Issuing NFTs won’t be the cure for marketing unless you define the right question first
The Blockchain market has undergone two narrative shifts in the past year: Defi Summer and NFT Autumn. Compared to the obscure and limited-to-VC-circle craze of Defi apps, the tiny images that sold for big bucks made all investors and digital art lovers swoon. So naturally, this fired up the media headlines, and corporate brands like apparel, hotels, and restaurants started their own NFT programs.
However, upon careful reading and understanding, we find that at least 80% of news content about NFTs in the media is devoted to “What is an NFT?” The most common words heard from companies are, “Let us start with an NFT to increase brand exposure.” However, these so-called “small images” remain untouched on Opensea’s pages.
Generally, it starts with an introduction to what NFT is, what are its application scenarios (based on NFT being a user ownership vehicle), and ends with a suggestion that business owners should start their NFT programs as soon as possible to revamp their membership systems and user loyalty programs.
Unfortunately, there is no article in the market to help companies identify if they are suitable for starting NFT projects. If so, what do they need to do to prepare? How much will it cost them to start NFT, and what return can they expect from these investments?
Fortunately, the Tanager team has been closely monitoring NFT developments since 2021. We will release a series of in-depth articles to help companies answer these questions in a structured and comprehensive manner.
Since the start of 2020, global inflation has become severe, leading to a decrease in worldwide consumption. The economic depression has caused the global tourism industry to shut down. Companies of all sizes in the stock market have experienced varying cash flow losses. To offset this, they need a lower-cost customer acquisition method and a more efficient user repurchase system to improve their profit margins.
Similarly, for new brands born during the COVID-19 pandemic, the unknown world has not allowed them to gain users’ attention by burning money. They also cannot afford to hire marketing companies to help them build viral marketing campaigns. They need to find lower-cost ways to capture users’ attention and seize the future market.
Question number one : Whether your business is suitable for starting NFT projects?
Before answering that question, let us look at the trend of big brands embracing NFTs in the past year.Let us examine some of the more representative cases in greater detail.
- In the United States, sports brands have always been ahead of the trend. Nike and Adidas were two of the first to test the waters. Nike launched a web3 platform called Swoosh, while Adidas launched its own virtual collection. Additionally, ASICS and the famous GameFi project Stepn joined forces to launch a virtual NFT shoe in 2022.
- In Japan, emerging brands like Not a Hotel are selling their free stay experience benefits as “Mint NFTs”. Traditional hotel membership purchases don’t typically excite consumers, but when an NFT (NFT + membership benefits) is included, it quickly sells out. The addition of a “money” item is irresistible.
- Although NFTs cannot be traded on the secondary market in China, more companies, such as pharmaceuticals, e-commerce, and travel, have released their own NFTs. Japanese hotels have taken a similar approach, but are even more aggressive, selling NFTs as a front to try and boost sluggish sales that have been affected since the pandemic began in 2020.
What do the business owners in these cases have in common?
First of all, they are mainly focused on clothing and hotel brands, which are mainly focused on inventory. Their goods are not the type of items that users will consume frequently in the short term. Their typical operational requirement is “to liquidate inventory.”
Second, these brands have their own offline and online stores, and clothing and hotels have mature sales chains and user point systems. This makes it easy for them to use points consumption to generate new sales demand.
Finally, they both need to increase their “loyal user” base and make them more loyal than the previous year. This will help them acquire new users with higher order conversion rates at a lower cost. Additionally, loyal users are more likely to pay for products with higher profit margins.
Now, let’s see how they use NFT to solve the problem.
- Launch NFT, allowing both new and existing users to buy NFT.When the sales page for NFTs went live, the company’s PR and media team quickly contacted the press for a release and collaborated with the marketing team to promote the limited release of NFTs.
- With the purchase of NFT, users get similar benefits to those available in membership, such as a one-time breakfast coupon and a free night for several consecutive nights. No surprise at all.
Most brands are playing similar strategies when it comes to NFTs. A select few, however, are taking the spirit of NFTs one step further. Members who buy the NFT can not only resell it in the secondary market, but all of the benefits and rights that come with the NFT can be transferred over to the new owner as well.
Well, this allows for the NFT to have a much higher value than just its resale value, as the rights and benefits associated with the NFT can add to the value of the item. This is an important factor that allows for NFTs to have a much higher value than just their physical worth.
Does this look like there’s a problem? It doesn’t appear to be an issue. After all, issuing an NFT doesn’t cost much. The company not only meets its marketing objectives, but also earns a significant royalty revenue from NFTs.The marketing department never imagined they could transition from a cost center to a revenue generator.
At this point, let’s look at the second question:
Question number 2 : “What do those who have purchased NFTs think after the passion has subsided?”
Users will consider questions such as: “What benefits do I get by buying a membership, and how much more money would I need to invest in an NFT?” That’s great, NFTs can be profitable. The question then arises: “Where can I sell my NFT? Who are the buyers? Why is my NFT worth money?”
It can be imagined that when users spend more money to buy an NFT + membership, and then find that they still need to find buyers for their NFT and act as their own sales staff (inadvertently becoming employees of the merchant), they may feel that the combination of NFT + membership offers no additional benefit compared to the membership alone, and could become resentful towards the enterprise.
Quesiton number 3 : Do NFTs help companies or brands achieve “loyal users” and “repeat business” metrics?
This is the process of combining NFT with traditional business, and these questions must be answered.
