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Hello and welcome to episode 309 of Let’s Talk Loyalty. Today I’m delighted to welcome back Mike Capizzi, the Dean of the Loyalty Academy. To share the latest Delphi report entitled The Future of Crypto Rewards. This report is the latest research produced by the Loyalty Academy, and it seeks to capture the insights and expertise of a global panel of loyalty industry experts on a key topic. In this case the future of crypto Rewards.
As the research facilitator Mike worked closely with Bakkt the sponsors of the report to explore key topics around the future potential for crypto rewards. The use cases it suits best, the industries and demographics it’s most relevant for, as well as some fascinating geographic differences in the interest and adoption of this emerging asset class.
I hope you enjoy listening and learning as much as I did from this global study with insights from 54 loyalty industry professionals. And I want to encourage you to let us know your comments and feedback in the show notes. All Let’s Talk Loyalty podcasts are now being published with a dedicated link where you can quickly and easily add your comments or questions.
I really want to hear your feedback on this topic to help us to continue to Share and learn as a community of loyalty professionals. So please do visit the show notes after you listen and share your feedback with me now on with the show.
Paula: So Mr. Mike Capizzi, welcome back to Let’s Talk Loyalty.
Michael: Thank you for having me back, Paula. I always, uh, appreciate your show and, uh, and talking to you about our favorite subject.
Paula: Totally, totally. Well, we have quite a few favorite subjects now, in particular with the latest Delphi report on The Future of Crypto Rewards, uh, coming from your work with the Loyalty Academy.
So really exciting and very relevant topic for today’s discuss. Uh, but before we get into that, Mike, as you know, I always like to ask my guests about their favorite loyalty programs just to get a sense of what people are admiring or enjoying, even in their own personal lives. So give us a sense, Mike, of, uh, what would you say if I asked you what is your favorite loyalty program?
Michael: Oh, Paul, I get asked that question a lot and I always answer the exact same way. They’re all my favorites, . Um, I, uh, I, I, I followed pretty much everything that goes on in loyalty marketing. So yeah, there isn’t one brand or one particular vertical market that I would, uh, um, tend to give favoritism too. When I do think is, um, the kind of thing that resonates the most with me are programs that are continually evolving. They’re trying to add, uh, new use cases. They’re trying to add new rewards. They’re trying to change the value proposition or the communications. They’re constantly experimenting with, uh, new systems, new techniques, new technologies in order to push their programs forward. Those are my favorites.
Paula: It’s a great answer. I do like that actually, because, um, there’s no such thing as anything that stays still. And I think that’s what inspires me actually about working in this industry as well as, I suppose the, the joy of feeling like you’re doing something back for your members and for your customers.
So I, I definitely agree that something that’s evolving means you really have your customer’s interests at heart, and I suppose trying to do, do right by them over, over time as things change. Definitely. So you have been on the show before, of course, Mike talking about a number of different things. Um, but specifically the Delphi report is one that, um, I was really impressed when you introduced it to me as a very structured research framework, which I think today it actually would be very useful if you wouldn’t mind just explaining a little bit of the methodology that you used, before we actually get into the topic for today, Mike, because I think crypto rewards, um, or anything crypto related is, is really interesting. There’s a lot of confusion, a lot of curiosity. So obviously you chose that topic for a very good reason and you have an amazing panel of people, of which I’m privileged to be one, uh, in terms of responding.
So will you talk a bit about the framework, first of all, and the methodology that the Delphi report offer.
Michael: Sure thing. Um, this is our, uh, let’s see, 1, 2, 3. This is our fifth year, fourth report. Uh, we did not do a report during the, um, the lockdown year. Um, okay. Yeah. Yeah. Everything, everything was screwed up that year.
We were all confused. All right. But this is our, our fourth report, and methodology’s always the same. Delphi is a structured research technique that seeks to predict. What it does is it gets a topic that tries to narrow the definition, uh, around that topic. It’ll put it out to a group of people who are expert, um, professional expert in that individual in that field.
And they’ll ask those people to, uh, kind of vet the topic, um, get it a little bit more, defined, again, a little bit more structured, and then they’ll put it out to a wider group of people, a panel of people, and ask them about the future related to that topic, uh, this particular year, the topic was crypto rewards, as you mentioned. Uh, a lot of confusion. Yeah. But also an awful lot of interest, and that’s how the topic was picked. Um, in the end, there were 52 Delphi panels. Who participated, including yourself. Um, virtually all of them are from the certified loyalty marketing professional community. Um, the CLMPs, uh, as designated by the Loyalty Academy.
Yeah. Uh, they came from all regions of the world. Uh, and they are people with generally 10, 15, 20 or more years, in loyalty marketing. Some are from the brand side, some are from the service provider side. Uh, but they’re people who, um, do loyalty for a living, uh, and they were in a good position to assess and offer their opinion about, um, the future of crypto.
Paula: Absolutely. Yeah. And I think it’s that global diversity, uh, that really gives it that incredible perspective, Mike. So I always love seeing what’s happening, for example, in the Middle East where I’m based versus Asia Pacific, because so much of what I see coming out is, you know, for one market, and of course there’s complexity and opportunity to research individual markets.
