After taking the realm of virtual collectibles by storm, non-fungibles are now making their presence known in the real world. The ability to link tokens to actual benefits that their owners can redeem has given rise to NFT loyalty programs.
Acquiring new customers gets more expensive each year. New research shows a 222% increase in CAC (customer acquisition cost) in e-commerce from 2013 to 2022. So doubling down on retention and loyalty seems like a smart move — and enlisting the help of blockchain tech makes a lot of sense.
NFTs are already generating fan engagement in sports and entertainment, and other industries could soon follow suit.
Can an NFT loyalty program help your business drive brand awareness, reach new audiences, and increase sales in new ways? How will the system work, and what do you need to create your own loyalty NFTs? What are the pros of using non-fungible tokens compared to conventional loyalty and membership programs?
Read our article to find the answers to these questions — so that when the time comes, you’ll have all the facts to make an informed decision.
What’s an NFT loyalty program and how does it work?
Simply put, running an NFT loyalty program means using non-fungible tokens to encourage and reward customers.
NFTs are records on the blockchain — a digital ledger that stores information in secure decentralized nodes. Each NFT is a unique asset whose value and history is continuously tracked by the chain. Self-executing smart contracts can be triggered under predefined conditions with pre-programmed results.
Sounds like an interesting model for loyalty rewards, doesn’t it?
Companies pursue a number of goals with loyalty incentives: building trust, engaging the audience, learning more about their preferences, and eventually boosting sales.
With the digital nature of NFTs, however, the focus is shifting toward increasing interactivity and building communities. It’s still about rewarding customers for their loyalty, but not just with the classic scheme of bonus points.
We’ll get to the particular strategies in a bit, but there’s a concept we need to talk about first.
NFT utility: the basis of your solution
Utility NFTs transform a few lines of code on the blockchain into tangible benefits. These non-fungibles represent ownership of real-world assets or privileges. So when your customer receives such a token, they also get a unique and valuable gift or opportunity associated with your brand.
This seemingly simple added function works miracles for loyalty marketing.
Ways of implementing NFTs for loyalty programs
To be honest, it’s mostly uncharted territory now, so the niche is up for the taking.
So far, only a few pioneers have ventured a voyage into the wild, and Starbucks is one of them.
Starbucks recently announced its NFT-powered Odyssey loyalty project, which builds on the foundation of the existing Starbucks Rewards program. Currently, customers can collect “stars” with every purchase and later exchange them for free food, drinks, and merchandise.
The company is keeping most details secret, generating hype around the sales of their NFTs, which will serve as passes to the program. We know that customers will get access to a web app, taking part in “journeys” — interactive games and challenges. They’ll be able to unlock perks and learn facts about the brand. Rewards will be collected in the form of NFTs, but some NFT collections will only be available for purchase.
Customers can then convert their NFTs into experiences like coffee-making classes and other events or trips to Starbucks coffee farms and roasteries. All of those benefits allow customers to interact with the brand on a different level than the conventional loyalty incentives did.
The truth is you can approach all aspects of your NFT loyalty programs creatively:
- Form of delivery – your customers can have their NFTs sent directly to their crypto wallets or to an app on their phone.
- Pricing model – you can drop your NFTs for free or sell them at a symbolic price, allowing customers to resell and increase their value over time.
- Distribution – list your loyalty NFTs on common marketplaces like OpenSea, Rarible, or Binance — or create your own NFT marketplace.
But you can really get inventive by devising your implementation of the reward model. We’ve listed our top five ideas below.
Unique one-time benefits
Each of your utility NFTs can only be redeemed once, giving the customer a single reward for loyalty. It can be as simple as a discount or a coupon for a physical item, or you could offer invitations to private events. The idea is to keep the interaction with your brand going.
To exchange their NFT for the benefit, a customer will have to produce a QR code. As soon as they receive the reward, the smart contract is fulfilled, and the token is destroyed. It’s as simple as that.
