Many entrepreneurs and business managers think of blockchain as the driving force behind cryptocurrencies, but the truth is that it has a lot more applications. Customer retention is one of the best ways to utilize blockchain and take your sales results to a higher level.
According to the report, financial companies can save up to $12 billion a year from using blockchain. It is also why almost 75% of tech-savvy executive teams believe there’s huge business potential in blockchain technology.
But how exactly does it function? How can you use blockchain technology to retain more customers? In this post, we will help you figure out the answers to these questions. Let’s take a look!
What Is Blockchain?
As a brand new type of technology, blockchain deserves a brief explanation before we move on to the core of our topic. The short definition says that a blockchain is a digital public ledger that records online transactions.
It sounds fairly simple, but it has tremendous business potential.
Just like the name suggests, blockchain is actually a chain of blocks where each unit represents a unique transaction. No central authority is governing blockchain, which really makes it a public data library with all the information about a given transaction.
The chain itself is immutable because no one controls it. To put it simply, blockchain transactions look like this:
- A user sends a transaction request
- The request is distributed to the public P2P network with thousands or even millions of individual computers
- The transaction is approved through the special algorithm
- Validated transactions are added as blocks to the chain, which means that the transaction is completed
- Everyone can see the basic transfer details such as time, date, etc.
Problems with Traditional Customer Retention Programs
Almost every company out there is using customer retention programs to boost loyalty. From assignment help and dissertation writing services to eCommerce and restaurants, you can hardly find a business without a loyalty program.
But there are a few key issues with traditional customer retention campaigns.
First of all, it turns out that way too many consumers never actually redeem their points. The average consumer belongs to nearly 15 loyalty programs but is only active in 6.7 of them.
Secondly, loyalty campaigns are very expensive in terms of planning and third-party integrations. It takes a lot of work and money to set up a loyalty campaign, which is very problematic if your redemption rates are low.
And thirdly, modern consumers are not willing to share sensitive personal information with all sorts of brands. They want to make sure that their data are stored safely, which is not something traditional loyalty programs can guarantee.
5 Ways Blockchain Improves Customer Retention
Blockchain is extremely versatile and there are no limitations regarding its real-world applications, but we can pinpoint a few surefire ways to use it for customer retention purposes. Here are the five most important mechanisms:
- Use tokens instead of points
The old point-based loyalty system proved to be inefficient in many cases due to the lack of options and flexibility. Digital tokens fix this issue because they can be treated as promo coupons and real currencies at the same time. When customers earn tokens, they can use them anywhere they want and even purchase products from other brands involved in the campaign. - Unification of loyalty programs
Loyalty programs are often costly and so they force multiple brands to cooperate and cut costs. Jake Gardner, a business analyst who makes custom essay service reviews explains that blockchain enables the unification of loyalty programs: “Blockchain-based programs make it easy to establish cooperation among companies and track loyalty rewards from start to finish.” - Cost-reduction
As we already mentioned, the sheer flexibility of digital tokens makes it easier to execute customer retention programs. Blockchain simplifies the system, so you only need a one-time investment to manage all future campaigns. - Risk mitigation
The fact that blockchain is decentralized means that no one can access users’ personal files and information. Such a system drastically reduces data-related risks and hence encourages consumers to join the action and take part in loyalty programs freely. - Real-time visibility
Another thing that makes blockchain incredible is its real-time visibility. Unlike traditional loyalty programs, blockchain-powered actions are easy to track almost instantly because the whole process is automated.
This also improves the overall transparency of loyalty campaigns and makes it easier to coordinate multiple parties involved in the process – brands, users, and third-party vendors.
The Bottom Line
Blockchain is a revolutionary technology and it already augments traditional businesses in many different ways. One of the most important improvements is related to customer retention, which is critical for companies eager to solidify sales results and ensure long-term profitability. In this article, you could learn:
- The basics of blockchain
- The problems with traditional loyalty programs
- Five ways blockchain enhances customer retention
Do you think you could add blockchain technology to your business?