Major corporations are guilty of the bandwagon effect having jumped on the NFT (non-fungible token) hype bandwagon but failed to accurately leverage the ideology behind these hyped projects. The success of an NFT is not determined by the price floor, but rather by the community that has been cultivated. Inspired by the gaming community, learn how brands can use NFTs as a foundational tool to connect with consumers to drive engagement and build loyalty.
The brand game
Asia is at the forefront of NFTs, as the region accounts for a third of the $22 billion global trade. This is unsurprising as over 82% of Southeast Asia’s online urban population are gamers, given that expensive consoles and computers once out of reach have now been swapped with mobile devices from everyday.
A once shunned hobby is becoming a lucrative industry where even luxury brands have begun to partner in the virtual world. Brands have been riding the gaming and esports wave for reasons other than diversifying with another digital channel, as the global gaming market is expected to reach a value of $340 billion by 2027.
Consumed by over three billion gamers worldwide (over 40% of the world’s population), community is what brands covet, capitalizing on entertainment to build brand value in the virtual world. With the gaming community now made up of individuals with different personalities and niches, brands are taking advantage of prized opportunities to connect with a new group of audiences.
The next evolution of rewards
Video games are designed to be addictive because the brain constantly seeks pleasure and encourages continued engagement. While traditionally players paid to play, blockchain games have shifted to a play-to-win model, incorporating crypto tokens and NFTs as a reward mechanism for players. For example, UniX is a community-centric platform that allows gamers to generate revenue and even win scholarships, through virtual games.
While many brands started off designing avatar skins as an entry point, these virtual collectibles provided no real value other than in-game skill or simple aesthetics. Cosmetic skins are also not available to transfer to other virtual environments and have no commercial value, which is why developers have now moved to blockchain games that allow consumers to own their assets as than NFT.
Luxury brand Louis Vuitton is active in game collaborations and recently launched its own mobile game with collectible NFTs as rewards. The shift to NFTs in gaming is growing in popularity, as users can now own digital assets as rare collectibles, with the potential to make a profit.
Where previously users paid to play and gave away data for free, the next generation of the gaming industry grants ownership to gamers and rewards them for the time and commitment they put into games. Today, consumers seek to be rewarded for their loyalty and to earn the title of ambassador for their favorite brands.
A community to connect
NFTs are more valuable than just a monetization opportunity, as the fundamental nature is to be associated with the community behind the project. “The key is to create a strong brand that can be determined by their marketing. So the questions to ask are: how are they perceived by the community on their social media platforms? Who invested in the project at an early stage? is their plan to raise awareness for mass adoption?” shares Mirko Basil Doelger, CEO and co-founder of UniX.
The social element of the game fulfills the human need to be part of a social group, encouraging social interaction, cooperation and competition. Knowledge sharing is actively practiced among players, from strategies to daily life discussions – also what marketers call word of mouth.
More than $637 million in eSports revenue comes from sponsorships, but consumers are savvy and can identify marketing ploys. They foster authentic engagement, and gaining that community can help build brand affinity, customer loyalty, and ultimately drive sales. Much like how retailers want shoppers to stay longer in their store, brands can capture the user in-game or in the metaverse with increased engagement time as a form of community building and marketing.
Incentivizing users with rewards releases dopamine in the brain, the feeling of pleasure to encourage longer engagement time – much like shopping. Gaming and esports have become a big part of mainstream culture today, so much so that even esports viewership is greater than that of the NBA, as viewers are invested in other people’s games like a form of social interaction. Popular Asian streaming platform VeraEsports, official partner of Tencent’s Riot Games and Valorant, saw one million viewers at its peak during tournament periods. The incredible growth of eSports and the size of its audience is unmatched by other communities that brands need to engage locally in an authentic way, beyond simple product placement.
Social status on the blockchain
The Dezen by Payal Shah, is one of the first fine jewelry companies in Hong Kong to launch a pair of digi-physical wearables with the NFT Digital Twin marketplace. A physical pair of 18k gold earrings with 2.27 carat diamonds were insured and shipped to the winning bidder – also digitally imposed on their profile picture (PFP). The NFT sale-related smart contract shows how the luxury space can use blockchain as a decentralized method to verify authenticity, as opposed to the traditional certification provided by brands when purchasing fine items. Both assets appreciate independently of each other and can be sold in tandem or separately at any time.
Brands are also using NFTs as a digital membership card and curating unique offline experiences to drive engagement with their online cliques. DNRR is an NFT platform that allows holders to visit a Metaverse Dining Club and attend real-life events at some of the hottest restaurants in the world. Wear, another Hong Kong-based luxury marketplace, also uses memberships to unlock exclusive products and insider events within the fashion community.
Although NFTs are created on permanent records and certified to private addresses, these digital assets are still vulnerable to imitation. Verasity, a company known for its patented Proof of View technology, can identify fake NFTs with its blockchain-based solution. “Not only can the owner be confident that the NFT they are buying is genuine, but also that the seller they are buying from and the marketplace they are using is also genuine,” says RJ Mark, CEO of Verasity. risk of fraud, a transparent and immutable record of the NFT throughout its lifetime is verified with the owner – of how it was created, moved, modified and stored.
But just like buying a high-quality replica versus a genuine designer piece, there might not be much difference to the naked eye. When it comes to luxury purchases, the motivation to buy a Hermès Birkin or Bored Ape Yacht Club NFT is not for its functionality, but for social status where the majority of the value resides. What really matters to the owner is associating with the brand when buying – and showing wealth. The prices of these assets in digital form are often appreciated at a higher value, as virtual property allows the consumer to display their collectibles for all to see on the world stage.
Take away key
The Metaverse is not designed to be another retail channel or marketing campaign, but a way to initiate engagement with consumers and empower them to own and lead the brand they love. Encouraging user-generated content and rewarding loyal subscribers with brand equity will be the future of loyalty programs to boost brand promotion.
The idea of an elite and exclusive community behind every NFT project is what drives the value and levels of engagement between holders and ambitious owners. Recognition and connection for those who have access to a community is an invaluable experience that goes beyond the high price of a jpeg. NFTs should be used as a storytelling element to convey brand value through the new era of decentralized networks and to build a strong community of support through human and social connections.