Steem for Business: Thinking about a Steem-Powered customer loyalty program
Imagining a basic customer loyalty program that's powered by the Steem blockchain?
Summary
Pixabay license, source
- Under assumptions stated here, a business could attract customers with a $1 upvote for each of 10 customers per day for posting "selfies" in the store with an investment of about $80k.
- Unlike other loyalty programs, the stake that's used to fund it could be withdrawn again at any time (subject to a 4 week delay).
- Unlike other loyalty programs, the account funding the loyalty program would receive interest and blockchain rewards, and might even grow in value.
- Cryptocurrency should be considered a high risk investment. It's possible that the funds used to launch the program could be lost. i.e. Crypto rules apply: Don't invest more than you can afford to lose.
Introduction
One possible blockchain use case has intrigued me for a while, so I thought I'd do a quick post on the topic to solidify my thoughts. Specifically, the possibility I have wondered about concerns the ability of a small business to use Steem as the basis for a customer loyalty program. So, in this post, I'll do some speculating and write down some numbers in order to get a rough idea about whether such an idea is feasible, and what it would cost? As I begin writing this article, I have no idea where it's going to lead. Of course, I suspect that it would be feasible, but let's have a look.
Pixabay license, source
Let's say that I am the proprietor at a local handbag store and I want to encourage customers to visit my store instead of shopping at Amazon, how might I do this? In the traditional social media space, people can "check in" to a location and receive coupons or discounts when they do. Steem, however, doesn't (yet?) have the ability to check in to a location, so what can we do with Steem?
What I have imagined is that a business could create an account, invest in a pool of Steem, and use that stake to fund up-votes for customers who post photographs of themselves (selfies) while they're in the store. Of course, the proprietor would also want to have the store's account mentioned in the post.
I'll consider some aspects of a program like this in three short sections, first the assumptions that I'll be forced to make, second the costs, and third (perhaps surprisingly), the income that such a program would generate. So, let's move into some details.
Assumptions
When considering the financial factors that go into a concept like this, it is necessary to make some assumptions about the market value and performance of the Steem token, as well as the size of the loyalty program.
Assumptions about the Steem blockchain
For this post, I'm going to assume that the price of STEEM is near it's all time lowest value ($0.08), and that the value of the SBD is pegged to $1, as originally designed. Further, I'm going to assume that the price of both tokens remains constant during the course of the program. Next, I'll assume that curation rewards come in at about 5% and that blockchain interest for vested STEEM (Steem Power) comes in at 2%. Finally, I'll assume that - at these rates - 1,000,000 SP are needed to distribute a $2 upvote.
Pixabay license, source
Of course, nothing is certain, but I believe that these assumptions are actually very conservative in comparison to the current real-world values of both tokens.
Assumptions about the loyalty program
To make the math easy, and to ensure that the proprietor's Steem account is fully utilized, I'm going to assume that the loyalty program rewards 10 customers per day, and that the proprietor wants to issue a $1 upvote to customers who post selfies in the store. I'll also assume that an employee earns $20 per hour and spends 1/2 hour per day checking notifications and issuing upvotes.
I should mention that I'm ignoring things like marketing and advertising that would be needed in order to make the program a success. I'm also ignoring the gain in sales that such a program would be intended to generate.
Costs
Pixabay license, source
Against those assumptions, how much does it cost me to reward customers for coming in my store? It's really a fairly simple calculation:
Labor:
- 1 employee * 1/2 hour * $20 = $10 per day, or $3,660 per year
Steem:
- $0 to create a Steem account
- $80,000 to purchase 1,000,000 STEEM and power them up
- $0.24 for 3 Steem (optional) if I want to create a community that's dedicated to my store and my customers
The fascinating thing about this is that most of these "costs" aren't really costs, because I can end the loyalty program and cash out the stake any time I want, with just a 4 week waiting period (subject to current market conditions).
So, in total, the program would have $3,660 in labor costs per year and a one time start-up cost of $80K, that can be recovered at the end of the program (subject to current market conditions and a 4 week delay). These funds would lead to $3,660 in reward distributions to customers (from the blockchain, not from the business' own funds).
