The shift of NFTs from short-term speculation to long-term utility: loyalty, membership, and ticketing

Written by: Cam Thompson

Compiled by: Deep Tide TechFlow

As the crypto market faces new challenges and a downturn, many are looking for other signs to understand how the future of decentralization and blockchain technology will evolve.

Non-fungible tokens (NFTs), especially profile picture (PFP) collectibles, saw a surge in sales in 2021. Many chose these colorful JPEGs as a reflection of their digital identity, establishing a community internet for Web3 or the next generation iteration, which has begun to take shape.

However, as NFT trading has slowed, the focus of discussions has shifted from short-term value and chasing hype cycles to the long-term utility of holding these tokens.

Many brands have begun exploring creative use cases for NFTs and how to leverage these digital tokens beyond just quick investment opportunities. Now, businesses are viewing NFTs as a way to build closer relationships between brands, creators, and consumers by linking rewards to long-term ownership.

For example, GQ launched an NFT-related magazine subscription service in February, while sports media Sports Illustrated introduced an NFT ticketing program in May. Meanwhile, Starbucks launched a beta version of its Odyssey Web3 loyalty program in October to reward its most loyal coffee drinkers for digital engagement.

These popular mainstream brands are primarily focused on attracting new customers seeking richer brand experiences while not compromising integrity or creating complicated entry procedures. For some thought leaders, loyalty programs, memberships, and ticketing opportunities are the most obvious use cases for NFTs and provide a pathway to bring the most new users into Web3.

Loyalty programs or points-based systems, such as Delta Air Lines' Skymiles or cosmetics retailer Sephora's Beauty Insider program, reward customers for purchasing the brand's goods and services.

According to a survey conducted by LendingTree in July 2022, at least 80% of Americans are members of at least one loyalty program. LendingTree's chief credit analyst Matt Schulz stated in the report that consumers generally expect better discounts, quicker access to free goods, and exclusive deals through loyalty programs.

As NFTs can create communities around brands, they have found a place in these systems, as demonstrated by well-known collectibles like Bored Ape Yacht Club (BAYC), Moonbirds, or Goblintown. They also help reshape the nature of incentives and transactions in Web2 loyalty programs by incorporating digital identity and ownership—this is a new component of loyalty programs empowered by blockchain technology.

Tara Fung, CEO and co-founder of Web3 infrastructure company Co:Create, said that NFT loyalty offers users the opportunity to connect more closely with their favorite brands. Brands are also able to connect and engage their audiences more effectively.

Fung stated, "Because loyalty is a known concept, specifically referring to retention marketing, it can become more by incorporating Web3 as part of the tech stack." Fung added, "The value that Web3 brings as part of the tech stack is introducing a greater degree of ownership over someone's loyalty."

Fung pointed out that when building new blockchain loyalty programs, there needs to be a careful balance between serving those already immersed in Web3 (often referred to as Web3 natives) and not disappointing potential new users.

Fung said, "It's still a trade-off. But we're trying to meet both needs, which is to help anyone engage and experience Web3 from the start and ensure that Web3 native users feel that these are actually my assets that I can carry with me."

For companies looking to add Web3 loyalty benefits to existing goods and services, the entry point is often a pain point. This is particularly important for Blackbird, a restaurant loyalty program builder that offers benefits to frequent customers of restaurants.

Ben Leventhal, co-founder and CEO of Blackbird and former reservation platform Resy, claims that he believes NFTs are the most effective mechanism for attracting and rewarding brand loyalty among restaurant customers.

Blackbird's NFT loyalty program is very straightforward: when customers dine at a restaurant supported by Blackbird, they immediately receive an NFT that is minted to a unique backend wallet, marking their "dining proof." Each time they return to that restaurant, the NFT transforms into a new token with more rare features.

Leventhal stated, "Overall, what we're considering is loyalty and connection, while also making a restaurant feel magical and exciting to build long-term engagement and relationships between the restaurant and customers."

Blackbird and many other projects utilizing blockchain technology have taken an approach to remove Web3-related terminology to be as user-friendly as possible for new users. For example, some companies, including Nike and Starbucks, have chosen not to use the term NFT in their marketing materials, instead referring to their products as "digital collectibles" and "tokenized assets."

When building Blackbird, Leventhal's goal was to abstract blockchain technology and terminology from the user experience to make participation core to their brand. Leventhal said, "99% of restaurant customers interact with Blackbird not because they want to engage with a Web3 company, but because they want to interact with a restaurant."

Non-Fungible Tickets

The chaos surrounding ticket sales for pop singer Taylor Swift's Eras Tour revealed serious issues within the mainstream ticketing industry. From malfunctioning platforms to duplicate tickets and exorbitant resale prices, Swifties and other fans often face significant barriers to obtaining tickets.

Non-fungible token (NFT) tickets provide solutions to some of the current problems plaguing the events industry.

David Marcus, executive vice president of music at Ticketmaster, explained that artists can use token-based ticket sales as a way to better control how tickets are distributed to fans. For example, the metal band Avenged Sevenfold offered exclusive tickets through Ticketmaster for holders of their Deathbats Club NFT collectibles to watch their live performances.

"Any artist minting their own NFT can try token-based sales, which can help connect token holders with the best seats, pre-show experiences, or simply the first opportunity to get tickets for an upcoming tour," he said, adding that the trend of using NFTs as "souvenirs to commemorate and relive live experiences" is also growing.

To enable the development and growth of NFT ticket sales, Marcus stated that this capability requires "communities activated in Web3, which are still growing on a broader scale."

