How Online/ E-commerce Shops Are Using Blockchain to Improve Customer Experience
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How Online/ E-commerce Shops Are Using Blockchain to Improve Customer Experience


10 Mar 2020

How Online/ E-commerce Shops Are Using Blockchain to Improve Customer Experience

Loyal customers are the cornerstones of successful businesses. They usually bring in significant revenue and profits for businesses. And they are especially important right now with the cost of customer acquisition going up and businesses facing even stiffer competition from other businesses. Through rewarding loyal customers, they can have even more brand loyalty and advertise a business to friends, family, and acquaintances at no extra cost.

Not really convinced that loyal customers are important to business? Here are a few stats to drive the point home:

1. For most businesses, repeat or loyal customers usually generate about 40 percent of revenue.

2. About 54 percent of customers usually prefer buying from a brand they are familiar with.

3. Loyal customers usually spend more than three times what other average customers spend.

As you can see from the above research-backed stats, loyal customers are very important to businesses. What is even more exciting to note is that loyal customers have a higher likelihood of spending more money, and of marketing the brands they prefer to their friends and acquaintances for free.

Because of the importance of loyal customers, many businesses are moving to make more customers more likely to be repeat customers aka loyal customers. For example, in a recent survey that involved big businesses in the United States, the majority of them (54 percent) said they would be boosting the budgets of their loyalty programs in the next financial year. Many small and medium-sized businesses are also increasing their reward program budgets to make more customers loyal.

For quite a long time, physical and online stores have been utilizing loyalty or reward programs to entice or motivate customers to be repeat customers. Traditionally, the programs have involved the awarding of points that can later be redeemed for discounts or free goods or services.

While the programs remain popular, challenging customer sign up processes or reward card acquisition processes have started making them unpopular among many customers. Thus, rather than the programs having the desired effect of encouraging customers to be loyal, they have ended up dampening the mood of many customers and pushing them away.

In recognition of this problem, a good number of businesses are turning to blockchain technology to boost brand loyalty. Research and anecdotal evidence has shown that the technology has a massive potential to revolutionize customer reward programs and to provide solutions to the many problems facing traditional reward programs.

Understanding Blockchain Technology

So what is blockchain technology and how will it revolutionize reward programs?

Well, blockchain is a special decentralized method of accounting for or recording transactions. The transactions are recorded in the form of “blocks”. Think of these blocks as digital storage units for transactions. They store important information like the amount being transacted, the date, the time, and the parties doing the transaction.

Each block generated has a unique code. The code is called hash and it identifies it or separates it from other transactional blocks. When other blocks are generated from other transactions, they are sequentially added to previous blocks forming a chain. Hence the term blockchain.

The blockchain then becomes a database of information about transactions that can be accessed publicly. The blockchain technology or database is distributed utilizing a peer-to-peer system of nodes. This makes its transactions quite anonymous and much more secure. Since each block has a unique code, is sequential, and is available on a public database, it is very difficult to interfere with or manipulate blockchain data or transactions.

While the term blockchain technology only became popular recently, the idea behind the technology was first made public in the nineties. However, it was only when the technology was utilized as a public ledger for cryptocurrency transactions in the year 2009 that it started becoming popular in the mainstream media.

The blockchain technology is particularly suited for the e-commerce world because it allows for the capturing of transactional data in a manner that is decentralized and very secure.

Now that you are familiar with what the technology is, it is time to reveal how it can help revolutionize customer reward or loyalty programs.

How the Blockchain Technology Can Improve Customer Reward Programs

Some customer loyalty programs are very easy to sign up for. However, many such programs are usually not very effective. They usually don’t turn as many customers as possible into loyal customers. Moreover, traditional customer reward programs usually suffer from a number of issues:

1. Low rates of redemption

There are so many loyalty programs on the market. Thus, if one does not stand out, it becomes easy for customers to ignore their points or to want to use their points for discounts or free offers. For example, several surveys have revealed that the average person is usually a member of seven loyalty programs. So it becomes challenging for them to keep track or to be interested in amassing more points from just a single business. Moreover, surveys have also revealed that a significant percentage of customers usually don’t end up redeeming points. Thus, the points awarded to them are essentially useless.

