In recent years (after the initial buzz around NFTs in 2021), brands in Web3 have focused on building Web3 loyalty programs – which is an incredibly effective way for brands to find more dynamic ways to engage and retain consumers.
But here’s the kicker: Web3 loyalty programs are about more than just loyalty – and in many ways they’re just the tip of the iceberg.
The real magic of Web3 loyalty programs is not just the coveted act of consumer retention, but, as we like to say in Web3, what happens under the hood. This is where things get really interesting.
In other words, the next big trend in Web3, after loyalty, could very well be a more efficient and attractive form of advertising.
At first glance, these realizations may seem at odds with diehard Web3 principles like decentralization and self-sovereignty. But the fact is that most brands and consumers don’t really seem to want or care about this anyway.
What the brands and consumers of the future do want are direct, rewarding relationships without the dependence on shadowy Big Tech middlemen. This revolutionary new paradigm between the old and the new – something I’ve called Web2.5 – is what will get them where they want to go.
The cookie trail will never look the same again.
How we got here
It’s been over two years since the $40 billion peak of the NFT market and almost a year since the collapse of FTX (among others) marked a new low in Web3 sentiment.
As often follows periods of crisis, the dust is now beginning to settle. The past two years have taught us that NFTs are not a one-size-fits-all solution for collectors looking to quickly earn ETH on an anthropomorphic PFP or for brands looking to signal cultural relevance.
While the best NFTs should still be celebrated, I think we can all agree that the brightest future for NFTs is one that goes beyond speculation and limited use cases. Instead, it’s a future that has the power to reshape the historically fragmented relationship between products, consumers and brands in ways never seen before.
I’m talking about the power of Web3 loyalty. It’s a direction that will disrupt not only the historical frameworks surrounding brand loyalty, but also the many underlying, often ineffective technologies that drive customer acquisition and retention – AdTech, CRM (customer relationship management), CDP (customer data platforms), analytics and our whole relationship with what will soon be outdated practices around data exploitation.
The big players are already on the Web3 loyalty train
Brand loyalty programs date back more than 200 years. And like many once-innovative concepts, they lost their original spark and turned into superficial programs designed to keep customers hooked into purchasing products without offering them anything of real value beyond the product itself.
Fast forward and thankfully many things have changed, with some of the world’s most forward-thinking brands such as Nike, Starbucks, Mercedes and Shiseido shifting their loyalty approach to focus on retaining the younger generation (whom studies show half as likely to participate in a loyalty program compared to their generational predecessors).
These brands have become hip because the next generation of consumers want more from the giant brands they partner with: they want to own a piece that they help bake and be rewarded for their time in the kitchen.
As a result, Web3 loyalty programs and the tokenized rewards (also known as NFTs) that connect brands to consumers have continued to grow as the method of choice for brands looking to leverage Web3 technology, and as a new way to grow customers – and preserve.
Reading between the lines of loyalty
Are loyalty programs really about loyalty?
Like most things in culture, commerce, and technology, there’s always more to it than a single descriptor. And like almost all In 2023, loyalty will come down to data, specifically personal and behavioral data that brands have about their consumers.
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In other words, the more data brands have on you, the more likely they are to offer you compelling reasons to spend more. This is why brands spend so much money collecting, connecting and owning consumer data.
But this data strategy is on its way out.
Relying on Big Tech platforms instead of fully owning the data is strategically dangerous, not to mention ineffective. Yesterday’s method of collecting, monitoring and analyzing data, especially the use of cookies, will be phased out within a year. This means brands are staring down the barrel of a gun without many obvious solutions.
Web3 comes to the rescue
As Michael Litman of the ever-forward-thinking digital marketing agency Media Monks once said, “NFTs are the new cookies.”
Here’s what that looks like:
Web3 wallets are the key to connecting tokenized brand loyalty assets with the consumers who own and need to store them. However, traditional wallets and the complicated technology within them (seedphrases, private keys, etc.) can be detrimental to onboarding new users. A new trend in ‘invisible wallets’ uses blockchain technology, while abstracting much of the complicated technology completely into the background.
Conventional static NFTs are often rigid in their usability: what you see is often what you get. Dynamic NFTs, however, flip the script (and the smart contract) and offer evolving assets that can change through different consumer promotions, reward points, and more.
Imagine having an airline loyalty card that changes based on how much you travel or where you travel, like a living, breathing map of your favorite destinations. That’s personalization on a whole new level.
A little exclusivity goes a long way in retaining customers, especially if they feel like they’ve truly earned the reward. With token gating, brands can grant people exclusive access to specific environments – an event, a community channel, a product sale – based on whether or not they own a particular token.
The future of advertising data will be tokenized
In the Web3-powered future of loyalty, brands will expand their CRM and CDP approaches by integrating the dynamic Web3 infrastructure and data flows I mentioned.
Ultimately, this means brands will have a whole new toolkit for collecting, connecting and owning consumer data in a new, future-proof way – which will essentially define the future of advertising.
In this tokenized future, brands will continue to roll out Web3 memberships, tokenized rewards, and on-chain loyalty programs to entice consumers to create wallets, mint tokens, and participate in new ways.
But that’s not the end game of what defines or drives loyalty programs.
Like Web3’s potential to disrupt countless consumer-facing industries, the path ahead will descend into many silos, increasingly ineffective spaces, rebuilding what they are to reimagine what they can be.
NFTs are the new cookies: catch them while you can.
Matthew is a brand strategist and Web3 product builder. He is co-founder and COO of Mojito, the first company to spin off from Serotonin. Mojito is a Web3 NFT commerce platform that powers Sotheby’s dedicated NFT marketplace, Sotheby’s Metaverse, where Matthew is currently Managing Director. Prior to his work at Serotonin, Matthew founded the blockchain-for-journalism startup Civil, which was acquired by ConsenSys, one of the key companies in the Ethereum blockchain ecosystem. Before entering the world of decentralized technology, Matthew led Nine Lines, a leading marketing agency where he worked with over 40 consumer startups over 6 years and co-founded the General Assembly digital marketing course.