The future of loyalty programs: How NFTs are disrupting traditional models

Loyalty programs are being pushed aside as customers become disengaged and numb to the high volume of similar programs in existence. Web3 and NFTs are here to solve that. How? Let’s find out.
The future of loyalty programs: How NFTs are disrupting traditional models

Web3 is quickly emerging as the next evolution of the internet. As one of the most exciting developments within web3, NFTs continue to disrupt industries with their endless, versatile applications. 

One use case that is quickly becoming a topic of conversation for businesses is leveraging the unique properties of and technology behind NFTs to create and improve loyalty programs. NFTs are uniquely positioned to provide unprecedented engagement, customization, and value for loyal customers. 

Creating a loyalty program that stands out is difficult when over 90% of companies already have them. Customers often forget they exist or find it hard to keep up when every loyalty program is indistinguishable from one another. There is nothing new drawing consumers in.

However, when done effectively, loyalty programs are proven to increase retention, revenue, and engagement. According to McKinsey, loyalty programs can increase a business’s revenue from engaged customers by 15% to 25%

But here’s the challenge. To create a successful loyalty program that attracts users, companies must push the limits of what’s already out there and create something that will last as technology and trends evolve.

Changing with the times

As you may remember, loyalty programs gained momentum in the 20th century revolving around stamps, coupons, and box tops. But as the digital world expanded, so did loyalty programs. 

Brands jumped to capitalize on this new technological wave called the internet. American Airlines revolutionized air travel with its online frequent flier program. CPG brands like Sephora have quickly garnered attention by acquiring millions of loyalty members after trading their physical loyalty cards for a mobile app. Starbucks has one of the most successful loyalty apps, and yet again, they continue to push the boundaries by adopting an NFT-powered loyalty program.

However big or small a business is, the question surrounding customer loyalty remains the same. How do you craft something that builds a personalized, long-lasting relationship with customers and fosters repeat business and trust?

Why companies should integrate NFTs into their loyalty programs

The next generation of loyalty programs and brand marketing will feature the capabilities of NFT and blockchain technology. NFTs deliver incredible value in the form of ownership. They tokenize assets, assigning unique and secure ownership to the sole person who possesses it. 

Owning a branded NFT gives customers the feeling that they now own a piece of the brand itself, deepening their engagement with a business. This can lend itself to increased brand affinity and advocacy–two essential factors of a loyalty program. 

A feeling of brand ownership can also lead to feelings of connectivity between the customer and the company. Consumers want to feel connected to brands. This is especially true for younger generations, who increasingly spend money on brands that align with their values. They crave personalized experiences. Emotional connection is becoming more and more important as a motivator for purchasing.

With the emergence of web3 in the enterprise landscape, NFTs are now unlocking an opportunity to revamp the traditional loyalty program model to add more ownership, connectivity, interactivity, and valuable rewards for loyal brand customers. These rewards can include: 

  • Unique digital and physical rewards: Rewards earned through NFTs can represent anything. Digitally, they can unlock rewards such as preferential pricing, virtual goods, and personalized customer service. Or an NFT can act as a ‘digital twin,’ meaning it represents any reward in the physical world–anything from a free coffee to a new car. 
  • Token-gating: Exclusive merch, memberships, or events for preferred reward members can be token-gated, meaning the experience or redeemable item is only unlocked for customers with a determined NFT. 
  • Tiered reward systems: Customers can level up the status of their NFT to unlock different perks and rewards for each level. The NFT’s appearance can transform as users complete different actions, allowing each NFT to feel personalized based on their actions. 

These are the same features fundamental to building a successful loyalty program. The synergy is already there. All that’s left is to utilize NFTs as a tool to enhance your loyalty program.

What makes an NFT-powered loyalty program different?

NFTs provide a competitive advantage for any business using them to start or improve their loyalty program. With mobile apps replacing physical loyalty cards, NFTs are the next natural step in the loyalty progression for brands to make a bigger impact with greater ease. Living on the blockchain, authentication, flexibility, and true ownership is made easier than ever with NFTs acting as digitally-verifiable reward cards.

So, what else makes an NFT experience stand out from your average mobile app or a physical loyalty card? Here are four of the many game-changing benefits NFTs can yield for loyalty programs:

1. Interactive activities

NFTs are way more interactive than any other loyalty tool out there today. They allow companies to build something fun and engaging that will strengthen the customer’s relationship with the brand.