NFTs as membership cards
Thanks to the blockchain’s long memory, it’s easy to build a membership program with NFTs. A nice use case for the travel industry, namely for its transportation and hospitality segments.
Tracking accumulated miles and points is simple and convenient in a blockchain-enabled app. Investing a hefty sum in membership is a totally different story when you know you can resell it with all the perks as an NFT. Some services can even be exchanged with partner companies, thanks to the interoperability of digital tokens.
Multi-tier NFT loyalty programs
Customers love unlocking new levels and receiving access to exclusive services. This tried-and-true model works even better when coupled with the benefits of the blockchain: every move is recorded in the system, and perks unlock automatically.
This could work nicely in the high-end automotive sales segment. By staying loyal to a brand — buying cars produced by it, servicing them at official points, and purchasing original accessories — customers become eligible for unique offers. It could be a limited edition of a supercharged model you can’t purchase otherwise or an invitation to an offroad event.
You can even build a blockchain from scratch and set your own game rules.
Specific rewards for desired behavior
While this functionality can be included in other models, we wanted to single out this use case.
Imagine: you’re a retailer, and your entire sales ecosystem is integrated with a blockchain. Every single item purchased in your online store and every piece of feedback on your website leaves a trace in the ledger attached to the customer’s identity.
With pre-programmed smart contracts, you can issue automatic rewards to your customers’ NFT “accounts.” Buying items from a collection you need to clear gets them free accessories, and completing surveys buys some sort of priority service.
Another great way to engage your audience is by offering NFT loyalty programs with a distinct social component. For example, you can direct a part of or all proceeds from auctioning your loyalty tokens to solving environmental issues. One of the ways to do this is by utilizing tokenized carbon credits.
People tend to unite around a great cause. Meanwhile, you’ll be killing two birds with one stone: making this world a better place and building a community of loyal customers.
But enough about the possibilities for implementation. Our next section is about the benefits, and guess what: you won’t have to make any choices. They’re all yours for the taking!
The perks of using NFTs for your loyalty initiatives
Blockchain technology has become a native part of the digital landscape. Part of the value of NFTs comes from a developed ecosystem and its seamless integration with other business tools. When you have a well-designed solution, the benefits of NFTs for loyalty become obvious:
- They’re interactive by design
NFTs are a great medium for creating touchpoints with your customer base. For instance, if you have an app, it’s easy to communicate with users — to inform them of new offers, run marketing incentives, and so on. You can also gamify the experience to further incentivize them.
- They’re in your customer’s phone
Phones are always with us, so there’s no need to lug around a wallet full of plastic membership cards or gift certificates. Your NFTs can’t be physically destroyed or lost. If you choose an app as your delivery model, you can use notifications to inform users about your loyalty program updates.
- Records are secured by the blockchain
With the blockchain’s robust security and reliable authentication, there’s no chance of fraud or mix-ups when redeeming benefits. And once a reward is redeemed, the NFT is burned, so that no one can reuse it.
- Benefits can be easily combined, upgraded, or transferred
Selling a membership or using another person’s accumulated miles/perks is easy — if the contract permits. How about trading your free Mediterranean cruise for a weekend in Paris? Not a problem with NFTs.
- Blockchain enables real-time operation
Forget waiting for that heavy centralized database to turn over. A blockchain-powered solution can update your users’ NFT perks in real time, offering a supreme user experience.
- You’ll attract a younger demographic
NFTs are all the rage, so the share of the young and trendy in your audience will definitely increase. At the same time, you won’t discourage the less tech-savvy users — if, of course, your NFT loyalty solution is designed and implemented well.
- You’ll be able to sell more exclusive/luxury products and services
By accumulating benefits and raising client status, customers can unlock perks and opportunities to buy exclusive products or services. All you have to do is keep them in the race by throwing in worthwhile challenges and fun rewards.
