Web3 & Customer Loyalty: Four Leading Challenges Brands Face


Loyalty programs are a popular tool for businesses looking to increase customer interactions and retain customers.

However, despite the potential benefits, many companies face significant challenges in making their loyalty programs effective.

In this article, we review and summarize the four leading challenges brands face in customer loyalty, based on the comprehensive BCG publication.

Fragmented Loyalty Relationships

Though most customers are willing loyalty members, they are overwhelmed by the promotion and messaging from different programs as they manage multiple loyalty accounts. Increasing ads and offers fly across their screens, often less personalized.

This tide of constant promotion dilutes the exposure of a single program. To stand out in a crowded field, companies must develop a compelling loyalty offering that has:


  1. An engaging and simple user experience
  2. Maintains meaningful partnerships with other programs.

Longtail of Low Activity Users

There is a large distribution of less active users throughout many programs, particularly in industries such as:

  1. Travel
  2. Hospitality
  3. Luxury goods

Brands should take note of a significant data point from Bakkt’s Loyalty & Rewards 2022 Outlook Study, which found that 66% of the average US consumers prefer cash back over earning points.

Companies that offer fungibility of points in the form of conversion to cash, digital assets with underlying utility, or access to other programs can help engage these longtail users and improve program effectiveness.

Closed Ecosystems

Prominent digital players often dominate the market and control access to customers and ad space. Companies must tap into these ecosystems to reach more customers and form partnerships with other businesses. Partnerships enable access to more touchpoints with:

  1. A broader base of customers
  2. More insights and campaigns
  3. A more comprehensive array of rewards

One way that brands can compete at scale is to draw in consumers with propositions involving many partners.

The numbers are impressive; for example, the Starbucks and Delta Air Lines partnership allows Delta Air Lines to appeal to Starbucks’ 27 million plus loyalty customers, who don’t necessarily all fly Delta Air Lines. Starbucks also gains more touchpoints with its consumers throughout its travel journeys.

Complexity Scaling Partnerships

Though there is strength in numbers, partnerships are hard to solidify. Brands often create “connected loyalty” partnerships to craft more comprehensive and widely appealing offerings for their diverse customer base. However, these partnerships are mostly point-to-point integrations that become harder to scale beyond one-to-one setups into multi-partner ecosystems.

There’s also lots of overhead when managing the details of cross-program agreements, including:

  1. Legal and regulatory compliance
  2. Currency tracking and reconciliation
  3. Marketing collaborations.

Web3 offers ways to scale partnerships and manage these intricate details—promising versatility as companies try to enhance loyalty offerings.

In conclusion, while loyalty programs can be effective tools for retaining customers, companies must navigate several challenges to make them successful. Overcoming these challenges requires a compelling loyalty offering, engaging user experience, meaningful partnerships, and effective management of program details.

Keep an eye out for our upcoming Global Rewards Liquidity Report (2023) for more insights and strategies on how to enhance your loyalty program through. Sign up now to receive the report as soon as it is released!

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