NFT Loyalty Programmes: Missing Piece in the Customer Loyalty Puzzle?

The new functionalities and capabilities introduced by blockchain technology are defining a new era of loyalty programmes as companies include NFTs in their incentive programmes. Despite their widespread usage, however, you may be wondering how NFTs will impact your loyalty programmes in practice. How, exactly, can an NFT loyalty programme provide more to customers compared to traditional models?

We’ll explore the potential of using NFTs to drive engagement in loyalty programmes. But first, we must start by learning what NFTs are and how they function.

Contents:

• Key Takeaways

• What are NFTs?

• What is Blockchain Technology and Web3?

• How Do NFTs Work in Loyalty Programme

• What are the Benefits of Using NFTs in Loyalty Programmes?

• 10 Core Components of an NFT Loyalty Programme

• Examples of NFT Rewards and Loyalty Programmes

• FAQs

Key Takeaways

• NFT loyalty programmes offer more flexibility and value than traditional points-based systems, letting customers truly own their rewards.

• Web3 technology gives members unprecedented control over their rewards, allowing them to trade, transfer, or sell their benefits.

• The NFT market reached £22 billion in 2021, showing significant potential for businesses looking to modernise their loyalty schemes.

• Creating NFTs for loyalty programmes is straightforward, requiring just four steps: design, platform selection, smart contract setup, and testing.

• Blockchain technology ensures rewards are tamper-proof and instantly updated, providing better security than traditional programmes.

• NFT loyalty programmes particularly appeal to younger audiences, with Millennials being three times more likely to trade NFTs than Generation Z.
  
  

What are NFTs? 

NFTs (non-fungible tokens) are digital assets that cannot be duplicated or replaced. Each cryptographic token signifies ownership of unique digital items like videos, art, exclusive content, virtual real estate, or sports collectibles.  These tokens are recorded in a blockchain (a digital ledger that keeps data encrypted). Each token is unique, and the blockchain keeps tabs on its value and transaction history in real time. 

NFTs have seen their importance increase over the years and continue to draw the attention of businesses looking to thrive in the digital space.

As digital tokens emerge as substantial investment opportunities, the NFT market has risen in popularity, reaching $22 billion in 2021.

Their popularity means more businesses and consumers are considering these digital assets as suitable rewards for brand loyalty. By rewarding loyalty with NFTs, businesses increase customer trust and participation; gain insights into customer preferences; and ultimately, increase revenue.

NFTs also improve digital identity through the tokenisation of an individual or entity. This unique, verifiable digital passport works across several platforms and applications. It allows users to securely manage personal information and other digital attributes as a non-fungible token on a blockchain.

However, attention is shifting toward nurturing better customer interaction and establishing stronger communities. It's still important to recognise and reward loyal customers, but in more creative ways than merely rewarding them with points.

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What is Blockchain Technology and Web3?

As mentioned briefly above, blockchain technology serves as the underlying infrastructure for NFTs (Non-Fungible Tokens) in loyalty programmes. Blockchain's distributed ledger ensures that loyalty rewards represented as NFTs cannot be duplicated or forged. Each NFT has a unique identifier and ownership history that's verifiable on the blockchain.

The blockchain relies on a network of computers to validate each block/element/transaction conducted the ledger. Computers within the network verify the legitimacy of all transactions. To update the transaction’s value, all the computers involved in the transaction anonymously compute and review its various components.

This ensures that everything recorded on the blockchain is up-to-date (displaying the correct and current value); tamper-proof (no third-party access or alterations); and passes multiple verification checks, guaranteeing its authenticity.

Web3 is a prediction of the future of the internet. The term represents the idea of a decentralised internet replacing the current centralised Web2 model. This will put an end to the time when a small number of corporations controlled the web and give community-controlled networks complete authority over it.

But what exactly would that mean for modern loyalty programmes?

The Role of Web3 in Modern Loyalty Programmes

Web3 will give users unprecedented levels of ownership and control over the rewards they receive and how they use them. Smart contracts will trigger rewards and benefits securely and fairly once the specified conditions are fulfilled. Digital ownership, made possible by technologies like NFTs, will also give customers control over their reward points or perks within a decentralised system.

