Starbucks coffee cup and coffee beans

Starbucks Odyssey: Are NFT loyalty programmes the next big thing in customer engagement?


What are the mechanics and benefits of Starbucks’ groundbreaking NFT loyalty programme, and is this just the beginning for blockchain's use as a customer engagement tool?

6th Apr 2023

The beta launch of the Starbucks Odyssey NFT loyalty programme has raised many questions for those unfamiliar with Web3 concepts (which, let’s face it, is most people). Being able to trade points may boost customer engagement, but how does such a system benefit from being built on the blockchain? Couldn’t Starbucks just add trading functions to its existing loyalty programme?

The difference is revenue. Whereas typical loyalty programmes balance the cost of discounts with the increase in custom, blockchain-based loyalty schemes generate royalties for the brand each time customers trade their NFT rewards.

Effectively, each programme is its own miniature economy that becomes more valuable the more active it is, while rewarding both the customer and the brand.

How does Starbucks Odyssey differ from legacy loyalty programmes?

For a business, it’s cheaper to retain customers than acquire new ones. For customers, there’s less risk in buying from a trusted business than an unknown one.

Loyalty programmes provide incentives to remain in this loop, but only the most committed customers can amass enough loyalty points and gain rewards; there is no way for occasional fans of the brand to “buy in”, even if there is a perk that they are willing to pay to access.

Starbucks Odyssey is explicitly positioned as a community building platform. Engaging in a typical loyalty programme – think the well-established air miles system – is an entirely solitary process: a customer amasses points, exchanges them for rewards, and that’s it.

Web3 loyalty programmes, on the other hand, are built on the ethos of decentralisation, where all stakeholders are able to do what they want with their data and digital assets.

Web3 loyalty programmes are built on the ethos of decentralisation, where all stakeholders are able to do what they want with their data and digital assets.

Participants in Starbucks Odyssey will be able to trade their collectible NFT stamps with other members, and points will be able to be purchased directly with fiat currency.

Such a system introduces market forces into a loyalty programme, where scarcity over limited edition NFTs and the points currency drive up value as they are traded. Should this mini economy take off, Starbucks Odyssey will pay for itself through transaction royalties, in addition to the typical customer retention benefits of loyalty programmes.

Beyond the experiential reward provided by the gamification of the Starbucks Odyssey “Journeys” – which are virtual tours through the Starbucks business and history – and the satisfaction of collecting limited edition items, the programme is planned to offer exclusive unlockable benefits such as virtual classes and unique events.

Anything a customer isn’t interested in can be traded, so no matter what, the customer benefits from their participation and anyone who simply wants to pay for a reward is able to do so.

What are the benefits of blockchain-based loyalty programmes?

For a brand that wants to explore Web3 loyalty programmes, building something like Starbucks Odyssey might sound like a lot of work, with a scope that is closer to game design than marketing.

However, the transparency and security of blockchain and NFTs offer immediate benefits to loyalty programmes of any scale, whether a brand wants to build full multi-phase “journeys” and unique collectibles, or roll out a simple points system.

The first benefit is cost reduction. Of course, adopting any new technology is going to come with an upfront investment, but the running costs for a blockchain are low as the process is largely automated with minimal post-launch nudging required.

Smart contracts – an automated legal contract that exists within blockchain ledgers – allows for trading between a business and a customer, or a customer and a customer, to occur without any manual processes or approvals. This is both simpler for all parties and minimises the risk of manual error.

Next is transparency. All activity within a blockchain loyalty programme is logged in an immutable and time-stamped ledger, giving all stakeholders the ability to trace their transactions and prevent any possibility of fraud and allowing participants to trust that their rewards cannot be lost to technical error.

This also allows for a clear and real-time view of the entire programme for analytics purposes, whether within an organisation or with selected partners.

The decentralised nature of blockchain and NFTs means that loyalty programme rewards don’t have to be locked into a single brand.

On the topic of partnerships, the decentralised nature of blockchain and NFTs means that loyalty programme rewards don’t have to be locked into a single brand.

Going back to Starbucks Odyssey, there is no technical reason that points could not be traded in exchange for rewards from another company’s blockchain-based loyalty programme. In the future, Starbucks points could be used to gain rewards from McDonald’s, or any other business with overlapping audiences – incentivising engagement with cross-promotional marketing.

NFT collectibles can also be displayed on social profiles – with support recently rolled out across Meta platforms – allowing users to show off their collections while giving brands a free boost in awareness. Someone could see that a friend of theirs has a Starbucks collectible they want and trade for it, extending the reach of their loyalty marketplaces across the entire social graph with no additional effort.

With marketers looking for ways to expand their audiences and increase ROI in the ongoing economic slowdown, blockchain-based loyalty programmes and collectible NFTs provide the opportunity to build their own active economies that reinforce customer loyalty and build communities of engaged fans.

This is more than a change in technology, it is a shift in mindset, from loyalty being a two-way exchange to an open marketplace that gains a life of its own.

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