How To Build An NFT Loyalty Program For Your Brand

October 31, 2022

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While consumer loyalty cannot be acquired and must be earned by providing a satisfying customer experience (CX), recognizing and rewarding commitment is a basic foundation for an ideal consumer experience. Brands value loyalty programs because the upsides of retaining existing consumers far outweigh the cost of acquiring new ones. As a result, many direct-to-consumer (D2C) businesses incentivize their customers through loyalty programs.

The next wave of loyalty programs will be defined by the new features and capabilities provided by web3 and blockchain technology. The next generation of marketing will focus on ownership, how things work together, and how value can be moved from one place to another.

Read more: What Is Web 3.0 And Its Impact On Digital Marketing?

In this article, we will look at how NFTs can be used as loyalty programs. But first, let's cover the groundwork and understand...

What is a loyalty Program?

A customer loyalty program is a strategy that aims to encourage repeat purchases in which a brand offers rewards, discounts, and other incentives to customers to attract and retain them. Loyalty programs are worthwhile because of their intended effect of increasing customer retention. Customers who are most loyal to a brand want to feel valued, but they also want to add value.

Building a brand loyalty program entails more than just providing exclusive perks; it also involves building the right exposure for your brand.

 Users join loyalty programs to:

  • Earn rewards on everyday purchases
  • Have early access to upcoming sales and exclusive merchandise
  • Save money

Customer loyalty programs can be difficult to manage, but when done well, they can be an extremely effective tool for growing your business and strengthening customer relationships.

Benefits of loyalty programs:

  • Attracts more customers
  • Increases average order value
  • Improves retention
  • Increases brand advocacy (word of mouth)

Types of loyalty programs

1. Points Program
The most popular form of loyalty program is a points-based system. In point-based loyalty programs, customers can earn points for their purchases, which they can then redeem for special offers and other benefits.

2. Tier Program
A tiered loyalty program offers different perks to different levels of customers. The higher a customer's ranking, the better the rewards.

3. Value Program
With a value-based loyalty program, a company gives back to the community by donating a portion of its sales proceeds to a nonprofit or other worthy cause. This is a fantastic way for companies to take a stand on a wide range of political, ecological, and economic issues.

4. Paid Program
When a customer pays a fee, either periodic or one-time, they become part of a paid loyalty program and receive immediate and ongoing benefits.

Why use NFTs to create loyalty programs?

Current loyalty programs can lose their luster if customers stop using them or forget they exist. The use of NFTs can pave the way for more interesting digital interactions with the consumer. Thanks to their modular and adaptable design, non-fungible tokens can be used to verify ownership of a product, incentivize purchases, restrict access to only members, gamify brand interactions, and create a unique identity for the customer within the brand's community.

NFTs have the potential to boost loyalty as a whole and encourage members to continue holding NFTs in the future in the hopes of receiving additional perks and benefits. The added benefit of using NFT for loyalty programs is that it provides validation and protection against fraudulent actors.

Furthermore, because NFTs are interoperable, they can be redeemed for physical products, traded for digital assets such as music or art, gain exclusive access to events, purchase digital assets in games or the metaverse, etc. What's so exciting is that NFTs can dramatically increase the value system for consumers while making things safer and easier to use. 

Read more: How are brands embracing marketing in the Metaverse?

How to use non-fungible tokens to build brand loyalty programs

1. As membership programs
Non-fungible Tokens can be used to gain access to a brand's loyalty program as well as specific tiered or individually tailored perks and benefits.

2. As member profile pictures (PFP)
This is currently one of the most popular NFT use cases, which is essentially a membership pass with unique profile artwork, potentially generative to show a fusion of unique attributes based on actual member behavior, transactions, and preferences. BAYC, Moonbirds, and Reddit Avatars are some popular examples.

3. Tokengating
Tokengated commerce allows users to gain access to special features, content, and more to holders of specific NFTs; this feature can also be used to gain early access to new NFT releases and airdrops, as well as gain VIP status at community events, in-person activations, and retail store openings.

For example, Gary Vee launched a restaurant called FlyFish that is available only for Flyfish token holders.

4. Replace status tiers with membership tokens
Every Loyalty Member receives a Membership Token (NFT), which evolves and changes over time. The Membership Token's appearance adapts to reflect the individual's status as a result of their brand engagement, with no two tokens looking identical because no two people's actions or information are identical.

How to build your own NFT loyalty program?

Use NFT traits to offer unique rewards

One of the reasons for the explosion in popularity of NFTs is the variety of different attributes that the non-fungible tokens can have, as well as the rarity connected with them. Brands can use the evolving characteristics of membership tokens to upgrade levels or offer customers unique and personalized rewards based on their engagement and purchases with the brand.

Layer rewards using NFTs

Using the composability of NFTs, brands can bundle rewards in such a way that the value of the loyalty token increases the more frequently a customer interacts with the company.

For example, as tokens accumulate, so do their benefits:

  • 1 token = 5% off all purchases
  • 2 tokens = 10% off all purchases
  • 3 tokens = 15% off all purchases
  • 4 tokens = a token-gated store with limited-edition products

How Starbucks built its loyalty program using NFTs

starbucks' loyalty program
Source: Starbucks

With almost 60 million loyalty program customers worldwide and 30 million in the U.S. alone, Starbucks' current loyalty program is perhaps the most successful rewarding scheme in the world. The loyalty program at Starbucks is responsible for approximately fifty percent of the company's total revenue. It does this by incentivizing customers on repeat business, upselling, and personalization.

Recently, Starbucks announced a new experience called Starbucks Odyssey, in which customers can earn and spend NFTs to gain access to exclusive content and special coffee offerings. All NFTs will be the result of collaboration between Starbucks' partners and independent artists. These NFTs will be stored on Polygon and can be bought, sold, and traded on Starbuck's marketplace, and each one has a rarity point value.

Members' points increase as they collect stamps through the program, granting them access to benefits and experiences such as:

  • Learning how to make a martini with espresso online
  • Merchandise and artist collaborations
  • Reserve Roasteries Events at Starbucks
  • Tours of the Starbucks coffee plantation in Costa Rica, and more

The Odyssey app includes a marketplace where Starbucks members can buy limited edition NFTs with a credit card and no need for a crypto wallet. The value of each collectible digital stamp will be determined by its rarity.

Members can exchange stamps, and ownership is recorded on the Polygon blockchain. Consumers who simply want coffee and happen to be rewarded can trade their NFT for fiat. On the other hand, customers who are not avid coffee drinkers but want exclusive perks can purchase them.

After signing in, members have access to a variety of "journeys" that feature games and challenges designed to expand their understanding of coffee and Starbucks culture. Members will receive a virtual "journey stamp" to display their accomplishments. This is huge for mass NFT adoption since terms like "metamask," "bridging," and "seed phrase" will essentially become words from a foreign language.

The brand is able to expand upon the current rewards program with supplementary offerings by making Starbucks Odyssey a voluntary, additional rewards program.

We’re here to help

Understanding how previous loyalty programs worked is critical to understanding where they're going with web3. Web3 is already changing businesses' perspectives on customer loyalty, and the pace of innovation in this area is only expected to quicken. By incorporating smart contracts and NFTs, loyalty programs can be more efficiently regulated and implemented.

Brands are using NFT incentives as the number of customers who are open to using blockchain technology grows. However, it is crucial that marketers comprehend the return on investment and the mechanism of value exchange.

Contact us today if you are looking for a web3-ready marketing agency to create compelling and results-driven marketing strategies for your company.

Looking for more ways you can adopt web3 for your business? Read these articles next

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