Research Info

Type: Research Paper
By: Ibrahim S. Hanoglu
For: Lindenwood University
Date: 2022


Abstract

  • Purpose:

Blockchain technology is systematically affecting all industries. This study examines the effects of the integration of blockchain technology into the supply chain in the marketing industry. The study aims to contribute to the researchers who will examine the marketing technologies of the future by discussing the effects of blockchain technology on product marketing applications.

  • Methodology:

An analytical review of the blockchain literature, followed by a review of case studies to establish a basic framework for evaluating the impact of blockchain on the supply chain, is carried out using a qualitative method. The basic structure and applications of blockchain technology and the distinctive features and functions of tokenized products for brand-consumer interactions are discussed.

  • Findings:

Blockchain technology has a very secure infrastructure, but since it has not yet completed its development, it still interacts with central systems, and that creates security vulnerabilities in the blockchain. Let’s take into consideration that blockchain technology is very new, and these problems are solved in its main structure. The problem occurs because technology has not yet reached its mature level. Blockchain is the technology of the future that will also affect the digital marketing industry for sure.

  • Value Added:

According to the results of the author’s research, the integration of blockchain into different industries, infrastructures, etc. changes the experience in the marketing phase of their products, and these experiences have not yet been studied. At this stage, the author conducted the research through the supply chain, keeping in mind the rapid development of blockchain technology in the supply chain.

  • Keywords:

Blockchain marketing, web3 marketing, decentralized marketing, tokenization, traceability, tracking, digital marketing, supply chain, consumer brand relations, and hybrid marketing.


Introduction

In terms of customer connections, blockchain technology can significantly revolutionize interactions by increasing data and information openness while also increasing privacy and security (Rejeb et al.). One of the most debated issues of blockchain technology is how it can have such a high level of security while ensuring that information is accessible to everyone at the same time. Blockchain technology is a hot topic in many business areas, and its applications seem endless. Blockchain is a technology known for its ability to decentralize and track information. It is also a decentralized, public, distributed ledger (Hahn et al. 21; Rejeb et al. 2; Perez-Sanchez et al. 3) that records transactions between two parties in an efficient, verifiable, and permanent way. While it can be scary to be the first to use this very new technology because of its complexity (Della Valle and Oliver 10), it is possible (Salfino 1), and marketers should start thinking about potential use cases and how to implement them. The answer to this study question is critical since blockchain has the potential to improve the marketing industry’s distrustful atmosphere. In general, blockchain is critical for digital marketing since consumers do not trust the manufacturer, the manufacturer to the advertising agency, and the advertising agency to the advertising provider in this field. This increases the likelihood of the digital marketing business adopting blockchain technology quickly. According to Ertemel, to reshape the global decline in consumer trust in marketers, marketers need to stop relying solely on individuals and companies and start building a system based on fully automated procedures instead (40). The research will address the integration of a physical product into the blockchain, also called tokenization, while attempting to answer the question of how blockchain tracking applications can be made useful for digital marketing. Thus, the author tries to find out whether tokenization will be one of the marketing techniques of the future. The literature review found more than 50 academic articles, journals, and books published in 2017 and beyond, mostly from the ProQuest database, but only 16 were determined to be relevant after the initial review. Keyword and keyword combinations were used, such as “digital marketing AND blockchain OR web 3”, “blockchain AND tokenization AND “supply chain”, “blockchain AND tracking AND “supply chain”, and “blockchain AND tracking AND “supply chain”.


Literature Review

Blockchain is a revolutionary technology (Xu et al. 307) that will affect all industries. While many think this is the future of computing, others are still skeptical because they don’t understand the concept. It is believed that transparency depends on the sharing of information by the participants in the supply chain, and as transparency increases, confidentiality will decrease (Xu et al. 307). However, blockchain is based on a simple concept: it is a database (ledger) that maintains a constantly updated list of records, and anyone with authority can add or update a record, and anyone with viewing authority can view the record (Boukis 309). Blockchain began its life as a decentralized, transparent, unchangeable database of records and digital events (Gleim and Stevens 124) to process Bitcoin transactions, an alternative to centralized databases managed by banks and governments. Blockchain technology is now being integrated into everything from the payments market to the healthcare space. A new blockchain application for healthcare promises to make medical records more accessible while reducing costs and improving patient care. Although one of the main ideas of blockchain is transparency, the identity of actual users remains anonymous (Gleim and Stevens 124). During or after any person’s use of a website or an app, companies cannot access user data, and the main purpose of the blockchain is to make the information transfer on the internet secure (Xu et al. 305) and to change the perception of insecurity created by the internet among the consumers (Ertemel 35-39). According to Routray, in today’s system, web 2.0, much personal information, including credit card information and spending habits, is recorded in the system as a digital trace in online transactions made by individuals (Rejeb et al. 2; Rejeb et al. 5). Blockchain technology, on the other hand, introduces a new model for consumer engagement and collaboration, allowing users to interact directly with the brand or company while responding to marketing campaigns with a unique and verified product or service reviews (56). Blockchain applications are used to perform such operations. Pérez-Sánchez et al, in their research on tourism, concluded that social norms will lead consumers to rapidly adopt new technologies and thus encourage them to seek innovative applications (13); here, they were talking about blockchain technologies and applications.

