The Modern Customer-Fan Experience

Report summary:

• The internet is turning the corner to version 3.0.
• Upside Advisors helps firms understand emerging trends and revenue opportunities.
• How can your business quickly adapt and position itself to maximize the revenue opportunities afforded by early adopters in the Web 3.0 space?
• This white paper discusses the opportunities Web. 3.0 offers via blockchain transaction technology, the metaverse and NFTs.
• Most consumers view NFTs as a simple, digital collectible fad and ignore the underlying utility. In reality, they represent a new way to create VIP access within a marketplace that can yield new opportunities to engage with your fans and create additional revenue for your company.

Rising age of engagement & community

The mid 1990’s were a seminal moment in history due the rise of the consumer internet. Not many people knew what it was or what to make of it, but descriptors like cyberspace and information superhighway emerged, foreshadowing its vast potential. Digital media rode shotgun on the rise of the internet and introduced many new paradigms and tools that fundamentally changed how many things get done and how we live our lives. It also created massive wealth for the trailblazers.

Prior to the internet, customer engagement was conducted mainly via broadcast, print and snail mail. That changed as brands began to understand how to use the internet to start having two-way interactions with customers. At first, brands were cautious about going digital. Eventually, digital proved its power and value, and was catapulted forward by the rise of mobile that added one-to-one persistent connectivity at scale. Accordingly, the web and digital marketing tools and tactics became standard operating procedure to foster relationships with customers.

Now social media provides brand advocates and detractors megaphones to amplify sentiments creating feedback loops that are a plausible means of gauging perception in near-real time. As a result, many brands are employing systematic strategies that incorporate social listening and sentiment analysis to enhance the customer lifecycle, measure effectiveness, and drive lifetime value that would be impossible without digital.

Why the history lesson? By now, most are aware we are experiencing another period of significant internet evolution. Web 3.0, also called the metaverse, is introducing additional novel archetypes. However, because it is new, mysterious and hypothetical, some are getting preoccupied by sci-fi hype and having a hard time imagining practical use cases and implementations. Past is prologue; cyberspace was initially misunderstood and at times over-hyped, but it evolved quickly and became absolutely essential. The metaverse is anticipated to grow quickly, too. Bloomberg Intelligence analysts have estimated a 13.1% CAGR over the next five years. While it is unclear how the metaverse will evolve, early movers are already proving use cases and demonstrating there is a lot of money to be made through a variety of business models, some of which are new.

The question for brands is not whether or not they will wade in, but rather when and how. To find the appropriate entry point it is important to understand that the fundamental and differentiating properties of the metaverse are ubiquitous data continuity, unprecedented interoperability, and that the next generation of applications are decentralized and permissionless. Simply put, data moves seamlessly across the web in the metaverse, and no single entity owns the applications, so no permission is needed to join and no one can arbitrarily kick someone out — a profound impact on the notion of community, a core tenant underpinning Web 3.0.

This is in stark contrast to Web 2.0 which was built with the intent of restricting data flows for monetization purposes. Facebook, for example, became an advertising behemoth by trading community hosting space within their walled garden for the exclusive right to collect and monetize user identity data. As such, the concept of data continuity and permissionless, decentralized communities is antithetical to Facebook’s business model because it would allow the value created to accrue to the communities rather than to Facebook. Frankly, one of the reasons why Web 3.0 is garnering so much attention is because it is intent on wresting control of the internet from giants, a tectonic shift.

Ubiquitous data continuity across the metaverse is enabled by the blockchain on which Web 3.0 is built. Blockchain is a public database distributed across a multitude of computers without a single owner or controller. This lays the foundation for communities to be platforms because they are able to be pervasive (connected by fellowship and shared interest, but not tied to a specific application), organic and authentic, as well as self-governing and moderating. Many of the early adopter brands in the metaverse are consumer product companies that understand the challenging dynamics of traditional marketing environments relative to capturing attention, let alone driving repeat usage and engagement. Accordingly, brands are using tactics that activate around Web 3.0 paradigms to foster existing communities and engage new ones.

Virtual experiences and NFTs are the leading Web 3.0 community concepts most brands are exploring. NFTs are the focus of this report. Since bursting on the scene several years ago, the NFT market has expanded rapidly. According to McKinsey and Co. research, it is expected to reach $2.1BN worldwide in 2022. They estimated the present Serviceable Addressable Market (SAM) in the United States is 17.5 million people aged 18–44 with annual average income of $155,000+. These individuals are geographically clustered around tech hubs and digitally assembled around crypto-blockchain related content sources. Further, McKinsey found these communities break into four segments: collecting (20%), speculating (35%), community (24%) and tech innovation (22%).