So the fact that you’re taking on a topic and giving it that global perspective is super exciting and it’s not the first time that you’ve addressed it. I know it was touched upon in the 2018 Delphi report. So will you tell us a bit about, uh, I suppose what came out at that very early stage?
Michael: Well, in 2018, the question was what’s the future of loyalty marketing gonna look like?
Okay. And it was kind of dribbled in the end. But one of the things that came up was, um, cryptocurrency. Okay. Uh, did it have a place in the future of loyalty? And at that time, most of the panel didn’t think so. Um, those that did were still a little bit uncertain about what was gonna happen. Now, this is 2018, 4 years ago.
The interesting thing was people jumped on the blockchain. But the, uh, cryptocurrency world and crypto rewards, um, will be enabled by blockchain technology. And in 2018, people were very excited about what the blockchain could do for loyalty and it was dragging crypto forward, but there was an awful lot of uncertainty and generally on the negative side.
Fast forward to 2022 and the world has changed. and in those four short years, the um, prevailing opinion about crypto rewards has shifted dramatically to the positive.
Paula: Yeah, it is incredible actually, and obviously I’ve been reading through the report today, Mike, a couple of times in preparation. The one statistic actually that the first one that jumped out was the fact that there is some data from, I believe a company called Payments, which said that nearly one in four Americans had owned cryptocurrency at some point in their lives by January, 2022, which absolutely astounded me.
I, I don’t think I would’ve guessed it was nearly that high.
Michael: Well, You’re not alone. Um, what’s interesting to us and, and Payments is, um, highly respected, um, uh, source and yeah, we use a lot of their, um, their research. Yeah. Uh, in and around the loyalty academy. What, what’s astounding to us is that in, in the grand scheme of global things, US, lags behind in this topic. They’re definitely behind. Wow. Yet we’ve got a high preponderance of people, mostly young people, Paula, yeah. Who are, uh, have experience firsthand with cryptocurrency. And the reason the US is behind can be, um, subject to argument. It appears that, um, the, regulatory uncertainty over here, and the way the news portrays cryptocurrency over here is, uh, definitely something that have people worried and concerned. And, uh, also the, um, incumbent, currency ecosystem is extremely strong over here. Very, very, very strong. Yeah. And they’re gonna beat down and prevent the newcomer from gaining a whole lot of ground.
Yeah. So you put those few factors together and given its size in terms of the loyalty marketplace globally, the US should be the leader and they’re not. Yeah. So we find little small pockets geographically. Um, Asia Pacific, and the Middle East are the two that are called out in their report. Um, they are smaller loyalty markets globally in terms of their share of total loyalty dollars.
Yet there are larger markets, disproportionately higher in terms of crypto rewards and, um, they’re young markets, so that helps. Uh, but also they are markets of greater innovation and less incumbency pressure than you’ll see, uh, in the US. Yeah. So, um, it, uh, it was pretty interesting, um, we’ve got people using, but um, we don’t have a whole lot of, um, sentiment yet for, um, crypto rewards in the US.
Some sentiment, but not as strong as it should have been.
Paula: Yeah. Yeah, I think you’re absolutely right, of course, Mike, that, um, you know, that level of maturity in the US market is often a reason that I would, you know, really think well actually, you know, there’s this perspective almost that if it’s not broken, why try and fix it?
So, you know, there is so much understanding and awareness, and value, I guess, already in terms of how all of these loyalty programs have grown up over the last 30, 40, 50 years. So, you know, to bring in something that is, I think, still perceived as, as quite complicated, understanding potential use cases, which of course is what we’re here to talk about today is one of our topics.
You know, it really, it’s, it’s not as compelling, I think, you know, when you guys are so, you know, clear in terms of how your programs work. But to your point about evolving loyalty programs, Mike, at the very start, I do think there’s a lot of people will be listening to this show, will be curious to hear exactly well, what kind of use cases, for example, what kind of demographics, like what should we be thinking about?
So maybe I’ll start by asking you then, what do you believe, um, or what did the, the panelists believe might be the most compelling use cases for crypto rewards?
Michael: Well, it’s on the redemption side, Paula. Uh, we asked about, um, crypto as an earning strategy. Um, and we asked about it as a promotional or incentive, um, engagement only, um, strategy.
And, uh, what came out on top was redemption, um, now some people believe that it can be used across all use cases. Okay? Uh, that was the highest level of response. So that would include earning, promotion and redemption. Um, but as an individual strategy, Um, the redemption was strongest and some people felt both earning and redeeming crypto rewards would be a trend to watch in the future.
But the dominant use case when you add it all up is on the redemption side.
Paula: Okay. Okay. And would you say that surprised you, Mike, or would that have been, you know, what you were sensing from your own, I suppose clients.
Michael: It did not surprise me. Um, there’s an issue here with it on the earn side, and that is that the valuation of the cryptocurrency itself changes.
And it, it’s changing all the time, uh, sometimes to the positive, sometimes to the negative, and it’s difficult to peg, um, the value of a point earned or a benefit earned when it’s valuation, underlying valuation’s constantly changing. On the redemption side, we really don’t have that issue. Uh, you redeem for a crypto, you put it in your account, and then Paula, you take the risk or reward, associated with its ultimate valuation. That’s a lot simpler proposition for marketers. .