Blockchain applications are digital ledgers where transactions are recorded. They are used for several purposes and represent the future of the global economy. Blockchain applications were first introduced to the financial sector, but now, applications cover a wide variety of use cases across the spectrum of business, finance, government, and other industries, like supply chains, and they are not trial applications but real-world applications (Xu et al. 306). These applications allow organizations to take advantage of the transparency and accountability that blockchain technology brings, create new business models, and innovate on existing ones (Della Valle and Oliver 9). Some key facets of blockchain technology are a decentralized digital ledger (Xu et al. 314; Ada et al. 2), peer-to-peer transactions, privacy & transparency at the same time, and irreversible transactions (Boukis 309).

Blockchain technology is revolutionizing the way we see data. The most important innovation in blockchain technology is the ability to decentralize the data (Gleim and Stevens 124; Routray 55) by eliminating all Trusted Third Parties, commonly known as middlemen (Ertemel 35; Bischoff and Seuring 237; Hahn et al. 24; Rejeb et al. 2). This platform has many applications, but its most obvious use is the currency known as Bitcoin, which is traded on online exchanges (Bischoff and Seuring 231). While Bitcoin is the earliest and most popular cryptocurrency (Hahn et al. 21), there are hundreds of other digital currencies, or cryptocurrencies, that have emerged in recent years. Its applications range from similar to how bitcoin is used, such as peer-to-peer transactions, to offering more secure transactions than the traditional banking system. However, not all cryptocurrencies are the same. For example, crypto tokens are cryptocurrencies that represent digital assets. They are more like corporate stocks than standard cryptocurrencies, and their value can be volatile. Cryptocurrencies are currencies that function as digital money. They are valued according to a chart called the cryptocurrency price index. Tokens, on the other hand, can support digital business models, open new markets, new possibilities, and new channels, and provide easier access to technological developments and market strategies (Della Valle and Oliver 11). Tokenization in blockchain makes a huge contribution to taking marketing to a higher level by keeping track of all transactions that take place in peer-to-peer networks (Routray 55). This study examined whether the changes that may occur after the integration of blockchain technology into the supply chain can be used as useful marketing practices and how these changes can be used to positively affect the relationship between the brand and the consumer.


Methodology

This article examines the brand-consumer relationship and the potential impact of tokenizing products by adding blockchain technology to the supply chain. Based on the literature review, it seems that some of the research has been done on blockchain-integrated supply chain problems and blockchain technology applications. However, the indirect changes or the potential beneficial use cases that blockchain technology may cause in marketing activities during the marketing of these products have not been examined. If we consider that a non-marketable concept cannot be considered a product, we can understand how vital marketing is for an industry, such as the supply chain, whose subject is physical products. This research examines if blockchain adoption and technologies changing the supply system can be used as useful marketing practices. An analytical review of the blockchain literature, followed by a review of case studies to establish a basic framework for assessing the impact of blockchain on supply chains, is carried out using a qualitative method. The essential structure and applications of blockchain technology are addressed, as well as the distinctive characteristics and functionalities of tokenized products for brand-consumer interactions.

In the preliminary analysis, the author identified the need for review, defined the review proposal, and drafted the research. In the analysis phase, the author found and reviewed the sources to be researched, and separated the most useful 16 sources from the others. In the post-analysis phase, the author reviewed the selected papers and, after summarizing and outlining, tried to answer the research question by synthesizing these sources in the final phase.


How blockchain can transform supply chains?

