Brand loyalty is essential for any successful brand today to survive and continue to thrive. While brand loyalty is considered a central marketing construct, keeping the consumer loyal to just one brand is more difficult in today's competitive and changing marketplace than ever before. Keeping customers satisfied and loyal ensures customer retention and frequent purchases from the same brand. In light of this consumer infidelity, companies are extending brands into lines of collectible merchandise such as Christmas ornaments, dolls, figurines, plush animals, glassware, etc. This merchandise heightens brand loyalty and boosts brand message exposure. Today, this collecting activity has been prepackaged with manufacturing, marketing, and distribution controlled by some of the most prominent Fortune 500 companies and many popular U.S. brands.

However, loyalty programs have been around for hundreds of years now. Let's dive into a detailed history of how collectibles happened and what they mean for brands.

Psychology of Collecting

"Collecting is the process of actively, selectively and passionately acquiring and possessing things removed from ordinary use and perceived as part of a set of non-identical objects or experiences." - Russel W Belk (1995)

Hoarding is a well-known phenomenon among animals. This need to collect comes from a survival-based instinct on the law of scarcity, which dictates that valuable resources are thin and the need to save up for darker times guarantees abundance. Magpies collect shiny objects in their nests, hamsters stuff their cheeks with nuts and grains, and squirrels are avid collectors and burrowers of nuts.

Humans are not any different when it comes to hoarding items and collecting. However, the need to collect has evolved outside the need for ensuring survival and turned into a hobby that provides both personal satisfaction entertainingly and generates value over time. Be it stamp collecting, collecting coins, comic books, happy meal toys, trading cards, or even NFTs – there is always purpose and desire behind people's obsession with collecting objects.

Collectors will always collect as long as objects exist that either arouse individual interest or pose any intrinsic value that can turn them into an investment. Blockchain technology and Non-Fungible tokens that give collectors proof of ownership for their collectibles and a way to make them tradeable have brought about a new wave of interest in collectibles. Digital art, A.I. art, and profile picture NFTs are traded for millions of dollars.

This shifts the power of collecting from a select few to everyone who uses blockchain technology. Anyone can create or buy an NFT today. This redirects value into the applications and use cases of the NFTs that are being traded. People are moving beyond only the collectible value of an NFT and using it for more than just that. This is bringing about a growing trend of brands getting into NFTs to connect further with their customers and reward them for their loyalty through collectibles.

By offering NFTs, businesses have a new way to identify their brands' most loyal and potential customers and reward them for their loyalty. But how do NFTs bring a fresh perspective into the landscape of digital marketing and loyalty programs?

Evolution of Loyalty Programs

"Collecting is not only commonplace in today's society, but it is also believed to be "an intensely involving form of consumption." - Belk (1995)

Loyalty programs have the power to turn brands into household names and turn them into powerhouses. Many brands, such as Coca-Cola, McDonald's, Campbell's Soup, Hot Wheels, Barbie, Hallmark, and Harley Davidson, are considered collectibles. Even if these collectibles aren't tradeable, they provide customers keep buying from them to keep receiving them and build a recall value for the brand among the customers. Some brands like Mcdonalds, KinderJoy, Taco Bell, and more offer collectibles to their customers to build brand loyalty and ensure customer retention through these tactics.

However, collectibles have been used by brands for a long time. Here's a short timeline of the evolution of brand loyalty programs using collectibles:

• Beer and Bread Tokens (Ancient Egypt)

  In Ancient Egypt: Anatomy of A Civilisation, Professor Barry Kemp argues that ancient Egyptians practiced a reward program that was very similar to modern frequent flyer programs, which included status tiers and the ability to redeem rewards for completing certain tasks.

  For the longest time in Egypt, fiat cash did not exist. Instead, citizens, workers, and enslaved people were all awarded commodity 'tokens' for their work and time spent serving at the temple. The tokens were physical objects made of wood with images of a jug of beer or a loaf of bread plastered over them.

  Seniors in the society were awarded bonus tokens for the same amount of work as they were higher in the hierarchy compared to the others. This can be seen as a form of tiered membership where those higher up received more tokens for their continued loyalty.

  These tokens could also be exchanged for things such as goods and services as well, just like airline frequent flyer programs where members with more points can redeem them on flights and non-flight rewards such as iPads, vacations, and Gucci handbags.

  Some of these characteristics are very similar to modern loyalty programs, which are essentially a non-fiat exchange system utilizing tokenized currencies.

