NFT Loyalty Program: The Latest Reward in Loyalty Programs

The NFT loyalty program trend has shaken up the world of marketing. We’ll tell you all about how to use it to build lasting brand love.

Antavo’s article on how to use NFT art to Build Customer Loyalty

The NFT loyalty program is a curiosity in the world of customer retention. From a cute pop-tart cat meme that was sold for $590,000 to the almost $3 million spent on the first-ever tweet from back in 2006, there was definitely a time when people showed a large amount of interest in NFT art. 

However, crypto art raises an interesting question about bringing exclusive ownership to the digital world. Because owning NFT art comes with privilege and status, it’s the kind of reward modern customers desire. Companies such as Estée Lauder and Hugo Boss are among the first to capitalize on this fresh opportunity, while companies like Starbucks have already established a full-fledged NFT reward system.

But what does the concept of crypto art actually entail, and how can a loyalty program use it to its full potential? This article will give you all the answers you need to use NFTs for customer retention, coupled with an analysis of the potential downsides and the possible future of the technology.

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What Is NFT Art and How Does It Work?

NFT stands for Non-Fungible Tokens. In very simple terms, an NFT acts as a certificate of origin by utilizing blockchain technology. The whole story of blockchain and the birth of crypto art probably deserves an article or two of their own, but let’s summarize the essentials. 

Clinique introduces its first NFT
If you’re looking for a practical answer, NFT  art is a hot new reward type that can generate hype, product awareness and user engagement among modern customers.

Understanding Blockchain

At its core, blockchain uses a network of computers that combine their processing power to verify each element — or block — on a ledger (or list). Think about it like this: if you buy something online, it’s the responsibility of your financial institution to verify every aspect of any transaction you make (for example, whether the sender has the necessary balance, or whether both accounts are accurately updated when the transaction is finalized, etc).

In the case of cryptocurrencies, transaction authenticity is validated by multiple computers from within the blockchain network. Each computer contributes some of its processing power to anonymously calculate and review each aspect of the transaction, and then to update the value on the report. 

This means that any data that appears on the blockchain’s ledger is:

  • Up-to-date (always shows the correct value)
  • Unalterable (outside forces cannot tamper with it)
  • Verified multiple times (correct, without a shadow of a doubt)
Blogchain image for the nft loyalty program.
Blockchain technology itself can serve so many utility other than just cryptocurrency and NFTs.

NFT: The Most Reliable Digital Certification

The situation is the same for NFTs. Non-fungible tokens are stored in a similar manner on a blockchain ledger (a version called Ethereum), where the same rules apply. 

Let’s say you purchase a digital piece of art — an image — that has an NFT attached to it. You will have undeniable proof of two things: that you are the sole owner of this picture, and that the image is considered the original. This idea mirrors the physical art world, where there’s only one original Mona Lisa (despite many copies existing). 

It’s worth highlighting, however, that blockchain doesn’t store the digital media itself. It only stores the details associated with it, such as its name, description and the source where it can be found. In other words, NFT art means digital media that comes with a blockchain-based certification token.

A 6-step diagram showing how blockchain works
Thanks to the fail-proof verification that blockchains use, many consider them to be more trustworthy than real-world certifications, which can be forged. (Image source: MLSDev)

Why Are People Going Crazy Over NFT Art?

But what does proof have to do with selling digital art? Quite a lot, actually. Up to this point, we have only talked about the “T” in NFT, which stands for “Token”. But the fact that someone is willing to pay $590,000 for a Nyan Cat meme GIF comes from the “NF” or “Non-Fungible” part of the acronym. 

If something is non-fungible, that means there’s only one of it. It’s irreplaceable, it’s unique, and it has a history. A pair of shoes is fungible because there are hundreds of them available in your local shoe stores. But the shoes you wore while winning your local marathon are one of a kind in your eyes. A common baseball ball is dirt cheap, but if it’s signed by the reigning league champions, then it becomes a collectible and is suddenly worth hundreds of dollars, if not more. This is the power of ‘non-fungible.

The various ways NFT art can be used.
In a way, collecting NFTs is no different from collecting rare baseball cards, or items related to famous historical events.

The New Trend for the 2020s? – Owning and Collecting Digital Art

In the past — early 2020, actually that’s how fresh the NFT trend really is — digital art belonged in the fungible bin. Even if you created a nice visual, it only took a couple of clicks to replicate it. Plus, it was extremely difficult to prove the origin and ownership of such pieces. Now with the fail-proof seal of authentication that is the non-fungible token, this has changed forever. 

When it comes to NFT art, it’s not really the token or the art itself that really matters (though both do play an important role). The sense of ownership is what matters. The person who purchased the Nyan Cat NFT or the world’s very first Tweet can now say that they are the de-facto owners of a piece of Internet history! 

As such, crypto art has established the concept of ownership for digital goods, and as such, has generated scarcity and FOMO in the digital art world.

