What Starbucks bet on NFT says about how loyalty will work in the future

Non-fungible tokens (NFTs) have become common in the past year, and brands often tie them to digital perks, merchandise, and exclusive experiences. Even though the tokens aren’t as surprising as they used to be, Starbucks plans to add NFT to its well-known loyalty program could give them new life.

In a recent earnings call, the company hinted that the NFT tie-in would start in September. This is a way to get more people to join its loyalty program, which already gives out free drinks and other things. The store chain also hopes the loyalty update will help its main stores.

During the call, Starbucks interim CEO Howard Schultz said, “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. It also introduces new ways to emotionally engage customers, expanding our digital third place community, and offering a wider range of rewards.”

Even though not all of the program’s details have been revealed yet, the news has made waves in the marketing world. Starbucks’ loyalty program is a very successful part of its business. In fact, its rewards members make up more than half of its sales. Linking the program to the virtual world and the blockchain technology that supports NFTs could pave the way for other programs in the future.

Pedro Rodriguez, senior vice president of growth and transformation at Horizon Media and head of its Chapter and Verse division, said that NFTs could make sense for loyalty programs because they are another way to interact with customers. “With cookies becoming less important, finding other ways to get to that first-party data will be very important.”

Some businesses have already started putting similar ideas into place. Applebee’s started a promotion last December that was all about NFTs. The owner of a unique digital image could get a year’s worth of real-world purchases at the chain. Reports say that Taco Bell and Domino’s are thinking about ways to link NFTs to their loyalty programs. The brands’ NFT promotions have been about getting people to donate money to their charities.

Heavy betting on NFT could be good for business for a few reasons, but the main one is that it could help the market to younger people who haven’t joined the Starbuck rewards program yet. If the plan works, it could be used by other marketers who want to reach Generation Z.

“People from different generations use Twitter and TikTok,” Rodriguez said. “There is a generation gap in the mobile space, and you need to start playing where the new generation is.”

Also, letting people trade NFTs based on how their interests and loyalties change could help brands eliminate expensive balance-sheet liabilities.

Mary Pilecki, vice president and principal analyst of customer loyalty programs at Forrester, said, “Points liability is a big deal.” “If you can trade an NFT, that means it has value. If I’m not interested in the product or brand anymore, it’s easier for me to share its value. They are a way for brands to trade value.”

As data privacy and access become more of a concern, NFTs give consumers a way to get something of value in exchange for the information they give to brands. When a non-financial transaction (NFT) is tied to a loyalty reward, a tangible exchange of value could make both parties feel like the transaction was worth it.

Rodriguez said, “It’s a way to give information and get something in return.” “A customer won’t buy something from a brand unless it has something valuable to offer.”

Still, Starbucks may have a tough road ahead of it. In a survey done by Forrester in March 2022, 72% of consumers said they had never heard of an NFT and had no interest in buying or owning one.

Pilecki said, “People don’t know what an NFT is, and they don’t know that its value can change dramatically.” “Starbucks will do a lot to help people understand them, but they and we both don’t know a lot right now. There are no protections for consumers, and NFTs may have to pay taxes because they have value.

Still, the category may be good in the long run. People take time to get used to new technologies and platforms, but brands that don’t move quickly risk being left behind.

Pilecki said, “If there’s a brand out there that thinks NFTs are the way to go, they’ll have to start doing NFTs now.” “Starbucks isn’t the only one. NFTs are going to be used in a lot of different ways in the future.

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