An NFT-powered loyalty program can drive competitive advantage for brands globally

Print

Email

Customer acquisition costs are increasing for the brands, and they are finding it difficult to offset these costs. Harnessing loyalty and increasing the lifetime value of their customers is the best way to do this, and many of the brands are doing this through a tier-based rewards system. The more purchases a customer makes, the more rewards they receive and attain a certain level in the loyalty program of the brand.

With NFT-focused loyalty programs, brands can not only incentivize their customers and rank up to a new level in the program, but customers can also resell their NFTs when their value appreciates. This adds more value for the customer, thereby making their association with the brand more fruitful. From the brand's perspective, they can take a royalty each time the NFT is resold. Thus, creating a win-win for both brands and customers.

These added advantages are expected to make NFT-based loyalty programs more mainstream from the short to medium-term perspective. Notably, the trend has already started to emerge in the global loyalty program space. For instance,

• In September 2022, Starbucks tied NFTs with its loyalty program. Under the Starbucks Odyssey program, rewards program members will also be able to buy limited-edition NFTs. Through the NFT-linked loyalty program, the firm is looking to better engage with consumers, while creating a Web3 experience with a low barrier to entry. 
• In October 2022, Balmain, the French luxury fashion brand, also announced that the firm had launched an NFT-powered loyalty program. Notably, the firm entered into a strategic collaboration with MintNFT to innovate with the loyalty program and offer a seamless experience to its customers across the physical and digital environment.
• In October 2022, Clinique became the first Estée Lauder brand to offer NFTs to drive brand loyalty. Notably, the firm is offering free NFTs to everyone who signs up for its rewards program. Over the last few quarters, fashion and luxury brands have been increasingly experimenting with NFTs and combining loyalty programs with NFTs is a strong use case, which is expected to further garner interest among consumers globally.

Consequently, over the next few years, more and more brands are expected to turn to NFT loyalty programs to drive value for customers as well as for their businesses. To tap into a potentially lucrative space, innovative startups are also emerging to help brands replace their existing loyalty programs with NFT-powered memberships. For instance,

• Hang, a B2B-focused startup, helps large brands revamp their existing loyalty and rewards programs with NFTs using blockchain technology. Notably, the firm also announced a US$16 million Series A round in July 2022. The funding round was led by Paradigm, a crypto venture firm, which also holds a stake in many leading exchanges such as Coinbase and BlockFi. Tiger Global is among the other investors that participated in the Series A round raised by Hang. The firm has already garnered clients such as Budweiser, Pinkberry, Bleacher Report, and Superfly, among others.

NFT-powered loyalty and rewards programs can potentially become a powerful tool for small brands that are seeking to generate brand loyalty among consumers while targeting higher conversion rates and revenue. Furthermore, such a loyalty and rewards program also gives them a competitive advantage over cash-rich brands that are spending millions of dollars on customer acquisition. Consequently, TechInsight360 expects smaller brands to adopt NFT-powered loyalty programs at a rapid rate over the next three to four years.

On the consumer side, the new Web3 experience and NFT-based loyalty program appear captivating, thereby allowing brands to better engage their customers in an immersive experience.

To know more and gain a deeper understanding of the global loyalty programs market, click here.