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Loyalty Programs 3.0: What Does the Future of Brand Loyalty Look Like?

Posted by Chris Miller
Feb 15, 2023

There is a new kind of loyalty program emerging.

One built upon tried-and-true principles of today’s loyalty programs, combined in novel ways with the mechanics of equity ownership, community-building, and enhancing customers’ digital identities.

And it is powered under the surface by new technology - namely blockchains, NFTs, and virtual currencies - while working to create more fandom, more engagement, and more revenue for brands, new and old.

In this article, we will explore what web3 loyalty programs are, what makes them “loyalty programs” in the first place, and how emerging brands have used them to amass billions in market value in a short period of time.

What is a Web3 Loyalty Program?

In short, web3 loyalty programs utilize tradable digital assets, community strategies, and connected experiences to engage and drive revenue from program members.

In a web3 loyalty program, NFTs can act simultaneously as:

  1. Memberships that unlock exclusive perks, access to digital & IRL experiences, and a community of other members
  2. A stake, similar to that of equity ownership that affords status, influence, and possible financial gain
  3. Works of digital art that express and enhance digital identity

Brands paving the way in web3 are adopting a co-creation strategy with their communities. For example, Nike and Lacoste are tapping their members for feedback, conducting community votes, and encouraging member-to-member communication. They are making the bet that involving community members in the creative process will tighten their bond and drive increased revenue over time.

And because of the public infrastructure powering web3 loyalty programs, the assets can be recognized and rewarded across more platforms, more seamlessly than ever before — including other brands’ websites, at in-person events, and in the metaverse.

Why is it a “Loyalty Program?”

Despite some obvious differences, web3 loyalty programs share key similarities with the traditional loyalty programs of today.

  1. They are layered on top of a brand’s core business and are built on a brand-consumer value exchange
  2. They involve thoughtful strategy, ongoing management, and  “programming” to keep the community engaged
  3. The desired outcomes are the same as traditional loyalty programs - namely maximizing customer lifetime value

Evidence the new model is working

The principles above have spurred the astronomical growth of several emerging consumer brands in just a few years. These brands have used web3 technology to bootstrap funding for core businesses they will be building over time, but their early market cap figures are remarkable.

Bored Ape Yacht Club - Launched April 2021

Current Est. Market Cap: $1.2B+

At the top of this list is Bored Ape Yacht Club, which has gone from $0 to $1.2B in market cap in less than two years. 

BAYC’s primary customers are its 10,000 rabid “members” who own an NFT like the one above. 

Once someone purchases their way into the community, the NFT serves as their membership card and unlocks exclusive access to: 

  • Holders-only perks, events & merchandise
  • Opportunities to earn ApeCoin - a digital currency that also enables voting privileges on key brand initiatives
  • A 1-of-1 piece of digital art often sported by members’ across the web

Over time, the brand’s founders aim to build a “web3 lifestyle company” leveraging the IP they have created with this project to expand into new mediums.

Other examples of brands applying web3 loyalty program mechanics and achieving astounding success in just a few years include:

But their playbook should not be your playbook

These web3-native businesses harnessed these new programs to become dominant consumer brands quickly.

But other enterprise consumer brands not only have existing businesses that exist at scale, they also have existing traditional loyalty programs.

In our next article in this series, we will explain where their approach must differ to be successful and how it can drive loyalty KPIs.

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