In the final part of the Loyalty Reimagined series we talked to Thomas Pan, a Web3 author and thought leader, about how Web3 is enabling new and powerful ways for brands to cross-collaborate.
Often denoted with an ‘x’, these partnerships offer a powerful way for brands to tap into each other’s customer base. They typically result in exclusive, limited-edition products that appeal to both brands' fans.
While brand collaborations can be extremely powerful, aren't they fairly hard to pull off?
In the final part of the Loyalty Reimagined Series, Step3’s Nick Casares and Alberto Mera sat down with Thomas Pan, aka TPan – a pretty prolific voice in Web3. They discussed how brands can, and are, leveraging Web3 technologies to create successful co-branded experiences.
Co-marketing: The jump from big brand partnerships to user-driven campaigns
Before we dive in, let’s check we’re all on the same page: what is co-marketing? Thomas gave us his definition (and we may well adopt it):
“Co-marketing is a form of partnership. A form of expanding the toolset of distribution for whatever the message, whatever the product, whatever the initiative might be.”
As an example of co-marketing done right, Thomas pointed to Nike. Nike x Travis Scott is a popular shoe line that combines two very large fan bases. The Travis Scott x Nike Air Force 1 Low originally dropped in 2017. Back then, a pair it would set you back around $150, but today it will cost you a fair bit more.
The concept of co-marketing isn't surprising. Marketers are always looking for new ways to reach more people.
Though co-marketing was initially dominated by larger brands, Thomas says the rise of social media has allowed for “more democratization” of “voice, attention, content, and the tools to create”. In the influencer era, brands have partnered up withTikTok influencers to reach younger audiences.
But how does Web3 fit into all of this? Thomas thinks Web3 provides opportunities for deeper engagement between brand communities. The Web3 shift will also involve a greater amount of UGC that feels more organic and genuine.
Nick also highlighted how NFTs (part of the Web3 ecosystem) – open up new possibilities for co-marketing. Entities that are identifiable on the blockchain, like NFTs act as markers of a community. Nick said that these markers can be linked to those of another community, allowing for “more fluid and open collaboration”. This paves the way for new marketing and engagement strategies…
Growing a business with Web3: Leveraging data and building an audience
Whether or not marketers turn towards Web3 will likely depend on one thing: “What’s in it for me?” Thomas categorized the advantages of Web3-powered marketing into two groups:
- Meaningful data insights
- New ways to build, and connect with, your audience
Thomas called Web3 KPIs the "hard stuff". He said they’re important for tracking steady business growth and brands could find particular value in accessing the contents of a customer's digital wallet: “Whenever someone with a Web3 or crypto wallet connects their wallet to a brand, that brand can typically see what they have in that wallet.”
This new level of transparency between brands and customers opens up new marketing avenues. For example, Thomas said Nike could explore overlaps between Nike NFTs owners and NBA Top Shot collectors. Spotting these kinds of connections could lead to some new partnerships and co-marketing opportunities.
Another important insight, Thomas thinks, will come from knowing who does, or doesn’t, touch the NFTs they own. This could mean seeing if an NFT owner has listed it on the marketplace or if they’re showing a strong intention that the NFT is theirs. For example, by holding the NFT long-term, or owning a few from the same collection.
New ways to expand your audience
With more meaningful data comes more ways to reward, connect and engage with your customers.
Thomas gave two examples to think about: 1. Yuga Labs’s Bored Ape Yacht collection (BAYC) and 2. Nike’s subdivision RKFT.
Yuga Labs is one of the biggest brands in the Web3 space and Thomas said it has created an IP ecosystem that spans more than 330 different brands:
“Harry_Forj and his team identified over 330 brands that were created from this Bored Ape Yacht Club IP. They can’t use a Yuga logo, but they could use their own Bored Ape for whatever.”
That’s right, BAYC’s broad commercial licence means BAYC holders can spin their NFTs into whatever film, music, book, or media project they want. Though it’s a little tricky to reverse engineer how exactly this all came about, it takes BAYC’s brand awareness to a new level.
Thomas also mentioned how Nike’s subdivision RTFKT (“Artifact") has become more heavily involved in co-marketing over the last couple of years.
Any new product or marketing strategy carries a certain level of risk. A brand has to ask itself: How will the market receive this? What RTFKT has allowed Nike to do is test the market on a smaller scale before opening it up to the wider brand.
