At the basic level, a loyalty coin makes it easier for businesses to engage their customers.
At the very least, giving customers loyalty points that they can spend wherever they like, or even exchange for fiat currency, makes a merchant more valuable to customers. This should help in retaining customers. The only thing that might differentiate between competitors is how they target customers and how much loyalty coins they offer.
Another benefit of a universal loyalty cryptocurrency to merchants is that it could help them reduce their loyalty liability. Liability is an entry in the balance sheet of a company that indicates what they’re owing to other people or businesses. And since loyalty points constitute a promise to give customers discounts or even free items, which would amount to money most of the time, it has to be recorded as a liability. If every customer decides to redeem their points all at a time, or in the same period, the financial books of the company are likely to suffer. However, since anyone can participate in the mining of, for instance, Elements coins, merchants could mine for themselves and offer the loyalty coins to customers. They also get to accept loyalty coins that other merchants mine.
The traditional loyalty points have no monetary value to the merchant after it’s been spent. And that’s why it’s a win for merchants because, a Blockchain-based currency could be traded for fiat currency, helping them recoup, at least, some of the sales made with loyalty points.