A framed portrait of the Nyan Cat meme
Of course, NFTs don’t establish exclusive rights to use the art, as other people can still post copies of it on social media and forums. (Image source: New York Times)

Entering the World of Digital Art  

This begs the question, though: what is considered NFT art? And the answer is: anything you want. Just add the non-fungible token to any digital medium, and it will become NFT art. Of course, if you wish to make it popular, you have to ensure that the medium itself holds value for the audience.

Some examples of NFTs:

  • Digital artwork by established artists and designers
  • Unreleased singles by popular musicians
  • Behind-the-scenes footage or bloopers from movies
  • Clips of exciting sports moments, such as NBA stars scoring

Bear in mind, though, that you need to be an authority regarding your digital art, otherwise the NFT won’t have legitimacy. For instance, the first-ever tweet was posted by Twitter’s Co-founder & CEO Jack Dorsey, and the only reason it was purchased for $3 million is that he himself put it up for action.

The official site where NBA clips are sold as NFTs
NBA Top Shots is a digital marketplace where people can buy short clips of amazing basketball moments as NFTs.

Why Is NFT Art an Enticing Reward When It Comes to Building Brand Love?

So why is NFT art the next-big crowd-pleaser reward for brands? First of all, creating crypto art is quite easy. All you have to do is upload the digital medium to an NFT marketplace or auction site, and then pay a small fee in cryptocurrency.

More importantly, however, crypto art is easily brandable, which makes it ideal for building a connection with customers. When a customer receives NFT art from their favorite brand influencer, a vintage photo of the flagship store’s grand opening, or a visually striking digital work of art that ties to the brand, it will no doubt be an exciting and memorable moment, which will encourage even more brand loyalty.

Last but not least, owning NFT art from their favorite brand gives customers a sense of special treatment, making them more likely to share the story on social media, generating positive word-of-mouth among their friends, virality, and desire among other customers.

Sport shoes sold as NFT digital art by Jimmy Choo
Jimmy Choo created a charity auction for an NFT depicting a pair of designer sneakers. The winner also received the real-world counterpart, while also contributing to a noble cause.

Putting Digital Art to Good Use: the NFT Loyalty Program 

With a thorough understanding of how crypto art works and why it’s such a tantalizing incentive, it’s time to take a look at how to incorporate NFT artwork into a loyalty program. 

One of Estée Lauder’s brands, Clinique, was among the first to tap into this opportunity. Clinique Smart Rewards already has a lot going for it, with a huge list of tiered benefits and a generous welcome discount, but the company took the experience to the next level with an NFT raffle.

Members can enter by sharing inspirational stories on Instagram, TikTok and Twitter, and the top three will be rewarded with two of the brand’s most coveted products and color-changing NFT art that symbolizes the theme of those items.

Clinique's unique NFT Art
Clinique brands its NFC art as a story, further increasing its emotional value.

What You Should Learn from Clinique’s Loyalty Program

Clinique deserves praise for seamlessly integrating NFT art into the loyalty concept:

  • The company introduced this reward as a limited-time event to inspire customers to act fast
  • Access to the event is universal and all members can participate regardless of their tier, ensuring the brand reaches the largest possible audience
  • Using a raffle format with a handful of winners maintains a high perceived value of the brand’s crypto art
  • The NFT comes packaged with other benefits, chiefly a fan-favorite product, so people who want more than just the art are also satisfied
  • Using social media contests as an entry requirement for winning the NFT ensures high participation rates, and makes the whole experience both fun and memorable, while driving virality for the brand
The loyalty program page of Clinique.
To top it all off, raffle winners will be announced by Clinique brand ambassadors, actors Emilia Clarke and Melissa Barrera, making the whole event even more thrilling.

The Loyalty Program, Where NFT Is the Core Concept: Starbucks Odyssey

In 2022, Starbucks has announced a new addition to its loyalty program, Starbucks Rewards. This new segment, called Starbucks Odyssey, allows members to earn NFT art (called stamps) by completing various activities, like playing virtual games or completing coffee-related challenges. Besides Starbucks-branded artwork that people can actually own stamps also provide benefits like bonus points, and based on stamp rarity, can unlock perks like access to coffee-making courses or invitations to exclusive events.

In addition to activity-based NFT stamps,  members of Starbuck’s program can also directly purchase limited-edition NFTs. To enable this new type of Web3 engagement, Starbucks aims to create a smooth user journey by allowing participants to directly buy NFTs using their credit cards. To do so, they don’t need to set up a digital crypto wallet or exchange money for cryptocurrency.

Starbucks Odyssey promo image.
Starbucks Odyssey is still in beta and is planned to be finalized in 2023.