Revenue
Of course, the point of any loyalty program is to bring customers into the store, and have them purchase merchandise. I'm not going to begin to estimate that revenue stream, and I suppose it would be different for every business.
Pixabay license, source
Steem offers a fairly unique capability, however, because the Steem Power that is driving the loyalty program also earns interest and the associated account receives curation rewards.
You may have noticed that I priced out a $2 upvote, but said the customer was receving a $1 upvote. What's that all about? On the Steem blockchain, 50% of the payout value goes to people who vote for (curate) a post, as curation rewards. So for each post the account gives out a $2 upvote, the customer gets $1 and the other dollar gets split among all the different curators. Additionally, the blockchain pays something like "interest" to people who stake their STEEM. So, using the assumptions from above, that works out to about $5,600 per year in revenue from the loyalty program itself. Amazingly, even before we factor in additional sales from bringing customers into the store, the rewards program already pays for the employee's 1/2 hour per day.
In the real world, the staked amount could gain value, lose value, or break even. Under the assumptions of the thought experiment, however, it would lead to an increase of 7% APR. $80,000 would be invested to fund the loyalty program, and in a year, it would turn into $81,940 (after subtracting labor costs).
Conclusion
It should go without saying that this is me, thinking about things "off the cuff". This is not investment advice, and anything involving cryptocurrency should be considered as "high risk". However, from this cursory overview, it seems to me that Steem could bring an advantage to brick and mortar retailers who want to attract in-person visits.
Now, let's talk about market volatility. We made the conservative assumption that the price of STEEM never changes, but the reality is that it does change. Over its six year history, STEEM has been as high as $8 and as low as $0.08 with a current price around $0.25. So, it is possible (but definitely not guaranteed!) that an investment like this could wind up also gaining in market value.
Some closing points are that this type of content would likely be valuable to the Steem blockchain because the proprietor would have the local knowledge that's needed to make sure that the visits and posts are authentic. Additionally, all of the customers who participate would become authentic new Steem account-holders.
Other factors include the notion that Steem developers could think about building custom applications that would facilitate this style of usage, and the shop owner might want to plan on some additional labor expenses for time spent helping their customers learn how to get a Steem account and how to post.
It also occurs to me that a program like this might be especially useful for businesses with repeat daily customers, like a coffee shop, news stand, or convenience store, for example.
What do you think? Does this make sense as a useful way for small businesses to capitalize on the Steem blockchain? After a quick pass through the numbers, it seems feasible to me.
Update: I should also note that the cost (in USD) would probably be roughly the same at today's STEEM price as at $0.08, because the the number of Steem Power needed to distribute a $2 upvote changes in proportion to the price of Steem. At higher prices, a proprietor would just buy fewer SP to achieve the same effect.
Thank you for your time and attention.
As a general rule, I up-vote comments that demonstrate "proof of reading".
Steve Palmer is an IT professional with three decades of professional experience in data communications and information systems. He holds a bachelor's degree in mathematics, a master's degree in computer science, and a master's degree in information systems and technology management. He has been awarded 3 US patents.
Very good stuff here @remlaps and I agree with many of your conclusions. My question is, how do we get business to see this opportunity? How do we lead the horse to water?
I wish I knew. My only thoughts would be a professional marketing campaign or launching a proof of concept business partnership. If one business were to succeed this way, I suppose others would follow suit.
IMO, the ability to invest money to fund a business program, instead of paying for the service outright should be a real differentiator, but it needs to be communicated and/or demonstrated in a way that attracts businesses (and non-profits).
Agreed. Their main issue will be the volatility of STEEM and the possibly that they could loose their initial $80k investment (number used in your model). Though if it's strictly for growing the business they should write that off anyways as a costs of growing the business I would think... What business specifically do you think this would appeal to the most?
Initially, I'd say low cost, high volume businesses with repeat daily customers. Convenience stores, coffee shops, bars, news stands. Anywhere that you could get a lot of traffic and would just need to convert a low percentage of customers.
Later, if the idea actually got traction, I can imagine that luxury businesses might want to give out high-power rewards, say a $500 upvote for a selfie with your new Ferrari, for example.