Matt Sanders, lead vocalist of Avenged Sevenfold, also known as M. Shadows, said that while not every type of event requires NFTs, they do provide fans with more options and alleviate some pain points in buying and selling tickets.

He said, "What we really need is to give fans a choice: they should be able to easily transfer or sell their tickets. They shouldn't need physical tickets because physical tickets are easy to lose. They also shouldn't pay exorbitant fees, which often include shipping and handling."

Alfonso Olvera, CEO of NFT ticketing experience company Tokenproof, explained that NFT tickets can offer holders benefits such as on-chain ownership verification, participation rewards, artist royalties on secondary sales, and even perks for sponsored events.

While Web3 ticket sales are still in the early stages of development, Olvera is optimistic about the future of the industry, although he believes it is necessary to start attracting attention from smaller events before the technology enters the mainstream.

Olvera said, "They don't have such a massive technology, so we're looking to first showcase the appropriate advantages of NFT ticket sales and then push it to a broader market."

While starting small may be a reasonable strategy, some well-known companies have already entered the Web3 ticket sales space. In May of this year, Sports Illustrated launched SI Box Office, a self-service event management and blockchain ticket sales platform that helps events create and sell NFT tickets. The platform partners with blockchain software company ConsenSys to mint all tickets on the Ethereum sidechain Polygon.

"We know how important live events are to fans. Instead of building traditional barcode infrastructure, we chose NFT ticket sales. We not only believe it's the future of live events, but because we don't support traditional infrastructure, we have the opportunity to build the system entirely on-chain." said David Lane, CEO of SI Tickets.

For Lane, NFT ticket sales can serve as an entry point for fans to explore blockchain technology and gradually adapt to Web3 events.

He said, "This is an opportunity for consumers to see on-chain content, experience token-based opportunities, and anything that the cryptocurrency or Web3 community really wants to express when they encounter it tomorrow. This is the first entry point, the first NFT experience, to give them some understanding."

Additionally, SI Box Office aims to make traditional entertainment or media brands more willing to enter Web3 and lead their audiences forward together.

Lane said, "We're waiting for a globally recognized brand to join the Web3 community and create something that everyone can truly use. We see this as a way to help partners, strategic vendors, community events, artists, and teams. If we can find partners, we can help them enter the Web3 community and showcase all the amazing effects that on-chain experiences can bring to these partners."

Web3 Membership and Community Engagement

In addition to loyalty programs, some brands are using NFTs as a form of membership to access entire ecosystems. These ecosystems not only provide users with unique experiences or benefits but also create pathways for community flourishing.

Meral Arik, co-founder of the Web3 membership platform Passage Protocol, said that Web3 membership varies in structure and execution between brands and platforms, whether allowing holders access to decentralized autonomous organizations (DAOs) or real-world social clubs. Smart contracts help drive these memberships, acting as "digital contracts" that signify a person's affiliation with a particular ecosystem.

Arik stated, "When consumers own membership NFTs, they can feel like they own a part of the brand, community, or ecosystem that the NFT represents." She said, "Therefore, consumers are more motivated emotionally and/or economically to create value for that ecosystem, whether by purchasing more products, engaging on social media, or promoting it to friends."

Arik noted that tokenized memberships can also reward members who participate in the ecosystem over the long term. She pointed out that Passage Protocol has built dynamic NFTs that evolve as holders interact with the brand.

More importantly, she stated that membership NFTs can enhance existing loyalty infrastructure without scaring off mainstream users with technical jargon.

She said, "If executed properly, membership NFTs can be a powerful tool or component of modern membership programs without needing to be the marketing focus of the program."

Web3 beauty company KIKI World has built a brand around a growing community of makeup enthusiasts who wish to connect better with the manufacturers of their favorite products and provide help in the process.

KIKI World utilizes the technology stack built by Co:Create to launch the KIKI World Membership Pass, an NFT that grants holders access to the DAO. Within the DAO, members can propose product ideas, vote on upcoming product releases, and participate in exclusive events and experiences.

Brendon Garner, co-founder and chief marketing officer of KIKI World, said that the membership program can leverage blockchain technology to enhance user experiences and create more enjoyable interactions.

Garner said, "The way traditional loyalty and membership programs usually operate is 'you'll receive an email discount code the day before public sales' or 'you have some points to use at Sephora,' but is that really a delightful experience?" He said, "We're committed to using language that everyone is familiar with and creating tangible impacts from the start by rewarding anyone who joins to become a KIKI World member."

Although NFTs are the tools driving the KIKI WORLD membership program, the DAO component of their strategy helps cultivate a more interactive community structure—similar to real-life membership programs but with the added benefits and security of blockchain technology.

Garner stated, "From a conceptual and philosophical standpoint, I think it's very important to reward those who contribute the most and empower them to have a real impact in the areas they are passionate about."

Bringing Brands to Fans Through Web3

Looking ahead, tools like NFT loyalty programs, membership rewards, or token tickets provide brands and consumers with a powerful framework to gradually adapt to Web3. By leveraging NFTs, brands can build communities around their products and connect and reward their most loyal fans who engage over the long term.

Brands can cleverly utilize these tools without losing new users in pursuit of short-term trends. The focus should be on finding the right way to fit the technology rather than blindly chasing fads. Furthermore, NFTs do not need to be marketed as the focal point of brand campaigns or Web3 strategies; instead, they can serve as a tool to enhance existing projects in a meaningful and sustainable way to engage mainstream users.