NFTs are ready for brands, how can brands get ready for NFTs?

NFTs have been part of the mainstream consumer conversation for a couple of years now, but very few household brands have incorporated them into their customer engagement strategy. NFTs — short for non-fungible tokens — still feel like an emerging technology, both to consumers and to enterprise brands, despite growing evidence of their potential as a loyalty and value driver. Why is that??

New technology can be intimidating. At the simplest level, an NFT is just a container for data. That data could represent art, a digital identity, access credentials, virtual items — any number of things. By capturing data in an NFT, brands can enable new use cases and possibilities for customer experiences, especially enabling exclusive access or community building. Many brands have invested in developing their NFT knowledge, but even still, many are deterred by the upfront costs to experimentation.?

Let’s take a look at some of the common reasons your company may be hesitant and evaluate options for simplifying and moving forward.?

Perceived barriers to working with NFTs...

Expectation of immediate success and great fortune There’s been a lot of unsubstantiated hype and speculation in the NFT space and a lot of inflated market projection numbers. It’s much easier to harm your reputation by over-promising and under-delivering than it is to organically and sustainably build your reputation through a thoughtful launch strategy.

Working through it...

This concern is common to cutting-edge customer experiences — brand collaborations, limited edition releases and metaverse/virtual activations to name a few. The same business case evaluation and campaign planning frameworks can be leveraged for NFT experiences.?

Finding product-market fit

Too often executives chase the shiny object and try to force the solution before understanding the problem. An NFT may not be the right tool for every marketing campaign, but when utilized effectively, it can enhance customer engagement in ways that other tactics cannot.

Working through it...

As with any product launch, companies should be willing to fail fast and often. Experimentation is the key to finding the right balance, but doing so on a limited scale can often be more effective than trying to reach everyone at once. Use a framework to evaluate your concept and confirm that it aligns to your existing strategy.

Integration with legacy systems and experiences

Depending on the functions of the NFT, implementation may include integration with other customer-facing systems (POS, e-commerce, mobile apps, loyalty, gift/closed loop systems, etc.) to enable seamless experiences.

Working through it...

Most major retail brands already have the technology and operational infrastructure required to implement NFTs today. The ubiquity of QR-enabled POS hardware (driven by contactless payments in the midst of COVID) and growth of web3-integrated e-commerce solutions (linked digital and crypto wallet options) make NFT integration more of a vendor selection project than a true technology upgrade. The primary obstacle may be mobile app integration, as some major phone developers have enforced? restrictions on in-app NFT experiences. Still, it is possible to mitigate these challenges with customer education and strategic browser-based experience design.

Resourcing and prioritization

Developing digital asset competency, defining and implementation of a strategy, and ongoingly maintaining your new web3 community can feel like a hobby on top of your day job. It can feel unfeasible to commit the resources necessary to support new technology, especially during a period of market uncertainty.

Some companies are experimenting and have even dedicated full time resources, but having a singular champion is often not enough to drive transformation. A web3 role is frequently responsible for developing a strategy, cultivating internal buy-in, maintaining customer engagement, developing the technological competency and staying up to date on the market. This sets your champion and your brand up for failure, never feeling truly prepared to take the next step.

Working through it...

There’s no need to go in alone. In fact it isn’t recommended. While it’s important to get in early and enhance your brand, it’s also important to understand what your brand stands for and who you are and then use this technology to enhance that rather than replace it. One way to stay authentic to your brand is to collaborate, as opposed to giving up full control, but that does mean listening to the feedback received.

Regulatory obscurity

The stakes are high and the guidance is unclear for consumer protection and other regulatory obligations brands face. Thus far, we have seen a lot of “regulating by enforcement,” creating a high-risk environment for brands that discourages experimentation/innovation.

Working through it...

Unsurprisingly,? relatively nascent technology means nascent regulatory guidance. Consumer protection standards, tax policy and accounting classification are still being decided by the regulatory agencies. It’s important for brands to be clear and exhaustive in their consumer disclosures for NFTs to not only drive consumer protection, but also to protect firms should the regulatory landscape change. Brands can think of this as an enhanced version of traditional consumer protection policies instead of a reinvention.

Negative misconceptions (“NFTs are Crypto, and Crypto is risky!”)

Every industry has its bad actors and the NFT space is no different. Speculation has led to volatility and volatility has led to people taking advantage of the hype, but as this technology advances a disassociation between crypto and NFTs is happening. This is important because the characteristics and uses of the two are inherently different.

Working through it...

The public has a surface-level understanding of NFTs today. There’s still a need for further education — not just for consumers, but for internal stakeholders and leadership as well. There needs to be a focus on the technology and what it can do, instead of a focus on employing NFTs.

NFTs can be a driver for many growth priorities, whether it be revenue growth, reaching new audiences, or deepening existing customer loyalty. Testing a technology doesn’t mean overhauling your entire stack. Test and learn.?

Cross this threshold, and a world of opportunity awaits

The launch of an NFT project is only the beginning. NFTs can enable transformation of what has historically been a transactional relationship between brands and consumers. Like anything that grows, brand growth requires nurturing and attention. In the case of an NFT, that means community management and continually evolving the engagement model, sometimes collaboratively with your customer. Giving up some control may be a new concept for brands, but it can be a powerful way to engage consumers by making them feel like a partial owner. While this can be challenging for brands that have limited resources, the risk of staying on the sidelines may be worse. Brands that are successful will have differentiated customer experiences, and competitors that don’t will likely soon fall short of the expectations set by early adopters.

What you can do now

Knowing your existing customers and bringing them in is likely the more effective and cost efficient strategy. With any product launch, know your audience and understand that you do not have to please everyone all at once.?

1. Build on success and evolve over time

It’s OK to start small, experiment and learn before fully committing. Each company’s strategy will look different. The important thing is to realize that you don't have to start from scratch - you can leverage external capabilities and business partners to help accelerate you as you map out your path. While there may not be a formal playbook for success, there have been enough NFT launches to get a sense of what works, what doesn’t and what capabilities are important to build out first.

2. First impressions are everything, even for established brands?

What’s important is not the immediate revenue earned from an NFT drop, but rather the engagement that follows. This is why it can be recommended to give an NFT away for free and view it as a marketing expense that you can then build around. Tying an NFT launch to an experience that commemorates involvement is one popular strategy that enables fans to show off their brand loyalty. As the technology evolves away from being used solely as a collectible or identity, it’s important to understand that attaching a unique benefit to the NFT is something that matters to end consumers.?

3. Launch with a purpose

Utility or benefit does not have to be an eternal characteristic, it can be something that either dynamically evolves based on user behavior or can be time bound. In other words, there are plenty of NFT strategies and they don’t all have to center around the initial price and transaction with a consumer.?

TLDR:

The benefits of NFTs are continually evolving both for the end consumer and, just as importantly, for brands. NFTs are becoming a way to engage consumers and use their feedback to enhance your operations. Your first campaign doesn’t have to be a home run, you just want to be in a position to score.? After all, we’re still early in the game.??

Big thanks to Caroline McIlroy and Chase McCaskill for their collaborations on this article.