Your favorite NFTs can now serve as your Twitter or Reddit profile picture, with Facebook and Instagram to follow soon after. Mass-market players and luxury brands alike are launching NFT collections at a dizzying pace, driven in part by a FOMO reminiscent of the dotcom anxiety of bricks-and-mortar businesses in the 1990s.
Granted, the vast majority of consumers in the general public still find it difficult to understand the 2021 NFT world of Bored Apes and CryptoPunks. Additionally, the usability of the underlying blockchain technology is still far from being user-friendly for regular people.
However, avoid thinking that NFTs are a passing trend. NFTs may be the Web3 killer app and its entryway into traditional commerce, even though the current hype cycle may be propelled by crypto-millionaires and Discord-obsessed Gen-Z users. The truly fascinating aspect of NFTs is the technology that powers them, which reveals their greater potential as a means for brands to escape the platform-centric marketing environment of Web2 and reclaim control of their online consumer relationships.
Beginnings: From collectibles to the expansion of digital product lines.
Since digital collectibles and NFTs currently seem to go hand in hand, many brands have chosen to launch their own collections as their entry into the NFT market. These pioneering efforts include first-ever releases of Campbell’s soup can art, Coca-Cola digital apparel, and generative art of White Castle hamburgers.
A first step, however, is not a strategy. In the dotcom era, successful brands didn’t give up after purchasing a domain name and launching a website, and in a similar vein, astute brands today must consider what comes next.
Just as it did when “brick and mortar” businesses looked for meaningful ways to use the internet in the 1990s, the solution will be more readily apparent for some brands than others. Because they already had the infrastructure for taking orders and making deliveries back then, retailers with a catalog business, like Office Depot, were able to start using the internet as a channel more quickly than other businesses.
Because they sold books, which are simple to describe, convenient in form, non-perishable, and don’t present any “fit” issues for users, bookstores like Barnes & Noble had a simpler ecommerce journey than retailers of clothing, furniture, or groceries.
A comparable dynamic is present in the current NFT market. NFTs are a natural tool for media companies to use to develop a new class of media assets. The most compelling historical example of this kind of product line expansion is currently NBA’s TopShot. (Media behemoths CNN and the Associated Press are speculating, possibly overly so, that consumers will be as thrilled to purchase news clips and iconic images as they are to own a LeBron James dunk.)
Similar to how physical clothing and accessories have digital counterparts, apparel companies can imagine this. In virtual worlds like Zepeto, Ralph Lauren has already started selling branded digital clothing. NFT-based digital couture valued at millions of dollars was recently auctioned off by Dolce & Gabbana.
Each of these initiatives expands how consumers interact with and experience the brands by metaverse porting an existing product line. For sneaker companies already well-versed in the NFT terminology of drops and flipping, the transition is especially smooth. Adidas has developed a line of virtual gear for the characters of NFT leader Bored Ape Yacht Club, while Nike has gone as far as to acquire RTFKT, a startup that specializes in NFT-based digital sneakers.
NFTs serving as the foundation for a complex digital consumer connection is the real promise.
NFTs, however, can be used for more than just extending product lines into virtual spaces. Despite Mark Zuckerberg’s fascination with the metaverse, businesses that restrict NFT thinking to the production of collectibles or digital assets for virtual avatars are missing a more significant change. In a few years, NFTs may serve as the primary digital interface between brands and their customers, one that is under the brand’s direct control.
NFTs are typically used to identify unique digital assets (such as a particular Bored Ape image or NBA video clip), but the underlying technology could also be used to recognize unique experiences (such as the fact that you attended an event) or unique real-world objects. The use of the digital identifier by businesses will determine whether each NFT can assert its authenticity and uniqueness. For instance, Nike’s 2019 CryptoKick patent links a real pair of shoes to an NFT-based digital twin, paving the way for a time when people who own multiple NFTs of sneakers may even “breed” them to create unique shoes. Emerging technologies, such as those from the Veracity Protocol, make it possible to create digital identifiers that can be encoded into an NFT and are based on the material or structural characteristics of the physical objects in question.
Such NFT-encoded digital identifiers can record a wide range of real-world consumer interactions, bringing them into our digital lives in ways that are portable and authentic across communities and opening up exciting new possibilities for both brands and their customers. If properly developed, NFTs could build on the growth of conspicuous consumption sparked by social media, enabling us to more fully and authentically display our non-digital lives in our digital spaces.
Did you wait in line the day the new iPhone was released to purchase one? Attend a show by that famous band before they became well-known? Or are you merely interested in naturally and subtly showing off your sizable brand-name wardrobe to your online friends? Future virtual spaces might display your NFTs for each of these purchases or experiences, offering presentation options that are more expansive than the current, limited options of Facebook check-ins and Reddit profile badges. These options could be tailored to your preferred level of subtly or ostentation.