Yes, this is one of the possible ways to attract business to Steemit. In general, I wonder why the business practically ignores such a large and dedicated platform. Probably due to lack of understanding of how everything works here. For example, everything is clear on Facebook. There are visitors, you pay for advertising, you get the result. Here at Steemit, a slightly different approach is needed and I don't think many people understand which one.
I agree. There's a whole world-full of businesses out there, and I don't understand why none of them seem to see the potential here. There should be a huge benefit to the idea of using a recoverable investment to direct blockchain rewards and thereby influence customer decision-making. Steemit has figured this out with their diary game, crypto academy, etc... but I don't know what's preventing other businesses from seeing it.
Not enough population reach in any particular location, I guess. Steem has lots of users, but I think we're spread pretty thin geographically.
It also occurs to me that an existing Steem stakeholder could use delegations to monetize their investment by implementing such a program on behalf of a business in exchange for a monthly payment in real-world currency. i.e. pay me $X in USD, and I'll delegate so that you can distribute $300 in upvotes to your customers during the next 30 days.
We have many users from developing countries and few from economically developed countries. Developed countries could be interested in advertising on social media.
For example, we have many authors from Venezuela. But most companies in Venezuela are state-owned, and small and medium-sized businesses are in a difficult position. Therefore, there is no business interest in advertising among Venezuelan authors. The situation is similar with authors from Nigeria or other countries.
Businesses from the United Kingdom, the United States or Canada may be interested in an advertising campaign on Steemit, but there are only a few authors from those countries.
Another reason, I think, is that the vast majority of business people just don't understand how to use Steemit.
You've put a lot of detailed thought into this. It sounds interesting.
I can't judge whether the concept would work like that because I don't have much insight into marketing.
It would have to be considered whether the system could absorb the sales.
But the Steemit team should definitely look into such an idea to get investors into the system. In addition, customers would also become aware of Steemit/Steem and could enrich the system as new bloggers...
Agreed. Also, as I already replied to @o1eh, it later occurred to me that existing stakeholders could charge a monthly delegation fee (denominated in local currency) to businesses that want to implement such a program. That might also reduce the concern about selling pressure.
An interesting thought to push steem towards mass adoption
If I have sufficient capital or there are investors who want to collaborate with me, I will implement this idea.
Thanks for sharing this great idea.
That would be great. I'd love to see it happen!
Thanks.. I hope I can do it some day.
It looks like we have our answer. The withdrawn STEEM can be matched on Binance over the course of yesterday.
Interesting. Yep, between the 15th and the 19th, I see Steemit's STEEM balance (or the part of it that I'm aware of) is down by about 6 million, and the Bittrex wallet dropped by about 14.5 million STEEM.
If I understand his Twitter posts, JS says that the Tron DAO is going to provide custody services for $10 billion in crypto as USDD collateral. In that context, 20 million STEEM is a drop in the bucket. My guess would still be that's where it's going, though. 30% on $5 million is a decent income stream.
I noticed that a BTTC/USDT pair was set up on Binance a short time later, so I'm guessing that Bittorrent will be in the collateral mix, too.
Peripherally related: I would hate to be the person hitting the "Submit" button on an 8,000,000 STEEM transfer. ;-)
I guess there's not much value in speculating. The price took a bit of a battering on the 18th which is when the 21m STEEM were transferred to Binance.
They did a 1 STEEM test run and then an initial 10 million - quite a leap!
I just noticed that a bunch of the documents that were locked are available for download now.
Looks like Steemit has a filing due on May 27 in response to this amended complaint. After setting up their interpleader deposit and making a settlement on attorney fees, I guess Bittrex is totally out of the mix now.
My understanding was also that these users all transferred their funds to this 321 account to use it to battle Steemit. These documents suggest they’re accusing Steemit of making these transfers.
I have probably confused something along the line somewhere.
The funds were transferred by the blockchain during the hardfork. There's a semantic argument to be had about whether it was Steemit, "the Steem witnesses", or "the Steem community" who did the transfer, but it definitely wasn't the account holders themselves.
