NFT Value Chain: the Best Tips How to Increase the Price of NFT
As we know from various studies, the determination of the products’ creating activities is necessary for developing the strategic analysis and and the way to increase prices. Value chain allows to identify the source of the competitive advantages by examining the activities of the individuals or companies. Additionally, this method provides information about each action cost and the possible ways to increase the final cost.
In this article, I want to outline the formation of the NFT value chain. I start with the review of the primary concept of the value chain, which is well known in management theory. Further, I consider the creative cycle since NFT is a part of the cultural industries. Then I formulate the primary and support activities of the NFT value chain. In the end, I give some ideas about using the NFT value chain for the strategical analysis for artists.
History of Value Chain concept
Michael Porter, the American economist, developed the central concept of the value chain at the end of the 1980th. According to Porter, the value chain is a sequence of activities for delivering a valuable product to the market. The initial value chain contained the primary and support activities that enable creating and delivering a product to the market. According to Porter, the primary activities included inbound and outbound logistics, operation, marketing&sale, and service. The supported activities are immutable infrastructure, HR management, technology, and procurement. This content became extremely popular, and managers imply it widely until today.
The value chain concept formed a basis for configuring the value chain for different products and industries. For example, other studies developed value shops and value networks, developing Porter’s ideas about forming a chain of activities that create value. Value shop can determine the sequence of the activities in service industries. In contrast, the value network helps to examine the types of businesses, that the main goal is to connect different parties. Thus, the value network also explains the value creation for the NFT marketplace because the primary purpose of the marketplace’s work is to connect the artists and traders on their platform.
What type of product is NFT?
Porter’s value chain develops the sequence of activities for the production industries. First, NFT, as a non-fungible token, is a product. Besides, NFT is part of the culture industry, and it needs to consider the features of the creative outcome in the creative industry. Additionally, NFT combines the elements of art and technology that impact the other characteristics of the value chain.
How is the NFT value generated?
UNESCO created the culture cycle that represents the value creation in culture. This cycle contains five steps that follow both sequentially and inter-connected. In that way, it includes creation, production, dissemination, Exhibition and consumption.
These steps generally relate to the NFT primary activities, which create value.
Pre-production
The initial name for this step was “creation”. This step implied the process of preparing ideas for the content. According to the further steps as production and postproduction, it is logically better to call pre-production. In any case, the concept of the first step remains the same. In this step, the artist discovers the ideas, designs the production plan, understands what software or other instruments they need. If the currently developing piece relates to the already presented collection, the artist needs to examine the ideas connected to it. Additionally, the goal of the piece creation can be observed here also, for example, if somebody considers the NFT marketplace a promotional instrument for their project. In that way, this step is dedicated to creating the concept of the collection, the form of the content, and other features before production.
Production
This stage involves the development of the final product by an artist or group of artists. As NFT is primarily a digital product, the need for software and space to work must be considered. This stage finds the whole process of content production, such as the creation of drafts, preparation, use of software and the entire process to the finished product.
Postproduction
Initially, this step was called dissemination, but in NFT, it is more about postproduction activities that need to be done before listing on the marketplace. This stage relates to explaining the NFT’s core idea and thus to the creation of the NFT name, description, and other content necessary for listing.
Listing
The original name for this stage in the culture cycle was Exhibition. Since NFT is not a pure art form but has as its main aim the sale on the market, it would be more appropriate to call this stage “Listing”, as it is the next step after “Production” and “Postproduction”. Thus, this stage consists of all the ‘Listing’ tasks. For example, it is an understanding of what type of gas to pay for, what marketplace to use, etc. In addition, the promotion of each piece of artwork belongs to this stage.
Selling
The last stage of the culture cycle is consumption, or NFT-sales, following the Listing stage. Sales management is vital. This stage has a significant impact on the final margin. This activity involves selecting buyers, arranging the transaction, and communicating needs to buyers.
Support activities of the NFT Value Chain
We have looked at the primary activities of the NFT value chain. The question of support activities then arises. A support activity is sufficient and is NOT less necessary than the main activity. It is called a support activity only because it is not directly related to the item’s production but is the basis for the main activity.
Education and Training
NFT requires a high level of diverse knowledge. It needs to know how to create artwork and use different software effectively. In addition, it needs to know about metaverse trends, particularly knowledge related to NFT listings and sales. Moreover, the artist needs to learn a lot about marketing to successfully organise the value chain, as promotion is the only tool to sell. Thus, education is a supporting activity in the NFT value chain that affects the final margin.
Management
As the NFT performer is often a freelancer, the project manager must be developed to a high level. Its impact on the efficiency of listing and promotion and consequently on the final margin. Besides, poor management can cause low margins even if the rest of the activities are checked and proven.
Development of the Personal Brand
It is not news that a personal brand can affect the final price of each piece of artwork, and this rule applies in the NFT market as well. The artist must consider the timing in this area, as it can be powerful to increase the price.
What should be looked for in a strategic analysis of the NFT and the identification of competitive advantage of NFT?
Since this NFT belongs to the cultural sector, it is difficult to discuss the search for competitive advantage in its pure form, as it is challenging to subordinate creativity to marketing grounds for evaluating artists and minimising risks before bringing them to the market. At the same time, however, the Internet gives us the opportunity not to concentrate on the preferences of a limited target but to find our own. So, the STP model can, in any case, be useful for understanding the target audience and how to talk to them. But this is something that needs to be done before creating a Value Chain.
The pre-production stage helps determine what you want to do and how it relates to the current agenda of your target audience. It can provide the best competitive advantage.
The postproduction stage is one of the most important and time-consuming. Since no other agents help to define or develop meaning in works of art, this task falls on the artists themselves. A detailed description of the idea and concept, as well as other related information in the NFT, can add value to a work.
In addition, the correct name for the NFT is crucial. People tend to search for similar things using the same words or keywords. As there are no current tools on the market for NFTs, this was in the early days of the Internet. It helps if you research to assess the appropriateness of the name. This will make it easy for your target audience to find you.
At the listing stage, all job of preparing the content is already done. All you have to do is post those data and then do the promotional marketing. What type is promotional marketing needed? It only depends on your target audience. For some, a Facebook post might be effective (but I doubt the effectiveness of posting to groups on LinkedIn and Facebook at all). For some, a video on TikTok or Instagram. There are many other ways to promote NFT, and I’ll do a detailed post on that later.
In addition, the effectiveness of sales can be influenced by the marketplace, as different marketplaces imply different vibes, strategies, and target groups.
The final critical stage is the sale. It is also sufficient to make the best effort and close the deal to sell the NFT.
Conclusion
In this article, I have looked at the NFT value chain, how it is formed, what actions influence the value of NFT and most importantly, what an artist can do to increase efficiency and, finally, the selling price. We now have a concept of precisely what value is created and how we can influence it.
What have I used for this article?
2. Mapping the creative Value Chains. A study on the economy of economy of culture in the digital age. Final report. ISBN 978–92–79–66638–4 doi: 10.2766/868748
