Demystifying Blockchain and Understanding its Impact on Marketing

A rewards program that pays off in real time. Instant ability to verify product claims like "all-natural" and "allergen-free." Smart contracts that automate buying. All powered by the magic of blockchain technology.

Blockchain is already changing the world. Everyone's heard of Bitcoin by now. But not everyone knows that behind every cryptocurrency like Bitcoin is a secure, efficient blockchain of data.

Blockchain is a disruptive technology, which can be a scary concept to many. The internet disrupted businesses, from mainstream media outlets to brick-and-mortar stores. But it also created opportunities, from streaming media to online retailers.

As blockchain continues to mature, it too has the potential to create significant advantages for marketers who learn to harness its power to deepen customer relationships through more sophisticated targeting and service.

But what, exactly, is blockchain?

Blockchain is a secure and decentralized technology

Blockchain technology is precisely what the term implies: blocks of data, linked to allow distribution and sharing. The chain of records lengthens over time, as new data is created when property or money changes hands.

Each block is securely encrypted and time-stamped. And though the database is easily shared, it can't be altered without overriding every single record—which would require massive computing power.

Bockchain has drawn comparisons to the digital ledgers banks use to maintain their records. Except with blockchain, there's no central database that can be hacked or corrupted due to human error. It also eliminates the need for a server, and the accompanying security and capacity issues.

It's open-source code that anyone can download and develop. And they are—from wallet applications and secure encryption technology with private keys to peer-to-peer payment with no transaction fees because there's no digital intermediary.

Blockchain technology is already in use

Though early attention has focused on finance, blockchain has the potential to solve myriad other problems for businesses, from advertising inefficiency to unsatisfactory customer service. Blockchain technology allows artists greater control over their work by clearly establishing copyright. It can let all of us control our own digital data and online records. And it can power the "Internet of Things", automating systems through software and sensors.

Many established companies have jumped into blockchain in recent months, including:

Royal Bank of Canada, which is using the technology to speed up payments between U.S. and Canadian banks.1

Goldman Sachs, which calls blockchain "the new technology of trust", is exploring bitcoin trading.2

IBM, which is teaming up with major food producers and retailers in a blockchain collaboration designed to track food supplies.3

Blockchain can ease privacy concerns

With every Equifax breach or Yahoo hack, consumer fears increase. Most people simply don't trust big tech companies or ISPs to protect their data, according to a Morning Consult poll4. More than two-thirds don't trust brands either, according to 2017 poll by Gigya5, an international technology firm.

Yet, consumers continue to visit sites anyway. There's a pessimism at play—a fatalistic resignation that eventually your financial or retail account will be hacked.

Researchers at MIT believe blockchain could change that by better protecting personal data.6 Companies such as Civic are already realizing that potential, creating apps that store personally identifiable information, and only sharing what the user allows.7 The technology has the potential to scale across many industries, including financial, e-commerce and social sites.

The downside: businesses will not have the perpetual access to consumer data they currently have through intermediaries such as Facebook and Google. It will also be more difficult to detect behavior patterns across the internet, according to a whitepaper by blockchain specialists Never Stop Marketing.8

More effective advertising with blockchain

On the flipside, blockchain can potentially enable brands to seamlessly deliver tightly-tailored ads, emails, texts or direct mail pieces without relying on remarketing campaigns. Blockchain gives consumers the power to lock down their data. However, consumers are increasingly more willing to give brands access to their information if they see a benefit to doing so.

Paying customers directly to look at content, through either enhanced rewards or the cold, hard Bitcoin equivalent of cash may sound ludicrous; but perhaps no more so than paying a middleman for ad campaigns that aren't always effective.

In fact, Never Stop Marketing reports that every advertising dollar nets 44 cents of value;9 and the Association of National Advertisers estimated bot fraud cost businesses $6.5 billion globally in 2017.10

Blockchain has the potential to help companies spend advertising money more effectively. It's happening already, with companies such as adChain,11 AdShares12 and MadHive13 building systems. Even Nasdaq has jumped in.14

Verifying your claims with blockchain

Say a business Is selling ethical leather products from free-range cattle, and wants to prove this selling point to attract socially conscious consumers. Blockchain technology can track every aspect of a supply and production chain, making claims much easier to verify.

In an era where 40% of shoppers believe "organic" is nothing more than a marketing term, according to a whitepaper by the IT firm Cognizant,15 this could be huge.

Automation via smart contracts

Smart contracts rely on if/then statements that execute when conditions are met. Blockchains make them possible on large scales.

"If the price on the PS4 Pro falls below $325, buy it." Or, "If the forecast calls for snow next week, ship sidewalk salt." Or, "Order a new pair of shoes when my running app has logged 300 miles."

If consumers like being able to tell a smart device to add bread to a grocery list, they're going to love the efficiency of purchasing via blockchain technology. On the merchant end, it takes "just in time" inventory to the next level by reducing lags through automation.

Improving loyalty programs with blockchain

Everyone loves loyalty programs, but Generation Z and Millennials are especially responsive to them.16 For Gen Z in particular—a group of up-and-comers not noted for brand loyalty—this marketing tactic is crucial, according to research by the multi-channel marketing firm CrowdTwist.17

But Millennials have never known a time without the Internet, and Generation Z can't recall life without the iPhone. These groups are not particularly patient, and eventually the system of "buy, verify and receive loyalty points weeks later" will not do.

Blockchain can speed that up, Cognizant says, by eliminating mainframes and tracking.18 Points could be available in real time, increasing customer satisfaction and strengthening brand loyalty.

Though blockchain technology is new and rapidly evolving, it will change the way business is conducted in the years to come. With its emergence comes the potential for improving privacy and efficiency—not to mention a powerful marketing tool that can help brands continuously build trust and deepen relationships with customers.

Want to discuss ways to raise the bar for your brand's communications? Talk to an RRD expert.

Share and Connect

  1. Reuters. Royal Bank of Canada Using Blockchain for U.S./Canada Payments (2017)
  2. Bloomberg. Goldman is Setting Up a Cryptocurrency Trading Desk (2017)
  3. IBM. IBM Announces Major Blockchain Collaboration to Address Food Safety Worldwide (2017)
  4. Morning Consult. Little Trust That Tech Giants Will Keep Personal Data Private (2017)
  5. Gigya. The 2017 State of Consumer Privacy and Trust (2017)
  6. MIT. Decentralizing Policy: Using Blockchain to Protect Personal Data (2015)
  7. Forbes. How the Blockchain Will Secure Your Online Identity (2017)
  8. Never Stop Marketing. The CMO Primer for the Blockchain World (2017)
  9. Never Stop Marketing. The Digital Advertising Strategy No One's Told You About: Blockchain (2017)
  1. Association of National Advertisers. The Bot Baseline: Fraud in Digital Advertising 2017 Report (2017)
  2. DocSend. The AdChain Registry (2017)
  3. AdShares. Blockchain Revolution in Advertising (2017)
  4. MarketingDive. MadHive Develops Cryptocurrency Tokens to Support Blockchain Ad Network (2017)
  5. NYIAX. The World's First Exchange to Trade Advertising Contracts (2017)
  6. Cognizant. How Blockchain Can Help Retailers Fight Fraud, Boost Margins and Build Brands (2016)
  7. RRD. Marketing to Generation Z: How Reaching Gen Z With Your Brand Message is Different Than Engaging Millennials (2017)
  8. CrowdTwist. Gen Z vs. Millennials: The Changing Landscape of Loyalty (2017)
  9. Cognizant. How Blockchain Can Help Retailers Fight Fraud, Boost Margins and Build Brands (2016)