Thomas said customers can download 3D files of virtual sneakers and more or less “do whatever you want with it". There are some limits to this – you couldn’t put an Adidas logo on it and start selling it, for example. But, it does allow customers to take part in Nike’s product creation process and make the brand their own.
Interesting, but how can smaller brands, without the hefty marketing budgets, get involved? Nick addressed this:
“Big players are experimenting in the industry... Not every company can engage at this level due to limited resources or creative capacity. However, the exciting part is the community aspect... In 3-5 years, we'll likely see a shift towards co-creation, involving communities in the product creation process. Imagine the impact on branding when customers help create products.”
Thomas observed a growing trend of unexpected brands entering this space, driven by both strategy and experience. He cited examples like asynchronous live experiences, allowing brand engagement in digital events beyond physical locations.
By adopting approaches like Web3-powered loyalty programs, smaller businesses can create more engaging and personalized experiences, setting themselves apart from the crowd.
The role of tokenized rewards in loyalty programs and social media
Unlike traditional loyalty points or discounts, tokenized rewards are digital tokens or NFTs, living on the blockchain, allowing customers to buy, sell, or trade them outside the loyalty program's ecosystem.
In the Web3 model, rewards are direct, tangible assets in a customer's digital wallet, contrasting with Web2's points system limited to specific rewards within a program.
Thomas highlighted Reddit's successful use of this mechanism, focusing on tokenized Reddit avatars. These avatars, customizable digital "selves," are part of Reddit's anonymous platform. They're stored in a Reddit vault, a type of digital wallet, and some are created by artists for a premium, supporting those artists.
Alongside this, Reddit introduced a community point system to tokenize user rewards for quality content. This approach is part of Reddit's "progressive decentralization," as Thomas explained: "They aren't decentralizing the platform... but the value of content... redistributing it and decentralizing that process to the communities."
Reddit's strategy illustrates a potential shift in social media, where content is rewarded with tangible, tokenized rewards instead of mere “likes”.
Pudgy penguins: The best of both webs?
Pudgy Penguins took off in 2021 at the height of the NFT craze. The brand started as a series of cute cartoon penguins that were released on the blockchain as NFTs. They were so popular that even famous people like Steph Curry and Steve Aoki bought them.
But what trends must eventually end, right?
Thomas explained how the founder was mostly interested in launching and building up the brand before exiting. This caused the community to grow concerned with the future of the brand and the floor price of Pudgy Penguins started to plummet.
In 2022, Luka Netz and a group of other investors bought the brand for $2.5 million. And what they did was pretty remarkable. Luka and his team evolved the brand into an “IP and brand development company”.
This shift meant creating a universe of digital intellectual property and expanding into the physical world. Earlier this year, Pudgy Toys hit the shelves in over 2,000 Walmart stores. Pudgy Penguins anticipates toy sales to reach about around US$10M from May to year-end.
Pudgy has embraced the best of Web2 and Web3.
Thomas highlighted some of Pudgy Penguin’s strategic moves, including:
- Attending key events the Las Vegas Licensing Expo. This is where many large IP deals and brands typically begin.
- Tapping into engagement techniques like the Comic-Con claw machine.
- Widespread sharing of cute/funny Pudgy Penguin gifs. At the time of writing, the Pudgy Penguin’s giphy account has more than 10 billion views across all its gifs.
What’s the next chapter in Web3 for brands?
Thinking about where Web3 is going in the next six to twelve months, Thomas said:
“Everything loyalty will be on chain and more more dynamic, flexible, open to a degree, and permissionless to a degree. I'm very convinced that loyalty is going to move in this direction.
Thomas said we’re already seeing this with brands like Starbucks and Nike starting to incorporate Web3 technology into their loyalty programs. (Here’s a short blog post with some more info if you’re curious.)
For brands looking to keep their loyalty program exciting, Thomas suggests monitoring how larger brands are using Web3 and leapfrogging off of their insights and strategies.
Nick observed the trends among larger brands, noting that “The stage is set to see a resurgence of membership programs.”
He added that these memberships now “not only offer perks and benefits” but also integrate loyalty in a way that allows points to move more freely and openly. This is already being seen in programs like Star Alliance in the airline world.
The consensus is clear: Web3's future seems intrinsically linked to the advantages it offers both brands and individuals. The coming decade is poised to foster greater openness, collaboration, and communication across diverse platforms and ecosystems.