According to the 2022 Loyalty Barometer Report published by CX management company Merkle, loyalty programs have a huge impact on customer retention: almost 8 in 10 consumers are more likely to continue to do business with a brand because of its loyalty program. Industry leaders such as GQ and Starbucks have embraced non-fungible token (NFT) loyalty programs, while Sports Illustrated released an NFT ticketing program to increase customer engagement, retention, and sales.
Companies Implement NFT Loyalty Programs for Customer Retention
Companies develop loyalty programs with the intention of growing the customer lifetime value and inspiring their continued loyalty. Companies that successfully improve their loyalty programs can grow revenue about 2.5x as fast as other companies in their industries, which means that achieving even just a 5% increase in customer retention can lead to a 25%-95% increase in profit.
According to the 2022 Loyalty Barometer Report, loyalty programs have a huge impact on customer retention: almost 8 in 10 consumers are more likely to continue to do business with a brand because of its loyalty program. It is important to note that 88% of consumers say it takes three or more purchases to build brand loyalty, and the average American consumer belongs to 16.7 customer loyalty programs. With customers belonging to so many loyalty programs, companies are challenged to make their loyalty programs stand out. Some companies are looking at NFTs to increase customer engagement, retention, and sales. For example, GQ released an NFT-linked magazine subscription in February, while Sports Illustrated released an NFT ticketing program in May. Meanwhile, Starbucks launched its Odyssey Web3 loyalty program in beta in October, rewarding its most loyal coffee drinkers for digital engagement.
NFT loyalty programs hold a special attraction for Gen Z consumers, given their status as digital natives and their comfort with technology. In addition, NFT loyalty programs tap Gen Z’s passion for genuineness, personalization, and self-expression. Companies can improve engagement and nurture brand loyalty by incorporating digital collectibles and gamified experiences into loyalty programs. The adoption of proof-of-stake blockchains, currently the foundation of most NFTs, addresses prior concerns about the energy consumption associated with blockchain technology, which aligns with Gen Z’s environmental awareness, further enhancing the appeal of NFT loyalty programs.
What Are NFTs?
NFTs are a distinct category of digital assets with an exclusive digital signature that is securely stored on a blockchain. Blockchain refers to a method of documenting data that ensures its security and integrity. This setup makes it impossible or difficult to modify, cheat, or hack the system. A blockchain is essentially a digital documentation of transactions that is disseminated and replicated across a network or computer systems that uses blockchain technology. NFTs rely on smart contracts, which are self-executing agreements encoded with the terms of the contract directly within their programming. These smart contracts serve as the foundation for generating, overseeing, and transferring NFT ownership on a blockchain. As a result, NFTs can be obtained, exchanged, and bought on online platforms, granting true digital ownership and the creation of scarcity within the digital asset space. Moreover, they have the capacity to hold tangible value in the physical world.
NFT loyalty programs have the potential to be superior to traditional loyalty programs by offering customers many distinctive kinds of experience:
- Unique and exclusive rewards: NFTs can be used to create unique and exclusive digital assets that are one of a kind and cannot be replicated, making them more desirable and valuable.
- Real-world value: A utility NFT could grant the holder discounts, early access to products, exclusive merchandise, or other tangible benefits that customers who earn or purchase NFT rewards can potentially benefit from resale, making the rewards more valuable and attractive.
- Increased engagement: NFTs can be used to create interactive and engaging customer loyalty experiences, which can create a sense of community and belonging among customers and increase engagement with the brand.
- Greater transparency: NFTs are unique, verifiable, and cannot be replicated, making them more transparent and secure than regular loyalty programs, where rewards could be replicated or modified.
- Personalization: NFTs can be used to create rewards and experiences that can be tailored to different customers based on their preferences, behaviors, or demographics.
GQ NFT-Linked Magazine Subscription
Recently, the men’s fashion magazine GQ announced the launch of its first NFT collection, “GQ3 Issue 001: Change Is Good,” granting holders access to a GQ magazine subscription, a curated GQ box of products, exclusive GQ3 merchandise, a special Discord channel, and members-only GQ3 parties and priority access to future releases. The collection is made up of 1,661 NFTs linked to one-of-a-kind art pieces created by artists Chuck Anderson, REO, Kelsey Niziolek, and Serwah Attafuah.
Sports Illustrated NFT Ticketing
Sports Illustrated has launched “Box Office by SI Tickets,” an innovative, self-service event management and primary ticketing solution built in partnership with Web3 leader ConsenSys and powered by Polygon’s blockchain technology. SI Tickets is the fan-first ticketing site from Sports Illustrated. Box Office is the first global platform to combine a complete NFT ticket solution for events of any size with visibility and adjacency to traditional, non-NFT tickets alongside the biggest in sports, concert, and theater on the SI Tickets marketplace. As part of Box Office, SI Tickets and ConsenSys are partnering to debut the all-new Super Ticket, an NFT ticket solution that empowers event hosts to remain connected to their attendees through highlights, collectibles, exclusive offers, loyalty benefits, and more.
Starbucks Odyssey Web3 Loyalty Program
Starbucks Odyssey integrates NFTs with Starbucks’ loyalty program to create an accessible Web3 community that brings the brand to life in a new way, according to the company. Starbucks Odyssey allows members to engage in interactive Journeys that earn Journey Stamps in the form of Polygon-based NFTs. In addition, users get Odyssey Points that will open access to new benefits and experiences in the future, including virtual espresso martini-making classes, exclusive events, and trips to Starbucks roasteries and coffee farms.
In conclusion, loyalty and rewards programs are key to creating the ideal CX to retain existing customers, which is by far more cost-effective than acquiring new ones. This advantage means companies are looking to incentivize their customers through loyalty programs. In a highly competitive world of many loyalty programs, NFT loyalty programs have the power to boost loyalty and encourage members to keep holding onto them in the hopes of receiving even more perks and benefits in the future.
Author Information
Clint brings over 20 years of market research and consulting experience, focused on emerging technology markets. He was co-founder and CEO of Dash Network, an integrated research and digital media firm focused on the CX market, which was acquired by The Futurum Group in 2022. He previously founded Tractica with a focus on human interaction with technology, including coverage of AI, user interface technologies, advanced computing, and other emerging sectors. Acquired by Informa Group, Clint served as Chief Research Officer for Informa’s research division, Omdia, with management and content strategy responsibility, formed by the combination of Tractica, Ovum, IHS Markit Technology, and Heavy Reading.
Clint was previously the founder and President of Pike Research, a leading market intelligence firm focused on the global clean technology industry, which was acquired by Navigant Consulting where he was Managing Director of the Navigant Research business.
Prior to Pike Research, Clint was Chief Research Officer at ABI Research, a New York-based industry analyst firm concentrating on the impact of emerging technologies on global consumer and business markets.
Clint holds a Master of Business Administration in Telecommunications Management from the University of Dallas and a Bachelor of Arts in History from Washington & Lee University.