Blockchain is not considered a disruptive technology that will have far-reaching effects on our economy and society, as the internet has done before, but simply produces a business model with a better solution and quickly outpaces firms that cannot keep up with change (Ertemel 35). Let’s use the car buying process as a case study. In the process of purchasing a car, information such as the working conditions in the production facility (Routray 59) where that car is produced or the manufacturer and quality of the parts inside the car are inaccessible to the consumer. In the current supply chain system, there is no simple method of figuring out where car parts came from and how they are made (Gleim and Stevens 127). A supply chain is a complex network of interactions that supplies materials, manufactures components, assembles parts, and delivers cars to market. Supply chain networks were fundamental hundreds of years ago. Natural resources were supplied by mines and farms to trained artisans, such as blacksmiths and tailors, who then produced and sold the finished product. Supply networks are much more complex, fragmented, and more difficult to understand today. Hundreds or even thousands of manufacturers from all over the world contribute to the creation and delivery of cars at dealerships. Oftentimes, multiple companies are unaware of each other (Routray 59), and consumers are probably unaware of how, when, or under what conditions the car was manufactured. This is not just a consumer concern. Because today’s supply chains are too complex, even larger manufacturers struggle to keep track of how their products are created. According to Della Valle and Oliver, the SCEM (Supply Chain Event Management Systems), the current solution for data sharing, solves the same problem as the blockchain; it is complex and limited, but blockchain improves the existing SCEM technologies and allows them to be deployed, traceable and transparent with greater flexibility (17-18). In the current system, many companies in the supply chain do not also cooperate with SCEM (Wang et al. 14). Blockchain has the potential to make supply chain management simpler and more transparent by forcing businesses to be more transparent about their operations (Routray 55-59). Distributed networks (blockchain networks) enable better use of information, while systems that allow accurate and timely monitoring can be beneficial in reducing supply chain risks (Wang et al. 16). The goal is to develop a single source of information about items in the supply chain, separate from a global ledger. Each component will have its blockchain entry that will be tracked over time. According to Wang et al, products can be easily tracked in real-time throughout the supply chain with RFID technology (Ahmed and MacCarthy 2) or QR codes, which are more cost-effective than RFID and have larger data storage capacity (2). The QR codes do not require any special tool to write or read them, but they are not efficient for every industry, since they can easily be copied. A component’s status can then be updated in real time by both companies. Therefore, each component will be traceable from the consumer (Ertemel 39) to its manufacturer during the purchasing process (Salfino 2; Bischoff and Seuring 231). The supply chain could theoretically be traced back to the mines where the raw materials were extracted. According to Della Valle and Oliver, this feature of blockchain can be used to resolve ethical issues (Ahmed and MacCarthy 4) like “fair trade,” which is being used as a sales technique nowadays. Supply chains can also use blockchain to prevent counterfeit production or illegal practices, such as illegal deforestation, slave mining, and various other human rights and environmental issues (Ertemel 40; Bischoff and Seuring 226; (Ahmed and MacCarthy 1) (11). Blockchain’s traceability feature can also be used by businesses to manage and monitor the supply chain to ensure the quality of delivered products (Xu et al. 316) and timely fulfillment of orders, as well as timely production of time- or usage-sensitive items. In addition, smart contracts, powerful computer programs for administrative automation (Della Valle and Oliver 11), can be used to autonomously manage and pay supply networks (Hahn et al. 23). For example, a tire manufacturer can receive immediate payment after each tire is tested at the assembly facility. Large contracts and invoices will be unnecessary, as well as back-and-forth reimbursement requests for broken components. The same smart contracts can help with shipping and logistics, using blockchain to track important items in transit around the world. This will reduce the need for manual monitoring (Hofacker et al. 1164). For the first time, companies will be able to see a comprehensive view of their products at all levels of the supply chain. According to Ertemel, everyone in the network has access to the blockchain, which assures transparency and traceability of all operations (36), and this will reduce the operation cost of manufactured products (Bischoff and Seuring 227; Hahn et al. 21).


Discussion

  • Can tokenization be one of the future marketing techniques?

As encryption techniques become ever more sophisticated, it’s only natural that criminals will try new methods of accessing data. Tokenization is one such approach that scrambles data by substituting sensitive data with tokens. By replacing the data with a hashed version, tokenization prevents criminals from being able to access sensitive data directly. This method is commonly used in major financial institutions and government agencies for data protection. According to conversations Della Valle and Oliver had with banking and finance experts, tokens can disrupt various operations and corporate processes and create new norms for digital asset and value exchange (11).

