Chapter 1: The Transformation of Loyalty

The landscape of customer loyalty is undergoing a significant transformation. Advances in technology, evolving consumer expectations, and the challenges posed by a global pandemic compel businesses to rethink the essence of loyalty, its strategic importance, and how to cultivate enduring loyalty among customers.

This year, the Loyalty Science Lab is diving deep into the future of loyalty, exploring innovative engagement strategies, customer loyalty across various channels, and the influence of empathetic AI and voice interactions. Our goal is to foster discussions about the direction loyalty practices are headed.

In this inaugural article of our Reenvision Loyalty Series, we spotlight insights from Stewart Pearson, Chief Strategy Officer at Real Engagement and Loyalty and Founder of the Consilient Group. Stewart is a renowned figure in the realms of digital, data, and relationship marketing, celebrated for his innovative approach and extensive experience in global marketing initiatives. His ability to foresee industry trends sets him apart, and we are eager to share his perspectives on Web3's implications for loyalty.

As we stand on the brink of a thrilling technological transformation, we are witnessing the rise of Web3—a collective term for a new wave of applications. This movement's significance extends beyond technology, affecting finance, business, and the broader societal landscape. For instance, in the discussion titled "Web3 and the Future of the Internet," Aaron Levie, CEO of Box, converses with Alex Kantrowitz, host of the Big Technology podcast.

The hallmark innovations of Web3 include Blockchain, Cryptocurrencies, Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs), and Decentralized Autonomous Organizations (DAOs). Together, they create a dynamic mix of ideas and opportunities that remain somewhat undefined. The core concept revolves around a decentralized internet that operates without the need for large tech corporations, ensuring that rewards are transparently distributed among all contributors, thereby opening up new avenues for business and incentive models.

Chapter 2: The Limitations of Previous Web Generations

Web1 set the stage with the promise of free access to information and the ability to connect, publish, and sell globally. However, over the past two decades, Web2 has evolved into the dominant framework for business operations, including marketing and advertising. This shift has had dire consequences for consumers and society, affecting brands, marketers, and advertisers alike.

Web2 capitalized on two fundamental human desires: the immediate availability of goods and services and instant access to opinions from a diverse range of individuals. This led to the creation of monopolistic platforms by leveraging network effects and affordable capital. Major sectors such as search, social media, shopping, news, and entertainment have become increasingly dominated by a handful of companies, commonly referred to as FAMGA: Facebook, Amazon, Microsoft, Google, and Apple.

As users flocked to these platforms, a new business model emerged that monetized personal data through advertising, with the platforms retaining all profits while sharing none with users. This has resulted in a centralized, secretive, and controlling ecosystem that predominantly extracts value from its participants.

Chapter 3: Embracing the Potential of Web3

Web3 holds the promise of a decentralized, transparent, and interoperable internet, where value is shared equitably among all community participants. While some critics view cryptocurrencies as mere Ponzi schemes and dismiss Web3 as overhyped, we, as marketers, should embrace this movement and advocate for a fair distribution of created value.

It is essential to acknowledge the damage inflicted by Web2. The marketing industry must confront the negative externalities resulting from its practices, particularly in the digital realm, which often lacks transparency and is marred by fraudulent activities. Under Web2, marketing and advertising have essentially funded the platforms, making businesses complicit in diminishing brand value and amplifying misinformation.

Chapter 4: Rethinking Loyalty Marketing in a Web3 World

What new opportunities arise for loyalty marketing within a framework that emphasizes value sharing rather than extraction? A decade ago, at Wunderman, a leading digital and data-driven agency, I attempted to pivot our strategies to focus on "the whole consumer." Our foundation was built on CRM, but I believed that brands could gain more value by engaging a broader community, including social media followers, influencers, partners, and employees. Although research indicated potential, the initiative did not gain traction.

I reimagined this idea as a model for sharing rewards with all individuals impacted by a brand or contributing to its community value—whether they are Buyers, Believers, Citizens, or Creators. To achieve this, brands will require new technologies and mechanisms to facilitate value sharing within their communities. Web3 provides the necessary organizational framework (DAOs), platforms (Blockchain), and assets (NFTs) to create transparent and trusted rewards (Cryptocurrencies and Tokens).

As marketers, we must challenge traditional loyalty practices and innovate in response to evolving consumer expectations. For instance, influential figures like Byron Sharp from the Bass-Ehrenburg Institute encourage brands to prioritize customer acquisition and promotions to drive purchases from infrequent buyers.

While criticisms exist regarding points and discounts rewarding consumers who would have purchased anyway, it is crucial to adopt effective analytics and targeting methods. However, these critiques highlight a fundamental issue: points-based schemes are primarily behavioral, while true loyalty is fundamentally emotional.

In 2021, we witnessed further advancements in four key areas:

1. Subscriptions: Brands like Panera Bread and Taco Bell have started rewarding regular customers through subscription models.
2. Circular Economy: Companies such as IKEA and car manufacturers like BMW are incentivizing long-term brand loyalty.
3. Social Consciousness: Brands like Warby Parker and Bombas are rewarding global citizens for their contributions.
4. Decentralized Creator-led Communities: Investments by firms like Andreessen Horowitz enable creators to earn cryptocurrencies linked to the businesses and brands they support.

These examples illustrate the potential for marketers to leverage Web3 concepts and tools to develop new loyalty models centered around a community of shared values, curated by membership, where value is transparent and equitably distributed among Buyers, Believers, Citizens, and Creators.

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