Web3 has the potential to revolutionize interactions between brands and consumers, as well as how brands engage with each other.
Brands and businesses often wonder why they should use Web3, a new technology that is still in its early stages. It's a valid question, considering that the full benefits of Web3 may take time to become evident. However, there are compelling reasons why brands should care about Web3 today.
What will loyalty and community look like in the future? And how does Web3 transform customer engagement? Engaging customers in innovative ways through the use of Web3 and the Metaverse is crucial.
What is Web3 all about?
Web3 focuses on two main aspects: ownership and interoperability of data, assets, and identity.
Let's break it down.
"Ownership" refers to the need for a digital ownership layer that mirrors the concept of property rights in the physical world. In the physical world, when we buy something, we receive a receipt as proof of purchase, and we can physically possess and use it, ensuring that it remains exclusively ours. However, replicating this notion of ownership on the internet has been challenging. This becomes problematic as our time and money increasingly revolve around online activities. Web3 aims to change this by introducing digitally-native records of ownership called NFTs (non-fungible tokens). NFTs can represent ownership of various forms of data, such as digital assets, transaction data, or even identity data.
With Web3, individuals can demonstrate ownership of digital assets, verify their identity across multiple facets, and indicate their affiliation with specific communities. The crucial aspect is that this can be done independently of centralized authorities like Google, Facebook, or government entities. This independence enables individuals to establish and secure their property rights, potentially even monetizing them, without relying on third parties that could remove their platform or control. Web3 also allows individuals to prove their identity and group affiliations without depending on intermediaries. It empowers individuals to retain control over their personal data, protecting it from manipulation or compromise by corporate entities or malicious actors.
Moreover, Web3 promotes "interoperability" by shifting the responsibility of data ownership to individuals and equipping them with user-friendly tools to manage their data. This paves the way for a universal and interoperable data standard across the digital realm. In the Web3 paradigm, everything from your identification to the assets associated with it can be accessed, understood, and interacted with by anyone.
Even for consumers who may not actively seek additional responsibilities, Web3 offers a superior experience by allowing the seamless transfer of identity and associated data across different digital environments. Currently, moving from Amazon to Netflix feels like filling out the same form repeatedly when visiting different doctors. Web3 envisions a world where identity is not confined within isolated systems but stored with individuals and shared as desired.
When we emphasize the importance of Web3 for brands, it stems from the belief that empowered consumers will increasingly demand ownership and control over their identity and data. While this shift may initially reduce some control for brands, embracing this new environment brings incredible benefits through the inherent interoperability of Web3.
However, brands are grappling with a crucial question: How does Web3 benefit them in the present, rather than in the distant future? The reality is that many of the advantages of Web3 will require time to fully materialize. Web3 has the potential to revolutionize interactions between brands and consumers, as well as how brands engage with each other. Nonetheless, most brands face immediate challenges and constraints, requiring solutions within months rather than years.
Given this context, it is vital to consider the timeline of Web3 benefits and identify short-term and long-term advantages. In this light, the focus is on differentiating oneself in the present while positioning for the future.
The Short Term
The short term is focused on addressing the immediate challenges and real problems that exist today. The following key issues are:
1. Growing consumer base: There is a rise in new consumers who are spending more time on various platforms. US adults, on average, spend 7 hours per day online, and popular virtual platforms have over 400 million monthly active users. Additionally, platforms like Roblox are widely used by children between the ages of nine and 12.
2. Increased demand for personalization: Consumers now have higher expectations for personalized content and experiences from their favorite brands. Around 83% of consumers expect personalized interactions.
3. Expanded consumer choices: Consumers have more options than ever before, with 77% of US consumers trying new shopping behaviors, channels, stores, and brands since the Covid pandemic. Consumers are increasingly motivated by a brand's cultural credibility and how it aligns with their personal values. Sustainability is a significant factor, especially among younger consumers.
4. Evolving technology landscape: Changes in technology, such as Apple's privacy-focused updates in iOS 14 and similar potential changes from Google, are making it harder to track individual user behavior using traditional programmatic marketing tools. Consumer brands are experiencing a revenue impact of 10-35% due to these changes.
These challenges are supported by clear data. Customer Acquisition Costs (CACs) have risen by 222% over the past eight years, with a 41% increase in the past year alone.
So, how does Web3 address these challenges? We see two major ways in which Web3 can make a difference.
Building Stronger, More Invested Communities: Adidas partners with BAYC and G Money to create Web3 community
The way products are distributed has changed, and customer acquisition costs (CACs) have been increasing for almost a decade. To address this, brands can invest in building and nurturing a community, which serves as both the engine and fuel for distribution.
A strong community is synonymous with loyalty, and consumer brands should prioritize maximizing it. One effective way to strengthen a community is by aligning incentives and providing a sense of ownership to its members.
By aligning incentives between the brand and community members, the relationship between the brand and the consumer is redefined. This encourages cooperation towards a common goal and creates a more participatory consumer experience. In this new paradigm, customers become more active, vocal, and engaged in shaping the direction and outcomes of the brand. They may contribute ideas to product roadmaps, suggest new flavors or colors, influence the company's vision and values, or be invited to exclusive online and offline events reserved for community members. When a brand makes its community feel valued as stakeholders, they will reciprocate with loyalty and support. Ultimately, in this new relationship dynamic, the success of the brand directly translates to the customer's satisfaction and success as well.