Companies can allow their customers to ‘level-up’ their NFTs to earn exclusive benefits by doing the same things that would earn them points in today’s loyalty programs, such as:

  • Purchasing items 🛍️
  • Showing up to live events 🎟️
  • Visiting stores in person 👋
  • Posting on social media 📱
  • And more

However, the exciting twist with NFTs is the mechanism that allows more elaborate and flexible activities. Some of these include:

  • Wrapping: Customers’ NFTs can be changed or evolve based on their actions in the real world or online. 
  • Burning: Customers can trade one NFT in for another permanently to unlock a different reward. 
  • Collecting: Companies can set collection challenges for users to collect multiple NFTs that, once completed, can be combined to earn a rare NFT that unlocks unique rewards.

2. Dedicated digital communities

Another major part of a loyalty program is building a community. There is no easier way to join like-minded individuals than through a digital community. Companies can bring together their existing loyalty members, but they can also attract new customers who are NFT enthusiasts. This can bring in new demographics and target audiences for companies looking to expand their reach.

A great tactic to engage and interact with your community is to reward the most dedicated members. Special giveaways, contests, and rewards for being an active or long-standing member are all fun and exciting ways to have your community earn NFTs. 

Brand-to-consumer relationships have historically been a one-way street, but this can change with a solid and safe digital community built on trust. Community transforms a company into a living, interactable being. It offers a place for customers to share user-generated content and feedback, giving loyal customers a voice and bringing them even closer to the brand. NFTs can offer a safe space to accomplish this.

3. Redemption flexibility for customers

A digital community can provide an even more profound impact when it comes to secondary marketplaces. Imagine an online marketplace where users can buy, sell, and trade a company’s loyalty NFTs and reward assets. This opportunity to engage with a secondary marketplace provides greater flexibility to customers. Giving customers a chance to choose how they’d like to benefit adds an entirely new layer of versatility to a loyalty program. 

This flexibility feeds into another critical element and metric for loyalty programs: redemption. How often are loyalty members actually redeeming their points and benefitting from the program in place? Redemption rates, on average, are below 20% for loyalty rewards. The power of choice to use, sell, or trade an NFT can improve and alter what it means to redeem. Empowering consumers with more autonomy and increasing motivation to attain these rewards is a win-win. 

4. Unlock a new stream of revenue

Currently, loyalty programs generate more revenue for a company by increasing basket size, frequency of purchases, and attracting new customers through brand advocacy. However, what if there was a simple and easy way to create an entirely new system to earn with minimal costs and resources?

There is already recurring revenue built directly into NFTs–called royalties. A company’s NFTs can have a royalty fee attached to them, which gives them a percentage cut, often between 5-10% of all secondary sales. This is a game-changer that unlocks an entirely new stream of revenue for a business looking to diversify and bring in more earnings. For example, Nike has made $93 million from secondary sales royalties alone on their NFTs. There is nothing like this in the current traditional loyalty model.

Evolving your loyalty program

NFTs have mostly been thought of and used as digital collectibles so far, but the truth is there are endless possibilities for businesses to use NFTs. Thinking about the natural progression of loyalty programs with technological advancement, this seems like a no-brainer as we herald in the new era of web3. 

The heart of all loyalty programs is customer retention. The premise of keeping existing customers as repeat buyers almost always pays off. The Harvard Business Review has found that it’s anywhere from 5-25 times more expensive to win a new customer than to sell to existing customers. Ultimately, this gamification that is special to NFTs will keep users interacting and coming back for more.

Loyalty is a two-way street. The absolute best thing brands can do for their customers is take them on an exciting new journey and experience that increases connectivity and community. 

NFTs are the future of loyalty programs, representing ownership, exclusivity, and authenticity. 

Ready to build?

RECUR Builder redefines loyalty by giving brands of all sizes the tools they need to seamlessly develop and integrate engaging web3 loyalty programs into their business strategy. 

If your business wants to see results and build lasting loyalty programs at scale, get in touch with our team or learn more at

Similar Posts

Cookie Consent
We use data collected by cookies and JavaScript libraries to improve your browsing experience, analyze site traffic, and increase the overall performance of our site.

You can change your preferences any time on our Cookie Preferences page.
Cookie icon