February 28, 2023
How Traditional Businesses Can NFT the Right Way
The Premier League and Formula One. Bud Light and Adidas. Amazon and Amazon Web Services. These are just a few of the world’s most recognizable enterprises making waves with their use of web3 technologies (and, in particular, NFTs) in early 2023.
An NFT launch can be a powerful tool for brands trying to attract new fans and foster deeper relationships with their current ones, while also providing an opportunity to create new recurring revenue streams. However, they can also backfire if companies are perceived as trying to extract additional revenue from their customers without ensuring that their NFTs offer at least equal value in return.
Utility is the most important trait of a great NFT launch. Your customers and fans must feel like they’re getting immense value for their purchase — and not just speculative value based on changing NFT prices. It’s your job to figure out the best way to provide that value, from early access to events, giveaways, or product to special status, community access, or even decision-making power within the brand.
NFTs offer a wealth of opportunities for traditional businesses to engage with their customers, drive loyalty, and create new revenue streams. To help you, SKALE Labs CEO & Co-founder Jack O'Holleran has put together this 5-Step guide to an NFT launch that provides the most amount of value both for your business and your customers.
1. Engage And Build With the Community
Web3 culture is especially interested in concepts of fairness and mutual value exchange. Rather than minting NFT collections and monetizing them immediately, brands can benefit from fostering trust first.
For instance, Budweiser purchased the Beer.eth domain, changed its Twitter profile pictures to a rocket ship designed by an NFT artist, and began using NFTs to enter the “Budverse” metaverse — all before launching its first two NFT campaigns, which together made more than $5M in revenue. Shortly after, it featured one of its Nouns NFTs in a Super Bowl ad, engendering even more goodwill within the community.
Consider how you can incorporate NFTs that add value without costing extra upfront to you or the consumer. This could be a lottery for backstage access, a golden ticket to a factory tour, or access to privileged and gated content. For example, a music festival could turn all of its digital tickets into NFTs, giving ticket-buyers a digital memento that they would continue to have access to on the blockchain for decades to come. Each NFT can also have unique designs or features, and, if the brand so chooses, could include tiers of rarity, which may give the NFT additional value.
Imagine if Woodstock had been able to reward attendees with NFTs in 1969, giving them a digital memento of their ticket, automatically verified for its authenticity on the blockchain. Now consider if each NFT ticket had a special image, video message, or other asset tied to an act that played at Woodstock: Today, it’s hard to fathom the value of the rare ticket tied to a headliner like Jimi Hendrix. Plus, other tickets may grow in value over time, such as those tied to acts that became famous later, such as Santana or Janis Joplin.
2. Drive Organic Value Back to Your Products
Once you have a strong engagement and community, it's time to think about monetizing your NFTs. But instead of just thinking about the NFTs themselves, consider how they can drive organic value back to your products or services. This is similar to how grocery stores give away coupons to drive customers back to their stores to make purchases. NFTs can be used in the same way to drive loyalty and incentivize customers to make purchases.
Using the Woodstock example once more: After the festival, organizers could airdrop NFT owners the videos of the performances, which they could then have stored in their wallet for the rest of their lives. They could then give those original attendees the first rights to buy more expensive NFT tickets for the next festival, coming with extra perks, such as the ability to vote on festival headliners or access VIP areas.
From a business perspective, the organizers of the festival would know who these original attendees are, giving them a direct line for future outreach and engagement to access that community for decades to come. The key is to create an emotional connection between your customers and the NFT, rather than just selling them a collectible — and it is an emotional one, as scientists have found that people often get attached to their digital personas and assets, a phenomenon known as the “Tamagotchi Effect.”
3. Create a Trustless and Transparent Loyalty Program
Loyalty programs have been successful for many brands and airlines, and NFTs can be used in the same manner to create trustless and transparent loyalty programs. For example, a coffee shop could offer NFTs that give customers access to exclusive drinks or merchandise. This incentivizes customers to keep coming back to the shop to collect more NFTs and earn more rewards.
