The Power of Personalization: NFTs as Loyalty Drivers

In an age where brand loyalty can make or break a business, Non-Fungible Tokens (NFTs) have emerged as an exciting and futuristic way to redefine loyalty programs. Traditional loyalty programs struggle to keep pace with the evolving needs of modern consumers, lacking the depth of connection and uniqueness that many seek. Enter NFTs.

The reality of NFTs is far more nuanced than a passing fad. With?Gartner?predicting a rise in adoption of NFTs for loyalty programs looking ahead to 2023, brands must act now to remain at the forefront of this revolution.

As Forrester explains, the era of NFTs that simply exist to be “cool” is wrapping up. Consumers now demand more tangible benefits.

“Brands will move from “cool” NFTs toward loyalty programs. Brands that launched consumer-facing NFTs once expected to look cool and innovative. Those days are gone. The next frontier for NFTs lies in customer loyalty programs.” —?Forrester

NFTs are no longer just digital art. They’ve transcended into an innovative approach to loyalty programs, attracting giants like Starbucks, Louis Vuitton, and more.

Here’s why utility and phygital NFTs are the way to go for innovative loyalty programs:

1. Bridging the Physical and Virtual World

NFTs act as a bridge between the tangible and digital landscapes, creating immersive experiences. Phygital NFTs enable brands to provide customers with physical counterparts to their digital assets, deepening connections, and enhancing brand loyalty.

2. Strengthening Brand-Customer Bonds

Trust, awareness, and charisma define strong brands. NFTs strengthen these bonds by aligning with consumer values and fostering community engagement. Brands that venture into Web3 with NFTs are positioning themselves as innovators, attracting a more tech-savvy audience. With?75% of Millennials?expressing a preference for digital rewards, NFTs resonate with the most substantial consumer segment.

3. Exclusive Access and Personalized Experiences

With NFTs, brands can offer early access to sales, exclusive merchandise, and even personalize strategies to save customers money. This exclusivity not only increases retention but also provides a unique customer experience.

4. Enhanced Exclusivity, Scarcity and Creativity

NFTs introduce a sense of rarity and uniqueness, driving desire and engagement. They provide customers with a platform to be inventive and imaginative, adding an extra layer of engagement. Limited-edition NFTs can be highly sought after, increasing brand value and customer loyalty.

5. Data Collection and Customer Insight

NFTs allow brands to track product journeys and collect valuable customer data. This information helps in tailoring marketing strategies, further personalizing the customer experience.

6. Innovative Rewards Systems

Beyond mere points, NFTs can offer experiences, access, and personal growth opportunities. The options are virtually endless, fostering creativity and breaking away from stagnant traditional models.

7. Decentralized Control

NFTs are hosted on blockchain, allowing for decentralized control and a transparent view of ownership. This increases trust and aligns with growing calls for ethical and transparent business practices.

8. New Opportunities with Web3 Wallets

Combining the potential of Web3 wallets with NFTs, brands can unlock innovative reward systems, ranging from token-gated access to personalized membership tokens.

9. Aligning with Social Causes

As seen with Taco Bell’s NFTacoBells, NFTs can also be used to drive social change, resonating with a growing consumer desire to engage with socially responsible brands.

Applications of NFTs in Loyalty Programs:

• Membership Programs:?NFTs act as unique membership passes, enhancing brand engagement.
• Profile Pictures (PFP):?Think of BAYC or Moonbirds, where NFTs are used as unique profile pictures reflecting member behavior and preferences.
• Tokengating:?Specific NFTs grant users access to exclusive content, VIP status at events, early access to new releases, and more.
• Membership Tokens that Evolve:?Loyalty members receive an NFT that changes over time, reflecting their engagement with the brand. This personalization makes each token unique.

