From Interest Exchange to Brand as a Service: A Paradigm Discussion on the New Scenarios of NFT and Brand Integration

Original Title: “From Interest Exchange to Brand as a Service: A Paradigm Discussion on the New Scenarios of NFT and Brand Integration”

Original Author: LiamWang, Co-founder of Amadeus

This article mainly aims to explore the new scenario applications of NFT and brand integration. There are two reasons for this: first, since last year, discussions about new scenarios for NFTs have been incessant, especially with the arrival of the bear market, which has led to more expectations and thoughts about what NFTs can still be used for; second, during our Amadeus team's service to NFT project parties and creators, many brands have approached me, hoping to receive some advice and solutions regarding the marketing applications of NFTs. In short, brands have noticed the potential of NFTs as a new marketing method, but lack understanding and systematic thinking about how to do it and why it can be done.

To more specifically answer the question of what NFTs can help brands achieve, I will unfold the discussion according to the following framework: first, we need to return to the basics and discuss a seemingly easy topic to answer, which is what a brand is; second, we need to focus on the present and discuss the problems brands are facing today; next, we will talk about the value of NFTs, listing the common uses of NFTs today and exploring the possibilities of other values; in the fourth part, we will discuss the paths worth exploring for the integration of NFTs and brands.

Now, let’s get to the main topic.

Brand: A Sensor for Value Connection

The most fundamental relationship between sellers and consumers is transaction: sellers provide corresponding goods or services, and buyers need to pay for the goods or services they enjoy. In a mature market economy environment, expanding the customer base and promoting continuous repurchase is the natural motivation of sellers. Therefore, for sellers, their core task is to find ways or means to achieve this natural motivation.

Building a brand is one such way. Marketing practitioners are no strangers to the term brand; traditional marketing theories have many explanations and discussions about brands, one of the most classic theories being positioning, which states that in addition to meeting the real needs of customers, a brand must also establish a mental connection to strengthen the relationship with customers.

In the practical reality of brand marketing, we see that almost all sellers are building their brand identity, with differences lying in the choice of paths and entry points. A brand can be a strong functional representation, such as "Use Head & Shoulders for Dandruff"; it can also be an expression of values, as expressed in Adidas's classic slogan "Impossible is Nothing"; or it may emphasize identity, like L'Oréal's "Because You're Worth It."

In my view, a brand is a sensor for value connection. Whether it is a strong functional representation, an expression of values, an emphasis on identity, or something else, sellers use this sensor to send messages to consumers. These messages can be functional, emotional, or more likely a combination of both (a blend of function and emotion). When consumers receive such messages, they provide corresponding feedback. Relying on this value connection sensor, an interactive foundation is formed between sellers and consumers.

When a consumer faces multiple sellers that can provide the same product or service, whether a brand has attributes becomes an important trigger for them to make a purchase decision. Over time, consumers' perceptions of sellers and brands merge into one—sellers become brands, which becomes a powerful fulcrum for expanding the customer base and promoting continuous repurchase.

Crisis: The Failure of Old Experiences, the Rise of Skepticism, and the Confusion of Brand Advocates

Through building a brand, enhancing user perception, and thereby expanding the customer base and promoting continuous repurchase, this path has been well validated in the traditional fast-moving consumer goods era represented by Procter & Gamble and Unilever, and has become a common effective experience for many brands. However, from the past decade to now, this experience has gradually ceased to be universally applicable. From acquiring new customers to retention, conversion, activation, and repurchase, brand effectiveness is waning, increasingly facing the prominent dilemma of "one high and four lows": high customer acquisition costs, low user retention/loyalty, low conversion, low activity, and low repurchase.

The failure of old experiences did not happen suddenly but can be traced:

First, the "scattered" state of consumers and attention deficit has increased the difficulty for brands to accurately find target customer groups. The rise of the internet has enriched the channels through which people obtain information. In the past, the main sources of information were television, radio, and outdoor billboards, whereas today, mobile phones, computers, and social media have increasingly become the primary media for people to receive and transmit information.

The diversification of media channels has brought convenience in information access, but it is not necessarily a good thing for brands: unlike the past, where large numbers of consumers could be easily covered through television, radio, and outdoor billboards, the emergence of mobile phones, computers, and social media has led consumers to transition from a "clustered" state to a "scattered" state. The difficulty for brands to accurately target customers is increasing.

At the same time, the attention deficit brought about by information overload also poses severe challenges for brands. To build consumer brand perception, brands first need to capture consumers' attention and encourage them to spend time understanding the brand. Unfortunately, in the era of information explosion, while people can quickly access information, they also experience increasingly fleeting attention due to the "feeding" of information. We see that today, a short video lasts only a few seconds to a minute, and long videos are often watched at 1.5x or 2x speed; brands no longer find it as easy as before to generate positive feelings and recognition among users.