Note that these rewards can benefit from being on the blockchain without being advertised as NFTs directly. Starbucks Odyssey, an extension of the coffee chain’s massively successful Rewards program, allows members to participate on “journeys” — interactive games and challenges that increase their knowledge of coffee and Starbucks — that reward them with a collectible “journey stamp.”
This stamp is an NFT, and it can be traded or sold with other users on a marketplace within the Starbucks Odyssey web app, with ‘limited-edition stamps’ creating rarity as well. What’s more, all these stamps can be bought directly with a credit card, making transactions seamless. More than just the direct sale value, Starbucks can now offer exclusive events to rare stamp holders, such as a tour of its Hacienda Alsacia coffee farm in Costa Rica.
The majority of Starbucks users probably might not actively use the Odyssey program, even if it’s essentially giving them free valuable assets. However, through Starbucks Odyssey, the coffee chain is able to quickly diagnose who their most dedicated and active consumers are — how much would you pay to have that information for your business? That information, programmatically recorded on the blockchain, becomes a resource to draw on for years to come.
4. Focus Long-Term Over Short-Term to Build Passive Revenue
The businesses that last are those that think of the big picture, and the ones that are poised to gain the most value from NFTs are the same. Yes, you can try to pump your customers for an arbitrarily high amount in a quick collection sale. But it’s not just a bad look: It actually might be settling for less in the long run.
When Adidas entered the metaverse with a $156,000 Bored Ape purchase in September 2021, it may have seemed like a risk. But Adidas leveraged that investment in the popular Bored Ape collection, plus partnerships with other trusted web3 operators — Coinbase and the Sandbox metaverse, where it had purchased virtual land — into a $23 million NFT sale in December 2021. Adidas built trust with the community, and demonstrated real value with its NFTs, including many perks for owners, including exclusive access to both real and virtual Adidas wearables.
In less-hot markets, it becomes even more important for legacy players to build trust and to show customers that they are providing real value, rather than just trying to quickly monetize them. A great example of this is the Porsche NFT launch in January 2023. While we commend them for working to enter the web3 space, their failed launch — with less than 1,500 of the initial 7,500 NFT collection sold — is a noteworthy lesson for brands.
Web3 enthusiasts struggled to see utility, and its initial list price of 0.911 ETH (at the time, nearly $1,500 each) was remarkably high: For comparison, Budweiser’s launch at the height of the market in 2022 included NFTs as low as $399. If Porsche had started at a lower price — say, 0.0911 ETH (almost $150), as web3 users suggested — it could have built a larger community of support and more goodwill. What’s more, because NFT sales can include smart contracts that return royalties back to the company, lowering the price from $1500 to $150 likely would have made Porsche even more money over time.
There are a number of other companies this could apply to, of course: If Pokemon cards were NFTs with royalties attached, Nintendo would still be making money every time one was re-sold … and these days, a single shiny Charizard can fetch nearly half a million dollars alone.
5. Connect Your NFTs to the Digital World or Metaverse
You can add additional utility for your NFT owners by connecting your NFTs to virtual worlds and gaming ecosystems within the metaverse. In fact, entire marketplaces have emerged around virtual world ecosystems, such as Fashion Street in Decentraland, including notable luxury brands such as Gucci and Prada.
Just as they do in the physical world, brand-name products convey value and status online. Giving your customers the ability to flaunt their purchases online and off is a value add. Plus, there are a number of ways for brands to facilitate interaction between their physical products and virtual worlds, particularly as augmented and virtual reality equipment continue to improve.
NFTs will be the backbone of virtual assets in the metaverse, with most projects already incorporating them in one way or the other. The brands and businesses that start maximizing the utility of their NFTs early will be most poised to take advantage of the opportunities that abound in the metaverse space, which McKinsey has predicted will generate $5 trillion in value by 2030.
We hope this guide has given you some valuable insights on how NFTs can work for your business. If you have any questions or would like to learn more, please don't hesitate to reach out to our team at SKALE.
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