Meeting Customer Demands

• Generation Z Expression:?Over?57% of Generation Z?say they can express themselves more freely in a virtual setting. The integration of NFTs with loyalty programs can allow brands to engage with younger generations in ways previously unimagined.
• Social and Environmental Causes:?With over?70% of customers?wanting brands to actively support social and environmental causes, NFT-based loyalty programs can lead the way in corporate responsibility. Through collaborations with environmental organizations, brands can release limited edition NFTs, the proceeds of which can go towards ecological initiatives.
• Accessibility for Millennials and Gen Z:?These generations view NFTs as an asset class, unlike other out-of-reach assets like real estate. Brands must target these demographics for their NFT Loyalty Program, establishing virtual areas to boost engagement.

Utility NFTs / Phygital NFTs

Phygital NFTs are tokens that not only have intrinsic value but also carry additional functionality and benefits. They can be used within a specific ecosystem, providing access to unique services or benefits, and unlocking content and experiences that otherwise wouldn’t be accessible.

For example, American Express launched an NFT program granting holders access to exclusive concerts and virtual events. This goes beyond the typical points system, creating an entirely new level of interaction with the brand.

These NFTs offer a robust and rich experience that is both meaningful and valuable to the customer. It makes the user feel seen and recognized, something that’s rare in traditional loyalty schemes.

The Challenges with Traditional Loyalty Programs

According to KPMG, a staggering?38% of respondents?had issues with a traditional loyalty scheme they were enrolled in. This shows a considerable gap in the market that could be bridged with innovative NFT solutions.

A Shift from Traditional to Digital Loyalty

Traditional Models vs. NFT Loyalty Programs:?The conventional loyalty models are evolving. The traditional point-based structures are losing their sheen as 38% of KPMG respondents reported issues with them. Meanwhile, NFT loyalty programs are creating a sense of digital scarcity and exclusivity.

NFTs like “Phygital” are bridging the gap between physical and digital, giving customers a glimpse of the reward before receiving the real thing. This transforms the customer experience, meeting the demands of over 70% who want brands to support social causes, and 46% who consider this a purchasing decision factor.

A Generation Gap:?Millennials and Generation Z are increasingly interested in virtual experiences. Over 57% of Generation Z expresses themselves more freely virtually, and 47% are open to meeting new people in the Metaverse. This drives brands to identify and leverage these trends in their NFT Loyalty Programs.

Brand Engagement with NFTs:?75% of brands that have engaged with NFTs found a positive impact on their customer engagement metrics.

Digital Collectibles Market Growth:?The market for digital collectibles is estimated to reach $40 billion by 2025. NFTs form a significant part of this market, driving brands to consider NFTs for their loyalty programs.

Starbucks’ Groundbreaking Initiative: Odyssey

Starbucks, the coffee giant, took the NFT plunge with its Starbucks Odyssey program. Let’s take a closer look:

A Journey into the Metaverse

Starbucks Odyssey offers members the chance to earn and purchase digital NFT assets, such as “journey stamps.” These stamps, NFTs in themselves, are part of an omnichannel experience including interactive games and challenges.

Employee-Designed Stamps

In a unique move, the first set of limited-edition NFTs is designed by Starbucks employees, with each stamp comprising five layers of original Starbucks art. Priced at $100 each, these stamps open up a new revenue stream for the company.

A Focus on Community and Sustainability

Starbucks’ Chief Marketing Officer, Brady Brewer, emphasizes building a global digital community centered around coffee and other areas like art, music, and books. Their approach also aligns with sustainability, tapping into a tech-savvy market that values environmental consciousness.

Seamless NFT Purchase

Starbucks simplifies the NFT purchase by not requiring crypto wallets or understanding web3 technologies. This is a significant step in making NFTs more accessible to a wider audience.

Three Core Components

Starbucks’ loyalty program has seamlessly integrated convenience, personalization, and exclusivity, aspects that are vital to a successful loyalty initiative.