This is a step up from traditional programme models that give brands the final say on reward usage. The transferability and interoperable tokenisation features of blockchain technology will allow users to sell, transfer, or even trade these digital rewards or points across several platforms, creating truly unique experiences. 

This opens up a new world of engagement opportunities, allowing brands to give customers a greater sense of ownership and involvement in programme development.

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How Do NFTs Work in Loyalty Programmes?

Loyalty programmes are expected to experience a 10.5% CAGR between 2022 and 2030 as more businesses recognise the need for brand loyalty.

However, many are turning away from traditional reward schemes due to shifting consumer behaviours and the push towards digital transformation.

Using NFTs as incentives within loyalty programmes is gaining traction as digital rewards become more commonplace. Whether you're an online store or an omnichannel retailer, an NFT loyalty programme allows you to make meaningful connections with your tech-savvy customers. Other applications for NFT rewards will also emerge when the technology reaches a broader audience.

With blockchain technology, NFTs provide a means for companies to provide customers with incentives for staying loyal to their brand. This provides real value for customers by offering them exciting digital assets that can be exchanged on NFT markets. 

The NFT Loyalty Programme vs Traditional Models 

The traditional loyalty programme is an incentive structure that allows customers to earn rewards for their continued business. Customers can earn points towards free or discounted products based on how frequently they patronise your business.

NFT loyalty programmes build on the traditional model by giving rewards an air of exclusivity to enhance the customer’s experience with your brand. These programmes allow businesses to connect with their customers in a new way by capitalising on the popularity of digital collectibles, which appeal to the modern customer’s craving for one–of-a-kind rewards.

While conventional loyalty programmes are usually created with just the company's immediate future in mind, NFT loyalty programmes have the potential to benefit the company for the foreseeable future by increasing customer participation and engagement . Customers benefit from NFT loyalty programmes because they provide greater flexibility and facilitate the development of digital scarcity for tangible goods.

What are the Benefits of Using NFTs in Loyalty Programmes?  

For many loyalty programmes, a lack of exciting and rewarding incentives often leads to a drop off in customer engagement.

KPMG discovered that 38% of respondents had issues with a loyalty scheme they were enrolled in.

Offering NFTs as rewards creates more opportunities for engaging digital interactions with your customers. NFTs' modular and customisable design makes them useful for a wide variety of purposes, such as establishing rightful product ownership, providing added incentive to make a purchase, limiting access to authorised users, and adding a fun element to customer interactions with a brand.

NFT's strict authentication standard and protection against fraudulent actions are additional benefits for loyalty programmes.

Due to their interoperability, NFTs can be traded to acquire access to special events or for other digital assets like artwork. One of the most interesting aspects of NFTs is their potential to greatly improve the value system for customers by making rewards more flexible, secure, and much easier to use.

The rewards on offer play a critical role in boosting engagement and new signups for any digital loyalty programme. These are some benefits that businesses can expect if they include NFTs in their loyalty programmes.

Real-time data

Access to key data often makes the difference for successful loyalty programmes. NFT loyalty programmes use a blockchain-based system that instantly refreshes or updates rewards for customers, providing them with a better experience.

 
Unique incentives

NFTs are intended to be rare and unique tokens as opposed to traditionally mass-produced rewards. Their uniqueness and rarity are what make them so valuable to the customers that receive them.

Each NFT should be tailored to the needs of your business in a particular setting, such as a marketing campaign or sales season. This means customers can look forward to something special when it’s time to receive their rewards, setting your brand's loyalty programme apart from the competition and encouraging them to continue using your products.

Interoperability

NFTs and other blockchain-based technologies eliminate the need for third parties in the interaction between a loyalty programme’s vendors, partners, and customers. This interoperability means you can link different loyalty schemes into a central loyalty network.

With increased participation in loyalty programmes, customers have the opportunity to interact with one another, sharing experiences and contributing to your brand’s community. It also makes it easier for international businesses to implement unified loyalty strategies that reward customers in several markets.

