Brief: Smart Contracts, Composable NFTs, and the future of brand loyalty programs
NFT as the solution to today’s Brand Loyalty programs
It’s improbable that everyone will start amassing JPEGs or NFTs in hopes that they’ll serve as sufficient brand loyalty rewards on their own. Not at all. The smart contracts included in NFTs, however, offer a better way to manage and implement loyalty programs.
By being grouped together, NFTs will be able to paint a more accurate and complete picture of an individual and can also adapt their function to reflect the needs and desires demonstrated by this more complete picture, serving as behavioral indicators and signals of personal preferences that are composable in nature. Most crucially, NFTs will make it possible to give personalized loyalty to the fullest extent possible without forcing businesses to gather a significant amount of first-party (PII) data or to invade an individual’s privacy.
Finally being able to deliver truly individualized loyalty programs that accurately reflect the behaviors and preferences of every member on a one-to-one basis will be made possible by these functions by enabling brands to do away with the overly straightforward Gold, Silver, and Bronze member tier systems that are currently endemic to loyalty programs.
The issue with current loyalty programs
Despite being a member of an airline loyalty program, you never quite have enough miles to gain anything truly valuable. Or the hotel program were obtaining a free night is always just a few visits away.
Due to points fatigue, elusive tier status, and general mistrust of the mechanics, these programs face certain issues in the eyes of consumers, who are skeptical of their true value. Given that 84% of consumers will choose a brand with a loyalty program when making a purchase, these programs are crucial for brands. However, due to the difficulties outlined above, only 37% of respondents believe that the points and tier are an effective strategy for retaining their loyalty.
A better loyalty solution is provided by NFTs and smart contract composability
The author analyzed Web3’s potential impact on loyalty through the eyes of a fictitious airline called Premium Airlines in order to provide some context and make the essay sound a little less theoretical. Their loyalty program needs to be updated, and one major goal is to create a rewards system that is tailored to the unique habits and preferences of each member and traveler.
The Membership Tokens at the core of the network are designed as “Soulbound NFTs” in order to properly regulate this. This implies that they are attached to the person and cannot be exchanged or sold. However, Premium Airlines is aware that occasionally customers may want to sell miles (or their tokenized equivalent), therefore they enable this by rewarding interaction with $Miles coin and Activity Tokens. These represent prior travel, individual preferences, and behaviors that are particular to each member and are earned through involvement.
Briefly stated, the loyalty program isn’t based on a single NFT but rather a group of composable NFTs (and the smart contracts contained within them) that link like Lego bricks, with each brick denoting a particular attribute. When put together, the brick responds to those around it in order to unlock a completely unique and personalized set of benefits through a framework that is managed and self-administered by the primary Membership Token’s master Smart Contract.
The purpose of the article was not to suggest that NFTs’ collectability or scarcity can overcome the problems that loyalty programs face. Instead, they will do this through connectedness, deterministic accuracy, and program participant utility. The following aspects are crucial to their success:
- Data is owned by the member
- Complete understanding of the member
- True one-to-one personalization
- Gives purpose and power to the Community
- Easier and cheaper to administer
Read the full article to understand thoroughly through the author’s example: https://becomingmetaversal.substack.com/p/smart-contracts-composable-nfts-and?s=r
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