3 Best Practices for an NFT Loyalty Program

If you’re planning to introduce NFTs into your loyalty program (or launch a rewards program that includes NFT art from the get-go), consider the following best practices:

1. Keep the experience non-fungible

NFTs were never meant to be mass rewards. Keep your NFTs as exclusive and high-end as possible to maintain their uniqueness and mistique. Furthermore, each NFT needs to be one-of-a-kind in terms of design. For a specific campaign, you can have different color variants, or have slight alterations, but for the next time, your design team needs to come up with an entirely different concept.

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Brand-created NFTs are predicted to be a huge trend in the future. By incorporating them into a loyalty program you can offer something special to your most valuable, most engaged customers. Members who earn a branded NFT art piece from you will always have a reminder of your relationship, further strengthening your bond.

2. Availability impacts the whole concept

Decide whether you wish to run NFT reward campaigns occasionally or consistently. Limited-time events should be open to all members, but have a unique entry condition, or an entry fee to be paid in loyalty points. If NFTs are always available, then reserve them as a thank you gift for reaching the highest, most exclusive tier or reaching a difficult milestone, such as being a loyal customer or subscriber for several years. They can then keep it or trade it at one of several popular NFT marketplaces

3. Introduce reward bidding to create a little competition

Social media contests are one way to engage a larger audience while only handing out a few pieces of NFT art. The other way is to offer reward bidding, which is like an auction among loyalty program members. During each round people can bid with their loyalty points, and the person who offers the most points receives the crypto art.

An image showing how reward bidding works in action
Reward bidding is an exciting experience that keeps members on their toes, giving them a great reason to earn as many points as they can. Learn more about this feature from Antavo’s Titanium Gray Product Release.

The Downsides of Using NFT Art – Trouble in Paradise

Unfortunately, not everything is sunshine and rainbows in the world of NFT, as technology has a serious impact on the environment. As mentioned earlier, Ethereum, the blockchain that currently houses NFTs, requires the shared processing power of many-many computers. We’re talking about a large number of huge warehouses, full of shelves stocked top-to-bottom with hardware solely dedicated to running blockchain-related calculations and mining cryptocurrency.

Operating such an immense infrastructure demands a lot of energy and comes with a considerable carbon footprint. Just to get a perspective of the sheer volume, the annual energy required to power all devices on the Ethereum network is comparable to the total annual energy usage of Chile, while Ethereum’s annual carbon footprint is akin to Ireland’s, according to Digiconomist’s Ethereum Energy Consumption Index.

An image showcasing huge shelves full of hardware, all mining cryptocurrency
One of the reasons why cryptocurrencies and NFTs are so resource-intensive is because the devices that carry out the calculations need to be running 0-24, which can generate a huge electricity bill  the long run.  (Image source: IEEE Spectrum)

The True Cost of Ethereum

It’s like a completely new country suddenly appeared out of nowhere, which is leaving its mark on the planet! Naturally, the wanton energy consumption that comes with the usage of Ethereum (and subsequently the NFTs), hasn’t gone unnoticed by the public, and there are many people advocating against the technology due to its toll on the environment. As a result, if your brand values include sustainability, using NFT art as a loyalty program reward may actually damage your reputation.

A diagram showing how much energy the Bitcoin and Ethereum blockchains are using, compared to various countries
Let’s not forget that Ethereum is only one of the many versions of blockchain. Another popular example is Bitcoin, which operates similarly. If you put the two together, they would be the 14th largest country in terms of energy consumption. (Image source: Digiconomist)

What’s in Store for the Future of NFT Loyalty Programs?

It’s fairly certain that crypto art won’t be a novelty forever, and the craze over it will tone down. Nonetheless, receiving an NFT from your favorite brand can be a memorable moment, so this technology is sure to become an important part of next-gen loyalty programs.

Of course, the team behind Ethereum is aware of the sustainability issue and is working on a more energy-efficient version, called Ethereum 2.0. In the future, this may make the use of non-fungible tokens acceptable for a broader audience, allowing NFT art to become a genuine part of our everyday lives.

NFT as a Loyalty Program Reward
Using NFT art as a loyalty reward adds a new flavor to customer retention and can attract new customers or reactivate old ones, but if sustainability issues persist, popular opinion might turn the public against it.

Reinventing How Digital Rewards Work

Launching an NFT loyalty program could be a great way to engage with a digitally-savvy audience, no matter whether you’re running an eCommerce or omnichannel business. And as the technology is adopted by a larger audience, new use cases will be created for NFT rewards as well.

Interested in learning more about other aspects of a next-gen loyalty program? Our experts are always ready to strike up a conversation with you, so feel free to request a demo or send us your RFP.

In the meantime, check out our ebook on loyalty program rewards to learn more about keeping customers engaged.

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Headshot of Tamas Oszi Senior Loyalty Program Specialist at Antavo

Tamas Oszi

Tamas is the Head of Content at Antavo and a Certified Loyalty Marketing Professional - CLMP. Tamas is known for having a keen eye for loyalty and customer retention strategies and trends. Tamas is also a true gamer at heart and has an impressive collection of cyberpunk books.

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