Whether it’s for a sweepstakes prize, loyalty reward or purchase premium, marketers always want to associate their brand with the next “it” product. And it’s not just emotionally driven. Partnering with the next “it” product is an extremely effective and pragmatic marketing strategy. Brands can generate excitement amongst existing customers while simultaneously extending awareness of their brand to the partner’s customers. Some common “it” partner categories over which brands compete include blockbuster movie releases, the latest electronic devices and hot new social media players.
Over the last few months, there’s been growing interest in a new “it” category: cryptocurrency.
Bitcoin has emerged as the Xerox or Kleenex of the category, with newer names such as Ethereum, Ripple and many others gaining notoriety. The digital currency checks several of the “it” criteria boxes: it’s new, garners a lot of press, gets everybody talking, and provides status for those who own it. People who don’t even know what cryptocurrency is—or more specifically, those who don’t fully understand it—still want to own it for the sole purpose of saying they have it. They want to be seen as an early adopter, part of the “it” crowd.
Despite delivering on a number of positive “it” criteria, marketers should proceed with caution before hitching their wagon to this global phenomenon. As with anything truly new, a partnership can be a gamble, and this new category is far from a traditional corporate product launch.
While the benefits may ultimately outweigh the risks, it’s important to understand the potential downside of partnering with cryptocurrencies.
Historically, currency is the most popular prize, reward and premium. It rises to the top of almost every focus group or survey response. Cash is king because everyone uses it; everyone accepts it as payment. Cryptocurrency is in many ways a modern, sexier version of cash. It may be even more appealing than cash to a progressive, image-conscious brand.
However, cryptocurrency falls way short of cash when it comes to universal appeal to consumers or acceptance by retailers. In a recent poll by LendEDU, awareness of Bitcoin is strong, with 78.6 percent of Americans responding that they have heard of it, while awareness for Ethereum (31.6 percent) and Ripple (22.2 percent) is considerably less.
Of course, awareness doesn’t always translate to adoption. Less than 15 percent of Americans responded that they currently own or have owned Bitcoin. And retailers have been even more reluctant to jump on the cryptocurrency bandwagon. According to Morgan Stanley, only 0.6 percent of the top 500 online retailers accept Bitcoin, which actually represents a decline from 1 percent in 2016.
Why are these stats important? Because consumer participation in marketing programs that offer niche prizes and rewards is typically much lower.
Some loyalty providers have started offering cryptocurrency as a reward option, which, in theory, is strategically sound. It’s a digital reward that eliminates the expense of warehousing and fulfillment costs. It’s appealing to international loyalty programs because it’s a global currency. But despite those positives, it carries substantial risk as a reward item.
This extremely volatile currency can see exponential price fluctuations in a relatively short period of time, which could be a death sentence to a loyalty program. If cryptocurrency has a tenfold increase in value, it translates to a tenfold increase in loyalty program currency cost or the need for the loyalty program to perpetually rebalance the points required to redeem the reward, which will frustrate program members.
Negative PR risks
This is perhaps the most important factor to consider. Whenever a brand creates a partnership, any negative PR associated with its partner casts a shadow over the sponsoring brand. Cryptocurrency is a high-risk partner for a variety of reasons, ranging from huge drops in valuation to regulation scrutiny.
Recent news reports about cryptocurrency, either as a category or about an individual cryptocurrency, often have a negative spin simply to garner more attention. All it takes is one of the cryptocurrencies to take a PR hit, and the rest will suffer.
That’s how “it” category news works: If a brand is running an incentive-based program with cryptocurrency and bad news breaks, that brand’s program suddenly becomes toxic.
Even with all of these concerns, there are still compelling rationales for partnering with cryptocurrency. For the right brand, targeting the right consumers (such as millennials who have greater awareness and acceptance of cryptocurrency), it might be the perfect “it” product. It all comes down to whether the benefits to the brand outweigh the risks. Proceed with any program with an eyes-wide-open understanding of the hazards and a contingency mitigation strategy should the cryptocurrency news cycle turn south.