How your business can take advantage of NFTs
May 11, 2023
Web3 is the so-called third evolution of the internet.
Web1 was focused on consumption, allowing users to read information that was available on websites. But it was not interactive in that users were unable to contribute information to the sites.
Web2 enabled interactivity by allowing users to read and write information, which in turn allowed platforms like Facebook, YouTube and Airbnb to flourish.
Web3 evolves still further so users can read, write and own information. Users don’t need to hand over their data to third-party companies to be able to interact with broader communities.
As Web3 and the digital world continue to evolve, businesses are looking for new ways to capitalize on the latest trends and innovations to engage with their customers and communities. One of the most exciting developments in this space is the emergence of a so called “community economy.” Non-fungible tokens (NFTs), one of the building blocks for Web3, represent a promising opportunity for businesses to leverage the power of blockchains and are a powerful tool for those looking to participate in the community economy. Here, we’ll take a look at the benefits of NFTs and how to take advantage of NFTs.
What are NFTs?
NFTs are unique digital assets revolutionizing the way we look at digital ownership and authenticity. Ultimately, they can represent anything (ranging from artwork to collectibles to virtual real estate). NFTs are stored on the blockchain in a way that ensures their one-of-a-kind nature and non-interchangeability. Unlike cryptocurrencies, NFTs cannot be subdivided and are not interchangeable. Each individual NFT is unique with no other version available ever.
How businesses can use NFTs
The most widely known application for NFTs to date is for art, collectibles and other consumer experiences like concerts and sporting events. Most businesses will start their NFT journey with basic collectible offerings to test out the technology and gauge levels of interest among their customers. However, well-known brands are exploring how to use NFTs to extend their reach and revenue in more complex ways, too.
The concept of “tokengated commerce” allows businesses to specifically tailor an experience for a customer that has a requisite NFT (or NFTs). For example, a retailer could create an NFT that grants the owner exclusive access to a new product line or discounts on future purchases. What the user sees on the brand’s website could be different depending on their specific combination of NFTs. By making ownership a requirement to access the benefits, the brand creates a sense of exclusivity, individualization and community for their most dedicated customers. The possibilities for tokengated experiences are only just starting to be explored and could end up replacing cookies as a means for firms to use brand to personalize their relationships with consumers.
NFTs can also be used to prove authenticity of physical products, which is particularly relevant in the luxury goods market. For example, a watch manufacturer could create an NFT that represents ownership of a specific watch. NFTs can also be used to provide a record over time. For example, when the watch was last serviced or if it was sold to someone else.
Smart contracts can also require a royalty payment to be made back to the watch manufacturer each time it gets sold in the future, opening up the possibility of repeatable revenue streams rather than single-event commerce. Furthermore, smart contracts could enable a set of experiences for the consumer that can be controlled by the brand long after the initial purchase. For example, the new owner of a secondhand watch could gain exclusive access to brand content even if they did not purchase their watch directly from the manufacturer.
Traditional loyalty programs are being disrupted by new digital ways to engage with consumers. NFTs can be used to incentivize and reward loyal customers, perhaps for referring new business or reaching spending thresholds. This encourages engagement with the brand but also opens up a new community of those who have been rewarded with the same or similar NFTs. The community engagement goes a step further when the NFTs become desirable and are traded between consumers, all under the original umbrella of the brand.
The average consumer participates in 15 consumer loyalty programs but actively uses fewer than half. With interest in crypto, digital assets and Web3 continuing to grow, it’s worth exploring how NFTs applied in a loyalty context can help you increase customer engagement.
Consider how these brands are adopting NFTs to build customer affinity:
- Nike opened registration for Swoosh, a blockchain-powered meeting space that provides members with access to specialty products and events. Through this initiative, Nike can create a community of members and offer unique and exclusive experiences while also building brand loyalty.
- Starbucks introduced Starbucks Odyssey, a combination of their current rewards program with an NFT platform. This allows customers to earn or purchase digital assets to unlock exclusive experiences and rewards. By implementing NFTs, Starbucks can create a more exclusive and personalized rewards program for its customers.
- Sony submitted a patent application for a system that tracks digital media assets in video games using NFTs. This allows Sony to create a more robust system for tracking and managing digital assets in its video games while also providing proof of ownership for players.
- Instagram is letting creators connect their digital wallets to sell NFTs directly from the platform. This allows creators to monetize their work and provides users with a new way to engage with digital content.
- STEPN is a move-to-earn app that allows users to walk, jog or run to earn crypto tokens. Users purchase and swap sneaker NFTs with different attributes that enable the optimal earning strategy for the individual.
- Online message board community Reddit’s NFTs generated $1.95 million in sales with more than three million of its avatars circulating in the marketplace. By implementing NFTs, Reddit created a new revenue stream and provides users with a new way to engage with the platform.
Customization and brand development are key
All these examples point to the individualization of NFT applications. In some cases, the users don’t even need to know that their experience is Web3 at all. Because the technology is still in its nascent phase, there are endless avenues to explore and opportunities for customization.
Even within industries, there are different ways to look at NFTs. For example, NFTs can be used in the travel industry to:
- Create personalized experiences such as travel points awarded in the form of NFTs that travelers can redeem for their choice of awards.
- Provide unique travel vouchers that can be distributed to commemorate a traveler’s journey, miles flown or countries visited and redeemed for flights, hotels and other travel-related services.
- Offer specific travel and in-airport discounts.
- Give users the ability to sell or trade their NFT if they don’t value the perks and buy one which is more aligned with their habits.
- Prove the authenticity of certificates used in travel such as vaccination certificates, personal identification documents or travel insurance.
The emergence of community economies represents a new era of customer engagement and loyalty. By adopting NFTs, businesses can create unique and exciting experiences for their customers, generate new revenue streams and build communities of loyal fans. Whether through exclusive access to products, limited edition digital assets or simply rewarding loyal customers (and being able to identify them), NFTs offer businesses a powerful new tool for engaging with their customers in a meaningful and impactful way.
If you have questions about Web3 and NFTs and would like to learn about the benefits of NFTs for your company, visit us here.