Loyalty and reward network
The current loyalty program overview
Current traditional loyalty program
Nowadays, the incentive program for loyal customers of retailers is an effective way to create a competitive advantage by reducing customers’ likelihood to switch shopping at other stores. Indeed, more than 7 of the 10 Vietnamese consumers (74%) participated in the loyalty program in Nielsen’s Global Loyalty-Sentiment Survey, somewhat or strongly agree that, all other same factors, they will buy from a retailer with a loyalty program over one without. Loyalty programs can also help increase customer purchases and purchases. More than 6 out of 10 Vietnamese consumers (61%) are participating in loyalty programs agree that loyalty programs make them more likely to continue shopping with retail stores and 73% agree that they shop more often and spend more at retailers with loyalty programs.
Recognizing the importance of that customer care strategy, many major Vietnamese brands have significantly invested in membership card programs such as VIP / loyalty cards. In Vietnam, some big names such as VinGroup, CGV, Co.opmart... are pioneers applying this strategy in their business.
Additionally, smaller brands and stores also started to build and create their own paper cards for customers. For example, at Ciao restaurant, in order to participate in the program to receive points, customers will be issued a ‘paper card’ and for each payment, the staff will remark the corresponding amount used to accumulate VIP card or discount amount when enough points. It seems that way of membership cards are extremely attractive to customer. But in fact, this is not really bringing much advantages.
Firstly is inconvenience. Let’s imagine if one consumer joins 20 different stores membership then will have to keep 20 different cards or paper cards. In addition, the use of multiple cards also generates additional problems for users: Paper cards can be forgotten, or lost or damaged, or faked (obviously, for programs that buy 1 get 1 free, this ability will be high).
Secondly, a shopper who has many cards cannot track his point accumulative progress. And this even makes him fall into the "promotion trap" in which some promotion values that the card brings as well as the need to use those promotions is sharply decreased. That leading a low redemption rate, and wasting cost for retailers.
New mindset for Loyalty program
The Asia Pacific region has the highest percentage of participants in the loyalty program, especially enjoy loyalty program mobile apps (69 % compared to 60% globally), for Vietnam is 66%.
In fact, mobile phone features are also expected with more than 2/3 of the members of the loyalty program in Vietnam (64%) agree that they are more likely to participate in a loyalty program if the program has an available mobile application, compared to only about 56% worldwide.
That digital tools is a must however to carry out valuable, retailers must leverage digital tools that create value for consumers. A new type of platform where customers have more choices, convenience and benefits from different loyal points from different shops, where merchants can save cost by co-brand marketing campaigns, develop appreciation from valuable customers, will create extraordinaire opportunities for the participation of consumer loyalty programs. On that platform, members can personalize their points, retailers can make coalition with each other to get promotion effectiveness. That’s the initial idea to develop new Loyalty and Reward Network platform with blockchain technology.
Comparison between single loyalty & open loyalty
The difference between traditional loyalty reward program and the new platform is in the crucial characteristic which is a private program and network program. In single loyalty program, members just use their points between designated merchants while open program they can exchange that point to a token then use for redemption at any merchants in network.
The comparison can be shortly described as below:
As aspect of members in a loyalty reward program, they pay attention the most on how liquidity of their loyal points, may their points be accepted widely. That liquidity factor of an open network is obviously higher than single network. The more merchants join in the platform, the wider choices for members. With a common currency (token), members can interact with all available merchants in network, decide how to save points and what reward they want to redeem. Hence, they have ability to personalize their reward and obviously increase their satisfaction.
As aspect of partners/retailers, the new open program inherits all advantages from blockchain technology, which are keeping high business data privacy, trust and transparency. Each branch decides sharing data and keep their own customer, sale transactions. Besides, with an open network, the ability to cross-sale, marketing and brand awareness is clearly wider than traditional program. From there, the member cost decrease, revenue growth.
Everything has pros and cons, in an open network, the wider brands reach, the lower brands focus. Effort to integration and standardize (for small retailers) is definitely a need.
Why blockchain
What is blockchain?
Blockchain can be simply understood as a time-stamped series of immutable data record. Each of these data blocks are secured and bound to each other using cryptographic algorithm.
Blockchain technology is famous for its privacy and integrity.
There are two primary types of blockchain network: public and private. In which, private blockchain is recommended for business application because of its properties:
Identity: Only authorized participant can join
Permission: Only authorized user can perform transaction
Governance: Only relevant user can see transaction
So, where can we apply blockchain for business? The answer is blockchain chain can help a business network with multi participants and have a set of data to be shared with trust between them.
Benefits of blockchain application in loyalty and reward network
In a loyalty and reward network:
As a company, I want to give point as a reward to my member, and I want to manage this action of giving as well as to know outputs of my point.
