Many companies overlook the benefits of Web3, and recent cryptocurrency hiccups are one of the main reasons. Billions of dollars in client wealth have been lost in cryptocurrency trading, perhaps the most publicized area of ​​Web3, with falls like the fall of the now-bankrupt FTX exchange. A “crypto winter” has begun, scaring retail businesses and institutional adopters away from the considerable promise of Web3.

One of the most promising areas for Web3, the third evolution of the Internet, is customer loyalty offers. Web3 offers a variety of ways to reinvigorate loyalty programs. Concepts like tokenization (digital tokens that represent assets or property rights) support use cases tied to wholesale payments, identity management, and most importantly, loyalty revenue streams for retailers. Consumers today are quite open to loyalty relationships, and Web3 is a rich environment to further drive engagement and scale partnerships more effectively.

At the same time, wild changes in regulatory and technological conditions are pushing brands to view loyalty programs as trusted drivers of customer data collection. Regulators are constantly scrutinizing consumer privacy, and big tech platforms are limiting the use of third-party cookies and setting tighter controls on data sharing. As brands look to a cookieless future, they are eager to build their own loyalty programs for first-party data collection to better engage customers, a role that Web3 fulfills with wide versatility.

However, the answer is not always as simple as launching another loyalty program in a flooded market. Clients are enrolled in more programs than ever before; American consumers had more than 16 loyalty memberships on average in 2022, according to the Bond Brand Loyalty Report. However, activity among these memberships can be disappointing; active customer loyalty engagement has stagnated at less than 50% of enrolled programs in recent years. Businesses need to understand Web3 and the various options to drive engagement, because consumers will respond, but only to the right offers.

The utility, services and features that a customer can access along with a digital asset, is vital to the success of Web3 loyalty offers. Businesses can tokenize customer relationships through non-fungible tokens (NFTs) to drive engagement and activate communities. There is also significant utility in transaction tokenization to strengthen loyalty collaborations between partners. Companies should avoid imitating conventional and myopic use cases or, worse, avoid Web3 altogether out of an abundance of caution. This article explores the challenges with existing loyalty paradigms, examines how Web3 technologies can be used in loyalty contexts, and offers a framework to help companies revive or boost loyalty offerings to energize customers.

Understanding Web3

Discussions about Web3 are often clouded by misunderstanding and hype, so it’s helpful to clarify how this new technology follows previous versions of the Internet. Web3 brings together emerging technologies, the most fundamental blockchain among them, to give users more control over their activity and interactions. Web 1.0, which lasted from roughly 1990 to 2005, supported the information economy, where publishers controlled content and collected revenue, and users consumed the content. Web 2.0 (2005–2020) was the platform economy, where networks and platforms enabled users to read and create content. However, the platforms still controlled the revenue streams of creators centrally. (Look at annex 1.)