Transforming your loyalty program through NFTs
January 19, 2022
For this post, we called in Prosper Digital’s co-founder and CEO—and resident NFT enthusiast—Jacob Osborne for a guest appearance. We asked Jacob to dust off his crystal ball and share his predictions for the future of NFTs in eCommerce—and how they could figure into next-generation brand loyalty programs.
The way of the future
If you’ve spoken to me in the last 12 months, there’s a good chance I mentioned my passion for NFTs and the opportunities they hold for eCommerce merchants.
NFTs represent ownership of unique digital items. If something is ‘non-fungible’, it can't be replicated—like a single-use ticket or coupon; or a numbered piece in a limited-edition collection. Simply put, NFTs are a means of creating digital scarcity.
While they’re fast gaining popularity in the worlds of digital art, music and gaming, we are—so far—yet to see many eCommerce retailers launch NFT programs. There have been a few noteworthy exceptions, though: in November, Adidas announced a partnership with huge NFT players in BAYC and Coinbase, as well as some renowned NFT influencers.
The first collection of 30,000 NFTs we're released on the 18th of December, selling out very quickly, earning the company a cool $30,000,000 AUD on the day, not to mention the $7,000,000 AUD+ from secondary trading royalties they have earned in the past month. I was very lucky to mint two of these NFTs and I look forward to seeing where Adidas takes their NFT program next.
Adidas x Bored Ape
We’ve partnered with @coinbase.
— adidas Originals (@adidasoriginals) November 24, 2021
Budweiser, meanwhile, dropped a generative NFT project that gives access to the ‘Budverse’, along with a horde of other generic and ambiguous benefits. After the suite sold out, with individual NFTs fetching between USD $499 and $999 at mint, one Budweiser NFT was purchased swiftly after for 7ETH—USD $22,145.55 at the time of writing. I’d definitely be buying a round if I were that lucky seller! (Probably not Bud, though.)
Nike has also been making moves in the space, filing a number of trademarks around the brand. Soon after, it celebrated the launch of an online gamezone, Nikeland, in the Metaverse Roblox, which serves as an online sports arena where fans can play using their own avatars. Most recently, Nike announced its acquisition of digital avatar collectibles company RTFKT Studios, which will enable the retailer to sell virtual sneakers that people can purchase for their online avatars. RTFKT (pronounced Artifact) have already launched a next-gen Avatar collection which currently has a floor price of 5.85ETH - $25,714.36 AUD 🤑.
RTFKT Studios Sneaker NFT
Giants of the fast food and beverage industries—Coca-Cola, PepsiCo, McDonalds, Taco Bell and Burger King—have also dipped a toe into the waters of NFTs.
While most retailers have been a little slower on the uptake, I don’t think it’ll be long before we begin to see NFTs used more and more by brands. NFTs offer plenty of exciting potential applications, but today, I’m going to dive into one in particular: how their power could be harnessed to increase brand engagement and loyalty.
The trouble with traditional loyalty programs
In 2021, customers are more cluey than ever when it comes to the value of their data. With most retailers offering a 10% discount or a copy-and-paste loyalty program in exchange for an email sign-up, customers are no longer excited by much of what’s typically on offer from eCommerce merchants.
Online tracking has become an ever-increasing topic of interest, between changes to privacy legislation, the release of Apple’s privacy update, and an increase in the number of users using an ad blocker with 1 in 4 internet users estimated to have used an ad blocker in 2021.
What this boils down to is: communicating with your target audience online is becoming harder than ever. Some brands are actively promoting how much tech companies have been tracking them—check out Apple's provocative iPhone privacy ad, advertising its new anti-tracking features. If you can’t beat them, join them, I guess.
Consumers know that most loyalty and VIP programs are pretty one-sided: consumers feel they are doing the brand (or salesperson) a favour by signing up. Most of them know there’s very little real value in joining as a customer—and frankly, we’re all overwhelmed by the number of marketing comms we’re subjected to as it is.
Resources like Point Hacks, which tracks the value of loyalty program points, break it down in stark terms. A Qantas point, for example, is valued at AUD $0.019.
Supermarket loyalty programs offer even less value: each Woolworths Everyday Reward point is worth half a cent, meaning that a whopping 2,000 points are needed in order to receive a $10 voucher.
While eCommerce sales are on the rise, the cost of entry to selling online is becoming lower and competition is on the rise, with 654,022 new Shopify stores launched last year.
In short: customers no longer want to hand over their personal data for free and your run-of-the-mill loyalty programs are no longer enticing.
So how can brands provide value to their customers to incentivise engagement and loyalty?
Rethinking loyalty programs
NFTs could pave the way for more mutually beneficial loyalty/VIP programs.
Imagine a loyalty card that was perceived as an asset whose value would increase. Imagine if every time you choose to fly with Qantas over Virgin, you’d be growing the value of your Qantas digital asset.
Imagine if you’d spent 20 years and countless flights earning a Platinum Loyalty card, and you were able to sell it for $100,000 when your jetsetting days are winding down. You’d be stoked—and the airline would earn a royalty while acquiring a valuable new holder in the card’s new owner. Everyone’s a winner, baby.
Here are just three ways we could see NFTs simultaneously enhancing the customer experience while increasing revenue for brands.
1. New revenue stream for merchants and customers
Let's say you’re a large brand with 100,000+ regular customers. You create 10,000 NFTs and sell them for $100 each. Congratulations—you just made a cool million. For luxury brands such as Gucci or Supreme, NFTs could conceivably sell for ten times this amount (or more). As well as selling NFTs, you might also give some away to reward loyal customers.
