How brands use NFTs for community building and DAO access

by James · June 15, 2023

FEWOCiOUS is auctioning five new unique NFT artworks, along with five physical paintings and never-before-seen drawings in a collection titled “Hello, i’m Victor (FEWOCiOUS) and This Is My Life” at Christie’s on June 28, 2021 in New York City . (Photo by Noam Galai/Getty Images)

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Many companies are exploring the utility of non-fungible tokens to help brands gain new audiences, build loyal communities and differentiate themselves from competitors. In fact, crypto market aggregation website CoinGecko’s found that 77% of crypto-savvy survey respondents cite “utility” as the top reason for buying an NFT.

NFT buyers are still a niche. Only about 3% of US internet users owned an NFT in 2022, according to data published by analytics platform Finder, even though NFTs have been in the public eye since 2017. NFTs associated with brand experiences seem to be the ones gaining consistent traction throughout the time. price movements and market cycles. From physical merchandise benefits to exclusive event cards and loyalty programs, brands that bring the metaverse into the real world foster communities of NFT fans.

For example, StarbucksSBUX has always been in the “surprise and delight” business; it recently extended this strategy to NFTs, offering free NFT stamps, extra points and a number of real-world benefits to members of the Odyssey community.

For a different type of loyalty benefit, fine jewelry company L’Dezen by Payal Shah created a smart contract for a “digi-physical” pair of 18-carat gold, 2.27-carat diamond earrings to be shipped to the highest bidder. The winner received an insured pair of unique earrings and a PFP NFT that allowed them to digitally overlay the earrings on their social media profile pictures.

In short, a number of companies are using NFTs to provide more value to customers.

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Driving engagement through “phygital” rewards

Customers are increasingly interested in tokens that can bridge the gap between virtual and physical and that offer tangible value beyond simply owning it. This kind of “phygital” (physical + digital) twin system is an effective way for brands to gain more engagement while allowing customers to try something new and be rewarded.

A recent example is the “Pharrell Pack” by music artist Pharrell Williams, who recently collaborated with NFT collection Doodles. Not only does this pack contain digital apparel from activewear brands like Adidas, Humanrace, and Billionaire Boys Club, but it also gives holders a token that can be redeemed for real-world apparel.

Another collaboration is the partnership between Tezos and McLaren to launch a collection of NFTs, starting with various digital components of the MCL35M 2021 Formula 1 racing cars.

“The project encouraged active brand engagement from more than 450,000 enthusiasts in hopes of obtaining all 23 McLaren Racing Collectibles, one from each race,” Victoria Zavyalova, Head of Brand Culture and Storytelling, Fuelarts x TezosXTZ accelerator, told me in an interview.

Digital-to-physical experiences are more than a passing fad, especially for luxury brands like Dolce & Gabbana. The fashion brand released an NFT collection called “Collezione Genesi” in 2021; it still offers utility today, allowing holders to access an exclusive online community. At least one original NFT buyer also received a customized physical copy of the Glass Suit NFT, a one-of-a-kind Dolce & Gabbana suit. Using NFTs to encourage a sense of belonging among devoted shoppers may be one of the best mainstream use cases for blockchain technology.

Optimization of customer reward and loyalty programs

Loyalty programs are not unique to corporate NFT experiments, but NFTs can help traditional customer rewards programs stand out in oversaturated markets. The average American is enrolled in 16.6 loyalty programs, but only active in about 7.6, according to Statista. As such, smart companies are turning to the metaverse to deliver the sense of novelty and personalization that makes a brand memorable to customers. Many brands are using NFTs to revitalize customer engagement through digital moments of surprise and delight.

Brooklyn cafe Gertie, for example, teamed up with loyalty platform Blackbird, which allows users to get free perks like baked goods and coffee through a digital experience, essentially reinventing the traditional punch card.

Gertie founder Nate Adler also mentioned to me a larger upcoming program backed by investor Fred Wilson. They are opening a new restaurant in Brooklyn called Gertrude, offering everyone the opportunity to become a basic member based on three membership levels. Benefits include token ownership, an invite to friends and family for pre-opening dining, access to secret menu items, a custom cocktail named after you, and more.

NFTs are more than a passing fad

Some brands are taking their NFT experiments even further by letting customers make the decisions through decentralized autonomous organizations, called DAOs.

Beauty brand NYX achieved this with a small group of NFT holders through GORJS DAODAO, a Web3 community for beauty creators. Through this collective, NFT-holding members can propose new projects, vote on product declines and claim both physical and digital rewards earned through community participation.

From the status indicator of owning a blockchain-verified luxury fashion item to the customer reward of having free food delivered to you, NFTs offer a variety of loyalty program tools that have only begun to influence what customers expect and want from brands.

While many NFT holders may see digital collectibles as investments or financial assets, NFTs can also be stand-alone branded components, independent of secondary market sales or prices. Such NFTs help brands connect with younger, tech-savvy audiences around the world, while also helping companies stay on top of giving loyal followers priority access and special treatment. With the right business strategy, NFTs can be a powerful tool for community building while fostering a sense of co-ownership, shaping the brand’s future image and creative value.

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I am the founder of a newsletter-based publication, Vivid Minds, which focuses on how leaders overcome challenges. I am particularly interested in exploring the intersection of mental health and the creative economy, as well as the impact of digital trends and crypto on our well-being. In 2016, I had the opportunity to interview Vitalik Buterin, the founder of Ethereum, when ether was only $12, and have followed the crypto scene closely ever since. Over the past six years, my work has taken me around the world, from Moscow to New York City. In San Francisco, I helped organize blockchain conferences for over 3,000 attendees. In 2018, my own blockchain event in Germany, called the Blockchain Visionaire Summit, gathered hundreds of participants and contributed to the growth of the European blockchain scene.