Paula: Yeah. And that really seemed to be what was coming through. And again, maybe surprisingly to me anyway, as part of the appeal. So whereas something like crypto, of course has been on a rollercoaster, I would say certainly in the last 12 months, you know, it does seem to be that there’s more potential or more perception, let’s say, of upside from, you know, what you’re hearing from the panelists.
Michael: That was, uh, a little bit, um, surprising. Yeah, for some people, but very loud and clear and we looked at it carefully and spoke in depth with quite a few people. And the the reasons are, once again, they’re, they’re varied. Paula, if I issue you a frequent flyer mile, um, you earned it because you flew from, um, Dubai to, uh, Paris, uh, to Dublin probably where you usually go, , of course.
And, um, you earned these, these miles and they go into your account, right? Yeah. There’s always the possibility that there’s devaluation on that mile. Always. This has been the history of our industry. Yeah. And it isn’t just airlines and hotels. Uh, almost every vertical market has devalued their currency at some point or another.
Yeah. And especially in the last couple years, there have been very, um, prominent publicized cases of devaluation of that currency. Yeah. So it never goes up in value. It only goes down. Now enter crypto, it can go either. It can go down. Yes. In fact, the last year it has. Uh, but it also can go up. And you remember when it was rising like dramatically in 20 and 21? Sure. Um, that the, um, publicity, around the rise of, say, a Bitcoin Yeah. Or an Ethereum currency. That the publicity was unbelievable. Yeah. And people were just rushing in to buy it because it says it’s just gonna keep going up and up and up.
Yeah. So there is a lingering perception that it can increase in its value. So if I, uh, give you the opportunity to redeem for crypto, just like you could redeem for travel or merchandise, or a gift card, Yeah. Um, or cash back. All those are all options. They don’t have a, um, potential. Yeah. To increase in value.
In fact, they have a potential to decrease in value. So that’s a, but the public understands that. Um, according to the panel, this would be an interesting question to ask consumers, uh, but, uh, appears that, uh, because of that upside, potential people are interested and they’ll take it. Put it in your account and keep your fingers crossed after all it was free.
Yeah, like all you know, hard benefits and loyalty. Yeah. It was free. You got it for shopping with a brand. They gave it to you. You put it in your account and keep your fingers crossed.
Paula: Yeah, yeah, yeah. I thought that was a good quote. Actually, there was a specific one in there, Mike, which I liked, which it says, loyalty programs are the perfect way for people to get into cryptocurrency without the reservations they might have from putting their own funds into the vehicle. So if it’s a loyalty earned crypto or loyalty redeemed crypto, it’s likely to perceived as free reward. So, so they get all of the, the benefits of the volatility, I guess, without, uh, you know, risking their own money.
Michael: Definitely. And you’ll see that especially among certain demographics.
Paula: For sure. For sure. Talk us through the demographics. I know you, you were quite surprised at, uh, you know exactly who was coming through. Tell us about who was most interested.
Michael: Well, we would’ve all voted or felt that millennials, um, would be the, um, obvious ones, demographic cohort that would be, uh, most likely to be an early adopter of crypto rewards.
They finished second, um, gen Z, uh, surpassed them by significant margin. Yeah. Um, and that surprised us. And the reason is that the spending power of Gen Z. Yeah. And the participation rate in loyalty marketing programs for Gen Z, is still low, much lower than Gen X, much low, much, much lower than baby boomers and lower than millennial.
Um, and the reason is they don’t yet have the established shopping patterns. Yeah. Or, um, the amount of, um, dollars, um, to spend, uh, shopping. And they, they’re kind of never been fond of the, um, traditional approaches in loyalty marketing anyway. So that, kind of, surprised us. Um, you know, every year they have more earning power, more spending power than they had the year before.
Yeah. Uh, every year, um, their lifestyle is subject to typical generational change. Um, because, uh, uh, you know, of the age that they’re at. So, um, they’re gonna keep marching forward, uh, and looks like, uh, they will be the group according to the panel who will lead discharge along with the millennials who are already engaged with, uh, some of this.
Paula: Yeah, I think it actually does make sense, but again, with the benefit of hindsight, you know, it’s always easy, easy to understand why it came through that way. But as I think it through, you know, I think this generation, as you said, have never been completely enamored, first of all, because they haven’t been. Um, in a position to be rewarded, as you said, because of their spend. But I also often think that, um, some of our traditional mechanics, of course, the usual points, for example, I, I’m wondering if, if Gen Z is feeling a bit jaded by that model, like having seen their parents go through it and maybe heard some frustrations over the years.
You know, there’s plenty of times I think we’ve all expressed frustration that we haven’t had the opportunity to earn maybe quickly enough. So there’s plenty of challenges the traditional loyalty has. So I’m wondering if they’re seeing this kind of crypto reward option as being like actually the answer to something that does make sense to them.
Michael: I think that was very well expressed and I believe that that is, uh, happening definitely in the background. Ok. The issue, Paula, is as they mature, Yeah. As they move through their life stage, will their attitude change? Yeah, of course. And we don’t know the answer to that. We won’t know that, that answer for, I’d say at least another 10 years.