Although blockchain is not yet a marketing channel or communication tool, it has important implications for digital marketing (Hofacker et al. 1163), which is a fast-growing industry today, and blockchain is a rapidly expanding technology that is ready to revolutionize the world of digital marketing (Routray 55). Because blockchain could be the technology that reorganizes our future economic system (Stallone et al. 2), marketers need to be prepared for the effects that blockchain can cause (Gleim and Stevens 128).

In the creation of blockchain applications, tokens are essential (Stallone et al. 2). Tokenization of products in the supply chain could completely recreate the world of marketing. The tokenization technique involves assigning a unique digital code, “digital twin” (Ahmed and MacCarthy 16), to real things like documents, records, products, or money and using that code to track, manage and exchange those items. As the volume or the value of such assets grows, tokenization becomes even more important. If the number of tokens is equal to the number of products, the tokens can be used to guarantee the authenticity of the product and to combat counterfeiting. To make traceability easier, blockchain technology can also be combined with RFID technology or QR codes as well (Wang et al. 2-8). Such practice will bring social benefits associated with higher levels of trust and higher production transparency (Della Valle and Oliver 12), which helps marketing efforts because, according to Ertemel, the trust issue is the biggest problem in today’s marketing industry (38). According to Boukis, consumers will be able to get more precise information about their manufacturing and service operations when blockchain is used. This is because blockchain networks give their users more visibility into supply chain activities during the production and/or service delivery processes. As a consequence, customer interactions with businesses will become more open, allowing them to create long-term customer trust (313). In addition, this system allows the manufacturer to have direct information about its products from consumers at the end of the supply chain (Wang et al. 14). This creates an opportunity for the company to directly gather information on consumer habits. If we think that the widespread of blockchain technologies will bring more privacy to end-users and destroy big data, this is priceless information for marketers. In addition, encouraging customers to share their information and adding themselves to the chain as a block directly and voluntarily, with reward systems, will change the structure of digital marketing. This change will be even greater than the shift from outbound to inbound marketing. The system will transform marketing techniques into programs such as rewards, membership, or loyalty (Rejeb et al. 3-8) and will ensure that the benefits provided to third parties are directed to end-users. This will increase demand. In other words, marketing will change from persuasion to temptation. This system will also prevent losses due to click fraud (Rejeb et al. 5) and similar reasons caused by the manipulated digital marketing industry.

  • Drawbacks of blockchain technology

For a long time, blockchain technology has been in the spotlight, with supporters believing it will change the world. And while some of its traits are truly accepted, some concerns make people hesitant to fully embrace it. Despite the promise of blockchain technology to alter supply chain management and control, due to a lack of literature on the technology’s applicability to real-world enterprises, its acceptance and implementation, in reality, remain problematic (Ahmed and MacCarthy 2). As Ada et al. stated in their research, the literature on the integration of blockchain into the automotive supply chain, which is their research topic, is not yet fully developed (3). Blockchain is still an immature technology (Routray 60; Della Valle and Oliver 13; Ertemel 44); therefore, the person requesting the exchange of funds may become vulnerable when they leave the network and interact with third parties, such as banks (Gleim and Stevens 124). Some experts claim that this weakness deters other people from accepting it as well (Della Valle and Oliver 9).  First of all, blockchain technology is not a green technology (Della Vallef and Oliver 9); energy consumption and carbon emissions are higher than conventional systems. Second, the starting cost is also higher. However, the main concern in supply chain operations is the existing engineering systems; in fact, the blockchain-based system in the supply chain is not fully decentralized (Della Valle and Oliver 9). On the other hand, According to Routray, since the blockchain is decentralized, it has fewer security vulnerabilities and thus carries less risk (55). As can be understood from these different interpretations, blockchain is a system with high security but has not completed the development of its more vital functions. What is seen as a blockchain’s weakness is caused by its interaction with the current system. Since this problem can be resolved in time, we can say that blockchain as infrastructure is the best among the possibilities we have at the moment.


Conclusion

The limited literature limited the research, as blockchain technology was new at the time of the research, and the supply chain integration was much newer than that. In addition, by examining the effects of the infrastructure of the blockchain technology or its integration into the supply chain, it has been observed that this integration is an impossible system to reject, considering the advantages it provides to companies and consumers. At the same time, if we consider that this undeniable system has changed the data collection system and our perspective on data, and if we consider that consumer information is indispensable for digital marketing, the developing blockchain technology cannot be prevented from changing the marketing industry (Rejeb et al. 2), and this needs to be urgently accepted by businesses and marketers. Based on the research and experience in the industry, the author believes that in the future, blockchain technology will take over the system, and this change will affect all sectors including digital marketing.



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