For a loyalty program to work, customers need to see it as a two-way street.
Which is to say, simply announcing that you’re canceling a top-notch rewards program isn’t a good way to build customer loyalty. Or keep customers.
Or, if you’re in the crypto space, block those customers from grabbing their virtual torches and pitchforks.
Exchange Crypto.com found this out the hard way this week when the price of its cronos exchange token (CRO) fell 11% by around 35 cents in two hours and more than 22% the next day, after on Sunday (May 1) announces that it was reducing rewards.
Rewards for the top tier of Obsidian (people who have locked at least $400,000 of crypto in a staking program) have dropped from 8% to 2% in one month, and from 1% to nothing at the highest tier. low, according to the announcement. Existing customers were given a six-month grace period.
Decision, Explain by Crypto.com CEO Kris Marszalek as needed to “move closer to the long-term sustainability of our card program,” was revised the next day.
“The community has been vocal regarding the card program changes announced yesterday,” Marszalek tweeted the following day. “We care deeply about the community, we always hear you and listen to you. Accordingly, we are revising the card betting rates. »
So what is staking? In its simplest form, it’s a way to earn interest by lending cryptocurrency. However, instead of lending it to a traditional borrower, you’re lending it to someone who uses it to earn the right to mint cryptocurrency by helping add and secure a type of blockchain called proof-of-stake — a process that is much less more polluting than the energy-intensive proof of work required by Bitcoin and Ethereum.
See also: PYMNTS DeFi Series: What is Staking?
While this largely happens in decentralized finance (DeFi) projects, it can be tricky, and several centralized exchanges handle it for clients. Coinbase, for example, offers rewards of between 0.15% and 5% for staking various cryptocurrencies held in your account.
As virtually all Visa and Mastercard branded crypto cards are debit cards, users tend to have a lot of crypto sitting around doing nothing, so staking for interest makes sense.
Anyway, Marszalek quickly revised the program. Obsidian card rate increased to 5%, but the lowest level remained at 0%. The three intermediate brackets ended at 3%, 1.5% and 0.5%, less than at the start, but better than they had been.
The response to Crypto.com’s decision is not really surprising. In PYMNTS’ April study of US crypto consumers, 26% said they were “very” or “extremely” interested in using cryptocurrency when shopping with merchants who offer rewards and discounts on purchases.
See also: The American Crypto Consumer: Use of Cryptocurrency in Online and In-Store Purchases
In fact, rewards “are just as much of a motivation for making crypto purchases as other purchases,” he found.
This is found in many other types of loyalty cards. Another recent study by PYMNTS found that consumers who have store-issued cards use them for purchases 87% of the time. The main reason, according to 42% of this group, is access to rewards programs.
Read more: Rewards programs are the number one reason consumers use store cards
Do not do that
There are two basic takeaways here.
First, don’t just give bad news to your customers, especially your best ones.
In response to a comment on Reddit’s 4.9 million member r/CryptoCurrency forum, the response to a member’s breach of trust comment read, “Exactly, if they had been in communication with the user base well in advance and maybe had this on a roadmap, I wouldn’t even be mad!
Second, and most importantly, don’t launch unsustainable loyalty programs.
This last part is probably the one more crypto companies and entrepreneurs need to pay attention to, especially when it comes to staking, as more than a few programs have interest rates high enough to suggest they are very risky.
While the rewards are paid in interest calculated hourly, it is very easy to find double digit rates. The top cryptocurrency exchange, Binance, for example, offers staking rates from 1.4% to over 25%.
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Crypto.com Discovers That Loyalty Programs Are A Two-way Street
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