The Evolution of Loyalty: Unlocked by Web3

After developing loyalty programs for direct-to-consumer lifestyle brands, Co:Create’s Director of Business Development, Audrey O’Regan, joined the team to bring the future of loyalty into web3. Read on for Audrey’s exclusive POV on the evolution of loyalty programs and what strategies to consider when creating web3 loyalty campaigns.

Brands + Technology = Always Evolving

The relationship between brands and customers is constantly evolving. From the solely brick-and-mortar era to the rise of e-commerce into the direct-to-consumer age of aesthetically-curated, millennial-friendly Instagram feeds, how brands are built continues to change, as does how they can attract new audiences and nurture existing supporters.

As we navigate a more authentic, community-centric world with culture at its core, we must understand that what drove successful brands and loyal customers in the past won’t work in the future — and why. Brands must evolve to connect the dots between new technologies and the opportunity to cultivate a community of loyal brand champions.

Web3’s Vision for a new Loyalty Landscape

In a must-read blog post from our Co-Founder and CEO Tara Fung, she described the groundbreaking potential web3 has for evolving loyalty programs — and consumer habits — in unseen ways:

“Supporters became participants, informing product roadmaps and creative direction, incentivized to contribute and stay engaged because they have a stake in the outcome and are accountable for the success,” she said. “[Web3 culture] breeds virality, engagement, advocacy, loyalty, organic growth, and yes, revenue, lots of it.”

Changing Tides for Consumerism & Culture

It’s a similar sentiment to Toby Shorins’ excellent essay Life After Lifestyle, which first premiered as a talk at FWB Fest in 2022. Shorins elucidates on the evolution of the “lifestyle era,” which is essentially the millennial direct-to-consumer brand era, to the era we’re entering — the consumer-to-culture economy.

“The Lifestyle era was not about creating culture; it was about attaching brands onto existing cultural contexts,” wrote Shorins, who argued it was more about “sorting consumer demographics into niche categories” than it was empowering people (and brands) to really shape culture through their products. “The new order we are entering into reverses this,” he continued. “For some organizations, culture has become the product itself, and products have become secondary, auxiliary, to the production of culture.”

The Problem with Traditional Loyalty — and Need for Change

Why is change so needed for how brands cultivate loyalty, especially with new technologies at their disposal? Historically, loyalty programs have been transparently transactional — a promotional flywheel that keeps the brand running on an incline for short-term user acquisition.

These kinds of loyalty programs historically had three components:

• Referral programs (refer your friend for $25 off).
• Loyalty points (earn points for every dollar spent).
• VIP programs (the more points you accrue, the better benefits).

In today’s oversaturated brand market, these traditional, clunky pay-to-earn programs aren’t working.

Web3: A New Novel Loyalty Framework Centered Around Ownership

Brands now need innovative ways to stand out and appeal to younger audiences, who don’t want to be merely tossed points from companies they don’t identify with. Web3, and the opportunity for gamified, tokenized rewards, introduces completely new frameworks around loyalty never before seen: self-ownership, interoperability (the ability to take rewards across platforms), and composability, which allows developers to build integrated, highly customizable reward-driven experiences.

In web3, authentic, sustainable loyalty comes from nurturing your community to evolve from mere consumers to empowered brand builders who can participate in co-creation on the brand level. This opportunity changes everything about how brands can — and should — consider building and measuring loyalty and engagement. Historically, loyalty as an initiative has sat primarily with growth performance marketers who are hyper-focused on things like CTR (clickthrough rate) and AOV (average order value), quantitative metrics which don’t tell the complete story of how engagement and consumer habits truly drive loyalty in today’s consumer climate.

However you feel about NFT projects like Bored Ape Yacht Club, Doodles, and Azuki — these community pioneers have helped completely reimagine how brands can breed loyalty and nurture culture by enabling community members to be shareholders (and co-creators) of brand assets. The key difference between web2 and web3 here is ownership — when a brand owns the IP and brand name and the community owns brand assets — it becomes the most powerful global affiliate program that has ever existed.

Loyalty Innovation in Action

In contrast, web2 loyalty programs are walled gardens; you can’t transfer (or even sell) assets earned (e.g. points, tiers) for access or redemption in other brand ecosystems. What if a brand could tap into new communities with similar cultural tastes and spending habits? With web3, on-chain loyalty programs allow for interoperability between brands and communities, serving as a new, more intuitive, and turnkey acquisition channel for brands and for more control and utility for the end consumer.

Think of Soho House and Alo Yoga, two non-competitive brands that one can assume have a ton of community overlap. Imagine if Alo and Soho House collaborated on a community activation, like a series of IRL yoga classes taught by a celebrity yoga instructor at a Soho House location. People who attend each event could earn each brands’ potential loyalty tokens, $ALO and $SOHO, which could be redeemed from either brand to unlock special collective rewards, credits, and experiences — like exclusive Alo x Soho House yoga apparel and access to private classes and token-gated community meetups.

Through loyalty and community-focused tokenization, two non-competitive brands can leverage the power of each other’s communities to fuel more engagement and excitement for their products, ultimately increasing the value of each other’s loyalty program. And by leveraging the interoperable and programmable features of ERC-20 tokens’ open data standard, these brands can launch cross-brand collaborations in days rather than months.

A Wakeup Call to the Brands of the Future

In this brave new decentralized world of web3, brands and consumers can no longer exist as a unilateral relationship where brands sell, and customers buy — and maybe you get some free stuff if you spend enough. If brands want to outlast fleeting trends, they must nurture a community instead of simply building their brand in a quantitative vacuum.

To create loyal customers who will grow to become your most engaged community members, you have to give them a real reason to be there — and stick around.

If you’re an innovative brand looking to activate and supercharge your community through true loyalty — let’s chat.