Basically, when Hive forked off, the fork include a step that forcibly transferred funds (on that chain) to empty the wallets from Steemit and about 200 other accounts (including myself, my son, and steemchiller, among others) because the Hive agitators were unhappy about the witness votes of those accounts. After Hive forked off, some Hive militants also continued harassing the Steem blockchain with obscene SPAM posting and intentionally harmful witness votes.
In response, "the Steem witnesses" used the exact same code (with a different list of account names) to empty the wallets of the alleged attackers and/or the people who were alleged to be voting for attacking witnesses, dumping the funds into the community321 account. Almost immediately after that transfer, some unknown party transferred the funds to Bittrex - apparently by making use of a compromised key.
So, I think Steemit's counterargument is probably that 1.) "the Community" or "the Witnesses" transferred the funds, not Steemit, Inc.; and 2.) The fact that most of the blockchain attacks stopped immediately after the hardfork demonstrates that it was a necessary defensive measure.
Wow - what a mess. So you had your account emptied for the simple reason that you didn’t oppose Justin Sun?
And in retaliation, the suspected conspirators had their accounts emptied and this is what ended up with Bittrex.
Which almost certainly means that nobody had any funds other than Bittrex and anybody who kept well out of it!
And after everybody lost… Steemit somehow manages to “win” 21m STEEM?!
Yeah, basically my son and I voted for decentralization by supporting enough witnesses from both "factions" to try to ensure that neither could gain full control, but the Hive chain emptied the wallets of anyone who voted for more than 2 of the Sun/Steemit-aligned witnesses (or maybe 2 or more, I forget now).
So far, I think they only won 14.5 million. The other 6 that transferred out to Binance was already in the steemit wallet, and (as I understand it) Bittrex now owns the 8 or 9 million "disputed STEEM" - they basically bought it with their interpleader deposit. The remaining legal dispute is in terms of USD, not STEEM, I think.
To be fair, Steemit lost far more on the Hive side than they gained from Bittrex, but the whole thing was definitely a mess.
Just skimming on my phone and agree with your conclusion. I can’t see bittrex wanting anything more to do with this now.
It’s interesting that Steemit’s being accused of transferring the funds whereas previous documents specify “a white hat hacker”. I’ll need to log in and have a read on my laptop when I can. What have you concluded from this and your thoughts on the 21m STEEM? Surely if Steemit never owned these STEEM, it would be unethical to cash them in to fund anything other than Steemi.
Yeah, without knowing what's going on, I can't have a strong opinion, but since those funds were "seized" in the name of "the community", one would certainly hope that they would be put to use in a way that benefits "the community".
There's an argument to be made that keeping the STEEM off the market by tying it up as USDD collateral and using it to generate a revenue stream for steemit.com would benefit the community, but I'd like to see some transparency on whatever is going on. (if that's what they're doing, as I speculated above)
OTOH, with the timing of the movement and now learning that Steemit has a response due on May 27, I'm wondering if this might be part of some sort of settlement agreement. We'll see.
I totally agree.
Could well be... despite the funds hitting Binance, it doesn't look like they've been sold to UDST, BTC or ETH yet - not all of them anyway (maybe about 1 million have though).
Sometimes, I wish that I wasn't so curious 😆
Steemit's reply was posted, but it's not available for download (yet?).
Hi @remlaps ,All this is very interesting , however the volatility of the currency is an obstacle for me , well you say so , let me explain , if a few days the price is 1 dollar , and the following days it drops to 0.50 , people will be stopping having profits is like receiving a salary in which you don't know how much you actually earn, another issue is that cryptocurrencies make you financially happy for a few days and even hours, and later you get depressed by the collapse of these, I think that this business It could work but with another form of payment, not cryptocurrencies.
I wish you a happy start of the week
Good point. I think if I were in charge of such a program on the business side, I would be sure to use dollar cost averaging in order to smooth out the volatility. Despite the volatility, I think that customers would still participate, because many loyalty programs take the form of a raffle where most of the customers get zero and only a few are rewarded.
Собственное сообщество с курирующим аккаунтом - да, по-моему, это интересная идея для стимулирования активности членов сообщества. По опыту сообщества RU Steem участники не слишком торопятся изучать криптомир, при этом заинтересованы в публикациях и обсуждении.