But that, that’s exactly what it is. They are very jaded. Okay. They don’t wanna jump through any hoops. Yeah. Um, they’re concerned about the whole privacy thing. Yeah. Uh, but the biggest reason is they don’t spend enough money yet to develop something meaningful in the way of reward. Yeah. Given what brands, um, across the world are offering with, with weak value propositions, you’re not gonna catch this audience. Also, they’re all digital, all the time. Yeah, of course. And we don’t always have, um, the most digital friendly methods. In terms of, uh, enrollment, earning, identification, redemption, all the other thing, communications, all the things that go along with, um, best practice and loyalty marketing.
Paula: Absolutely. And that leads actually very well I think, Mike, into, I suppose, the type of verticals, um, where it might make the most sense to think about crypto rewards because as we all know, if there’s an opportunity to join a coalition program, um, or a multi merchant program, there’s obviously much, you know, bigger opportunity and greater speed to earn.
So, Pleased to see that coming through as, as the one that, um, was most likely to be relevant in this space. And then I was certainly very surprised to see financial services coming in second place in terms of what kind of market might, um, might be appropriate. So what was your, uh, reaction to seeing the, the types of verticals that might benefit from this strategy?
Michael: Well, the coalition, uh, multi merchant was, um, not surprising. Yeah. Um, the, the, um, presence of so many non-US people on the panel, um, helped drive that number forward. Uh, that was the number one, um, uh, vertical in terms of, uh, weighted average. Yeah. Um, But the, um, and you, you said it right, and you can earn, uh, rapidly across multiple, um, categories who are members of the coalition.
And, um, that’s really the key to their model. We don’t have that model to any strength at all in the US we have it in Canada. Yeah. And of course around the world, but we don’t have it, uh, in the US. Um, so that number probably would’ve been even higher, um, because we did have, you know, American, um, respondents on the panel.
Um, financial services was not a surprise to me. I thought it would’ve been first or second. Okay. And the reason, Paula, is that the. Last couple years have seen an increase in the cash back approach. Okay. Financial services traditionally allows you to earn points and you redeem those points for either travel or merchandise.
That was the prevailing model and still is in many parts of the world. Yeah. Both of those things cost too much money. Um, especially when the financial services, especially credit card rewards, were always governed by, uh, how much money could be made by the issuer. Uh, from interchange. Well, most of the world interchange is under attack. Sure. Already changed in the UK, Australia, New Zealand. Yeah. New Zealand just very recently and other parts of the world. And as the amount of spread that the issuer can make from interchange declines, yeah. Is reluctance to fund more rewards, intensifies and, uh, travel, buying miles, if you will, from an airline or buying nights from a hotel.
Yeah. Always an attractive reward, but now it’s costing him more money and he’s making less on interchange and merchandise, uh, it’s also costing him more money because of shipping and handling and other kinds of things. So cash back. Or gift card, have, uh, picked up steam in that vertical, and now crypto can be a challenge to cash back.
Because it looks just like it. , but it has the potential, as we discussed, to increase in value over time.
Paula: Yeah. I just wanted to actually just ask you, Mike, because I did a little bit of work, um, with one of the banks back in Ireland now, this was back in 2016, 2017, but to me, the level of, uh, risk aversion from, you know, the, the various people in, in, at all different levels within the bank, any loyalty proposition that we talked through, the various mechanics, it was all fear based.
You know, they really were so risk averse, and I guess that’s why I was surprised to see that crypto would resonate for them.
Michael: Well, I think that’s a good point, and I, I think it also depends on what part of the world you’re in. Yeah. Um, uh, there are less, less risk averse. In, um, more emerging, uh, markets Yeah.
Than they are in well established markets like the UK, sure, um, or the, or the US yeah. Um, but I think Paula, that they’ve realized that their model of benefit was always based on interchange funding. Of course, and as that funding is under attack and, and continues to decline, they’ve gotta do something.
Yeah. Plus all their programs look the same. Yes, that’s true. , how do you separate one credit card rewards program from another? Yeah. And debit isn’t even used in many parts of the world because there is no interchange left. Yeah. According to the bank. So, um, they will make profit no matter what. That is their model. That’s what they love about rewards. Yeah. So they’ve gotta find a way. And despite their aversion to risk, uh, crypto rewards could be the way of the future, especially in certain markets.
Paula: Yes. And especially to the demographics that they most need to get, uh, the, the right behaviors from.
Michael: Definitely. The uh, the other vertical market that scored really high was entertainment.
And, um, you know, that might mean different things to different people. Yeah. But, um, it, um, it’s scored really high. And in fact, it’s the market where we see the most experimentation. Okay. If you read The Wise Marketer and you look at our stories about crypto rewards, you’ll find that that vertical market, um, as well as say the restaurant vertical market, um, are the two where you see a awful lot of experimentation, but entertainment’s broad. Um, it includes, um, all forms of digitally delivered entertainment, which could be directly to the home. Okay. It includes all forms of venue entertainment. Music, concert, um, ballet, uh, whatever kind of arts are out there.
