Credit: Smart Token labs

Brand Loyalty 2.0: Why NFTs Are the Future of Digital Marketing

BY Brent Annells

June 27, 2022

The internet has come a long way since it first went mainstream in the 1990s. We’ve gone from the early days of the world wide web (Web 1.0) where users could only consume content to today’s more interactive and user-centric Web 2.0. And now, we’re on the cusp of a new era of the internet known as “Web3” — a decentralized web powered by blockchain technology.

In Web1, marketing efforts were focused on building awareness and driving traffic to websites. With the advent of Web2 and social media, marketing became more about engagement and building relationships with customers. Web3 is moving us into a new era of marketing, one where authenticity, trust, transparency, and ownership are paramount.

NFTs (non-fungible tokens) are one of the key technologies powering this new decentralized web. NFTs are unique digital assets, meaning they cannot be replicated or substituted for another asset. This makes them perfect for things like digital art, event ticketing, sports collectibles, and more.

Major brands are already experimenting with NFTs. Adidas launched an NFT campaign with the Bored Ape Yacht Club, PUNKS Comic, and gmoney. NBA Top Shot, a platform for buying and selling digital collectibles of highlight moments from NBA games, has seen explosive growth since launching in 2020. And social media platform Twitter is allowing users to use verified NFTs as their profile pictures.

As Web3 gathers steam, it’s clear that NFTs will play a major role in the future of digital marketing. Brands at the forefront of this shift are exploring how to use the underlying NFT tech to connect with their customers in new and authentic ways. That said, the magic isn’t in the NFT itself. It’s how the NFT is used that makes it special.

Brands that nailed their NFTs  

2021 was the year NFTs went mainstream. And while there were some high-profile flops, there were also some brands that nailed it with their NFT launch. 

The most successful NFTs have a few things in common. For one, they’re on-brand, meaning that consumers can see right away how the NFT fits into the larger brand ecosystem and story. They’re also targeted at the brand’s existing community, as those are the people most likely to be excited about and invested in a brand-related NFT. And finally, they’re authentic and scarce, two qualities that are essential for any NFT irrespective of future resale opportunity.

With those characteristics in mind, let’s take a look at three brands that did NFTs right.

The first is Nike, which partnered with RTFKT Studios on a project called Cryptokicks. The project was about collectible digital sneakers, and it didn’t deviate far from their established model based on scarcity in drops in the real world. Where it did differ was in the fact that NFT owners would share future royalties from secondary sales with Nike and RTFKT. It was an entirely new “fan-as-owner” model that we couldn’t have imagined five years ago.

Nike fans were clearly excited about the project, as evidenced by the fact that thousands of NFTs quickly sold out — and at rates of up to nearly half a million dollars a piece. How did they make it happen? Simple. The project was on-brand and targeted at existing fans, so many will hold these limited edition sneakers in the same way they do Nike sneakers in the real world i.e., as a prized possession to show off to their friends.

The second brand is Time magazine, which launched its first NFT project in March with a three-part collection of digitized magazine covers from decades past. It was a beautifully on-brand project that gave fans the opportunity to own a unique digital slice of Time history. NFT holders could unlock free subscriptions to Time and other benefits core to their enjoyment of the product itself. Time has raised over $10 million in incremental revenue from NFT drops this past year.

Finally, there’s Space Beyond from La Prairie Switzerland and world-renowned digital artist Carla Chan. The project involved everlasting and generative digital art that draws from live demographic and environmental data in the world’s 31 most populous cities. The project emerged from La Prairie’s brand commitment to both the arts and the environment.

These three brands have two things in common: they found ways to use NFTs that are true to their brand identity and brought value to existing fans. 

Brand NFTs 2.0: It’s about true utility

NFT 1.0 largely ignored utility in favor of hype and speculation. NFT 2.0, inspired by major brands, will go much further than speculative investment in collectibles, skins, and shoes. It will go much further than vouchers or redemptions or gated content.

The basic utility of a discounted subscription is insufficient to drive meaningful adoption. The same is true for event tickets. The idea that communities of super fans are going to run through walls for a discounted subscription or event ticket is fanciful. For an NFT to truly take off in the future, it must offer real utility that’s worth the investment of time or money.

And when it comes to the top 1% of your brand loyalists or super fans, NFTs that solely focus on basic utility are entirely the wrong starting point. NFT 2.0 will carry royalties, rights, and returns, such as a percentage of sales. They will incentivize users to hold the NFT for the long term, by giving them a stake in the brand. A powerful way to transform brand fans into brand owners.

And the NFT drops will be authentic to the brand and products your customers love. They will bring them closer to the brand by enabling unique, scarce, and valuable connections and interactions. For example, a customer could purchase an NFT that gives them early access to new products or even a voice in company decisions.

The key for companies is to design an NFT 2.0 strategy that’s focused on shared value creation and bringing customers closer to the brand, purpose or products they already believe in.

Bringing Customers Closer 

As brands evolve from Web 2.0 to Web3, they need to adopt new technologies to remain competitive. Increasingly, projects have begun building open source bridges between Web 2.0 and Web3 to allow companies to connect their existing sites, systems, and data with tokens, smart contracts, and other blockchain technologies.

For brands to take advantage of some of the use-cases discussed above, from enabling early product access to revenue sharing, they need the ability to recognize and respond to NFTs in a user’s wallet. By recognizing and responding to any NFT in any user wallet, brands can connect with their customers in new and innovative ways.

With the ability to recognize and respond to NFTs in real time via a brand website or loyalty program, brands can leverage NFTs as a new connection bridge between high-value customers and the brand products and services they love.

For example, superfans of a particular sports team could be given exclusive access to merchandise or VIP experiences by virtue of holding the team’s NFT. Similarly, customers of a luxury fashion brand could receive early access to new collections or be invited to special events by holding the brand’s NFT. Taken even further, customers could be given the opportunity to share in the revenue generated by the brand by holding its NFT. 

We’re very passionate about the underlying technology of NFTs and the possibilities that exist for this next wave of innovation. And when we’re asked by a partner or brand whether they should drop or not – we like to say: 

It’s not about the drop.

It’s not about the utility.

It’s not about shiny new stuff.

It’s about deeper brand connection. 

With your most valuable fans. 

About the author: Brent Annells is a serial entrepreneur, technology enthusiast, and the CMO of Smart Token Labs, which connects brands to the NFT ecosystem. Brent has led partnerships and branding for major technology companies, including Facebook and Uber. 

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