Few pieces of house cleaning before dive into this week’s One Big Idea:
An issue with the One Big Idea OG collectible has been resolved. You can claim here by connecting to a Polygon enabled wallet bridge. Instructions for setting up a Polygon bridge on Metamask are here.
While the collectible is free you will need a small amount of Matic to complete the transaction. You can use the free Polygon faucet to have Matic sent to your wallet to cover the cost.
Alright, with that out of the way…let’s get into it!
As the bear market marches forward, Web3 products are experiencing an ugly truth. Churn. Bored Ape Yacht Club, arguably the most successful NFT brand, has lost holders in its OG collection over the past 30 days.
Acquiring customers is five times more expensive than retaining existing ones. On the flip side, increasing customer retention by just five percent can increase profits by up to ninety-five percent. Thus, churn's downside and retention's upside seem too critical to ignore. How then can NFT brands build sustainable relationships, and therefore businesses, with their holders?
Understanding How We Got Here
As a product manager, I learned to segment the product goals into three metrics: acquisition, retention, and monetization.
Many “growth stage” start-ups obsess over acquisition. All other metrics should come second to getting as many users as possible. Once you have product-market fit and have captured an audience, you can worry about keeping people and making money.
However, if you can’t keep the customers you acquire, all the money spent on acquisition is wasted. NFT brands have been so focused on acquisition that they’ve neglected to focus on retention.
In a bull market, this is an acceptable approach. Most holders are comfortable sitting back and watching their portfolio go up and to the right. But in the bear? You can kiss those same holders goodbye.
Proof of Participation
To right the ship, NFT brands need to invest in nurturing loyalty. Attachment to a brand comes from a shared identity and belonging. This is precisely where most NFT brands fall flat. Buzzwords like community were simply a shell to create an investment club where holders were tied together by their financial interest in the project. Brands who understand identity know it is not what you own but what you do that makes someone who they are. Take this tweet from Chris Cantino:
NFTs move from assets to identity when they let holders fully represent themselves. Instead of a fixed asset, Chris proposes a piece of identity that changes as you change. Where your actions are meaningful. Participation begets a change in the NFT and, therefore, a change in your relationship with the brand. The holder is both validated and able to flaunt their new status to the world.
Azuki recognizes the power of identity.
Their recently launched profile pages gave holders a space to broadcast who they were to the broader community through a collection of collectible pins. These pins could be earned (completing a task) or unlocked (holding a specific attribute Azuki). Post-launch, The feature became a marketing event. People within the community holders scrambled to acquire as many pins as possible and showcase their progress on socials. Outside the community, you could not avoid the wave of participation. People watched with FOMO as holders changed their profile pictures and raved about the experience. Azuki created a product that increases engagement, retention, and acquisition by focusing on expressing identity.
The most robust loyalty programs will incentivize consistent engagement with actions to strengthen the company’s mission.
Arkive, a self-described “global community of members redefining culture and building the first decentralized physical museum,” is implementing a DAO framework in service of its mission. Within this structure, participation is not nice to have. It is needed to function.
My Arkive Points displayed in the Atrium
Members earn points by completing small tasks like engaging in the discord to bigger ones like voting on which pieces will be curated for the collection. Members can see their progress (and soon others) via a profile page (sound familiar?). By rewarding consistent engagement, Arkive is creating a habit loop. Engage, reward, validate. Yet, the initiative would fall flat if it was just fake points. Engagement requires strong incentives. In the future, members will use Arkive points to access membership NFTs, more voting power, IRL events, discounts, merch, and even revenue share on pieces the DAO sells. With Arkive points, the team recognizes the value of rewarding actions which are tangential to the mission.
Web3 loyalty programs will take advantage of the composable nature of blockchains.
Remember when Spotify allowed you to see how big of a fan you were of an artist? You’d connect your profile, and the app would tell you how early you were to discovering them (I was in the first 50k of Phoebe Bridgers, not to brag). It left you with a feeling of ownership and a deeper understanding of your relationship with the artist and the app. Like the Azuki example above, this campaign led to a viral moment as people ran to socials to show just how big of a fan they were.
Mint, a podcast by Adam Levy on the Web3 creator economy, rewards listeners with NFT pins for each podcast season. These pins prove participation and create a digital fingerprint of just how early you were. With this tool comes limitless opportunities to extend further utility. These tokens have unlocked content, served as entry passes to events, and even given beta access to protocols like Lens. Participation, which over time can be defined as loyalty, helps the audience because of its utility.
For Mint, these tokens give critical insight into an audience’s on-chain behavior. Using Bello Insights, a web-3 CRM platform, Adam can analyze what other tokens his audience holds. These insights lead him to book guests and sponsors that align with his audience’s interests.
The bear market is making it clear as day. NFT projects have neglected to nurture the relationships they already have.
In the future, NFT brands must get closer to their customers by allowing them to represent themselves within their ecosystem. Displaying identity and rewarding participation will create a pathway toward sustainable business models.
Thanks for reading! We will be back later this week with an episode of the One Big Idea Podcast.
Have a great week,
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