‍Introduction

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In the last article, we talked about the principles behind token-based rewards. In this article, we will examine some case studies of blockchain-powered rewards programs, trying to draw some lessons from each and determine what considerations are essential for a successful token-based reward program.

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Rewards History

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The history of customer rewards demonstrates changing ideas about how to encourage loyalty and encourage desirable consumer behavior while still delivering a seamless and positive customer experience.

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We can highlight 3 examples of the early customer rewards experience:

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• The earliest customer rewards programs were highly manual; in 1891, the Schuster and Company department store in Milwaukee began issuing rewards stamps to customers that paid with cash (as a reward for not paying on credit).

• In 1981, American Airlines introduced the AAdvantage program, initially awarding free flights to a select list of frequent American customers.  

• In 1986, Discover launched the first cashback program, offering a radical degree of transparency in the distribution of its rewards.

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With the rise of cryptocurrencies in the recent decade, innovators have seen the potential of combining blockchain technology with the established rewards model, paving the way for crypto rewards. Many token-based rewards programs involved delivering cashback in the form of bitcoin or other major crypto assets, seeking to capitalize on growing customer interest in owning cryptocurrencies.

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More recently, companies have experimented with the creation of tokens specifically for their rewards programs. This approach can bring powerful benefits, especially token customizability, but it can also bring risks. Below, we examine two case studies that reflect the benefits, and potential pitfalls, of token-based rewards programs.

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Case Study #1: Crypto.com and the importance of sound tokenomics    

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In 2018, Crypto.com launched a groundbreaking Visa® prepaid card program with industry-leading rewards rates, delivered in the form of Cronos (CRO) tokens. In addition to reimbursing cardholders’ Spotify and Netflix subscription, the Crypto.com card program offered a maximum cashback rate of 8% (well above the maximum prepaid interchange rate). These highest earning rates were accessible only to customers who staked CRO.

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Unfortunately, Crypto.com’s sky-high rewards proved only to be sustainable during bull market conditions; when markets soured, these rates became unsustainable. Following a 50% plunge in the price of CRO in the first half of 2022, Crypto.com sharply reduced its rewards earning rates, prompting customer uproar.

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The conclusion from Crypto.com Rewards is that a successful rewards program requires strong tokenomics. Due to souring market conditions, Crypto.com made the understandable decision to lower its rewards rates. However, this move frustrated customers, rather than delight them, quite the opposite of the goal of customer rewards.

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Case Study #2: Revamping the attention economy  with the Brave Attention Token (BAT)

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Launched in 2017, Brave Browser’s Basic Attention Token (BAT) represents a novel approach to the digital advertising model. BAT enables a new approach to aligning incentives among advertisers, users, and content creators:

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1. Advertisers purchase BAT in order to show ads on the Brave platform;
2. Users earn BAT for their time spent watching ads;
3. Content creators can receive BAT tips.

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The success of the BAT platform is clear: More than 8 million users are earning Brave Attention Token (BAT) through Brave Rewards. Additionally, Brave Ad campaigns have been supported in nearly 200 countries, with over 7.5 billion ad confirmation events to date. BAT has also retained its value over time; the token’s launch price in 2017 was $0.28, nearly on par with the price in September 2022 of $0.30.

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BAT represents a success story in incentive alignment, and using tokens to address challenges in digital marketing. In the Brave ecosystem, consumers are partners, not the product. Tokenized rewards, issued on a public blockchain, enable valuable rewards for consumer attention to advertisements.

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Key Considerations for a Successful Token-based Rewards Program

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Keeping in mind the experiences of the companies in our case studies, there are a few key considerations necessary to ensure a successful token-based rewards program.

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• Utility and user-centricity: Accessibility is crucial when introducing new technology like blockchain, especially to skeptics of cryptocurrencies.

• Tokenomics: To prevent a price collapse and ensure the project's viability, solid tokenomics (the principles that control a token's supply and distribution) are crucial, especially in volatile market conditions.

• Regulations: Blockchain-related legal requirements are in flux, so a rewards program that is compliant today might not be tomorrow. A token-based rewards program should be structured in close cooperation with legal counsel, in order to ensure that all stakeholders are protected.  

• Ability to build community: Successful token projects have strong community buy-in, which requires a compelling narrative and opportunities for community engagement. Many mainstream companies lack experience in promoting this sort of engagement, requiring specialized talents and perspectives from the crypto community.

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Conclusion

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Token-based rewards create management efficiencies and enable a richer customer experience. However, success in tokenizing a reward program depends on solid tokenomics, regulatory compliance, and above all, token utility and creating tangible benefits for customers.