September 27, 2024
Digital collectibles are unique, non-fungible tokens (NFTs) that represent a digital asset, such as art, music, videos, and other forms of media. These are different from most digital media in a very specific way: They offer provenance and true ownership via blockchain. We go into detail about provenance and ownership here.
However, new use cases are emerging for digital collectibles, one of which should interest businesses: Using Digital Collectibles to Engage and Reward Customers
Digital Collectibles add new features to existing loyalty programs to increase value to the business at a marginal cost. They offer new ways to engage with customers, boost brand awareness, increase customer base, diversity income, and support a company's mission and values. This leads to lower customer acquisition costs, higher retention & LTV, more repeat purchases, and higher profit.
Increase Customer Engagement: Businesses can create unique and engaging experiences for customers by offering limited edition digital collectibles as rewards for purchases, social media posts, or other activities.
For example, a customer 'earns' a point for every coffee purchased at a café. Once the customer accumulates 10 points, they can convert that into a digital collectible (uniquely "created" each time), which can still be redeemed for a discount or a cup of coffee.
The customer, however, can also choose to keep the digital collectible because they like the art, and want to collect more.
Businesses can further add to the experience by adding gaming elements, such as growing or evolving into a different collectible.
For example, the same customer can also convert reward points into other items (maybe coffee for a coffee shop, or a salad for a restaurant) that can be 'fed' to the collectible to grow and evolve into a new collectible. This represents a new tier of loyalty that the customer has achieved, and the business can offer additional benefits to customers who hold a more evolved collectible, such as access to private events, or special edition merchandise.
By offering collectibles that are unique to each customer and adding gamification, businesses can greatly increase customer engagement. This leads to more repeat purchases and higher customer retention.
Boost Brand Awareness: Digital collectibles can be used to generate buzz and excitement around a brand. Businesses can create a branded collection that resonates with their customer base. Engaged customers will feel connected to the brand, and will share their collectibles on social media, generating buzz and awareness for the brand.
Furthermore, businesses can reward top influencers by airdropping special edition collectibles, to further incentivize social media engagement. These special edition collectibles can have its own set of special utility, such as access to holder-only events, or redemption for merchandise.
Adding collectibles to existing rewards programs can significantly increase brand awareness and engagement at a small marginal cost.
Turn Your Customers into Advocates: Because Digital Collectibles is a NFT that uses blockchain technology, the collectible itself can be transferred to another customer, wallet, or a secondary market. This means that loyalty and its associated benefits become liquid and transferable.
Your top customers can become your best advocate.
Businesses can either allow customers to share, gift, or sell their earned benefits to others, creating opportunities to obtain new customers. Alternatively, businesses can airdrop special collectibles to their top customers which offer more limited, customized benefit, for them to gift to their friends.
This transferability also means that rewards benefits can be sold or traded on a secondar market. This increases the value of the reward to the loyal customer, and also increases the potential customer base.
By leveraging the feature uniquely enabled by blockchain technology, businesses can increase the value of a rewards program to their customer, and also convert them into brand advocates. This leads to higher revenue and lower customer acquisition costs.
Acquire New Customers: Digital collectibles exist on a public blockchain, which means the customer's behavior and preferences can be viewed and analyzed. This can be done without needing to collect the customers' personal information, which reduces compliance requirement to properly handle personal data. The information still provides businesses with highly useful and valuable insights into customer preferences, which informs future marketing and product development efforts.
The visibility of this data also means that the blockchain itself becomes a CRM tool. Businesses can analyze purchase pattern and preferences for all public accounts and wallets (they don't need to be an existing customer) to identify new potential customers, and offer benefits to convert them into a customer.
As usage of blockchain increases, businesses can tap into the transparent nature offered by blockchain technology to find new ways to grow their customer base.
Diversify Revenue Streams: Businesses can also create new collections and sell the collection as a new revenue stream. Because there is a secondary market for digital collectibles, brands can work with renown artists, designers, to create highly valuable NFTs that have artistic value to collectors.
Furthermore, the collection can even speak to the company's mission or represent brand values. For example, if the company is committed to improving the environment, they can commit to donating some or all of the proceeds to planting trees, or removing plastic from the ocean.
One thing to keep in mind, however, is that the regulatory guidance on selling digital collectibles to raise funds for the business is murky (especially in the U.S.), since these could be classified as securities. Unless the business has a big legal team, this use case may need to wait until we have more legal clarity, especially in the United States.
The ability for digital collectibles to be sold to generate revenue can help diversify their income, or to contribute to a cause that aligns with the company's missions. .
In Conclusion
Digital collectibles offer businesses new ways to engage with customers, increase brand awareness, acquire new customers, and diversify income. There are other utility, such as cross-pollination of customer base, growing and maintaining a community, that we did not cover; and even more that have yet to be discovered.
As the popularity of digital collectibles continues to grow, businesses should consider how they can incorporate this technology to rewards and retain their customers, lower customer acquisition costs, and/or further their mission & values.