Despite mass adoption, crypto and NFTs have skeptics asserting it is all a fad. Currently, the crypto market is in a period of correction and recent data show NFT transactions have declined since September 2021. But to judge NFTs on the speculative merits of Bored Ape Yacht Club or Jack Dorsey’s First Tweet is missing the forest for the trees. Industry analysts postulate that 2021 was the NFT v1.0 era which was driven by hype, greed and FOMO (fear of missing out), and 2022 and beyond is NFT v 2.0 which is about building new businesses from the unique utility of crypto and NFTs. Visa’s recent report, NFTs: Engaging Today’s Fans in Crypto and Commerce, posits:

While the prices of individual NFTs fluctuate, fascinating use cases for NFTs are still emerging and the groundwork is being laid for the long-term utility of NFTs. This new form factor for commerce has vast potential in the sports and entertainment world, representing a deeper and more dynamic way to engage fans and potential new revenue streams for organizations. 

Visa’s “form factor for commerce” is a reference to a key element of the metaverse’s financial system, the creator economy, which is essentially a passion economy where hobbies are converted into viable, steady income streams via NFTs consumed by indulgent communities. Analysts and investors speculate this dynamic will have a profound impact on the arts and original content development. NFTs will profoundly affect music distribution, where they are becoming the new digital rights management authority that enables artists to self-distribute creations online without falling prey to another Napster. Early indications are validating Visa’s hypothesis.

Crypto advocates suggest that brands should consider NFTs as new versatile marketing tools. Specifically, NFTs paired with physical and experiential elements provide authentication and verification, which can be molded to create many use cases around community and customer engagement, as well as serve as a currency supporting physical and virtual world transactions. Visa’s report echoed this sentiment saying:

One exciting aspect of NFTs is their composability. As the ecosystem develops, NFTs can be designed in a way that spans multiple use cases. This long-term utility enables deeper fan engagement and ultimately creates more valuable NFTs that generate additional revenue on secondary sales or auctions. This area is rich for potential and can span multiple phases of the customer experience: Loyalty and Gamification, Utility across the Metaverse, Ticketing, Fan Governance/ Decision Making and Fan Data with Pseudo-Anonymity.

NFTs build communities by bonding owners of similar NFTs not only by common interest, but also by financial interest. All NFT owners have skin in the game having invested in an asset class whose value relies on a brand and affinity. Visa puts it like this:

Fans today yearn for digital community. They want to build stronger bonds with the sports teams, personalities and products that they love, and they are willing to pay for it.

In sum, this is the next level digital community where enthusiasts can own a stake in their affinities and their ownership stake can serve as a key to deeper engagement. This community concept applies to brands across many vertical markets — properties, creators, merchandisers, etc. — where customers are enthusiasts and affinity is a currency.

Since NFTs exist on blockchain, digital ownership and identity verification is managed by crypto wallet, which also stores acquired NFTs. Crypto wallets have already achieved mass adoption in part because there are many free options available that are easy to use. A crypto wallet is a digital application that manages what are essentially private personal keys which act like user credentials to access the blockchain database – no need to sign-in with Facebook. Accordingly, individuals are empowered to control how their identity attributes are shared, cutting out the disintermediating identity brokers. Crypto-wallet functionality can be built into existing apps to seamlessly integrate NFTs into brand experiences. Similarly, services and experiences can be created and offered to NFT holders across the metaverse where the record of NFT ownership serves as a digital membership card.

Currently, most NFTs are acquired through auctions on marketplaces like Dapper Labs or Ocean Seas, which are essentially e-Commerce websites connected to blockchain. Wunderman Thompson noted in their 2021 NFT Innovation report that:

The growing interest is driving brand innovation in the space — opening the door to new forms of advertisement, ownership and retail. In fact, retailers not traditionally part of the auction scene are taking advantage of the NFT auction space as well.

Wunderman also noted, creative brands are using auction formats to gamify what otherwise might be unmemorable marketing activities:

In May, General Mills auctioned off 10 original digital artworks in the form of NFTs, which the brand playfully referred to as “new frosting tokens.” The highest bidders will be the first to taste the return of the popular Chocolate Dunkaroos before they return to stores.

This NFT program created a collectible that fostered a unique connection to the brand/product as well as among the winners. Additionally, the token in their wallets will serve as a reminder, keep this community bonded over time, and be an access point for re-activation and communications.