Etihad Airways’ Innovative Loyalty Program: Bridging Physical and Digital Experiences with NFTs

Aiming to revolutionize the travel industry, Etihad Airways has ventured into the world of NFTs (Non-Fungible Tokens) with a groundbreaking loyalty program called “Horizon Club.” This innovative approach seeks to bridge physical and digital experiences, redefining how customers engage with the brand.

Etihad’s Horizon Club utilizes NFTs by tokenizing its rewards. Each NFT represents exclusive access to various travel experiences, airline amenities, and branded merchandise. The rewards are sent in digital form to customers before the actual service or product is delivered, making them a part of an immersive, boundary-pushing experience.

Etihad’s EY-ZERO1 Collection: Elevating Travel Experience

The EY-ZERO1 NFT collection, which started in July 2022, is a series of 3D aircraft models with special features, such as the Mission Impossible-themed Boeing 787 Dreamliner. These limited-edition NFTs are not just digital artifacts; they also offer exclusive benefits, such as Etihad Guest Silver Tier Status, priority check-in, lounge access, and the ability to earn Etihad miles.

The NFT collection also enables customers to stake their NFTs, locking them up to earn Etihad Guest Miles redeemable for real-world flights, upgrades, and other perks. By doing so, Etihad has managed to merge the concepts of customer loyalty, blockchain technology, and cinematic storytelling into a seamless, engaging experience.

Etihad’s Horizon Club: Transforming the Loyalty Landscape

Scheduled to launch in September, the Horizon Club Web3 loyalty program embodies Etihad’s vision for the future of customer engagement. With the staking-for-miles program, Etihad is not only providing a new way to earn travel rewards but also opening up new opportunities for interaction within the crypto and blockchain communities.

Collaborations with asset tokenization firms like Arcube and infrastructure firm Crossmint underline Etihad’s commitment to pioneering a unique loyalty program that transcends traditional boundaries.

Impact on the Travel Industry

The integration of NFTs into loyalty programs is still in its infancy, but Etihad Airways’ bold move may signal a turning point in the industry. By embracing the potential of phygital NFTs, they have positioned themselves at the forefront of technological innovation.

Beyond incentivizing purchases, the Horizon Club offers a model for customer engagement that combines convenience, personalization, and exclusivity. As brands like Flybondi, Air Europa, and All Nippon Airways (ANA) begin to explore similar possibilities, we can expect NFT-based loyalty programs to play a significant role in shaping the future of travel and customer engagement.

Nike’s RTFKT and the Phygital Revolution: Merging Sneakers with NFTs

Nike is no stranger to innovation. With the acquisition of RTFKT Studios, the brand has leaped into the future, fusing digital and physical realms through its latest project, Cryptokicks iRL. This new sneaker collection builds upon the initial success of Nike CryptoKicks and takes it to the next level, creating a perfect symbiosis between the tangible and the virtual world.

The Phygital Collection: Cryptokicks iRL

What makes Cryptokicks iRL stand out is the blend of modern technologies and stylish design. These sneakers incorporate auto-lacing, enhanced lighting, haptic feedback, walk detection, and AI algorithms. Limited to 19,000 pairs, this collection is available in four unique color combinations. It’s an embodiment of RTFKT’s vision of bringing together the digital and physical world, with each pair sold as a digital collectible with a physical counterpart.

Connecting Physical and Digital Worlds

The Cryptokicks iRL is more than just a sneaker. With each purchase, collectors receive RTFKT’s WM Chip, a bridge that links digital and physical elements. This connection adds a tangible value to the associated NFTs, priced between $450 to $1333. For the average sneaker enthusiast not deeply entrenched in the NFT space, this linkage ensures that the investment in digital assets also translates to real-world ownership.

Adidas on a different note linked up with Bored Apes Yacht Club, selling 30,000 NFTs for 0.2 ETH a piece which could be exchanged for physical goods, such as hoodies, tracksuits, and hats.