Embracing Composable, Multiplayer Commerce:
Tiffany & Co. partners with Crypto Punks for NFT pendant
By utilizing a decentralized and trustless foundation for data, Web3 has the ability to transform competitive relationships into cooperative ones, turning adversarial games into coordination games. This has significant implications for brands as it provides an opportunity to convert isolated communities and loyalty programs into interconnected ecosystems of loyalty. Within these ecosystems, complementary brands and creators can collaborate and enhance each other's offerings, ultimately resulting in an improved experience for the end user.
Alex Danco of Shopify has highlighted that traditional loyalty schemes, membership programs, promo codes, and account-based gating systems are not incapable of building loyalty networks. However, the challenge arises when these systems rely on complex dependencies tied to accounts and permissions. As loyalty networks expand beyond simple bilateral agreements, the accounting and technological complexities escalate rapidly.
In contrast to account-based systems, where accounts are confined within a brand's isolated infrastructure, non-fungible tokens (NFTs) function more like files that can be accessed and modified by anyone utilizing the same operating system (specifically, through Web3). This decentralized approach allows for greater flexibility and interoperability among different participants in the loyalty ecosystem.
Brands should be enthusiastic about the possibilities offered by Web3. Although it may appear to involve a loss of control by opening up the customer base to the external world, it actually presents a tremendous opportunity for growth. Embracing multiplayer commerce entails embracing new creators and complementary brands that have their own engaged audiences. By fostering collaborations and partnerships within this decentralized framework, brands can tap into new markets, expand their reach, and unlock untapped potential.
The Long Term
As Web2 companies begin integrating Web3 technology into their operations and Web3-native brands emerge to compete with their Web2 counterparts, the possibilities offered by Web3 will undergo a profound transformation.
3. Leverage New Distribution Channels
To take advantage of the increasing influx of user attention toward new platforms and venues and to influence the preferences of the next generation of consumers, it is imperative to establish your presence in these spaces. Rather than perceiving this as a mere expense, view it as an investment and a chance to capitalize on and generate revenue from your intellectual property through innovative and unique methods.
Metaverse platforms on a spectrum
Establishing a presence is the initial step, but what adds an intriguing dimension is that these emerging venues serve as novel distribution channels. They provide fresh opportunities for selling products and services, such as metaverse platforms, while introducing innovative distribution mechanisms like cryptocurrencies and publicly viewable crypto wallets. Consequently, this has attracted a new wave of creators who have astutely recognized the potential, breathing new life into the concept of the creator economy and infusing it with a renewed sense of significance.
4. Build Genuine, Multi-Reality Commerce Experiences
Doodles live minting experience at NFT NYC
We have already caught glimpses of the future: you start your shopping experience by trying on something in a physical store, then it seamlessly transitions to the online realm, and weeks later, you find yourself attending an exclusive community event hosted in a virtual platform.
However, at present, this progression feels somewhat disjointed and unconvincing. The promise of the open Metaverse is to bridge the gap between our digital and physical worlds, enhancing our experiences by providing more data and context, and reducing friction. In terms of commerce, this expansion means an increase in distribution opportunities, and the potential for significantly enhanced user experiences through improved continuity, convenience, and personalization.
A significant breakthrough in this realm comes in the form of NFTs. These tokens not only serve as proof of ownership for digital assets but can also create digital counterparts for physical goods, often referred to as "digital twins." This integration of physical and digital realms is the key to creating seamless experiences that transcend dimensions. Consumers can now demonstrate ownership of both digitally native and physical-first products online, verify the origin of these goods, trade them, use them as collateral, and even bring them into the digitally-native worlds like the aforementioned metaverse platforms, which will continue to evolve and improve over time.
As Nic Carter astutely points out, in the years to come, people will view purely analog luxury goods as an anachronism and will feel incomplete without their digital counterparts. This concept aligns with the increasing amount of time individuals already spend online today and how that time is shifting from "traditional" online channels to more immersive platforms.
Conclusion
The core principles of Web3 revolve around ownership, interoperability, and data control. If you share our belief that modern consumers will increasingly seek participatory and interactive experiences in e-commerce and beyond, it becomes crucial to understand how you can empower them with greater control over their identity and data online, while also leveraging that shift to your advantage, both now and in the future.
In the short term, Web3 plays a vital role as a differentiating factor in response to the changing landscape of acquisition and retention driven by technological advancements. Embracing Web3 entails building robust communities that act as potent engines for both retaining existing customers and acquiring new ones, all while embracing the concept of multiplayer commerce.
Looking ahead to the long term, it becomes imperative for brands and Web2 companies serving consumers to position themselves for significant shifts in distribution that will render current models obsolete. It is essential to prepare for a future where multi-reality commerce, fueled by new distribution channels, will hold substantial benefits and opportunities. By embracing this vision, businesses can stay ahead of the curve and thrive in the evolving digital landscape.