But unlike with physical items, the revenue doesn’t begin and end with the initial sale. Every time one of your NFTs is sold on the secondary market, you receive a royalty payment.
To return to the Budweiser example: Budweiser made $999 from the initial sale of the NFT mentioned, and a minimum of $1650 from the secondary sale—which could become a repeat event. Just like this, your NFTs become a recurring revenue stream.
The more value you provide to your NFT holders, the more valuable the NFTs will become, and the more often they’ll be traded on the secondary market. Collectors, too, also benefit from an increase in value should they wish to sell their NFT.
That’s the retailer covered. What about the other side of the equation—your customers? Here’s a handful of ways you could deliver value.
Crypto airdrops describe a complimentary NFT or fungible token being sent to a user’s wallet, either as a marketing tactic or as a reward for holding another NFT.
As brands become more crypto-literate, we can expect to see airdrops gaining popularity as a means of rewarding holding by randomly airdropping gift cards, tokens or other redeemable NFTs to NFT-holders.
An NFT program can also be used to build a community for NFT holders. Tools such as Collab.Land allow you to grant access to Telegram or Discord channels based on tokens held by users. If a user sells their token, Collab.Land boots them from the channel. This creates a place for your brand's superfans to assemble—and for retailers to gather feedback from their most engaged customers.
You could, for instance, offer a super-exclusive NFT that grants access to a channel that your brand’s founder is part of. You could also run polls, give sneak peaks, offer giveaways, and make announcements to your customers.
Voting / DAO
Holding a certain NFT could allow customers to vote as a part of a DAO.
A DAO is a decentralised autonomous organisation, which is effectively an online community who share a wallet. DAOs are created on blockchain networks, and members use their tokens to vote on all big decisions—which is important, since, like its name suggests, a DAO is non-hierarchical.
A DAO set up in October raised USD $32 million to purchase the last remaining private copy of the US Declaration of Independence. Talk about the power of the people! While the group was ultimately outbid by an extremely wealthy individual, the episode demonstrated the power of DAOs.
I'm also a part of LinksDAO which is a DAO that was set up to purchase a golf course, which I think is pretty awesome!
Brands could allocate a percentage of resale royalties to the DAO’s wallet to spend on gift cards or other rewards to give back to the community.
Imagine allowing the members of your community to vote for your next flash sale: What are you keen for? React with a 🧢 for 20% off caps, or 👕 for 20% off tees.
First access to new releases and promotions
Don’t you hate it when you’re ready to hit up an online sale, only to discover your size is sold out? NFTs can help ensure that your most engaged customers get first dibs on new releases and promos.
No bots past this point
For long-anticipated or much-hyped product releases, NFTs can also provide an effective defence against bots by only allowing users with a certain token to access the product or campaign launch page. Sorry, re-sellers.
Another powerful use case for NFTs is ‘token-gating’, with potential for both physical and digital experiences. This is similar to paid subscription gating for news articles (‘This article is for paid subscribers’)—only for NFTs, where certain content and experiences are ‘gated’.
Monetising content has become more and more common, with influencers charging a fee on platforms such as OnlyFans and Patreon, but brands have yet to catch up.
It could work something like this: content (such as podcasts, videos, music, interviews—anything!) is locked, and to enjoy it you need the right key: a specific NFT. This means that customers with this NFT have exclusive access to the content, creating value through scarcity. As mentioned above, through token-gating, your NFT holders might be granted early access to promotions and new releases, for example.
This increases the token’s value—and also gives brands another chance to speak with their audiences. Instead of attempting to drive sales with the classic last-ditch, slightly desperate LAST LAST CHANCE emails, you could send an email extending the invitation or announcement to the public after you’ve finished communicating with your NFT holders.
3. Promotions and publicity
In November, AMC Theatres ran a promotion with Sony Pictures to offer 86,000 NFTs for pre-orders of Spider-Man: No Way Home movie tickets, resulting in the second-highest instance of one-day ticket sales in AMC Theatres’ history. Gary Vaynerchuk used a similar approach to achieve over a million pre-orders of his new book in just 24 hours. The author and entrepreneur gave away an NFT for every 12 copies of the book purchased, with one enthusiastic fan purchasing 1,008 copies.
These examples show the powerful pull of NFTs when used as a promotional tool, and demonstrate the hunger for NFTs among these engaged fan and customer segments. It’s not hard to imagine how NFTs could be extrapolated to an eCommerce setting.
- NFTs present a win-win opportunity for merchants and customers alike, who both stand to enjoy a far greater financial gain compared to traditional loyalty programs.
- There's great potential for repeat customers to become brand advocates via organic or planned community creation.
- Token-gating—monetising content by allowing specific NFTs to access valuable content—is set to become a key element of customer acquisition and retention for brands.
- FOMO, or the fear of missing out, is a driving force in today's society, so the sale of NFTs attached to a new release or pre-order product is a powerful way to hit sales goals—and generate customer loyalty at the same time.
So you’re sold on creating an NFT for your eCommerce brand. Where do you start?
- Undertake an audit on your current loyalty program. This could involve internal discussion, customer research, or crunching some data. You should be aiming to answer the question: what value does this provide—for us as the retailer and for the customer?
- Support relevant staff members to take a course on NFTs, such as this program offered by online provider Udemy. Youtube, Twitter and diving into Discord channels are also great places to learn about NFTs.
- Create a strategy roadmap and execution playbook. This will involve some initial research into the market and your competitors. You'll also want to think about your current and required capabilities around the creation of NFTs—you’ll likely need to recruit some new talent or work with an agency to help you execute your new strategy.