But NFTs don’t have to be auctioned. In fact, some prognosticators say most NFTs will be acquired through “in-app purchases” in the future. Ultimately, it is up to brands to identify different ways to leverage NFT utility to engage customers and build communities. Wunderman Thompson’s VIP NFTs report cited several examples “from fine dining to private events, where NFT purchases are unlocking premier access and memberships, bringing a level of exclusivity and extravagance to the digital realm.” The examples include:

• Patron sold 150 one-of-a-kind physical bottles of the limited-edition Chairman’s Reserve exclusive blend.
• Coachella Keys Collection, a group of 10 NFTs, were sold to buyers who each earned a lifetime pass to the festival. Purchases also included exclusive perks for the 2022 festival, including a celebrity chef dinner and front-row access to events.
• Hennessy released its first NFTs in January for $226,450 each. Each purchase includes physical and digital ownership of the first and last bottles of a limited-edition Hennessy 8 from the LVMH-owned Cognac house.

Another example is Budweiser’s metaverse destination, the Budverse, which is accessible to 1,936 NFT owners and unlocks “exclusive access and rewards.” Thirty-six owners of the rare “Gold NFTs,” which tie to the brand’s Heritage cans, get VIP tickets to a range of events.

Point is, there is no one way to NFT and elevate the consumer experience to fandom. In fact, Visa concluded their report by saying, “Commerce is evolving, and innovations such as crypto and NFTs are likely to shape sports, entertainment, and other communities going forward. NFTs represent a deeper and more innovative way for fans to engage and potential new revenue streams for organizations.”

The key takeaways are (1) NFTs are marketing utilities that support trendy, perhaps unconventional, use-cases as well as highly practical examples like collectibles, authentication and access rights; and (2) NFTs are community builders and engagement drivers that, when done creatively, can be a key part of go-to-market activities.

2022 is the year of NFT 2.0 when brands, through trial and error, will begin to more fully realize NFTs’ unique utility and make NFTs mainstream. With this in mind, let’s shift gears to how to incorporate NFTs in a sales motion and marketing plan.

Launching an NFT Project

The first step when launching an NFT project is to determine business goals, which typically fall in one of three buckets: engagement, relationship management and/or revenue. For spirits brands, the goal of an NFT program is likely to be enticing repeat sales and attracting new sales. In this case an NFT project is supplemental to the traditional sales approach, meaning it is a special additional channel with extensive geographic reach to attract personas with high propensity for collecting, investing and community. Promoting NFT projects to existing customers and NFT intenders helps a brand stand out, creating buzz and awareness.

For an NFT program to be well supported, brands want to create projects around items that have long-term value or utility like access to special product releases and insider information, or membership to a club. A number of distillers are using NFTs to great success and fanfare by pairing physical products like rare or special premium releases with digital elements like digital bottle art and membership to affinity programs. Generally speaking, NFT values benefit from scarcity, so brands can mimic the approaches being used by others by offering a special limited-release run or an award-winning product to showcase their craft and artisanship.

Unlike retail markets, NFT markets feature primary and secondary sales opportunities with royalties from all transactions paid to the brand. In addition to paying higher margins by circumventing distributors, it behooves brands to think about strategies that drive an active secondary market to collect incremental royalties, which typically relies on an engaged community. Most brands link their NFT offerings to community platforms like Discord so NFT owners can engage others seeking to buy in secondary markets.

If this sounds complicated or expensive, it’s not. Upside Advisors is a full-service specialist agency that works with brands to understand and prosper in the Web 3.0 realm. To simplify the process, we have introduced Enthuz.Net, a turnkey enthusiast experience solution consisting of upfront strategy and project planning, full technical implementation, marketing and promotions services, community development and curation. We are working with brands across sports, entertainment, and craft spirits where customers are enthusiasts and affinity is a currency.

As the name suggests, Enthuz.Net is a digital space that is Web 3.0 enabled where brands and properties can engage customers and build communities. We take care of the details so you can focus on converting customers to fans.

Enthuz.Net technology has delivered successfully for the NBA, NHL and MotoGP. Enthuz.Net offers a white-label, Ethereum-based NFT marketplace platform which is integrated with Open Seas, Shopify, and Discord for community development and curation. Custom technical development is available as well.

The Enthuz.Net business model is to partner with brands to launch projects with little to no up-front costs. We are paid a share of revenue when the project is generating revenue for our brand partners. Most projects can be fully operational in two to four weeks

We are actively seeking brands to be part of Enthuz.Net and are open to supporting proof of concept trials.

If you would like more Web 3.0/Metaverse perspective or are interested in exploring an NFT project on the Enthuz.Net platform, please contact inquiries@enthuz.net.