The staying power of cryptocurrencies and digital assets in general is due in part to their versatility. Every time I feel like I've reached the bottom of the barrel, someone contacts me with a new use case for cryptocurrencies.
Recently, however, it was Dan Jurek, vice president of strategic services at Lacek Group, who presented some new ideas for already established use cases for digital assets. Lacek Group is a loyalty marketing agency focused on driving customer loyalty for Fortune 1,000 companies.
Digital assets like NFTs and cryptocurrencies not only offer new opportunities for brands to reward loyal consumers, but they also promise to deepen relationships between companies and their customers.
"I feel like we're at one of these cool milestones in our industry because this burgeoning area of cryptocurrencies and the metaverse is such a perfect fit for what we do," Jurek said. "With so much technology, we can deliver personalized experiences based on what we know about our customers."
As the simplest example, Jurek says some brands are using cryptocurrencies to pay their customers or using digital assets to directly reward consumers' desired behaviors. Other companies are using blockchain technology itself to ensure transaction traceability, transparency and security. Still others are using NFTs for advertising and sales promotion.
As new layers of digital assets are developed and new applications are invented, companies have the opportunity to go much deeper, Jurek said.
"We're seeing the metaverse and Web 3.0 being used to hide promo codes, and companies are getting people to look around the metaverse and earn - I think there's going to be a lot of growth there," Jurek said. "With NFTs, we see a market that's pretty flooded, but it's the path of least resistance for companies to get involved in that space. With NFTs, brands are dipping their toes in the water."
Jurek identified four trends that will determine how companies use digital assets to build customer loyalty.
NFT auctions for a good cause.
"I liken it to an art auction - people can bid on NFTs, and if you're the highest bidder, you win the NFT," Jurek said. "Promotions like this have been around for some time. The real question is what brands are doing with it to make their customers feel valued and to put themselves out there, and that's why NFTs exist for a purpose. It's like a badge of honor."
If a brand auctions off a series of NFTs to support a good cause with the proceeds, consumers can wear the NFTs "like a badge of honor," Jurek says, meaning others can see on social media or in the Metaverse that a person supports or is involved with a social, political or religious cause.
Flexibility in rewards
NFTs in particular allow brands to be flexible with what they offer their customers, Jurek said.
For example, consider two different cosmetics consumers, Mary and Amy. Mary spends $5,000 per year on cosmetics, while Amy spends only $1,000.
"Knowing that, we can differentiate the value we provide to these two NFT holders and use it to cross-sell and upsell," Jurek says. "So if Amy buys a certain type of moisturizer, we can give her authentic offers and experiences - maybe an exclusive experience with one of her favorite cosmetologists. Since she has an NFT, she may be one of only 50 people who can do that."
Promoting desired consumer behavior.
"Basically, brands are now saying, 'We want you to fill out this survey so we understand you better, and in return we'll give you this NFT or cryptocurrency,'" Jurek said. "With digital assets, they can also go further - if a consumer gives us their information within 30 days, their NFT can be redeemed for x amount of products and additional purchase opportunities."
In other words, digital assets can be a carrot to get people to do the things brands want them to do.
Speaking of digital carrots....
NFT redemption options
Brands can redeem NFTs for concert experiences, meetings, access to content or products. But in the future, consumers will have many more options for how to redeem their NFTs.
Although NFTs are not pawnable, they can change hands like any other digital asset, and the secondary market for NFTs is still in its infancy. So let's say Amy from our cosmetics example doesn't necessarily want her exclusive experience with a makeup artist - she can trade her NFT on the secondary market for crypto, cash, or another NFT that offers a similarly valuable experience.
"This will open up a world of different options for people," Jurek said. "Let's say I received a trip to Hawaii through a points program, but I don't want to go to Hawaii. I can exchange it on a secondary marketplace like Baakt for a trip to Belize. We'll see a lot more peer-to-peer trading than in the past.
What this means for financial advice.
The proliferation of blockchain and digital asset-based rewards programs has some implications for financial advisors. For one, advisors need to be prepared to provide advice on how rewards can and should be redeemed, and they should be able to discuss potential transactions in a secondary NFT marketplace. Advisors should also be prepared to review NFT auctions for a specific purpose and compare them to other, more traditional giving options.
Second, the financial industry could adopt some of the behavioral management techniques from the larger brand universe to help its clients adopt better financial behaviors. These could include "digital carrots" for good saving, spending, and investing behaviors and NFT rewards for loyal customers that give them access to social experiences.
By incorporating digital rewards for consumers, advisors could find ways to catch up with behavioral engineering already used by digital investment apps like Robinhood and Betterment, and create wealthier, happier, and more satisfied customers.