Cost-effectiveness 

NFTs don’t typically cost much to create, making them a cost-effective reward option. Algorithmically programmed collections both save costs and increase returns for the business. The true outlay of resources is in formulating and committing to a brand-aligned long-term reward strategy.

Appeal to a younger demographic

Adding NFTs to your loyalty strategy means attracting the attention of the younger generations, who are more in tune with its benefits.


Over 57% of Generation Z say they can express themselves more freely in a virtual setting than in real life and 47% say they wouldn’t mind meeting new people in the Metaverse.

Also encouraging is the fact that Millennials are three times more likely to trade NFTs than members of Generation Z.


This shows that if your NFT loyalty programme is well designed, you can count on the participation of these tech-savvy customers.

Utility

Utility NFTs provide benefits to their holders that they would not have otherwise. These digital rewards provide holders with additional perks that stretch beyond the actual value of the reward itself. The reward could give the holder early access to new products or access to limited edition products.

These utility NFTs are value-laden offerings that can be expanded to give more value to your customers. They can improve customer loyalty programmes and provide customers with new ways to engage with your brand.

Better security

Due to the blockchain's immutable records and foolproof authentication, redeeming rewards is a smooth and error-free process. In addition, the NFT is destroyed when a reward is cashed in, ensuring that it won’t be reused.

Sustaining brand growth 

Long-term brand survival requires adapting to shifting consumer preferences and taking advantage of emerging technologies.

NFTs are an excellent example of emerging technologies that are gaining traction. In the third quarter of 2021, the Ethereum network recorded NFT trading by over 265,927 active users.

NFTs provide a new channel for communicating with and rewarding customers and forging partnerships with other businesses, contributing to building a devoted community for your brand in the long run.

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10 Core Components of an NFT Loyalty Programme 

Let's explore some key components of a loyalty and reward programme.

1) Reward Structures

There are several reward structures to use in your NFT loyalty programmes. Popular options include:

Point-based programmes

Replace basic rewards with unique NFTs to add value to point-based programmes. Customers earn points for completing purchases or other desirable actions and redeem them for NFTs. They can choose to trade or sell these assets, creating opportunities for more memorable experiences.

Tiered programmes

Create tiers with different reward packages. As customers engage and earn NFTs, they unlock higher tiers with better, more valuable rewards. Unique NFTs will provide the perfect blend of personalisation and flexibility in structuring tiers.

Value programmes

Create NFTs that reflect the values of a charitable organisation or cause. Customers can earn this when they participate in activities that contribute towards these values. They can even add it to their social profiles as a digital badge of honour.

Paid programmes

Launch a paid loyalty system where members join an “Inner Circle” or “Elite Collection” for a monthly/annual fee. Members get unique NFTs that double as a digital collectible and proof of membership. You can even add subscription tiers with different NFT designs/rarity levels. Inner circle benefits could include member-only events or a limited-edition product or service.

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2) BlockChain & NFT Marketplace platforms

Your choices here set the foundation for programme success. Let’s compare some of the available options and explore key considerations to inform decision-making.

Blockchain Platforms for NFT Loyalty Programmes

Key Considerations:

• Scalability: You’ll need a platform that can manage large transaction volumes efficiently for a seamless user experience.

• Transaction Fees: Low transaction fees offset the cost of transactions in your programme, increasing participation levels.

• Community Support: Vibrant communities support implementation and maintenance with valuable development tools, better resources, and support.

• Notable Features: Unique features provide a competitive edge with additional benefits matching your programme needs.

NFT Marketplaces for Loyalty Programmes

Key Considerations:

• Blockchain Compatibility: Your marketplace must support your NFT loyalty programme’s blockchain network.

• User Base: Large user bases drive engagement by giving your NFTs greater exposure.

• Supported NFT Types: The marketplace should support the types of NFTs you want to add to the loyalty programme.

• Notable Features: Look out for other notable features that align with your needs, including gasless minting, governance tokens, or curated communities.

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3) Profile pictures 

One of the most common applications of NFT at the moment is what amounts to a membership pass. With a personalised illustration on the front, it displays a blend of distinctive qualities depending on the real behaviour, transactions, and preferences of the cardholder. A few well-known examples are Reddit Avatars and Moonbirds.