It also includes sports. And, uh, many people in the panel called out sports and uh, some people put it in other, some people put it in entertainment. Um, but you’re seeing a lot going on there already. Most of it on the NFT side. Yeah. As opposed to pure crypto rewards. Yeah. But the reason it makes sense, um, is demographic.
Um, people who are into that particular vertical market with a disproportionately higher frequency or spend are definitely younger. Yeah. Um, you know, you and I, Paula, despite our love of music or theater, we don’t go as often as maybe we used to. Sure. Um, our lives are just too busy or we don’t wanna deal with the hassle of the crowds or whatever.
But, uh, there’s people out there, young people who would go to a sporting event every Sunday or every, every weekend, or go to a concert once a month, et cetera. Yeah. So their frequency and their spend is much higher. So their ability to earn crypto rewards will be, um, sufficient enough to, uh, make it attractive to them.
Paula: Yeah. Makes sense. Perfect sense. Absolutely. Yeah. And the sport one is where I am certainly hearing, as you mentioned, more NFT type activity rather than necessarily crypto. Uh, but there’s more and more coins coming through, and I suppose my understanding is slowly, slowly catching up with all the various options, but, It does seem to be, you know, a cohort of people that are, you know, happy to engage in that kind of behavior, you know, because they are passionate about something and therefore I suppose that, you know, again, halo effect of what crypto can bring probably has an extra appeal that they might just be more open to.
Michael: Yeah. Also, you know, we’re gonna maybe see a team. Issue their own coin. Okay.
That would be exciting.
Paula: Yeah. Yeah. Absolutely. My goodness. Sounds like you have some inside track knowledge there, Mike .
Michael: Uh, well, we’re, we’re, we’re watching. I’m sure we’ve, there are some teams, especially coming outta the UK or the soccer community.
Yeah. When you guys call football, Uh, red hot right now, when you’re part of the world, there are some teams that have already issued NFTs. Yeah, of course. Yeah. Uh, but I think you’ll see a movement to issue coin. Yeah. Because it could be kind of a collection thing. Um, so not only can it be a reward, but can it also be a currency.
Paula: For sure, for sure. And I did, uh, have one on the show recently as well, Mike. Um, somebody I used to work with, but a fantastic app called Sweat Coin. Yeah. So I’ll make sure we link to it in the show notes. I’m sure it came up in your discussions, but incredibly impressive to see, you know, a, a, digital health paced application driving behavior of, you know, walking and, and, and really just getting people moving and, you know, then there’s an option obviously to, to, to claim rewards.
Uh, but they also have issue to coin as well. So I haven’t explored that piece now personally. But, um, again, I love this opportunity to, you know, start experimenting and I think that’s a key word that came through. Certainly again, in this report, which we’ll talk about now in a second, but it feels like we all need to, I suppose, as consumers, you know, learn what it feels like to earn a crypto reward, ideally, before we can even understand as a loyalty professional, how without applying a loyalty program that I’m running. Well said. And tell me then, just before we leave the, the verticals, Mike, what about, uh, travel? Of course we know how, you know, well established our, our airline and hotel friends are. So what’s the appetite there, do you think, in terms of crypto rewards?
Michael: It was kind of in the middle of the pack. Paula was better, a little bit higher than specialty retail. Uh, and it was definitely higher than restaurant, but well below entertainment, uh, financial and, and multi merchant. Um, couldn’t really assess the middle of the road, other than, again, you’re gonna hear this all the time, Paula.
Um, the preponderance of people who are highly engaged in travel loyalty programs are baby boomers. It’s because of their business travel and their personal travel and their discretionary income. It makes perfect sense. Yeah. And they grew up with frequent flyer programs. That’s what started our industry. Uh, if you really think about it. Yeah. You don’t find a whole lot of young people with lots of frequent flyer miles or frequent guest points. Yeah. Uh, it’s just because they don’t travel that much yet. As they mature, and as their careers take off, they travel more. You gotta remember too, that Covid put a big, big hole in this entire business for about two years, where nobody traveled at all.
So I think the appeal again relates to demographic. And, um, the baby boomer. Uh, he’s not actually fond of crypto rewards. Give me my miles. Yeah. Give me my points. Totally. Um, that’s what I. and the younger person says, I’ll never get there. I’ll never get enough miles to redeem for a free trip.
So why bother giving the crypto?
Paula: Yeah. Yeah, yeah, absolutely. And then we talked a bit already, Mike, about, uh, different areas of the world. Um, exciting to see, I suppose, Asia Pacific coming through as the top region that seems most interested and not surprising to see my friends in, uh, in Europe lagging way down.
So was any of this surprising to you in terms of the geographical, uh, appetite?
Michael: Yeah, it, it was, cuz you gotta remember, Paula, that this should follow, uh, loyalty market share globally. Sure. Uh, cuz you’re asking people what region will likely, uh, adopt as a future strategy. And it, the region that has the most loyalty programs, the most loyalty spending should come out on top.
And that reason would be North America. Yeah. And it came in second and good thing that Canada, um, is included, cause we had, we had Canadian panelists of course, as well as American panelists. Yeah. Uh, and um, um, Um, presence of those four or five Canadian panelists might have boosted it by a few points. So Asia Pacific came in first, so you gotta remember you got North Americans.