Second, traditional internet marketing methods have made consumers more "variable," raising the threshold for brands to acquire, retain, and encourage repurchase. Over the past decade, the large-scale money-burning marketing methods of internet companies have rapidly acquired users while gradually cultivating users' awareness of subsidies, leading the general public to habitually use price as a decision-making basis rather than relying on brand influence. At the same time, with the awakening of subsidy awareness, more and more consumers have become "smart," becoming immune to brand advertisements and no longer being blindly attracted.

The bigger challenge is that, as the term "user experience" has been prominently placed in marketing, consumers have also begun to use user experience as a "weapon," demanding more from brands. This explains why terms like "customization" and "user insights" have been continuously emphasized by brands in recent years.

Third, the decline in purchasing power brought about by economic cycles has also weakened brands' effectiveness in acquiring new customers and encouraging repurchase. In the past five or six years, the most talked-about topic has been consumption upgrading, but in the past one or two years, more discussions have shifted to "consumption downgrading." Consumers have begun to make detailed plans regarding their spending, with demand-based consumption replacing luxury consumption as the general choice for consumers. Brands are investing more and more in acquiring new customers and user loyalty, but the returns are increasingly diminishing.

The failure of old experiences has led brands to question: Is it still useful to invest significant resources in building brand power? With the rise of skepticism, brands have also undergone some new changes in their actual marketing methods: compared to the past, where brand marketing was treated as a separate marketing module, brands now increasingly emphasize the integration of brand and effectiveness; at the same time, leveraging the capabilities of big data, more brands have become obsessed with precision marketing, emphasizing the ROI of input-output ratios; third, whether it is live streaming, advertising, private domains, or others, there is a greater emphasis on price rather than brand, with the points of interest becoming simpler and more direct; fourth, with the disappearance of traffic dividends, brands are focusing on the continuous operation of existing customers rather than acquiring new customers.

All these new changes have left brand marketing practitioners feeling lost. In my conversations with some practitioners, the most frequently mentioned word is "difficult": budget cuts, low ROI on advertising/marketing events, and bosses placing more emphasis on actual output have all become internal resistance they face in exercising their skills. Brands are still important, but not as important as before. As one practitioner told me, "Brands need to find new narrative dependencies; they not only need to win the hearts of consumers but also need to gain internal recognition." It seems that brand practitioners are turning their attention to NFTs, hoping that NFTs can become a breakthrough point to resolve the narrative challenges of brands.

NFT: The Combination of Asset Value and Individual Expression Value

When we talk about NFTs, we still need to trace back to understand what NFTs are. NFT, short for Non-fungible Token, is mostly translated into Chinese as "非同质化代币," and another translation is "非同质化通证." Compared to cryptocurrencies like Bitcoin, the biggest feature of NFTs is that they are indivisible and unique. The Bitcoin you own is the same as the Bitcoin owned by others, but the NFT you own is definitely different from others.

From today's market environment, NFTs mainly have four major use scenarios:

The first is art collection. For example, Beeple's NFT work "Everydays: the First 5000 Days" was sold at Christie's auction house for $69 million in March 2021, making it the third-highest auction price for a living artist after Jeff Koons and David Hockney.

The second is game items in GameFi. When you play Axie Infinity, you need to purchase NFT items as a prerequisite for the game.

The third is social/identity tokens. When you buy an avatar from Bored Apes or CryptoPunks, you gain a ticket to enter this circle and showcase your unique traits.

The fourth value is the financial attributes of NFTs. This means investing/speculating through buying, selling, renting, lending, and installment payments to earn profits or enhance the liquidity of NFT assets. Buying and selling NFTs is relatively easy to understand, as NFTs are a form of crypto asset, and when NFTs are classified as assets, they also possess trading characteristics. Since last year, we have seen many entrepreneurial projects emerge, aiming to solve the liquidity problem of NFTs from perspectives such as fragmentation, renting, lending, and installment payments.

Except for the third use scenario, the other three use values share a common premise: treating NFTs as assets. If we step away from the asset attributes and view it from the perspective of the creator economy, there is another value worth emphasizing—NFTs have sounded the clarion call for individual self-expression in the Web3 world.

How do we understand this value? From Rare Pepes to Crypto Kitties, Crypto Punks to BAYC, Azuki, Doodles, Moonbirds, and MEME representatives like mfer and Goblintown, NFT project parties attract supporters to join through their narratives, forming a force through the community to express their values, emotions, preferences, and positions to the outside world.

Whether we acknowledge it or not, the world is becoming increasingly chaotic and torn apart. The retreat of globalization, the rise of populism, the widening gap between the rich and the poor, privacy infringements caused by the monopolization of internet giants, the intensification of regional conflicts and wars, fierce competition among major powers, and the impact of the pandemic are all factors that continuously challenge the stability of the original international order and global social system. In this turbulent transition, certain stable consensus foundations are being impacted, and decentralization or anti-authoritarianism is gradually being recognized by more people. The motivation for individuals to express their own voices and to form some influence through this expression has become stronger.

