The Loylogic Podcast - Web3 x loyalty: building communities with digital assets

In the world of ever-evolving technologies and digital ecosystems, Web3 has the potential to revolutionize the way we interact and engage online. At the heart of this transformation lies the concept of community building, which has been amplified and invigorated by the integration of digital assets. These digital assets have given rise to new possibilities, particularly in the realm of loyalty programs, where brands and organizations can enhance customer engagement, foster long-term relationships, and create thriving communities like never before.

The utilization of digital assets within loyalty programs not only provides tangible value to customers but also facilitates active community participation. Through the use of NFTs, brands can offer digital assets ( e.g. a limited-edition digital artwork) that can create new game mechanics built around transferring or collecting. A customers’ assets serve as a record of achievement (e.g. attainment of an asset confers your ability), value (e.g. financial or cultural) or privileges (e.g. project governance or special access) in digital format. The public blockchain ensures the transparency and authenticity of these digital assets, instilling confidence and trust among community members.

In this episode of the Loylogic Podcast, Rob Clements, Lead Consultant at Loylogic, combines his detailed knowledge and passion for Web3 technology with his expertise in loyalty and engagement to explore the opportunities and risks that Web3 brings to brands – whether they already have a loyalty program or are venturing into the space for the first time.

In this podcast we’ll:

- Hear more about Rob's journey so far utilizing Web3.
- Discuss why Web3 is important for loyalty programs, generating interest and building communities, while challenging ownership concepts and giving control to individuals.
- Explore real-world examples of Web3 in loyalty programs, like art-focused NFTs and digital asset utility and hear Rob’s views on how brands are exploring Web3 principles.
- Get Rob’s views on whether Web3 is easier for new loyalty programs to embrace than existing ones – and how legacy infrastructure is impacting the adoption of Web3.
- Talk about the risks presented by Web3 and how brands need to navigate asset value challenges effectively, while understanding reputational risks and consequences.
- Share key takeaways for loyalty program owners who are keen to experiment with Web3 in loyalty programs.

Web3 offers a unique opportunity for loyalty programs to leverage new technology, build communities, and engage customers in new ways. This podcast helps demystify the topic and enable programs to seize the Web3 opportunity. Listen now for more, or read the transcript below.


(0:51) Rob, it's great to have you back in the studio. What have you been up to since we last spoke?

Rob Clements: “I've been quite busy actually. It's great to be back in business travel mode, great to be in our HQ in Zurich, and also traveling to Geneva, for the first time as well, meeting some clients. So, very busy on the work front, and it was also great enjoy a bit of personal time to enjoy parts of Switzerland I've not seen before.”

(1:20) For this conversation, I want to pick up on one of the topics that I know you're passionate and knowledgeable about. And that's Web3. What piqued your interest in it and what has been your journey with the technology so far?

Rob: “I guess it started originally from listening to a podcast from Wired about this kind of blockchain technology and Bitcoin, but first, it was really seeing what they were doing on Reddit with Dogecoin. It was used as a as a currency for incentivizing and rewarding people who are making really good posts. At that point, I thought, wouldn't it be cool to create a currency that rewards people? And I know, nowadays, people will see those as a, a meme coin and a joke, and largely, you know, it is, but actually, the original reason why it was created was actually to reward those participants and incentivize that behavior, which I think was particularly interesting.

“More recently, in, 2021, I guess the growth of NFTs, seeing BEEPLE being able to generate a lot of interest, and ultimately find a vehicle for selling his art through NFTs, was a particularly interesting moment for me. That really started my own journey into collecting digital art, in particular, a stream called generative art, and then seeing how the community has kind of sprung up around that, recognizing that actually, it's not really too dissimilar from the communities that spring up around brands and loyalty programs. Over the last couple of years, I've seen how that has caught on and how people are now doing some tests in that space.”

(3:05) Brilliant. That's all great. And you have touched on it there. But why is Web3 important to loyalty?

Rob: “I think the important element is really that this is around generating interest and building communities and brand. That's what loyalty programs are about. So, you know, I don't think that the fundamentals of the things you're trying to achieve are different, you just have different technology and ways of doing it.

“At first, that sounds a little bit like oh well, why use this technology? Why don't just use the existing technology? And I think in a lot of cases, that's a fair argument, and you do need to justify why you would want to use blockchain technology for any of these things you're doing. However, I do think there are certain concepts within it, and one in particular, that I think is really interesting and maybe requires a mind shift, which is what does ownership mean?

