WTF Is An NFT And Why Should Brands Care?
NFTs are the bright, shiny objects capturing the attention of brands today. Here is a look at what NFTs can really offer your brand with lessons informed by real-world examples.
Non-fungible tokens (NFTs) are the newest tool demonstrating how value and currency as concepts are evolving through the digital age. And many companies are already taking notice—cementing their positions as frontrunner brands in the process. Coca-Cola is experimenting in digital art NFTs, creating digital scarcity for collectors' items. Ray-Ban is reimagining their signature sunglasses for the metaverse. Gucci is auctioning off NFTs on a virtual runway.
For leaders seeking to get a grasp of what an NFT is and how it can be used to drive brand value, it is important to first talk about what ‘value’ even is, a few key economic principles and the technology underpinning NFTs.
It is time to think critically about value
Chief Brand and Marketing Officers often talk about value in context of how brands contribute to the success of a business: brand awareness, reach, market share, customer experience, customer loyalty, among many others. The truth is value is one of the few things we encounter that always exists in both a conceptual and actual state. Understanding value practically and conceptually will be integral for exploring and understanding the world of NFTs.
In this context, value refers to the price that someone is willing to pay for a thing. What makes ascribing value to a thing interesting is that it is always possible for two parties—person to person, person to machine, or machine to machine—to have diverging opinions on a given value. Asking ten people or machines what something is worth could yield you one to hundreds of thousands of different outputs, all informed by how the given party assesses disparate information.
So what is an NFT?
An NFT is a unique digital asset that has its ownership details tracked on a blockchain. This can be a broad set of assets that includes digital goods, like virtual land or digital art, all the way to tangible assets, such as physical land and art. As NFTs are a way to make digital files (e.g., MP3, MP4, gifs, jpegs, etc.) ownable, they open unlimited possibility to new outlets for brand expression and points of connection with customers.
There are three steps to driving your brand’s NFT strategy in a way that creates new value for both your business and your customers. To learn more about how brands are navigating the new realities of leadership in emerging tech, sustainability, purpose and more, visit frog’s Chief Challenges report series.
Determining whether NFTs are right for your business will take time and research, but the upside of NFTs is access to an existing globally distributed network of customers which may continue to grow over time especially as new applications are discovered and virtual experiences proliferate.
1. Embrace shifting perspectives of value. One potential source of NFT value is the default direct-to-consumer state that NFTs exist in. Given the mechanics of how the technology functions, visibility into the custody and uses of assets is available for all to see. This means that companies can have frictionless interactions with consumers and have near perfect visibility into how their outputs are being valued and used by end consumers every time it is bought or sold.
Another facet of NFTs that offers potential brand value is fractional ownership. Brands can take lessons from artistic experimentation in NFTs. Being able to buy part of a song, for example, or part of any other digital asset opens the door to increasing the volume of participants in each market. Traditional art spaces feature centralized transactions and ownership that have benefited the ultra-rich. NFTs are decentralized assets available to anyone with stable internet and disposable income to transact.
2. Connect NFTs to your brand’s purpose. Nike has started to use NFTs to certify the veracity of each pair of sneakers. When Nike customers buy a shoe, a digital version of the product appears in a ‘virtual locker’ under an initiative called ‘CryptoKicks.’ Given the subculture that exists around collecting, trading and reselling sneakers, incorporating a digital seal of authenticity to the physical counterpart of the token takes these practices to the next level, and is aligned with their brand’s purpose of delivering highly desirable products and services their customers love.
On the other hand, releasing NFTs that are misaligned with your brand’s purpose can be a risk. For example, given the environmental impact associated with the blockchain and NFTs, a sustainability-driven brand would need a good reason to embrace this technology as a pure marketing initiative.
3. Get creative with your brand expression. The possibilities for NFTs that enhance your brand strategy are limitless, and so should be your appetite for creative expression in this space. As in the Nike example, one strategy for NFTs is minting a digital collectible tied to a physical item in your portfolio that can be used for video game characters or online forums. But the potential for NFT- and crypto-based brand opportunities goes beyond the realm of the collectible to unlocking enhanced customer experiences. Across all industries, NFTs offer new avenues for rewards systems that enhance brand loyalty. In the world of sports, NFTs are already being used to build communities of devoted fans and offer exclusive access to their favorite athletes. Asset management agencies like Centerblock provide end-to-end creation and management services and even marketplaces for collateralized loans as exemplified by NFTfi.
As companies explore digital assets and upskill their marketing and product teams to deliver, they will be inundated with narrow use cases and high prices amplified by the hype machine that can distract from the wider application of the technology. But remember, NFTs are novel, digital and something that many people will not have encountered in their day-to-day lives. As a result, there is only a limited amount of information that can be gleaned from market prices of NFTs. Instead, we encourage a meaningful and sustained focus on understanding NFTs’ economic value to service natural levels of skepticism when assessing this new technology. Bring to the table the economic, behavioral, and even psychological principles as tools for engaging and evaluating the applicability of this innovative technology for your business.
Just like traditional art, NFTs’ cultural significance, financial accessibility and commercial viability will have to intensify over time to achieve staying power. Until then, use strategic experiments to determine whether NFTs are right for your business. At a minimum, the NFT marketplace can function as an additional revenue stream where companies can monetize intangible digital assets. At best, NFTs can serve as a springboard for inventing new commercial norms, methods of ownership, and economic and market value practices.
The future of NFTs is still being defined. Will NFTs become a currency of choice with universal accessibility? Will NFTs become the latest form of digital artwork? Will NFTs be regarded as an integral part of a brand’s product portfolio? What magical experiences and brand expressions will NFTs unlock for iconic brands around the globe? What new businesses will arise through the broadscale adoption of NFTs? Lean in, participate and write this story.
Viral Shah is Executive Strategy Director at frog, part of Capgemini Invent. 
Charles Brown is a senior strategist at frog, part of Capgemini Invent, who operates as a change agent
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