• Coupons and Certificates (the 1800s)

  This period may have been an excellent time for the boom of loyalty marketing, with many companies adopting this approach. One good example is The United Cigars Store Co which had over 3,000 retail outlets in 1926. They ran a 'certificates and coupons' rewards program (where five coupons equaled one certificate). The company built collaborated with several partners, such as Wrigleys, Swifts, Danish Pride, National, Barkers, Votan, and Tootsie, who put United coupons in their product packaging. Certificates and coupons could be redeemed by mail or at 250 widely spread-out redemption centers. The United Cigars Store Co Catalog featured a selection of over one thousand reward items which included clothes, umbrellas, cutlery, smoking accessories, razors, leather goods, toiletries, jewelry, clocks, kitchenware, electronics, sporting goods, toys, games, and silverware.

• Betty Crocker (1921)

  Betty Crocker coupons were the first brand loyalty program to introduce the concept of the emotional engagement generated by a loyalty program through the use of a brand mascot. In 1921, The Washburn Crosby Company invented the fictional character Betty Crocker to personalize responses to consumer inquiries. The company also started a coupon program that allowed customers to redeem a complete set of dinnerware.

  Mark Bergen, marketing department chair at the University of Minnesota's Carlson School of Management, said: "The Betty Crocker program was remarkable for its longevity and the depth of emotion it inspired among its devotees. It became more than a coupon redemption program by working its way into the fabric of family life."

• Physical Collectibles

  Physical collectibles are items handed out at the end of the customer's journey. These were items like physical toys, collectibles like tazos and trading cards, watches, or jewelry found in the packaging boxes or at the grocery store during checkout. Some examples would be Happy Meal Toys given at Mcdonalds, toys found inside a pack of Kinder Joy, Pokemon Tazos that were found inside a bag of Cheetos, or gifts given to you during checkout at a store for purchasing a certain quantity of an item. This helped brands create a recall value among customers, strengthen brand-customer relationships, and somewhat gamify the purchase experience. Some of these collectibles went on to become high-priced items later.

• Miles and Points

  In 1981, American Airlines launched the world's first currency-based frequent flyer program using new miles, which was based on how many miles a member had flown on the airline. Members could earn miles at a and redeem them for free flights, service upgrades, and gifts from other brands. This model was copied by United Airlines, TWA, and Delta Airlines and has become a norm today.

  After the launch of these large programs, hotel and car rental companies began partnering with airline companies and started offering miles and points as a strategy to grow their customer base by targeting a group of rich airline travelers.

  Banks and retailers soon replicated their approach with the rapid expansion of the frequent flyer and hotel coalition models and their new currencies. Points and miles loyalty programs quickly became the dominant loyalty program currency globally, ending the ninety-year reign of stamps.

• NFTs and Tokenised Assets

  NFTs gave brands the ability to supercharge membership and loyalty programs. It is the first kind of membership that grows in value with spend. With NFTs, customers can own their membership and loyalty status, meaning the more they interact with a brand, the more perks and benefits they accumulate over time which makes their NFT more valuable.

  In a way, NFTs turn your customers into stakeholders, making them far more accountable and invested in your brand, thus building long-term loyalty.

  Brands today can elevate the experience of customer loyalty programs using NFTs. Here are some ways to do so:

Building long-term relationships with your customers using NFT collectibles

If Web 1 was about "read" and Web 2 was about "read and write," then Web 3 is about "read, write, and own. We always think of technology as enhancing the human interaction between curators, creators, and levels of fashion, as opposed to replacing that human connection." - José Neves, Founder and CEO - FarFetch.

NFT loyalty programs transcend borders and provide perks, rewards, and experiences across both the physical and digital worlds. A brand can make the most of using NFTs for brand loyalty programs in several ways. Here are some ways to do so:

• Reward Loyalty with Exclusive Rewards

  Physical collectible campaigns are a big part of today's traditional loyalty programs. McDonald's, KinderJoy, and several brands have used this method for decades to drive sales. Brands could take this concept to another level by implementing similar promotional collectibles but digitalized through NFTs. NFTs are programmable, secure, and stored permanently on the blockchain, which gives brands a much larger playground to experiment with gamification, long-term strategies, and adding a social aspect to collectibles. From making customers a part of historical moments through collectibles to rewarding customers for their loyalty, the use cases for collectibles are infinite.

