Why brands and retailers should use NFTs to reward customers for their loyalty
January 31st, 2022

NFTs or non-fungible tokens took the world by storm in 2021, with recent reports putting the value of the market at over $40 billion. In December, Nike made waves by acquiring RTFKT, a digital fashion and NFT studio, for an estimated $100 million.

This year is set to be another year of explosive growth for the space. So far in 2022, brands including Samsung, GAP, Patrón, Hennessy, Konami, Associated Press, Budweiser, Barbie and Bugatti have all announced NFT launches, with many other organisations making plans to adapt their businesses for the metaverse.

An NFT is simply a unique digital asset, with provable provenance and ownership recorded on a blockchain. Thanks to NFTs, we know who owns a digital asset, such as a photo, video, drawing or piece of music. This proof-of-ownership allows digital assets to have value and be traded on marketplaces, such as OpenSea, LooksRare and Rarible.

With this context in mind, an area that I’ve yet to see explored is the use of NFTs as a brand loyalty mechanism. To date, brands have focused on NFTs as highly exclusive collectibles targeted mostly at NFT collectors and enthusiasts, rather than a way to engage their regular customers.

Quite simply, I believe issuing NFTs to reward loyal customers could produce better results for brands than traditional loyalty programmes, as well as draw in new customers.

Let’s consider how NFTs could increase brand loyalty. At a high level, there are three main reasons why NFTs will create loyal customers.

1. Desirable Collectibles

Brands can design memorable digital assets that customers want to show-off.

NFTs can be anything digital - an image, video, audio clip, drawing etc.

A brand’s NFT could be relatively simple - a logo or representation or a product - or something more complex like a totally new piece of IP, exclusively designed for the NFT.

Fundamentally, it needs to be in some way appealing to the buyer, typically aesthetically. If a physical product is poorly packaged or aesthetically undesirable, it’s less likely to command a high price. The same isn’t always true of NFTs, but it certainly helps.

In web 2, consumers like to align themselves with their favourite brands - posting on social media about the shoes, jumpers, cars and watches they buy, or restaurants, cafes and hotels they visit.

Showing off the NFTs you own on social media or in digital galleries is the next big form of brand interaction. At the time of writing, Twitter has recently rolled out NFT profile picture verification, enabling NFT owners to publicly demonstrate their ownership of an NFT. Facebook and Instagram are also preparing to offer users the opportunity to show off their NFT collections.

As a brand, NFTs offer a way to form part of your customer’s online identity, an area which is sure to grow over the coming years.

2. Exclusive Benefits

Brands can give NFTs utility (benefits) related to their brand.

For a brand, an NFT can provide its owner with exclusive benefits, starting with those of “traditional” loyalty schemes (discounts, early access to new items and free products).

This should be combined with deeper, community-focused benefits, an approach which many top NFT projects have demonstrated successfully - see Bored Ape Yacht Club, VeeFriends and smaller projects like Ethereal Collective.

Example benefits a brand can offer:

  • Physical collectibles - GAP’s NFT launch included the opportunity to redeem a limited edition hoodie
  • Access to the brand’s founders or expert team - online, in a Discord server or even in-person
  • Invites to brand events or other offline utility - launch events, fashion shows, food and drink tastings, parties, meetups, access to clubs and bars. Whatever is appropriate to your brand
  • Future free airdrops of other NFTs or tokens - from the same brand when new NFTs are launched or from other partner projects and brands
  • Access to online communities for NFT holders - such as on Discord servers. These communities are based around shared interest and passions. Crucially, the incentives of participants with a community are aligned: primarily, growth in value of the NFT, and secondarily in the NFT’s utility being delivered by the brand that created the NFT
    • Many NFT projects generate their own marketing buzz once launched, as holders create content to share the collection with others
    • Members of the community may even develop derivative projects, such as additional NFTs, to reward their fellow holders

NFT projects with well thought-through utility encourage holders to keep holding and promoting their ownership of the NFT.

3. Make Money

The big one: customers can make money supporting their favourite brand.

A brand distributing an NFT to its customers is offering a type of ownership in the success of the brand.

Due to the properties of NFTs discussed earlier, NFTs can be bought and sold using open marketplaces. Transaction history is transparently recorded on the blockchain, meaning that the prices of a brand’s NFT collection and its owners are public knowledge.

This dynamic makes NFTs tradeable assets that fluctuate in price. If the demand for a brand's NFT rises, the price will rise. Those who hold the NFT (having either purchased or been given the NFT by the brand, a subject for a future article!) have the option to cash out for a profit.

With NFTs, brand advocates can benefit financially from their support for the brand.

There are many circumstances that could impact the demand for a brand's NFT - from customers, collectors, or speculators. For example:

A clothing brand may become more fashionable as a celebrity starts wearing its clothes. A coffee shop might become more popular as a tech company opens a new office next door. An F1 team might win their first race and receive an influx of new fans and attention.

When a great community, great rewards and great art come together in an NFT drop, over time, more people become interested in owning a piece of the drop.

In summary, NFTs will enable brands to:

  • Become a part of customers’ online identity
  • Reward customers with utility
  • Offer a significant financial incentive to keep supporting the brand

...all of which can drive brand loyalty.

NFTs flip the incentive structure of loyalty schemes on their head. Rather than a loyalty programme being a way to offer loyal customers a discount for purchasing, NFT loyalty programmes instead offer upside in the brand’s future success. This stake in the business will not only lead to repeat purchases and customers sharing their love for the brand with others, but also rewards them for doing so.

If we’ve not been introduced, my name is Fraser and over the last year I’ve been part of the founding team at Melon. At Melon we’ve built an NFT platform and marketplace for social media creators and celebrities to launch their first NFTs. Next, we're building a platform to allow any creator to launch their own DAO (decentralised autonomous organisation).

Prior to joining Melon I worked as an innovation consultant and for SaveTheHighStreet.org with hundreds of independent retailers and brands. Before that I launched ecommerce business, MEXI Clothing.

This article is part of a series of articles I’ll be releasing on the creator economy, brands, retail and web 3. If you’d like to learn more about NFTs for creators and brands, stay tuned to the blog or contact me on Twitter or LinkedIn.

Cover image: adidas for Prada re-source on OpenSea

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