Original author: Cam Thompson

Original translation: Deep Tide TechFlow

With new challenges and market downturn in the crypto market, many are looking for other signs of how decentralization and blockchain technology will evolve in the future.

Non-fungible tokens (NFTs), especially profile picture (PFP) collectibles, saw a surge in sales in 2021. Many people choose these colorful JPEGs as a reflection of their digital identity and have built a Web3 or next-generation iteration of the community internet, which has gained momentum.

But as NFT trading slows down, the focus of the discussion has shifted from short-term value and chasing speculative cycles to the long-term utility of holding these tokens.

Many brands have started exploring creative use cases for NFTs and how to leverage these digital tokens beyond quick investment opportunities. Now, companies are seeing NFTs as a way to build closer relationships between brands, creators, and consumers by linking rewards with long-term ownership.

For example, GQ launched an NFT-related magazine subscription service in February, while sports media outlet Sports Illustrated introduced an NFT ticketing program in May. Meanwhile, Starbucks launched a test version of its Odyssey Web3 loyalty program in October to reward its most loyal coffee drinkers with digital interactions.

These popular mainstream brands are most focused on attracting new customers seeking richer brand experiences without compromising integrity or creating complex onboarding processes. For some thought leaders, loyalty programs, memberships, and ticketing opportunities are the most obvious use cases for NFTs and provide a way forward to onboard the most new users onto Web3.

Loyalty Economy Enhanced by NFTs

Loyalty programs or points-based systems, such as Delta Air Lines' Skymiles or cosmetics retailer Sephora's Beauty Insider program, reward customers for purchasing a brand's goods and services.

According to a survey conducted by LendingTree in July 2022, at least 80% of Americans are members of at least one loyalty program. Matt Schulz, Chief Credit Analyst at LendingTree, stated in the report that consumers typically want to gain better discounts, faster access to free products, and exclusive deals through loyalty programs.

Due to their ability to create communities around brands, NFTs have found a place in these systems, as demonstrated by well-known collectibles such as Bored Ape Yacht Club (BAYC), Moonbirds, or Goblintown. They also help reshape Web2 loyalty programs that drive incentives and transactions by incorporating digital identity and ownership into them—a new component empowered by blockchain technology.

Tara Fung, CEO and co-founder of Web3 infrastructure company Co:Create, said that NFT loyalty provides users with an opportunity to connect more closely with their favorite brands, while brands can connect and engage with their audience more effectively.

Fung said, "Because loyalty is a known concept, specifically referring to retention marketing, by incorporating Web3 into the technology stack, it can become something more." Fung added, "The value brought by Web3 as part of the technology stack lies in introducing greater ownership of loyalty to an individual."

Fung pointed out that when building new blockchain loyalty programs, a careful balance needs to be struck between serving those already involved in Web3 (often referred to as Web3 natives) and not disappointing potential new users.

Fung said, "It's still a trade-off. But we are trying to meet the needs of both, that is, to help anyone get involved and experience Web3 from the beginning and ensure that Web3 natives feel these are actually my assets that I can carry with me."

For companies seeking to incorporate Web3 loyalty benefits into existing products and services, getting started is often a pain point. This is especially important for Blackbird, a builder of restaurant loyalty programs that offer benefits to frequent customers of restaurants.

Ben Leventhal, co-founder and CEO of Blackbird and former reservation platform Resy, believes that NFTs are the most effective mechanism for attracting and rewarding brand loyalty among restaurant customers.

Blackbird's NFT loyalty program is straightforward: when customers dine at a restaurant supported by Blackbird, they immediately receive an NFT that is minted into a unique backend wallet, marking their "proof of dining." Each time they return to that restaurant, the NFT transforms into a new token with more rare features.

Leventhal said, "Overall, what we consider is loyalty and connection, while also making a restaurant feel magical and exciting to build long-term engagement and relationships between the restaurant and customers."

Blackbird and many other projects utilizing blockchain technology take an approach of removing Web3-related terminology to be as user-friendly as possible for new users. For example, some companies, including Nike and Starbucks, choose not to use the term NFT in their marketing materials and instead refer to their products as "digital collectibles" and "tokenized assets."

In building Blackbird, Leventhal's goal is to abstract blockchain technology and terminology from the user experience, making participation the core of its brand. Leventhal said: " 99% of restaurant customers interact with Blackbird not because they want to interact with a Web3 company, but because they want to interact with a restaurant."

Non-fungible Tickets

The chaos surrounding the sale of tickets for Taylor Swift's world tour revealed serious problems in the mainstream ticketing industry. From faulty platforms to duplicate tickets, Swifties and other fans often face major obstacles in acquiring tickets.

Non-fungible token (NFT) tickets provide a solution to some of the issues plaguing the events industry.

David Marcus, Executive Vice President of Music at Ticketmaster, explains that artists can use token-based ticket sales as a way to better control how tickets are distributed to fans. For example, the metal band Avenged Sevenfold offered exclusive tickets to their live performances to holders of their Deathbats club NFT collectibles through Ticketmaster.

"Any artist who mints their own NFT can try out token-based sales, which can be used to help connect token holders with the best seats, pre-show experiences, or simply gain access to upcoming tours for the first time," he said, adding that the trend of using NFTs as "mementos and memorabilia to commemorate and relive live experiences" is also growing.

In order for NFT ticket sales to thrive and grow, Marcus suggests that this capability requires "communities activated within Web3, and these communities are still growing at a broader scale."

