Points >>> Tokens

Loyalty Points Vs Tokens for Evolv Eco-system

In the evolving landscape of customer engagement, Evolv has strategically chosen loyalty points over tokens for its ecosystem in Phase 1. This decision aligns with our goals of enhancing user engagement, retaining customers, and creating a secure, regulatory-compliant environment.

Points as a Tool to Move Users Up the Loyalty Ladder

Customer Engagement through Maslow’s Hierarchy of Needs

1. Physiological and Safety Needs: Loyalty points act as a gamified reward system, offering tangible benefits for customer behaviors. These rewards provide utilitarian and financial value, fulfilling basic customer needs and motivations.

2. Recognition and Personalized Treatment: As customers accumulate points, they receive recognition and rewards that reflect their specific interactions and loyalty to the brand, enhancing their sense of value and belonging.

3. Emotional Relationship and Self-Actualization: The pinnacle of customer loyalty is achieved when customers form an emotional bond with the brand, viewing it as an integral part of their identity. This deep connection is fostered through consistent positive interactions and rewards that resonate on a personal level.

Points Program Design Considerations

Strategy and Implementation

1. Retention vs. Acquisition: While points programs are traditionally seen as more effective for retention, in web3 contexts, points can also drive significant user acquisition due to perceived future value.

2. Redeemability: Sustaining user interest requires that points can be redeemed for meaningful rewards, ranging from simple discounts to exclusive experiences that forge lasting emotional connections.

3. Reward Diversity: A mix of readily accessible and aspirational rewards ensures that all levels of engagement are catered to, allowing users to derive immediate value while striving for more significant achievements.

Differences and Tradeoffs Between Points and Tokens

Characteristics and Implications

1. Onchain and Transferability: Unlike tokens, which are freely transferable and often subject to market speculation, loyalty points are controlled within a closed ecosystem. This control allows brands to maintain the intended value and utility of the points, directly correlating with customer behaviors.

2. Composability: While tokens offer the potential for broader ecosystem integration through composability, this feature also introduces complexities such as increased competition and diluted brand loyalty.

Drawbacks of Onchain Points

Challenges and Limitations

1. Speculation Risks: Tokens might incentivize speculative behavior that does not align with the loyalty program’s goals, potentially undermining the intended customer engagement strategies.

2. Customer Lock-in and Competition: The transferability of tokens can reduce customer lock-in and increase competition, as customers have fewer disincentives to switch brands.

3. Regulatory Concerns: Tokens face significant regulatory challenges, including potential classification as securities, which can complicate the deployment and operation of loyalty programs.

Legal and Regulatory Perspective

Compliance and Strategy

1. Reduced Regulatory Risk: Loyalty points are generally not treated as securities, thus presenting a lower regulatory hurdle compared to tokens. This aspect makes loyalty points a safer choice for brands aiming to avoid complex legal challenges.

2. Flexibility and Control: Loyalty points provide brands with greater flexibility to adjust program parameters without the irreversible implications of token distribution, allowing for more iterative and responsive program development, and that's why it makes perfect sense for Phase 1.