  NFTs can be used to replace traditional Airline Miles Programs. Instead of offering points, using NFTs will give customers access to more unique flight experiences and rewards such as premium upgrades, free flights, and premium in-flight services. Airlines could also partner with other brands to give customers access to brand collectibles or gifts from other brands, such as access to new designer perfumes, the latest sneakers, the latest gadgets, or the latest in-flight movies. As passengers level up on their NFT tiers, they can unlock more exclusive NFTs, giving them further incentives to stay loyal.

  Starbucks recently unveiled Starbucks Odyssey, their NFT loyalty program. Starbucks Odyssey is an extension of the Starbucks Rewards program that members can access using their Starbucks Rewards login credentials. Once logged in, members can engage in Starbucks Odyssey' journeys,' a series of activities, such as playing interactive games or taking on fun challenges to deepen their knowledge of coffee and Starbucks. The company will reward members for completing journeys with a digital collectible 'journey stamp.' Users could join a waitlist using their email I.D.s for a chance to be among the first to receive access to the Starbucks Odyssey experience.

  Through ownership of exclusive NFTs, collectors can feel a more profound connection with their favorite brands, which will translate into increased customer loyalty. And since brand NFT collectibles could be sold on secondary markets for profits in the future, purchasing a brand's NFT could be a new way for consumers to invest in their favorite companies.

• Collectibles to boost engagement and sales

  NFTs represent digital scarcity. Brands can use NFTs to drive subscriptions and engagement by creating engaging experiences around collectibles. Gamifying the venture of claiming an NFT can drive subscription and social media engagement for brands.

  Flipkart partnered with eDAO and Dehidden for a digital treasure hunt on their NFT platform Firedrops earlier this year. It was a ten-day treasure hunt leading up to The Big Billion Days. Flipkart also announced its interactive and Metaverse-themed virtual shopping platform, Flipverse, during the ongoing 'Big Billion Days Sale. Flipverse is a metaverse that allows users to walk through virtual shopping centers and interact with digital storefronts.

  https://twitter.com/0xFireDrops/status/1575357161412374529?s=20&t=pZfQPdehZzcfVXqN1MJBGA

  This campaign not only onboarded many web 2.0 users into web 3.0, but it also drove much engagement on their platforms before the launch of their metaverse.

  AMC also released 86,000 NFTs to celebrate the release of the movie "Spider-man: No Way Home. "Only members of its loyalty program— AMC Stubs Premiere, AMC Stubs A-List, and AMC Investor Connect who order advance tickets for the December 16 release of the movie was gifted with these NFTs. This campaign drove the second-biggest one-day move ticket sales in AMC's history. The record still belongs to "Avengers: Endgame" in 2019, surpassing "Spider-Man: No Way Home" by only 1.5%.

• Study User Behavior and Gather Collectible - First Data

  Brands can use collectibles to incentivize and automatically recognize people's actions across Web 2.0 and Web 3.0 systems and reward them immediately. We can link in-real-life behavior with digital rewards using Proof of Behavior. Brands can ultimately use NFT token rewards and digital experiences to drive long-term engagement and loyalty and grow their brand equity.

  As you scale your business and look for new ways to communicate and engage with customers, you should view collectibles as a must-have to ensure that you are targeting and segmenting your messaging. Provide your community only with what they ask for with utility-driven NFTs.

  Collectibles give users ownership of your consumer data and interactions, which makes them more involved in the building of your brand and its growth. Collectibles allow brands to ask communities for inputs on how their growth trajectory should be as opposed to brands creating products that a community doesn't want.

  But how do you personalize user experiences using collectibles to build long-term relationships with your users?

• Build Communities driven by Utility

  To make the most of blockchain technology, brands need to understand what makes a successful NFT project. Execution is just one part of this. Community building and engagement are equally important.

  Brands can ultimately use NFT token rewards and digital experiences to drive long-term engagement and loyalty and grow their brand equity. From making customers a part of historical moments through collectibles to rewarding fans for their loyalty and engagement, a brand has several ways of providing value and being memorable to its community.

  NFTs are the catalysts for culture, and many people buy NFTs for the historical significance of the token. Rewarding loyal diamond-handed holders with unique perks, recording historical moments for brands with NFTs and giving the community the benefits they want is a great way to engage with your community and build a loyal community.

  Most brands are in an exciting position to be early adopters of this trend and shift their market dynamics. They can take their already existing Rewards programs completely onto web 3. This allows space for immense value capture in terms of customer engagement, brand recognition, and revenue.

