Hack Your Value Creation Model with NFTs
NFTs are the proof of digital superiority over physical. For so long the digital realm has replicated the physical models with an additional layer of scalability. But NFTs are here to change that.
TL;DR
NFTs’ value is contextual i.e. it depends on utility, features, and other aspects.
Brands can create multi-dimensional value using NFTs.
NFTs will reduce the distance between the manufacturer and the customer and make it a co-creation process.
NFTs can be used in event tickets, merchandise, exclusive products, fundraisers, etc.
NFT was undeniably one of the most talked-about topics of 2021. This magical thing made pixeled cartoons incredibly valuable and all of a sudden everyone was turning into millionaires just by buying them early. People started changing their public profile pictures to apes, lions, cats, owls, etc.
On the other side, there were critics who were baffled by the idea of owning pictures that could be easily saved with a right click. And why would someone pay millions of dollars to buy something like that?
However, like most controversial topics, there is a lot in the middle that is often missed in either party’s argument. But I won’t cover that in this article. In this issue, I’ll expand on the topic of value creation and how NFTs are a new vehicle for any producer to add an additional layer of value—beyond the benefits of a core product
So, I’ll start by explaining NFTs and why is it important.
What is an NFT and why does it matter?
NFTs or Non-fungible tokens are a type of tokens that are stored in a blockchain and can be verified by their unique characters. Given their uniqueness and verifiable identity, NFTs cannot be reproduced or copied. Their ownership records (provenance) and creator’s identity are also subject to storage and are available publicly.
So in simpler terms, we have got something that is unique, which means only one such thing can exist, and that thing has a specific creator and an owner. Using that framework, I can say any type of unique thing that lives on a blockchain is an NFT.
Now if I can use these NFTs and assign financial value to them (depending on certain factors), I have got myself a product that will be a dream of any business because for so long, digital products couldn’t have been verified because we didn’t have blockchains.
That is what makes NFTs so special and popular.
The Hype around NFTs
But is that value enough to pay millions of dollars for artworks that are at best mediocre (not all)? The short answer is, no. But the long answer is, it depends.
An NFT is generally perceived and presented as a piece of art. And art experts like Christie’s and Sotheby’s value art based on several factors like artist, rarity, period, age, quality of materials, historical significance, provenance, etc.
But if I see an NFT that is presented as a show pass or a community access card, that begs me to judge it differently. If I own an NFT that is a ticket to a trip to space, that will definitely be worth millions of dollars. But for a picture of a cat that practically does nothing—I don’t really consider it as either art or valuable or even rare.
So the hype that was created around NFTs was primarily around a narrative and strong marketing, that worked well for some. Demand was created around a story, which because of the curiosity of a new asset class, attracted early retail investors. Simply nothing more than financial speculation circling an evolutionary invention.
I like to think of NFTs as a piece of paper, it really doesn’t have any value of its own but depends on the context. If it’s filled with scratches, it has no value, but if those scratches are made by Jackson Pollock, it has great value. In short, it’s purely contextual.
How Brands Can Create Value with NFTs?
For so long value creation has been unidirectional, dependent on the central product. Shoe companies could only sell shoes because that is the brand identity and customers expect them to deliver shoes.
But with the introduction of social media, brands slowly started experimenting with different offerings. Businesses partnered up with non-competing businesses, they sponsored different things and offered things that would create different streams of value. Famous partnerships like Louis Vuitton & BMW, Spotify & Starbucks are examples of this.
But thanks to NFTs, we have crossed that level and we have something entirely new waiting for us. Continuing the example of shoe brands—a shoe company only made money when they sold shoes. But think of a shoe brand like Nike in the metaverse organizing a campaign where the people running a marathon with their Nike shoes on will get an airdrop in their registered wallet. And in that airdrop, there is an NFT.
Or a manufacturer of an electric vehicle who connects the odometer with a tokenized reward model, where drivers collect “no-emission NFTs” based on the miles driven, sort of a drive-to-earn while contributing to an environmental cause.
These are just a couple of examples of what value creation with NFTs means. Coupled with a thriving community and NFTs—any brand can monetize its secondary products, create unique offerings, and form partnerships.
Basically, NFTs create a new layer of value, that has previously not been possible. Meaning, that we have not been able to date to expect any brand, to provide their product bundled with a gamified, valuable unique asset that can be co-created.
So if you were a decision maker in a company, how would you use NFTs to create value?
These are a few examples of how brands use NFTs to create value right now.
Event Tickets
NFTs have a great use case in event tickets. As a unique token, it can authorize entry to any gated events and also later act as a collectible. Last year, the NFL turned the tickets to the Super Bowl to NFTs. Similarly, AMC distributed 86000 NFTs to those who bought tickets to the new Spider-Man movie.
NFTs are the answers to an efficient verification process while being impossible to counterfeit. So if you’re organizing an event, give NFTs a shot.
Digital Merchandise
NFT digital merchandise is going to be huge in the fashion, entertainment, and sports industry. While businesses treat merch items as secondary products, with NFTs they will become the star of the show.
Because, again, NFTs make digital products verifiable and exclusive. That means the possibilities of digital product gets 100x bigger with NFTs.
Brands like Gucci, Louis Vuitton, and Forever 21 have already begun their expansion to the magical lands of the metaverse using NFTs. Last year Gucci sold a virtual handbag for over $4000 in Roblox. And since then virtual products have been sold more than ever before.
Exclusivity
For those who value rare and exclusive things, NFTs are their gateway to the digital world. Even in the physical world, products like Wine are being sold as NFTs. Yao Family Wines, Robert Mandovi, Chateau Angelus—these are just a few wineries that have dabbled with NFTs.
Fundraiser
Another great use case of NFTs can be found in fundraising events. Blankets of Hope, Hope for Haiti, the UNICEF, all of these organizations used NFTs to raise funds to help needy people across the world.
I want to leave you with a thought! I imagine a future in which any product will come with a bundled offering. A future in which customers can collaborate in the co-creation process of this unique digital asset and therefore equally co-own. A future in which brands no longer will be able to get attention because of ads that are presented, but only if companies manage to build experiences customers have co-created.
If you feel the need to learn more about metaverse/web3, here’s how I can help you: