Published on Jun 20, 2021
Essays

Programmable Loyalty

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Canadian Tire is a Canadian institution. It is the quintessential Canadian retailer. It was my favorite place to go to when I was a kid. One of the things I loved about it was Canadian Tire money. It consisted of coupons which resemble real banknotes and were used to save on your next purchase. You were given money as you left the door!

The concept is simple, the more you buy, the more you save and my parents were hooked. We had a drawer full of these bills at home. It remains one of the most effective loyalty programs in operation. As I’ve been learning more about crypto and Ethereum, my mind keeps coming back to Canadian Tire money and about incentives in particular.

Going down the rabbithole

The range of future possibilities in crypto are endlessly fascinating. It still feels that it’s early days, kinda like the web in 1995 but with many projects already at massive scale. It’s a humbling topic because of the scope and complexity. Luckily, there are many brilliant people working in the field to learn from.

The two biggest currencies right now are Bitcoin and Ethereum. Bitcoin is one dimensional while Ethereum is more multi-purpose. A friend of mine described it as disk space vs. Windows, you want both. What’s interesting about Ethereum is of course it’s programmable nature. It’s much more malleable than bitcoin and can be thought of almost like Javascript. You can program and embed smart contracts into almost anything – and people do.

Creating new economies

While some scoff at the recent NFT mania, I don’t think it’s crazy at all.. Some might argue, it’s just a JPEG but that is short-sighted in my view. This nascent capability to capture value from your most ardent supporters is just beginning. The ability for creators to monetize their work is just one use case; this idea can be applied in a ton of different scenarios. As people start buying more & more digital goods, it’s easy to see these new business models emerge – all on the back of Ethereum and smart contracts.

Money will be programmable but so will loyalty

I won’t venture into the currency debate because, to be honest, I don’t know enough about it. I do know that holding positions both in Bitcoin and Ethereum is probably smart (not investment advice!). The bet being that programmable money is better than fiat currency – this obviously unlocks many new paths thanks to software.

With Ethereum being programmable by nature, you are able to create and embed rules that are then guaranteed by code. If we can program money, one layer below is being able to program loyalty as well.

This newfound ability to create rules, guarantee them programmatically will create tremendous value in loyalty. The key aspect of loyalty that I believe that can be unlocked is the alignment of incentives. Traditionally, loyalty programs focus on the end customer with a promised future reward. What programmable loyalty can achieve is to align not just customers but a broad range of stakeholders. One simplistic example of this would be Canadian Tire money. What if instead of just having a rebate on your next purchase, you can decide to convert your Canadian Tire into shares of the company. Now the customer can have a seat on the shareholder’s table more easily than before.

This is what my simple brain can think of. Imagine what the brilliant developers in crypto can create. It’s hard not to get excited about the future possibilities.  I keep asking myself these questions:

  • What new applications can this concept unlock? Were the promises of the ICO craze just too early?
  • What industries & companies stand to benefit the most? Which stand to lose?
  • What new business models will be built on top of programmable loyalty?

Where to start

A good starting point for me is always the customer. What will they want and how can we make it easy for them to obtain it. Being able to create entire new economies where there is an alignment of interests between different groups is just around the corner. We are making loyalty programmable and it will be more powerful than Canadian Tire money in a drawer.

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