In 2022, non-fungible tokens (NFTs) will become commonplace. You can now show off your favourite NFTs as profile pictures on Twitter and Reddit, with Facebook and Instagram to follow soon. Mass-market players and premium brands alike are introducing NFT collections at a swift pace, fueled in part by FOMO reminiscent of brick-and-mortar enterprises' dot-com fear in the 1990s.
Sure, the large proportion of average consumers is still perplexed by the Bored Apes and CryptoPunks world of 2021 NFT. And the core blockchain technology's usability is still far from being consumer-friendly.
But don't think of NFTs as a transitory craze. While crypto-millionaires and Discord-obsessed Gen-Z users may be fueling the ongoing hype cycle, NFTs could be Web3's key product and doorway into traditional commerce. The technology that NFTs run on is what makes them so intriguing. It indicates their greater promise as a way for marketers to sidestep the platform-centric marketing world of Web2 and recover control of their digital customer interactions. Brands with NFTs are the new marketing story to be unveiled.
From collectibles to digital product extensions
NFTs and digital collectables appear to be intrinsically linked right now, and many brands' first foray into the NFT world has been to build their own collections. Early efforts include special Campbell's soup can art and Coca-Cola digital attire, as well as generative art of White Castle burgers.
A first step, however, is hardly a strategy. In the dot-com era, successful brands didn't stop after purchasing a domain name and launching a website; likewise, today's savvy businesses must consider what happens after.
Some brands will find the answer more easily than others, just as they did when "brick and mortar" businesses found significant ways to leverage the internet in the 1990s. Retailers having a catalogue business, such as Office Depot, were able to use the internet as a channel earlier than other businesses. Since they already had the systems in place to take orders and deliver them. Booksellers like Barnes & Noble had a smoother eCommerce journey than fashion, furniture, or grocery merchants because they sold books. It's simple to express, has a practical form factor, is non-perishable, and has no user "fit" difficulties.
In today's NFT world, a similar dynamic exists. NFTs and brands can go hand in hand. It can be used by media companies to establish a new class of media assets. The NBA’s TopShot product line extension is currently the most convincing example.
Apparel firms can create digital replicas of their real garments and accessories. Ralph Lauren's branded digital attire has already been sold in virtual environments like Zepeto. NFT-based digital couture from Dolce & Gabbana was recently auctioned for millions of dollars.
All of these projects expand how customers interact with and experience companies by bringing them into the metaverse. For sneaker companies already familiar with the corporate NFT jargon of drops and flipping, the shift is particularly smooth. Nike even bought RTFKT, a company that specialises in NFT-based digital footwear. Adidas has produced a virtual gear line for Bored Ape Yacht Club, the leader of the branded NFT.
NFTs as the foundation for a multifaceted digital consumer connection
Brand NFTs can be used for more than just extending product lines into digital realms. Regardless of Mark Zuckerberg's infatuation with the metaverse, businesses who limit NFT ideation to collectables or generate digital assets for virtual avatars are ignoring a bigger change. In a few years, NFTs with brands may become the primary digital point of interaction between brands and their customers – one that the brand can control.
Although NFTs are most commonly employed to identify distinct digital assets, brands can also use NFTs to define a unique experience (events or matches) or physical thing. It's all about how businesses employ the digital identity that underpins each NFT's claim to uniqueness and validity.
Example of a brand using NFTs: Nike's CryptoKick patent from 2019 links an actual pair of shoes to an NFT-based virtual counterpart, paving the way for a future when owners of multiple shoes branded NFTs might "breed" them into personalized sneakers. Emerging technologies, like Veracity Protocol, make it easier to create digital identifiers that can be encoded into an NFT and are derived from the physical products' actual material or structural qualities.
These NFT-encoded digital identifiers can be used to track a variety of real-world buying and consumption activities. Incorporating them into our digital lives in authentic and flexible ways among communities, and opening up exciting new opportunities for brands and their customers.
NFTs, if properly designed, have the potential to expand the extension of conspicuous consumerism that social media has sparked, enabling us to more expansively and honestly present our non-digital lives in our digital spaces.
Did you wait in line on the day the new iPhone was launched to buy it? Have you ever gone to a concert by a well-known band before they became well-known? Or are you just looking for a natural and understated method to share your extensive designer wardrobe with your online friends?
Your NFTs from each of these purchases or experiences may appear in future virtual worlds, giving display options that go beyond today's limited possibilities of Facebook check-ins and Reddit profile badges, and are customized to your desired level of subtlety or ostentation.
