Credit: Superlogic
How Superlogic Tokenizes — And Transforms — Loyalty Programs
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One thing that is interesting when looking at the website of Superlogic—a company that helps power some of the biggest customer loyalty programs in the world—is that it says nothing whatsoever about blockchain or cryptocurrency on its customer-facing site.
Despite being in the background, Superlogic’s blockchain-powered technology, which it claims drives nine times more customer activity than occurs within typical loyalty programs, is used by major companies like Warner Music Group and American Express.
Here in Web3, we often talk about how we onboard the world to crypto. The good news is that it’s happening! Blockchains are already deep in use in enterprise applications like supply chain management and the tokenization of real-world assets, but Superlogic’s use of blockchain goes much further than deploying a fancy immutable database.
Members of its customers’ loyalty programs enjoy many of the benefits that are second nature to us in web3, like engage-to-earn and access to rewards marketplaces that allow them to customize their member benefits.
Superlogic, a Miami-based portfolio company of Amex Ventures, is rolling out its technology at a time when members expect more and more out of their relationships with a company—and that includes rewards.
Recently, Superlogic founder Lin Dai spoke on a panel at the National Retail Federation’s conference on digital innovation. In front of an audience of retail experts who have likely heard relatively little about web3, he explained how Superlogic’s tech helps companies meet customer needs.
“We are hearing from our clients that customization is the next frontier. Consumers demand personalization in their interactions with a brand’s loyalty offerings based on their preferences,” he said at the January 2024 event.
At the event, Dai went on to explain what Superlogic is doing—again, touching on concepts celebrated by web3, like interoperability, without invoking blockchain at all except by referring to “tokenizing” data.
“One way we achieve this without losing efficiency for a client’s loyalty program is by tokenizing and digitizing all the earnable rewards and benefits into ‘digital badges,’ and introducing a market dynamic by allowing program members to trade these digital rewards badges with other members within the retailer’s own rewards marketplace. Customers earn and trade rewards with each other and end up with more of the perks and benefits they truly want. This also opens brand-to-brand collaborations in a big way. Because rewards are represented digitally, it’s easier than ever to connect and make loyalty programs interoperable, where earning rewards from retail purchases in one program can perhaps unlock front-row tickets to see your favorite artist in a different program. The personalization of rewards and loyalty is not only beneficial for consumers but can lead to a significant increase in sign-ups, engagement, and sales for brands,” he explained to the audience.
Hearing Dai’s comments, the team at nft now got curious. It turns out that Superlogic is white-labeling its tech, offering it on Software as a Service (SaaS) terms to companies. We spoke with Dai to learn more.
nft now: It’s interesting to see a tokenized service being used by companies everyone has heard of; American Express, Warner Music, Anheuser-Busch—but your website doesn’t mention crypto at all, and I think that’s by design?
Lin Dai: Since 2018, we’ve been developing blockchain solutions for mass consumer enterprises. The goal is always, “How do we make this technology so easy that my mom can use it and not think about it?”
Some of the use cases we thought about very early on—besides currency trading, we thought that loyalty is a very similar system, right?
90% of US brands have loyalty programs, and those programs have millions of dollars, if not billions of dollars in points. That’s essentially their own centralized digital currency for each corporation, issued to consumers, that can only be redeemed back for their goods and services.
In the early days, each blockchain protocol could only work within its own ecosystem. So, very early on, we thought about developing that kind of ecosystem: it could be tokenized. It’s very easy to represent points as stablecoins and redeemable goods and services as NFTs. We’ve been working on this since 2018.
What made you and your team interested in loyalty programs?
Loyalty, as a use case, is something that every consumer understands—on average, every consumer signs up to 16.6 loyalty programs. Everybody knows how to deal with points.
The first version of the technology we designed, we signed our first deal with Warner Music Group, and launched their loyalty program on blockchain in 2019.
We went through the 2020 excitement, and in 2021, we launched our consumer-facing branded NFT marketplace, oneof.com. So that’s very well known—we went out and did a lot of music projects.
Fast-forward—we ended up pitching these ideas to our major loyalty programs. American Express made an investment in our company in 2022, and we started working with multiple divisions there and with MasterCard.
“Loyalty, as a use case, is something that every consumer understands.”
superlogic founder lin dai
The latest iteration of this is not only tokenized loyalty but also interoperable loyalty—which is a real use case for “why do you want to bring loyalty on-chain?”