And Europeans. And, uh, people from the Middle East, North Africa region, voting for Asia Pacific. Yeah. So it was disproportionately high. To their share of the global loyalty marketplace. Um, it, it is a factor of, again, um, the age of the population, the newness and innovation associated with their loyalty programs.
Yeah. The unprecedented adoption of digital technology. Sure. Uh, remember many of these brands over there never went through a phase one Yes. Or a loyalty 1.0. Yeah. Uh, they went right immediately to Loyalty 3.0. And, uh, because of that, they didn’t have to deal with these legacy, um, traditions and systems that were typical in, um, other parts of the world. Um, as for Europe, um, sad Paula. Just totally sad. .
Paula: Oh yes. I mean, it’s,
Michael: it’s, panelists believed that there’s high perceived, risk in Europe because of overregulation. Yeah. Um, when you read new stories about crypto, not to mention crypto rewards in Europe, it’s a negative story. Yeah. And it’s somebody in Brussels at the EU saying, you can’t do this, you can’t do this, you can’t do this.
So a lot of brands are gonna shy away from that environment until it stabilizes. Yeah. Um, and we had a lot of European panelists, who voted elsewhere. Um, middle East, Latin American, higher than their market shares again, Middle East. Um, about 15% felt it was the number one region in the world. And in terms of loyalty market share, it’s well below 10.
So again, disproportionately higher, uh, and Latin America, not too bad at all. Um, around 10%. So you’re gonna see differences in rates of adoption, by geographic market. And if you’re a brand who, um, um, sells your goods and services in more than one region of the world, you may have to adopt different strategies or at different times.
Yeah. Than if you are, um, a brand that operates in a single, in a single region. But if you’re not paying attention to what is happening in places like Asia Pacific or the Middle East. Um, you need to be paying attention. Uh, listen to Paula’s show that’ll help you read The Wise Marketer, that’ll help you, um, you know, check out, um, the blogs and, um, some of the other, um, uh, sources of news and information about the loyalty business.
And you’ll see, see little, um, examples of crypto popping up, uh, crypto rewards popping up here or there. And that will help you.
Paula: For sure, for sure. And I liked the quote as well towards the end of the report, um, coming from one of your UK panelists where, you know, the guys shared that, um, 10% of British adults have expressed an interest in receiving crypto from loyalty program.
So probably long, pardon me, probably less than I would’ve expected. Um, given that I would tend to think that the UK market is quite savvy as well. So I don’t know, did that strike you, Mike, as being lower than you might expect from, you know, a consumer demand perspective?
Michael: No, that was from, the YouGov report was done earlier in 22.
They put out good stuff. Sure. Uh, one of our panelists, uh, at Loyalty Academy faculty member, uh, Charlie Hills, who I think you know, of course, works with YouGov on all their loyalty research initiatives. Yeah. And it, it did not surprise me, um, the, uh, it’s been a difficult year for people in the UK, um, yeah, that’s been political instability, uh, all over the place and, um, it’s been, uh, rough economically, uh, a lot of different fronts.
So it’s like, once again, during 2022, the value of crypto in the news just declined every day. Yeah. Eventually bottomed out and stabilized, which is kind of where we’re at right now, I think. Yeah. But it’s still, you know, when it goes down, Paula, it’s front page news. Oh, for sure. Yeah. And, and, uh, the Brits don’t like that especially.
Yeah. Um, so in a tough economic environment, it, um, isn’t as high Yeah. As people might think it would be. But there are people who are expressing an interest there.
Paula: Yeah, for sure. And you definitely said in the report, of course, quite clearly that, you know, depending on how the whole crypto industry performs, of course there is then, I suppose, the halo effect in the loyalty industry.
If, for example, Bitcoin does take off again and do another hockey stick, then of course the demand will suddenly go up from members. But yeah, it takes time for that, you know, to, to really settle in. And as you said, it’s not a good year in the UK, for example to be thinking about one more thing to worry about in terms of your rewards portfolio, for example, as distinct from something that you might know and understand, like a points-based, uh, coalition program.
Michael: Right. Or give me cash back so I can pay my utility bill.
Paula: Totally, totally. Yeah. And then listen, what um, what did you, um, conclude in terms of, you know, the value for crypto rewards, you know, and what they can do for a brand? You know, because obviously we tend to focus on retention from a loyalty perspective, but sometimes loyalty initiative, can also support the, the acquisition of customers. So what do your panelists think about, uh, the most value and opportunity? Lies?
Michael: I was definitely, outvoted on this one, Paula . Uh, I, um, I just, I grew up thinking and seeing and measuring and analyzing loyalty programs. And acquisition was never a, um, a strong reason for getting into a loyalty initiative.
Yeah. Um, you didn’t acquire new customers because you introduced the rewards program. Yeah. The exception of course, was coalition. Yeah. Uh, where a different kind of network effect can help you acquire. Um, so I never believed it. Uh, the panelists felt that because crypto has got a, a certain cache about it, if you will.
