The staying power of cryptocurrencies and digital assets in general derives in part from their versatility. Every time I feel like I’m nearing the bottom of the barrel, someone contacts me with a new use case for crypto.
Most recently, however, it was Dan Jurek, vice president of strategic services at the Lacek Group, offering a few new spins on well-established use cases for digital assets. The Lacek Group is a loyalty marketing agency focused on driving consumer engagement for Fortune 1,000 companies.
Digital assets like non-fungible tokens (NFTs) and cryptocurrencies are not only offering new possibilities for brands to reward loyal consumers, but they have the promise to build deeper relationships between companies and their customers.
“It feels like we’re at one of those cool milestones in our industry because this burgeoning area of crypto and the metaverse are so perfect for what we do,” said Jurek. “With so much technology, we can deliver personalized experiences based on what we know about the customers.”
In the most simple example, Jurek says that some brands are using cryptocurrencies as payment methods for their customers, or tap digital assets to directly reward desired behavior from consumers. Other companies are leveraging blockchain technology itself to ensure the traceability, transparency and security of transactions. Still others are using NFTs for publicity and promotions.
As new layers of digital assets are developed and new applications are innovated, companies have the ability to go much deeper, said Jurek.
“We’re seeing the metaverse and Web 3.0 being used to hide promo codes, and companies are getting people to look around and earn things in the metaverse – that’s where I think there’s going to be a lot of growth,” said Jurek. “In NFTs, we see a market that is quite flooded, but it’s become the path of least resistance for companies to get involved in the space. NFTs are how brands are dipping their toes in the water.”
Jurek identified four trends that are defining how companies are using digital assets to drive consumer loyalty.
NFT auctions for a cause
“I liken it to an art auction – people can bid on NFTs, and if you’re a high bidder, you win the NFT,” said Jurek. “These have been happening for a while. The real question is what brands will do with them to make customers feel appreciated and to keep themselves top of mind, and that’s why there are NFTs for a cause. It’s like a badge of honor.”
When a brand auctions off a set of NFTs to support a cause with the proceeds, consumers can “wear” or display the NFT as if it were a “badge of honor,” said Jurek, meaning others on social media or in the metaverse can see that a person supports or is involved in a social, political or faith-based cause.
NFTs in particular allow brands to be flexible with what they’re offering consumers, said Jurek.
For example, let’s consider two different consumers of cosmetics, Mary and Amy. Mary spends $5,000 per year on cosmetics, while Amy spends $1,000.
“Knowing that, we can differentiate the value which we offer to each of these two NFT holders and leverage it to cross-sell and upsell,” said Jurek. “So if Amy is buying certain types of moisturizer, we can give her authentic offers and experiences – maybe an exclusive experience with a favorite makeup artist. Because she holds an NFT, she might be one of only 50 people who can do that.”
Driving desired consumer behavior
“Really, what brands are doing right now is saying ‘we want you to complete this survey so we understand you better, and in return we’ll give you this NFT or cryptocurrency,’” said Jurek. “With digital assets, they can also go further – if a consumer gives us their information within 30 days, their NFT can be redeemed for ‘x’ amount of product and additional opportunity to buy things.”
In other words, digital assets can be a carrot to get people to do the things that brands want them to do.
Speaking of digital carrots …
NFT redemption options
Brands can allow NFTs to be redeemed for concert experiences, meetings, access to content or access to products. But in the future consumers will have a lot more options for how they dispose of their NFTs.
While NFTs are non-fungible, they can still change hands just like any other digital asset, and the secondary market for NFTs is still in its infancy. So let’s say Amy, from our cosmetics example, doesn’t really want her exclusive experience with a makeup artist – she can put her NFT on the secondary market and trade it for crypto, cash or another NFT offering a similarly valued experience.
“This is going to open up a world of different options for people,” said Jurek. “Let’s say I’ve been rewarded a trip to Hawaii through a points program, but I don’t want to go to Hawaii. I can trade it to you for your trip to Belize across a secondary marketplace like Baakt. We’re going to see a lot more peer-to-peer commerce than has happened in the past."
What it means for financial advice
The proliferation of blockchain- and digital asset-based rewards programs has a few implications for financial advisors. For one thing, advisors need to be prepared to provide counsel on how rewards can and should be redeemed, and they should be comfortable discussing potential transactions on a secondary NFT marketplace. Advisors should also be prepared to vet NFT auctions for a cause and contrast them with other, more traditional giving experiences.
For another, the financial industry may want to adopt some of the behavioral-nudging techniques of the larger brand universe to instill better financial behaviors in their clients. This might include offering “digital carrots” for good saving, spending and investing behavior and offering NFT rewards to loyal clients giving them access to social experiences.
By embracing consumer rewards driven by digital assets, human advisors may find ways to catch up with the behavioral engineering already embraced by digital investment applications, such as Robinhood and Betterment, and create wealthier, happier and more satisfied clients.
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