American Express signed up to work with us directly, and we debuted the latest iteration of our technology in November—and we showcased this at the National Retail Federation show in New York in January: American Express is reselling our solution to merchants.
So, everybody from restaurants to e-commerce companies can start tokenizing their loyalty programs. Once our software development kit is installed, we can represent your goods and services digitally, on-chain.
So, what is the experience like for the user base and the company running the program?
There are two layers to this, directly within a merchant’s ecosystem. Users can do everything they can do normally within a loyalty program, but also, because it’s tokenized, they can actually trade peer-to-peer.
So if I have, say, an upgrade on an airline, and I don’t want to use that, but I really need a second ticket to the airport lounge, I can trade with somebody. Basically, it creates a more personalized loyalty experience.
Loyalty programs are designed as one-size-fits-all; there are, say, 14 different benefits negotiated for all members—but even in the programs you’re most active in, you’re probably only taking advantage of two or three of those benefits.
What we offer is mass personalization—allowing users to trade peer-to-peer.
A second thing we can do is gamification. Most programs already do a pretty good job of rewarding purchase behaviors; when you buy something, you get points for it. But it’s very hard for a traditional loyalty program to reward non-purchase actions.
This is for several reasons. Traditional loyalty points systems are points-based only, meaning for every 100 points, there will be, say, $1 of liability for the company—or, in some cases, $1 in the bank that actually backs the points by law.
It’s a massive accounting liability: American Express issues something like $18 billion worth of liability in new points every year.
About two-thirds get redeemed, and about one-third don’t get redeemed—that’s a huge liability left on corporate books.
Also, if you want to reward a non-purchase action like watching a product video or tweeting out a promotion code—these programs would love their tens of millions of users to retweet everything they post, but users really don’t. To incentivize that, a program can’t afford to use points—if my favorite loyalty program told me to do that for 100 points, I’d be posting all day, right?
So what we came up with in our system is a hybrid tokenized program that has two instruments: stablecoins on blockchain and digital badges, which are actually NFTs.
“The average engagement with the program for the average user is over 27 transactions per month. In a traditional loyalty program, the average engagement would be less than three times per month.”
lin dai
You can unlock them for, say, hitting a $500 spending threshold or watching a video. The great thing about them is they don’t carry any direct accounting liabilities.
Brands can issue literally millions of these—and we’ve developed a minting method called Power Mint that allows us to generate about a million of these badges for $26 in costs.
That allows a brand to issue millions of tokens without considering gas costs. They can easily stack them: imagine, as a consumer participating in Restaurant Week, you can watch a video of our restaurant to unlock a badge. Share that video, and you unlock a second badge, and dine out at one of the participating restaurants to unlock a third. Once you’ve got all three actions, you can unlock a bigger reward. It incentivizes the user to complete a series of actions and gamifies the experience.
In the programs where we’ve deployed the digital badges plus points, the average engagement with the program for the average user is over 27 transactions per month.
In a traditional loyalty program, the average engagement would be less than three times per month.
If it’s possible, can you share any examples of the system in practice?
Probably the biggest example is Warner Music Group—you can see it in action at wmgrewards.com.
If you think about the music business, you want to encourage people to do three things: listen to more music, purchase more merch, and go to concerts. Some of those activities are non-purchase actions: previously, very difficult to reward with points. One of the standout asks is: listen to music, follow your favorite artist, and save a track to your playlist.
All those actions are new digital badges that you can do to complete challenges to unlock bigger things and then be rewarded with credit towards merch purchases, concert tickets, or an intro to a meet-and-greet experience with your favorite artist.
This has increased user engagement with the program by a factor of nine and has boosted sales by fourteen percent.
So, let’s say I’m a company that wants to do my loyalty program with you—one of the first questions would be, what blockchain is this on?
So here’s the best part: it’s agnostic. We have multiple options for our brands. They can choose either to deploy a private chain solution or a public chain solution. We’ve done Hyperledger-based deployments, Tezos-based deployments, Ethereum and Polygon-based deployments. Essentially, we can support any EVM-compatible chain, plus a few others. We can work with whatever their ecosystem needs, but if we need to do a cross-chain swap with another program, we can use something like CCIP from Chainlink to accomplish that.
Where do you see this tech going in the future?
We’re very bullish that there’s going to be a lot of adoption this year by loyalty programs. This is something that we hope is a game-changer for loyalty program owners. It’s simply a more engaging, more useful tool for their consumers. So, we think this sort of tech will be underneath all technologies for loyalty programs in the future.