Smart contracts play an important role in stimulating customer engagement
Lately I’ve been doing a lot with NFTs. They may still be in a hype phase, but they seem to have a lot of potential. I am therefore convinced that at some point they will transcend the status of collectibles and that they will radically change the game of customer loyalty. I will explain.
What exactly IS an NFT?
For those who do not yet know what an NFT or non-fungible token is: it is a file on the blockchain of a cryptocurrency that represents a piece of digital media. Non-fungible means that it is a unique digital piece that cannot be replaced by anything else. As explained by the Verge:
“A bitcoin is fungible – if you exchange it for another bitcoin, you have exactly the same thing. A rare trading card, on the other hand, cannot be replaced. If you change it to another card, you have something completely different.”
But in principle, anything digital can be turned into a unique NFT: a drawing, music, a video of an unlikely soccer goal, a tweet or a meme, etc. technology was used to sell digital art. With the sale of Beeple’s (everyday Mike Winkelmann) digital artwork ‘EVERYDAYS: THE FIRST 5000 DAYS’ for a whopping $69,346,250, people began to really notice the phenomenon for the first time.
And then of course there was Jack Dorsey, CEO of Twitter and Square, who sold his first tweet “just setting up my twttr” as an NFT for over $2.9 million. While many people still viewed the hype with suspicion (many people act fast if it has anything to do with blockchain), established brands like Coca Cola, Taco Bell, Quartz and celebrities like William Shatner, Grimes and Steve Aoki all joined. For example, there was the virtual Coca-Cola jacket, which sold for $575,000. And 10,000 packs of William Shatner trading cards containing approximately 125,000 digital collectibles depicting his personal life and career from 1930 to the present, which sold out in nine minutes. And don’t forget the launch of TIME’s TIMEPieces, a collection of more than 4,500 original NFTS from more than 40 artists around the world.
Everything about digital loyalty, engagement and collectibles were experimented with as NFT. DappRadar, a market tracker, says it generated nearly $11 billion in sales from June to September, no less than eight times as much as in the previous four months. And yet this is still a niche market; only 250,000 people use it in a world of almost 8 billion people. It is even too early to talk about early adopters, they are the innovators among innovators.
Changes in customer loyalty
At the moment it is still mostly a gimmick, but I expect NFTs to have the potential to grow beyond the current ‘exciting’ collection phase, and then structurally change the game in customer loyalty. This is because they can offer smart contracts, which can play an important role in promoting customer engagement. And we are already seeing many early signs of this. Kings of Leon, for example, were the first band to release an album as an NFT and their tokens, which also include 18 unique “golden tickets”, unlock special perks such as limited edition vinyl and the best seats at future concerts.
It’s also no surprise that digital marketing guru Gary Vaynerchuck is experimenting with these kinds of smart contracts. His VeeFriends collection consists of more than 10,000 non-fungible character tokens, drawings by his own hand of animals with characteristics he truly believes in, containing a “smart contract” of metadata that Vaynerchuck can use to communicate with his buyer. For example, token holders get exclusive access to an annual business event called VeeCon for up to three years after purchasing the NFT, and depending on the type of token, they get perks like a one-on-one conversation with Gary V himself.
What makes an NFT successful?
What exactly are the ingredients of a successful NFT that has value for both the customer and the seller?
- lack: NFTs work best in a limited edition, preferably unique. There is only one first ever tweet from Jack Dorsey. There is only one original Nyan Cat meme. There is only one World Wide Web source code.
- Smart contract: with this type of contract, NFTs can represent unique value and provide access to specific unique goods. This includes, for example, access to the best seats for a Kings of Leon concert or TIME Magazine events.
- Community: you can’t sell your unique content or contracts if no one wants them. So NFTs work best when offered to a large and loyal existing fan base. That is why they are so popular with strong fan circles in the music, sports and film industries, often encouraged by celebrities such as Paris Hilton, Snoop Dogg, Ellen Degeneres, Eminem, skateboarder Tony Hawk, footballers Diego Costa and James Rodriguez and even Martha Stewart. This is also why we have already seen early adoption signals in the media with Quartz, Time Magazine, Fox entertainment, The New York Times, CNN, Vogue Singapore and even Playboy.
Brand economies can change customer loyalty forever
However, the most interesting potential of NFTs lies in the concept of branded economies, which can bring about a major shift in customer loyalty. It works as follows. Most current loyalty systems are completely out of balance: more benefits go to the company than to the customer. For example, frequent flyer programs allow Gold and Platinum customers to board the plane faster and, if they’re lucky, wait in a special lounge. But most of the (financial) value goes to the airline.
NFTs, on the other hand, involve customers much more in the business, making them part of the journey. As a frequent flyer, if I had an NFT interest in an airline, we would have a shared interest in the company rather than an adverse interest. In other words, if the company does well, the value of NFT will increase and so will I. If they win, I win. If they lose, I lose too. As a customer, I benefit from the brand performing better, and then I become an ambassador.
That’s why we call it an economy; the customer is an active part of the exchange rather than a passive part. When NFTs work, sellers and buyers are on the same side of the economy and work together to make business better. It’s almost as if the customer is a shareholder, but an emotional one. This can even affect companies’ sustainability efforts: customers do not want a stake in destructive companies and will support companies as they work towards a better future.
The NFT game is still in its infancy, and will certainly continue to evolve a lot before it becomes a truly useful part of the economy. It may even change its name. I firmly believe that this has the same potential as the advent of the Internet in 1995. For the first time in history, we can now own unique digital assets, opening up a lot of possibilities that we probably don’t even understand now. Just as we did not understand that Steve Jobs explained to us that the iPhone would become our ‘pocket life’, or that Bill Gates dreamed that we would have a computer on every desk and in every home. In 2030, this may have the same impact on the internet as mobile technology had then. So keep a close eye on NFTs I would say. This could get really interesting.