How can brands today use NFTs to supercharge loyalty programs

Soul Bound Membership Tokens

Customers can be rewarded with membership tokens that are Soul-bound in nature. A user's loyalty and interactions with the brand can be cited using an NFT-based loyalty system where a user's actions are recorded and reflected via these dynamic Soul-bound NFTs.

A Dynamic SBT (Soul-bound token) can be sent to every user who creates an account with the brand. The parameters in which this dynamic NFT changes can be based on a user's brand choices, time spent, the amount spent, and other interactions to upgrade this NFT. Furthermore, any external collaborations can also be matched with the NFT user's purchase history. This can later be utilized for Tracking and providing Further offers with directed marketing.

Activity/Reputation Tokens

These are a collection of NFTs representing a history of the user's interactions with the brand. These include POAPs, loyalty points, badges, and collectibles collected from the brand. This history can be used as an NFT Based Stamp redemption system that enables a transparent and authentic trace of offers, gift cards, products, and services. Users who have a certain number of badges, POAPs, loyalty points, or collectibles can be offered coupons and gift cards based on their on-chain activity.

Every time users avail of any one-time coupon, the card or token can be generated, which will be an NFT. The generation of these tokens and consumption can be tracked on chain and exchanged between peers. Users can gift these to friends and family to receive a special discount.

Utility/Exchange Tokens

These tokens enable users who are eligible to receive cashback from the brands for various offers or offers to reward loyalty in the form of NFTs or tradeable cryptocurrencies (Ex: ApeCoin). These can later be used for multiple other purchases or redemption within the platform. The idea is to design and develop an on-chain mechanism where users who are eligible to receive cashback from the brand for various offers and schemes for any reason can be rewarded in this said token which can be used to stake and earn passive income.

How does web 3 elevate loyalty programs for brands?

The campaigns by AMC and Starbucks show how web 3 tools can reach far beyond web 3-native projects and provide a meaningful growth lever even for companies far removed from the tech industry. Seeing web 2 companies revving up their customer loyalty programs with NFTs proves that web 3 adoption isn't coming. It's already here. And it's unfolding simultaneously across dramatically different operational scales.

Digital Ownership Can Breathe New Life Into Traditional Customer Loyalty Programs in the following ways:

Boosting customer buy-in: Ownership can cultivate a sense of belonging, generating a stronger sense of customer connection and buy-in.

Reinforcing brand image: Whether artwork, music, or other media, NFTs can be creatively designed to emphasize essential elements of a brand's identity. While stickers and magnets may still have their place, a permanent, branded digital asset that belongs to the customer will stand out above traditional marketing swag.

Fostering relationships between customers: Web 3 tools can cultivate customer interactions, creating community around a brand and spurring a positive feedback loop for brand loyalty.

Providing added value to customers: NFTs have the potential to deliver more meaningful financial rewards to customers. Utility NFTs can unlock discounts or experiences, and they gain even more value when they are transferable. In these ways, NFT ownership can deliver value that encourages positive sentiments toward a brand and ongoing participation in its community.

Interoperability: On-chain ownership facilitates interoperability that can supercharge rewards programs. Traditional rewards programs depend on custom internal databases. On-chain rewards provide an entirely new paradigm through instant and permissionless data integration. For example, on-chain data makes it easy to partner with various third-party perks providers who can offer customer rewards to certain tiers of customers. Because data is visible on-chain, rewards holders could even receive airdrops, IRL event invitations, or other benefits independent of the company as NFTs.

With the mainstream implementation of NFTs, brands can improve user experiences and customer relationships. The dynamic yet immutable nature of NFTs makes them very useful as membership tokens for a loyalty program or even an NFT badge to reward user loyalty. We can use the knowledge from traditional loyalty programs and elevate it on a digital level by integrating it with NFTs.

This is just the tip of the iceberg regarding loyalty programs with NFTs. Although NFTs are still new and the use cases are still in an experimental phase, many of the ideas discussed have real potential for brands to build long-lasting relationships with their customers. The possibilities are truly endless with NFTs and blockchain. It is an excellent time for brands to dip their toes into this, explore the possibilities of NFTs, and redefine customer relationships with their brand.

If you’re a brand looking to launch your NFT collection, we at Dehidden are here to help you every step of the way through our solutions right from the development of the idea for launch to scaling your brand after the drop. You can read more about us here.