Burger King

Burger King is a recognizable brand that has adopted phygital NFTs. In their loyalty scheme, QR codes in meal packages provide NFT gaming chips, leading to rewards like digital collectibles and even a year’s supply of Whopper sandwiches. It’s an innovative way to encourage repeat purchases and enhance the customer experience.

Taco Bell

Taco Bell has stepped into the NFT space with a special edition called NFTacoBells. They auctioned 25 artworks from NFT artists, and each token holder gets a $500 Taco Bell e-gift card. The program is also tied to social action, with sale revenues funding the Live Más Scholarship, aligning brand loyalty with social responsibility.

The Metaverse: A New Dimension in Customer Engagement

The metaverse, a collective virtual space where digital and physical realities blend, is gaining traction as a platform for brands to create immersive and interactive customer experiences. This interconnected universe allows businesses to establish virtual venues, where customers can interact, explore, and engage with brands in entirely new ways.

How the Metaverse and Utility NFTs Intersect in Loyalty Programs:

• Personalized Experiences: Brands can create customized virtual environments within the metaverse, where customers can use utility NFTs to access exclusive content, products, or experiences. These could include virtual fashion shows, concerts, or product launches that are only accessible to NFT holders.
• Gamified Loyalty Programs:?By integrating utility NFTs within the metaverse, brands can gamify their loyalty programs. Customers can earn NFTs through purchases, engagements, or challenges within the virtual world, enhancing engagement and reinforcing brand loyalty.
• Community Engagement:?Utility NFTs can foster a sense of community within the metaverse. Exclusive virtual clubs, forums, or events for NFT holders can drive interaction and create a sense of belonging, further strengthening brand affinity.
• Social Impact Integration:?Brands can also align utility NFTs with social or environmental causes within the metaverse. Customers could redeem or invest their NFTs in projects that reflect their values, bridging brand loyalty with social responsibility.

Conclusion

As we forge ahead into an increasingly digital future, the appeal and application of NFTs are poised to grow. No longer restricted to the realms of art and luxury items, they are redefining loyalty programs, offering a level of engagement, personalization, and exclusivity that is unparalleled in traditional models.

In a world where?46% of customers?consider social and environmental causes as a key factor behind their purchase decisions, the brands that adopt NFTs in their loyalty programs are not just innovating; they are aligning themselves with the values and aspirations of a new generation.

The integration of NFTs into loyalty programs isn’t just a trend; it’s a reflection of a broader shift in consumer behavior and expectations. As digital natives continue to shape the market landscape, the adoption of NFTs within loyalty schemes is not just advisable; it’s imperative.

The fusion of Utility and Phygital NFTs is a blueprint for success, signaling a new era where brands and customers connect on a deeper, more meaningful level. It’s time for businesses to embrace this wave of innovation, reimagining loyalty programs through the lens of NFTs and preparing for a future where customer loyalty is not just earned but celebrated and experienced like never before.

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About Author

Ganesh Raju, a dynamic entrepreneur, investor, and digital transformation leader, is the visionary Founder and CEO of Akshaya NFT and Metaverse (www.akshaya.io). With a strong expertise in open source permission-less, decentralized networks, blockchain, and Artificial Intelligence, Ganesh has made a significant impact as an emerging tech strategist. As an early adopter and influencer in the Web3/DeepTech space, Ganesh has been at the forefront of groundbreaking developments in Blockchain, Cryptocurrency, DeFi, NFTs, Digital Twin, and Metaverse technologies. His contributions go beyond entrepreneurship as he actively engages with the world’s biggest tech companies, providing consultancy and advisory services in the realm of AI and ML. In addition to his role at Akshaya NFT and Metaverse, Ganesh also serves as the COO of RapidEVChargE and holds the prestigious position of Vice Chairman at the IEEE Blockchain Houston Chapter. His dedication to the development of Metaverse standards is further evident through his active involvement in various Metaverse standards bodies and councils.

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