2. High set up costs

Many online shops usually pay a lot of money to set up loyalty programs on their websites. This is because most loyalty programs are usually developed and run by third-party businesses. The setup cost is usually high and so is the maintenance cost. E-commerce stores usually have to pay between $2,000 and $15,000 every month to developers for maintenance. Upgrades or adjustments to customer loyalty programs usually cost even more.

3. Most reward programs are not customer-centric

The majority of traditional reward programs are not customer-centric. They are company-centric. They are designed in such a manner to favor the company’s offering them. This is why many customers ignore them. For example, some require customers to acquire very high points for redemption. While others require customers to buy stuff they do not want or need to get rewards.

So instead of making customers excited, such loyalty programs usually make them less enthusiastic about the brands offering them.

4. Security Concerns

Many millennials and other age-group customers as well have security concerns when sharing their personal information online. This is because of the many report cases of data or security breaches that are increasingly making many people paranoid about sharing their information with any company.

A recent survey found that more than 70 percent of customers are unlikely to join a customer reward program if it requires more than just their names and their mobile numbers. This is because of security concerns. This is not surprising considering how fast cases of hacking and stealing of personal information shared online have been increasing over the years.

How Blockchain Can Help

Research and anecdotal evidence have shown that blockchain can resolve many of the issues associated with traditional loyalty programs. And that it can do it by connecting the users and owners of loyalty programs.

Through the blockchain technology, loyalty programs can be simplified and customers can be enabled to enjoy reward programs and redeem points without having to carry around many cards.

Here are some of the ways a blockchain-based token loyalty program can resolve the issues facing traditional loyalty programs:

1. Transparency

A blockchain-based loyalty system will have blockchain tokens. The tokens will obviously be recorded in a publicly accessible blockchain database. This creates transparency. The e-commerce store that issues the tokens cannot claim not to have given them or take them away because of some reason.

Thus, with such a system, the client never has to fret about things such as their points being reduced, expiring or devalued. This will make them more excited about using such a loyalty system. And at the same time will make them loyal customers which is a win for e-commerce stores.

2. Interoperability

When rewards are not in the form of company points but in the form of blockchain tokens, they can be utilized at other stores. They can also accumulate more rapidly since it means any company that provides rewards will be in the form of tokens. Hence no separate loyalty points and cards from the customer’s favorite airline, favorite fast food restaurant, favorite ridesharing app, and so on. Just tokens from all that can be used anywhere.

3. Increased flexibility

Blockchain tokens can give customers more flexibility. More flexibility in terms of the manner they redeem their reward tokens and in terms of being able to redeem fewer points. Most customers complain that most traditional loyalty programs are archaic and award very little points that take a lot of time to accumulate. This cannot be a problem with blockchain loyalty tokens as they give customers the freedom to use fewer tokens. They also give customers the freedom to redeem their tokens in more shops; not just one.

4. Lower costs

One of the biggest problems with traditional loyalty programs is that they require a lot of money to develop, maintain, and upgrade. However, this cannot be a problem with a blockchain-based program since it will have a native ledger that will be easier to develop and maintain.

5. More security

A blockchain database for a blockchain customer loyalty program will obviously be a P2P system. This means there is very little likelihood that it can be breached or hacked. Moreover, since the blockchain database is unalterable, the entries are time-stamped, and the parties anonymous, there is very little chance that transactions can be manipulated or for fraud to occur.

The Case for Blockchain Technology in E-commerce

The use of blockchain technology is set to increase over the next couple of years. According to research, by 2030, the total value of the technology for companies will be in excess of $3.1 trillion USD.

Many businesses are excited about this and they are looking for ways to spend on blockchain technologies or to increase their spending on the same technologies.

So why are e-commerce businesses looking to invest in blockchain?

