Over the next few weeks we’re going to be unpacking a new concept a little further. You’ve heard of Open Source, right? The movement that makes software freely available to use, modify and distribute however you want. Well, we think we can apply a similar idea to Value, especially in our chosen field: loyalty.
Open Source is a fantastic thing. I love the idea that there are people out there who believe strongly enough in affordable, secure, flexible, effective software that they are willing to go to the lengths of creating anything from a few lines of code to a whole operating system. But of course, the idea isn’t built solely on altruism. Distribute free software and you open up new revenue models — and there are wider economic benefits. Consider the fact that forms of Linux are used for everything from mobile phones to super computers, servers to point-of-sale systems, and you’ll get the idea.
So what’s Open Value all about?
Put simply, Money doesn’t like to be confined. One of its signature features is portability (along with characteristics economists talk about like fungibility, durability, divisibility, scarcity and resistance to counterfeiting). Prevent it from moving around and you make it into something other than money.
So it’s no wonder that traditional loyalty points aren’t widely considered money. They lack portability by design: they cannot be transferred from one user to another, and they cannot be spent anywhere except with the issuing business or businesses. As a result, they lack real value too. They’re like Monopoly money, which can only be used as a token of exchange within a very limited setting.
Businesses limit portability of their loyalty points for reasons that superficially make sense. Why give value away if you’ve worked for it?
We think that’s flawed thinking. Firstly, because the ‘value’ you’re holding onto isn’t worth much. The current wisdom in the loyalty sector is that giving people something that’s often worthless will foster repeat custom. So it shouldn’t come as any surprise that few loyalty schemes work well, and some even cost the merchant more than they bring in.
More fundamentally, if you’re truly going to ‘reward’ a customer, we think you should do so with something that has real value — not with plastic points that can’t be used outside of that narrow setting and that may well expire in the meantime! That’s the Open Value approach: give people something worthwhile, and that can be used in whatever way they see fit.
The final point is where the flaws in current thinking become a gaping chasm. Open Value does not have to mean giving up your hard-earned profits as a business: quite the opposite. Once loyalty tokens are portable, they have value: they are real money. So merchants can remit a variable percentage of each sale transaction back to the customer as Incent — smart, configurable cashback. The value of Incent is designed to rise over time with use and adoption, so if those points come back to the merchant as payment, they can buy more than they did when issued. If not, the cost of issuing them is known up-front: there’s no forward liability, which is a major problem for merchants and something they’ve told us they love about Incent. It’s zero risk.
But the merchant benefits in other ways from this Open approach. They are part of a growing network of businesses who use Incent — and they’re all available to the Incent-holding customer via the smartphone app. So Incent circulates within this system, being spent wherever it’s worth spending. Everyone gets a piece of the cake.
Of course, there may be customers who go to the trouble of cashing out their Incent points at an exchange. That’s up to them and it’s fine, because 1) it’s their money and 2) it adds liquidity to the currency. For them, Incent is effectively a small discount on their purchase price.
Hold it for the rise in price, spend it with any number of participating merchants, cash it out at an exchange. That’s what a truly Open and rewarding reward point looks like.
And why wouldn’t that keep customers coming back?
Want to know more? Visit www.IncentLoyalty.com or register for our ongoing crowdfund at www.IncentLoyalty.com/register.