Technology

How brands can develop a Web3 entry strategy

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At an increasing pace, brands are looking for an on-ramp to Web3 to connect with their customers. Whether it be a presence in a virtual world (fast-food chain Wendy’s opened a restaurant in Meta’s Horizon World) or with digital goods (Coca-Cola launched virtual fashion items in Decentraland), companies are experimenting with attracting customers using these new environments.

Often, they’re doing so with a sense of FOMO — fear of missing out — as they race to capture the hearts and minds of Generation Z and Millennial consumers on these emerging platforms. 

The gap between Web3 interest and current experiences presents an opportunity

Our recent survey of over 700 online consumers reveals that they’re indeed interested in using Web3 to interact with companies: 51% said they would be interested in using these technologies to engage with brands. In the same breath, however, consumers say that brands aren’t doing a good job offering Web3 experiences that fully engage them, with 48% agreeing that companies are largely unsuccessful with their current initiatives. 

This finding reveals an opportunity for brands: They can experiment with compelling ways to meet the consumer appetite for Web3 and welcome new customers to their businesses through these new channels. 

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Developing a Web3 entry strategy today

Although many opportunities exist for brands using Web3, many companies have difficulty defining what kind of experience they want to develop at this stage of the technology. The complexity and cost involved in developing extensive experiences within these environments – including the risk that consumer preferences might suddenly change — have limited many companies’ efforts to experiment.

Non-fungible tokens (NFTs), in particular, can serve brands as an on-ramp to Web3 because they have immediate practical applicability for business. They also contain future utility for other Web3 applications in distributed autonomous organizations (DAOs) and the metaverse. 

The shift from collectible to utility NFTs

In 2021, much of the excitement around NFTs revolved around collecting rare, one-of-a-kind NFTs to post as a profile picture or hold in a digital wallet.

On the brand side of the equation, this manifested itself in companies launching collectible NFT projects that drove buzz around the initiative but largely resulted in little benefit to the collector. Since then, the conversation around NFTs from a brand perspective has shifted from them being used primarily as collectibles to utility NFTs that confer benefits to the holder. 

Our research among consumers reflects this shift.

To date, many companies have experimented with collectible NFTs to drive buzz as part of their Web3 initiatives. However, when it comes to including NFTs as part of the brand experience, customers indicate they would like to see a shift in this strategy. They indicate that utility NFTs (containing additional benefits) drive 5.1% higher purchase intent over the traditional collectible NFTs launched by many companies.

Top-performing utility types for NFTs

Customers also have specific types of utility benefits they’re seeking from NFT-enabled brand programs, and the value that companies can deliver to them as a result.

Consumers say the top benefit they’re looking for in utility NFTs is a way to be rewarded for their brand loyalty, with 37.4% indicating that it increases their brand engagement. Other top benefits users look for in utility NFTs: a way to support organizations that drive social impact (27.8%), a branded community with exclusive offers (26.6%), and a way to obtain event tickets (23.9%).

NFT-enabled brand communities drive exclusive experiences

As the buzz around collectible NFTs fades, the next logical step for companies looking to attract Gen Z and Millennial customers is to build a brand community enabled by utility NFTs.

NFT brand communities can not only attract new customers with digital assets, but can provide added benefits to deliver added engagement and value. By wrapping these benefits in an active brand community powered by NFTs, companies can deliver continual engagement for customers — and earn brand loyalty as a result. 

In these groups, brands can extend the conversation with their customers and deliver special perks, benefits and content to loyal members, such as access to special events, discounted offers and behind-the-scenes interviews. One benefit of these private membership communities is that brands can engage NFT holders in a curated, brand-safe environment.

Specifically for brand communities, our research of 700-plus consumers indicated that certain benefits would make them more likely to become NFT holders, with members-only discounts at the top (43.1%), followed by access to special product features (late check-out at a hotel, for example) (31.5%), and access to exclusive merchandise (30.7%). These types of added, exclusive amenities create additional value for Gen Z and Millennial customers. 

Taking advantage of Web3 today

Web3 technologies offer compelling opportunities for brands to immerse their customers in virtual experiences and to engage in decentralized ways. But because these technologies will take time to mature, many brands view them as available only in the future. In the meantime, they’re experimenting with one-off initiatives to attract Gen Z and Millennial customers on these platforms so as not to miss out on emerging opportunities. 

NFTs offer a practical on-ramp to Web3 for brands who want to experiment with opportunities that NFTs unlock now, as well as future-proof their strategies as virtual worlds mature and develop.

The best news is that companies can start with branded NFT communities today, with web technologies that users are widely adopting. Whether it’s using NFTs as a part of loyalty programs, as social impact initiatives, or for community building, these digital tokens offer a compelling way to attract Gen Z and Millennial customers and keep them loyal to your brand.

Dave Dickson is the founder of PicoNFT.

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