As we make the shift towards Web3, businesses are looking for new opportunities to engage customers - so how can businesses use NFTs to achieve this goal?
NFTs may seem like a relatively new concept, but the first known NFT was created back in 2014. Initially, they were mainly used by artists as a way to digitise and protect their art.
Eight years on, we’re moving towards the third generation of the internet (Web3) at a rapid pace, and the use cases for NFTs are expanding every day. If you’re considering joining the growing number of businesses that are exploring the commercial and marketing benefits NFTs can bring, keep reading to find out.
What is an NFT?
‘NFT’ stands for ‘non-fungible token’. These tokens are ‘non fungible’ because they are completely unique, which means they cannot be traded for another item of the same value.
It may be easier to think of it like this: there is only one original Mona Lisa painting. It could be traded for money, but it couldn’t be replaced by any other painting. It’s an original, which means that while there may be many copies and prints, there is nothing that holds the same value as the Mona Lisa itself.
NFTs are the same - they each have a unique digital identifier that can’t be copied, and their data is stored on blockchain, a digital ledger that makes it easy to see who owns each and every NFT.
What an NFT actually consists of can vary significantly. It may be a piece of digital artwork, a song, a GIF or even a virtual trainer. Anything that has a digital footprint could theoretically become a NFT - and that’s why there are so many opportunities available to brands interested in creating their own NFTs.
How can businesses use NFTs?
There are a range of ways that your business can use NFTs to achieve its objectives. Here’s how you can harness NFTs to…
Build brand awareness
In 2021, sales of NFTs reached $17.6 billion, a 21,000% increase from the $82 million traded in 2020. Interest in NFTs has never been higher, and while more brands are beginning to realise the huge potential they hold, the novelty of NFTs means that businesses creating them is still seen as newsworthy.
This means that creating an NFT can be a great way to boost your brand awareness. A great example of this is the digital artist Mike Winkelmann (also known as Beeple), who was relatively unknown and hadn’t sold a print for more than $100 until he began creating NFTs. Last year, one of his NFTs sold for $69 million at Christie’s.
So if you’re looking to reach new or wider audiences, creating NFTs can build a real buzz around your brand and help you to secure some valuable PR. This is particularly true if you are one of the earliest adopters of NFTs in your industry, as you’ll be seen as a trailblazer.
Increase brand loyalty
As marketers, we understand the psychological power of scarcity - customers love to feel that they’re one of few to own a limited edition product, for example. And as NFTs are totally original, they are a great way to build brand loyalty by offering long-time customers a novel perk.
There are a range of ways you can do this. You could offer NFTs as digital collectibles - Nike, for example, has created a range of virtual trainers that can only be worn by avatars in the metaverse.
But your brand doesn’t have to be as big as Nike to use NFTs to build brand loyalty. Perhaps your customers aren’t quite dedicated enough to value an NFT of your logo - but they might appreciate a discount code, or an invite to an exclusive event.
By providing customers with an NFT whenever they buy from your business, and offering rewards when they collect a certain number of your NFTs, you incentivise them to remain loyal to your brand.
Develop a community
Many businesses are also capitalising on the collectible aspect of NFTs in order to build a community around their brands. Brands are using channels like Discord to create exclusive groups that only owners of their NFTs can access.
One of the best examples of an NFT community is the Bored Ape Yacht Club (BAYC), a digital club that can only be entered by those who hold Bored Ape or Mutant Ape NFTs (a list that includes celebrities like Eminem and Selena Gomez). Members of BAYC can not only network with each other within their online community, they also receive exclusive invites to in-person meetups across the globe.
By bringing your most dedicated customers together as a community, you can create a real brand following and provide these loyal customers with new ways to interact with your brand. But it’s important to ensure that you have a plan to foster the sense of community among these customers - could you invite them to a special event to meet senior members of your team, for example? Or hold structured online discussions to encourage engagement?
Develop a new source of revenue
First and foremost, NFTs were designed as tradeable collectibles, and this is where they could represent a completely new revenue stream for your business.
If your business offers incentives for anyone who holds your NFTs, then they have value beyond the NFT itself. This means that your customers can sell your NFTs - and their associated perks - to others through NFT marketplaces like Rarible and OpenSea.
How can your business benefit from this? Well, when creating your NFTs, you can build a smart contract mechanism into them. Under this smart contract, you can specify that your business is entitled to a certain percentage of the price the NFT is sold for if the holder decides to sell it in the future.
As NFTs cost relatively little to create, the returns you can receive from future sales of NFTs with smart contracts in place can provide a significant new source of revenue for your organisation.
Support from a Web3 marketing agency
At Cognition, we’re keen to help our clients to make the most of the opportunities presented by Web3. If you could use some advice on how your business can use NFTs, or you’d like some help minting your first NFT, contact us today.