Additionally, the growth of the Gen Z youth group has made self-expression even more important. Compared to their parents, young people are more independent and bolder in expressing their views and claims. Today, on social platforms like YouTube, Instagram, and TikTok, we increasingly see young people expressing their personalities, thoughts, and values through text, video, and music.

Some may argue that self-expression does not seem like a novel concept, as it has already been mainstream in the traditional creator economy. I agree with this statement, but I believe that NFTs will give people a greater desire and ability to express themselves than before.

The reason is that NFTs are an important part of Web3, and the values advocated in Web3—decentralization, trustlessness, privacy protection, rights confirmation, returning profits to creators, and respecting individual expression—are all reflected in NFTs and recognized by people. Whether you are using an NFT avatar or creating your own NFTs (PFP, music, video, etc.), you will realize that you possess the most important identity—you are an expresser, capable of having your voice heard by the world and gaining your own users and fans.

This also leads me to firmly believe in another thing: Just as everyone today has the ability to shoot TikTok short videos and earn income through this method, in the future, the entire production and creation threshold for NFTs will be as low as shooting TikTok short videos, meaning everyone will have the opportunity to produce and create their own NFTs. In other words, in the future, people can be consumers of NFTs while also being producers of NFTs.

The Integration of NFTs and Brands: Brand as a Service

Having discussed my views on the value of NFTs, we must return to the core theme of this article: what are the new scenario applications of the integration of NFTs and brands? As I mentioned earlier, the relationship between brands and consumers is one of interest exchange, where brands provide corresponding goods or services, and consumers pay for the goods or services they enjoy.

Once a transaction is completed, the relationship between them weakens, which is why every brand hopes to continuously strengthen brand power to maintain or enhance the relationship with consumers. However, in the era of Web3.0, the emergence of NFTs may fundamentally change the relationship between brands and consumers. The completion of a transaction is not the end of the relationship but the beginning, which is a thought I want to propose—Brand as a Service.

How can this be achieved? Let me illustrate with a hypothetical example.

【Problem to Solve】

A trendy brand releases a series of 10,000 T-shirts priced at 500 yuan each. After a user spends 500 yuan to purchase, they receive an NFT. How can the brand leverage NFTs to increase sales and enhance user loyalty?

【Executable Path】

Step 1: The trendy brand's NFT should become a CC0 project, meaning it relinquishes copyright. After consumers purchase the brand's T-shirt and receive the NFT, they can create derivative works. One point to clarify is that the CC0 declaration only relinquishes copyright but does not give up trademark rights, patent rights, and other unspecified rights.

Step 2: While granting consumers the opportunity to create derivatives, the brand can initiate a derivative project competition in the community and allow community voting to select winners. For example, the top three derivative projects can collaborate with the brand to sell NFTs and physical clothing, with the proceeds from selling NFTs and physical clothing shared according to a certain ratio.

Step 3: Each consumer will accumulate a certain level of contribution. The brand can grant additional rare attributes of different levels of NFTs based on different contributions (weights could include reaching a certain spending amount, derivative activity, sales of derivative NFTs and physical clothing, etc.). This NFT is programmable, and as the consumer's contribution increases, the rarity attributes will also improve. The rarer it is, the more collectible and tradable value it has.

That said, to realize this hypothetical example, several prerequisites may be needed:

First, low-threshold NFT creation tools that enable every consumer to have the ability to create derivative NFTs.

Second, a change in the brand's perception. Brands need to transition from a singular interest relationship to the understanding of brand as a service.

Finally, broader adoption of Web3 among consumer groups.

Today, we are also pleased to see that more and more brands are beginning to experiment with using NFTs to connect with users. For example, Starbucks is about to launch a coffee-themed user loyalty program, Coca-Cola has collaborated with Rich Minsi to launch the Pride Collection NFT, and Tiffany has introduced the limited edition NFT project "NFTiff."

However, overall, the current integration of NFTs and brands is more reflected in marketing gimmicks, low-cost customer acquisition, and changes in new membership systems, essentially still remaining at the level of interest exchange. The concept of brand as a service I propose hopes to explore and redefine the relationship between brands and consumers through NFTs or Web3, where consumers and brands are no longer corresponding subjects; consumers can become designers for brands and can also own their own brands based on the brand.

Of course, this does not mean that every consumer will become a designer or own their own brand, just as we all have the ability to become content creators, but not everyone will become a TikTok influencer. But this is the most meaningful aspect of Web3, which not only allows us to see values such as decentralization, trustlessness, privacy protection, and rights confirmation but also provides the public with greater possibilities for expressing their voices and exercising creativity (DAO is the best proof), creating a more inclusive and open opportunity for everyone.

Similarly, I have always believed that Web3 and Web2 should not be two disconnected worlds; Web3 should be rooted in real life and solve the problems existing in real life. The new scenarios of NFT and brand integration are a timely and evolving topic, and it is a field I focus on. I look forward to communicating with more brands and friends interested in Web3, thinking and exploring greater application scenarios for NFTs together.