Building loyalty with Web3

Using NFTs for Marketing: Innovative or Ineffective?

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January 17, 2023

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Why are so many big-name brands using NFTs these days? We weigh up the pros and cons of using NFTs as part of marketing strategy.

In an article about Web3 marketing, Alanna Gregory, Head of Customer Marketing at Afterpay, said, “Web3 will do today what social media did for brands in the early 2010s. This shift will mainly be ushered in through immersive, branded, and VR-enabled realities. Just like brick-and-mortar audiences flocked to social media, they’ll follow the same brands into metaverse communities.”

In the past couple of years, we’ve seen a lot of well-known and established brands incorporate the latest internet sensation, NFTs, into their marketing strategy

Brands like Bud Light and Starbucks have created NFT collections that provide unique benefits to token holders. While other groups like Coachella and Vegas Afterparty have experimented with issuing NFTs that act as tickets to exclusive events. But why did these companies choose to utilize NFTs in this way? What are the benefits of using NFTs in brand marketing? And what are the drawbacks? Let’s take a look. 

How could NFTs strengthen your brand?

1. Brand extension

Bud Light and Starbucks already have brands with established products. They didn’t make NFTs as art collections to be solely bought and sold as their own digital goods. Rather, they created NFTs that promote a new product or product category that’s already under the umbrella of what their brand offers. Creating a new product in this manner is referred to as a brand extension

As an example, Bud Light’s NFT N3XT collection is a partnership with the NFL. Holders of a N3XT token can claim a free Bud Light X NFL “Team Can” to support their favorite football team. Token holders will also be eligible for exclusive prizes, team-specific video calls, and even private stadium tours. The N3XT NFT is considered a brand extension because it rewards customer loyalty with prizes and experiences that directly relate to their interest and devotion to the brand. 

Brand extensions can reward the loyalty of existing customers or expand the customer base by reaching a new audience. NFTs that act as brand extensions utilize the brand equity that you’ve already built and expand it with new offerings. NFTs operating in this manner need to have practical applications, such as offering special perks, access to exclusive communities or special discounts. 

If successfully implemented, NFTs can be a low-cost way to expand your customer base and increase sales for already existing products without having to spend a lot of money developing and producing a new physical product. 

2. Ownership proof

A useful byproduct of the NFT creation process is its effectiveness as a record-keeping tool. It is near impossible to maliciously alter a blockchain successfully which means the ownership of an NFT is verifiable. As a result, NFTs make it possible to verify the sale and purchase of a digital good that is owned by an individual. So how can this be useful? 

In our NFT guide, we discuss how NFTs can potentially be used to ease the transfer of real estate ownership between individuals. A real estate NFT would, upon purchase, link to the documents required to transfer ownership and the property details that a new owner would need. Sales can take place on an online NFT marketplace, which means no hassle in setting up a website with its own online store. This can work on a smaller scale for anything, as purchasing an NFT with an associated product would provide all the documentation needed for a physical product. For example, Patrón tequila created a rare product called Chairman’s Reserve that only had 150 bottles. The reserve could only be purchased via an NFT that served as both a proof of authenticity and verification of ownership. Upon purchase, the NFT holder could choose to keep the physical bottle at the secure facility or “redeem” it and have it shipped to them at any time 

NFT groups like also provide authentic celebrity autographs that come with additional perks and digital experiences. Although you won’t necessarily always get a physical product with an autograph NFT, this group is utilizing NFTs to verify the ownership and authenticity of their product. A physical product in a collection could have an attached NFT that would perform a similar function.

3. Community building 

Different green zombies in deadfellaz NFT collection
The Deadfellaz NFTs

One of the main draws of purchasing an art NFT is access to an exclusive community that meets in a social space like Twitter or Discord to chat about similar interests. Access to these spaces require an NFT for entry that may provide additional perks on its own. However, the shared unifier between members of the community is the brand of the NFT that they originally purchased. 

There are numerous popular NFT communities based around different passions and interests. Deadfellaz, for example, is an NFT “undead horde” that takes inspiration from zombie and horror movies that the founders were passionate about. Their community encapsulates the horror aesthetic, as well as music, gaming, and queer culture. World of Women is another NFT collection that features women discovering and creating new worlds. Their community supports an inclusive, uplifting, and optimistic community that helps people from all backgrounds navigate the Web3 space

This can be a great way to foster and reward your brand’s most loyal customers – and create brand advocates in the process. Creating community platforms also allows you to stay connected with your customers and audience, which creates a bond between you and them that goes beyond the product or service that you provide. You’ll receive direct feedback about your brand and stay in touch with your loyal customers. 

Creating a community can be done fairly inexpensively, making it a kind of grassroots marketing of sorts. It can be used to complement your existing marketing strategy. Or if you have a fairly restricted budget, it’s a great alternative to those big-ticket marketing line items like paid social and paid search. 

4. Inclusivity

The NFT art platform has already expanded creating and collecting art beyond traditional spaces. In a Forbes article titled The Diversity, Equity and Inclusion Potential of NFTs, author Rebekah Bastian discusses how NFT art spaces are providing mediums for women, people of color, and LGBTQ artists to share their work in a financially viable way. Bastian gives ARTXV as an example, which is an NFT collection that focuses on showing the work of neurodivergent artists. 