The secondary markets for physical goods may undergo a revolution thanks to these blockchain-based tokens of authenticity. Original manufacturers have so far infrequently realized a profit when their products are resold, and in those few instances (like with certified-pre-owned cars), the products must be expensive enough to cover the costs of certification and sales.
Using platforms like Trove and Recurate that incorporate this kind of secondary trading into a branded retail experience, a brand can be empowered to share in the associated value capture more easily by using an NFT-based digital seal of authenticity for a physical item to create more seamless trust in peer-to-peer resale.
In fact, because NFTs are programmable rather than just static digital records of authenticity, brands may decide to adopt an NFT royalty standard that encrypts a small portion of the value capture related to each resale.
Brands should take into account the fact that some valuable items are rare but not uncommon. A dynamic digital point of contact unique to that transaction can be created by minting an NFT with each consumer transaction. This point of contact can respond to a variety of outside events and signals. There are countless opportunities for innovative and creative after-sale engagement and loyalty programs.
Brands’ future direction toward NFT.
It’s simple to forget how long it took established businesses to figure out how to use Web1 and connect it to their existing businesses in meaningful ways. Exactly six years after Amazon’s founding, in 2000, Walmart only began actively selling online. Other retailing giants, like Target, who were still having trouble with their e-commerce operations, made the decision to rely on Amazon’s storefront and fulfillment services as early as 2001, laying the groundwork for Amazon’s enormous platform business.
And Web3 is evolving as a commercial technological infrastructure more slowly than Web1 and Web2 is, in part because some members of the community actively oppose the centralized coordination that can hasten that evolution. As a result, it will take some time before the true brand potential of NFTs is realized.
However, just as in the early days of the Web, it is crucial for brands to maintain their competitiveness while also avoiding bad decisions that appear to be “ticking the NFT box.”
Start with clever digital collectibles.
It’s a sure bet that the current NFT mentality will continue to be dominated by digital collectibles. When developing an NFT collection, it’s crucial to engineer the proper trade-offs between accessibility and exclusivity.
For instance, maintaining consumer interest may be difficult given the scarcity of Campbell’s and Coca-Cola NFTs. On the other hand, having an excessively large NFT collection can give the impression that it is of low value. The motivation behind collecting is mimetic; the value of an item depends on how many people want it. Finding the ideal balance is essential.
Exclusiveness is only one tool for influencing consumer interest. The programmability of NFTs can be used by brands to increase collaboration and engagement. By enabling the combination of several common NFTs into fewer exclusive ones, Gap has gamified its collection of NFTs. Engagement can be further increased by including community features in an NFT collection. The Bored Ape Yacht Club is maintaining higher interest levels (and valuations) than its CryptoPunks predecessor, in part because of its social value.
Connect your NFT line to your main offering and brand.
Most companies don’t intend to continue making and selling digital art in the long run. It’s crucial to link your non-fungible touch collection to your brand’s identity, as Nivea has done with theirs. Additionally, adding a novel philanthropic component can improve brand perception. The innovative use of NFT technology for micro-sponsorship by Budweiser in supporting 22 up-and-coming musicians through their Royalty NFTs sets the company apart from the more commonplace philanthropy of “donating the proceeds of my NFT drop,” which many other brands have already tried.
Although you may bemoan the sluggish consumerization of the underlying Web3 technology, you can nonetheless start making small improvements to NFT connections with your goods or services. Give away a physical item connected to a digital collectible NFT to flip the notion of an NFT as a digital token of ownership of a physical product.
Coach promised each NFT holder a custom Coach bag when it introduced an NFT collection with animal-themed artwork from its holiday promotions. Connect the issuance of NFTs to involvement in brand-related experiences (events you sponsor, for example). Mint NFTs that prove attendance at special branded events, such as fashion shows or product launches. Use an NFT collection to improve an existing loyalty program, as Clinique has done.
Try new things, but do it honestly and with the long term in mind.
It will initially seem intimidating to wade into the murky waters of Web3. Through trial and error and observation of what succeeds and fails for others, brands must gradually learn what works for them. Keep in mind that sincere experimentation and adoption, much like with Web1 and Web2, will bring about greater rewards. Go easy on the WAGMIs.
Faking community involvement by using NFT slang in social media posts can backfire and make one appear out-of-touch. Your token NFT art collection efforts will likely not get you any further than your dotcom era vanity websites did.
The good news is that there will be plenty of time to understand the space because the true impact of NFTs will emerge gradually over the coming years. The entirety of your current and potential customers make up your eventual audience, not the current crypto community.
Therefore, avoid gauging your success by your NFT prices on OpenSea. Instead, focus your metrics on those that more clearly depict a future in which NFTs serve as the foundation for all physical products and experiences while extending them into the digital environment of your choice.