize the infrastructure.
Bakkt research has indicated a correlation between rewards program participation and crypto purchases. Individuals who purchase crypto also tend to participate in loyalty programs at a greater frequency.
Says Gordon, “Overall, crypto appeals to younger and tech-savvy customers who see value in fractional ownership of digital assets, and in an asset that has potential to grow over time.”
Businesses can use cryptocurrency as an addition to their programs or as a replaced value, and as a core value prop or promotional incentive. As a core value prop, for example, customers could earn crypto on each purchase.
As a promotional incentive, customers could earn crypto after a certain number of actions. Additionally, businesses have the option of stacking on an existing program where customers earn points traditionally and redeem them for cryptocurrency. Brands who incorporate crypto in any way will have an early user advantage and will experience the innovative halo that goes with participation.
Businesses that want to explore the world of crypto but have reservations about working with new technology will benefit greatly from the services Bakkt provides.
Bakkt works with companies to cover the
heavy lifting, providing back-end mechanics such as custody, KYC, tax consideration and the NYDFS BitLicense. Bakkt takes care of the complexity and regulatory requirements that enable businesses to offer crypto to their customers. This frees up the business to focus on the value prop of incorporating crypto into their loyalty program versus the complexities of crypto itself.
By offering plug-and-play options, direct-to-consumer apps or embedded benefits, Bakkt makes it easy for brands to think about the variety of go-to-market approaches. For businesses that want to leverage APIs, Bakkt gives them the opportunity to design their own experience.
Partnerships Help Personalize Loyalty Offerings
Most large brands today have their own proprietary loyalty programs where customers primarily redeem points for rewards within the brand. The most successful customer loyalty programs will focus on using data to create personalized experiences. Personalized experiences can occur in the physical world, digital world and/or the metaverse. Seeking out mutually beneficial partnerships can help brands engage with customers on an individual level and grow personalized loyalty.
“I think we are going to see a shift from transactional loyalty to experiential loyalty to help break through the rational versus emotional connections,” says Gordon. “Bakkt drives change in loyalty propositions in both proprietary loyalty programs and those seeking collaboration.”
A common trend in customer loyalty is personalization, and growing technology is powering this trend. Companies have a new opportunity to harness actionable insights from multiple channels to create exclusive earning schemes and promotions within a program at an individual level. This requires privacy-compliant, consent-oriented data collection, but more importantly, the ability to drive insights.
Zero, first and second-party data are all equally valuable to creating personalized experiences that will grow customer loyalty. Taking the traditional loyalty database structure and leveraging new technologies is the key to creating a personalized loyalty program and growing customer engagement.
Says Gordon, “This sets the stage for new models, especially with digital asset technologies available for longitudinal loyalty that recognizes consumers at the present time and anticipates future behavior.”