4) Digital twin

Rewards can be tokenised by using their digital twin. The reward can be sent to the customer in digital form before the physical product is produced. This gives the customer a glimpse into the finished product before they receive the real thing.

5) Token-gating 

This practice limits specific features or perks to specific NFT owners. These NFTs can serve as membership credentials for exclusive access to a brand's loyalty programme and its associated advantages, whether those benefits are tier-based or otherwise custom-tailored to the token's owner.

Token-gating adds exclusivity and scarcity to rewards, encouraging customers to spend more to upgrade.

6) Social initiatives

Providing NFT loyalty programmes that have a strong social element is yet another excellent method of engaging customers. One option is to sell your loyalty tokens at auction and donate proceeds to environmental causes. People respond positively when their preferred brands take a strong stance on social issues.

Over 70% of customers want brands to actively support social and environmental causes, and...

46% consider this a key factor behind their purchase decisions. You'll be contributing positively to the environment while also creating a devoted customer base.

7) Royalties

The versatility of NFT allows you to setup “programmable royalties” that return a percentage of NFT sales to the original creator. Whenever customers trade or sell NFT rewards, you get a percentage, which you can use to fund programme improvements.

Channel this fund towards personalised rewards or new product lines and services.  

8) Membership tokens

Each loyalty member can have a unique membership token (NFT) that undergoes constant development and upgrades. No two membership tokens will look the same since customer behaviours or information differ, and the token will adjust its design to reflect that.

For instance, customers who favour specific product or service categories could have their digital token evolve to match their preferences. It could be a visual change in the NFT itself and more relevant discounts and recommendations. This hyper-personalisation directly boosts customer loyalty. 

9) Decentralised Communities

Blockchain technology has transformed community building, a change that benefits Web3 loyalty programmes. Blockchain’s collaborative system prioritises customer input by ensuring that no single entity has total control.

These decentralised communities follow a transparent, democratic model that embodies the expectations of the modern consumer. Changes and updates are a collective effort in these programmes, with voting rights allowing members to directly contribute to development. 

They vote on everything from partnerships to rewards and programme rules. These active communities are highly engaged and invested in the brand’s growth.

10) Interactive experiences

Use NFTs to create immersive, gamified experiences that make your programme exciting. Turn routine interactions into thrilling adventures with digital scavenger hunts where members earn NFTs by completing challenges or making purchases. Each token could be a piece of larger NFT collections that members try to complete like a jigsaw puzzle.

Introduce seasonal campaigns that encourage members to collaborate to get community rewards. It could be a holiday-themed challenge where each member contributes to a collective goal. The NFTs would evolve visually as they approach the target.

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Examples of NFT Rewards and Loyalty Programmes

Let’s see some examples of NFT rewards in action in real-world loyalty programmes.

Burger King

Burger King is one of the recognisable brands that has joined the NFT bandwagon. In their loyalty scheme, each meal package contains a QR code that, when scanned, will provide the customer with one of three NFT gaming chips. A fourth NFT reward is automatically sent to subscribers once the set is complete.

Examples of the rewards on offer include a digital collectable, a year's supply of Whopper sandwiches, and brand merchandise. To further encourage engagement, Burger King is also experimenting with cryptocurrency rewards.

Starbucks 

Starbucks and Polygon recently announced a partnership to supply blockchain technology for the Web3 experience, Starbucks Odyssey. Through this partnership, the company hopes to expand the reach of its popular loyalty rewards programme.

In previous programmes, customers collected "stars" for each purchase and then used them to trade in for freebies like drinks and baked goods. However, using Web3 will be a whole new experience. US Starbucks customers and partners (workers) now have the chance to earn and purchase digital collectables that unlock premium perks and exciting coffee-themed experiences.

Members will participate in "journeys" like interactive games or tackle entertaining tasks to increase their familiarity with coffee and the Starbucks brand. They obtain a "travel stamp" (digital collectable—NFT) for completing a voyage. The option to buy limited-edition travel stamps without using cryptocurrency is also available. With the use of these stamps, members earn more points and unlock exclusive rewards and experiences.

