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Over the past year, non-fungible tokens (NFTs) have become commonplace, with brands frequently tying them to digital perks, merchandise and exclusive experiences. Though the tokens have gradually been losing shock factor, an upcoming push by Starbucks to tie NFTs into its lauded loyalty program could reignite some spark.
In a recent earnings call, the company teased a September launch date for the NFT tie-in, a move meant to attract new customers to its loyalty program, which already awards free drinks and merchandise. The chain also hopes the loyalty update will be accretive to its core retail stores.
“This new digital web3-enabled initiative will allow us to build on the current Starbucks Rewards engagement model with its powerful spend-to-earn stars approach while also introducing new methods of emotionally engaging customers, expanding our digital third place community, and offering a broader set of rewards,” said Starbucks interim CEO Howard Schultz during the call.
Though full details of the program are yet to be revealed, the announcement has created waves within the marketing industry. Starbucks’ loyalty program is an extremely successful part of its business, with over half its sales coming from its rewards members. Tying the program to the virtual world and blockchain technology underpinning NFTs could paint the way for future programs.
“NFTs could make sense for loyalty programs because it is another way to interact with consumers,” said Pedro Rodriguez, senior vice president of growth and transformation at Horizon Media and head of its Chapter and Verse division. “With the depreciation of cookies, getting access to that first-party data [in other ways] is going to be critical.”
Some businesses have already gotten a jump on introducing similar concepts. Last December, Applebee’s launched an NFT-centric promotion in which the owner of a one-of-a-kind digital image unlocked a year’s worth of real-world purchases at the chain. Taco Bell and Domino’s are reportedly considering ways to tie NFTs to their loyalty programs, though, to date, the brands’ NFT promotions have involved generating donations to their charitable arms.
Heavy betting on NFTs could help business for a few reasons, but at the core is the potential to market to younger consumers who have yet to get in on Starbucks’ rewards program. If the strategy proves successful, other marketers looking to engage Gen Z could follow suit.
“There’s a generation of difference between the use of Twitter and TikTok,” Rodriguez said. “In the mobile space, there’s a generational break, and you need to begin to play in the spaces where the new generation is.”
Plus, the ability for consumers to trade NFTs based on their changing interests and loyalties could provide a way for brands to offload costly balance-sheet liabilities.
“Points liability is a big deal,” said Mary Pilecki, vice president and principal analyst of customer loyalty programs at Forrester. “The fact that an NFT can be traded means it has value. If I’m no longer interested in the product or brand, I can share that value more easily. … They are a value exchange between brands.”
As data privacy and access become a bigger issue, NFTs are also a way for consumers to get something of value for the information they share with brands. An NFT tied to loyalty rewards offers a tangible value exchange that could make the transaction feel worthwhile for both parties.
“It’s a way to give data and get something in return,” Rodriguez said. “A consumer will not want something from a brand unless it has something of value.”
Still, Starbucks could be facing an uphill battle. In Forrester’s March 2022 Consumer Energy Index and Retail Pulse Survey, 72% of consumers said they had never heard of an NFT and have no interest in purchasing or owning one.
“People don’t understand what an NFT is, and they don’t understand that their value can change dramatically,” Pilecki said. “Starbucks is going to do a lot to help consumers understand them [but] right now, there’s a lot they and we don’t know. There are no consumer protections and there may be a tax liability of an NFT because there is a value to them.”
Yet, the category may hold a long-term upside. Consumer comfort with new technologies and platforms can be slow, but the brands that wait in the wings run the danger of being left behind.
“If there’s a brand out there that thinks NFTs are the way to go, they’re going to have to get involved with NFTs now,” Pilecki said. “Starbucks won’t be the last. We are going to see a lot of experimentation with NFTs in the future.”
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