NFTs allow these groups who haven’t had opportunities to sell their art in traditional platforms and spaces to make careers out of their passions. Many NFT projects need freelance or full-time artists that can create unique art pieces en masse. 

Certain NFT projects also fund charities and humanitarian efforts by dedicating a portion of their proceeds generated from selling NFTs. One such example is Geometry Runners by Art Blocks. The project donated $3.4 million to the Information Technology & Innovation Foundation and the Coalition for Rainforest Nations. 

Altogether, NFTs can be a great medium to expand your commitment to inclusivity and diversity. Dedicating a portion of the proceeds is also a great choice to promote additional sales of the NFTs and improve your image. 

What should you bear in mind?

1. Environmental impact

Crypto mining has a notoriously large environmental impact by taking up a lot of energy to function. However, most cryptocurrency networks now operate from a proof-of-stake system instead of proof-of-work and no longer require crypto mining rigs to work. To learn more about the difference between these systems, check out our article on the environmental impact of NFTs

2. Risk vs reward

Into the Metaverse: An Overview of Adidas' web3 Strategy — Spatial  Awareness by Chris Sotraidis
Source: Adidas x BAYC

NFTs are still in the early stages of development and the internet hasn’t entirely adopted them quite yet. No one can predict the future so it’s difficult to know exactly how NFTs will be used in the future or what their sticking power will be on the internet. Most large brands have taken a conservative approach to experimenting with NFTs – introducing a collection or new product to see if it sticks.

Adidas, for example, has exclusive NFT/metaverse products and has partnered with popular NFT collections like Bored Ape Yacht Club and to promote this new product. These NFTs are only meant to boost the sales and popularity of their clothing brand – not replace it. 

Therefore it’s important to evaluate the risk/reward of investing in an NFT project. You need to know if your audience would be receptive to this sort of project or if there’s a new customer base out there that would be attracted to your brand if you introduced NFTs. It comes down to the cost of acquiring a new customer. How much would an NFT project cost you in relation to the new customers you would acquire?

3. Fostering trust

A lot of NFT scams are driven by a focus on FOMO: The fear of missing out. This is the idea that if you don’t invest in an NFT project right now, you’ll be missing out on heaps of cash down the road. If your brand’s NFT project is too aggressive in its marketing or isn’t clear about its goals and motives, customers may incorrectly assume that you’re out to fleece them. 

To avoid association with these types of scams, be as transparent as possible with what the goals of your NFT project are. You want some amount of exclusivity and mystique surrounding your project, but not so much that people wonder if you’ll “pull the rug out” from under them once you get their money. 

If your brand is established and trusted – and you have clear intentions with the project – you shouldn’t have much to worry about. It can be smart to employ the method we mentioned earlier where a portion of the proceeds generated from your first NFT project are donated to charity.

4. Hidden fees

Minting an NFT on the blockchain market comes with an additional fee that’s called “gas”. This fee is rewarded to Ethereum validators who verify and process transactions that occur on a blockchain network. This fee can fluctuate – going up and down depending on how many transactions are currently occurring on the network. The average gas fee has significantly reduced since Ethereum switched over to a proof-of-stake system, currently averaging at around -88.79% from a year ago in October of 2021. 

The best way to avoid gas fees is to space your transactions across greater periods of time. Most groups practice “lazy minting” which creates a smart contract that will only mint the NFT when it’s bought. That way, when you introduce a new NFT collection, you won’t have to mint them all at once and can save money on gas. 

Gas fees aren’t what they used to be and can be mitigated to some extent. But it’s still certainly a potential expense that can add up if not properly accounted for or managed.

5. The hype cycle

NFTs are often labeled as a fad and some of the early uses of them would point toward that being true. Selling popular memes as NFTs doesn’t exactly have a lot of staying power. That said, once the initial buzz faded, the utility and power of NFTs began to emerge. 

It’s worth revisiting the Gartner Hype Cycle to understand how new technology matures and eventually is adopted. Initially, there will be an innovation trigger where the new technology gains widespread traction and is proven to be commercially viable. After that, the expectations of the new technology are over-inflated to an unrealistic scale. Following several failed projects with no follow-through, there is a period of disillusionment where people label the technology as a failure or a fad. 

However, following this, realistic applications of the technology occur as people better understand and implement the tech. Later-generation projects appear that are much more rigorously researched and tested before going on the market. After this, the technology is adopted into the mainstream and the market broadens. 

Although it’s difficult to say exactly where we are in this hype cycle with NFTs, we are starting to see some practical applications for them. Musicians, artists, and other creators have been able to cut out the middleman platform that takes a portion of their earnings by minting their work as NFTs. Games may use a play-to-earn system to reward players with NFTs after a certain amount of time invested while encouraging them to invest their own money in the game. 

As long as your brand is clear about its goals and properly researches and tests the applications of its NFT projects before rolling them out, you’ll stay firmly in the fad-free zone. 

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