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How blockchain can aid customer relationships

By Nathan King, Senior Experience Strategist, RAPP San Francisco

Most are only familiar with blockchain from bitcoin, but uses for the technology far exceed digital currency. Bitcoin's 2017 peak near $19,000 seems quaint compared to the current valuation attached to the pioneer in decentralized cryptocurrency. But beyond the volatile swings in price, the currency spurred significant interest in the underlying blockchain technology.

Consumers were certainly curious, but businesses were especially eager to harness distributed ledgers in an effort to increase efficiency, unlock savings, and upend old and outdated business models. Although some forward-thinking industry leaders billed blockchain as a must-have tool in 2018, the reality was a little different: It certainly held promise, but actual use cases were few and far between.

Fortunately, interest led to cycles of innovation and development that have culminated in real value for brands and consumers, most recently with non-fungible tokens (or NFTs).

Can you ever really own anything on the internet?

The problem with creating on the internet is that files are infinitely copiable, modifiable, and distributable by anyone. Digital files are not unique, with little verifiable proof of ownership or creation. Consider the song you downloaded without paying or the photograph you used without attribution. In reaction to these actions, digital rights management technology popped up. Photographs are covered in watermarks to prevent their reuse, and song downloads became locked down to a particular piece of hardware or software. Digital ownership has failed creators and been unfriendly to customers.

NFTs are technology built on the blockchain and aim to solve some of these problems. NFTs are digital files, and in the case of some media are easily duplicated, but the creator and owner is unique and verifiable. This has opened up new possibilities in the world of digital art and collectibles.

Companies like NiftyGateway have sprung up to offer a marketplace for NFTs, and Christie's auction house has already set the record for the most expensive NFT auction. So far, collectors are eagerly embracing digital ownership of digital goods while artists are reconsidering how they create to engage with customers. Businesses and brands will have equal opportunity to take advantage but may have to start from square one.

Blockchain demands we challenge our assumptions

Understanding the opportunity that blockchain technologies introduce for NFTs and beyond is difficult without first considering built-in assumptions we have about our digital exchanges with companies. Many of the frustrating or unfair interactions we have today could be solved through blockchain technology. Here are four ways brands can consider incorporating blockchain technology in service of their relationship with the customer and audience:

  1. Rethink digital goods as limited and scarce and exclusive, but interoperable.

Digital goods like skins, wearables, and emotes have become an important recurring revenue stream for businesses. Think of the branded outfit your Snapchat Bitmoji character wears, or the Fortnite dance emote your kid's character uses (or maybe your own). In 2019, the artist and performer Marshmello received an incredible amount of earned media for throwing the first live concert in Fortnite's digital world, and part of the promotion for the event included branded "skins" for users' avatars to wear.

These types of co-branded events serve both parties well by building shared brand equity, and digital goods serve as a collectible memento and signal to other users. The challenge is that they aren't very customer-friendly. They're proprietary and locked down, and are not truly collectible because the number created is either unlimited or unverifiable.

Issuing digital wearables as NFTs may allow these assets to be used interoperably and across multiple digital worlds. That utility would be more attractive from the user's perspective, but it's also a more meaningful opportunity for the brand. If the skins given out for attendees of Marshmello's concert were popping up in other games — appearing in augmented reality on apps like Snapchat or TikTok, and being offered for sale in online marketplaces for digital goods — they would be far more valuable for the DJ, in addition to the fans.

  1. Rethink real-world products to have digital counterparts.

Particularly for luxury and collectible products, proving that items are genuine is a recurring challenge, while counterfeit products are a disservice to the customer and brand. Issuing NFTs for real-world items acts as a form of authenticity and allows their uniqueness to be verified by anyone. Satoshi's Closet linked our online and offline worlds with the first streetwear apparel drop on the blockchain, a limited release where every item was verifiable. But more than just a marker of authenticity, in online worlds it's a unique symbol that they own something special.

Other brands are already creating new value for customers from existing purchases. Nike recently patented CryptoKicks, which are blockchain-based sneakers, issuing the owner a matching digital pair of the physical shoes. And if this all seems silly or farfetched, consider how branding can play a part as we augment reality with AR-enabled cameras, glasses, and devices. The opportunities are just beginning for these technologies to help customers verify their prized purchases (and show them off), whether digital or physical.

  1. Rethink rewards points as digital currency.

Consider airline rewards, which often use points or miles to incentivize consumer loyalty. These rewards are essentially a form of currency, but the brand is both the sole issuer and marketplace for their redemption. The systems do frequently improve retention and can be quite profitable, but they're often opaque to the consumer and expensive for companies to manage.

If rewards points were an actual digital currency, these systems would be cheaper and easier to manage, but the real potential would be tapping into an open and flexible technology. Imagine a business conglomerate with unified rewards, allowing United Airlines customers to use points to book Marriott hotel rooms. Companies could also issue a completely open currency as reward points, allowing their customers to spend these assets anywhere in the world, and creating a competitive differentiator compared to companies with strict redemption rules.

  1. Rethink tickets and product drops as digital membership cards.

Exclusivity is a fundamental pillar of some of the strongest relationships between customers and brands. And in the real world, it's a constraint of supply and space. Nike's exclusive product drops have fans lining up or clicking refresh for hours. Artists often create fan clubs for early ticket releases that tap into the power of exclusivity to boost sales and give passionate fans a better chance at a limited spot.

Currently, though, access to these product drops doesn't transfer, and tickets are often resold for higher prices on a secondary market. Both create outcomes that aren't friendly to the consumer. If brands were to begin issuing digital membership cards and tickets via blockchain, access could be transferred with predefined rules. For example, concert tickets issued with smart contracts inherent to the technology can not only verify the ticket's legitimacy, but also cap the resale value at a fixed amount. Neither of these is currently feasible with existing systems, but they are possible on blockchain.

Creating the future of customer relationship programs and digital engagements starts with two questions: 1. Is this a good experience, and 2. Can we do better? Blockchain finally gives us an answer to the second, but it isn't a cure-all for any broken form of engagement on its own. It can't build an audience, and won't bring customers back just for the sake of the technology. But for businesses, brands and creators willing to take a step back and rethink, it may represent the next chapter in building customer engagement.