Um, that it could be, um, a way for a brand to acquire a new customer, especially if that brand needs a better penetration among younger cohorts. So while they voted engagement higher, uh, than acquisition as a pure benefit for the brand, um, they thought that both were definitely, um, the highest used case.
Um, amazing. So whether it’s gonna be used to acquire new people into the brand through the rewards program, or to engage and reward existing customers or both of those. Um, all that looked, uh, very positive.
Paula: Yeah. Absolutely. And it was also very positive to see the, the potential for a halo effect back to the brand as well.
Yeah. Um,
Michael: uncertainty, um, you know, more than half the panel said maybe, yeah, but, uh, but yes, there will be a halo effect that’s positive, back to the brand was two to one over and no, there won’t be. Yeah. Uh, two to one. Uh, pretty strong. But, uh, you’ll notice once again, um, the panel is expressing their level of uncertainty about the future. Um, so it’s a, it’s a maybe.
Paula: Yeah, yeah, yeah. No, the future, uh, is definitely one where I think everybody’s just trying to, you know, I suppose get beyond wait and see, get into, I suppose experimentation seems to be the, the main, you know, opportunity in the next, I suppose, short term future. So, um, so tell us a bit about what we should be expecting from a future perspective with cryptocurrencies.
Michael: Well, when, when the advisory group vetted the, uh, actual questions, um, we spent a lot of time on this. And we said, you know, we need to ask people in a quantitative sense what the future was gonna look like. And, um, we decided that that needed to be split into, into two timeframes. Because you know, what’s the future?
Is the future tomorrow? Yeah. Um, or is the future, you know, two years away or, or what? So when we asked that, uh, we asked it on a scale of, uh, zero to two years. Um, we’d like to know where you believe crypto will be zero to two. And the overwhelming response was, experiment. . Yeah. Uh, certain brands, certain markets, certain geographies, yeah.
Would be experimenting with crypto rewards between now and two years. Yeah. When we move that, um, to, um, uh, three to five years. , um, it shifted, uh, and permanent adoption, uh, among specific programs, um, became the number one answer. Almost half the panelists said there would be permanent adoption within three to five.
Yeah. But experimentation was still. Yeah. Yeah. Uh, but the number of people that said, you know, impact not proven, still nascent, isn’t going anywhere. Um, was always, you know, 5% it didn’t really matter. There’s people that don’t believe in this, um, no matter what you do. Sure. And, um, I, I think that’s good for the, uh, zero to two versus the three to five findings in the report I think are, uh, a very positive, uh, message for the crypto rewards indusrty.
Paula: Yeah. And actually, you know, zero to two years actually is quite a short timeframe. I think certainly from my experience of, you know, designing and building programs, it can often take that much time, you know, to get, you know, to, to the starting point. So, you know, with 80% coming through as experimenting within zero to two years, I was very inspired by that.
I think that shows a big appetite, a big curiosity, and a willingness obviously, to go and put some investment into it to exactly. See, do we want to do something permanently? So I thought that was incredibly positive.
Michael: I, I thought so too. And it outweighs, um, as the report indicates, it outweighs all the, um, negative sentiment, yeah.
That, that often appears around this topic. And the, the, um, the consumer adoption, uh, well, we asked the panel, you know, what’s gonna drive consumer adoption here? Yeah. And you know, the thing that emerged strongest is that there needs to be an improvement in consumer perception about crypto in general. Not just crypto rewards.
Yeah. But about cryptocurrency. Yeah. Because consumer perception and understanding of safety or, you know, fungibility or trust, Uh, protection. Um, it’s all over the place. Now look at any consumer survey regarding the subject and people just, they’re uncertain. And when a consumer is uncertain, have a tendency not to act.
Yeah. So they’re not exactly dragging it forward, but if there are improvements in consumer perception, the adoption of this type of reward is gonna accelerate dramatically. Yeah. That was our conclusion.
Paula: And I think what you also emphasized in the report as well, Mike, very clearly, and it would be one of my, I suppose, favorite, uh, opportunities, let’s call it as an entire industry, is the importance of education.
Um, and you know, it really seems that in this, you know, relatively complex topic, um, the brands that do invest in that education for their members are the ones that could really, I suppose, benefit by giving that, um, understanding as well as, rewards I guess.
Michael: Yeah, I think the, um, the message there was, um, um, kind of directed at the service provider, Paula.
Okay. Um, yeah, the brand of course. But, um, the quote in the report was, you know, brands may not be asking about crypto rewards today. Got it. But they will be soon. Yeah. So rather than wait for the client request, service providers and consultants should take a leadership position Okay. And help brands assess the crypto rewards concept right now.
Okay. Um, you need to educate your clients, if you’re a service provider, you need to educate your management, okay. Uh, if you brand marketing, because if you don’t do that, they’re gonna be left to the whims of the mass media. Which one day are like, oh, this stuff continues to go up in value. And the next day they’re like, this is the worst idea in the world.
but a hack over here. Yeah. Uh, the government’s gonna regulate us. Uh, woe is me. The sky is falling in all the typical stuff. Sure. So I think that, um, you need to be out front. And the group that I think should help lead is as the loyalty service provider, loyalty consultant.
Paula: Got it. Yeah, no, thank you for clarifying that actually, Mike, because, uh, I had read it as, I suppose the programs educating their members.