“We often think that we have ownership of our assets, whether that be the money in your bank, but the reality is that it is actually held by a more centralized authority and the bank really governs the permission that you have to use the asset that is your money. I think having a wallet that contains your digital assets and being able to transfer them is that sort of mind shift, rather than you relying on a more centralized authority. And of course, for loyalty programs, people would consider them potentially as banks as well. So it's a an interesting, new dynamic. And if you think that ownership of assets is important, then building a community around the individual ownership the customer has, is an interesting idea.”

(4:44) So what does that mean practically for programs? Are there any real world examples of Web3 that you can share?

Rob: “There's a lot of interest around the ability to create communities around these assets that are created. And I don't know whether the community comes first, or actually whether the asset comes first. It's hard to work that out. You can generate an asset that has value, which communities flock towards, or you can have an existing community, for which you generate a new asset. It can work in both of those ways.

“For programs and for brands, we're seeing that they will release maybe an art focused NFT, or something that relates specifically to their brand. And for their most loyal customers, you know, they see that there's a value in that.

“Some of the use cases that we're seeing at the moment, or have been particularly popular, is the generation of new, let's say, intellectual property. And maybe that is monkey pictures, or whatever those new digital assets can be! Ultimately, there is value attached and maybe it's that they unlock experiences, maybe they operate like a membership program, maybe there's a game that leverages those different digital assets being collected, or held together in a single wallet. So I think those kinds of elements are things that we're seeing programs start to get comfortable with.

“Different programs are probably thinking about it based on the level of innovation or risk appetite that they have. You've seen the likes of Starbucks Odyssey that's moved quite early into the space. They adopted some of the principles of Web3, but I think, in a little bit more of a controlled environment, which is a little bit more, let's say, web 2.5 than Web3, in my opinion. It doesn't fully have a an open marketplace where you can kind of trade these assets. It's a little bit more closed, a little bit safe. But, you know, maybe that is the right step for brands that potentially have a lot to lose. And I'm sure that they're learning a lot kind of as they're going as well.

“Then you have the likes of Etihad, Miles and More, who are kind of working more on actually updating their existing programs and providing utility and access through those different NFTs as well. But I think the core element is that there are digital assets and there is a community that can be built around that asset. It's interesting in those interactions, how does a program leverage those elements?”

(7:30) Okay, so a question that has sprung to my mind is, just as is the case with electric vehicles, where new players have started with a blank canvas and have arguably stolen a march on traditional manufacturers who are incumbered by past ways of doing things, is it easier for brands launching new loyalty programs to embrace Web3 than it is for brands with existing programs to leverage the benefits and technology?

Rob: “Yes, I think it is, I think if you look at existing programs, they do have a legacy in terms of their infrastructure and their plumbing. And that simply isn't true for someone who just rocks up, whether that's an individual or whether that is a new business as well. So I think there's a lot of, let's say, competitive advantage in the networks and the partnerships that have been developed off chain by some of these programs. The idea of then moving all those automatically on chain, doesn't really stack up for them, especially when you think that then on a more level playing field with some of the other guys as well.

“However, the idea of starting from scratch, not having all of these systems and knowing that some very basic operations are just part of the protocol, is a great advantage for new startups.”

(8:56) On a similar thread, does Web3 bring loyalty within reach of smaller brands, or even personal brands? And I want to bring in your personal experience here of buying a piece of Damien Hirst of it transforming the loyalty landscape in that respect?

Rob: “It almost comes down to what do you think a loyalty program or an engagement program is? How do you build this culture in this community? So to start with, there's always been customers that are passionate and will refer their friends to the brand or will make impassioned speeches about why you should be buying this brand or values that are attached to this brand. The difference now is maybe a little bit more that some of those things are a bit more trackable and measurable because you're creating new communities that maybe weren't in existence before.

“For example, although there are lots of Damien Hirst fans, there wasn't really a central point that those communities could engage around. With the NFT art projects that he's done, it has enabled a gated area for those holders of that project to actually come together and communicate in a digital space. Just a couple of weeks back, I attended an event where we actually saw the new NFT: WTF? film, which was just one of the benefits that they were going to put on for the holders. We enjoyed early access, were wined and dined and took away some free merchandise, linking in some of those physical experiences along with a digital as well. It's really the idea of community outside of a formal loyalty program.

“That's interesting as well, but it doesn't mean that you can't also layer on a loyalty program as well. It's just the passion. And the energy that's within that community is something you want to harness, and it doesn't necessarily need to be an earning or accrual event to drive some of that positive behavior.”