Taco Bell

Taco Bell has been holding auctions for a special edition Taco Bell NFT, dubbed NFTacoBells. In under 30 minutes, 25 artworks from NFT artists were snapped up. Each GIF sells for thousands of dollars, while originally being listed for only a dollar.

Token holders of this NFT will get a $500 Taco Bell e-gift card as a real prize. The programme is also a social action outlet for Taco Bell. The Taco Bell Foundation uses the sale's revenues to fund the Live Más Scholarship.

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NFTs will Define the Future of Loyalty Programmes

As the metaverse continues to grow, the widespread use of NFT rewards by businesses shows that we should start preparing for it now. A new kind of brand loyalty is emerging as companies engage in digital platforms and assets to transform their relationships with customers.

We have only just scratched the surface of the possible applications for digital assets in the loyalty industry, and you can expect this trend to continue.

Ultimately, NFT rewards and the digital experiences they deliver can foster engagement, brand loyalty, and growth. It opens up exciting avenues for companies to leave a lasting impression on their consumers, from the ownership of a piece of the company's history to limited edition products.

FAQs

What is an NFT loyalty programme? 

An NFT loyalty programme uses blockchain technology to offer rewards as unique digital assets that existing customers can truly own, trade, or sell. These programmes create exclusive experiences through token gating and smart contracts, transforming how brands deliver products and services.

How do NFT loyalty programmes differ from traditional loyalty schemes? 

Traditional schemes restrict point usage, while NFT programmes give repeat customers complete ownership of their rewards. They enable trading between friends and family, real-world redemption options, and create genuine emotional connections through personalised digital collectibles.

What benefits do NFT loyalty programmes offer to businesses? 

Businesses gain detailed customer data, strengthen customer relationships through transparent transactions, and improve their bottom line. Smart contracts automate reward distribution, while customer feedback helps refine products and services for better engagement and loyalty.

How can customers participate in an NFT loyalty programme? 

Customers join by creating a digital wallet and linking it to their account. Like famous nft collections such as Bored Ape Yacht Club, members earn unique digital rewards through purchases or engagement, accessing exclusive experiences through token gating.

Are NFT loyalty programmes secure and how is customer data protected? 

Blockchain technology makes NFT programmes highly secure through encrypted smart contracts and transparent transactions. Customer data is protected by decentralised storage, with each transaction verified by multiple network nodes, preventing unauthorised access or tampering.

What types of rewards can be offered through NFT loyalty programmes? 

Beyond traditional points, NFT programmes offer rewards like exclusive digital artwork, early product access, and unique experiences. Token gating ensures existing customers receive special benefits, while real-world perks create meaningful customer relationships.

How can businesses implement an NFT loyalty programme? 

Implementation requires choosing a blockchain platform, designing unique digital rewards, and setting up smart contracts. Businesses must consider their existing customers' needs, integrate customer feedback, and ensure seamless products and services delivery.

What are the potential challenges in adopting NFT loyalty programmes? 

Challenges include technical complexity, customer education about digital wallets, and balancing token gating with accessibility. Businesses must maintain strong customer relationships while managing implementation costs and protecting customer data effectively.

How do NFT loyalty programmes enhance customer engagement? 

NFT programmes boost engagement by offering unique experiences and fostering emotional connections. They encourage repeat customers through exclusive rewards, enable friends and family sharing, and create vibrant communities around nft collections.

What are some successful examples of NFT loyalty programmes in use today? 

Major brands like Starbucks use NFTs to enhance customer relationships through unique digital collectibles. Real-world examples show how token gating, smart contracts, and exclusive products and services drive engagement and improve bottom line results.

Mark Camp | CEO & Founder at PropelloCloud.com | LinkedIn

Mark is the Founder and CEO of Propello Cloud, an innovative SaaS platform for loyalty and customer engagement. With over 20 years of marketing experience, he is passionate about helping brands boost retention and acquisition with scalable loyalty solutions.

Mark is an expert in loyalty and engagement strategy, having worked with major enterprise clients across industries to drive growth through rewards programmes. He leads Propello Cloud's mission to deliver versatile platforms that help organisations attract, engage and retain customers.