1. The technology levels the playing field in terms of loyalty programs

As mentioned, loyalty programs are expensive to develop, maintain, and upgrade when necessary. This means they were previously only available to businesses that had the money to acquire them.

However, blockchain-based loyalty programs are not expensive to develop or maintain. They can be implemented at a lower cost. This means that the technology has leveled the playing field and now even small or new players can run their own programs.

2. The technology has improved accounting

Blockchain has made it easier to manage customer accounts. This is because it prevents manipulation and fraud. There is also no need for an accounting team to constantly monitor the tokens or points being accumulated by customers because the system is near impossible to manipulate.

Moreover, it also has the potential to prevent customers from having to carry several loyalty cards or to sign up on several loyalty accounts. So less clutter for the customer and easier management of loyalty points.

3. The technology has resulted in happy customers

Business is very competitive. In many industries, the competition is cutthroat. This is why organizations need more than just good products to thrive. They need innovative strategies to get customers coming back. And one of the best ways is obviously through the use of customer loyalty programs.

But as mentioned earlier customer loyalty programs have been frustrating rather than exciting customers. Nevertheless, through the use of blockchain technology, customer loyalty programs can be streamlined and enhanced to become better.

This has the potential to make customers happier and to increase their brand loyalty. It also has the potential to increase brand ownership.

4. A blockchain-based loyalty program ecosystem can connect businesses to more customers

Assuming a single ecosystem where various e-commerce shops reward their customers with blockchain tokens that can be redeemed in any store on the same ecosystem, e-commerce stores will have access to a wider pool of customers who have tokens to spend and to get to interact with their businesses.

Examples of Businesses Adopting or Using Blockchain Reward/ Loyalty Programs

Blockchain customer loyalty programs are not yet mainstream. Nevertheless, this does not mean that businesses are not interested in such loyalty programs. In fact, many businesses including major global corporations are already either developing or implementing reward programs that are blockchain-based.

Here are a few notable examples:


This is a new and unique e-commerce platform that allows businesses to sell products to an ecosystem of customers who can pay via traditional payment systems or via the platform’s native cryptocurrency.

Both businesses and customers get rewarded with tokens for performing various functions on the platform. And this incentivizes them to continue using the platform and doing business with each other on it.-

2. Singapore Airlines

In mid-2018, Singapore Airlines, the Asian country’s national carrier, announced that it would be changing its frequent flyer program into a digital wallet that allows them to use their miles/ points to buy things or services from other merchants.

When the digital wallet was being launched, already 18 different merchants had registered on it including e-commerce stores, gas stations, and restaurants. The airline hopes to continue expanding the digital wallet customer loyalty program as time goes by.

3. Chanticleer Holdings

While many are not familiar with the term Chanticleer Holdings, the company owns renowned American burger restaurants including American Burger Co., Little Big Burger, and BGR.

The company recently announced it is introducing a blockchain-based reward program. The program rewards customers eating at any of the company’s restaurants with cryptocurrency that they can redeem and use at the same restaurant or at any other of the company’s restaurants.

The company believes that the new program will ensure no fraud concerns.

4. American Express and Boxed

American Express and Boxed (an e-commerce store) have partnered to offer a blockchain-based customer loyalty program. The program ensures those who shop on Boxed have their details captured and their points saved. Points that they can later redeem without having to worry about fraud concerns or the security of their data.

Final Word

The e-commerce industry is constantly evolving. It is changing and only those businesses that change with it will survive and thrive.

One of the ways businesses are evolving is to implement blockchain-based loyalty programs that are making customers to have more brand ownership and to become more loyal.

As time goes by, more customers will become aware of the benefits of blockchain-based reward programs and will, therefore, turn their backs on traditional loyalty programs.

So stay ahead of the curve if you are an e-commerce store owner. Get onto to ensure your customers are rewarded. If you are an online shopper, register on too to find out the benefits of a blockchain-based system. Believe you me, you will not regret the decision.