These blockchain-based authentication tokens have the potential to change a physical item in secondary marketplaces. Original producers have rarely captured value when their products are resold, and in the few circumstances where they have (like certified-pre-owned vehicles), the products must be pricey enough to support the certification and sales expense.
In peer-to-peer reselling, a digital mark of authenticity based on NFT generates more seamless trust. Platforms like Trove and Recurate, which incorporate this type of secondary trading into a branded retail experience, can empower a brand to share in the accompanying value capture more readily. In addition, because NFTs are programmable rather than static digital records of authenticity, businesses can decide to adopt an NFT royalty standard that encodes a small portion of the value captured with each resale.
Brands should also think about how certain valuable items are unique but not rare. The creation of a dynamic digital point of contact particular to that transaction by minting an NFT with each consumer transaction can respond to a variety of external events and signals. There are countless options for new and innovative loyalty and after-sale engagement.
Future of Brands and NFTs
It's easy to overlook how long it took established businesses to find out how to navigate Web1 and develop meaningful linkages between their existing operations and the Internet channel. Walmart only began selling online in 2000, six years after Amazon. Other retailing giants, such as Target, who were still battling with e-commerce operations in 2001, elected to use Amazon's storefront and fulfilment capabilities, setting the groundwork for Amazon's massive platform business.
As a commercial technological infrastructure, Web3 is evolving more slowly than Web1 and Web2, in part because certain members of the community intentionally refuse centralised coordination, which may speed up the process. As a result, it will take a few years to achieve the true brand potential of NFTs. Nonetheless, just as in the early days of the Internet, companies need to avoid falling behind while also avoiding making mistaken decisions that appear to be "checking off the NFT box."
Begin with smart digital collectables.
The immediate NFT perspective will most likely remain focused on digital collectables. When creating an NFT collection, it's essential to engineer the appropriate balances between availability and exclusivity throughout the phase.
Example of brands using NFTs: The scarcity of Campbell's and Coca-Cola NFTs may make maintaining consumer interest difficult. While making your NFT collection too large can give the impression of lacking value. Collectables have worth because enough people want them. It's crucial to strike the proper balance.
Consumer interest is shaped by a variety of factors, including exclusivity. NFTs' programmability can also be used by brands to make them more collaborative and engaging. Gap's NFT collection has been made more gamified by allowing numerous common NFTs to be blended into fewer limited ones. Including community elements in branded NFT collections can help to boost engagement even more. Part of the reason for the Bored Ape Yacht Club's higher interest (and prices) than its CryptoPunks precursor is its social significance.
Connect your NFT collection to your main product and brand.
Most companies don't intend to stay in the business of generating and selling digital art in the long run. For companies with NFTs, it is important to tie your NFT collection to your brand identity, as Nivea has done with their non-fungible touch collection. A new philanthropic dimension can improve brand perception as well.
Budweiser's Royalty Program has sponsored 22 upcoming musicians. Innovative use of NFT technology for micro-sponsorship elevates the brand above the more mundane altruism of "donating the proceeds of my NFT drop," which many others have attempted.
Despite the slow consumerization of the underlying Web3 technology, you can start strengthening NFT links with your products or services in subtle ways. Give away a physical object linked to a digital NFT collectable, inverting the idea of an NFT as a digital token of physical product ownership. Sportzchain offered Phygital NFTs in collaboration with ngageN platform offering memorabilia of a framed and signed match day jersey of Surjeet Singh. Link the distribution of NFTs to brand-related experiences (events you sponsor). Mint NFTs are used to track attendance at special brand events such as product launches and fashion shows. Sportzchain also offered its NFT holders kabaddi match tickets and meet opportunities.
Experiment, but do it with integrity and a forward-thinking mindset.
At first, diving into the dark waters of Web3 will appear frightening. Brands must learn what works for them over time through trial and error, as well as observation of what works and doesn't work for others. Keep in mind that, as with Web1 and Web2, sincere adoption and exploration will reap larger dividends. Feigning community participation by using NFT lingo in social media posts can backfire by making one appear out-of-touch (so be careful with those WAGMIs), and token NFT art collecting efforts will likely get you as far as your dotcom era vanity websites did.
The good news is that the actual impact of NFTs with brands will emerge gradually over the next few years, giving us plenty of time to figure out how to navigate the domain. Your ultimate audience will be all of your current and potential customers, not just the crypto community. So don't judge your success by your OpenSea NFT prices. Rather, focus your indicators on those that will help you envision a future in which NFTs anchor all real-world products and experiences while expanding them into the digital realm of your choice.