May 31, 2018
By Bediz Eker, Y&R Group Strategy Director
This post originally appeared on BrandZ.
Blockchain is the new buzz word in various industries including marketing communications. Some of its radical evangelists think that blockchain will solve most of our modern world problems while there are also skeptics who see it as a Ponzi scheme because of its associations with the highly volatile and unregulated cryptocurrency markets. However, familiar faces from the internet revolution have already started up companies set to disrupt various categories with this new technology and repeat their previous success with “the next big thing.”
On the other hand, giants like Walmart and Amazon are also exploring different ways to implement blockchain technology to improve their supply chain management and to increase return of their marketing investment. Governance of this new technology is one of the major barriers to scalability and it will take years to resolve but even at this early stage blockchain has started to change relationships between brands and consumers.
Consumers will own their data, making brand switching easier. Unchained by blockchain, consumers will choose the brands they can trust.
Bediz Eker, Y&R Group Strategy Director
Blockchain was invented in order to keep a decentralized and immutable ledger for cryptocurrency transactions. Unlike central database management systems, storing encrypted data by multiple bookkeepers on blockchain reduces the need for intermediaries, making data transfer more transparent, efficient, and simple. According to Juniper Research’s Blockchain Enterprise Survey, two-thirds of large corporations (defined as having at least 20,000 employees) are expected to integrate blockchain by the end of this year.
Everything from dental care to real estate can be potentially affected and there are already existing companies that disrupt the conventions of these categories by using blockchain. As the approximately $600 million blockchain products and services market is expected to grow to $7.74 billion by 2024, according to Grand View Research, brands that have a larger footprint in blockchain will eventually grow their values accordingly. While hardware and software solutions that establish blockchain infrastructure will become a growing market for business-to-business, brands that deliver integrity, value and convenience through their blockchains will enjoy longer relationships with their consumers.
However, brands will not have the option of taking loyalty for granted because consumers will have ownership of their personal data, and with it the power to take their data to another brand that delivers higher benefits in return. Even today, erosion of brand trust and exigence of data privacy amongst consumers don’t help brands recruit loyal customers. Y&R’s proprietary Brand Study BAV, Brand Asset Valuator results show that in the last 15 years, Brand Trust has fallen from 44 percent in 2001 to a low of 18 percent in 2017. And the Cambridge Analytica scandal surfaced the greatest data leak in Facebook’s history bringing data privacy issues top of mind.
Technically, blockchain will help marketers tackle both issues by building a totally transparent relationship with their consumers if brands commit to it. And brands will be forced to commit, because consumers will have ownership over their own data, meaning they will move to a competitor if their expectations aren’t being met. We will then meet the real “empowered consumers” who will not only expect brands to keep their promises but also expect to be treated as stakeholders.
Consumers are already asking for traceability of products for different need states. But with its totally transparent and immutable ledger, blockchain will enable consumers to easily get sight of the supply chain and spot any suspicious activity which contradicts their personal values. Consumers will also become stakeholders when the majority of brands start to reward loyalty with branded cryptocurrencies. As decentralized ledgers are maintained by independent book keepers that expect cryptocurrencies in return, brands will be able to provide this incentive in their own ecosystems as well.
It’s hard to predict whether brands will be able to land on a common blockchain that will enable consumers to use their “loyalty coins” across categories or whether we will have exchange rates between different branded loyalty tokens, but in both cases, consumers will become stakeholders of the brands they choose to stay loyal to. In both cases brands won’t be able to afford to disappoint their consumers not only by their product or service performance but also by the way they produce and deliver them.
Just like every innovation in marketing communications, blockchain will first raise expectations and complicate the relationships between brands and consumers but at the end of the day we will find ourselves going back to the basics. Whether it’s an ancient Egyptian livestock brand back in 2700 BCE, or a frozen meatball brand that uses blockchain in its supply chain in 2018, in both cases brands are expected to keep their promises to their consumers. However, today’s consumers will be more unchained by blockchain once they gain ownership of their personal data and have the luxury to share it with whomever they choose among an array of brands that fiercely compete with each other.