Editor’s note: Two years ago, the term “NFT” would have elicited a confused look from all but the most dedicated crypto or Web3 enthusiasts. Today, it is very much a part of the mainstream marketing lexicon, with everyone from Taco Bell to Tiffany jumping aboard the non-fungible token bandwagon. But in a world where The Wall Street Journal is declaring the “collapse” of the NFT market one moment and Eminem and Snoop Dogg are performing as Bored Ape characters the next, should brands be steering clear or investing in NFTs for the long-term?
In this article, I would like to discuss the new scenarios of combining NFTs with brands. There are two reasons that inspired me to write about this. Firstly, since last year, there have been multiple discussions about new scenarios regarding NFTs. Discussions were heated after the advent of the crypto assets bear market, which brought more expectations and reflections about what NFTs can be used for. Secondly, as a Web3 builder, I interact with various NFT projects and creators, and many brands have come to me for advice and solutions on NFT marketing. So I’d like to put my thoughts into one coherent article. In short, brands are aware of the possibilities of NFTs as a new marketing approach, but they lack the understanding and systematic thinking about how and why it can be done.
Over the past 10 years, the traditional marketing approach of building a strong brand to attract repeated purchases gradually stopped being universally applicable. Brands are losing their effectiveness as they are faced with a series of outstanding problems: the high cost of new acquisitions, low user retention and loyalty, low conversion rates, low activity, and low repurchase rates. These changes are largely due to the diversification of the market as consumers become smarter and more powerful in selecting brands.
The failure of old experiences has led brand owners to wonder: is it still useful to invest a lot of resources in building brand power? Along with the rise of skepticism, brands have evolved in terms of marketing approach. First, in the past, brand marketing was regarded as a separate business module, while today more emphasis is placed on the integration with the brand and the effectiveness of marketing. Second, having seen the potential of big data, more brands have become obsessed with precision marketing, emphasizing ROI. Third, whether it is livestreaming, ad placement, or other factors, consumers with more simple and direct benefit perceptions are focusing on the price instead of the brand. Fourth, as the traffic dividend disappears, brands are focusing on the continuous operation of stock customers rather than the acquisition of incremental customers.
All these new changes have left brand marketing practitioners feeling lost. The word I hear most in my conversations with marketers is “difficult”: budgets are being slashed, ROI for advertising/events is low, and bosses are more focused on actual output – all of which means internal resistance to their efforts.
Branding is still important, but it’s not as important as it used to be. As one marketer told me, “Brands need to find a new narrative to fall back on, not only to win the hearts and minds of consumers but also to win internal recognition.” It is against this backdrop that many brand practitioners are now looking to NFTs as a breakthrough in solving the brand narrative crisis.
NFTs: A combination of asset value and individual expression value
When we talk about NFTs, it’s important to find out what an NFT is. The dominant feature of NFTs, or “non-fungible tokens”, is that they are indivisible and unique, compared to other crypto assets. These days, one can use NFTs for art collections, game props, social identities, and stores of financial value.
Although many use cases consider NFTs assets, there is another advantage for NFTs from the creator economy – in the world of Web3, NFTs blow the trumpet of individual self-expression.
How do we understand this value? From Rare Pepes to Crypto Kitties, Crypto Punks to BAYC, Azuki, Doodles, Moonbirds, and MEME representatives such as mfer and Goblintown, the NFT projects using their own narratives to attract people who identify with them are creating a community to express their values, emotions, preferences, and positions to the outside world.
The world is becoming increasingly more divisive, with the regression of globalization, the rise of populism, the widened gap between the rich and the poor, the invasion of privacy brought about by the monopoly of internet giants, the intensification of regional conflicts and wars, the fierce rivalry between major powers, the impact of the pandemic, and many other factors that continue to threaten the stability of international order and the global system. In the midst of such turbulence, decentralization has become increasingly more acceptable. Individuals are more motivated to express themselves and build followings through their expressions.
In addition, the rise of Gen Z has made self-expression even more important. Compared to their parents’ generation, young people are more independent and more willing to express their opinions and ideas. Today, on social media platforms such as YouTube, Instagram, and TikTok, we see more and more young people expressing their personalities, ideas, and values through text, video, and music.