Um, but you’re right, actually, it was very much around within the industry, um, to create this level of awareness. So, you know, for people building programs, of course, we looked to our partners, we looked to our consultants, we look to people like you and I. Where, you know, we have an opinion and obviously we’re trying to educate ourselves and each other.
So I, I do think there’s a huge role to play. So, um, yeah, you’re right. The media plays a huge role and the industry plays a huge role. So a lot of work to be done is what I’m thinking, huh?
Michael: Yeah, and the brand needs to make sure that their, um, their consumer marketplace is, uh, Um, being told positive things, not just negative things.
Yeah. Um, and, and the brand needs to kind of constantly reinforce that. Yeah. Um, what’s interesting is that some brands don’t really need to do that because their demographic target, uh, matches up nicely. Some other brands Yeah. Just run away, run away from it, because that’s not their target audience.
Paula: Yeah. Yeah. But what I think is also helping, I suppose overall, so crypto is obviously one element within the whole web 3.0 space, and I think it’s really exciting to see what brands like Starbucks, for example, are doing in using, you know, adjacent, um, thinking and methodologies and NFTs, for example. So, you know, to me that really makes it mainstream and the underlying tech then, More, um, acceptable I think to people.
And then crypto becomes just part of that overall infrastructure by association almost. So I might be oversimplifying it, but I think when a mainstream brand is getting into very highly evolved and innovative models, I think more and more other brands get, uh, a bit more courage to try and experiment as well.
Michael: I believe that that is, uh, definitely true. Um, they always get, you know, front page coverage, uh, whatever they do. Yeah. And they’re a global brand, Paula, they’re, you know, people think of them as American brand. Do not Yeah. Uh, they’ve got presence all over the world. Yeah. And very strong sales in non-US markets.
Of course. So I, I think that that globalness Yeah. Um, helps them see what’s going on in different parts of the world. Yeah. And, uh, they certainly cater to a younger demographic. Um, you know, people my age do not pay five US dollars for a cup of coffee. ,
Paula: You’re better off, Mike, you and me both. makes perfect sense.
So listen, I think, uh, we’ve gone through everything in the report in terms of the questions I had. Mike, is there anything else that you think was, was super important to mention before we wrap?
Michael: Yeah, just so you know, want to go through some of the key conclusions. And, uh, I wanna say one other thing too.
Uh, you mentioned Paula, but as crypto. The currency itself as it grows in prominence sold to with crypto rewards. Um, brands who know that they cater to a certain demographic audience should already be adopting. Yes. Uh, so they need to know and understand that target most brands do. Um, so if it’s skews young, uh, millennial and, and Gen Z, you should already be adopting.
Yeah. And I think it’ll be redemption, um, and you can already put it in there and that’s how you can experiment it right now today. Just put it in your redemption catalog, and if you will, and see what happens. Yeah. Um, we talked about the brand’s gonna start asking, so the industry better start leading and educating and responding.
Yeah. And, uh, that it’s clear to us and to the panel that the vertical, vertical markets and geographic regions will be different in terms of their rate of, uh, of redemption. Yeah. Um, the last thing I wanna say, Paula, is none of this would’ve been possible without the, uh, research team and management team at Bakkt. Um, okay.
If you don’t know Bakkt, look ’em up. Um, they’re the leader in, in Crypto Redemption right now, US Company. Um, very, very strong in this space. A lot of use cases, um, they’re somebody who decided to, um, support the Delphi panel project. Um, and helped us kind of shape some of the questions and some of the understandings.
So, uh, we are indebted to the, to their support, uh, to make this project happen. Wonderful. And we’ll be back next year with, uh, Delphi 2023.
Paula: Amazing. And of course we will make sure to link to Bakkt as well B A K K T for anybody who’s interested in exploring that. And I guess the most important thing is people looking to download the report and thewisemarketer.com, I guess is the best place.
Is it Mike, for them to find it?
Michael: Best place. Totally free, yeah. At Wise Marketer if it’s not on the homepage, um, you’ll find it under the, uh, dropdown for research services. Yeah. Um, Paula, thank you as always. You’re doing a great job for our industry and, uh, we, uh, always, uh, are interested and who you’re gonna interview next and what are they gonna talk about
Paula: Totally. You know, it keeps me on my toes, Mike, what can I tell you? Keeping, keeping the content coming as you guys do so well, as well. So, listen, it’s always a joy to have you on the show, Mike. I always learn so much. Um, and I, I tend to listen back a few times after I’ve had you on just to capture everything.
There’s so many nuggets of wisdom, so with all of that said, I wanna thank you for the incredible work on the 2022 Delphi report. So Mike Capizzi, Director of Education for the Loyalty Academy. Thank you so much from Let’s Talk Loyalty.
Michael: Thanks Paula. Take care.
This show is sponsored by The Wise Marketer, the world’s most popular source of loyalty marketing news, insights, and research. The Wise Marketer also offers loyalty marketing training through its Loyalty Academy, which has already certified over 245 executives in 27 countries as certified loyalty marketing profess. For more information, check out thewisemarketer.com and loyaltyacademy.org.
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