- You’ll be presented with endless opportunities for business analysis
If you have a properly engineered NFT-based ecosystem, you can effectively use it to create a feedback loop. You’ll be able to monitor your customer’s buying preferences, predict demand, and fine-tune marketing activities.
After reading about all those benefits, you probably can’t wait to develop your own NFT-based loyalty program. Luckily, we have some tips on that too.
Steps to building your own NFT loyalty program
Before we get into details, there’s one thing we need to make clear.
Simply minting a bunch of NFTs and offering them to your customers won’t do the trick.
What you want is an ecosystem that will help you leverage the full potential of the blockchain and utility NFTs. Whether your NFT loyalty program succeeds or fails will often depend on how well you analyze, plan, and execute its creation.
Unicsoft can help you navigate this. Drawing on our experience with NFT marketplace development, we’ve prepared a list of recommendations on how to approach building your first NFT loyalty program.
Find your angle
Start by asking the right questions. How can you benefit from introducing NFTs as loyalty rewards? Look for a use case that will work best for the needs of your business. Do you just want to plug holes in your marketing strategy or create a strong following and influence customer behavior?
Because the right choice of strategy might eventually tick all the boxes for you.
Assess your current loyalty system
You won’t necessarily have to rebuild your legacy system from the ground up. The smart way is to analyze the current system, take the best from it, update the tech stack, and add NFT functionality.
That’s why you’ll need a team of software development pros by your side. A good tech partner will help you save on your budget by listening to your needs and finding the best course of action.
Choose a model for your ecosystem
Will you use NFTs as digital membership cards, issue them as rewards for a specific behavior, or create NFT games and challenges?
We’ve listed a few options before, so you may want to go with one of those, combine them, or devise your own unique model. Keeping it safe or going all in on creativity — the choice is yours to make.
Develop the solution with your tech partner
This phase will be very technical and require a lot of meetings and planning. Your tech team will be gathering requirements, making decisions on the architecture and tech stack, coding, presenting an MVP (minimum viable product), and so on.
You’ll have to decide what blockchain to use, where to store your tokens, and what infrastructure to build. Then you’ll want to integrate the system with your existing CMS or ERP solutions and business intelligence tools. Again, your tech partner should guide you along the way.
Getting it right on paper is one thing, but your plans will require perfect execution. That’s when your software partner’s experience and skills will really count.
You’re great at what you do — whether it’s automotive, travel, e-commerce, entertainment, or any other industry. Keep your focus on the core business and let professionals handle the development of your new loyalty system.
But remember: you’re in control. With most software companies now using Agile methodologies, you’ll be able to constantly monitor the process, provide feedback, and see changes being made.
Mint your NFTs
The time has come for your first loyalty tokens to be born! Fortunately, it’s a lot simpler than traditional coin minting.
The process mostly amounts to registering your NFTs on the blockchain. We have a great guide to minting NFTs, give it a read when you have a minute.
Advertise and distribute
It’s ironic, but you’ll probably need a marketing campaign for your new marketing tool. Use your website, your social media pages, Google — whatever tools you need to get the word out.
Drop your collection or point your audience to where they can download your new NFT-enabled app.
Support and grow your community
Foster a sense of trust and encourage your customers to interact. Run your incentive campaigns, create challenges and tiers, and be generous with your rewards. After all, this is why you spent all this time and effort building your new NFT loyalty program.
Adopting non-fungible tokens in loyalty marketing is an exciting and promising trend. It can be technically challenging, but if done right, creating a loyalty program with NFTs can help your business build a stronger bond with customers.
However, it’s not at all about hopping on the bandwagon and hastily minting your own tokens.
It’s a process where you’ll need to clearly understand your end game and carefully choose your implementation model and tech stack. Consulting with a software partner early in the planning stages will get you on the right track and save time and money.
Unicsoft has a team of experts versed in blockchain and NFT technology who can identify potential issues and offer the most fitting solutions for your business needs. We’re ready to step in and help you get the ball rolling on that NFT loyalty program.