As a reward network operator, I want to manage my gift store effectively: my stock quantity, the redemption behavior for each of my gifts, and I also want to know store these information on a secure place.
As a customer, I want my loyalty information (such as point balance, point history, rank, ranking history) as well as redemption history to be apparent and can be tracked anytime.
It is can be seen easily that there are many sensitive information shared between the business network of Company, Reward network operator and Customer:
Member loyalty information
Member’s point transaction
Member’s redemption history
Rewards on reward network
And many more.
These information need to be very apparent and clear. Application of blockchain technology in loyalty and reward network can solve the problem here:
All sensitive information will be encrypted and store on blockchain
Only relevant participants can commit transaction:
Only company can update member’s loyalty information or create point transaction.
Only reward network operator can generate and store voucher on blockchain.
Only member can create gift redemption request.
Data on blockchain is private:
Member loyalty information only visible to company and member.
Gift information is only visible to reward network operator and member.
Gift redemption history of a member is only visible to that member.
Any changes of data have to go through consensus algorithm to ensure integrity.
Concept of Loyalty network
Business goal
Create a loyalty & reward platform for cooperation or the group of small-and-medium enterprise, using block-chain and smart contract technology, enable all enterprises to engage and reward their customers with tokens.
Real-time calculation/ attractive membership & loyalty: transaction base, behavior base, gamification
Integration standard to other ecosystems
Nice user experience:
Customer easy to use, easy to redeem
Partner easy to manage business
Administration easy to manage the business network
Business model
Concept of Reward Network
The journey overview
The member journey
The Merchant A (Exchange point) journey
Merchant B (Grant token and POR) Journey
Contact us for more working flow
Merchant C (POR) journey
Contact us for more working flow
Technical Architecture
The Components
Blockchain network
API layer
Reward network can use this API whenever it would like to store important data (such as transaction, redemption, …) into the blockchain
Event Grid
Other systems can ask Loyalty engine to calculate point via Event Grid
Event Gird also allows one signal SMS gateway connect to 3rd party webhook consumer
Blockchain base
Main ledger to store important information (such as transaction, redemption, etc.)
Loyalty engine
Loyalty Engine
Core engine to calculate point for the whole system
Webhook Consumer
This gateway allows reward network to connect to loyalty engine
Reward network
Cloud CDN
Store image for reward network system, by using Cloud CDN images can adjust to fit different devices.
Consumer App
App flatform for consumer to interact with our system.
Consumer API
Consumer API is gateway for Consumer App and Caching Service. Consumer App also can call this API to connect to Offchain DB or blockchain via Service Bus.
Merchant Web
Web flatform for merchant to interact with our system.
Merchant API
Merchant API is gateway for merchant web and webhook consumer. Merchant web also can call this API to connect to Offchain DB or blockchain via Service Bus.
Service Bus
This is the middle ware to help Consumer API, Merchant API interact with SQL Consumer, DLT Consumer more effectively.
SQL Consumer
SQL consumer is in charge to interact with service bus and offchain DB. It will receive request/ data from consumer app or merchant web to access/ store data into offchain DB.
DTL Consumer
DTL consumer is in charge to interact with service bus and blockchain API. It will receive request/ data from consumer app or merchant web to access/ store data into blockchain via blockchain API.
Offchain DB
Caching Service
This service stores static information (such as product list, product catalog, etc.)
Third party
One Signal SMS Gateway
This component is in charge to send information from third party via SMS (such as OTP)
3rd Party Webhook Consumer
This component is indicated for our partner, they can interact/ connect to our system by using event grid component.
Architecture flow
Access data from offchain/ blockchain
Firstly, consumer app or merchant web need to call their API (consumer API for consumer app; merchant API for merchant web, after that API will interact with service bus to send requests to SQL/ DLT consumer. Whenever receive requests from service bus, depend on the importance of information SQL/ DLT consumer will connect to Offchain or Blockchain API.
Store data into offchain/ Blockchain
Firstly, Consumer App or Merchant web need to call their API (consumer API for consumer app; merchant API for merchant web, after that API will interact with service bus to send requests to SQL/ DLT consumer. Whenever receive requests from service bus, depend on the importance of information (sensitive information like transaction, redemption will go into Blockchain) SQL/ DLT consumer will connect to Offchain or Blockchain API to store that information.
Calculate point for transaction
Whenever transaction has been made, loyalty engine will calculate point for user.
Firstly, the trigger from consumer app or merchant web will be called by their API, after that service bus will send those requests to event grid. Whenever event grid receives those requests, it will ask loyalty engine to calculate point.
Calculated point will be sent to SQL/ DLT consumer by service bus to store in offchain/ Blockchain.
Should you be interested in developing a loyalty and rewards network application that utilizes blockchain technology, or require any further information, please do not hesitate to reach out to us.
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