Today, we carry more computing power in our pockets than what got Neil Armstrong to land on the moon. Technology is extraordinary, and one of the hottest items on the market is the non-fungible token (NFT). Just between January 2021 and March 2021, the search term for NFTs grew by 98 per cent on Google.
NFTs are created by uploading a file into the digital collectibles auction market, such as KnownOrigin, OpenSea, or Rarible. Encrypted with details about the file, it is bought by consumers through cryptocurrency. First used by Larva Labs that released 10,000 digital collectible characters on CryptoPunks, the trend dramatically shot up in the last couple of years. According to experts, the surging value of Bitcoin and the impact of the pandemic created the NFT craze.
Capable of creating unique brand experiences, increasing brand awareness, and encouraging customer engagement, NFTs have become the latest addition to the martech stack allowing brands to witness a spike in revenue and conversion growth rates. Additionally, the main reason why NFTs work well with customers is that it allows them to control asset ownership, backed by blockchain technology.
SUPERNOVAE that released applications of NFTs in the gaming industry back in 2017, recently announced its decision to move a level up. Its recent update of the city builder game MegaCryptoPolis is evolving into a metaverse called Megaworld, where every item is an NFT. The company believes that the Megaworld will be the future global marketplace for all NFTs. Things are getting wild, and brands are leaning towards NFT as a marketing tool.
But why are people attracted to digital collectibles?
The Psychology of Collecting
People have always chosen to collect art to store value. Psychologists believe that humans are biologically wired with the desire to gather. During the prehistoric times, humankind collected food and water for survival. Now, collectibles are more for personal satisfaction. The psychological phenomena to collect include the endowment effect that something is valued more when the person owns it, or associated with someone or something popular. Everybody is a collector, some collect paintings, autographed items or vintage records, while others collect limited edition items of a favourite brand.
Tangible collectibles are popular because it is almost impossible to create a replica. Even if it did exist, originals could always be distinguished as they come with rarity, provenance, and quality. And digital collectibles couldn’t tick any of these factors, until recently that is. With the advent of blockchain technology, digital collectibles can be owned and verified. While it has lost its outrageous momentum, brands are still eyeing all the possibilities. They believe NFTs can strengthen their marketing strategies, and they are not wrong. Customers still value NFTs as they come with unique factors.
Also Read: Consumer Psychologists You Need To Know
Like a legal contract, smart contracts seal the maximum supply of an asset and it can set unbreakable issuance limits. If the item allows only 13 copies to ever exist, the code makes sure that there are no possibilities of allowing a 14th copy.
The collectible need not just exist as an image on the internet. The ERC-1155 tokens can be added to games, applications, or any other project for increasing its utility and value. Experts state that digital collectibles are more useful after its creation as it can be used for other purposes.
NFTs do not require a chauffeur assist or a meeting in another city, or an exchange appointment. Being a 24/7 online marketplace, it can be bought from anywhere at any time.
When a collector decides that his collectible is no longer satisfying, the ERC-1155 tokens can be salvaged for its raw materials and sold. Confused? By destroying the item, their Enjin coin value can be recovered.
Also Read: Marketing Trends Driving Luxury
Leveraging NFTs in marketing strategies
According to 5WPR’s 2020 Consumer Culture Report, 83 per cent of millennials choose brands that align with their values. Experts strongly recommend companies to openly support causes and include them in their marketing strategies to increase brand valuation. A brand that has been successful with it for years is Taco Bell. How did it add NFT into its equation? The brand launched 25 NFT GIFs to support the Live Más scholarship. Creating a lot of buzz on social media, they were sold out in 30 minutes. Sportswear brand Asics launched a Sunrise Red collection including digital sneakers, and the proceeds were to fund the digital artists who produced the artwork.
While NFTs have proven to be valuable assets for brands to drive their revenue and awareness, adding an element of surprise to the digital tokens might attract more customers. Applying this strategy, was Coca Cola, in partnership with developer Tafi. They launched a four-piece collection featuring multi-sensory NFTs housed inside a Friendship Box. Each of these mystery boxes unlocked surprise goods. NFTs can be encrypted with special discounts, loyalty rewards, freebies and gift vouchers, specifically personalised through CRM data.
While AR and VR technology is increasingly being used for try-ons, NFTs can help optimise the process for customers. Once a brand creates a new design for, say, a lipstick shade, a digital version of the same can be made available for virtual try-ons. In other cases, selling digital versions with an AR collaboration. For instance, Gucci introduced their Gucci Sneaker Garage in 2020, and recently, the brand launched digital Gucci shoes in partnership with Wanna with hopes of reaching a broader audience. The brand plans to sell them as part of an access pack that will allow customers to virtually try on the shoes through AR. According to Sergey Arkhangelskiy, CEO, Wanna, the NFT and AR collaboration will only continue to grow in the future.
Meanwhile, most consumers worry about being duped when they buy a luxury item through a third-party platform. According to the Organisation for Economic Co-operation and Development (OECD), the trade in counterfeit goods stood at 3.3 per cent of the global trade in 2019, and experts reckon the numbers have only increased in the last two years. Fortunately, the luxury industry has found a way to ease customer worry with proper authentication and tracking through NFTs. For instance, Nike has added a digital version for every pair of sneakers. Upon purchase, the ownership of both the physical and digital sneakers is transferred to the customer, and details are stored in a cryptocurrency wallet called the digital locker. So, even if the sneakers end up in the resale market, the next owner can authenticate the product and know its history through the stored digital information.
The $250 million market is opening up new opportunities in the digital marketing landscape. From billionaire investor Mark Cuban who is building an online gallery to display NFTs to showbiz celebrities like Lindsay Lohan who sold her single Lullaby as an NFT for $85,000. On the other hand, Tim Sweeney, co-founder of the studio that launched Fortnite commented that “the tech is going places” but such digital assets are still “a speculative mess.”
Makes sense as there is no guarantee that the assets will increase in value in the future, but as long as the digital tokens delight customers, it will play an important role in the retail, commerce, and social media landscapes. Beeple setting a record sale of an NFT for over $69 million and Twitter launching its NFT collection are just the beginning.