(11:14) Flipping the discussion on its head and moving to the risk side of things, what additional risks does Web3 heighten when it comes to loyalty?

Rob: “There are probably many risks that can be talked about, some of them are perceived risks, and those risks don't really materialize, or are now redundant. I think for a long time, people were thinking that the environmental concerns of NFTs were a reason not to get involved. Technology advances mean that's no longer really a concern, yet the wider public would still flag that as one of the risks, as CEOs or certain managers would in a business regard. We've also seen FTX, and crypto exchanges blow up. There's no doubt that there are fraudulent actors in the space. But it's a bit unfair to think that actually, just because there are bad actors in the space, that automatically this whole space is like that.

“So, I'd focus on the risks that are directly associated with the things that you want to do, which essentially means the digital assets that you're now creating for these communities. What's the risk that's created by those assets? One of the interesting things that we're seeing at the moment is, a lot of those people in those communities are actually more like speculators, and the manipulation is similar to some of the stocks and shares activity that you may see. If your communities are not really very brand focused, and essentially treat it as an investment and generate revenues from it, then what they're incentivized to do is really increase the value of that asset, and then sell it, which can be quite negative for your customers. You can imagine that if someone really wanted to be a part of that brand, bought in at a high price, and then sees that price crash, then obviously lost money there. So, there's an element around the speculation and value of that asset.

“We're also seeing that there's almost an expectations gap and a challenge for the projects and the programs to actually deliver their roadmap or deliver what they've said. And, again, if you're really keen on the piece of art, or you're really aligned with the community, then actually that's easier to take. Whereas, if you're looking to make money, then you're much more likely to, I guess, trash the project or be frustrated and upset by it.

“You see even with the likes of Starbucks, that their original launch token, the holiday stamp, has been trading around $1,000. That price is set by those individuals and there has been around 200 transactions, so it's not really representative of a market price. So anyone that's buying into it, any of those Starbucks collectors who are buying that stamp now, is there real value in that stamp? Maybe there is in the fact that it's the first stamp, but potentially, there isn't much value there. And as that price drops, maybe you see that people get a bit disenfranchised and there's some reputational risk attached to that as well.”

(14:56) From an airline perspective, who often talk about their loyalty program was one of their biggest assets. How will Web3 and giving people communities control of their assets impact that value and how the program as a whole is looked at?

Rob: “That's interesting. So I guess there are assets that are for the customer. And then there's the asset, that's the program itself. You may believe that customers that benefit from those assets from the program would also go on and spend more and become more loyal, which would ultimately generate more profit for the program, which essentially builds that asset value. So I think they can be linked in that way.

“There are some interesting economic models associated with some of those assets that get given to customers. If you look at what Nike does, with some of their exclusive drops, there's only a couple of hundred of the particular shoes available. And they know that they're not going to price them at crazy prices, they're going to price them at normal prices, knowing that that secondary market marks them up by ten times, but that benefit accrues directly to those individual customers, not directly to the program or the brand itself. But you can imagine that that ecosystem of people wanting to be involved in it, and valuing that brand then generates additional revenues and additional value back to that brand. It's an interesting concept of the asset value and the value that accrues to the customer. And also, whether directly or indirectly, the appreciation and the value of the program asset.”

(15:40) Thanks for that, Rob. So to wrap up the conversation, what are your key takeaways for loyalty program owners? What would you recommend people do now with Web3? And how can Loylogic help?

Rob: “It's a good time to be building and experimenting, because I think there is much lower risk than there was because the attention isn't really on this space. I do feel that we're moving towards a bit more momentum and possibly a second cycle, but at this point, certainly in the NFT space, there's enough room for you to try and experiment without there being too much risk. As long as you understand, if you are releasing an asset and the utility associated with that asset, as long as you understand some of those potential reputational risks or unexpected consequences, it's a relatively safe time to be testing.

“If you're not prepared to test or you don't feel you have enough understanding, it's a good time to be learning as well. And normally, learning via doing is a good step as well. So setting up your own crypto wallet, looking to purchase currency and transact those currencies, that sort of stuff, just sets you in good stead and gives you a good perspective. And of course, some of those things are going to be new or confusing for people. And I think that's really where Loylogic can help you understand maybe some of those risks some of those opportunities, and see whether a Web3 strategy makes sense for your brand.”

Like this? Then don't miss an earlier episode of the Loylogic Podcast featuring Rob Clements:



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