Some might say that self-expression doesn’t seem like a novelty, as it is already mainstream in the traditional creator economy. I agree with this statement; however, I think that NFTs will give people the desire and ability to express their rights more than in the past. The reason is that NFTs are an important part of Web3, and the values advocated in Web3 such as decentralization, de-trust, privacy protection, affirmation of rights, putting revenue back in the hands of creators, and respect for individual expression will all be reflected and recognized in NFTs. Whether you have an NFT avatar or create your own NFT (profile picture, music, video, etc.), you will realize that you have a unique identity – an expresser that can make your voice heard by the world and win your own users and fans.
This also convinced me of something else: just as today everyone is able to make TikTok videos and earn money that way, the threshold for NFT production and creation will be just as low, which means that everyone will have the opportunity to produce and create their own NFTs. In other words, in the future, one can be a consumer of NFTs, as well as a producer.
The combination of NFTs and branding: brand as a service
After talking about the value of NFTs, it’s time to return to the central theme of this article: what are the new scenarios in which NFTs and brands can be combined? The relationship between brands and consumers is that of benefit exchange, with brands providing certain goods or services and consumers paying for what they enjoy. Once the transaction is concluded, the relationship is weakened, which is why every brand wants to strengthen its brand power to continuously maintain or enhance its relationship with consumers. But in the era of Web3, the emergence of NFTs has the potential to essentially change the relationship between brands and consumers, where the transaction is not the end of the relationship, but the beginning of it. In other words, this new approach is Brand as a Service.
How can this be done? Let me explain through a hypothetical case.
Problem to be solved: A fashion brand offers a series of 10,000 T-shirts priced at $80, and the customer gets an NFT after spending $80. How could this brand increase sales and enhance consumer loyalty through NFTs?
Step 1: This brand should make its NFT a CC0 project, i.e. give up copyright and allow consumers to remix and recreate the NFT after purchasing the brand’s T-shirt. One small note: the CC0 statement only waives copyright, but no other rights are mentioned, such as trademark rights and patent rights.
Step 2: In addition to giving consumers the opportunity to create their own products, the brand could launch a community competition for recreations and let the community vote on them. For example, the top three winning designers could cooperate with the brand to sell NFTs and clothes, and the proceeds from the sales could be shared to an extent.
Step 3: Each consumer will interact with the brand and the brand can award additional NFTs with different levels of rarity according to different contribution levels (the weighting can be a certain amount of consumption + recreation activity + sales of recreation NFTs and clothes, etc.). The NFTs are programmable and the rarity will be enhanced with an increase in consumer contribution. The rarer the item, the more valuable it is to collect and distribute.
Having said that, for the above example to be realized, several prerequisites need to be in place:
- An NFT creation tool with a low threshold that enables every consumer to recreate the NFT.
- A change in the brand’s perception: the brand needs to transition from the single interest relationship of the past to the Brand as a Service relationship.
- Web3 becoming more widespread among consumers.
Today, more and more brands are trying to use NFTs to connect with users. Examples include Starbucks’ upcoming coffee-themed user loyalty program, Coca-Cola’s Pride Collection NFT in collaboration with Rich Minsi, and Tiffany’s limited NFT “NFTiff”.
But in general, the combination of NFTs and brands at present is more of a marketing gimmick aimed at low-cost acquisitions and new membership, and is still essentially at the level of benefit exchange. I propose Brand as a Service in the hopes of exploring and redefining the relationship between brands and consumers via NFTs or Web3, i.e. consumers and brands are no longer corresponding subjects to each other – consumers can become designers for brands, and can also own their own sub-brands based on existing brands. Of course, this does not mean that every consumer will become a designer or own their own brand, just as we all have the ability to become an influencer, but not everyone would choose to be a TikTokker. Yet this is where Web3 is most meaningful, not only presenting the value of decentralization, de-trust, privacy protection, and empowerment but also making it more possible for the masses to have a voice and be creative (as evidenced by DAO), an opportunity that is more inclusive and open to all.
I have always believed that Web3 and Web2 cannot be two separate worlds and that Web3 should be rooted in real life and solve real-life problems. The new scenario of combining NFTs with the brand is an evolving topic and is a focus for me. I look forward to building a new way of marketing with more brand owners as Web3 gradually develops.