Matt Sanders, lead singer of Avenged Sevenfold, also known as M. Shadows, said that while not every type of event requires NFTs, they do provide fans with more options and alleviate some pain points in buying and selling tickets.

He said: "What we really need is to give fans an option: they should be able to easily transfer or sell their tickets. They shouldn't need physical tickets, as physical tickets are easily lost. And they shouldn't have to pay exorbitant fees, which often include shipping and handling fees."

Alfonso Olvera, CEO of NFT ticketing experience company Tokenproof, explains that NFT tickets can provide holders with benefits such as on-chain ownership verification, participation rewards, the artist's royalties from secondary resale, and even perks for sponsoring events.

Although Web3 ticket sales are still in the early stages of development, Olvera is confident about the future of this industry, although he believes it is necessary to attract attention by starting with smaller-scale events before the technology enters the mainstream.

Olvera said: "They don't have such a massive technology, so we are seeking to first showcase the areas where NFT ticket sales advantages are appropriate, and then push them into the broader market."

Although starting small-scale strategies may be reasonable, some well-known companies have already entered the Web3 ticket sales field. In May of this year, the sports magazine "Sports Illustrated" launched SI Box Office, a self-service event management and blockchain ticket sales platform that helps create and sell NFT tickets for events. The platform collaborated with blockchain software company ConsenSys to mint all tickets on the Ethereum sidechain Polygon.

"We know how important live events are to fans. Instead of building traditional barcode infrastructure, we chose NFT ticket sales. We not only believe it is the future of live events, but also because we do not support traditional infrastructure, we have the opportunity to build the system completely on the chain." said David Lane, CEO of SI ticketing company.

For Lane, NFT ticket sales can serve as an entry point for fans to explore blockchain technology and gradually adapt to Web3 activities.

He said: "It is an opportunity for consumers to see on-chain content, experience token-based opportunities, and understand anything the cryptocurrency or Web3 community really wants to express when they encounter it tomorrow. This is the first entry point, the first NFT experience, to give them a glimpse."

In addition, SI Box Office aims to make traditional entertainment or media brands more willing to enter Web3 and lead their audiences forward together.

Lane said: "We are waiting for a globally renowned brand to join the Web3 community and create something that everyone can truly use. We see this as our way of helping our partners, strategic suppliers, community activities, artists, and teams. If we can find partners, we can help them enter the Web3 community and showcase all the amazing effects that on-chain experience can bring to these partners."

Web3 Membership Identity and Community Engagement

In addition to loyalty programs, some brands are using NFTs as membership identities to enter the entire ecosystem. These ecosystems not only provide users with unique experiences or benefits, but also create paths for the vibrant growth of the community.

Meral Arik, co-founder of Web3 membership platform Passage Protocol, said that Web3 membership identities differ in structure and execution between brands and platforms, whether it is allowing holders to access decentralized autonomous organizations (DAOs) or real-world social clubs. Smart contracts help drive these membership identities, acting as "digital contracts" that represent a person's affiliation with a particular ecosystem.

Arik said, "When consumers own a membership NFT, they can feel that they own a part of the brand, community, or ecosystem represented by that NFT." She said, "Therefore, consumers are more motivated to create value for the ecosystem, whether it is buying more products, interacting on social media, or promoting it to friends, both emotionally and / or economically."

Arik stated that tokenized membership identities can also reward members who participate in the ecosystem for the long term. She pointed out that Passage Protocol has built dynamic NFTs that evolve as holders interact with brands.

What is more important, she stated that membership NFTs can be used to enhance existing loyalty infrastructures without scaring away mainstream users with technical jargon.

She said, "If done properly, membership NFTs can be a powerful tool or component of a modern membership program without needing to be the marketing focus of that program."

Web3 beauty company KIKI World has built a brand around a growing community of beauty enthusiasts who want to better connect with the manufacturers of their favorite products and provide input along the way.

KIKI World has launched the KIKI World Membership Pass, an NFT that grants holders access to the DAO using the technology stack built with Co:Create. Within the DAO, members can propose product ideas, vote on upcoming product releases, and participate in exclusive events and experiences.

Brendon Garner, Co-founder and CMO of KIKI World, says that membership programs can leverage blockchain technology to enhance user experiences and create more enjoyable interactions.

Garner says, "Traditional loyalty and membership programs often operate in the way of 'here's a discount code in your email the day before a public sale' or 'you have some points to use at Sephora,' but is that really a delightful experience?" He adds, "We're committed to speaking a language that everyone is familiar with and creating tangible impacts from day one by rewarding anyone who joins as a KIKI World member."

While NFTs are the tools driving the KIKI World membership program, their strategic DAO component contributes to cultivating a more interactive community structure - similar to real-life membership programs, but with the added benefits and security of blockchain technology.

Garner explains, "Conceptually and philosophically, I think it is important to be able to reward and empower those who make the most significant contributions and give them the ability to have a real impact in their passionate fields."

Bringing Brands to Fans through Web3

Looking ahead, tools such as NFT loyalty programs, membership rewards, or tokenized tickets provide a powerful framework for brands and consumers to gradually adapt to Web3. With NFTs, brands can build communities around their products and connect with and reward those who have been long-term and loyal fans.

By cleverly utilizing these tools, brands can avoid alienating new users by chasing short-term trends. The key is to find the right ways to incorporate the technology rather than blindly following the hype. Additionally, NFTs don't need to be marketed as the centerpiece of brand activities or Web3 strategies; they can be used as a tool to enhance existing projects and attract mainstream users in a meaningful and sustainable way.