By Rabih Farhat, Founder and Managing Partner, Related
From copper coins to stamps, then cards and ultimately digital platforms, the centuries-long evolution of loyalty programs seems to be on the cusp of another great leap.
Unlike the cost-conscious switch from copper to paper, the recent migration to digital is being driven by a shift in consumer behavior — namely, an ever-growing relocation of shoppers to digital channels and platforms. In this new congested, highly competitive world, building customer experiences takes center stage.
Now, the newest iteration of digital realms, the long-awaited Metaverse — a persistent, wholly immersive virtual world — promises to usher in a new era for loyalty marketing.
Hitting the Mainstream
While technology was not yet ready and scalable to handle a Second Life concept, today with the roll out of high speed/low latency data providers like 5G, the adoption of an immersive technology became more user-friendly and virtual experiences became even more convenient and efficient than physical ones. As adoption increases, brands will start to flock, and loyalty marketing will have to follow.
Generally, market projections and estimates have varied greatly – Goldman Sachs, for instance, expects the Metaverse market to reach anywhere between 1 and 12 trillion dollars. There is also little information from Meta on how well its Metaverse-related projects are faring. We do know, however, that Horizon Worlds, one of Meta’s high-profile VR projects and a core component of the “Metaverse vision” according to Zuckerberg, has seen its user base increase 10 fold each month since launch in December 2021.
With a growing millennial population where half of them have grown up with video games, e-sports, and social media, many of them see the emerging metaverse as a modern day mall; a connected world where they can hang out, shop and socialize. Fully virtual in-game events have also been well received: we’ve seen concerts, album releases, Disney even premiered ‘Star Wars: The Rise of Skywalker’ exclusively inside Fortnite. Other industries following suit seems to be a matter of time: According to a whitepaper by JPMorgan, the Metaverse “will likely infiltrate every sector in some way in the coming years.”
What Does This All Mean for Loyalty Marketing?
Early studies around virtual shopping are showing great promise: 70% of all consumers who have visited a virtual store have made a purchase, and most said that they would do it again. Interestingly as well, that same study revealed that more than half of its respondents (52%) were willing to pay as much as $50 for a virtual product for their avatar. More on this later.
As e-commerce in the metaverse takes off, loyalty marketers will have to adapt their strategies while staying true to their two key pillars: value and experience. The hyper-immersive nature of virtual worlds engenders limitless opportunities to craft and deliver hyper engaging experiences that delight customers; early movers will also have the chance to capitalize on the sense of awe and enchantment that this new medium inspires in people. Delight, and consequently loyalty, that is nurtured in the Metaverse will also trickle to real world, and vice versa.
The Rise of Digital Ownership and NFTs
People’s willingness to spend on virtual novelty items – such as accessories for an avatar as we mentioned above – is a growing trend, and one that bodes particularly well for the future of loyalty marketing, as it lends credence to the immense potential of NFTs.
In fact, the meteoric rise of non-fungible tokens is testament to the growing perceived value of unique and exclusive, though intangible, items. Businesses have already started capitalizing on this. In New York, a restaurant selling exclusive-access tokens has turned into a craze — a regular-membership token sold for over $13k on the secondary market; higher-tier tokens broke $29k.
And brands are just beginning to experiment with NFTs in their loyalty schemes, be it as tokens that unlock VIP perks and deals, or branded digital collectibles that have intrinsic value. So what can marketers do? Well, much like we’re seeing with digital art pieces, a well thought-out and careful investment into the technology will only appreciate over time.