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A loyalty program based on Blockchain and Mobile Phone Interactions
Abstract
Loyalty cards programs have been used by retailers to increase customer retention. Loyality cards provide means to identify a particular customer and to collect customer specific data, thus enabling individualized marketing; however, operating a loyalty program is complicated for retailers since they require to manage balances, collections, and transfers of customers. Moreover, customers may forget or even deliberately decide to not use their cards mainly because it is uncomfortable carrying a physical card. %
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This paper proposes a Loyalty program based on a blockchain that does not require a physical card for identifying customers as it associates customers to their phone numbers. In this perspective, companies can reduce overhead costs involved in managing the loyalty program. This paper reviews the technology required, and describes the implementation of a loyalty program based on blockchains. Finally, it also enumerates the reasons for choosing the blockchain technology for this application.
... A local Ethereum node can be used for the transactions (Ibarra González et al., 2018); alternatively, a public node can reduce the footprint in a local system. The advantages of using a public node are introduced in the following section. ...
Loyalty cards programs have been used by retailers to increase customer retention. Loyality cards provide means to identify a particular customer and to collect customer-specific data, thus enabling individualized marketing; however, operating a loyalty program is complicated for retailers since they require to manage balances, collections, and transfers of customers. This is exactly the same problem the retailers were facing before credit cards were readily available. A new problem is that customers now have too many cards, customers may forget, or even deliberately decide to carry only a selection of their cards. This paper proposes a loyalty program based on a blockchain that does not require a physical card for identifying customers as it associates customers to their phone numbers, since nowadays people always carry their phone. In this perspective, companies can reduce overhead costs associated to managing the loyalty program. This paper reviews the technology required and describes the implementation of a loyalty program based on blockchains. Finally, it also enumerates the reasons for choosing the blockchain technology for this application.
In extant loyalty program (LP) studies, one of the main challenges is to keep customers motivated in participation behaviors and achieving financial goals. While some companies have initiated efforts to use blockchain (BC)-based distributed ledgers and smart contract capabilities to reduce LP operating costs and enhance customer experience, academic assessment of BC application in the LP context remains in paucity. In this paper we establish a theoretical framework to explain the effects of BC on LP participation. Guided by the self-determination theory (SDT), we illuminate how the BC-based natures influence the relationship of varying customer motivations (economy, autonomy, competence and relatedness) and perceived value, which consequently induces participation behaviors. We outline 4 propositions to depict the conceptual mechanism based on the theoretical framework, and then employ a case study to illustrate how a BC-enabled LP scheme can help enhance customers' involvement in a point exchange environment.
We apply a graphical model to develop a digital loyalty program protocol specifically tailored to small shops with no professional or third-party-provided infrastructure. The graphical model allows us to capture assumptions on the environment the protocol is running in, such as capabilities of agents, available channels and their security properties. Moreover, the model serves as a manual tool to quickly rule out insecure protocol designs and to focus on improving promising designs. We illustrate this by a step-wise improvement of a crude but commercially used protocol to finally derive a light-weight and scalable security protocol with proved security properties and many appealing features for practical use.
Purpose
This article aims to examine the negative effects of loyalty programs from the perspective of frustration theory. It seeks to develop a model of customer frustration on the basis of frustration theory and an exploratory qualitative study.
Design/methodology/approach
First, frustration is defined as a special form of dissatisfaction and a general model of frustration in business relationships is developed by evaluating the literature on frustration theory. Second, an explorative and qualitative focus group study among participants of a loyalty program for frequent travelers is conducted. A multi‐level iterative content analysis of the participants' statements reveals the existence of different categories of frustration incidents. Third, the findings of the study are used to develop a system of propositions that generate a specific model of customer frustration in loyalty programs.
Findings
Seven categories of frustration incidents that were triggered by the loyalty program and lead to frustration sensation and subsequent frustration behavior, like protest or avoidance, could be identified. With four categories of incidents – inaccessibility, worthlessness, qualification barrier and redemption costs – customers' frustration sensation and behavior are directed on the program itself (program‐related frustration incidents). For the other three – discrimination, economization and defocusing – frustration sensation and behavior also affect the perception of the relationship with the firm (relationship‐related incidents).
Research limitations/implications
The exact differentiation of frustration from related constructs should be the topic of further research. The findings of the empirical study are of limited generalizability because the object of investigation was a single company's loyalty program in a special industry sector. Hence, the introduced propositions should be further specified and tested in a large‐scale quantitative study in different sectors and with a number of companies and programs. Further work is necessary to allow deeper insights into the relationships between the elements in the customer frustration model.
Practical implications
Several implications for planning and implication arise from the results of the study. Management has to make sure that program‐related and relationship‐related negative effects are avoided. That calls for offering only those benefits that represent genuine additional value to customers and for ensuring that the benefits can be claimed at any time and without any additional effort by the customer. Furthermore, the perceived quality of the program should be monitored to obtain prompt information about possible customer frustration and indications of protest (i.e. customer complaints) should be viewed with particular attention.
Originality/value
This paper provides new insights into the so far highly neglected negative side effects of loyalty programs. Also, innovative is the first‐time application of the frustration construct to the analysis of customer behavior in the context of loyalty programs. The contribution is of high value for all who research in the field of customer relationship management and customer loyalty.
To foster customer relationships, firms have implemented so-called loyalty programs (LPs). These programs provide monetary benefits (e.g. through direct discounts or rewards) and/or more soft benefits by focusing on creating commitment to the firm among customers through excellent service or giving special treatment to customers. In this chapter, we present a framework of three mechanisms underlying the LP effect. Next, we incorporate a discussion of relatively under-researched areas, such as reward redemption effects and so-called short-term LPs. We discuss models that can be used to examine LP effects and to analyze customer data to support marketing decisions. Finally, we provide a discussion on emerging topics in LPs, specifically addressing increasing digitalization, empowered customers, and the prevalence of big data. We conclude with a discussion on some pressing research questions.
Smart contracts are computer programs that can be correctly executed by a network of mutually distrusting nodes, without the need of an external trusted authority. Since smart contracts handle and transfer assets of considerable value, besides their correct execution it is also crucial that their implementation is secure against attacks which aim at stealing or tampering the assets. We study this problem in Ethereum, the most well-known and used framework for smart contracts so far. We analyse the security vulnerabilities of Ethereum smart contracts, providing a taxonomy of common programming pitfalls which may lead to vulnerabilities. We show a series of attacks which exploit these vulnerabilities, allowing an adversary to steal money or cause other damage.
This study examines the differential effects of the benefits customers receive from a loyalty program (LP) on satisfaction with the LP, trust in the LP, and store loyalty for high- and low-end fashion retailers. With survey data from U.S. LP subscribers, the study tests the relationships using multiple regressions and analysis of covariance. The results show that symbolic benefits are more important for high-end fashion store consumers' satisfaction with the LP; conversely, utilitarian benefits increase consumers' satisfaction with the LP more in low-end fashion retailing, whereas hedonic benefits increase consumers' satisfaction with the LP in both types of retailers. All benefits in both types of retailers affect trust in the LP. Finally, satisfaction with and trust in the LP are important drivers of loyalty to the retailer. The findings have important implications on how managers of high- and low-end fashion retailing can effectively design their LP rewards to maximize loyalty.
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