“How do you cause people to believe in an imagined order such as Christianity, Democracy or Capitalism? First, you never admit that the order is imagined.”
Yuval Noah Harari, Sapiens: A Brief History of Humankind
As the price of Bitcoin teases $100,000, the overall cryptocurrency market is growing rapidly in depth and breadth. Cryptocurrency and NFTs have become a part of day-to-day vocabulary globally. But what exactly is cryptocurrency and NFT? Why did these intangible assets become a global phenomenon and an important catalyst in increasing customer loyalty? Let’s explore.
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What are Cryptocurrency and NFT?
To understand the concept of cryptocurrency and NFT you need to know two things. First, there’s a vast difference between the two, and second is the concept of blockchain.
Blockchain is a decentralized public network that stores information in a digital format. It maintains a secure ledger of transactions be it cryptocurrency or NFTs. Cryptocurrency, commonly known as crypto, is a digital, decentralized and encrypted form of currency that can be used for online transactions. It’s a peer-to-peer system that enables transactions from any part of the world. Crypto is stored in digital wallets and the transactions are recorded in a public ledger.
NFTs (Non-fungible tokens) are a digital contract on the blockchain. An NFT asset could be anything from art, to music, and even experiences. NFTs can only be bought or sold through cryptocurrency, not with Fiat currency (government-issued currency). It’s non-fungible, meaning it can’t be replicated and is unique. Initially designed to combat digital fraud and essentially maintain a digital inventory on a granular level, due to their increasing popularity and demand, NFTs have emerged as a popular and coveted tool to create, develop, and maintain customer loyalty.
The Governing Idea Behind Digital Currency and Proprietorship
The entire foundation of the modern-day economy is based on trust. As Yuval N. Harari describes it best in his monumental work, Sapiens: A Brief History of Humankind, trust in the future is what enables banks, and the entire economy to flourish. Most of the wealth that’s saved and stored in banks is non-tangible. Imagine, if all the customers of a particular bank decided to withdraw their money at the same time, the bank would most likely collapse, because the money stored in the bank for the most part is non-tangible. Yet, we still trust the bank to safeguard our wealth and multiply our investments. This formula has worked successfully since the early 1500 and the modern-day concept of cryptocurrency and NFTs is based precisely on this foundation of trust. NFTs also promote the idea of a circular economy (which is fundamentally regenerative in nature), separating growth from consumption of finite resources.
Why the Buzz?
The global blockchain market is expected to grow to $23.3 billion by 2023. The introduction of Metaverse has further bolstered the growing market of NFT and crypto, with rumors of Meta (formerly Facebook Inc.)being interested in bringing NFTs to Facebook and Instagram.
NFT thrives on exclusivity, uniqueness and, most importantly, fear of missing out (FOMO). No two NFTs are identical, which offers the NFT owner exclusivity. This exclusivity factor is leveraged by various artists and businesses. For example, a Nyan Cat meme was sold for $590,000 in 2021. Jimmy Choo Mystery Box NFTs were sold for $13,672 per box, regardless of what items it contained. The NFT market is created on the foundation of digital scarcity. The exclusive collectibles are priced exorbitantly because they’re limited and could potentially become valuable antiques in the future. This is one of the primary reasons for the buzz around NFTs.
Crypto, on the other hand, is the new-age currency and has a growing fan base of Millennials and Gen Zs, with a spending capacity of approximately $165 billion cumulatively. In 2021, global crypto ownership rates averaged 3.9%, with more than 300 million crypto users worldwide. The latest statistics estimates the market size for cryptocurrency will grow to $1.087 million by 2026.
Now’s the ideal time to integrate crypto and NFTs into your marketing and loyalty strategies. There’s curiosity as well as excitement among average consumers and making NFTs and crypto part of loyalty rewards will help you attract more customers while improving overall brand value.
Why NFTs and Crypto Are the Next Big Thing in Loyalty Marketing
So, why is every other brand switching tangible rewards with NFTs and cryptocurrencies? Here are five reasons why.
- Relevancy – In 2022, cryptocurrency and NFTs have become a global phenomena. From Asian and European to Middle Eastern countries, including the United States, cryptocurrency is traded on a regular basis. It’s the new rage and major brands like Coca-Cola, Louis Vuitton, NBA, and Nike are exploring NFTs and crypto as part of their marketing and loyalty strategies. The earlier you jump on the bandwagon, the better. Rewarding customers with limited-edition NFTs or crypto can increase engagement and acquisition rate by making customers feel special.
- More Value – According to a Forbes article, an average consumer belongs to 14.8 loyalty programs but is only active in 6.7 of them. Why? Well, the prime reason customers participate in loyalty programs is the reward itself. One report, states 50% of consumers say their primary reason for joining a loyalty program is to earn rewards on everyday purchases. Another Wirecard report shows less than 8% of customers say rewards aren’t important. With the hype surrounding cryptocurrency and NFT, it’s safe to say rewarding with crypto or NFTs will drive customer appreciation and advocacy.
- Shared Interest – One of the major advantages of integrating NFTs and crypto into your loyalty strategy is the power of branded economics or shared interests. Traditional reward or loyalty programs are essentially designed to benefit the business. Sure, customers do win rewards in exchange but the major profit goes to the brand. But, with NFTs, customers become more involved with the brand. Both the customer and the brand share a common interest—growth of the company. If the company grows, the value of the NFT too increases. The customer becomes more invested with the brand, which provides a solid foundation for a strong brand-customer relationship.
- The X-Factor – The exclusivity of the NFTs is also a major advantage. Empirical evidence shows limited editions and exclusive items have more value than items that are readily available year-round. Non-fungible items themselves are exclusive, so by combining it with innovative strategies like Binance’s mystery boxes you can create a sense of urgency and excitement among customers. Crypto and especially NFTs have an X-factor and appeal that attracts a wide audience, including customers outside of your target group.
- Creating a Community – Lastly, NFTs have successfully managed to accomplish what many marketing machines have failed to do effectively—create a community of like-minded and loyal customers. By integrating NFTs into your loyalty strategy, you’re introducing your brand to a massive global community. Sure, not every person is a customer, but increasing brand reach seldom has a downside. With your loyal customers, you can create your own community with NFTs, stay relevant, and position your brand to be part of the next big thing.
The Future of Loyalty
The face of loyalty marketing is rapidly evolving. With brands shifting their focus on enriching their customers’ lives, and the introduction of cryptocurrency and NFTS, it’s essential to keep up with the changing times and stay relevant. If you’re working to reinvent and revive your loyalty marketing strategy, you’ll need the experience and expertise of a loyalty partner like Annex Cloud. Connect with us to explore how loyalty can re-energize your growth and marketing strategies, boost customer engagement, increase retention and acquisition rate, and more.
Leveraging Crypto and NFTs is one of our ten trends and predictions for 2022. Read about all 10.